Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

or

For the fiscal year ended December 31, 20202021

or

or

Date of event requiring this shell company report: N/A

Commission file number 1-15224

COMPANHIA ENERGÉTICA DE MINAS GERAIS –- CEMIG

(Exact name of Registrant as specified in its charter)

ENERGY CO OF MINAS GERAIS

(Translation of Registrant’s name into English)

BRAZIL

(Jurisdiction of incorporation or organization)

1200, Avenida Barbacena; Barbacena; Belo Horizonte/MG, BrazilCEP 30190-131

(Address of principal executive offices)

Leonardo George de Magalhães

Chief Officer for Finance and Investor Relations

ri@cemig.com.br – +55+55 (31) 3506-5024

1200, Avenida Barbacena; Barbacena; Belo Horizonte/MG, Brazil CEP 30190-131

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

*Not for trading but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common share as of the close of the period covered by the annual report:

566,036,634735,847,624 Common Shares

1,127,325,4341,465,523,064 Preferred Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes☒No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐No☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes☒No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act. ☐

* The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 ☐Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐No☒

Table of Contents

PART I

PRESENTATION OF FINANCIAL INFORMATION

The Companhia Energética de Minas Gerais – CEMIG is a state-controlled mixed capital company (‘sociedade por ações, de economia mista’) organized under the laws of the Federative Republic of Brazil, or Brazil. References in this annual report to ‘CEMIG’, the ‘CEMIG Group’, the ‘Company’, ‘we’, ‘us’, ‘our’ and ‘ourselves’ are to Companhia Energética de Minas Gerais – CEMIG and its consolidated subsidiaries, and references to ‘CEMIG Holding’ are to Companhia Energética de Minas Gerais – CEMIG on an individual basis, except when the context otherwise requires. References to the ‘Real,’ ‘Reais’ or ‘R$’ are to Brazilian Reais (plural) and the Brazilian Real (singular), the official currency of Brazil. References to ‘U.S. dollars’, ‘dollars’ or ‘US$’ are to United States dollars.

We maintain our books and records in Reais. We prepare our statutory financial statements in accordance with generally acceptedthe accounting practices adopted in Brazil, and with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). For purposes of this annual report, we prepared theour consolidated financial statements in accordance with the IFRS, as issued by the IASB. Our consolidated financial statements for the years ended December 31, 2019 and 2018 and the opening balance as of January 1, 2019 have been restated to reflect the change in accounting policy disclosed in note 2.8 of our annual consolidated financial statements.

Ernst & Young Auditores Independentes S.S. (‘EY’) audited theour consolidated statement of financial position of Companhia Energética de Minas Gerais – CEMIG as of December 31, 2021 and 2020, and 2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020.2021. The consolidated balance sheets of Madeira Energia S.A. as of December 31, 2020 and 2019, and the related consolidated statement of operations, of comprehensive (loss) income, of changes in equity and of cash flows for each of the threetwo years in the period ended December 31, 2020 were audited by PricewaterhouseCoopers Auditores Independentes (‘PWC’) whose report related to this financial statement has been presented to EY and are the sole base for the opinion of EY on the financial statements of Madeira Energia S.A., which iswas a significant investment of the Company accounted for under the equity method.

This annual report contains translations of certain Real amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise indicated, such U.S. dollar amounts have been translated from Reais at an exchange rate of R$5.19355.5749 to US$1.00, as certified for customs purposes by the U.S. Federal Reserve Board as of December 31, 2020.30, 2021. See “Item 3. Key Information – Exchange Rates” for additional information regarding exchange rates. We cannot guarantee that U.S. dollars can be converted into Reais, or that Reais can be converted into U.S. dollars, at the above rate or at any other rate.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals and/or subtotals in certain tables may not be an arithmetic aggregation of the figures that precede them.

MARKET POSITION AND OTHER INFORMATION

The information contained in this annual report regarding our market position is, unless otherwise indicated, presented for the year ended December 31, 2020.2021. It is based on, or derived from, reports issued by the Brazilian National Electric Energy Agency (Agência Nacional de Energia Elétrica, ‘Grantor’, or ‘ANEEL’), and by the Brazilian Electric Power Trading Chamber (Câmara de Comercialização de Energia Elétrica, or ‘CCEE’).

Certain terms are defined the first time they are used in this annual report. As used herein, all references to ‘GW’ and ‘GWh’ are to gigawatts and gigawatt hours, respectively, references to ‘MW’ and ‘MWh’ are to megawatts and megawatt-hours, respectively, and references to ‘kW’ and ‘kWh’ are to kilowatts and kilowatt-hours, respectively.

References in this annual report to the ‘common shares’ and ‘preferred shares’ are to our common shares and preferred shares, respectively. References to ‘Preferred American Depositary Shares’ or ‘Preferred ADSs’ are to American Depositary Shares, each representing one preferred share. References to ‘Common American Depositary Shares’ or ‘Common ADSs’ are to American Depositary Shares, each representing one common share. Our Preferred ADSs and Common ADSs are referred to collectively as ‘ADSs,’‘ADSs’, and our Preferred American Depositary Receipts, or Preferred ADRs, and Common American Depositary Receipts, or Common ADRs, are referred to collectively as ‘ADRs.’‘ADRs’.

The Preferred ADSs are evidenced by Preferred ADRs, issued pursuant to a Second Amended and Restated Deposit Agreement, dated as of August 10, 2001, as amended on June 11, 2007, by and among us, Citibank N.A., as depositary, and the holders and beneficial owners of Preferred ADSs evidenced by Preferred ADRs issued thereunder (the ‘Second Amended and Restated Deposit Agreement’). The Common ADSs are evidenced by Common ADRs, issued pursuant to a Deposit Agreement, dated as of June 12, 2007, by and among us, Citibank, N.A., as depositary, and the holders and beneficial owners of Common ADSs evidenced by Common ADRs issued thereunder (the ‘Common ADS Deposit Agreement’ and, together with the Second Amended and Restated Deposit Agreement, the ‘Deposit Agreements’).

FORWARD-LOOKING INFORMATION

This annual report includes certain forward-looking statements, mainly in “Item 3. Key Information”, “Item 4. Information on the Compay”Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk”. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and contingencies including, but not limited to, the following:

The words ‘believe,’ ‘may,’ ‘could,’ ‘will,’ ‘plan,’ ‘estimate,’ ‘continue,’ ‘anticipate,’ ‘seek,’ ‘intend,’ ‘expect’ and similar words are intended to identify forward-looking statements. We do not undertake to publicly update or revise any forward-looking statements because of new information, future events or otherwise. Considering these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not materialize as described. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.

SUMMARY OF RISK FACTORS

The Company’s business, results of operations, financial conditions and cash flows are subject to, and could be materially adversely affected by, a number of risks and uncertainties, including risks relating to the nature of the Company's business and its operations in Brazil. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.

Risks Relating to the Company’s Business

Risks Relating to Brazil

Risks relating to the Preferred and Common Shares, and the Preferred and Common ADSs

PART I

Not applicable.

Not applicable.

The following tables present our selected consolidated financial and operating information prepared in accordance with IFRS as of the dates and for each of the periods indicated.

The selected consolidated financial data as of December 31, 2021 and 2020 and for each of the years ended December 31, 2021, 2020 and 2019, has been derived from our audited consolidated financial statements, prepared in accordance with IFRS, as issued by the IASB, and included elsewhere in this annual report.

You should read the following information together with our consolidated financial statements, including the notes thereto, included in this annual report and the information set forth in “Item 5. Operating and Financial Review and Prospects” and “Presentation of Financial Information”.

The selected consolidated financial data asThis annual report contains translations of December 31, 2020 and 2019 and for each of the years ended December 31, 2020, 2019 and 2018, prepared in accordance with IFRS, has been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this annual report.certain real amounts into U.S. dollar amounts in the table below areat specified rates solely presented for your convenience. The selected consolidated financial dataYou should not construe these translations as of December 31, 2018, 2017 and 2016 and for each ofrepresentations by us that the years ended December 31, 2017 and 2016 has been derived from our audited consolidated financial statements not included in this annual report on Form 20-F, which have not been restated to reflectreal amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the change in accounting policy.rates indicated or at any other rates.

Consolidated Statement of Income Data

Year Ended December 31,	2020	2020	2019 (4)(5) (Restated)	2018 (3)(5) (Restated)	2017 (6)	2016 (6)
	(in  millions of US$) (1)	(in  millions of R$, except per share/ADS data or otherwise indicated)
NET REVENUE	4,858	25,228	25,486	22,299	21,712	18,773
Operating costs and expenses
Energy purchased for resale	(2.332)	(12,111)	(11,286)	(11,084)	(10,919)	(8,273)
Charges for use of the national grid	(337)	(1,748)	(1,426)	(1,479)	(1,174)	(947)
Depreciation and amortization	(190)	(989)	(958)	(835)	(850)	(834)
Personnel	(246)	(1,276)	(1,272)	(1,410)	(1,627)	(1,643)
Gas purchased for resale	(209)	(1,083)	(1,436)	(1,238)	(1,071)	(877)
Outsourced services	(244)	(1,265)	(1,239)	(1,087)	(974)	(867)
Post-employment obligations	(84)	(438)	(408)	(337)	229	(345)
Materials	(15)	(79)	(91)	(104)	(61)	(58)
Operating provisions (reversals)	(81)	(423)	(2,401)	(467)	(854)	(704)
Employee’s and managers’ profit sharing	(27)	(142)	(263)	(77)	(5)	(7)
Infrastructure construction costs	(304)	(1,581)	(1,200)	(897)	(1,119)	(1,193)
Other operating expenses, net	(57)	(297)	(494)	(405)	(393)	(155)
Total operating costs and expenses	(4,127)	(21,432)	(22,474)	(19,420)	(18,818)	(15,903)
Periodic Tariff Review, net	97	502	-	-	-	-
Share of profit (loss), net, of affiliates and jointly-controlled entities	69	357	125	(104)	(252)	(302)
Dividends declared by investee classified as held for sale	-	-	73	-	-	-
Remeasurement of previously held equity interest in subsidiaries acquired	-	-	-	(119)	-	-
Impairment loss on Investments	-	-	-	(127)	-	(763)
Result of business combinations	10	51	-	-	-	-
Income before finance income (expenses) and taxes	906	4,706	3,210	2,529	2,642	1,805
Finance income (expenses), net	(174)	(906)	1,358	(518)	(996)	(1,437)
Income before income tax and social contribution tax	732	3,800	4,570	2,011	1,646	368
Income taxes expense	(180)	(936)	(1,600)	(599)	(644)	(34)
Net income for the year from continuing operations	552	2,864	2,970	1,379	1,002	334
Net income after tax from discontinued operations	-	-	224	363	-	-
Net income for the year	552	2,864	3,195	1,742	1,002	334
Non-controlling interests:
Non-controlling interests from continuing operations	-	(1)	(1)	(1)	(1)	-
Non-controlling interests from discontinued operations	-	-	-	(41)	-	-
Net income for the year attributed to equity holders of the parent	551	2,863	3,194	1,700	1,001	334
Net income for the year	552	2,864	3,195	1,742	1,002	334
Other comprehensive income (loss)	(1)	(7)	(1,055)	(463)	(302)	(553)
Comprehensive income for the year	550	2,857	2,139	1,279	700	(219)
Basic earnings:
Per common share (7)	0.33	1.69	1.89	1.02	0.37	0.10
Per preferred share (7)	0.33	1.69	1.89	1.02	0.84	0.35
Per ADS common share (7)	0.33	1.69	1.75	0.83	0.37	0.10
Per ADS preferred share (7)	0.33	1.69	1.75	0.83	0.84	0.35
Diluted earnings:
Per common share (7)	0.33	1.69	1.89	1.02	0.37	0.07
Per preferred share (7)	0.33	1.69	1.89	1.02	0.84	0.32
Per ADS common share (7)	0.33	1.69	1.75	0.83	0.37	0.07
Per ADS preferred share (7)	0.33	1.69	1.75	0.83	0.84	0.32

Statement of Financial Position Data

Other data

Exchange Rates

On March 4, 2005, the National Monetary Council (Conselho Monetário Nacional, or ‘CMN’), consolidated the commercial rate exchange market and the floating rate market into a single exchange market. Such regulation, as restated in 2008, allows subject to certain procedures and specific regulatory provisions, the purchase and sale of foreign currency and the international transfer of Reais by a foreign person or company, without restriction as to the amount. Additionally, all foreign exchange transactions must be carried out by financial institutions authorized by the Brazilian Central Bank (Banco Central do Brasil, or the ‘Central Bank’), to operate in this market.

Brazilian law provides that whenever there (i) is a significant deficit in Brazil’s balance of payments or (ii) are major reasons to foresee a significant deficit in Brazil’s balance of payments, temporary restrictions may be imposed on remittances of foreign capital abroad. In the past, the Central Bank has occasionally intervened to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Federal Government will continue to let the Reais float freely or will intervene in the exchange rate market. The Reais may depreciate or appreciate against the U.S. dollar and other currencies substantially in the future, Exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of Preferred ADSs or Common ADSs. We will make any distributions with respect to our preferred shares or common shares in Reais and the depositary will convert these distributions into U.S. dollars for payment to the holders of Preferred ADSs and Common ADSs. We cannot make assurances that such measures will not be undertaken by the Brazilian Government in the future, which could prevent us from making payments to the holders of our ADSs. Exchange rate fluctuations may also affect the U.S. dollar equivalent of the Reais price of the preferred shares or common shares on the Brazilian stock exchange on which they are traded. Exchange rate fluctuations may also affect our results of operations. For more information see ‘Risk Factors—Risks Relating to Brazil—Exchange rate instability may adversely affect our business, results of operations and financial condition and the market price of our shares, the Preferred ADSs and the Common ADSs’.

The table below sets forth, for the periods indicated the low, high, average and period-end exchange rates for Reais, expressed in Reais per US$1.00.

Source: U.S. Federal Reserve Board.

Risk Factors

The investor should take into account the risks described below, and the other information contained in this Annual Report, when evaluating an investment in our Company.

Risks Relating to CEMIG

The Covid-19 pandemic and its ongoing effects could adversely affect our business, operational results and financial condition.

The COVID-19 pandemic and its effect on the Brazilian and global economies have continued to impact the Company, and the future effects of the COVID-19 pandemic remain uncertain. COVID-19 necessitated governments, including in Brazil, to respond at unprecedented levels to protect public health, and to support local economies and livelihoods. The resulting government support measures and restrictions have created additional challenges given the rapid pace of change and significant operational demands. Renewed outbreaks, particularly those resulting from the emergence of new variants of the virus, emphasize the ongoing threat of COVID-19 and could result in further tightening of government restrictions.

The Company iscontinues to closely monitoringmonitor the impacts of the Covid-19 pandemic on the Brazilian macroeconomic environment, especially in relation to its business and the market in which it operates, and decidingin order to decide on actions to maintain the sustainability of its operations, mitigate economic and financial effects, and protect the health of its employees. The Company established the Coronavirus Crisis Management Committee (‘Comitê Diretor de Gestão da Crise do Coronavírus’) in March 2020, to ensure its readiness to makingmake decisions in light of the fast-changing situation, which has become more widespread, complex and systemic. Several measures were taken to protect the Company´s liquidity position in 2020, such as capital expenditure restraintrestraints and expenses reduction,expense reductions, the payment of only minimum mandatory dividends to shareholders, and deferral of dividends and interest on equity to the end of 2020 and the negotiating of contracts with its customers on the free market. The Company continued to implement similar policies throughout 2021.

In order to cope with the reduction in collections resulting from the economic crises,crisis, in 2020 measures to support the sector have beenwere implemented by the Grantor and regulated by ANEEL, with a view to ensure that companies maintain adequate liquidity and arewere able to comply with contracts in the electricity sector supply chain. This scenario resulted in the need for internal reassessment by the Company of its Investment Program, revision of the budgets for revenue and expenses, and alteration of the assumptions used in calculating the fair and recoverable value of certain financial and non-financial assets. Among the measures implemented by ANEEL having a greater financial impact on us was the creation of the ‘Covid-account’, issued on May 18, 2020, to support the energy distribution sector, which, as the customer interface, is the basis of the energy sector financial flow, aimed either to cover the distribution agents revenue/cash flow deficit or to anticipate sector receivables. The ‘Covid-account’ increased CEMIG DD's cash flow by R$1.4 billion in 2020 enabling it to meet its financial obligations, in spite of the collection reduction resulting from the economic crisis.

The totalSince February 2021, the load carried byon the Brazilian electricity system fell by approximately 1.5%, comparingNational Interconnected System (SIN) has been higher than in the previous years of 2020 toand 2019, and overall has been slightly above the year before, with gradual recovery since that period. The effectsprojected loan levels for 2021 which were published in December 2020, except for the Company inmonth of October 2021, which was lower than the energy Marketprior months (but still above the projection), and the months of November and December which were also observed on a similar scale to these national effects with a consequent decrease in its revenue.

lower than the 2021 projections. The most critical period to date of the pandemic regarding the energy supply in Brazil occurred in the second and third quarters of 2020. The

Since the onset of the COVID-19 pandemic in 2020, the negative economic conditions arising from the pandemic have negatively impacted the Company’s financial results, in particular during 2020, in various respects. Furthermore, the Company cannot foresee the durationfuture impacts of these effectsthe COVID-19 pandemic on the economic condition arising from social isolation, and its future impactBrazilian economy or on its marketbusiness and revenue, norresults of operations. The Company still faces the effectiveness of the ongoing actions that are being implemented by the federal government, such as the beginning of the population´s vaccination program, as well as the mitigation of the effects of the crisis. The continuing duration or a worseningCOVID-19 pandemic which may have an adverse effect on its business and results of the pandemic couldoperations.

Ongoing military conflict between Russia and Ukraine may have a material adverse effect on the global economy, certain material and commodity prices and our business.

Global markets are currently operating in a period of economic uncertainty, volatility and disruption as the military conflict between Russia and Ukraine unfolds, following Russia’s full-scale invasion of Ukraine on February 24, 2022. Such military conflict and the effect of the resulting economic sanctions imposed on Russia and certain Russian citizens and enterprises could have a negative effect on the global economy and are highly uncertain and difficult to predict. As a result, many entities outside the region may be adversely affected by rising prices of commodities such as oil, gas and wheat, or by a potential slowdown in the global economy. The occurrence of large-scale business disruptions potentially gives rise to liquidity issues for certain entities and there may also be consequential impacts on the credit quality of some suppliers. As of the date of this annual report, while we are not directly involved in the region and, therefore, our exposure to Russia and Ukraine is limited, considering the uncertainties surrounding the impact of the conflict on global economy, we are unable to estimate in advance the extent of their potential effects on our business, liquity, capital resources, results of operations and financial condition.position, or operational results.

We are not certain whether new concessions or authorizations, as applicable, will be obtained, nor that our present concessions or authorizations will be extended on terms similar to those currently in effect, nor that any compensation we receive in the event of non-extension will be sufficient to cover the full value of our investment.

We operate most of our power generation, transmission and distribution activities, and related services under concession agreements entered into with the Brazilian Federal Government or pursuant to authorizations granted to companies of the CEMIG Group. The Brazilian Constitution determines that all concessions related to public services must be granted through a bidding process. In 1995, in an effort to implement these constitutional provisions, the Brazilian Federal Government adopted certain laws and regulations, which are collectively known as the ‘Concessions Law,’ which governs bidding procedures in the electric power industry.

On September 11, 2012, the Brazilian Federal Government issued Provisional Act No. 579 (‘PA 579’), later converted into Law No. 12,783 of January 11, 2013 (‘Law No. 12,783/13’), which governs the extensions of concessions granted prior to Law No. 9,074/95. Law No. 12,783/13 determines that, as of September 12, 2012, concessions prior to Law No. 9,074/95 can be extended once, for up to 30 years, provided that the concession operators accept and meet certain conditions described in such Law. With respect to generation activities, the Company chose not to accept the mechanism offered to extend the generation concessions that would expire in the period from 2013 to 2017. These concessions are: Três Marias, Salto Grande, Itutinga, Volta Grande, Camargos, Peti, Piau, Gafanhoto, Tronqueiras, Joasal, Martins, Cajuru, Paciência, Marmelos, Dona Rita, Sumidouro, Poquim and Anil.

