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Challenges of a new time

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Agenda

1. New State administration

2. The CRC affair

3. CVM and SEC

4. The new Federal Administration

5. Energy auctions

6. The rate review process

7. Earning preview

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Disclaimer

Certain statements contained in this presentation are

“Forward-Looking Statements” within the meaning of

the US Securities Laws, and are thus prospective and

subject to risks and uncertainties. “Forward-Looking

Statements” are matters that are not historical facts

and are beyond our control. For a discussion of risks

and uncertainties as they relate to us, please refer to

our 2000 Form 20F, and in particular Item 3 under

“Key information - Risk Factors”.

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The new governor is a young congressman who is the House of Representatives Speaker

1. New State administrationa. The new governor is Mr. Aécio Neves

i. A first round win, with 57% of total votesii. Congressmaniii. A large and comfortable majority at the local Legislature

b. Major proposalsi. Create Cemig holding company

1. Expand generating capacity2. Energy trading

ii. Expand the transmission and distribution systems aiming at improving service quality

iii. Expand natural gas supplyiv. 100% penetration in rural areasv. Develop and consolidate an excellence center on energyvi. No plans to privatize Cemig

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• The Board of Directors • 11 members• 7 appointed by MG• 4 appointed by SEB

• The Auditing Committee*• 5 members• 3 appointed by MG• 1 appointed by SEB• 1 appointed by PN holders

• Decisions are made on a 50% majority basis

* Organized under Brazilian legislation

The new Administration will appoint new members of Board

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The executive officers mostly are career employees or retiredemployees who are able to respond the challenge of a competitive industry.

Professional team is expected to be appointed

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Final decision will come at the long run

* SEB : the legal proceedinga. Case Update

i. Still in the State Appeal Courts, pending on appeal filed last year

ii. Next step: Federal Appeal Court

b. What changes with the new State Administrationi. Nothing : the legal proceeding must be finally ruled by the

Courts

ii. There is no perspective of an earlier agreement

* SEB : AES, Mirant and Opportunity Fund joint venture

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Negotiations with government to settle the industry agreement

2. The CRC affaira. Negotiations with the Federal Government

i. Total amount : R$ 1.1 billionii. Discount rate : 12%iii. Use of proceeds:

a. Expenses derived from the rationing related agreement

b. Debt of any sort

b. Negotiation with the State of Minas Geraisi. R$ 510 million ii. Tenor : 12 yearsiii. Interest rate : 12% p.a.iv. Guarantees: dividends

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Cemig is taking the proper measures to resolve the CRC case

3. CVM and SECa) ANIMEC

i. The Brazilian Association of minority shareholders notified CVM, complaining about the lack of action of the executive officers on the CRC case. Therefore, those officers should be sued.

ii. The CVM , after the company’s defense be accepted, ruled on the company’s officer favor saying the management had taken proper measures to collect the CRC receivables.

b) CRC bad debt accrual

i. CVM notified Cemig on CRC overdue payment determining a bad debt accrual for those payments and the re-filing of the second quarter ITR .

ii. Cemig filed a administrative appeal aiming at the suspension of the required measure.

c) Minority shareholder appointed Director letter to CVM

i. The SEB appointed Directors filed a complaint against the State appointed Directors alleging inaction or omission on the CRC case. The company is preparing a defense letter.

d) 20 F

a) With the closing of the CRC negotiation, the 20F filing will be resumed

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The PT’s view on the electricity industry

4. The new Federal Administration1. There is no official statement on the industry yet:

• Change on the approach : market oriented regulation may be discarded.

• Deep concern on prices may result in attempt to establish price control.

• Deeper changes may require Congressional approval.

2. The team responsible for the industry restructuring is not appointed yet:

• The policymakers who made the PT’s campaign proposal are likely to take responsibility:• The key person is Luiz Pinguelli Rosa

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“ It is necessary to unravel the big confusion the industry is.”