Following publication of the tender documents for Generation Auction No. 12/2015, on October 7, 2015 (‘Auction 12/2015’), which was held under the revised regulatory structure for renewal of concessions of existing power plants as set forth in Law No. 13,203 of December 8, 2015 (‘Law No. 13,203/15’), the Company’s Board of Directors authorized CEMIG Geração e Transmissão S.A. (CEMIG GT) to bid at an auction, held on November 25, 2015, in which CEMIG GT was successful. In the auction, CEMIG GT won the concessions for the 18-hydroelectrical18-hydroelectric plants comprising ‘Lot D’, for 30 years: Três Marias, Salto Grande, Itutinga, Camargos, Cajuru, Gafanhoto, Martins, Marmelos, Joasal, Paciência, Piau, Coronel Domiciano, Tronqueiras, Peti, Dona Rita, Sinceridade, Neblina and Ervália. The total installed capacity of these plants is 699.5 MW, and their offtake guarantee is 420.2 MW average.

In relation to the Jaguara, São Simão and Miranda power plants, which the date of the first contractual extension of their concessions fell after the issuance of PA 579, the Company understood that the Generation Concession Contract No. 007/1997 enables the extension of the concessions of these power plants for 20 years, i.e., until 2033, 2035 and 2036 respectively, without any restrictions.

Based on this understanding, on February 21, 2017, CEMIG GT filed for a judicial order of mandamus against the actions of the Brazilian Mining and Energy Ministry (MME) to safeguard its rights to an extension of the concession term for the Jaguara, São Simão and Miranda Hydroelectric Power Plant, under the terms of Clause 4 of the Generation Concession Contract No. 007/1997, and in accordance with the original terms and conditions of that agreement, which was signed prior to Law No. 12,783/13.

Nevertheless, on September 27, 2017, the Brazilian Federal Government auctioned the concessions of Jaguara, São Simão, Miranda and Volta Grande hydroelectric power plants formerly owned by CEMIG GT with a total capacity of 2,922 MW for a total of R$12.13 billion. In each case, the winning bidder of the concessions is unrelated to CEMIG. Volta Grande power plant concession was transferred to the winning bidder on November 30, 2017, Jaguara and Miranda power plants concession were transferred on December 30, 2017 and São Simão power plant concession was transferred on May 9, 2018.

The applications for mandamus relating to the Jaguara and Miranda hydroelectric plants have now reached final judgment against the Company and further appeal is not possible. Because of these judgments, the Company assesses that the chances of success in the application for mandamus in relation to the São Simão hydroelectric plant, which has not yet reached final judgment, is remote.

In parallel to the discussions on extension of the generation concessions because the concession for various plants operated by CEMIG under Concession Contract 007/1997 have expired, CEMIG GT has a right to be reimbursed for the assets not yet amortized, as set out in the concession contract. The accounting balances corresponding to these assets are recorded as financial assets and are analyzed by Brazilian Regulatory Agency (ANEEL).

On August 31, 2018, CEMIG received R$1,139 million as indemnification for the basic project of the São Simão and Miranda plants. This amount had been adjusted by the Selic rate up to the date of its receipt.

The compensation to the holders of hydroelectric were granted through the extension of the concession period for generation plants and were recognized as an intangible asset in exchange for a compensation of electricity costs.

This renegotiation represents important progress for the electricity sector, reducing levels of litigation – and for CEMIG, in that it enables extension of the periods of its generation concessions.

The periods of extension approved by ANEEL through normative resolutions 2,919/2021 and 2,932/2021, assured an extension of approximately two years for two of our principal power plants, Emborcação and Nova Ponte, and extensions of seven years for the plants of Lot D – as well as extensions for the other plants where we hold an equity interest directly or through investees.

Considering the degree of discretion granted to the Brazilian Federal Government in relation to new concession contracts or new authorizations, as applicable, and renewal of existing concessions and authorizations, and due to Law No. 12,783/13 and amendments, for renewals of generation, transmission and distribution concession agreements, we cannot guarantee that: (i) new concessions and authorizations will be obtained; (ii) our existing concessions and authorizations will be extended on terms similar to those currently in effect; nor (iii) the compensation received in the event of non-extension of a concession or authorization will be in an amount sufficient to cover the full value of our investment. Our inability to obtain new or extended concessions or authorizations could have a material adverse effect on our business, results of operations and financial condition. For more information about the renewal of our concessions and authorizations, see “Item 8. Financial Information – Legal and Administrative Proceedings”.

On September 9, 2020, the Law 14,052 was issued, changing the Law 13,203/2015 and establishing new conditions for renegotiation of hydrological risk in relation to the portion of costs incurred due to the GSF, borne by the holders of hydroelectric plants participating in the Energy Reallocation Mechanism (MRE) since 2012, when there was a serious crisis in water sources.

The compensation to the holders of hydroelectric occurs through the extension of the concession period for generation grants and will be recognized as an intangible asset in exchange for a compensation of electricity costs.

This renegotiation represents important progress for the electricity sector, reducing levels of litigation – and also for CEMIG, in that it enables extension of the periods of its generation concessions.

The periods of extension, published by the CCEE, which are still awaiting approval by ANEEL, indicate an extension of approximately two years for two of our principal power plants, Emborcação and Nova Ponte, and also extensions of seven years for the plants of Lot D – as well as extensions for the other plants where we hold an equity interest directly or through investees.

Our subsidiaries might suffer intervention by Brazilian public authorities to ensure adequate levels of service or be sanctioned by ANEEL for non-compliance with their concession agreements, or the authorizations granted to them, which could result in fines, other penalties and/or, depending on the severity of the non-compliance, legal termination of concession agreements or revocation of authorizations.

We conduct our generation, transmission and distribution activities pursuant to concession agreements entered into with the Brazilian Federal Government, through ANEEL, and pursuant to authorizations granted to companies of the CEMIG Group, as the case may be.

ANEEL may impose penalties or revoke a concession or authorization if we fail to comply with any provision of the concession agreements or authorizations, including those relating to compliance with the established quality standards. Depending on the severity of the non-compliance, these penalties could include:

Further,Furthermore, the Brazilian Federal Government can revoke any of our concessions or authorizations before the expiration of the concession term, in the event of bankruptcy or dissolution, or by legal termination, if determined to be in the public interest. It can also intervene in concessions to ensure adequate provision of the services, full compliance with the relevant provisions of agreements, authorizations, regulations and applicable law; and where it has concerns about the operations of the facilities of the Company.

Delays in the implementation and construction of new energy infrastructure can trigger the imposition of regulatory penalties by ANEEL, which, under ANEEL’s Normative Resolution No. 846 of June 11, 2019, can vary from warnings to the termination of concessions or withdrawal of authorizations.

Any compensation we may receive upon rescission of the concession agreement or revocation of an authorization may not be sufficient to compensate us for the full value of certain investments. If we are responsible for the rescission of any concession agreement, the effective amount of compensation could be lower, due to fines or other penalties. The imposition of fines or penalties or the early termination or revocation by ANEEL of any of our concession agreements or authorizations, or any failure to receive sufficient compensation for investments we have made, may have a material adverse effect on our business, financial condition and results of operations, and on our ability to meet our payment obligations.

Rules under the Fifth Amendment to the distribution concession contract came into effect in 2016. They contain new targets for service quality, and requirements related to CEMIG D’s economic and financial sustainability. These targets must be complied with over the 30 years of the concession. Compliance with these targets is assessed annually, and non-compliance could result in an obligation for CEMIG to inject capital into CEMIG D or a limitation on distribution of dividends or the payment of interest on equity by CEMIG D to CEMIG. According to ANEEL regulations, in case of failure to comply with global annual targets for collective continuity indicators for two consecutive years, or three times in five years, or at any time in the last five years of the agreement term, distribution of dividends or payment of interest on equity may be limited until compliance is resumed.

We are subject to extensive and governmental legislation and regulation which may be subject to change, and any changes to such legislation and regulation could have a material adverse effect on our business, results of operations and financial situation.

Our operations are highly regulated and supervised by the Brazilian Federal Government, through the MME, ANEEL, the National System Operator (Operador Nacional do Sistema, or ‘ONS’), and other regulatory authorities. These authorities have a substantial degree of influence on our business. MME, ANEEL and ONS have discretionary authority to implement and change policies, interpretations and rules applicable to different aspects of our business, particularly operations, maintenance, health and safety, consideration to be received and inspection. Any significant regulatory measure implemented by such authorities may result in a significant burden on our activities, which may have a material adverse effect on our business, results of operations and financial condition.

The Brazilian Federal Government has been implementing policies that have a far-reaching impact on the Brazilian energy sector. As part of the restructuring, Law No. 10,848, of March 15, 2004 introduced a new regulatory regime for the Brazilian energy industry. This regulatory structure has undergone several changes in recent years, the most recent being the changes added by PA 579 (which was converted into Law No. 12,783/2013), which governs the extension of some concessions governed by Law No. 9,074/1995. Under this law, such concessions can, from September 12, 2012, be extended only once, for up to 30 years, at the option of the concession authority.

Currently, the Law Project 232/2016 is under evaluation by the Congress. This draft law proposes changes in the legislation, arising from the former Public Consultation No. 33/2017, which includes some proposals for changes in the current regulatory model of the sector. These changes consist of subsidy reductions and revision of the allocation of costs, among others, creating the basis for a more open market.

Amendments in the legislation or regulations relating to the Brazilian energy industry could adversely affect our business strategy and the conduct of our activities if we are not able to anticipate the new conditions or if we are unable to absorb the new costs or pass them on to customers. In addition, we cannot guarantee that measures taken in the future by the Brazilian Federal Government, in relation to development of the Brazilian energy system, will not have a negative effect on our activities. Further, we are unable to predict to what extent such measures might affect us. If we are required to conduct our business and operations in a way that is substantially different from that specified in our business plan, our business, results of operations or financial position may be negatively affected.

Changes in Brazilian tax law or conflicts regarding its interpretation may adversely affect us.

The Brazilian Federal, state and municipal governments regularly implement changes in tax policies that affect us. These changes include the creation and alteration of taxes and charges, permanent or temporary, related to specific purposes of the government. Some of these governmental measures can increase our tax burden, which could affect our profitability, and consequently our financial situation. We cannot guarantee that we will be able to maintain our cash flow and profitability after an increase in taxes and charges that apply to us, and this might result in a material adverse effect on the Company.

We are subject to restrictions on our ability to make capital investments and to incur indebtedness, which could adversely affect our business, results of operations and financial condition.

Our ability to carry out our capital expenditure program is dependent upon a number ofseveral factors, including our ability to charge adequate rates for our services, access to the domestic and international capital markets, and a variety of operational and other factors. Further, our plans to expand our generation and transmission capacity are subject to compliance with competitive bidding processes. These bidding processes are governed by Law 13,303/2016 (the ‘State Companies Law’).

In relation to loans from third parties: (i) as a state-controlled company, we are subject to rules and limits relating to the level of credit applicable to the public sector, including rules established by the National Monetary Council (Conselho Monetário Nacional, or ‘CMN’), and by the Brazilian Central Bank; and (ii) we are subject to the rules and limits established by ANEEL that regulate indebtedness for companies in the energy sector. Also, although we may access both the international and local capital markets, we, as a state-controlled company, can only be financed with funds extended by local commercial banks if such debt is guaranteed by receivables, as well as with funds extended by Brazilian federal banks in transactions with the purpose of refinancing financial obligations contracted with entities of the Brazilian financial system.

Further,Furthermore, we are subject to certain contractual conditions under our existing debt instruments, and we may enter into new loans that contain restrictive covenants or similar clauses that could restrict our operational flexibility. These restrictions might also affect our ability to obtain new loans that are necessary for financing our activities and our growth strategy, and for meeting our future financial obligations when they become due, and this could adversely affect our ability to comply with our financial obligations. We have financing contracts and other debt obligations containing restrictive covenants, including Brazilian local market debentures and Eurobonds on international market.

We have approximately R$12.69.8 billion of outstanding debt with financial covenant restrictions, and any breach could have severe negative consequences to us. See ‘– The Company has a considerable amount of debt, and it is exposed to limitations on its liquidity – a factor that might make it more difficult for the Company to obtain financing for investments that are planned and might negatively affect its financial condition and its results of operation.’

If, for example, we breach a financial covenant under the CEMIG GT’s 9.25% Senior Notes due 2024 (the ‘Eurobonds’), we would be subject to an interest increase or acceleration of certain debt as a result of cross-default provisions under certain of our outstanding debt agreements. Similarly, if the Company violates a covenant under our debenture issuance, the debenture holders may accelerate the maturity of the debt in a meeting organized by the Fiduciary Agent (‘Trustee’), unless 75% of the debenture holders decide not to do so. Any acceleration of our outstanding debt could have a material adverse effect on our financial situation and may trigger cross-default clauses in other financial instruments.

In the event of a default and acceleration, our assets and cash flow might be insufficient to repay amounts due, or to comply with the servicing of such debt. In the past, we have, on certain occasions, failed to comply with certain financial covenants that had conditions that were more restrictive than those currently in place. Although we were able to obtain waivers from our creditors in relation to past non-compliance, we cannot guarantee that we will be successful in obtaining any particular waiver in the future.

The Company could suffer adverse effects in connection with its previous minority interest in Renova Energia S.A. if such entity is unable to continue as a going concern

We havehad a 36.23%13.80% investment in Renova Energia S.A. (‘Renova’), which is currently in a court-supervised reorganization, and has reported recurring losses and an equity deficit for the year ended December 31, 2020.

However, in view of the investee’s equity deficit, the Company reduced the carrying value of its equity interests in Renova to zero. No further losses have been recognized, considering the non-existence of any legal or constructive obligations to the investee. Additionally, since June 30, 2019, considering Renova's financial situation the Company recorded an impairment of the full amount of credits with the jointly controlled entity in the amount of R$688 million.2021.

On October 16, 2019, the request for processing the court-supervised reorganization of Renova Group was granted by São Paulo Bankruptcy Court and the respective court-supervised reorganization plans were approved by Renova goup of creditors at the General Meeting of Creditors held on December 18, 2020 and ratified by the Second Bankruptcy and Court-Supervised Reorganization Court of São Paulo. The main effects of the the court-supervised reorganization plan were recorded onin Renova’s financial statements atin December 2020 and its measures are in progress. See Note 16 to our Financial Statements.

Further,

In 2020, Renova is being investigated by the Civil Police of Minas Gerais State and the Brazilian Federal Police, see risk factor ‘Anti-corruption investigations currently in progress in Brazil, which have received wide public exposure, and any allegations against CEMIG or anti-corruption investigations of CEMIG, could have adverse effects on perception of Brazil and of CEMIG’.

Since the Company´s investment in Renova is fully impaired at December 31, 2020, and since no contractual or constructive obligations in relation to the investee have been assumed by the Company, it is not expected that effects resulting from the court-supervised reorganization process (the plan was approved and if its implementation is successful), or the investigations, or the operational activities of this investee can significantly impact the Company’s financial statements (refer to Note 16 to our consolidated financial statements for more detail).

Renova signed with the Companyentered into Debtor in Possession (DIP) loan agreements signed with the Company (CEMIG) in the total amount of R$37 million. The funds offrom these loans, made under specific rules of court-supervised reorganization proceedings, were necessary to support the expenses of maintaining the activities of Renova, and were authorized by the second State of São Paulo Bankruptcy and the Court-supervised Reorganization Court. TheySuch loans are guaranteed by a fiduciary assignment of shares inof a company owningthat owns assets of a wind power project owned by Renova, and they also have priority of receipt in the court-supervised reorganization process.

On May 2, 2020, the State of São Paulo Bankruptcy and Court-supervised Reorganization Court issued a decision ordering that the DIP loan, in the total amount of R$37 million, with asset guarantee, already constituted and registered, would be subscribed as a capital increase in Renova. Company has filed a Motion for Clarification and in a virtual and permanent session of the 2nd Chamber of Business Law of the São Paulo Court of Justice, decided to uphold the appeal. Thus, the clauses of the court-supervised plan that deal with the loan contracts signed by the Company are maintained.

On December 18, 2020, the in court supervised reorganization Plans filed by Renova were approved by the General Meeting of Creditors (AGC) and ratified by the recovery court on the same day.

On May 06, 2021 and August 23, 2021, the Renova Board of Directors approved partial ratification of its first and second capital increase, within the limit of the authorized capital, and in accordance with the terms of the court supervised reorganization plan. Cemig GT was not part of the group of creditors that requested conversion of their credits into equity and will not subscribe any part of the capital increase. On November 11, 2021 the third ‘window’ agreed for increase in Renova’s capital, specified in the in court supervised reorganization Plan, ended. This resulted in aggregate credits of not more than R$15. The equity interest held by Cemig GT in the common shares of Renova reduced from 36.23% to 13.80%.

On November 11, 2021, Cemig GT signed a Contract for Share Purchase and Assignment of Credits for Consideration, for disposal of its entire equity interest in Renova Energia S.A., and for assignment, for consideration, of the totality of its credits held against that investee. Thus, the investment was classified as a non-current asset held for sale. However, in view of the Renova’s equity deficit, the Company reduced the carrying value of its equity interests in Renova to zero. No further losses have been recognized, considering the non-existence of any legal or constructive obligations to the Renova. Additionally, since June 30, 2019, considering Renova's financial situation the Company recorded an impairment of the full amount of credits with the jointly controlled entity in the amount of R$688 million.

On December 1, 2021, sale of Renova’s entire equity interest in the UPI Brasil PCH to the other shareholders of Brasil PCH S.A. (BSB Energética S.A and Eletroriver S.A, exercising their right of first refusal under the Shareholders’ Agreement) was concluded, in the terms specified in the Tender Offer and in the in court supervised reorganziation Plan of the Renova Group. The funds received in the transaction, in the amount of R$1,100, were used for early settlement of the Debtor in Possession (DIP) loan contracted by its subsidiary Chipley SP Participação S.A., with co-obligation by Renova and Renova Participações S.A., with Quadra Gestão de Recursos S.A..

On January 27, 2022, Renova accepted the proposal presented by AES GF1 HOLDING S.A., under a share purchase agreement for sale of certain assets and rights of the Cordilheira dos Ventos complex, comprising the projects Facheiro II, Facheiro III and Labocó, in the State of Rio Grande do Norte, with potential for development of wind generation capacity of 305 MW. The agreement included the right to an earn-out if the generation capacity built in the areas comprising the project turns out to be higher than 305 MW. The transaction is subject to certain conditions precedent, including holding of a competitive proceeding for the disposal of the Cordilheira dos Ventos UPI, under the in court supervised reorganization Proceedings, with AES as First Proposer (i.e. of a ‘Stalking Horse’ offer), with the right to match any offer made by third parties interested in the acquisition. On March 15, 2022, this process was ratified by the Judge of the second Bankruptcies and Supervised Reorganization Court of the Central legal district of São Paulo, with AES GF1 Holding S.A. being declared the winner, for the amount of R$42.

Considering the non-existence of any legal or constructive obligations to the investee, the Company has concluded that the court-supervised reorganization filed by Renova does not have any additional impact on its financial statements for the year ended December 31, 2021.

On November 11, 2021, the Company signed a Share Purchase Agreement with AP Energias Renováveis Fundo de Investimento em Participações Multiestratégia, an Angra Partners’ investment vehicle, administered and managed by Mantiq Investimentos Ltda, including the sale of the whole equity interest held in Renova and the assignment, for consideration, of all credits owed to the Company by Renova Comercializadora de Energia S.A., for total consideration of R$60 million. The contract establishes the Company right to an earn-out, depending on certain future events.

On May 5, 2022, Cemig concluded the sale of its entire equity interest held in Renova Energia S.A. – In-court supervised reorganization – as well as the assignment, for consideration, of all credits owed to CEMIG by Renova Comercializadora de Energia S.A. – In court supervised reorganization – for a total consideration of R$60 million, with a right to receive an earn out subject to certain future events, as provided in Share Purchase Agreement (‘the Agreement’) entered into with AP Energias Renováveis Fundo de Investimento em Participações Multiestratégia on November 11, 2021.

In addition, since 2017, Renova has been a party to a formal investigation by the Civil Police of Minas Gerais State and the Brazilian Federal Police (see “The anticorruption investigations currently in progress in Brazil, which have had large-scale public exposure, and any allegations against, or anticorruption investigations of, CEMIG, may have adverse effects on the perception of Brazil, as well as on our business, financial conditions and results of operations.”). While this investigation remains ongoing, the Company cannot predict the outcome of these proceedings or how any such outcome may affect the business of the Company. The Company will continue to evaluate future developments with respect to its investment in Renova and will continue to cooperate with authorities in their analysis related to the ongoing investigation.

The Company cannot assure that, for the foregoing reasons, its shareholding in Renova will not have a material adverse effect on its business, financial condition or results of operations.

A reduction in our credit risk rating or in Brazil’s sovereign credit ratings could adversely affect the availability of new financing and increase our cost of capital.

The credit risk rating agencies Fitch Ratings,Standard and Poor’s, Moody’s and Standard and Poor’sFitch Ratings attribute a rating to the Company and its debt securities on a Brazilian basis, and also a rating for the Company on a global basis.

Ratings reflect, among other factors, the outlook for the Brazilian energy sector, the hydrological conditions of Brazil, the political and economic conditions, country risk, and the rating and outlook for the Company controlling shareholder, the State of Minas Gerais.

In the event of a downgrade due to any external factors, our operational performance or high levels of debt, our cost of capital could increase and our ability to comply with existing financial covenants in the instruments that regulate our debt could be adversely affected. Further, our operating or financial results and the availability of future financing could be adversely affected.

In addition, probable reductions in Brazilian sovereign ratings could adversely affect the perception of risk in relation to securities of Brazilian issuers, and, as a result, increase the cost of any future issues of debt securities. Any reductions in our ratings or Brazil’s sovereign ratings could adversely affect our operating and financial results, and our access to future financing.

Disruptions in the operation of, or deterioration of the quality of, our services, or those of our subsidiaries, could adversely affect our business, operating results and financial condition.

The operation of a complex system that interconnects numerous power generation plants with large transmission lines and distribution networks involves various risks, operational difficulties and unexpected interruptions, caused by accidents, equipment failure, underperformance or disasters (such as explosions, fires, climate events, floods, landslides, sabotage, terrorism, vandalism and other similar events). In the event of any such occurrence, the insurance coverage for operational risks may be insufficient to fully repay the asset damage or service interruption costs incurred. In addition, National Grid Operator decisions, Regulatory Agency acts, and Environmental Authority demands could adversely affect our business.

The Company's income is stronglyhighly dependent on equipment availability, service quality and regulatory compliance of the assets and facilities it builds, operates and maintains. FailingFailure to comply may lead to business and operating losses. For example, the distribution business may be penalized in the tariff revision process with a higher "X-factor", would reducing its expected annual revenue requirement; the transmission business may have its annual permitted revenue reduced due to any asset unavailability; and the generation business may have its earnings affected if a power plant does not meet a minimum availability sincelevels, because in the event that when hydro generation is less than thedoes not fully meet previously contracted energy levels, the equivalent shortfall has to be acquired at the spot price, which is highly volatile.

Penalties and financial compensation are applicable depending on the scope, severity and duration of the service or equipment unavailability. Thus, disruptions in power plants, transmission and distribution facilities, substations or networks, may have a material adverse effect on our business, financial situation and operating results.

We have a considerable amount of debt, and we are exposed to limitations on our liquidity – a factor that might make it more difficult for us to obtain financing for investments that are planned and might negatively affect our financial condition and our results of operations.

In order to finance the capital expenditures needed to meet our long-term growth objectives, we have incurred a substantial amount of debt. As of December 31, 2020,2021, our total loans, financing and debentures (including interest) waswere R$15,02011,364 million; an increasea decrease of 1.64%24.3% compared to the R$14,77715,020 million reported as of December 31, 20192020 and, anwhich 2020 amount represented increase of 1.68%1.7% compared to R$14,77214,776 million reported as of December 31, 2018.2019. Currently, 27.1420.2 % of our existing loans, financing and debentures - totaling R$4,0762,302 million, have maturities in the next threetwo years. To meet our growth objectives, maintain our ability to fund our operations and comply with scheduled debt maturities, we will need to raise debt capital from a range of funding sources. To service its debt after meeting the capital expenditure targets, the Company has relied upon a combination of cash flows provided by its operations, sale of assets, drawdowns under its available credit facilities, its cash and short-term financial investments balance and the incurrence of additional indebtedness. Any further lowering of its credit ratings may have adverse consequences on the Company’s ability to obtain financing or may affect its cost of financing, also making it more difficult or costly to refinance maturing obligations. If, for any reason, the Company were to face difficulties in accessing debt financing, this could hamper its ability to make capital expenditures in the amounts needed to maintain its current level of investments or its long-term targets and could impair its ability to timely meet its principal and interest payment obligations with its creditors. A reduction in the Company’s capital expenditure program or the sale of assets could significantly and adversely affect its results of operations.

Our strategy for maximizing value for CEMIG’s shareholdingsshareholders depends on external factors that could impede its successful implementation.

CEMIG’s strategy for shareholdingsto maximize shareholder value in the Company is the maximization of value and capital recycling based on three pillars:

All thoseof these pillars canmay be affected by external factors especiallythat are beyond the control of the Company, in particular any divestment that has totransactions which must take into consideration particular risks associated towith each relevant business, such as performance (technical, operational, commercial and financial), market risks, sectorial risks and national and international macroeconomic risks (e.g., market volatility). Furthermore, any closing of divestment operationstransactions will depend on the favorable development of negotiations with potential investors regarding the conditions of the possible transactions. The Company cannot provide any assurances that factors outside of its control will not hinder the implementation of its strategies to maximize shareholder value.

We mightmay be unable to implement the strategies in our long-term strategic planningplans within athe desired time,timeframe, or without incurring unforeseen costs, which could have adverse consequences for our business, results of operations and financial condition.

Our ability to meet our strategic objectives depends, largely, on successful, cost-effective and timely implementation of our Long-term Strategy and our Multi-year Business Plan. The following are some of the factors that could negatively affect this implementation:the implementation of our strategic plans:

The occurrence of the above factors, separately or taken together, mightcould lead to a significant increase ofin costs, and might delay or impede the implementation of initiatives, and consequently compromise the execution of theour strategic plan,plans and negatively affectingaffect our operating and financial results.

Furthermore, as we are a mixed-capital company controlled by the State of Minas Gerais, we are subject to changes to our board of directors and executive officers because of changechanges in the political agents of the Executive Branch of the State government duefrom time to the electoral processtime, as a result of elections and due to political instability. These types of changes may adversely affect the continuity of the Company’s strategy.

The operating and financial results of our subsidiaries, jointly controlled entities and affiliates, minority investees or from thoseany companies, which we may be acquiredacquire in the future, mightmay negatively affect our strategies, operating results and financial situation.

We own equity in and do business through various subsidiaries and investees, including companies with assets in the energy generation and transmission sectors, energy and natural gas distribution sectors and other correlatedrelated business. The future development of our subsidiaries, jointly-controlledjointly controlled entities and affiliates, such as Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’) and Aliança Geração de Energia S.A. (‘Aliança’) as well as Renova Energia S.A. (Renova), Guanhães Energia S.A., Norte Energia S.A. (‘NESA’) and Madeira Energia S.A. (‘MESA’), in which the Company has significant financial commitments, could have a significant impact on our business and operating results. The Company’s ability to meet its financial obligations is correlated, in part, to the cash flow and the profits of its subsidiaries and investees, and the consequent distribution to the Company by such companies of such profits in the form of dividends or other advances or payments. If these companies’ abilities to generate profitprofits and cash flowflows are reduced, this mightmay cause a reduction of dividends and interest on capital paid to the Company, which could have a material adverse effect on our results of operations and financial position.

In addition, the investees mightmay not reachachieve the results expected when they were acquired. The process of integration for any acquired business could subject the Company to certain risks, such as, for example, the following: (i) unexpected expenses; (ii) inability to integrate the activities of the companies acquired with a view to obtaining the expected economies of scale and efficiency gains; (iii) possible delays related to integration of the operations of companies; (iv) exposure to potential contingencies; (v) legal claims made against the acquired business that were unknown at the momenttime of its acquisition, might negatively affect our strategies, operating results and financial situation,acquisition; (vi) environmental licensing and liabilities, (vii) hydrological risk, (viii) power system operation and control, and (ix) general claims. The Company might be unsuccessful in dealing with these or other risks, or problems related to any other operation of a future acquisition and be negatively affected by the companies acquired or which may be acquired in the future.

Further,Furthermore, some of our subsidiaries and investees might, in the future, enter into agreements with creditors that could restrict dividend payments or other transfers of funds to the Company.

Due to the Covid-19 pandemic, results of subsidiaries and investees might be affected, since the reduction on economic activity has the potential to decrease energy consumption, leading some of those companies to lose their abilities to generate profit, reducing cash flow and dividends and interest on capital paid to the Company. These subsidiaries are separate legal entities. Any rightrights that we mightmay have in relation to the receipt of assets or other payments in the event of liquidation or reorganization of any subsidiary, will likelycould be in fact structurally subordinated to the demands of the creditors of such subsidiary (including tax authorities, commercial creditors and lenders to those subsidiaries).

Any deterioration in the operating results or financial conditions of these subsidiaries, and any sanctions or penalties imposed on them, could have a material adverse effect on the Company’s business results of operations or financial condition.

Delayed completion of construction projects or late capitalization of new investments in our generation, transmission and distribution companies could adversely affect our business, operationoperating results and financial condition.

We are constantly engaged in the construction and expansion of our plants, transmission lines, distribution networks and substations, and studyingregularly consider other potential load expansion projects. The company’s capabilityCompany’s ability to complete projects within deadlines and on budget, without adverse economic effects, is subject to various risks. For instance, we may encounter the following:

If faced with any of these or similar issues related to the new investments or to the expansion of our generation, transmission or distribution capacity, the Company might incur increased costs or lower profitability than originally expected for the projects.

The level of default by our customers could adversely affect our business, operating results and/or financial situation, as well as those of our subsidiaries.

On December 31, 2020,2021, the total of our past-due receivables owed by our customers, traders and power transport concession holders waswere approximately R$1,249 million (R$1,510 million (R$1,635 million in 2019)2020), corresponding to 5.99%3.71% of our consolidated net revenue in 2020 (6.42%2021 (5.99% in 2019)2020). We have recorded in 20202021 an allowance for doubtful accounts in the amount of R$833 million (R$712 million (R$810 million in 2019)2020). The possibility exists that we mightmay be unable to collect amounts receivable from various customers, which are in arrears. If such debts are not totally or partially settled, we will suffer an adverse impact on our business, operationoperating results and/or financial situation. Additionally, the amount of debts in arrears from our customers that exceeds the allowance could cause an adverse effect on our business, operating results and/or financial condition.

CEMIG D’s economic and financial sustainability is directly related to the effectiveness of the actions to control energy losses, and the regulatory limits established for it. If CEMIG D fails in successfully controlling energy loss, its business, operations, profit and financial situation could be substantially and adversely affected.

The energy losses of a distribution company comprise two types of losses: technical losses and non-technical (commercial) losses. Technical losses are inherent to the process of transporting and the transformation of electric power and occur in the cables and equipment of the energy system. Non-technical losses comprise energy that is supplied and not invoiced, which may be the result of illegal connections (theft), fraud, metering errors or failures in internal processes.

CEMIG’s Total Losses Index as of December 31, 2020,2021, using a 12-month window, was 12.57%11.27%. This percentage is in relation to the total energy injected into the distribution system (the total volume of losses was 6,5456,135 GWh). Of that percentage, 8.77% comprised technical losses, and 3.80%2.50% comprised non-technical losses. This result was 0.161.3 percentage points lower than the result for December 2019 (12.73%2020 (12.57%), and abovebelow the regulatory target set by ANEEL for 2020 (11.43%2021 (11.28%).

From a regulatory point of view, ANEEL has been increasingly rigorous in establishing target caps for distribution losses. The target caps for non-technical losses are set based on a benchmarking model that compares using an index, which measures the social-economic complexity of each concession area and how efficient the distributors are in combating non-technical energy losses. For the targets for technical losses, ANEEL uses metering measurements and power flow software.

In light of this complex scenario involving regulatory uncertainties, even with the implementation of a strategy to reduce technical and commercial losses, CEMIG cannot guarantee that the target caps for losses established by ANEEL will be met in the short term, and this could affect the Company’s financial situation and operating results, since the portion of a distribution company’s power losses that exceeds the regulatory cap cannot be passed through to the customercustomers as an expense in the form of an increase in tariffs.

Dams are part of the critical and essential infrastructure in the Brazilian energy sector. Dam failures can cause serious damage to affected communities and to the Company.

There is an intrinsic risk of dam failure, due to factors that may be internal or external to the structure (such as, for example, failure of a dam upstream from the site). The scale, and nature, of the risk are not entirely predictable. Thus, we are subject to the risk of a dam failure that could have repercussions far greater than the loss of hydroelectric generation capabilities. The failure of a dam could result in economic, social, regulatory, and environmental damage and potential loss of human life in the communities downstream from dams, which could have a material adverse effect on the Company’s image, business, results of operations and financial condition.

We might be held responsible for impacts on our own workforce, on the population and the environment, due to accidents related to our generation, transmission and distribution systems and facilities.

Our operations, especially those related to transmission and distribution lines, present risks that may lead to accidents, such as electrocutions, explosions and fires. These accidents may be caused by natural occurrences, human errors, technical failures and other factors. As a significant part of our operations is conducted in urban areas, the population is a factor to be constantly considered. Any incident that occurs onat our facilities or in human occupied areas, whether regularly or irregularly, can result in serious damages such as human losses,loss of life, environmental and material damage, loss of production and liability in civil, criminal and environmental lawsuits. These events may also result in reputational damage, financial compensations,damages, penalties for the Company and its officers and directors, and difficulties in obtaining or maintaining concession contracts and operating licenses.

Requirements and restrictions imposed by environmental agencies might require the Company to incur additional costs.

Our operations relating to generation, distribution and transmission of energy and distribution of natural gas are subject to various Federal, state and municipal laws and regulations, and to numerous requirements relating to the protection of health and the environment. Delays by the environmental authorities, or the refusal of license requests by them, or any inability on our part to meet the requirements set by these bodies during the environmental licensing process, may result in additional costs, or even, depending on the circumstances, prohibit or restrict the construction or maintenance of these projects.

Any non-compliance with environmental laws and regulations, such as construction and operation of a potentially polluting facility without a valid license or authorization, could give rise to the obligation to remedy any damages that are caused (third party liability) and result in criminal and administrative sanctions. Under Brazilian legislation, criminal penalties, such as imprisonment and restriction of rights, may be applied to individuals (including managers of legal entities), and penalties such as fines, restriction of rights or community service may be applied to companies. With respect to administrative sanctions, depending on the circumstances, the environmental authorities may: (i) impose warnings, or fines, ranging from R$50,000 to R$50 million; (ii) require partial or total suspension of activities; (iii) suspend or restrict tax benefits; (iv) cancel or suspend lines of credit from governmental financial institutions; or (v) prohibit us from contracting with governmental agencies, companies or authorities. Any of these actions could adversely affect our business, results of operations and financial condition.

We are also subject to Brazilian legislation that requires payment of compensation if our activities have polluting effects. According to Federal Law No. 9,985/2000, Federal Decree No. 6,848/2009, and Minas Gerais State Decree No. 45,175/2009, up to 0.5% of the total amount invested in the implementation of a project that causes significant environmental impact should be used to pay for offsetting, based on the project’s specific level of pollution and environmental impact. State Decree 45,175/2009 (‘Decree 45,175’) also indicated that the compensation rate will be applied retroactively to projects implemented prior to promulgation of the present legislation.

Among the provisions of law that can lead to operating investments and expenses, one is compliance with the Stockholm Convention on Persistent Organic Pollutants (the ‘Convention’), to which Brazil is a signatory, assuming the international commitment to withdraw the use of PCB by 2025, and its complete prohibition by 2028, through Decree No. 5,472, of June 20, 2005. The legislation to be enacted for this purpose could have a major effect on the energy industry and on CEMIG, due to the possibility of obligations to list, replace and dispose of equipment and materials containing substances included in the Convention such as Polychlorinated Biphenyls (PCBs).

If we are unable to meet the technical requirements established by the environmental agencies during the process of licensing, this might prejudice the installation and operation of our projects, or make carrying out of our activities more difficult, which could negatively affect our business, financial, condition and results of operations.

Finally, the adoption or implementation of new safety, health and environmental laws, new interpretations of existing laws, increased rigidity in the application of the environmental laws, or other developments in the future might require us to make additional capital expenditureexpenditures or incur additional operating expenses in order to maintain our current operations. They might also restrain our production activities or demand that we take other action that could have an adverse effect on our business, results of operations or financial condition.

Cyber-attacks,Cyberattacks, or violation of the security of our data might lead to an interruption of our operations, or a leak of confidential information either of the Company, or of our customers, third parties or interested parties, might cause financial losses, legal exposure, damage to reputation or other severe negative consequences for the Company.

We manage and store personal and sensitive or confidential data related to our business. Our information technology systems may be vulnerable to a variety of and cybersecurity breaches and incidents. Computer hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions, or cause shutdowns. Computer hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products.

The costs we may incur to eliminate or address the security problems and security vulnerabilities before or after a cyber-related incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or potential customers that may impede our critical functions.

Successful cybersecurity attacks, breaches, employee malfeasance, or human or technological error may result in unauthorized access to, disclosure, modification, improper use, loss or destruction of data or systems, including those belonging to us, our customers or third parties; theft of sensitive, regulated or confidential data including personal information; the loss of access to critical data or systems through ransomware, destructive attacks or other means; transaction errors; business delays; and service or system disruptions. We have observed an increase in cybersecurity attacks worldwide in 2020 and 2021, and the remote working arrangements that we have implemented due to the Covid-19 pandemic have increased our dependence on information technology systems and infrastructure, and they may further expand our vulnerability to this risk. In the event of such actions, we, our customers or other third parties could be exposed to risk of loss or improper use of this information, resulting in litigation and potential liability, damage to our brand and reputation, or otherwise harm our business. In addition, we rely on third-party infrastructure providers whose potential security vulnerabilities could have impact in our business.

On December 25, 2020 an anomalous behavior, related to ransomware attacks, was detected by our Security Operation Center (SOC). Due to a quick and efficient response by CEMIG Cyber Security Team (CSIRT) the Industrial Control System (ICS) related to our critical infrastructure and the main databases (customers, billing and enterprise management) were not affected and no data was exfiltrated, causing no impact to customer services this way.

The regulatory environment with regards to cybersecurity, privacy and data protection issues is increasingly complex and may have impacts on our business, including increased risk, costs and expanded compliance obligations.

Failures in the security of our databases containing customer personal data, as well as events related to non-compliance with data privacy and protection legislation may have an adverse effect on our business, results of operationoperations and reputation.

We have databases containing collected personal data from our customers, partners and collaborators. Any improper use of this data, or failures in the correct use of our security protocols may negatively affect the integrity of those databases. Unauthorized access to information concerning our customers, or unauthorized disclosure of sensitive information, may subject us to lawsuits, and as consequence, we might incur financial liabilities, penalties and reputational damage.

The Brazil General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD), was signed into law in August 2018 and came into effect on September 18, 2020, with the exception of the administrative sanctions, which are expected to come into effect in August 2021. This law2021 establishes rules and obligations regarding the collection, processing, storage and use of personal data and will affectimpacts all economic sectors including the relationship between customers and suppliers of goods and services, employees and employers and other relationships in which personal data is collected, whether in a digital or physical environment. Violations of the LGPD carry financial risks due to penalties for data breach or improper processing of personal data. The new legislation establishes penalties for non-compliance that include application of fines of up 2% of revenues, limited to R$50 million, for the most serious infringements. An increased number of data protection laws around the globe may continue to result in increased compliance costs and risks. The potential costs of compliance with or imposed by new or existing regulations and policies that are applicable to us may affect our business and could have a material adverse effect on our results of operations.

Increases in energy purchase prices could cause an imbalance in CEMIG D’s cash flows.

The expense on purchase of power from the distributors is currently strongly linked to the PLD price (Availability Contracts, Physical Guarantee quotas, and Itaipu Hydroelectric Plant quotas) and to MRE’s adjustment factor (Physical Guarantee quotas, Itaipu quotas and Hydrological Risk of the plants that have been renegotiated).

In 2018,2021, a combination of negative factors affected purchases by the distributors, including (i) an adverse period in terms of rainfall, resulting in high spot prices from May to October; and (ii) seasonalizationseasonality of the physical guarantee of the MRE, allocating a large volume of energy in the second half of 2018,2021, resulting in very low MRE adjustment factors between June and October. In 2019, the spot prices were not as high as in 2018.November.