• Luiz Pinguelli Rosa

PT energy industry policymaker

The insights to follow were selected from an interview granted to an energy specific electronic newspaper

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The approach will be changed

• Change the approach so that it is focused on public service rather than privatization and liberalization;– Notwithstanding, previously signed contracts will be

honored;

• Electricity system expansion planning will be centralized and will be conducted by the existing energy planning committee, the CNPE ;o The responsibility to handle growing demand is that

of the Federal Government ;o The private investor role is supplementary;

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Deep concern with the capacity expansion

• Assure the capacity expansion through state owned and private generators:o The needed investment is approximately R$ 10 billion per year

of which R$ 5 billion will be invested by the Eletrobras group;o The state owned utilities are under-leveraged and there may

raise funds in the capital markets;o The restrictions on state owned companies’ ability to raise

funds will be lifted.o The MAE, the wholesale energy market, will have a

complementary role:o The generators will be committed to the capacity expansion;

• The ROI will be set through transmission fixed revenue like approach;

• It will be assured inflation based adjustments ;

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Concerns on price levels• The electricity price must be affordable for the

consumers:o Change the way the concessions are grantedo The idea is to have lowest rate bid win rather than the

highest licensed fee;o The rate review process will be revised to change the

inflation adjustment index, the IGP-M, which reflects the impact of the depreciated real;

o Extend initial contracts through negotiation among the various parties;

o nevertheless, the utilities must be profitable but not excessively so;

o The negotiation process will not be extensive with the Government in the role of arbitrator;

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Other points to watch

• The ANEEL will have an industry oversight role assuring regulation enforcement;

• The rationing loss recovery mechanism will be preserved and other points will be revised :o Energy supply insurance;o The CBEE ( Government owned trader) role;

• Thermal generation projects will have a supplementary role to the hydro-generation and a progressive growth in the country’s energy matrix. Points to be revised are:o Natural gas high price ( dollar denominated contracts);o Take or pay contracts;

• The use of alternate energy sources is one of the highest priorities of the PT’s energy industry strategy;

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Low demand turned prices low

5. Energy auctions

What went wrong?a. Disappointing demand.

b. Low asked prices for energy to deliver in the SE and MW region.

c. Buyers unsure on price trend.

d. Overcapacity on the short term

e. Uncertainty on the regulatory framework

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Federal auction final results

Seller Region Tenor Asked price

Bid price 0.5 MW blocks offered

Blocks purchased

AÇUC. ZILLO LORENZETTI SE/CO 2 65,00 65,00 20 -

CGTEE S 2 70,05 70,05 69 -

CHESF NE 2 45,06 45,06 148 74

CHESF NE 4 45,99 45,99 588 403

CHESF NE 6 46,33 46,33 736 679

CHESF N 4 45,99 45,99 220 74

CHESF SE/CO 2  45,06 45,06 794 418

CHESF SE/CO 4 51,08 57,58 318 318

CHESF S 4 48,51 48,51 140 86

COPEL GERAÇÃO S 2 62,00 62,00 380 -

COPEL GERAÇÃO S 4 65,00 65,00 200 -

COPEL GERAÇÃO S 6 70,00 70,00 200 100

ELETRONORTE N 2 41,00 41,00 230 98

ELETRONORTE N 4 43,00 46,00 132 132

ELETRONORTE N 6 59,00 59,00 72 50

TRACTEBEL SE/CO 2 52,00 52,00 120 13

TRACTEBEL SE/CO 4 63,90 63,90 300 -

TRACTEBEL SE/CO 6 69,89 69,89 120 -

FURNAS SE/CO 2 62,39 62,39 340 -

FURNAS SE/CO 4 57,95 57,95 160 160

FURNAS SE/CO 6 69,95 69,95 2,720 30

USINA BARRA Gde LENÇÓIS SE/CO 2 65,00 65,00 30 -

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The 2002-2005 pricing outlook– The VN, R$ 85 per MWh, is the price

reference– Marginal cost is around VN– For the long run, price will range from R$ 70

to 85 per MWh– Good rainfalls may affect spot market price

keeping it down for the short term– Subsidies on the natural gas price will turn

thermal projects competitive

Electricity price linked to capacity expansion cost

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Still pending decision on the methodology to be used

6. The rate review process

a. The rate base asset value to be calculated by a replacement price approach.

b. CNPE’s request on the criteria taken by the ANEEL.

c. Cemig’s process supposed to be completed until April 2003

d. Subject to public hearings

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Year of volatility

7. Earning preview

Major highlights

• Devaluation of the Br R$ was very sharp : 30% in the quarter, 40% year to September.

• Sale volume growth is still sluggish because of the weak economic activity and rationing impact .

• Subsidies granted to the low income consumers.