The ‘Flag Account’ (Conta Centralizadora de Recursos de Bandeiras Tarifárias – CCRBT or ‘Conta Bandeira’) manages the funds that are collected from captive customers of distribution concession and permission holders operating in the national grid, and are paid, on behalf of the CDE, directly to the Flag Account. The resulting funds are passed through by the CCEE to distribution agents, based on the difference between the realized amounts of costs of thermal generation and the exposure to short term market prices, and the amount covered by the tariff in force.

force The first half of 2019 had a smaller deficit on the Tariff Flag account compared to same period in the previous year and, as of June, 2019, the account no longer presented a deficit and 2019 ended with an accumulated surplus of R$745 million for all distribution companies in Brazil. This positive result was due to the better hydrological conditions of the system.

In 2020, the surplus lasted for almost the entire year, but started a declining trend from October, reaching a deficit of around R$3 billion in November for all distribution companies. The reason for the deficit was the increase in energy costs, mainly due to a considerable increase in PLD prices in that month. Due to the actions undertaken to mitigate the impacts of the pandemic, ANEEL suspended the application of tariff flags in 2020, but with the scenario getting worse, there was a necessity to reapply it in December 2020 at its maximum value.

In 2021, hydrological conditions continued to deteriorate and several measures were taken to avoid energy rationing. As a result, the Company decided to carry out a greater dispatch of energy from plants with higher costs (thermal generation), which had a consequential impact on the costs of the flag account. 2021 started with a deficit of approximately R$3 billion, which amount increased throughout the year. In order to stabilize the balance of the account against the increase in generation cost of electricity power, the Brazilian government instituted the so-called “bandeira escassez hídrica”, increasing the amount of the surcharge to be charged from consumers and which will be used during the period of September 2021 until April 2022.

The methodology of the Tariff Flag system is reviewed every year, always seeking improvements, butyear; however, under the present methodology, when very adverse situations occur the system cannot respond sufficiently, resulting in negative effects on the distributors’ cash position. This factor could have an adverse effect on our business, operating results and financial condition.

Brazil’s supply of energy is heavily dependent on hydroelectric plants, which in turn dependdepends on climatic conditions to produce energy. Adverse hydrological conditions that result in lower generation of hydroelectric power could adversely affect our business, results of operations and financial condition.

Hydroelectric generation is predominant in Brazil. The advantages of hydroelectric power have also been widely publicized due to it isbeing a renewable resource and avoids substantial expenditures on fuels in thermal generation plants. At the same time, the main difficulty inrisk related to the use of this resource arises from the variability of the flows to the plants. There are substantial seasonal variations in monthly and annual flows, which depend fundamentally on the volume of rain that falls in each rainy season. Adverse hydrological conditions in the Brazilian southeast region caused drought and water scarcity in the states of São Paulo, Minas Gerais and Rio de Janeiro in recentthe past. These conditions might become worse during the dry period, which occurs from April through September. This could cause rationing of water consumption and/or energy, which could have a material adverse effect on the Company’s business and results of operations.

To deal with this difficulty, the Brazilian system has a complementary component of thermoelectric generation plants, and a growing portfolio of wind farms and Photovoltaic solar farms. It also has accumulation reservoirs, the purpose of which is to secure water from the rainy to the dry period and from one year to the next. However, these mechanisms are not able to absorb all the adverse consequences of a prolonged hydrological shortage, like the one that we have seen in the recent past.

The National Energy System Operator (Operador Nacional do Sistema, or ‘ONS’) coordinates the operation of the Brazilian energy system. Its primary function is to achieve optimal operation of the resources available, minimizing operating cost,costs, and the risks of shortage of energy.energy shortage. In periods when the hydrological situation is adverse, a decision by the ONS might, for example, reduce generation by hydroelectric plants and increase thermal generation, which results in higher costs for the hydroelectric generating agents, as happened in 2014. In the distributors, this increase in costs generates an increase in the purchase price of energy that is not always passed through to the customer at the same moment, generating mismatches in cash flows, with an adverse effect on the business and financial situation of those distributors. In addition, in extreme cases of scarcity of energy due to adverse hydrological situations, the system might undergo rationing, which could result principally in reduction of cash flow.

The MRE aims to mitigate the impact of the variability of generation of the hydroelectricalhydroelectric plants. This mechanism shares the generation of all the hydroelectricalhydroelectric plants in the system in such a way as to supplement the shortage of generation of one plant with excess generation by another. However, this mechanism is not able to eliminate the risk of the generation players, because when there is an extremely unfavorable hydrological situation, to the extent that all the plants in aggregate are unable to reach the sum of their Physical Guarantee levels of energy output, this mechanism makes an adjustment to the Physical Guarantee of each plant through the Physical Guarantee Adjustment Factor (Fator de Ajuste da Garantia Física, or ‘GSF’), resulting in the generating companies being exposed to the short-term (‘spot’) market.

The company transferred to captive customers the hydrological risk related to Queimado and Irapé power plants (Regulated Market Contracts), in exchange for payment of a ‘risk premium’, while also receiving indemnity for the losses suffered in 2015 through.

In the free market, we do not have the same process, since even with the payment of the premium, generation companies would have had to continue assuming the hydrological risk at moments of critical hydrology. Thus, no plant that sells energy in the free market signed up for any renegotiation of hydrological risk.

Those operators that did not subscribe to the renegotiation continued to have injunctions preventing charging of the hydrological risk in full. These injunctions are causing a deficit of approximately R$10.0301.078 billion in the short-term market as of December 2020.2021. This position increases the level of default calculated by the CCEE, thus reducing the amounts received by creditor agents in the short-term market. To avoid this effect, some creditor agents filed for further injunctions to acquire the right to priority in receipt. This effect leads to uncertainty in the market, reduction of liquidity, increase of default, and reduction in amounts received in the short-term market, representing a risk for the Company.

Any substantial seasonal variation in the monthly flows and in the total of flows over the year could limit hydroelectric generation, making it necessary to use alternative generation systems, which could have a significant adverse effect on the Company’s costs, including court fees and expenses relating to the subject.

Law 14,052/2020 and Resolution 895/2020 proposed the reimbursement of agents holding the concession of hydraulic plants in the MRE of the effects: (i) generation in disregard of the merit order which means dispatching energy to the grid in disregard of the ascending price ranking for energy generation, (ii) anticipation of delivery of firm energy to the system of relevant power plants, and (iii) restriction to the supply of energy to the grid due to delay in the transmission system. These effects will bewere calculated retroactively from 2012 to 2020, updated and remunerated at the ANEEL rate of 9.63%. The amount will then behas been paid through extension of the plants' concession. With this new agreement, injunctions are expected to be withdrawn and market deficits to be settled. In this way, the liquidity of the market in the short term and the default in the CCEE should return to their historical values.

The rules for energy trading and market conditions may affect the sale prices of energy.

Under applicable laws, our generation companies are not allowed to sell energy directly to distributors. Thus, the power generated by our companies is sold in the Regulated Market (Ambiente de Contratação Regulado, or ‘ACR’) – also referred to as the ‘Pool’ – through public auctions held by ANEEL, or through the Free Market (Ambiente de Contratação Livre, or ‘ACL’) through bilateral negotiations with customers and traders. The applicable legislation allows distributors that sign contracts for existing energy supply (‘energia existente’) with generation companies in the Regulated Market to reduce the quantity of energy contracted by up to 4%, per year, in relation to the amount of the original contract, for the entire period of the contract. This exposes our generation companies to the risk of not selling the de-contracted supply at adequate prices.

We conduct trading activities through power purchase and sale agreements, mainly in the Free Market, through our generation and trading companies. Contracts in the Free Market may be entered into with other generating entities, energy traders, or mainly, with ‘free customers.’ Free customers are customers with a demand of 1.5 MW or more: they are allowed to choose their energy supplier, this limit will be reduced to 1.0 MW in 2022 and 0.5 MW in 2023 (Ordinance 465, published by the Ministry of Mines and Energy in December 2019). Some contracts have flexibility in the amount sold, allowing the customer to consume a higher or lower amount (5% on average) from our generating companies than the original amount contracted, which might cause an adverse impact on our business, operating results and/or financial situation.

Other contracts do not allow for this kind of flexibility in the purchase of energy, but increased competition in the Free Market could influence the occurrence of this type of arrangement in purchase contracts.

In addition to the free customers referred to above, there is a category of customers referred to as ‘Special Customers’, which are those with contracted demand between 0.5 MW and 1.5 MW. Special Customers are eligible to participate in the Free Market provided they buy energy from incentive-bearing alternative sources, such as Small Hydroelectric plants, biomass plants or wind farms. As envisaged by the Ordinance 465/2019, by 2023 the demand restriction for free consumers will suffer reduction from 3.0 MW to 0.5 MW and consider there will be no more separation of free and special consumers. The Company has conducted sales transactions for this category of energy from specific energy resources in particular companies of the CEMIG Group and, since 2009; the volume of these sales has gradually increased. The Company has formed a portfolio of purchase contracts, which now occupies an important space in the Brazilian energy market for incentive-bearing alternative power sources. Contracts for the sale of energy to these customers have specific flexibilities to serve their needs, and these flexibilities of greater or lesser consumption are linked to the historic behavior of these loads. Higher or lower levels of consumption by these customers may cause purchase or sale exposures to spot prices, which can have an adverse impact on our business, operating results and/or financial situation. Market variations, such as variations of prices for signature of new contracts, and of volumes consumed by our customers in accordance with flexibilities previously contracted, can lead to spot market positions, which can potentially have a negative financial impact on our results.

The MRE aims to reduce the exposure of generators of hydroelectric power, such as our generation companies, to the uncertainties of hydrology. It functions as a pool of hydroelectric Generation Companies, in which the generation of all the plants participating in the MRE is shared in such a way as to meet the demand of the pool. When the totality of the plants generates less than the amount demanded, the mechanism reduces the assured offtake levels of the plants, causing a negative exposure to the short-term (‘spot’) market and, as a consequence,therefore, the need to purchase power supply at the spot price. Correspondingly, when the total generation of the plants is higher than the volume demanded, the mechanism increases the guaranteed offtake level of the plants, leading to a positive exposure, permitting the liquidation of power at the PLD. In years of poor rainfall, the reduction factor, which applies to the assured energy levels, can reduce the levels of the hydroelectric plants by 20% or more.

Low liquidity or volatility in future prices, due to market conditions and/or perceptions, could negatively affect our results of operations. Further, if we are unable to sell all the power that we have available (our own generation capacity plus contracts under which we have bought supply of power) in the regulated public auctions or in the Free Market, the unsold capacity will be sold in the CCEE at the PLD, which tends to be very volatile. If this occurs in periods of low spot prices, our revenues and results of operations could be adversely affected.

The PLD’s value is calculated through the results of the optimization models of the operation of the national grid used by the ONS and by the CCEE. The PLD is currently published weekly by the CCEE for three load levels (light, medium and heavy). The models depend on entry data revised by the ONS at each period of four months, monthly, and weekly. In this system, there is the possibility that errors occur during the input of data into the model, which can lead to an unexpected change in the PLD. Alteration of these models, and errors in data input, constitute risks for the trading business, because they cause uncertainty in the market, reducing liquidity, and financial losses due to the unexpected change of price. To mitigate the risk of change of the models during the current year, the National Energy Policy Council (CNPE) published a note in 2016 which established that changes in the mathematical models used in the sector will need to be approved by the CPAMP (‘Comissão Permanente para Análise de Metodologias’ – Standing Committee for Methodologies Analysis and Energy Industry Computer Programs) by July 31 of each year in order to be in force in the subsequent year.

The Covid-19 pandemic has put the world on alert, prompting countries to take substantial measures to contain people to reduce the spread of the virus. In Brazil, these measures started in Mid-March of 2020 and their impacts on the Brazilian energy market were noticed almost immediately with a reduction in the energy consumption of the National Integrated System of approximately 13% in the week following the implementation of these measures. The reduction in consumption, with the consequent deceleration of the economy, lead to an increase in the levels of the reservoirs, since less hydroelectric generation is necessary to meet the lower consumption. Thus, the combination of these factors led to a reduction in prices in the short-term market. With regard to market prices, the evolution of systemic conditions and the revision in market forecasts led to a reduction in contract prices in the medium term. In this sense, the increase or decrease in exposure will depend on the contractual position and contract flexibility at each moment.

In 2020, the frequency of changes in the PLD were increased to hourly. Having an hourly PLD improves the PLD’s adherence to the real operation of the system, which will then better capture the hourly changes in the intermittent sources (solar and wind). This better alignment of price with operation tends to reduce the System and Service Charges (‘ESS’), and to remunerate the thermoelectric generation plants more efficiently when they are activated. On the other hand, the quality of the entry data when input on an hourly basis, especially for solar and wind sources, introduces one more element of uncertainty to the pricing of the market.

The anticorruption investigations currently in progress in Brazil, which have had large-scale public exposure, and any allegations against or anticorruption investigations of CEMIG, mightmay have adverse effects on the perception of the country,Brazil, as well as on our business, financial conditions and on us.results of operations.

Certain anti-corruption investigations could have adverse effects on CEMIG or other companies of the CEMIG Group. Investors’ perception aboutof Brazil has been adversely affected by investigations of public corruption in large Brazilian companies, and by political events, which mightmay represent potential risks to the social and economic outlooks for Brazil.

Among the Brazilian companies involved in these investigations are state-controlled companies in the oil and gas, electricity and infrastructure sectors, and private companies in the construction and equipment supplier sectors, which are being submitted to investigations due to accusations of corruption by the Brazilian Securities Commission (‘CVM’), the Federal Police, the Brazilian Public Attorneys, the Federal Audit Board, the U.S. Securities and Exchange Commission (‘SEC’) and the U.S. Department of Justice (‘DOJ’), among others.

In the energy industry, EletrobrásEletrobras has set up an independent internal investigation into possible non-compliancesnon-compliance with law and/or regulations indicated by media reports that alleged illegal acts related to service providers of Norte Energia S.A. (NESA) and of Madeira Energia S.A. (MESA) for the construction of Belo Monte and Santo Antônio hydroelectricalhydroelectric plants, respectively and some other special purposes entities, in which Eletrobras holds a minority stake. There have been no direct findings against NESA or MESA nor against any of its managers or employees, and the supposed illegal acts are in fact alleged to have taken place before NESA was formed. The internal investigation, however, estimated the economic and financial impact of these alleged illegal acts, related to NESA’s service providers at R$183 million, and this was considered by Eletrobras and by NESA in accounting analyses and conclusions for the year ended December 31, 2015. This total supposedly represents amounts estimated in excess for acquisition of machines, equipment, services, capitalized charges and administrative expenses, since the alleged improper payments were not made by NESA, but by contractors and suppliers of the Belo Monte hydroelectricalhydroelectric plant; and this impedes identification of the amount and precise periods of the payments.

CEMIG holds, through CEMIG GT, an 11.69% indirect minority stake in NESA, through the jointly-controlledjointly controlled entities Aliança Norte Energia Participações S.A. and Amazônia Energia S.A. and the estimated amount of losses has already been recorded in CEMIG’s consolidated financial statements as of and for the year ended December 31, 2015.

The independent internal investigation of MESA, concluded in February 2019, in the absence of any future developments such as any leniency agreements by third parties that may come to be signed or collaboration undertakings that may be signed by third parties with the Brazilian authorities, found no objective evidence enabling it to be affirmed that there were any supposed undue payments by MESA that should be considered for possible accounting write-off, pass-through or increase of costs to compensate undue advantages and/or linking of MESA with the acts of its suppliers, in the terms of the witness accusations and/or cooperation statements that have been made public.

Since 2017, Renova, a company in which CEMIG has a direct stake of 36.23%13.80%, is part of a formal investigation conducted by the Civil Police of Minas Gerais State in relation to certain injections of capital made by some of its controlling shareholders, including the Company, and capital injections made by Renova in certain projects under development in previous years. The equity interest held in Renova, which carrying amount is zero, was classified as an asset held for sale on December 31, 2021.

On April 11, 2019, the Brazilian Federal Police commenced the ‘Operation E o Vento Levou’ as part of the Lava Jato Investigation and executed a search and seizure warrant issued by a Federal Court of São Paulo at Renova’s head office in São Paulo, based on allegations and indications of misappropriation of funds harmful to the interests of CEMIG. Based on the allegations being investigated, these events are alleged to have taken place before 2015. On July 25, 2019, the second phase of such investigation was initiated.

The ‘Operation E o Vento Levou’ and the police investigation of the Minas Gerais State Civil Police (PCMG) have not yet been concluded. Thus, there is a possibility that material information may be revealed in the future. If a criminal action is filed against agents who damaged Renova, Renova intends to act as auxiliary to the prosecution in any criminal proceedings, and subsequently sue for civil recovery of the damages suffered.

In 2019, the tax authority issued infraction notices against Renova, questioning the calculation of income tax and social contribution tax, and payment of withholding income, relating to contracts of services which allegedly did not have the due perfomance,performance, in the estimated amount of R$89 million. Based on the opinion of its legal advisors, Renova provided for this amount as contingency on its financial statements.

Due to these third partythird-party investigations, the governance bodies of Renova requested the opening of an internal investigation, conducted by an independent companya third-party investigator with the support of an external law firm. The internal investigation was concluded on February 20, 2020, and according to a statement Renova issued at the time, no concrete evidence of acts of corruption or diversion of funds to political campaigns was identified.

However, the independent investigators identified irregularities in the conducting of business and agreement of contracts by Renova, including: (i) payments without evidence of the performance of services, in the total amount of approximately R$40 million; (ii) payments not in accordance with the company’s internal policies and best governance practices, in the total amount of approximately R$137 million; and (iii) deficiencies in the internal controls of the investee.

As a result of the analysis of the above mentionedabove-mentioned values, Renova concluded that R$35 million relates to effective assets and therefore no impairment was necessary. The remaining amount of R$142 million was already impaired in previous years, producing no impact on the consolidated financial statements for the year ended December 31, 2019.

In response to the irregularities found and based on the recommendations of the Monitoring committee and legal advisers, the Board of Directors of Renova decided to take all the steps necessary to preserve the rights of the investee, continue with the measures to obtain reimbursement of the losses caused, and strengthen Renova’s internal controls. Additionally, the Executive Board of Renova hired a Chief Officer for Governance, Risk and Compliance, who will be responsible, among other duties, for ensuring the effiectivenesseffectiveness of Renova´s internal controls and compliance processes.

Since our investment at Renova, classified as held for sale, is fully impaired aton December 31, 2020,2021 and since no contractual or constructive obligations in relation to the investee have been assumed by the Company, it is not expected that effects resulting from the investigations can significantly impact the Company’s financial statements, even if such effects may not yet be recorded by Renova.

In addition to the cases above, there are investigations being conducted by the Public Attorneys’ Office of the State of Minas Gerais (MPMG) and by the Civil Police of the State of Minas Gerais (PCMG), which aim to investigate possible irregularities in the investments made by CEMIG in Guanhães Energia S.A. and in MESA (Santo Antônio Energia S.A. or ‘SAESA’). Additionally, on April 11, 2019 agents of the Brazilian Federal Police were in the Company’s head office in Belo Horizonte to execute a search and seizure warrant issued by a São Paulo Federal Court in connection with the ‘Operation E o Vento Levou’, as described above. These proceedings are being investigated by reviewing of documents requested by the respective authorities, and by hearing of witnesses. At present, it is not possible to determine what the results of the MPMG and PCMG’s investigations will be.

Taking into accountConsidering these investigations, we contracted specialized independent advisersthird-party investigator to analyze the internal procedures related to these investments, as well as the Company internal proceedings related to the acquisition of Light’s interest in Enlighted (see Note 25 of the Financial Statements). The specialized independent company’s investigation was subject to oversight of an independent investigation committee whose creation was approved by our Board of Directors. The specialized independent advisers’ investigation was completed in May 2020 and identified no objective evidence substantiating illegal acts made by Company in the Company’s investments that were the subjects of the investigation. Therefore, there was no impact in the consolidated financial statements as of December 31, 2020.

By the end of 2020, CEMIG initiated internal investigations into allegations that are the subjects of inquiries conducted by the Minas Gerais State Public Attorneys´ Office,MPMG, regarding certain alleged irregularities in public bidding and purchasing processes. The investigations are being conducted by a new Special Investigation Committee (Comitê Especial de Investigação – ‘CEI’), with support from specializedthird-party investigator and external law firm.

On November 24, 2021 the independent advisers.internal investigation begun in 2020 has been concluded, and its final report has been delivered and was approved by the Investigation Committee. However, the Company awaits completion of the investigations by the Public Attorneys’ Office of Minas Gerais State (MPMG) and by other Brazilian and international authorities that are still ongoing.

The Executive Board determined the establishment of a disciplinary administrative process (‘Processo Administrativo Disciplinar)Disciplinar) to verify the veracity of the allegations and to pursue the preventive removal of certain personnelall managers from the Supply and Logistics area, which aims to ensure impartiality and exemption in the investigations.

CEMIG is and has been fully cooperating with any and all investigation and inspection by competent authorities, whether in the United States or Brazil. For example, in July 2019, pursuant to the DOJ’s Corporate Enforcement Policy, the Company disclosed the above-described investigation to the DOJ and the SEC and has been cooperating with those agencies. We cannot guarantee that CEMIG or companies of the CEMIG Group will not in the future become target of legal actions based on these or future investigations, whether in the United States or Brazil.

Any future anti-corruption actions, which might find failures of conduct by the management of the Company or by third parties, might result in fines, penalties or significant negative postings in the accounts, or intangible damage, such as damage to reputation, and/or other significant, unforeseen, adverse effects.

We may be exposed to behaviors that are incompatible with our standards of ethics and compliance, and we might be unable to prevent, detect or remedy them in time, which might cause material adverse effects on our business, results of operations, financial condition and reputation.

Our businesses, including our relationships with third parties, are orientedguided by ethical principles and rules of conduct.conduct that we have established. We have a range of internal rules that aim to orient our managers, employees and contractors, and to reinforce our ethical principles and rules of professional conduct. Due to the wide distribution and outsourcing of the production chains of our suppliers, we are unable to control all the possible irregularities of the latter.these third parties. This means that we cannot guarantee that the financial, technical, commercial and legal evaluations that we use in our selection processes will be sufficient for preventingprevent our suppliers from having problems related to employment law, or sustainability, or in the outsourcing of the production chain with inadequate safety conditions. We also cannot guarantee that these suppliers, or third parties related to them, will not involve themselves in irregular practices. If a significant number of our suppliers involve themselves in irregular practices, we might be adversely affected.

Further,Furthermore, we are subject to the risks that our employees, contractors or any person who may do business with us might become involved in activities of fraud, corruption or bribery, circumventing our internal controls and procedures, misappropriating or using our assets for private benefit to the detriment of the Company’s interests. This risk is exacerbated by the fact that there are some affiliates, such as special-purpose companies and joint ventures, in which we do not have control.

Our internal controls systems to identify, monitor and mitigate risks may not be effective in all circumstances, especially in relation to companies that are not under our control. In the case of companies, we have acquired, our internal controls systems might be incapable of identifying fraud, corruption or bribery that took place prior to the acquisition. Any failing in our capacity to prevent or detect non-compliance with the applicable rules of governance or of regulatory obligation could cause harm to our reputation, limit our capacity to obtain financing, or otherwise cause material adverse effects on our, business, results of operations, financial condition and reputation.

Two members of our board of directors are party to administrative and judicial proceedings and ongoing corruption investigations.

One member of our board of directors is a defendant in two "Civil Actions of Administrative Impropriety due to Damages to the Public Treasury" and another member of our board of directors is a defendant in a ‘Tax Evasion Action’, all in pre-trial proceeding stage. For more information, see “Item 6. Significant Civil and Criminal Proceedings Involving Key Management Members”. We cannot assure you that judicial and administrative proceedings, or even the commencement of new judicial and administrative proceedings against any members of our management or board of directors, will not impose limitations or restraints on the performance of the members of our management and board of directors that are a party to these proceedings. In addition, we cannot assure you that these limitations will not adversely affect us and our reputation.

The multiple uses of water and the various interests related to this natural resource might give rise to conflicts of interest between CEMIG and the society, as a whole, which might cause losses to our business, results of operations or financial condition.

At present, considering projects and companies that are jointly controlled, CEMIG has more than 7063 hydroelectric power plants, with 5,9695,638 MW and representing 98.1%98% of our installed capacity.

Water is the main raw material for CEMIG’s production of energy and is a resource that is sensitive to climate change and vulnerable to the consequences of exploration of other natural resources, significantly impacted by human actions and subject to a regulatory environment.

CEMIG’s operation of reservoirs for generation of hydroelectric power essentially requires consideration of the multiple uses of water by other users in a river basin; and this in turn, leads to the need to take into account a range of constraints — environmental, safety, irrigation, human consumption, waterways and bridges, among others. In periods of severe drought, like those of 2013 until 2019, monitoring and forecasting the levels of reservoirs and the constant dialogue with the public authorities, civil society and users were essential for ensuring the generation of energy, and the other uses of this resource.

Finally, CEMIG uses a Risk Management System to analyze scenarios and determine the degree of financial exposure to risks, considering the probability of occurrence and its effect. In the scenarios relating to potential conflicts with other users, CEMIG evaluates both the effects arising from prolonged droughts, which can lead to an increase of competition between the energy sector and other users, and the effects of flood events occurring due to excessive rain. While CEMIG engages with other essential users and takes steps to analyze community input and studies on issues relating to the impact of water use, competing interests relating to water use could, subject to certain minimum limits previously established by law, affect its availability to us for use in the operations of certain of our projects, which could adversely affect our business results of operations and financial condition.

We are controlled by the government of the State of Minas Gerais, which might have interests that are different from the interests of theour other investors, or even of the Company.

As our controlling shareholder, the government of the State of Minas Gerais exercises substantial influence on the strategic orientation of our business. Currently it holds 51% of the common shares of CEMIG and as majority shareholder has full powers to decide on business relating to the Company’s objects as stated in the by-laws, and to adopt whatever decisions it deems to be necessary for the defense of its interests and development.

The government of the State of Minas Gerais can elect the majority of our senior management and has the competencyauthority to approve, among other subjects, matters that require a qualified quorum of shareholders. The latter include transactions with related parties, shareholding reorganizations and the date and payment of dividends.

The government of the State of Minas Gerais, as our controlling shareholder, has the capacity to direct us to engage in activities and to make investments that promote the controlling shareholder’s economic or social objectives, and these might not be strictly aligned with the Company’s strategy or the strategies of our other shareholders, adversely affecting the direction of our business.

Our processes of governance, risk management, compliance and internal controls might fail to avoid regulatory penalties, damages to our reputation, or other adverse effects on our business, results of operations or financial condition.

Our Company is subject to various different regulatory structures, of which the following are examples: (a) laws and regulations of the Brazilian energy sector, such as Law No. 10,848/04 (on trading in energy), regulations by ANEEL; (b) the laws and regulations that apply to listed companies with securities traded on the Brazilian capital market, such as Law No. 6,404/76 (the ‘Corporate Law’), regulations of the CVM; (c) laws and regulations that apply to Brazilian companies with majority state-owned shareholdings, such as Law No. 13,303/2016 (the ‘State Companies Law’); (d) laws and regulations that apply to Brazilian companies that have securities registered with the SEC, such as the Sarbanes-Oxley Act of 2002, the Foreign Corrupt Practices Act (FCPA) and regulations of the SEC; and (e) laws and regulations regarding privacy and data protection, such as Law no. 13,709/2018 (the ‘General Data Protection Law, LGPD’), among others.

Furthermore, Brazil has intensified and improved itsrigorous legislation and structures relating to maintaining competition combat of improbity and prevention ofpreventing corrupt practices. For instance, Law No. 12,846/13 (the ‘Anticorruption Law’) established objective liabilities for Brazilian companies that commit acts against Brazilian or foreign public administration, including acts relating to tender processes and administrative contracts, and established tough penalties for those companies that are punished.

The Company has a high number of administrative contracts with high values and a large number of suppliers and customers, which increases its exposure to risks of fraud and administrative impropriety.

Our Company has structures and policies for the prevention and combat of fraud and corruption, audit and internal controls, and has adopted the recommendations for Best Corporate Governance Practices recommended by the Brazilian Corporate Governance Institute (Instituto Brasileiro de Governança Corporativa, or ‘IBGC’) and the framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Furthermore, due to the majority interest held by the State Government in our shareholding structure, we are required to contract the greater part of our works, services, advertising, purchases, disposals and rentals, through competitive tenders and administrative contracts, which are ruled by the Tenders Law, State Companies Law and other complementary legislation.

However, despite the Company having processes of governance, risk management and compliance, we might be unable to avoid future violations of the laws and regulations to which we are subject (regarding labor, tax, environment, energy, among others), or violations of our internal control mechanisms, our Declaration of Ethical Principles and Code of Professional Conduct, or the occurrence of fraudulent or dishonest behavior by employees, or individuals or legal entities that are contracted, or other agents that may represent the company in dealings with third parties, especially with the Public Authorities.

Our management has identified material weaknesses in internal controlcontrols over financial reporting and has concluded that our internal controlcontrols over financial reporting waswere not effective onas of December 31, 2016 2017, 2018, 2019 and 2020,to 2021, which may have a material adverse effect on the Company’s results of operations and financial condition.

Our management identified material weaknesses in our internal controlcontrols over financial reporting for the last 5six years. For further information on the material weakness identified by our management, see “Item 15 - Controls and Procedures - Management’s Annual Report on Internal Control over Financial Reporting”. Because of the identified material weaknesses, our management concluded that our internal control over financial reporting was not effective as of December 31, for the last 5 years. Although we have developed and implemented several remediation measures, to remedy these material weaknesses, we cannot be certain that we will remedy our existing material weakness or that there will be no other material weaknessesone in our internal control over financial reporting in the future.

If our efforts to remediate the material weaknessesweakness are not successful, we may be unable to report the Company’s results of operations for future periods accurately and in a timely manner and make our required filings with government authorities, including the SEC and the CVM. Due to its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements, and we cannot be certain that in the future additional material weaknesses will not exist or otherwise be discovered. Any of these occurrences could adversely affect our and the Company’scompany’s business, results of operations and financial condition.

Potential shortages of skilled personnel in operational areas could adversely affect our business and results of operations.

It is possible that we will experience shortages of qualified key personnel. In recent years, we have been carrying out voluntary severance incentive programs open to all of our employees. Such programs may reduce our employees’ headcount by more than our ability to hire new ones to fill key positions. Our success depends on our ability to continue to successfully train our personnel so they can assume key positions in the organization. We cannot assure you that we will be able to properly train, qualify or retain key staff, or do so without costs or delays. Nor can we assure you that we will be able to hire new qualified personnel, in particular in operational areas, should the need arise. Any such failure could adversely affect our results of operations and our business.

Our ability to distribute dividends is subject to limitations.

Whether or not thean investor receives dividends depends on whether our financial situation permits us to distribute dividends under Brazilian law, and whether our shareholders, on the recommendation of our Board of Directors, acting in theirits discretion, determine suspension, due to our financial circumstances, of the distribution of dividends in excess of the amount of mandatory distribution required under our by-laws in the case of the preferred shares.

Because we are a holding company with no revenue-producing operations other than those of our operating subsidiaries, we can only distribute dividends to shareholders if the Company receives dividends or other cash distributions from itsour operating subsidiaries. The dividends that our subsidiaries can distribute depend on our subsidiaries generating sufficient profitprofits in any given fiscal year and on restrictive covenant clauses in contracts for loans and financingfinancings of these subsidiaries as well as byon any restriction imposed by the regulator, all of which place limits upon theirour subsidiaries’ payments of dividends.dividends to the Company. Similarly, we have a limitation on the payment of dividends which cannot exceed the mandatory minimum of 50% of the net income for the business year, as contained in our by-laws, due to restrictive covenant clauses in the contracts for loans and financingfinancings of the subsidiaries in which we are guarantors. Dividends are calculated and paid in accordance with applicable Brazilian corporate law Brazilian Corporate Law’) and the provisions of the by-laws of each of our regulated subsidiaries.

ANEEL has discretion to establish the rates that distributors charge their customers. These rates are determined by ANEEL in such a way as to preserve the economic and financial balance of concession contracts entered into with ANEEL.

Concession agreements and Brazilian law have established a mechanism that permits three types of rate adjustment: (a) the Annual Adjustment; (b) the Periodic Review; and (c) the Extraordinary Review. The purpose of the Annual Adjustment (‘Reajuste Annual’) is to compensate for changes in costs that are beyond a company’s control, such as the cost of energy for supply to customers, the sector charges that are set by the Federal Government, and charges for use of the transmission and distribution facilities of other companies. Manageable costs, on the other hand, are adjusted by the IPCA inflation index, less a productivity and efficiency factor, known as the X Factor, which considers aspects such as distribution productivity and service quality standards. Every five years, there is a Periodic Tariff Review (Revisão Periódica Tarifária, or ‘RTP’), the purpose of which is to: identify the variations in costs referred to above; provide an adequate return on the assets that the companyCompany has constructed during the period, establish a factor based on economies of scale, which will be taken into account in the subsequent annual tariff adjustments and define the efficient operational costs. An Extraordinary Tariff Review takes place whenever there is any unforeseen development that significantly alters the economic/financial equilibrium of the concession. Thus, although CEMIG D’s concession contracts specify preservation of their economic and financial balance, we cannot guarantee that ANEEL will set tariffs that do remunerate us adequately in relation to the investments made or the operating costs incurred due to the concession, and this might have a material adverse effect on our business, financial situation and operating results.

ANEEL has establishedthrough concessions contracts establish the Permitted Annual Revenue (Receita Anual Permitida or ‘RAP’) of our transmission companies; if any adjustments result in a reduction of the RAP, this could have a material adverse effect on our results of operations and financial condition.

ANEEL defines the RAP that we receive through our transmission companies, on behalf of the Federal Government. The concession contracts provide for two mechanisms for the adjustment of revenues: (a) the annual tariff adjustments; and (b) the Periodic Tariff Review (‘Revisão Tarifária Periódica’). The annual tariff adjustment of our transmission revenues takes place annually in June and is effective in July of the same year. The annual tariff adjustments take into account the permitted revenues of the projects that have come into operation, and the revenue from the previous period is adjusted by the inflation index (IPCA for Contract No. 006/1997 and IGP-M for Contract No. 079/2000). The periodic tariff review takes place every five years. During the periodic tariff review, the investments made by a concession holder in the period and the operating costs of the concession are analyzed by ANEEL. The regulatorgrantor takes into account only investments that it deems to be prudent, and operating costs that it assesses as having been efficient, using a benchmarking methodology. Thus, the tariff review mechanism is subject to some extent to the discretionary power of ANEEL, since it may omit investments that have been made, and could recognize revenues for operating costs lower than those actually incurred. This could result in a material adverse effect on our business results.

An Extraordinary Tariff Review takes place whenever there is any unforeseen development that significantly alters the economic/financial equilibrium of the concession. Thus, although our concession agreements specify that the economic and financial balance of the contract shall be preserved, we cannot guarantee that ANEEL will set tariffs that adequately compensate us in relation to the investments made or in relation to the operating costs incurred because of the concession. This may have a material adverse effect on our business, financial condition and results of operations.

We have strict liability for any damages caused to third parties resulting from inadequate provision of energy services.

Under Brazilian law, we are strictly liable for direct and indirect damages resulting from the inefficient rendering of energy generation, transmission, distribution and distributionrelated services. In addition, when damages are caused to final customers as a result of outages or disturbances in the generation, transmission and distribution system, whenever these outages or disturbances are not attributed to an identifiable member of the ONS or to the ONS itself, the liability for such damages is shared among generation, distribution and transmission companies. Until a party with final responsibility has been identified, the liability for such damages will be shared in the proportion of 35.7% to the distribution agents, 28.6% to the transmission agents and 35.7% to the generation agents. The number of votes establishes these proportions that each of these types of energy concession holders receives in the general meetings of the ONS, and as such, are subject to change in the future. Consequently, our business, results of operations and financial condition might be adversely affected in the event we are held liable for any such damages.

We may incur losses and reputational damage in connection with pending litigation.

We are party to several legal and administrative proceedings relating to civil, administrative, environmental, tax, regulatory, labor and other claims. These claims involve a wide range of issues and seek indemnities and restitution in money and by specific performance. Several individual disputes account for a significant part of the total amount of claims against the Company. See “Item 8. Financial Information – Legal and Administrative Proceedings”. Our consolidated financial statements include provisions for risks in a total amount of R$1.91,9 billion, as of December 31, 2020,2021, for actions in which the probability of loss have been assessed as ‘probable’.

One or more unfavorable decisions against us in any legal or administrative proceeding may have a material adverse effect on us. In addition to making provisions and the costs associated with legal fees, we may be required by the court to provide collateral for the proceedings, which may adversely affect our financial condition. In the event that our provisions for legal actions are insufficient, payments for actions in excess of the amounts provisioned could adversely affect our results of operations and financial condition.

In addition, certain members of our management are involved as defendants in criminal proceedings that are currently pending, which may distract our management and negatively affect us and our reputation. See “Item 6. Significant Civil and Criminal Proceedings Involving Key Management Members”.

Environmental regulations require us to perform environmental impact studies on future projects and obtain regulatory permits.

For reasons of obligations imposed by Brazilian environmental law, we must conduct environmental impact studies and obtain regulatory and environmental permits and licenses for our current and future projects. We cannot assure that these environmental impact studies will be approved by environmental agencies, that environmental licenses will be issued, that public opposition will not result in delays or modifications to any proposed project, or that laws or regulations will not change or be interpreted in a manner that could materially adversely affect our operations or plans for the projects in which we have an investment. We believe that concern for environmental protection is also an increasing trend in our industry. Although we consider environmental protection when developing our business strategy, changes in environmental regulations, or changes in the policy of enforcement of existing environmental regulations, could have a material adverse effect on our results of operations and our financial condition by delaying the implementation of energy projects, increasing the costs of expansion.

Furthermore, the implementation of investments in the transmission sector has suffered delays due to the difficulty in obtaining the necessary regulatory and environmental permits and approvals. This has led to delays in investments in generation due to the lack of transmission lines to provide for the outflow of the energy generated. If we experience any of these or other unforeseen risks, we may not be able to generate, transmit and distribute energy in amounts consistent with our projections, which may have a material adverse effect on our financial condition and results of operations.

We operate without insurance policies against catastrophes and third-party liability.

Except for use of aircraft, we do not have third-party liability that covers accidents and we do not seek proposals for this type of insurance. CEMIG has not sought a proposal for, and has not contracted, insurance coverage against disasters, such as earthquakes or floods, that might affect our facilities. Any events of this type could generate unexpected additional costs, resulting in adverse effects on our business, results of operations and financial condition.

The insurance contracted by us might be insufficient to reimburse costs of damage.

Our business is normally subject to a range of risks, including industrial accidents, labor disputes, unexpected geological conditions, changes in the regulatory environment, environmental and climatic risks, and other natural phenomena. In addition, we and our subsidiaries might be found responsible for losses and damages caused to third parties as a result of failures to provide generation, transmission and/or distribution service.

We only maintain insurance for fire, risks involving our aircraft, and operational risks, as well as those types of insurance coverage that are required by law, such as transport insurance of goods belonging to legal entities.

We cannot guarantee that the insurance contracted by us will be sufficient to cover in full or at all any liabilities that may arise in the course of our business nor that these insurance policies will continue to be available in the future. The occurrence of claims in excess of the amount insured, or which are not covered by our insurance policies, might generate significant and unexpected additional costs, which could have an adverse effect on our business, results of operations and/or financial condition. Further, we cannot guarantee that we will be able to maintain our insurance coverage at favorable or acceptable commercial prices in the future.

Strikes, work stoppages or labor unrest by our employees or by the employees of our suppliers or contractors could adversely affect our results of operations and our business.

All of our employees are represented by labor unions. Disagreements on issues involving divestments or changes in our business strategy, reductions in our personnel, as well as potential employee contributions, could lead to labor unrest. We cannot ensure that strikes affecting our production levels will not occur in the future. Strikes, work stoppages or other forms of labor unrest at any of our major suppliers, contractors or their facilities could impair our ability to operate our business, complete major projects and adversely affect our ability to achieve our long-term objectives.

A substantial portion of the Company’s assets is tied to the provision of public services and would not be available for attachment as collateral for the enforcement of any court decision.

A substantial portion of the Company’s assets is tied to the provision of public services. These assets can notcannot be attached as collateral for the enforcement of any court decision because the assets revert to the concession-granting authority to ensure continuity in the provision of public services, according to applicable legislation and our concession agreements. Although the Brazilian Federal Government would be obligated to compensate us for early termination of our concessions, we cannot assure you that the amount ultimately paid by the Brazilian Federal Government would be equal to the market value of the reverted assets. These restrictions on liquidation may lower significantly the amounts available to holders of the notes in the event of our liquidation and may adversely affect our ability to obtain adequate financing.