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Energy Retail Sale Volume Growth Analysis

• Estimated retail sales in 2002 are:• Match 1998 and 1999• 4.7% lower than 2000• 2.3% higher than 2001

33.000

34.000

35.000

36.000

37.000

38.000

GWh

1998 2000 2002

Retail Sale Growth

See disclaimer slide 2

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Energy Retail Sale VolumeGrowth Analysis

6,0006,500

7,000

7,500

8,0008,500

9,000

9,50010,000

GWh

2000 2001 2002

Third Quarter Analysis• 3Q 02 retail sale

volume is:– 4.8% lower than 2000– 16.8% stronger than

2001

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Energy Retail Sale VolumeGrowth Analysis

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

Jan

Feb Mar

April

Mai

Jun

July

August

Septe

mbe

r

GW

h

Retail SalesMonthly average consumption

• In the 2 and 3Q 02, the monthly average retail sales volume was 10% higher than 1Q 02

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2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,2003,300

GWh

2000 2001 2002

September Retail Sales Analysis

• September 2002 retail sales were:– Approximately 16%

stronger compared to September 2001

– 4% lower than 2000

Energy Retail Sales VolumeGrowth Analysis

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• 2002 energy retail sale estimate is still higher than the 2001 energy retail sales

• Nonetheless, 2002 estimates match 1998 and 1999 retail sales

• The impact of 2001/2002 rationing will persist for at least 3 years

• 2000 retail sale level will be matched only in 2005

Energy Retail Sales VolumeGrowth Analysis

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Retail Sales Volume Growth Estimate Reflects Impact of 2001-2002 Rationing

33.000

34.000

35.000

36.000

37.000

38.000

39.000

GW

h

1998

1999

2000

2001

2002

2003

2004

2005

2002-2005 Estimated Energy Retail Sales Growth

• For the 2003-2005 period the estimated annual growth rate is 2.2%

• 2000-2004 CAGR is 0.4%

See disclaimer slide 2

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• The major reasons for slower growth are:– Change in average residential and commercial

consumption: • 1st half 2002 averages are 16% and 13% lower than

2001;– Change in industrial consumption pattern:

• Some consumers are replacing utility supply by self-generation (hydropower projects at aluminum industry, cogeneration projects at steel and fertilizer plants) and diesel fired generators or other alternatives during peak hours.

Energy Retail Sales VolumeGrowth Analysis

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Therefore, we are revising our estimate for 2002

• New requirements for low income consumer subsidy brought a R$5 million monthly revenue loss.

• Reduction of the initial contract volume rose from 2.4% to 6.3%, resulting in a lower revenue loss recovery.

• Consumption growth estimate now is 2.3% down from 4%, previously predicted.

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R$3.4 Billion Planned for the Next 4 YearsEconomic Basis

CAPEXCAPEX

2000 2001 As of Jun/02 2002 2003 2004 2005

Generation 144.4 169.0 133.7 416.7 201.3 91.2 13.8

Transmission 8.9 46.8 19.5 44.6 96.6 104.2 94.9

Sub-transmission 40.6 31.5 25.5 98.8 130.9 121.9 126.7

Distribution 291.8 348.1 115.5 399.5 354.9 321.0 292.4

Other 17.3 6.8 9.1 93.0 64.7 87.9 90.5

Infovias 18.5 33.2 117.0 117.0 - - -

TOTAL 521.5 635.4 420.3 1,169.6 848.4 726.2 618.2

ActualItems

Projected

Values in million of reais

All financial information in Brazilian GAAPAll financial information in Brazilian GAAP

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Major Projects

PLANT 2002 2003 2004

Hydro Power Plants In Operation 5,434 Under Construction

FUNIL 180 QUEIMADOS 105 AIMORÉS 330 IRAPÉ CAPIM BRANCO I 240 CAPIM BRANCO II

Thermal Power Plants In operation 171 Under construction

SULMINAS 500 BARREIRO 13 IGARAPÉ 219

Others 1

Cemig's total capacity 5,694 6,175 6,380

Generation Capacity Expansion(MW)

Aimorés

FunilQueimado

Porto Estrela

All financial information in Brazilian GAAPAll financial information in Brazilian GAAP

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• BOVESPA Level I : CMIG3 and CMIG4BOVESPA Level I : CMIG3 and CMIG4• NYSE Level II ADR: CIGNYSE Level II ADR: CIG• Latibex : XCMIGLatibex : XCMIG• Dow Jones Sustainability Index 2000Dow Jones Sustainability Index 2000,, 2001 2001 and 2002 and 2002

Committed to the best Corporate Governance practices

Best Electricity IndustryCorporate GovernancePractices in Latim America