Loss by our subsidiary Gasmig of its concession could cause losses in Gasmig’s results.

In 1993, Gasmig obtained the concession for commercial operation of supply of piped gas to the industrial, automotive, commercial, institutional and residential sectors in the state of Minas Gerais for a period of 30 years (‘the Concession Contract’). The concession was extended to January 10, 2053 under the Second Amendment to the Concession Contract, dated December 26, 2014.

On September 19, 2019, Gasmig executed the Third Amendment to the Concession Contract, which replaced the obligation of Gasmig to build a gas pipeline from the city of Queluzito, in Minas Gerais, in the direction of the city of Uberaba, Minas Gerais, for a compensatory grant payment of R$852 million to the State of Minas Gerais and confirmed extension of the Concession Contract to January 10, 2053. In addition, Gasmig committed to reach a total of 100,000 clients served by the end of 2022, and to build networks to serve the seven meso-regions of the State of Minas Gerais. Currently, Gasmig serves five of these meso-regions.

Under Article 35 of Law 8987 of February 13, 1995 (‘the Concessions Law’), the concession is subject to termination under certain circumstances, including the following: (i) expiration of the contractual term; (ii) the operation being taken over by the state; (iii) termination for other reasons, usually of time, arising from law; (iv) rescission of the contract (amicably, or by the courts); (v) annulment of the concession contract as a result of a failing or irregularity found in a tender or public bid procedure or in the manner of its grant; or (vi) bankruptcy or extinction of the concession holder. In any of these circumstances, the concession assets will revert to the Concession-granting Power, the state of Minas Gerais (‘the Grantor’). In the event that Gasmig loses its concession for any reason, we cannot guarantee that any indemnity payable to Gasmig will be sufficient to compensate its investments, the implicit rate of return, nor loss of future profits relating to the assets not yet totally amortized or depreciated.

The activities carried out by Gasmig are subject to interruptions, disturbances and risks in the distribution system, caused by accidents, operational difficulties, damage, failure of equipment or processes, natural causes or catastrophes (such as explosions, fires, floods, landslides, sabotage, terrorism, vandalism, and others), which might result in Gasmig having an obligation to indemnify clients that suffer damages and might expose it to administrative or court proceedings.

In addition, Gasmig may suffer the intervention of the Grantor in the event that, in the Grantor´s opinion, there is a risk of Gasmig failing to perform the services, or if Gasmig has failed to perform its obligations under the concession contract or the applicable law. In such events, the Grantor could also levy fines against Gasmig or even revoke its concession.

Early termination of the Concession contract, and penalties in connection with such termination, would generate significant impacts on Gasmig’s results, and affect its capacity to pay and comply with its financial obligations. Gasmig’s concession will expire in January 2053, and may be extended, at the sole discretion of the Grantor.

Changes in the methodology and parameters adopted by the regulatory authorities in connection with the tariff review cycles of Gasmig may adversely impact our operations and financial conditioncondition.

The general parameters of tariff regulation are specified in the Concession Contract, which: (i) determines the general guidelines for adjustment of tariff; (ii) guarantees pass-through of the cost of acquisition of gas and of the tariff review; and (iii) determines the distribution margin, which enables the economic and financial sustainability of Gasmig in accordance with the best practices used by Brazilian and international regulatory agencies for the natural gas distribution sector.

The concession contract also provides that the tariff will be reviewed if events occur that put the economic and financial equilibrium of the Concession Contract at risk, in the form of and for the periods necessary to avoid losses due to tariffs becoming inadequate.

In November 2019 the Economic Development Department of Minas Gerais State (SEDE), a division of the Minas Gerais State Government, responsible for regulating the distribution of piped gas, completed the first tariff review cycle, in which the parameters for the remuneration rate, expectations of investments, costs and volumes for determining the tariffs in the 2018-2022 cycle were determined. In addition, SEDE included the impact of the payment of the Compensatory Grant in tariffs.

In August 2021, the Grantor proposed bringing forward the tariff review, for the purpose of making the necessary adaptations regarding the assumptions on which Gasmig’s tariff is based, with particular attention to the current scenario of the distributor’s operational costs and capital situation, and also adaptation of the targets for clients and investments, as specified, compared to those actually achieved in the current tariff cycle, so as to guarantee the economic-financial equilibrium of the concession Through Resolution No. 03, of January 31, 2022, the Sede/MG approved a tariff adjustment to be applied by Gasmig for the Industrial, Cogeneration, CNG/LNG, CNG, Residential and Commercial consumer classes as of February 1, 2022, with an average increase ranging from 16% to 26%, depending on the consumer class, in relation to the tariffs that have been in effect since November 2021. This increase refers to the variation in the costs of gas acquired by the Company and the readjustment of its distribution margin.

Changes in the tariff review cycles could cause a material adverse effect on Gasmig’s activities, affecting its financial condition and the results of its operations. These changes may also impact on market conditions and the prices of securities in Brazil, consequently adversely affecting Gasmig, and could change the price of gas or increase the costs of its activities.

Gasmig might not succeed in implementing the strategies in its long-term strategic plan at the desired moment, or might incur unexpected costs, which could have adverse consequences for its business, operational results of operations and financial condition.

Gasmig’s capacity to comply with theits strategic objectives depends, largely, on the timely, cost efficient and successful implementation with a good cost-benefit ratio, of its long-term strategy.

The following are some of the factors that could negatively affect this implementation:

The existence of a single supplier of natural gas in Brazil affects competitiveness in the market in which Gasmig operates.

The Brazilian gas market is undergoing ain the process of opening,becoming more open and competitive, but there are still some obstacles to be overcome. Currently,In 2021 Gasmig held a bid for acquisition of gas. Various market players sent proposals; however as of the end of 2021, only Petrobras had the conditions necessary to guarantee the supply of gas to Gasmig. This reflects the fact that Petrobras still holds the monopoly on supply and transport of natural gas. gas in Brazil.

Gasmig and Petrobras entered into atwo Purchase Agreement forAgreements regarding the supply of natural gas under the ‘Firm Inflexible’ regime, specifying the quantity contracted, the price of gas, and other factors. TheIn both contracts, the price of gas acquired from Petrobras varies according to a contractual formula and is adjusted in accordance with changes in the price of Brent oil, and the US dollar exchange rate. In 2020, the price of acquisition for gas other than for thermoelectric power varied significantly, decreasing by as much as 27.4%, but later increased at the end of the year to a price 3.7% lower than at the end of 2019.

The contract is for the period up to 2023, and the pricingPricing of the molecule portion maycomponent in the two contracts can be altered only by agreement between the parties.

The price of the transportation of natural gas is regulated, by, and maycan be revised by the National Oil, Natural Gas and Biofuels Agency (ANP). If ANP changes the pricing, the difference isamount will be passed through to the distributors.

The longest standing contract that serves only the non-thermoelectric-generation market is in force until 2023. In 2021 its price increased by 59.1%. The most recent contract, on the other hand, has pricing 36.8% higher than the older contract, but is for less than 20% of the total volume contracted by Gasmig.

Due to the foregoing, the Company cannot guarantee that adequate supplies of gas will exist in future periods, or that gas prices will not fluctuate in such a way as to cause a material adverse effect on the Company's business, financial condition and results of operations.

Changes in the prices and/or pricing policies of products that are substitutes for the product that Gasmig sells could affect the price of the energy products sold by Gasmig.

Petrobras also controls the prices of the principal energy substitutes that compete with natural gas. In 2017, Petrobras revised its pricing policy for energy sources that compete with natural gas. The prices of LPG (‘Liquefied Petroleum Gas’) and Fuel Oil fluctuatedincreased significantly during the last year. The prices of these energy products also vary in accordance with the oil price, and the US dollar exchange rate, which might result in their maintaining their competitiveness in relation to gas.

Petrobras may revise its pricing policy at any time. Any changes could influence the market´s demand for natural gas and its competing fuels, such as LPG, petroleum gas, and/or Fuel Oil, which could positively or negatively impact Gasmig’s operationaland the Company's business, operating results and financial situation.

OpeningThe opening of the gas market, or measures to encourage reduction of the price, could affect the profitability of Gasmig.

In 2016 the Brazilian federal government launched the ‘Gás para Crescer’ (‘Gas for Growth’) program, with the objective of fostering the natural gas market in Brazil, through implementation of changes in the regulatory environment of the natural gas sector, preparing it for a reduction in the participation of Petrobras. The proposals of the Gás para Crescer program were incorporated into a draft law, which has been going through Brazil´s Congress for some years. Also becauseBecause of this program, the National Oil, Natural Gas and Biofuels Agency (ANP) issued Requests for Public Contributions, with a view to receiving contributions from agents in the natural gas chain to enable the entry of new players in the market.

The ‘Gás para Crescer’ program was succeeded by the ‘Novo Mercado de Gás’ (‘New Gas Market’) program. The main directives of the program are consolidated in CNPE Resolution 16/2019, which sets principles and objectives for the promotion of free competition in Brazil’s natural gas market.

Among the directives, it is established that there should be an incentive for the States and the Federal District to adopt good regulatory practices that contribute to effective liberalization of the market, increase in transparency and efficiency, de-verticalization of the sector, and appropriate pricing in the supply of natural gas, by segment of users. This will likely also involve an incentive for the States and the Federal District to adopt reforms and structuring measures, including a possible amendment to concession contracts to reflect good regulatory practices, which include the regulatory principles for Free Consumers, independent producers and independent importers. Finally, there would be an incentive for the States to arrange for privatization of the local state piped gas concession holders.

In July 2019, Petrobras and the Brazilian antitrust authority CADE (‘Conselho Administrativo de Defesa Econômica’, or Economic Defense Administrative Council) signed an Undertaking for Cessation (‘Termo de Compromisso de Cessação –TCC’), under which Petrobras undertook to sell the holdings that it presently owns in the transporters transporter Nova Transportadora do Sudeste S. A. – NTS (10%), and TBG - – Transportadora Brasileira Gasoduto Bolívia-Brasil S.A. (51%). Petrobras will also sell indirect equity interest in distributors, by selling either its shares in Gaspetro or Gaspetro’s equity interests in the distributors. Petrobras also made an undertaking to adopt certain measures to give more transparency to the contracts for transport, and for third parties to have access to the capacity of the existing assets.

These measures, ifwhich are already being implemented, might affect Gasmig, and there could be a variation in the cost price of gas and in the competitiveness of natural gas compared to other energy sources, generating a possible devaluation of natural gas in the market and altering Gasmig’s operational cash flow – i.e., it might have to pay a higher price than expected for the same product, generating negative financial consequences for Gasmig.

The renewal or extension of the gas supply contracts is not guaranteed, and the growth strategy might be adversely affected.

The gas supply contracts have specific periods of validity, and Gasmig might be adversely affected if this renewal and/or extension does not take place on terms that are favorable to Gasmig’s growth strategy – this might occur in view of the possibility of entry of new agents into the gas market.

Further, Gasmig will have to comply with certain requirements for the renewal of the gas supply contract, and for this reason cannot guarantee that this contract will be renewed, or that it will be renewed on the same terms. If the supply contract is not renewed, or if it is renewed on less favorable terms, the business, financial situation and operational results of Gasmig could be negatively affected.

The volumes of natural gas supplied by Gasmig are concentrated in few sectors, and few clients.

The large-scale industrial market sustainsaccounts for the significant majority of natural gas sales volume, and constitutedvolumes in Brazil, with approximately 77% of the volume of gas notvolumes sold directly to such clients in 2021, as opposed to being sold to thermal electricity generation plants in 2020.thermoelectric generators. Gasmig’s largest clients are concentrated in steel, metallurgy,a few economic sectors: steelmaking, the metallurgical industry, mining, and the manufacture of wood pulp.

InGiven the concentration of Gasmig's primary natural gas customers in a limited number of economic sectors, in the event that any one or more of reversal of expectations and/or anthese sectors experiences adverse economic scenario, continuity ofconditions during future periods Gasmig's sales volumes and results could be materially adversely affected, which could materially and adversely affect the structure of the market served by Gasmig might have a negative effect on Gasmig’sCompany's business, operationaloperating results andor financial situation.condition.

Discussions in progress on the newNew public policy directives of public policies in relation tofor the gas market in Brazil could negatively affect Gasmig’s business, if implemented.

Since the second half of 2016 Petrobras has been reducing its presence in the natural gas supply chain. In 20172020, it sold 90% of its stockholding interest in Nova Transportadora do Sudeste S.A. – NTS, to the Canadian company Brookfield Infrastructure Partners, and in June 2020, completedconcluded the sale of 100% of its equity interest in Transportadora Associada de Gás S.A. – TAG, to (TAG) and, in 2021, it concluded the group comprising Engie and the Canadian fundsale of its equity interest in Caisse de Dépôt et Placement du QuébeNova Transportadora do Sudeste S.A.c (CPDQ) (NTS).

Even with these divestitures, Petrobras continues to have a dominant position in the market, because it has a contract for the transport of gas from these assets and continues to be the monopoly supplier in the Brazilian gas market.

In 2019 the ‘Novo Mercado de Gás’(‘ (‘New Gas Market’) program, developed by the Mining and Energy Ministry in partnership with the Economy Ministry, ANP, CADE and EPE, was instituted, with four sectors: Promotion of competition; Integration of natural gas with the electricity and industrial sectors; Harmonization of the state and federal regulations; and Removal of tax barriers. As practical results of the program, we highlight Resolution 16 of June 24, 2019, enacted by the National Energy Policy Council (CNPE) and the signature of the Cessation Undertaking (TCC) between the monopolies authority CADE (‘Conselho Administrativo de Defesa Econômica’) and Petrobras. CNPE Resolution 16 details guidelines of energy policy to achieve the objectives of the ‘New Gas Market’, especially in relation to promotion of competition. The TCC signed by CADE and Petrobras aims to stimulate competition in the sector and prevent future occurrence of anticompetitive conduct, covering total disposal of transport assets by the dominant agent, release of excess transport capacity to the market, and negotiation of non-discriminatory access for third parties to the infrastructures of outflow and processing of natural gas.

Finally, DraftOn April 8, 2021, the President of Brazil sanctioned the Law 6407/2013,14,134/2021, known as ‘The Newthe ‘New Gas Law’ (‘Nova Lei do Gás’), which brings together somethe measures that are necessary for formation of an open natural gas market, was passed by the Senate on December 10, 2020, and now requires only passage by the Chamber of Deputies (the lower house of Congress) and signature by the President.market.

The proposed changesconsequences arising from this new law could contain negative impacts onnegatively impact the natural gas distribution business and generate uncertainties on some aspects.in certain respects. The adoption of systems of entry and exit to the transport activity generates uncertainties in relation to the future cost of the service of transport. The incentive for theBrazilian States to adopt harmonized regulatory principles for free agents (independent producers, independent importers) could represent risks to the distribution concession holders of having to bear the burden of commitments to minimum withdrawals included in supply contracts, or even suffer a physical bypass by the large consumers. The Company cannot provide any assurances as to whether these or any other developments related to the implementation of the New Gas Market would materially adversely affect its business, financial condition or results of operations.

The regulatory agency responsible for the distribution of piped gas is controlledunder the influence by the government of Minas Gerais State, whose interests might conflict with the interests of economic balance of the concession granted to Gasmig.

The Brazilian Federal Constitution lays down that the commercial operation of local piped gas services is a function of the States, directly or through concessions. Gasmig is indirectly controlled by the State of Minas Gerais, through the majority stockholding position held by CEMIG in Gasmig. The Minas Gerais Economic Development Department (SEDE) is a division of Minas Gerais State government, responsible for the function of regulation of piped gas distribution services. Further, SEDE is also responsible for the promotion of sustainable development in Minas Gerais State.

As indirect controlling shareholder of Gasmig, and at the same time regulatorgrantor of the public service, through SEDE, the government of Minas Gerais State has the authority to direct the efforts and investments of Gasmig in accordance with its own interests – political, economic or social which could have a negative impact on the economic equilibrium of the concession.

Climate change can have significant impacts on our distribution, generation and transmission activities.

The effects of climate change, the increase in the frequency and intensity of extreme climate events and regulatory changes can directly affect our distribution, generation and transmission activities, which can lead to financial impacts, loss of competitiveness, risk of disinvestment and reputational damage.

Given that virtually all of Cemig’s generation site is composed of hydroelectric power plants, changes in rainfall totals and rainfall dispersion impact certain business activities. Extreme events can also impact distribution and transmission activities, mainly related to asset availability. On the other hand, high water flow is also a potential risk, since the Company is required to open floodgates to ensure dam safety, thus flooding the downstream area. Moreover, with increased severity and frequency of extreme climate events, such as cyclones and floods, heavy rainfall may occur in a short period accompanied by windstorms and lightning. These events may damage power transportation and distribution facilities, making the resource unavailable to customers. Furthermore, Cemig may be required to adjust to possible regulatory changes defined by the government to achieve the goals to which it has committed through the National Policy on Climate Change, which defines commitments to reduce emissions by 2030, and through emerging regulations that include carbon pricing mechanisms. The actions include a regulation applicable to the consumption of fossil fuels. The carbon price applied in the fuel sector would imply an increase in fossil fuel prices or fossil source-based thermal plants. Cemig’s business may also be impacted by new technologies in the medium and long term if it does not build strategic partnerships or is unable to implement technological changes to its services. If we fail to adapt or experience delays in adapting to this new global scenario, our operations and financial results may be adversely affected. 

Risks Relating to Brazil

Political and economic instability in Brazil could have effects on the economy and affect us.

Historically, the Brazilian political environment has influenced, and continues to influence, the performance of the country’s economy. Political crises havehas affected and continue to affect investor confidence and that of the general public, which resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies. The President of Brazil has power to determine the governmental policies and actions related to the Brazilian economy and, consequently, to affect the operations and financial performance of companies, including ours.

Further,General elections are scheduled to be held on October 2, 2022 in Brazil to elect the President, Vice President, and the National Congress. In addition, on the same date elections for State Governors and Vice Governors, as well as State Legislative Assemblies, including those of Minas Gerais, will also take place. The results of these elections, and the policies eventually implemented by both the Federal Government and State governments, could have a material impact on our business.

Furthermore, Brazilian markets have experienced a high level of volatility due to the uncertainties arising from on-going anti-corruptionanticorruption and other investigations being carried out by the Brazilian Federal Prosecutors, and their impact on the economy and on the Brazilian political environment. Such events could cause the trading value of our shares, preferred and common, of our preferred and common ADSs, and our other securities to be reduced, and could negatively affect our access to the international financial markets. Furthermore, any political instability resulting from such events, including upcoming political elections at the federal and state levels, if it affects the Brazilian economy, could cause us to re-evaluate our strategy.

The Brazilian Federal Government has exercised, and continues to exercise, significant influence on the Brazilian economy. Political and economic conditions can have a direct impact on our business, financial condition, results of operations and prospects.

The Brazilian Federal Government frequently intervenes in the country’s economy and occasionally makes significant changes in monetary, fiscal and regulatory policy. Our business, results of operations and financial condition may be adversely affected by changes in government policies, as well as other factors including, without limitation:

Uncertainty on whether the Brazilian Federal Government will make changes in policy or regulation that affect these or other factors in the future might contribute to the economic uncertainty in Brazil and to greater volatility of the Brazilian securities-markets and the markets for securities issued outside Brazil by companies. Measures by the Brazilian Federal Government to maintain economic stability, and speculation on any future acts of the Brazilian Federal Government, might generate uncertainties in the Brazilian economy, and increase the volatility of the domestic capital markets, adversely affecting our business, results of operations and financial condition. If the political and economic situations deteriorate, we may also face increased costs.

Additionally, there are uncertainties regarding the federal government's capacity to promote actions in 20212022 that minimize the impacts of Covid-19 and promote a faster economic recovery.

recovery from the impacts of the coronavirus (COVID – 19). These uncertainties, together with the current economic crisis that Brazil is undergoing and other future developments in the Brazilian economy, may adversely affect our business, results of operations and financial condition.

The stability of the Brazilian Real is affected by its relationship with the U.S. dollar, inflation and Brazilian Federal Government policy regarding exchange rates. Our business could be adversely affected by any recurrence of volatility affecting our foreign currency-linked receivables and obligations as well as increases in prevailing market interest rates.

The Brazilian currency has experienced high degrees of volatility in the past. The Brazilian Federal Government has implemented several economic plans and has used a wide range of foreign currency control mechanisms, including sudden devaluation, small periodic devaluation during which the occurrence of the changes varied from daily to monthly, floating exchange market systems, exchange controls and parallel exchange market. From time to time, there was a significant degree of fluctuation between the U.S. dollar and the Brazilian Real and other currencies. On December 31, 2020,2021, the exchange rate between the Real and the US dollar was R$5.19355.5749 for US$ 1.00. There is no guarantee that the Real will not depreciate, or appreciate, in relation to the US dollar, in the future.

The instability of the Brazilian Real/U.S. Dollar exchange rate could have a material adverse effect on us. Depreciation of the Real against the United States dollar and other principal foreign countries could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy, and consequently, our growth. Depreciation of the Real could cause an increase in financial and operating costs, since we have payment obligations under financing contracts and import contracts indexed to exchange rate variations. In addition, depreciation of the Real could cause inflationary pressure that might result in abrupt increases in the inflation rate, which would increase our operating costs and expenses, which might adversely affect our business, results of operations, or outlook.

We generally do not enter into derivative contracts or similar financial instruments or make other arrangements with third parties to hedge against the risk of an increase in interest rates. To the extent that such floating rates rise, we may incur additional expenses. Additionally, as we refinance our existing debt in the coming years, the mix of our indebtedness may change, specifically as it relates to the ratio of fixed to floating interest rates, the ratio of short-term to long-term debt, and the currencies in which our debt is denominated or to which it is indexed. Changes that affect the composition of our debt and cause rises in short or long-term interest rates may increase our debt service payments, which could have an adverse effect on our results of operations and financial condition.

Inflation and certain government measures aimed to control it might contribute significantly to economic uncertainty in Brazil and could have a material adverse effect on our business, results of operations, financial condition and the market price of our shares.

Brazil has historically experienced extremely high rates of inflation. Inflation, and some of the Federal Government’s measures taken in an attempt to curb inflation, have had significant negative effects on the Brazilian economy. Since the introduction of the Real in 1994, Brazil’s inflation rate has been substantially lower than in previous periods. Brazilian annual inflation as measured by the IPCA index in the years 2018, 2019, 2020 and 20202021 was, respectively, 3.75%4.31%, 4.31%4.52% and 4.52%10.06%. In 2021, the inflation rate was impacted partially supply chain issues around the world due to residuals from the 2020 pandemic effects. No assurance can be given that inflation will remain at these levels.

Future measures taken by the Federal Government, including increases in interest rates, intervention in the foreign exchange market or actions intended to adjust the value of the Real, might cause an increase in the rate of inflation, and consequently, have an adverse economic impact on our business, results of operations and financial condition. If Brazil experiences high inflation rates in the future, we might be unable to adjust the rates we charge our customers to offset the effects of inflation on our cost structure.

A significant increase in interest rates or inflation would have an adverse effect on our finance expenses and financial results as a whole. At the same time, a significant reduction in the CDI rate, or in inflation, could negatively affect the revenue generated by our financial investments, but also have the positive effect of revaluing adjustments to the balances of our concession financial assets. Substantially, all of our cash operating expenses are denominated in Reais and tend to increase with Brazilian inflation. Inflationary pressures might also hinder our ability to access foreign financial markets or might lead to further government intervention in the economy, including the introduction of government policies that could harm our business, results of operations and financial condition or adversely affect the market value of our shares and as a result, of our preferred ADSs, common ADSs and other securities.

Risks relating to the Preferred and Common Shares, and the Preferred and Common ADSs

Instability of the exchange rate could adversely affect the value of remittances of dividends outside Brazil, and the market price of the ADSs.

Many Brazilian and global macroeconomic factors have an influence on the exchange rate. In this context, the Brazilian Federal Government, through the Central Bank, has in the past occasionally intervened for the purpose of controlling unstable variations in exchange rates. We cannot predict whether the Central Bank or the Federal Government will continue to allow the Real to float freely or whether it will intervene through a system involving an exchange rate band, or the use of other measures.

This being so, the Real might fluctuate substantially in relation to the United States dollar, and other currencies, in the future. That instability could adversely affect the equivalent in US dollars of the market price of our shares, and as a result the prices of our ADSs, common and preferred, and also outward dividends remittances from Brazil. For more information, see “Item 3. Key Information – Exchange Rates”.

Changes in economic and market conditions in other countries, especially Latin American and emerging market countries, may adversely affect our business, results of operations and financial condition, as well as the market price of our shares, preferred ADSADSs and common ADSs.

The market value of the securities of Brazilian companies is affected to varying degrees by economic and market conditions in other countries, including other Latin American countries and emerging market countries. Although the economic conditions of such countries may differ significantly from the economic conditions of Brazil, the reactions of investors to events in those countries may have an adverse effect on the market value of the securities of Brazilian issuers. CrisesCrisis in other emerging market countries might reduce investors’ interest in the securities of Brazilian issuers, including our Company. In the future, this could make it more difficult for us to access the capital markets and finance our operations on acceptable terms or at all. Due to the characteristics of the Brazilian power industry (which requires significant investments in operating assets) and due to our financing needs, if access to the capital and credit markets is limited, we could face difficulties in completing our investment plans and the refinancing our obligations, and this could adversely affect our business, results of operations and financial condition.

The relative volatility and illiquidity of the Brazilian securities market may adversely affect our shareholders.

Investing in Latin American securities, such as the preferred shares, common shares, preferred ADSs or common ADSs, involves a higher degree of risk than investing in securities of issuers from countries with more stable political and economic environments and such investments are generally considered speculative in nature. These investments are subject to certain economic and political risks, including, as examples, the following:

The Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than the major securities markets in the United States. This might substantially limit an investor’s ability to sell the shares underlying his preferred or common ADSs for the desired price and within the desired period.

In 2020,2021, the São Paulo Stock Exchange (Brasil, Bolsa, Balcão S.A or ‘B3’), the only stock exchange in Brazil on which our shares are traded, had an annual market capitalization of approximately R$5.147.25 trillion, and average daily trading volume of approximately R$29.828.9 billion.

Holders of the preferred and common ADSs, and holders of our shares, may have different shareholders’ rights than holders of shares in U.S. companies.

Our corporate governance, disclosure requirements and accounting practices are governed by our by-laws, by the Level 1 Differentiated Corporate Governance Practices Regulations (‘Regulamento de Práticas Diferenciadas de Governança Corporativa Nível 1’) of the B3 (the main Brazilian stock exchange) by the Brazilian Corporate Law (Federal Law No. 6,404/76) and by the rules issued by the CVM. These regulations may differ from the legal principles that would apply if our Company were incorporated in a jurisdiction in the United States, such as Delaware or New York, or in other jurisdictions outside Brazil. In addition, the rights of an ADS holder, which are derived from the rights of holders of our common or preferred shares as the case may be, to have his interests protected in relation to decisions by our board of directors or our controlling shareholder, may be different under the Brazilian Corporate Law from the rules of other jurisdictions. Rules against insider trading and self-dealing and other rules for the preservation of shareholder interests may also be different in Brazil if compared to the United States rules, potentially establishing a disadvantage for holders of the preferred shares, common shares, or preferred or common ADSs.

Exchange controls and restrictions on remittances from Brazil might adversely affect holders of preferred and common ADSs.

The investorInvestors in our preferred and common ADSs may be adversely affected by the imposition of restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and the conversion from Reais (R$) into foreign currencies. Restrictions of this type would hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of preferred shares or common shares from Reais (R$) into U.S. dollars (US$). We cannot guarantee that the Federal Government will not take restrictive measures in the future.

Foreign shareholders may be unable to enforce judgments given in non-Brazilian courts against the Company, or against members of its Board of Directors or Executive Board.

All of our directors and officers reside in Brazil. Our assets, as well as the assets of these individuals, are located mostly in Brazil. As a result, it may not be possible for foreign shareholders to effect service of process on them within the United States or other jurisdictions outside Brazil, or to attach their assets, or to enforce against them, or against the Company in United States courts, or in the courts of other jurisdictions outside Brazil, judgments that are predicated upon the civil liability provisions of the securities laws of the United States or the respective laws of such other jurisdictions.

In order to have a judgment rendered outside of Brazil enforced in Brazil, the party seeking enforcement would need to be recognized in the courts of Brazil (to the extent that Brazilian courts may have jurisdiction) and such courts would enforce such judgment without any retrial or reexamination of the merits of the original action only if such judgment had been previously ratified by the STJ, in accordance with Articles 216-A to 216- X of the Internal Regulations of the STJ (RISTJ), introduced by Regulatory Amendments No. 18/2014 and No. 24/2016. Notwithstanding the foregoing, no assurance can be given that ratification will be obtained.

Exchange of preferred ADSs or common ADSs for underlying shares may have adverse consequences.

The Brazilian custodian for the preferred shares and common shares must obtain an electronic certificate of foreign capital registration from the Central Bank to remit U.S. dollars from Brazil to other countries for payments of dividends, or any other cash distributions, or to remit the proceeds of a sale of shares.

If the investor decides to exchange his preferred ADSs or common ADSs for the underlying shares, the investor will be able to continue to rely, for five business days from the date of the exchange, on the depositary bank’s electronic certificate of registration in order to receive any proceeds distributed in connection with the shares. After that period, the investor may not be able to obtain and remit U.S. dollars abroad upon sale of our common/preferred shares, or distributions relating to our common/preferred shares, unless he or she obtains his or her own certificate of registration or registers the investment under CMN Resolution No. 4,373/2014, dated September 29, 2014, which entitles registered foreign investors (‘Resolution No. 4,373/2014’) to buy and sell on a Brazilian stock exchange. If the investor does not obtain a certificate of registration or register under Resolution No. 4,373/2014, the investor will generally be subject to less favorable tax treatment on gains with respect to our common shares.

If an investor attemptsthe ADR investors attempt to obtain his or hertheir own certificate of registration, the investorthey may incur expenses or suffer delays in the application process, which could delay his or hertheir ability to receive dividends or distributions relating to our common shares or the return of his or hertheir capital in a timely manner. The custodian’s certificate of registration or any foreign capital registration obtained by an investor may be affected by future legislative changes, and additional restrictions applicable to the investor, the disposition of the underlying common/preferred shares or the repatriation of the proceeds of disposition may be imposed in the future.

If the investor decidesinvestors decide to exchange histheir preferred or common shares back into preferred ADSs or common ADSs, respectively, once he hasthey have registered histheir investment in preferred shares or common shares, hethey may deposit histheir preferred or common shares with the custodian and rely on the depositary bank’s registration certificate, subject to certain conditions. We cannot guarantee that the depositary bank’s certificate of registry or any certificate of foreign capital registration obtained by an investor may not be affected by future legislative or other regulatory changes, nor that additional Brazilian restrictions applicable to the investor, or to the sale of the underlying preferred shares, or to repatriation of the proceeds from the sale, will not be imposed in the future.

An investor of our common shares and ADSs might be unable to exercise preemptive rights and tag-along rights with respect to the common shares.

U.S. investors of common shares and ADSs may not be able to exercise the preemptive rights and tag-along rights relating to common shares unless a registration statement under the U.S. Securities Act of 1933, as amended, or the Securities Act, is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to our common shares relating to these rights, and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, an ADR investor may receive only the net proceeds from the sale of his or hertheir preemptive rights and tag-along rights or, if these rights cannot be sold, they will lapse and the ADR investor will receive only the net proceeds from the sale of his or hertheir preemptive rights and tag-along rights or, if these rights cannot be sold, they will lapse and the ADR holder will receive no value for them.

Judgments of Brazilian courts with respect to our shares will be payable only in Reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our common shares, we will not be required to discharge any such obligations in a currency other than Reais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than Reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and any such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors full compensation for any claim arising out of, or related to, our obligations under our common shares.

Sales of a substantial number of shares, or the perception that such sales might take place, could adversely affect the prevailing market price of our shares, or of the preferred or common ADSs.

As a consequence of the issuance of new shares, sales of shares by existing share investors, or the perception that such a sale might occur, the market price of our shares and, by extension, of the preferred and/or common ADSs, may decrease significantly.

The preferred shares and preferred ADSs generally do not have voting rights, and the common ADSs can only be voted by proxy by providing voting instructions to the depositary.

Under the Brazilian Corporate Law and our by-laws, holders of our preferred shares, and, consequently, holders of our ADSs representing preferred shares, are not entitled to vote at our shareholders’ meetings, except in very specific circumstances.

Holders of our preferred ADSs may also encounter difficulties in the exercise of certain rights, including the limited voting rights. Holders of the ADSs for our common shares do not have automatic entitlement to vote in our General Meetings of Shareholders, other than by power of attorney, by sending a voting instruction to the depositary. Where there is not enough time to send the form with voting instructions to the depository, or in the event of omission to send the voting instruction, the holders of ADSs for CEMIG’s preferred and common shares may be unable to vote by means of instructions to the depository.

Future equity issuances may dilute the holdings of current holders of our common shares or ADSs and could materially affect the market price for those securities.

We may in the future decide to offer additional equity to raise capital or for other purposes. Any such future equity offering could reduce the proportionate ownership and voting interests of holders of our common shares and ADSs, as well as our earnings and net equity value per common share or ADS. Any offering of shares and ADSs by us or our main shareholders, or a perception that any such offering is imminent, could have an adverse effect on the market price of these securities.

The Brazilian Government may assert that the ADS taxation for Non- Resident Holders shall be payable in Brazil.

Pursuant to Section 26 of Law No. 10,833, published on December 29, 2003, the sale of property located in Brazil involving non-resident investors is subject to Brazilian income tax as of February 1, 2004. Currently, the Company understands that ADSs do not qualify as property located in Brazil and, thus, should not be subject to the Brazilian withholding tax; nevertheless, the Brazilian Tax Authorities may try to assert Brazilian tax jurisdiction in such situation, incurring on the payment of tax income in Brazil for the Non-Resident Holders.

Organizational and Historical Background

Companhia Energética de Minas Gerais – CEMIG is a state-controlled mixed capital company (‘sociedade por ações de economia mista’). CEMIG has its registered office located at Avenida Barbacena, 1200, Belo Horizonte, Minas Gerais, Brazil. The U.S. Securities and Exchange Commission (the “SEC”) maintains a website (http:(http://www.sec.gov)www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as us, that file electronically with the SEC. Our internet address is https://www.cemig.com.br. The information posted on our website or that could be accessed through our website is not an integral part of, or attached to or incorporated by reference into, this Form 20-F.

CEMIG built its first three hydroelectric power plants in the 1950s and commenced its energy transmission and distribution operations in 1960. CEMIG was incorporated on May 22, 1952 and is organized and existing under the laws of Brazil and the State of Minas Gerais. In the 1970s, CEMIG took over the distribution of energy in the region of the city of Belo Horizonte, commissioned the São Simão hydroelectric power plant and advanced the transmission of energy with the construction of 6,000 km (3,728 miles) of power lines.

In the 1980s, a partnership between CEMIG, Centrais Elétricas Brasileiras S.A. (‘Eletrobras’) and the Brazilian Federal Government launched the Minas-Luz Program, to expand service to low-income populations in rural areas and outer urban suburbs, including the shantytowns. The Emborcação hydroelectric power plant, at the Paranaíba River, started operating in 1982. At that time, together with the São Simão plant, the Emborcação plant tripled the Company’s generation capacity. In 1983, CEMIG created its Ecological Program Coordination Management Unit, which is responsible for planning and developing the Company’s environmental policies. This new unit fostered the research of alternative energy sources, such as wind power and solar generation, biomass and natural gas. Since then, the Company has focused its research projects on such alternative energy sources.

In 1986, CEMIG’s subsidiary Companhia de Gas de Minas Gerais – Gasmig, a natural gas distribution company, was incorporated. By the end of the 1980s, CEMIG’s energy distribution business had a market share in the State of Minas Gerais of 96%.

In 2000, CEMIG was listed in the Dow Jones Sustainability Index for the first time and continues to be listed since then. We believe this to confirm our dedication to the balance between the economic, environmental and social pillars of corporate sustainability. In 2001, CEMIG’s ADRs representing its preferred shares were upgraded to Level 2 on the New York Stock Exchange. In 2004, due to new legal and regulatory requirements, CEMIG transferred its operations to two wholly owned subsidiaries: the energy generation and transmission company CEMIG Geração e Transmissão S.A. (‘(‘CEMIG GT’) and the energy distribution company CEMIG Distribuição S.A. (‘(‘CEMIG D’).

In 2006, CEMIG began to operate in other states, with the acquisition of a significant interest in Light S.A. (‘Light’), which concession is in the state of Rio de Janeiro, and Transmissoras Brasileiras de Energia – TBE, which owned transmission lines in Northern, Midwest and Southern Brazil. In 2008, CEMIG initiated its participation in the UHE Santo Antônio generation project at the Madeira River. In April 2009, CEMIG GT acquired Terna Participações S.A., now called Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’). In May 2013, it increased its holdings in the energy transmission sector with the acquisition of equity interests in five other transmission companies. This increased CEMIG’s market share in Brazilian energy transmission from 5.4% to 12.6% at that time. In 2011, CEMIG GT expanded its participation in relevant generation and transmission assets, including the acquisition, by Amazônia Energia S.A. (in which CEMIG and Light have, respectively, 74.5% and 25.5% of the total capital) of a 9.77% stake in Norte Energia S.A. (‘NESA’), the owner of the concession for the construction and operation of Belo Monte Hydroelectric Power Plant, in Xingu River, State of Pará. The transaction added 818 MW of generation capacity to our total activities and increased Light’s total generation capacity by 280 MW. Also, in 2011, CEMIG acquired a controlling stake in Renova Energia S.A. (‘Renova’), which has been working with Small Hydroelectric Power Plants (SHPs) and wind farms for over a decade. In 2015, the association between Vale S.A. (‘Vale’) and CEMIG GT to form Aliança Geração de Energia (‘Aliança’) was concluded. The two companies subscribed shares issued by Aliança which were paid in by means of the equity interests they held in the following energy generation assets: Porto Estrela, Igarapava, Funil, Capim Branco I, Capim Branco II, Aimorés and Candonga; plus, a 100% interest in the following wind generation Special-Purpose Entities (‘SPEs’): Central Eólica Garrote Ltda., Central Eólica Santo Inácio III Ltda., Central Eólica Santo Inácio IV Ltda. And Central Eólica São Raimundo Ltda. CEMIG GT won the concession for Lot D in ANEEL’s Auction No. 012/2015, for placement of concessions for hydroelectric plants under a regime of allocation of generating capacity and physical offtake guarantees. Lot D is comprised of 13 plants that were previously owned by CEMIG, and an additional five plants which were owned by Furnas Centrais Elétricas S.A. (‘Furnas’). The aggregate installed generation capacity of these 18 plants is 699.57 MW.

On July 17, 2019, in connection with the public offering of shares by Light, the Company sold 33,333,333 shares that it held in that investee, at the price per share of R$18.75, in the total amount of R$625 million.

On January 22, 2021, the Company sold 68,621,264 shares that it held in that investee, at the price per share of R$20.00, in the total amount of R$1,372 million. The transaction is part of the execution of CEMIG’s divestment program. With the completion of this transaction, CEMIG is no longer a stockholder of Light.

2020On November 11, 2021, CEMIG entered into a Share Purchase Agreement (‘the Agreement’) with AP Energias Renováveis Fundo de Investimento em Participações Multiestratégia, including the following terms (‘the Transaction’): (i) sale of all of CEMIG equity interest in Renova Energia S.A. – In Judicial Recovery, (ii) assignment, for consideration, of all credits owed to CEMIG by Renova Comercializadora de Energia S.A. – In Judicial Recovery – for a total consideration of R$60 million, and (iii) a CEMIG earn-out right subject to certain future events. The closing of this transaction is subject to compliance with certain conditions precedent that are specified in the Agreement, including prior approval by the competent regulatory bodies, by the creditors holding asset guarantees listed in Renova’s Judicial Recovery Plan, and by third parties who are signatories of certain commercial contracts with the Company.

On May 5, 2022, Cemig concluded the sale of its entire CEMIG equity interest held in Renova Energia S.A. – In-court supervised reorganization – as well as the assignment, for consideration, of all credits owed to CEMIG by Renova Comercializadora de Energia S.A. – In court supervised reorganization – for a total consideration of R$60 million, with a right to receive an earn out subject to certain future events, as provided in Share Purchase Agreement (‘the Agreement’) entered into with AP Energias Renováveis Fundo de Investimento em Participações Multiestratégia on November 11, 2021.

2022 Capital Increase

On JulyConsidering that on December 31, 2020,2021 the Shareholders’ Ordinaryprofit reserves, with the exclusion of the Tax Incentive reserves, exceeded the registered share capital by R$1,523 million, the Annual General Meeting of Shareholders approved anon April 29, 2022, the Management´s proposal for increase inof the registered share capital to R$11,007 million, as per Article 199 of the Brazilian Corporate Law through the issuance of new shares through a stock dividend available only to the Company’s capital, of R$0.3 million, from R$7,294 million to R$7,594 million, through issuance of 60 million new shares, eachexisting shareholders, with nominal value of R$5.00, comprising 20,056,076 common sharesthe following terms and 39,943,924, preferred shares. The shares that were subscribed in the capital increase of July 31, 2020, were considered in full in the calculation of basic and diluted profit for 2020, since these new shares already had potential for subscription since that date, as decided by the shareholders.conditions (the ‘Capital Increase’):

2021 Capital Increase

Considering that on December 31, 2020 the profit reserves, with the exclusion of the Tax Incentive reserves, exceeded the registered share capital by R$1,529 million, the Annual General Meeting of Shareholders approved on April 30, 2021, the Management´s proposal for increase of the registered share capital to R$8,467 million, as per Article 199 of the Brazilian Corporate Law through the issuance of new shares through a stock dividend available only to the Company’s existing shareholders, with the following terms and conditions (the ‘Capital Increase’):

Auction of Former CEMIG GT Generation Concessions and Indemnification

The concessions of the Jaguara, São Simão, Miranda and Volta Grande hydroelectric plants, operated by CEMIG GT, expired in August 2013, January 2015, December 2016 and February 2017, respectively.

As per the original terms of the concession contracts of Jaguara, São Simão and Miranda plants, CEMIG GT believed that it had the right for the renewal of such concessions and filed administrative and court proceedings requesting for the extension the contracts. These requests, however, were rejected by the MME on the view that the request was made out of time in relation to the period/rules set by Law 12,783/13.

As part of the court decision, in March 2017 the preliminary injunctions that had maintained CEMIG GT in possession and operation of the concessions of the Jaguara and Miranda plants were revoked. CEMIG GT remained in control of the assets, and recognized revenues from the sale of energy and the operating costs of the assets through the date that the preliminary injunction was revoked. From that date onwards, CEMIG GT ceased to recognize any depreciation on the assets and began to recognize revenues relating to the provision of services of operation and maintenance of these plants in accordance with the regime of quotas specified by Law 12,783/13 (the ‘Quotas Regime’). As ordered by the MME Order 432/2015, the São Simão plant was operated under the Quotas Regime since September 2015.

Despite the ongoing court legal proceedings involving the São Simão, Jaguara and Miranda plants, on September 27, 2017, the Brazilian Federal Government tendered the concessions for the São Simão, Jaguara, Miranda and Volta Grande plants. The Volta Grande plant concession contract expired in February 2017. These plants have total generation capacity of 2,922 MW, and the concession price in the bid amounted to R$12,131 million. The parties that won these concessions are not related to CEMIG.

The new concession contracts were signed on November 10, 2017, and on this date extension of the periods in which CEMIG GT was engaged to temporarily continue to operate the assets was agreed upon as follows:

On August 3, 2017, the MME Order 291/17 determined the amount payable to CEMIG GT for the residual value of the infrastructure assets of the São Simão and Miranda plants at the end of the contract, at R$1,028 million, of which R$244 million relates to the residual value of the São Simão Plant, and R$784 million for the residual value of the Miranda Plant – these amounts being expressed in Reais as of September 2015 and December 2016, respectively. The amounts had been adjusted by the Brazilian Selic rate for federal securities, and the total adjustment recognized in 2018 as an operating income amounted to R$55 million. On August 31, 2018, CEMIG GT received the amounts of reimbursement relating to the assets not previously amortized or depreciated in the basic plans of the São Simão and Miranda hydroelectric plants, as specified in MME Order 291/2017. The total amount received was R$1,139 million. As of December 31, 2020, investments made after the Jaguara, São Simão and Miranda plants came into operation, in the amounts of R$174 million, R$2.7 million and R$23 million, respectively, are recorded as concession financial assets, and the final determination of the amounts to be paid to CEMIG GT are under discussions with the regulator. Management does not expect losses in the realization of these amounts.

The MME has not yet established indemnification amounts with respect to the Jaguara and Volta Grande power plants.

Wind Farms in the State of Ceará

On May 17, 2018, CEMIG GT signed an agreement with Energimp S.A. (‘Energimp’).

On December 20, 2018, following compliance with the conditions specified in the transaction agreement, CEMIG GT and Energimp signed the related Memorandum of Conclusion of Elimination of Cross-holdings. With the signature of this document: (i) the cross-holdings previously existing between the parties in Parajuru, Volta do Rio and Morgado were eliminated; (ii) all shareholding partnership between the parties was terminated; and (iii) CEMIG GT now owns 100% of the share capital of Parajuru and Volta do Rio, and Energimp owns 100% of the share capital of Morgado.

The following describe certain activities relating to CEMIG subsidiaries, jointly controlled entities and associates during 2021, 2020 2019 and 20182019 (aggregated by business):

RENOVA GROUP

Change in control of Renova

On October 15, 2019, Light sold, for R$1.00, the totality of its shares in the jointly controlled entity Renova, equivalent in total to 17.17% of the share capital of the company, to CG I Fundo de Investimento em Participações Multiestratégia, namely 7,163,074 shares and 98 preferred shares. Additionally, Lightcom Comercializadora de Energia S.A. signed an Assignment Agreement through which it assigned all the credits held against Renova to CG I. With the expiry of the period specified in the Shareholders’ Agreement of Renova, the subsidiary CEMIG GT did not exercise its right of first refusal nor its right of joint sale, and thus there has been no change in its direct equity interest in Renova. On December 31, 2021, this investment is classified as an asset held for sale.

Application by Renova for a court-supervised reorganization plan

On October 16, 2019, the second State of São Paulo Bankruptcy and Court-supervised reorganization Court granted the application for in-court reorganization applied for by Renova, and by the other companies of the group (‘the Renova Group’), and determined, among other measures, the following: (i) Appointment of an independent company to act as judicial administrator; (ii) Suspension of actions and executions against the companies of the Renova Group for 180 days, under Article 6 of Law 11,101/2005; (iii) Presentation of accounts by the 30th of each month, while the in-court reorganization proceedings continue, on penalty of the controlling shareholders of the companies of the Renova Group being removed, and replaced by administrator, under Article 52, IV, of Law 11,101/2005; (iv) Waiver to present tax debt clearance certificates so that the companies of the Renova Group can carry on with their activities; and (v) Order to publish a list of creditors, with 15 day term for presentation of qualifications and/or divergences of credits in relation to the court-supervised reorganization.

On December 18, 2020, the General Meeting of Creditors approved the court-supervised reorganization plans submitted to the court by Renova. In this sense, the plans describe the means of recovery in detail, give details of the DIP bridge loan, identify the Isolated Production Units (UPIs) and specify the procedure for resources disposal and allocation. For more details related to the court-supervised reorganization plans, see Item.3 – RisckRisk Factors and see note 16 to our Financial Statements.

In 2021, in line with its Judicial Recovery Plans, Renova sold the assets and rights of Phase B of the Alto Sertão III wind power complex (R$ 59.8 million), and the equity interests held in Brasil PCH S.A. (R$ 1.1 billion), in March 2022 Renova sold its rights and assets in Enerbrás (R$ 265.8 billion).

Additionally, the Board of Directors of Renova approved ratification of the increase corresponding to the amount of the credits to be capitalized under the terms of the court supervised reorganization plan, which the amount aproximally R$380 milions were converted into equity in Renova, until December 31, 2021, reducing the indebtedness of Renova and its subsidiaries.

Phase A of the Alto Sertão III wind power complex is Renova’s main project in development and one of the main reasons related to the success of the Judicial Recovery Plan. During Phase A, in December 2021, the first seven aerogenerators of the AbIl Wind Farm began test operations, with aggregate installed capacity of 21 MW. The works of Phase A of the Alto Sertão III windfarm complex are currently approximately 92.5% completed.

Considering the non-existence of any legal or constructive obligations to the investee, the Company has concluded that the court-supervised reorganization filed by Renova does not have any additional impact on its financial statements.

LIGHT

Divestiture of Light

On June 21, 2017, CEMIG started a process to sell all its equity interest in Light S.A. (‘Light’). On July 14, 2017, Rio Minas Energia Participações S.A. (‘RME’) and Luce Empreendimentos e Participações S.A. (‘Lepsa’) also decided to start a process to sell all their interest in Light. This formalized the joint decision of CEMIG, RME and Lepsa to divest of their aggregate 52.12% controlling interest in Light at the time.

On November 27, 2018, RME sold 4,350,000 of its common shares in Light, reducing its holding to 10.90% of Light, thus reducing the combined interest of CEMIG, RME and LEPSA from 52.12% to 49.99% of Light's share capital.

On July 17, 2019, Light announced the closing of the primary and secondary public offering of common, nominative and book-entry shares issued by Light, with no par value, free and unencumbered of any charges or liens. In the context of the offering, there were (i) 100,000,000 (one hundred million) newly issued shares of Light, following an increase in Light’s capital stock, and (ii) 33,333,333 (thirty-three million, three hundred thirty-three thousand, three hundred thirty-three) shares held by CEMIG at a price per share of R$18.75.

With the settlement of the restricted offering, the Company’s equity interest in the total share capital of Light was reduced from 49.99% to 22.58%, limiting its voting rights in Shareholders’ Meetings and, as a result, its ability to direct the relevant activities of the investee.

Thus, as from that date, the Company no longer had power that gave it control of this investee. In accordance with IFRS 10 – Consolidated financial statements, the investee was no longer considered a subsidiary, and therefore was no longer consolidated in the Company’s financial statements.

On January 22, 2021, in the public offering of common shares of Light, CEMIG sold its entire remaining holding of shares in Light at R$20.00 (twenty Reais) per share for a total of R$1,372 million. With the completion of this transaction, CEMIG is no longer a stockholder of Light.

TAESA

Acquisition of 11.624% of the shares of Brasnorte Transmissora de Energia S.A. (‘Brasnorte’)

On August 30, 2019, Taesa concluded the acquisition of 11.624% of Brasnorte increasing its equity interest from 88.376% to 100.00%. For the acquisition, Taesa will paypaid to the seller R$18,024 million.

Acquisition by Taesa of 100% of the shares of Rialma Transmissora de Energia 1 S.A. (‘Rialma’)

On March 13, 2020, Taesa concluded the acquisition of 100% of the shares of Rialma. The asset located in the State of Rio Grande do Norte, interconnected with one of Taesa’s substations – SE Lagoa Nova of Paraíso Açu Transmissora de Energia S.A., will allow operational advantages in maintaining the new asset, and consequently contributing to Taesa´s growth plan and its consolidation in the Brazilian transmission sector. Rialma comprises the transmission line LT Lagoa Nova II – Currais Novos II, voltage of 230 kV, double circuit, with an extension of 28km and Annual Permitted Revenues (RAP) of R$12.6 million (2019-2020 cycle).

For the acquisition, Taesa will paypaid to the seller R$60,482 million, subject to positive or negative adjustments resulting from the variation between the net debt and the working capital between the base date and the closing date, as well as other adjustments after the closing.

Taesa – Closing of Eletrobras Auction Process

On January 15, 2019, Taesa was informed about the formal closing of the process of Eletrobras Auction No. 01/2018, regarding the lots L, N and P, for which it placed the minimum bid. Through a notice, the Sale Committee of the Eletrobras Auction No. 01/2018 stated that, on January 14, 2019, Eletrobras’s Executive Board unanimously approved, without any reservations the ratification of Eletrobras Auction No. 01/2018, referring to lot L (‘Brasnorte’) and lot N (‘ETAU’). Concerning Lot P (‘Centroeste’), CEMIG, which was already a shareholder along with Eletrobras, exercised its right of first refusal, as detailed along this document.

On April 29, 2019, Taesa concluded the acquisition of shares of ETAU, with the payment of R$32.9 million.

On May 31, 2019, Taesa concluded the acquisition of Brasnorte with payment of R$75.6 million and of Transmineiras, with payment of R$77.5 million.

Taesa wins dispute for Lot 12 On December 20, 2018, Taesa won the dispute for the lot 12 related to the Transmission Auction 004/2018, promoted on this date by ANEEL. The volume of investments (CAPEX) and the construction period mentioned above are based on the call notice of the auction published by ANEEL. However, Taesa expects a reduction in the estimated volume of investments as well as in the period to conclude and energize the project.

Taesa signs a SPA for the acquisition of four operational transmission assets

On December 17, 2018, Taesa entered into a Sales and Purchase Agreement with Âmbar Energia Ltda. (‘Âmbar’) and Fundo de Investimento em Participações Multiestratégia Milão (‘FIP’ and, together with Âmbar, the ‘Sellers’), for the acquisition by Taesa of (i) all shares representing the total and voting capital of São João Transmissora de Energia S.A. (‘SJT’) and São Pedro Transmissora de Energia S.A. (‘SPT’), and (ii) of 51% of the shares representing the total and voting capital of Triangulo Mineiro Transmissora de Energia S.A. (‘TMT’) and Vale do São Bartolomeu Transmissora de Energia S.A. (‘VSB’).

On January 3, 2019, Taesa´s Extraordinary General Meeting approved the acquisition of SJT, SPT, TMT and VSB. The completion of the acquisition is subject to certain conditions precedent, including, among others: (i) regulatory authorizations of ANEEL and CADE; (ii) the non-exercise of the preemptive right by Furnas Centrais Elétricas S.A. (‘Furnas’) in relation to shares issued by TMT and the non-exercise of the preemptive right by Furnas and CELG Geração e Transmissão S.A. in relation to shares issued by VSB; (iii) confirmation of fulfillment of the obligations set forth in the Leniency Agreement signed by J&F Investimentos S.A. and the Sellers, including the commitment that no indemnifying or sanctioning measures be proposed against the purchaser; and (iv) non-occurrence of any material adverse effect.

On February 14, 2020, Taesa completed the acquisitions of SJT and SPT for an adjusted amount of R$753.2 million. The acquisitions of TMT and VSB were cancelled due to the failure to obtain the consent by the creditors.

On September 1st, 2021, Taesa announced that delivered the project Janaúba Transmissora de Energia Elétrica, 100% controlled by the Company, in reference to lot 17 of the transmission auction No. 01/2015 (part 2), conducted in October 2016. As such, the Janaúba concession became commercially operational, generating an additional R$ 213.6 million of Annual Permitted Revenues (RAP) for the Company. The project was concluded proximally 6 months ahead of ANEEL’s required deadline on February 9, 2022 and achieved cost savings of approximately 18% in comparison to ANEEL’s stipulated capex, resulting in a total investment of R$950 million. It is important to note that Janaúba is Taesa’s largest greenfield project delivered to date, with an extension of 542 km of lines located between the states of Minas Gerais and Bahia.

On December 17, 2021, Taesa won of the bid regarding lot 1, related to the Transmission Auction No. 02/2021, promoted on this date by ANEEL. The project will generate an additional R$129.9 million of RAP for the company, the result of a discount offered of 47.76%. Furthermore, lot 1 is composed by 363 km of transmission lines, located in the states of São Paulo and Paraná and has an investment forecast of R$1,750,054 million, according to ANEEL, which estimates a construction period of 60 months. The awarded lot has important synergies, it takes advantage of Taesa’s existing Operating and Maintenance structure, in addition to expected CAPEX efficiencies and anticipated project delivery, as usually performed by Taesa.

CEMIG SIM

Launch of CEMIG Soluções Inteligentes em Energia – CEMIG SIM

On October 08, 2019, CEMIG Soluções Inteligentes em Energia – CEMIG SIM was launched. It comprises the activities developed by Efficientia and CEMIG Geração Distribuída – CEMIG GD. Efficientia's by laws were modified in order to adapt to the new object of CEMIG SIM and change of corporate name. On October 19, 2020, a CEMIG’s Extraordinary General Meeting of Shareholders approved the merger of Geração Distribuída – CEMIG GD (wholly-owned subsidiary), at book value, and as a result the investee ceased to exist and the Company took over of all its rights and liabilities.Theliabilities. The proposal is for CEMIG SIM to act, in this first moment, but not limited, in the following segments: distributed generation, account services, cogeneration, energy efficiency (with PEE resources), and supply and storage management.

On November 25, 2020, the Company’s wholly-ownedwholly owned subsidiary CEMIG Sim acquired 49% of interest in seven special-purpose companies operating in photovoltaic solar generation for the distributed generation market (‘geração distribuída’), with total installed capacity of 29.45MWp, for R$55 million. On August 19, 2020 and on September 30, 2020, this wholly-ownedwholly owned subsidiary also acquired 49% of interest in two others SPCs operating in the same market segment for R$8 million and R$10 million, respectively, with total installed capacity of 11.62 MWp.

In 2021, CEMIG SIM achieved 107% growth in sold supply energy totaling 8,199 MWh/month, generated by eleven photovoltaic plants (the Janaúba, Corinto, Manga, Bonfinópolis II, Lagoa Grande, Lontra, Mato Verde, Mirabela, Porteirinha I, Porteirinha II, and Brasilândia plants). On December 2021, CEMIG SIM had 4,752 clients.

CENTROESTE

On December 20, 2018, CEMIG notified Eletrobras stating its interest in exercising its right of first refusal to acquire the interest held by Eletrobras in Companhia Transmission Centroeste de Minas Gerais S.A. - Centroeste, which constituted Lot P of Eletrobras Auction 01/2018. As officially reported by Eletrobras on October 22, 2018, the winning bid was for R$43.243 million.

The first refusal right was exercised on the same terms as contained in the Auction Announcement. The amount stated above will be adjusted by the accumulated variation in the Selic rate over the period from the reference date to the closing date of this transaction, less dividends and/or interest on capital paid or declared in favor of Eletrobras in the period.

On January 15, 2019, CEMIG announced that it had been informed of the acceptance and ratification by Eletrobras of the exercise by CEMIG of its right of first refusal.

On January 13, 2020, Centroeste became a wholly ownowned subsidiary of the Company through the acquisition of the remaining equity interest of 49% held by Eletrobras.

Centroeste operates in construction, operation and maintenance of the transmission facilities of the Furnas-Pimenta transmission line – part of the national grid.

The cash consideration paid amounts to R$45 million, which was the price in the Tender Announcement, adjusted by the accumulated variation of the Selic rate up to the date of conclusion of the transaction and adjusted by the dividends and/or Interest on Equity paid or declared by Centroeste in favor of Eletrobras in the period.

Prior to the acquisition above and as of December 31, 2019, the Company held a 51% share of the investee, and did not control the entity according to its shareholders agreement, therefore, the investments in Centroeste waswere accounted for under the equity method. See more information on Note 16 to our consolidated financial statement - Investments.

Sete Lagoas Transmissora de Energia

On December 23, 2021, Cemig completed the acquisition of all equity interests held by Cobra Brasil Serviços, Comunicações e Energia S.A. and Cobra Instalaciones y Servicios S.A. in Sete Lagoas Transmissora de Energia S.A. (SLTE), becoming the holder of 100% of that company. The amount paid by Cemig was R$ 48 million.

SLTE acquired the concession of Lot H in ANEEL Transmission Auction 008/2010, for construction and operation of the Sete Lagoas 4 substation, in the city of Sete Lagoas, Minas Gerais. The Sete Lagoas 4 substation began operation in June 2014, and its concession contract expires in June 2041.

The assets of SLTE comprise Sete Lagoas 4’s substation, which accesses the national grid through the Neves 1–Três Marias 345kV transmission line, owned by Cemig GT itself. Management believes that are significant synergies that will benefit for CEMIG GT (Generation and Transmission), and for CEMIG D (Distribution).

The companies incorporated in Brazil described below are our major subsidiaries and affiliates. The subsidiary companies were recorded under the equity method (*):

* As of March 31, 20212022, the only change in our major subsidiaries and affiliates from December 31, 20202021 to March 31, 20212022, was the saleamendment of the interest on Light which was already configuredbylaws of Cemig Participações Minoritárias S.A. - Cemigpar, a non-operating company, changing the corporate name to UFV Três Marias S.A., as an asset held for sale. For more information, see “Divestmentwell as the corporate purpose, making it possible to incorporate the assets of Light."the photovoltaic plant installed in Três Marias.

CEMIG’s main subsidiaries and jointly controlled entities and affiliates include the following: