SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15 (D) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of Report (date of earliest event reported): June 18, 1997

                               THE AES CORPORATION
             (exact name of registrant as specified in its charter)

       DELAWARE                   333-15487                    54-1163725
     (State  of               (Commission File No.)           (IRS Employer 
    Incorporation)                                         Identification No.)

                       1001 North 19th Street, Suite 2000
                            Arlington, Virginia 22209
          (Address of principal executive offices, including zip code)

               Registrant's telephone number, including area code:
                                 (703) 522-1315

                                 NOT APPLICABLE

          (Former Name or Former Address, if changed since last report)



<PAGE>
ITEM 2.  ACQUISITION OF DISPOSITION OF ASSETS

On June 18, 1997,  AES together  with The Southern  Company and The  Opportunity
Fund,  a  Brazilian  investment  fund,  (collectively,  the  "AES  Consortium"),
acquired 14.41% of Companhia Energtica de Minas Gerais ("CEMIG"),  an integrated
electric  utility  serving  the  State of Minas  Gerais in  Brazil,  for a total
purchase price of  approximately  $1.056 billion,  $654 million of the financing
for which was in the form of non-recourse  financing  provided by Banco Nacional
de Desenvolvimento  Economico e Social ("BNDES").  AES's portion of the purchase
price was approximately $364 million after  consideration of the BNDES facility.
The shares of CEMIG,  which represent  approximately 33% of the voting interest,
have been purchased from the State of Minas Gerais in a partial privatization of
CEMIG.  Initially,  AES and The  Opportunity  Fund  will have a 90.6% and a 9.4%
economic interest in the AES Consortium,  respectively. The Southern Company has
an option  until  January 9, 1998 to  purchase  up to a 25%  interest in the AES
Consortium  from AES.  Pursuant  to a  shareholders  agreement  between  the AES
Consortium and the State of Minas Gerais,  AES will have  significant  operating
influence,  including the right to appoint the chief operating officer of CEMIG,
and will otherwise share control of CEMIG with the State of Minas Gerais.  CEMIG
owns  approximately  5,000 MW of generating  plants and serves  approximately  4
million  customers.   The  foregoing  transaction  and  the  financing  therefor
described below are referred to herein as the "CEMIG Acquisition".


ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

a.(i) Financial statements of Businesses Acquired

      The  following  audited  financial  statements  of  Companhia   Energetica
de Minas  Gerais - CEMIG as of and for the years  ended  December  31,  1996 and
1995, together with the Independent  Auditors' Report are prepared in accordance
with generally accepted accounting principles in Brazil.


<PAGE>
                        Rua dos Inconfidentes, 1190 9'   Telefone (031) 261-6322
                        Caixa Postal 289                      Fax (031) 261-6950
                        30161-970     Belo Horizonte, MG-Brasil

Price Waterhouse

Report of Independent Accountants

February 28, 1997

To the Board of Directors and Stockholders
Companhia Energetica de Minas Gerais - CEMIG


1    We have audited the accompanying  balance sheets of Companhia Energetica de
     Minas  Gerais  - CEMIG as of  December  31,  1996 and 1995 and the  related
     statements of income, of changes in stockholders'  equity and of changes in
     financial  position  for the years then  ended,  expressed  in  currency of
     constant   purchasing   power.   These   financial   statements   are   the
     responsibility  of  the  company's  management.  Our  responsibility  is to
     express an opinion on these financial statements.

2    We conducted  our audits in accordance  with  Brazilian  approved  auditing
     standards  which  require  that we perform  the audit to obtain  reasonable
     assurance  about whether the financial  statements are fairly  presented in
     all  material  respects.   Accordingly,  our  work  included,  among  other
     procedures:   (a)  planning  our  audits  taking  into   consideration  the
     significance of balances, the volume of transactions and the accounting and
     internal  control systems of the company;  (b) examining,  on a test basis,
     evidence  and  records  supporting  the  amounts  and  disclosures  in  the
     financial  statements;  and (c) assessing the accounting practices used and
     significant estimates made by management, as well as evaluating the overall
     financial statement presentation.

3    In our opinion,  the financial  statements audited by us present fairly, in
     all material respects,  the financial  position of Companhia  Energetica de
     Minas  Gerais - CEMIG at December  31, 1996 and 1995 and the results of its
     operations,  the  changes in  stockholders'  equity and the  changes in its
     financial  position for the years then ended, in conformity with accounting
     principles generally accepted in Brazil.

4    The U. S. dollar amounts shown in these financial  statements are presented
     solely for the convenience of the reader.  These amounts were translated on
     the bases explained in Note 2.2 to the financial statements.


/s/ Price Waterhouse

Price Waterhouse
Auditores Independentes
CRC--SP-16O "S" MG


/s/ Jorge R. Manoel
Jorge R. Manoel
Partner
Contador CRC-SP-110.719 "T" MG


<PAGE>



COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET                         
                                      
AT DECEMBER 31, 1996 AND 1995         
                                      
IN  THOUSANDS  OF  REAIS  AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                R$                    US$
                                                  --------------------------    ------------
ASSETS                                                1996          1995             1996      
                                                  ------------  ------------    ------------   
CURRENT ASSETS
   Cash and banks                                     154,348       160,481          148,497   
                                                  ------------  ------------    ------------   
<S>                                                <C>           <C>              <C>          
   Accounts receivable, securities
      and other assets
   Consumers and dealers                              338,157       305,060          325,339   
   Income receivable                                    6,329        l0,815            6,089   
   Recoverable taxes and social contribution           99,960        59,569           96,171   
   Sundry debtors                                      56,226        24,646           54,094   
   Other receivables                                   14,543         2,038           13,992   
   Allowance for doubtful
      accounts                                        (31,223)      (15,336)         (30,039)  
   Stores                                              94,918        84,292           91,320   
   Services in process                                 13,919         5,727           13,391   
                                                  ------------  ------------    ------------   
                                                      592,829       476,811          570,357   
                                                  ------------  ------------    ------------   
   Prepaid expenses                                     3,161         3,262            3,041   
                                                  ------------  ------------    ------------   
                                                      750,338       640,554          721,895   
                                                  ------------  ------------    ------------   
LONG-TERM RECEIVABLES
   Securities                                         135,461                        130,327
   Judicial deposits                                    1,714         1,816            1,649   
   Other receivables                                  933,501       880,346          898,115   
                                                  ------------  ------------    ------------   
                                                    l,070,676       882,162        l,030,091   
                                                  ------------  ------------    ------------   
PERMANENT ASSETS
   Investments                                        l08,917        91,842          104,788   
   Property, plant and equipment                   11,268,491     9,431,734       10,841,342   
   Deferred charges                                     5,170     1,548,709            4,974   
                                                  ------------  ------------    ------------   
                                                   11,382,578    ll,072,285       l0,951,104   
                                                  ------------  ------------    ------------   
TOTAL  ASSETS                                      13,203,592    12,595,001       12,703,090   
</TABLE>





<PAGE>






COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET
AT DECEMBER 31, 1996 AND 1995
IN THOUSANDS OF REAIS AND IN
   THOUSANDS OF U.S. DOLLARS                                         (continued)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                          R$                 US$
LIABILITIES AND STOCKHOLDERS' EQUITY               1996         1995        1996     
                                              ------------  ----------  -----------  
<S>                                            <C>          <C>          <C>         
CURRENT LIABILITIES
    Suppliers                                     118,876      128,186      114,370  
    Payroll                                         2,486        6,900        2,392  
    Financial charges                              l0,909       10,067       10,495  
    Taxes and social contribution                 185,617      148,634      178,581  
    Proposed dividends                            130,787      141,903      125,829  
    Loans and financings                          141,029       79,291      135,683  
    Accrued liabilities                           182,014      189,683      175,115  
    Taxes charged to consumers                     66,057       75,134       63,553  
    Profit sharing                                 12,918                    12,428
    Advance billing of electric power              47,832        3,337       46,019  
    Other                                          94,306       74,266       90,731  
                                              ------------  ----------  -----------  
                                                  992,831      857,401      955,196  
                                              ------------  ----------  -----------  
LONG-TERM LIABILITIES
    Loans and financings                          879,807      746,634      846,456  
    Deferred taxes                                523,720      492,098      503,868  
    Advance billing of electric power              64,315                    61,877
    Other                                          30,374       64,556       29,223  
                                              ------------  ----------  -----------  
                                                1,498,216    1,303,288    1,441,424  
    Special contributions                       1,143,350    1,041,397    l,l00,0l0  
                                              ------------  ----------  -----------  
                                                2,641,566    2,344,685    2,541,434  
                                              ------------  ----------  -----------  
STOCKHOLDERS' EQUITY
    Capital                                     1,736,116    1,735,045    1,670,306  
    Capital reserves                            5,846,192    5,683,970    5,624,583  
    Revenue reserves                            1,929,301    1,946,941    1,856,168  
    Retained earnings                              45,989       15,396       44,246  
                                              ------------  ----------  -----------  
                                                9,557,598    9,381,352    9,195,303  
    Funds for future capital
       increase                                    11,597       11,563       11,157  
                                              ------------  ----------  -----------  
                                                9,569,195    9,392 915    9,206,460  
                                              ------------  ----------  -----------  
TOTAL LIABILITIES                              13,203,592   12,595,001   12,703,090  
                                              ============  ==========  ===========  
</TABLE>



   The accompanying notes are an integral part of these financial statements.



<PAGE>



COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET                          
                                       
AT DECEMBER 31, 1996 AND 1995          
                                       
IN  THOUSANDS  OF  REAIS  AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                          R$                             US$
                                               -------------------------            ---------
                                                   1996          1995                  1996   
                                               -----------  ------------            --------- 
<S>                                            <C>           <C>                   <C>        
OPERATING REVENUE
     Electricity sales
        to final consumers                      2,462,677     2,276,246             2,369,326 
     Electricity sales to the Interconnected
        Power System and other
        concessionaires                            98,868        79,920                95,120 
     Other                                         42,582        30,874                40,968 
                                               -----------  ------------            --------- 
                                                2,604,127     2,387,040             2,505,414 
     Deduction from operating revenue
        Global reversal of reserve quota          (60,401)     (121,781)              (58,112)
        Fuel consumption account quota            (81,806)      (75,983)              (78,705)
        Taxes and contributions on revenue       (506,188)     (463,342)             (487,000)
                                               -----------  ------------            --------- 
                                                 (648,395)     (661,106)             (623,817)
                                               -----------  ------------            --------- 
NET OPERATING REVENUE                           1,955,732     1,725,934             1,881,597 
                                               -----------  ------------            --------- 
OPERATING EXPENSES
     Personnel                                   (553,328)     (509,730)             (535,353)   
     Supplies                                     (38,921)      (35,842)              (37,446)   
     Third-party services                        (129,070)     (ll0,267)             (124,177)  
     Electric power purchased
        for resale                               (435,253)     (461,733)             (418,754)   
     Depreciation and amortization               (441,436)     (466,480)             (424,703)   
     Royalties for the use of
        water resources                           (24,637)      (25,375)              (23,703)   
     Leasing, rents and loans of assets           (16,104)      (15,631)              (15,494)   
     Formation of operating provisions            (39,901)      (19,667)              (38,389)   
     Other expenses, net                          (42,651)      (66,139)              (41,034)   
                                               -----------  ------------            ---------    

                                               (1,721,301)   (1,710,864)           (1,656,053)   
                                               -----------  ------------            ---------    
</TABLE>


<PAGE>


COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
STATEMENT OF INCOME
YEARS DECEMBER 31, 1996 AND 1995
IN THOUSANDS OF REAIS AND IN
   THOUSANDS OF U.S. DOLLARS                                         (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                 R$                 US$
                                        ---------------------    ---------
                                           1996        1995        1996   
                                        ---------   ---------    ---------
<S>                                   <C>         <C>         <C>         
FINANCIAL INCOME (EXPENSES)
   Income from financial investments      32,394      70,065      31,166  
   Interest on electricity bills
      paid in arrears                     59,484      60,044      57,229  
   Finance charges                       (57,546)    (66,475)    (55,364) 
   Net monetary variations and others     61,276      43,513      58,953  
                                        ---------   ---------    ---------

                                          95,608     107,147      91,984  
                                        ---------   ---------    ---------

OPERATING PROFIT                         330,039     122,217     317,528  
                                        ---------   ---------    ---------
Non-operating income                      17,001      19,546      16,357  
Non-operating expenses                   (13,982)    (26,448)    (13,452) 
                                        ---------   ---------    ---------
                                           3,019      (6,902)      2,905  
                                        ---------   ---------    ---------

INCOME BEFORE TAXATION
   AND PROFIT SHARING                    333,058     115,315     320,433  

INCOME TAX AND SOCIAL CONTRIBUTION       (78,151)    (68,160)    (75,189) 

REVERSAL OF DEFERRED TAXES                 8,082     189,873       7,776  

EMPLOYEES' PROFIT SHARING                (21,414)                (20,602)
                                        ---------   ---------    ---------

NET INCOME FOR THE YEAR                  241,575     237,028     232,418  
                                       =========   =========    ========= 

NET INCOME PER THOUSAND
   SHARES R$/US$                            1.86        1.83        1.79  
                                       ---------   ---------    --------- 
</TABLE>



   The accompanying notes are an integral part of these financial statements.






<PAGE>

COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
<TABLE>
<CAPTION>

                                                                                 
STATEMENT  OF  CHANGES IN  STOCKHOLDERS' EQUITY                                  
YEARS ENDED DECEMBER 31, 1996 AND 1995                                           
IN THOUSANDS OF REAIS                                                           
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                                
                                                                                                                   FUNDS
                                                         RESTATED        OTHER                                FOR FUTURE
                                                          PAID-UP      CAPITAL      REVENUE      RETAINED        CAPITAL
                                                          CAPITAL     RESERVES     RESERVES      EARNINGS       INCREASE       TOTAL
                                                      -----------   ----------   ----------    ----------   ------------ -----------
<S>                                                     <C>          <C>          <C>             <C>           <C>       <C>      
AT DECEMBER 31, 1995                                    1,735,045    5,683,970    1,946,941       15,396        11,563    9,392,915
                                                      -----------   ----------   ----------    ----------   ------------ -----------
                                                
Capital increase (EGM of 11.08.96)                          1,071                                               (1,071)
Premium on share subscription                                            3,211                                  (3,211)
Remuneration of construction in progress
   financed by own resources                                           156,973                                              156,973
Funds for capital increase - advances received                                                                   4,316        4,316
Reversal of income tax and social contribution
   on special restatement of special contributions                     (51,316)                                             (51,316)
Difference in social contribution rate                                 (49,113)                                             (49,113)
Transfer relating to reduction in 1992 income tax rate                  98,807      (98,807)
Investment credits                                                       4,805                                                4,805
Treasury stock                                                          (1,145)                                              (1,145)
Reversal of dividends relating to treasury stock                                         56                                      56
Net income for the year                                                                          241,575                    241,575
Transfer to retained profits reserve                                                122,499     (122,499)
Reversal of unrealized profits reserve                                              (41,388)      41,388
Proposed dividends R$ 1.00 per thousand shares)                                                 (129,871)                  (129 871)
                                                      -----------   ----------   ----------    ----------   ------------ -----------

AT DECEMBER 31, 1996                                    1,736,116  5,846,192      1,929,301       45,989         11,597   9,569,195
                                                      -----------   ----------   ----------    ----------   ------------ -----------
</TABLE>





<PAGE>
<TABLE>
<CAPTION>

<S>                                                                                                          <C>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG   
STATEMENT  OF  CHANGES IN  STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995         
IN THOUSANDS OF REAIS                                                                                              (CONTINUED)

------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                                                 FUNDS             
                                                        RESTATED        OTHER                                FOR FUTURE             
                                                         PAID-UP      CAPITAL      REVENUE      RETAINED        CAPITAL             
                                                         CAPITAL     RESERVES     RESERVES      EARNINGS       INCREASE       TOTAL 
                                                     -----------   ----------   ----------    ----------   ------------ ----------- 


<S>                                                    <C>          <C>            <C>           <C>            <C>       <C>      
AT DECEMBER 31, 1994                                   1,666,410    4,370,666      891,643       969,817        130,710   8,029,246
                                                     -----------   ----------   ----------    ----------   ------------ ----------- 


Capital increase (AGM de 03.27.95 e EGM 12.11.95)         68,635                                                (68,635)
Premium on share subscription                                          72,122                                   (72,122)
Remuneration of construction in progress
  financed by own resources                                           134,587                                               134,587
Funds for capital increase - advances received                                                                   21,610      21,610
Income tax on special restatement - adjustment
  of rate - Law 9249/95                                               328,036                                               328,036
Investment credits
  Credit assignment of results account for offset - CRC               771,745                                               771,745
  Others                                                                6,814                                                 6,814
Adjustment of deferred taxes                                                                       5,606                      5,606
Net income for the year                                                                          237,028                    237,028
Transfer to reserves:
  Legal                                                                             11,849       (11,849)
  Retained profits                                                                 854,482      (854,482)
  Unrealized profits                                                               225,134      (225,134)
Reversal of unrealized profits reserve                                             (36,167)       36,167
Proposed dividends (R$ 1.OO per thousand shares)                                                (141,757)                  (141.757)
                                                     -----------   ----------   ----------    ----------   ------------ ----------- 

AT DECEMBER 31, 1995                                   1,735,045    5,683,970    1,946,941        15,396         11,563   9,392,915
                                                    -----------   ----------   ----------    ----------   ------------ ------------

</TABLE>

The accompanying notes are an integral part of these financial statements.



<PAGE>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG        
STATEMENT  OF  CHANGES IN  STOCKHOLDERS' EQUITY                                 
YEARS ENDED DECEMBER 31, 1996 AND 1995                                          
IN THOUSANDS OF U.S. DOLLARS                                                    
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                FUNDS             
                                                       RESTATED        OTHER                                FOR FUTURE            
                                                        PAID-UP      CAPITAL      REVENUE      RETAINED        CAPITAL            
                                                        CAPITAL     RESERVES     RESERVES      EARNINGS       INCREASE       TOTAL
                                                    -----------   ----------   ----------    ----------   ------------ -----------
<S>                                                    <C>          <C>            <C>           <C>            <C>       <C>      
AT DECEMBER 31, 1995                                  1,669,276    5,468 511    1,873,139        14,812         11,125    9,036,863
                                                    -----------   ----------   ----------    ----------   ------------ -----------

Capital increase (EGM of 11.08.96)                        1,030                                                 (1,030)
Premium on share subscription                                          3,089                                    (3,089)
Remuneration of construction in progress financed by
own resources                                                        151,023                                                151,023
Funds for capital increase - advances received                                                                   4,151        4,151
Reversal of income tax and social contribution on
  special restatement of special contributions                       (49,371)                                               (49,371)
Difference in social contribution rate                               (47,251)                                               (47,251)
Transfer relating to reduction in 1992 income tax rate                95,061      (95,061)
Investment credits                                                     4,623                                                  4,623
Treasury stock                                                        (1,102)                                                (1,102)

Reversal of dividends relating to treasury stock                                       54                                        54
Net income for the year                                                                         232,418                     232,418

Transfer to retained profits reserve                                              117,855      (117,855)
Reversal of unrealized profits reserve                                            (39,819)       39,819
Proposed dividends (US$ 0 96 per thousand shares)                                              (124,948)                   (124,948)
                                                    -----------   ----------   ----------    ----------   ------------ ------------

AT DECEMBER 31, 1996                                  1,670,306    5,624,583    1,856,168        44,246         11,157    9,206,460
                                                    -----------   ----------   ----------    ----------   ------------ ------------

</TABLE>

   The accompanying notes are an integral part of these financial statements.




<PAGE>


COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET                          
                                       
AT DECEMBER 31, 1996 AND 1995          
                                       
IN  THOUSANDS  OF  REAIS  AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                              R$                          US$
                                                                  -------------------------           ------------
                                                                      1996         1995                  1996     
                                                                  -----------  ------------           ------------
<S>                                                                <C>             <C>                <C>         
FINANCIAL RESOURCES WERE PROVIDED BY:
Operations                
   Net income for the year                                           241,575       237,028              232,418   
   Expenses (income) not affecting
     working capital:                                                441,436       466,480              424,703   
   Depreciation and amortization                                          21          (416)                  20   
   Allowance for doubtful accounts - long-term                                     (15,561)                       
   Remuneration of construction in progress                          (13,967)        6,073              (13,437)  
   Increase in deferred income tax
   Equity in the earnings of subsidiary                                 (501)       (4,810)                (482)  
     company                                                         (80,724)      (23,354)             (77,664)  
   Long-term gains and losses                                         14,110        25,002               13,575   
   Residual value of asset disposals                                   9,680        12,637                9,313   
   Adjustments to present value -
     long-term receivables                                            (8,082)     (189,873)              (7,776)  
   Reversal of deferred taxes
   Interest and charges on
     long-term receivables                                           (62,629)      (31,907)             (60,255)  
                                                                  -----------  ------------           ------------
                                                                     540,919       481,299              520,415   
                                                                  -----------  ------------           ------------

Stockholders
   Advances for future capital increase                                4,316        21,61O                4,151   
                                                                  -----------  ------------           ------------
Third-parties
   Financing                                                         292,984       210,368              281,879   
   Transfer from current to long-term                                              120,132                        
     financing - renegotiations                                        4,805         1,615                4,623   
   Investment credits
   Write down of fixed assets on discontinued                         25,539         2,714               24,571   
     operations                                                      101,953        91,420               98,088   
   Special contributions
   Increase in other long-term
     liabilities                                                      69,192         2,043               66,569   

   Other                                                                  56            27                   54   
                                                                  -----------  ------------           ------------
                                                                     494,529       428,319              475,783   
                                                                  -----------  ------------           ------------

TOTAL FUNDS PROVIDED                                               1,039,764       931,228            1,000,350   
                                                                  -----------  ------------           ------------
</TABLE>






<PAGE>


COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEARS ENDED DECEMBER 31, 1996 AND 1995
IN THOUSANDS OF REAIS AND IN
   THOUSANDS OF U.S. DOLLARS                                         (continued)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                    R$                   US$
                                        ------------------------   -----------
                                            1996         1995           1996  
                                        ----------    ----------   -----------
<S>                                      <C>          <C>            <C>      
FINANCIAL RESOURCES WERE USED FOR:
Property, plant end equipment             624,798       642,943       601,114 
  Proposed dividends                      129,871       141,757       124,948 
  Increase in long-term receivables       127,674        75,304       122,834 
  Increase in investments                   8,480         2,982         8,158 
  Transfer from long-term to current
  liabilities
  Deferred taxes                            5,181        73,064         4,985 
  Loans and Financing                     145,163        82,748       139,660 
  Other                                    23,041        17,728        22,168 
  Increase in deferred charges                 57            60            55 
  Treasury stock                            1,145                       1,102
                                        ----------    ----------   -----------
TOTAL FUNDS USED                        1,065,410     1,036,586     1,025,024 
                                        ----------    ----------   -----------

DECREASE IN WORKING CAPITAL               (25,646)     (105,358)      (24,674)
                                        ----------    ----------   -----------

CHANGES IN WORKING CAPITAL

CURRENT ASSETS
At the beginning of the  year             640,554       536,166       616,273 
At the end of the year                    750,338       640,554       721,895 
                                        ----------    ----------   -----------

                                          109,784       104,388       105,622 
                                        ----------    ----------   -----------
CURRENT LIABILITIES
At the beginning of the year              857,401       647,655       824,900 
At the end of the year                    992,831       857,401       955,196 
                                        ----------    ----------   -----------
                                          135,430       209,746       130,296 
                                        ----------    ----------   -----------
DECREASE IN WORKING CAPITAL               (25,646)     (105,358)      (24,674)
                                        ==========    ==========   ===========
</TABLE>



   The accompanying notes are an integral part of these financial statements.





<PAGE>






COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------




1    OPERATIONS

     Companhia   Energetica  de  Minas  Gerais  -  CEMIG,  a  Brazilian   listed
     corporation  registered under GEMEC/RCA  certificate No. 200-75/109 and the
     General Taxpayers' Register (C.G.C) No. 17.155.730/0001 -64, is an electric
     power public  utility  concessionaire  controlled by the Minas Gerais State
     Government.  Its principal  business  activities are the  construction  and
     operation of systems used in the generation, transformation,  transmission,
     distribution  and sale of electric  power,  as well as the  development  of
     activities in diverse energy-related areas for business purposes.

     The concession area held by CEMIG covers 562,762 km(2),  approximately  97%
     of the  territory  of the State of Minas  Gerais,  providing  power to some
     4,248 thousand (1995 - 4,049 thousand)  consumers.  It has 35 power plants,
     mainly hydroelectric,  with a generating capacity of approximately 5,068 MW
     (1995 - 4,962 MW).

     The  construction of the following  hydroelectric  power plants is still in
     progress:

     *    Miranda, with a generating  capacity of 390 MW. Start-up of operations
          of the first unit is programmed for 1997. The total  estimated cost is
          R$ 848,628 (US$  816,459),  which is being financed with the company's
          own funds and funds from  Eletrobras  and from IMPSA.  R$ 618,820 (US$
          595,363) of this  amount has already  been  expended  to date,  net of
          interest on construction.

     *    Igarapava,  with a generating  capacity of 210 MW, is a joint  venture
          with private  enterprise.  The total estimated cost is R$ 243,599 (US$
          234,365), of which CEMIG's participation is 14.5%.

     The  company  has 14,923  employees  (16,452 in 1995) and the  minimum  and
     maximum  monthly  salaries in December 1996 were R$ 389.00 (US$ 374.25) and
     R$ 8,943.00 (US$ 8,604.00), respectively.









<PAGE>



COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------




2    PRESENTATION OF THE FINANCIAL STATEMENTS

     The financial  statements were prepared in conformity with the requirements
     of Brazilian corporate  legislation and the Brazilian Securities Commission
     (CVM). The procedures adopted may be summarized as follows:

     MONETARY ITEMS

     Monetary  items which  include  anticipated  inflation  and  interest  were
     adjusted to present value by using the National  Association  of Investment
     Banks and Securities Dealers (ANBID) rate.

     Monetary  gains and losses,  as well as the  adjustments  to present value,
     were  allocated  to the  statement  of income  accounts  according to their
     nature. In the specific cases of suppliers, consumers and dealers, monetary
     gains and losses were allocated to the financial income (expense) accounts.

     NON-MONETARY ITEMS

     These  are  shown at  restated  cost  expressed  in  currency  of  constant
     purchasing power at December 31, 1996.

     ITEMS IN THE STATEMENTS OF INCOME,  OF CHANGES IN STOCKHOLDERS'  EQUITY AND
     OF CHANGES IN FINANCIAL POSITION

     These are  restated  as from the date or month they were  recorded  through
     December 31, 1996, adjusted both for gains and losses on monetary items and
     for the adjustment to present value of receivables and payables.

     COMPARATIVE FINANCIAL STATEMENTS

     The financial statements for the year ended December 31, 1995 were adjusted
     for  comparative  purposes  to currency  of  constant  purchasing  power at
     December 31, 1996,  using the  variation of the General  Market Price Index
     (IGP-M) in 1996 as the basis for restatement.

     Monetary gains and losses, adjustments to present value and the restatement
     of inventories  and monetary items were allocated to the income and expense
     accounts to which they relate as follows:

     GAINS AND LOSSES NET OF RESTATEMENTS (1996)




<PAGE>



COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

<TABLE>
<S>                                             <C>           <C>            <C>

INCOME AND EXPENSE ACCOUNTS                        R$            US$                   MONETARY ITEMS
------------------------------------------------------------------------------------------------------------------------------------
Deductions from operating revenue
    Reserve/fuel consumption quotas               5,590        5,378          Taxes charged to consumers
    Taxes and contributions on revenue            3,766        3,623          Taxes and social contributions - ICMS

OPERATING EXPENSES
    Personnel                                     8,664        8,336          Payroll and social security contributions
    Supplies                                     (5,001)      (4,811)         Stores
    Third party services                         (1,146)      (1,103)         Services in progress
    Royalties for the use of
    water resources                                 380          366          Water resources
    Other operating expenses                     35,371       34,030          Sundry

FINANCIAL INCOME (EXPENSES)
    Finance charges                                 646          622          Finance charges payable
    Other                                        10,626       10,223          Sundry

NON-OPERATING INCOME                               (554)        (533)         Services in progress
PROVISION FOR INCOME TAX                         41,596       40,019          Provision for income tax
------------------------------------------------------------------------------------------------------------------------------------
GAINS AND LOSSES NET OF RESTATEMENTS (1995)
------------------------------------------------------------------------------------------------------------------------------------
INCOME AND EXPENSE ACCOUNTS                        R$                                  MONETARY ITEMS
------------------------------------------------------------------------------------------------------------------------------------
Deductions from operating revenue
   Reserve/fuel consumption quotas                 6,745                      Taxes charged to consumers
   Taxes and contributions on revenue             12,316                      Taxes and social contributions - ICMS

OPERATING EXPENSES
   Personnel                                      24,984                      Payroll and social security contributions
   Supplies                                       (9,488)                     Stores
   Third party services                           (2,181)                     Services in progress
   Royalties for the use of
      water resources                                934                      Water resources
   Social charges not related
      to payroll                                     195                      Taxes and social charges payable
   Other operating expenses                       13,256                      Sundry

FINANCIAL INCOME (EXPENSES)
   Finance charges                                   871                      Finance charges payable
   Other                                          10,873                      Sundry

NON-OPERATING INCOME                                (177)                     Services in progress
PROVISION FOR INCOME TAX                           3,108                      Provision for income tax
</TABLE>





<PAGE>


COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


ADJUSTMENT TO PRESENT VALUE AND RESTATEMENT OF INVENTORIES (1996)
<TABLE>
<CAPTION>
OPERATING REVENUE                                     R$               US$
------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>          <C>
Electricity sales                                  (28,076)         (27,012)  Consumers and dealers
OPERATING EXPENSES
  Supplies                                           8,259            7,946   Stores - special restatement
                                                       126              121   Suppliers
  Third-party services                               1,875            1,804   Suppliers
  Electric power purchased for resale                1,040            1,001   Suppliers
  Other expenses                                       471              453   Suppliers

FINANCIAL INCOME (EXPENSES)
  Commercial financial income                       28,390           27,314   Consumers and dealers
  Commercial financial expense                     (11,055)         (10,636)  Suppliers
                                                 ----------        --------
                                                     1,030              991
EFFECT OF INCOME TAX                                  (315)            (303)
                                                 ----------        --------
                                                       715              688
                                                 ==========        ========

<CAPTION>

ADJUSTMENTS TO PRESENT VALUE AND RESTATEMENT OF INVENTORIES (1995)


OPERATING REVENUE                                     R$            
---------------------------------------------------------------------------------------------------
<S>                                            <C>                            <C>
Electricity sales                                  (46,193)                   Consumers and dealers          
                                                                                                             
OPERATING EXPENSES                                                                                           
  Supplies                                          14,816                    Stores - special restatement   
                                                       286                    Suppliers                      
  Third-party services                               2,808                    Suppliers                      
  Electric power purchased                                                                                   
     for resale                                      1,797                    Suppliers                      
  Other expenses                                       606                    Suppliers                      
                                                                                                             
FINANCIAL INCOME (EXPENSES)                                                                                  
  Commercial financial income                       46,310                    Consumers and dealers          
  Commercial financial expense                     (20,364)                   Suppliers                      
                                                 ----------                   
                                                        66          
  EFFECT OF INCOME TAX                                 (21)         
                                                 ----------        
                                                        45          
                                                 ==========        

</TABLE>





<PAGE>


COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------



2.1  SIGNIFICANT ACCOUNTING PRINCIPLES

     The  accounting  principles  comply  with  the  requirements  of  Brazilian
     corporate  legislation,  of the Brazilian  Securities  Commission (CVM) and
     with those of the  regulatory  authority - the National  Water and Electric
     Power Department - DNAEE. The main principles are the following:

     *    Assets and  liabilities in foreign  currency are restated based on the
          exchange rates ruling at the balance sheet dates;


     *    Other assets and liabilities,  subject to monetary correction by force
          of law or contract,  are restated to show amounts at the balance sheet
          dates, using the indices determined by law or the related contracts;

     *    The electric  power  supplied at the balance sheet dates,  but not yet
          billed, was accounted for on the accrual basis;

     *    The  allowance  for  doubtful   accounts  is  recorded  at  an  amount
          considered  sufficient  to  cover  probable  losses,  both  short  and
          long-term;

     *    Inventories of materials,  classified as current assets, are stated at
          their average cost;

     *    Investment in  subsidiary  company is recorded on the equity method of
          accounting;

     *    Property,   plant  and  equipment  in  use  is   depreciated   on  the
          straight-line  basis at rates determined by the regulatory  authority.
          Depreciation is charged to operating expenses or the cost of expansion
          projects, depending on the use of the assets concerned.

     *    Remuneration  of own resources used to finance  construction of assets
          and  installations  is based on the  Long-term  Interest  Rate (TJLP),
          limited to 10% a year and  recorded in property,  plant and  equipment
          with counter entries credited to stockholders' equity.

     *    Interest and other  financial  charges on financing from third parties
          related to  construction  in progress were  appropriated  to property,
          plant and equipment during the course of construction.

     *    The provision for income tax is recorded gross and is charged  against
          results  for the year net of  credits  from  tax  losses  and from the
          effects of tax temporary differences. 



<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


2.2  TRANSLATION INTO U.S. DOLLARS

     The amounts in U.S. dollars in these financial statements as at and for the
     years ended December  31,1996 were translated from the amounts in the reais
     financial  statements expressed in constant currency at December 31,1996 at
     the exchange rate of R$ 1.0394 to US$ 1.00. Such translation  should not be
     construed as representing that the reais amounts  represent or have been or
     could be converted into U.S. dollars at that or any other rate.

3    CONSUMERS AND DEALERS
<TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     
     Consumers - Invoices rendered             159,858          142,848          153,799 
     Consumers - Invoices not yet rendered     108,637          103,727          104,519 
     Consumers - Renegotiated receivables       33,817           41,096           32,535 
     Dealers - Billed                            9,968           10,708            9,590 
     Other                                      25,877            6,681           24,896 
                                             ----------       -----------     -----------
                                               338,157          305,060          325,339 
                                             ==========       ===========     ===========
</TABLE>

4    OTHER LONG-TERM RECEIVABLES
 <TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     
     Renegotiated contracts with consumers      77,025           77,735           74,105 

     Credit assignment contracts (CRC)         855,860          802,185          823,417 

     Other                                         616              426              593 
                                             ----------       -----------     -----------
                                               933,501          880,346          898,115 
                                             ==========       ===========     ===========
</TABLE>




<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

5    INVESTMENTS

 <TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     
     Long-term equity investments               36,939           30,366           35,539 
     (-) Provision for loss                       (357)            (357)            (343)
     Project studies                            50,645           40,004           48,725 
     Jequitinhonha river control project        13,548           14,009           13,034 
     Other investments                           8,142            7,820            7,833 
                                             ----------       -----------     -----------

                                               108,917           91,842          104,788 
                                             ==========       ===========     ===========
</TABLE>

     Long-term equity investments include R$ 31,215 (US$ 30,032)  representing a
     95.05% holding in the capital of Companhia de Gas de Minas Gerais - GASMIG.
     CEMIG  intends to sell  control of this  subsidiary  company,  approval for
     which was given in State Law 12279 of July 29, 1996.

     Project  studies relate to expenses for technical and economic  feasibility
     studies  for  the   construction   of  power   plants  and   installations,
     sub-stations  and  transmission  lines to be carried  out in the  company's
     concession  area and in  particular  with the  Formoso,  Bocaina  and Irape
     projects.  Once projects start, expenses are transferred to construction in
     progress accounts.






<PAGE>







COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

6    PROPERTY, PLANT AND EQUIPMENT

 <TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     
  In operation
     Generation
       Thermoelectric plants                   141,253          148,430          135,899 
        Hydroelectric plants and other       5,376,803        4,349,675        5,172,987 
     Transmission                            2,656,873        2,403,098        2,556,160 
     Distribution                            5,076,539        4,545,913        4,884,105 
     Intangibles                                19,185           17,796           18,458 
     Other                                   1,077,030        1,031,339        1,036,204 
                                            ----------       -----------     ----------- 
                                            14,347,683       12,496,251       13,803,813 
     (-) Accumulated depreciation
         and amortization                   (5,246,872)      (4,456,105)      (5,047,982)
                                            ----------       -----------     ----------- 
                                             9,l00,811        8,040,146        8,755,831 
     Constructions in progress               2,167,680        1,391,588        2,085,511 
                                            ----------       -----------     ----------- 
                                            11,268,491        9,431,734       10,841,342 
                                            ==========       ===========     =========== 
</TABLE>

     Depreciation  and amortization are calculated at the following annual rates
     specifically established for electric power concessionaires: Thermoelectric
     plants and intangibles -5%;  distribution assets -4% and all other assets -
     3%.

     Construction in progress relates mainly to the expansion of the generation,
     transmission and distribution systems, as follows:
<TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     ------------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     
     Generation                              1,080,018          405,251        1,039,078 
     Transmission                              485,790          322,977          467,376 
     Distribution                               14,531           28,320           13,980 
     Material in stores                        125,506          111,888          120,749 
     Dams for river control                    253,353          222,381          243,749 
     Other                                     208,482          300,771          200,579 
                                             ----------       -----------     -----------
                                             2,167,680        1,391,588        2,085,511 
                                             ==========       ===========     ===========
</TABLE>



<PAGE>







COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


     As  prescribed in articles 63 and 64 of Decree 41,019 of February 26, 1957,
     assets  and  installations   used  in  the  generation,   transmission  and
     distribution  of electricity  cannot be withdrawn,  sold, lent or mortgaged
     without prior specific authorization by the regulatory authority.

     As  from  1996,  the  company  is   capitalizing   financial   charges  and
     inflationary  effects on the construction  financing as part of the cost of
     property,  plant  and  equipment  as  prescribed  in  Article  2  of  DNAEE
     Administrative  Rule 526, of November 22, 1995, The following  amounts were
     capitalized in 1996:

                                                           R$            US$
                                                       ---------      ---------

     Financial charges                                   21,440         20,627
     Inflationary effects                                11,035         10,617
                                                       ---------      ---------
                                                         32,475         31,244
                                                       =========      =========

     Expenses  have been  incurred on river  control works which are included in
     the  property,  plant and  equipment  accounts.  The  company  has  started
     negotiations with the State Government for their transfer.  At December 31,
     1996, amounts incurred are as follows:

                                                          R$            US$
                                                       ---------      ---------


     Investments                                        13,548        13,035
     Constructions in progress                         253,353       243,749
                                                      ---------      ----------
                                                       266,901       256,784
                                                      ==========     ==========
     These  amounts  include  approximately  R$ 80,000 (US$  76,967)  related to
     interest capitalized on construction.







<PAGE>







COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

7    DEFERRED CHARGES

 <TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     
     Expenses on remuneration of
       construction in progress                                1,880,164                 

     Financial charges and
       inflationary effects                                      102,309                 

     Other deferred items                        11,053           22,127          10,634 
                                             ----------       -----------     -----------

                                                 11,053        2,004,600          10,634 
     (-) Accumulated amortization                (5,883)        (455,891)         (5,660)
                                             ----------       -----------     -----------

                                                  5,170        1,548,709           4,974 
                                             ==========       ===========     ===========
</TABLE>

     Expenses on remuneration of construction in progress, financial charges and
     inflationary  effects  recorded as deferred charges up to December 31, 1995
     were  transferred to the respective  Construction  in progress and Services
     accounts  in 1996,  under the terms of DNAEE  Administrative  Rule 526,  of
     November 22, 1995.

8    ADVANCE BILLING OF ELECTRIC POWER

     In October 1996,  the company sold 3,980,400 MW of electricity to a private
     sector  consumer  over a 30-month  period.  The amount  agreed  between the
     parties of R$ 118,572 (US$ 114,077) was fully received and is substantially
     invested in long-term securities. 

     At December  31, 1996,  the amount  related to future sales is reflected in
     liabilities as follows:


                                                          R$            US$
                                                       ---------      ---------


     Short-term                                         47,832        46,019
     Long-term                                          64,315        61,877
                                                       ---------      ---------
                                                       112,147       107,896
                                                       =========      =========

     Balances are subject to restatement based on the U. S. dollar variation.






<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

9    LOANS AND FINANCING

     Most of the loans and financing are secured by guarantees  from the Federal
     and State  Governments and were  contracted in order to generate  resources
     for the  expansion of the  generation,  transmission  and  distribution  of
     electric power systems in its concession area.

     The composition of loans and financing  outstanding at December 31, 1996 is
     presented as follows:







































<PAGE>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS
<TABLE>
<CAPTION>

                                                                                               
  
FOREIGN CURRENCY DEBT (1)                                                                                           1996  
                                                                                           ------------------------------ 
                                                                    ANNUAL                   SHORT        LONG
INSTITUTIONS                                    DUE DATE        INTEREST(%)     CURRENCY      TERM        TERM     TOTAL  
--------------------------------------------  -------------  -----------------  ---------  ---------  --------- --------- 
<S>                                            <C>             <C>              <C>        <C>         <C>      <C>       
Interamerican Development Bank (BID)           1984/2O06        4.0 to 9.25       Sundry    26,496      90,235   116,731  

International Bank for Reconstruction 
  and Development (IBRD)                       1981/2002               7.25       Sundry     5,141      28,791    33,932  

Chase Manhattan Bank                           1997/1998            9.88125          US$    34,647      17,323    51,970  

IMPSA - Industria Metalurgica Pescarmona S/A   1999/2003                9.8          US$                43,776    43,776  

Banco do Brasil S/A (2)                        1997/2024             Sundry          US$       370     111,354   111,724  
  
Citibank N.A.                                       1997             8.8125          US$     2,868                 2,868

Sundry (3)                                          2004              9.125          US$               l55,9l0   l55,9l0

Autotrol S.A.C.I.A.F. & I                      1999/2002               12.0          US$                   215       215

Bank Boston                                         1997  5.8125 and 5.8750          US$     4,307                 4,307

S.B.E./Asea                                    1997/1999               10.5          US$    26,207      50,846     77,053 

Siemens S/A                                         2000               9.97          US$                 1,205      1,205 

Nativa S/A                                          2000               9.97          US$                 2,641      2,641
                                                                                         ---------   ---------  --------- 

Total foreign currency debt                                                                100,036     502,296    602,332 
                                                                                         ---------   --------- - -------- 

</TABLE>




<PAGE>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS
<TABLE>
<CAPTION>

                                                                                               
  
LOCAL CURRENCY DEBT                                                                                          1996    
                                                                                      ------------------------------ 
                                                                          ANNUAL         SHORT        LONG
INSTITUTIONS                                          DUE DATE        INTEREST(%)         TERM        TERM     TOTAL 
--------------------------------------------     -------------  -----------------     ---------  --------- --------- 
<S>                                                 <C>              <C>              <C>        <C>       <C>       
Centrais Eletricas Brasileiras S/A - ELETROBRAS      1995/2024           5 to 10        38,715     365,584   404,299 
Fundacao Forluminas de Seguridade Social - FORLUZ    1985/1996              10.0                                     
Major consumers - TELEMIG / CVRD                     1982/1998            Sundry         1,367      10,886    12,253 
Consumers - RECON/REDES A. PARTICULARES              1994/1997               6.0           773                   773 
FINEP                                                1997/2000              10.0           138         734       872
INEPAR                                               1998/2002             14.48                       307       307
                                                                                   -----------   ---------  -------- 

Total local currency debt                                                               40,993     377,511   418,504 
                                                                                   -----------   ---------  -------- 

Total debt (4)                                                                         141,029     879,807 1,020,836 
                                                                                   -----------   ---------  -------- 
     

The long-term amounts fall due as follows:       1) Amounts  are  payable  in  foreign  currency,  however,  in  order to facilitate
                                                    presentation they were translated into reais.
                     1996               1995     2) Interest rates vary: - 4% to 8% a year
                  -------            -------        - LIBOR readjusted half-yearly, plus interest from O.8125 to 0.8750% a year
1997                                 134,513     3) In 1996, the company raised  funds in foreign markets through the issue of fixed
1998              167,861            117,450        rate notes and the balance at December 31, 1996 amounts to R$ 155,910.
1999               93,348             95,165     4) At December 31, 1996, in addition  to these loans and financing, the company had
2000               85,366             78,180        unused  lines  of  credit  of  R$ 158,990,  of  which  R$ 71,235  in  Brazil and
2001 to 2004      533,232            321,326        R$ 87,755 abroad, which are to be used in the construction program.
                  -------            -------

                  879,807            746,634                        
                  -------            -------   
                                                 
</TABLE>




<PAGE>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>

                                                                                               
  
FOREIGN CURRENCY DEBT (1)                                                                                           1996 
                                                                                -----------------------------------------
                                                                    ANNUAL                   SHORT        LONG
INSTITUTIONS                                    DUE DATE        INTEREST(%)     CURRENCY      TERM        TERM     TOTAL 
--------------------------------------------  -------------  -----------------  ---------  ---------  --------- ---------
<S>                                            <C>             <C>              <C>        <C>         <C>      <C>      
Interamerican Development Bank (BID)           1984/2006        4.0 to 9.25       Sundry    25,491      86,815   112,306 

International Bank for Reconstruction 
  and Development (IBRD)                       1981/2002               7.25       Sundry     4,946      27,700    32,646 

Chase Manhattan Bank                           1997/1998            9.88125          US$    33,334      16,666    50,000 

IMPSA - Industria Metalurgica Pescarmona S/A   1999/2003                9.8          US$                42,117    42,117 

Banco do Brasil S/A (2)                        1997/2024             Sundry          US$       356     107,133   107,489 
  
Citibank N.A.                                       1997             8.8125          US$     2,759                 2,759

Sundry (3)                                          2004              9.125          US$               l50,000   l50,000

Autotrol S.A.C.I.A.F. & I                      1999/2002               12.0          US$                   207       207

Bank Boston                                         1997  5.8125 and 5.8750          US$     4,144                 4,144

S.B.E./Asea                                    1997/1999               10.5          US$    25,213      48,919     74,132

Siemens S/A                                         2000               9.97          US$                 1,159      1,159

Nativa S/A                                          2000               9.97          US$                 2,541      2,541
                                                                                         ---------   ---------  ---------

Total foreign currency debt                                                                 96,243     483,257    579,500
                                                                                         ---------   ---------  ---------
</TABLE>





<PAGE>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>

                                                                                               
  
LOCAL CURRENCY DEBT (1)                                                                                         1996  
                                                                                      ------------------------------- 
                                                                          ANNUAL         SHORT        LONG
INSTITUTIONS                                          DUE DATE        INTEREST(%)         TERM        TERM     TOTAL  
--------------------------------------------     -------------  -----------------     ---------  --------- ---------  
<S>                                                 <C>              <C>              <C>        <C>       <C>        
Centrais Eletricas Brasileiras S/A - ELETROBRAS      1995/2024           5 to 10        37,247     351,726   388,973  
Fundacao Forluminas de Seguridade Social - FORLUZ    1985/1996              10.0                                      
Major consumers - TELEMIG / CVRD                     1982/1998            Sundry         1,315      10,473    11,788  
Consumers - RECON/REDES A. PARTICULARES              1994/1997               6.0           744                   744  
FINEP                                                1997/2000              10.0           133         706       839
INEPAR                                               1998/2002             14.48                       294       295
                                                                                   -----------   ---------  --------  

Total local currency debt                                                               39,439     363,199   402,639  
                                                                                   -----------   ---------  --------  

Total debt (4)                                                                         135,682     846,456   982,139  
                                                                                   -----------   ---------  --------  
     

The long-term amounts fall due as follows:       1) Amounts  are  payable  in   local  currency,  however,  in  order to facilitate
                                                     presentation they were translated into U.S. dollars.
                     1996               1995     2) Interest rates vary: - 4% to 8% a year
                  -------            -------                             - LIBOR readjusted half-yearly, plus from 0.8125 to 0.8750%
1997                                 129,414                               a year
1998              161,498            112,998     3) In 1996, the company raised funds in foreign markets through  the issue of fixed
1999               89,810             91,558         rate notes and the balance at December 31, 1996 amounts to US$ 150,000.        
2000               82,130             75,216     4) At December 31, 1996, in addition  to these loans and financing, the company had
2001 to 2004      513,019            309,146        unused  lines  of  credit  of  US$ 152,963,  of  which US$ 68,535  in Brazil and
                  -------            -------        US$ 84,428 abroad, which are to be used in the construction program.
                  846,457            718,332 
                  -------            -------     
                                                   
</TABLE>



<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


     Percentage  participation  of currencies in loans and financing at December
     31, 1996.

                    ABROAD                                      BRAZIL
      -----------------------------------------------    ----------------------
      CURRENCY         %      CURRENCY              %     INDEX              %
      --------       -----    ---------          ------  -------          ------
      US$             81        FLS                 1     IGP-M              57
      DM               3        SWFR                4     FINEL              37
      Y                2        Unit of account     9     Other               6

     The percentage  variations in the principal  currencies and indexes used to
     adjust loans and financing during 1996 were as follows:

      CURRENCY/INDEX          VARIATION %  CURRENCY/INDEX       VARIATION %
      --------------          -----------  --------------       ------------
      FINEL                      1.78      DM                        (1.25)
      IGP-M                      9.19      SWFR                      (8.60)
      US$                        6.88      SRLS                      (6.88)
      Y                        (5.28)      FLS                        (162)
                                           Accounting Monetary Unit (UMC)(1.06)







<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

10   DEFERRED TAXES
<TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     

     INCOME TAX
       Inflationary gain                                         14,711                  
       Result of the special
         restatement                           426,886          413,109          410,704 
                                               426,886          427,820          410,704 
       Tax credits (temporary timing
         differences and tax losses)           (43,923)         (64,764)         (42,258)
       Adjustments on inflationary effects      15,753                            15,156
       Effects of present value adjustments
         and restatement of inventories         (5,271)          (5,586)          (5,071)
                                               393,445          357,470          378,531 

       SOCIAL CONTRIBUTION
         Result of special restatement         136,605          134,628          131,427 
         Tax credits on temporary
           timing differences                   (6,330)                          (6,090)
                                             ----------       -----------     -----------

                                               523,720          492,098         503,868  
                                             ==========       ===========     ===========
</TABLE>

11   INCOME TAX AND SOCIAL CONTRIBUTION

     The main effects on the 1996 financial statements are the following:

(a)  Income tax - due to the  non-deductibility  of the social  contribution  as
     from 1997 when  determining  taxable  income as  prescribed  in Law 9316 of
     November 22,1996,  the balance of the Income Tax on the Special Price-level
     Restatement was increased by R$ 38,9O7(US$ 37,432), with a counter entry to
     the Special Price-Level Restatement Reserve account.





<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

(b)  Social  Contribution - due to the increase in the Social  Contribution rate
     from 7.4O7% to 8% as from 1997,  the  deferred  Social  Contribution  asset
     balance and the Special  Price-Level  Restatement balance were increased by
     R$ 468 (US$ 450) and R$ 10,206 (US$  9,819),  respectively  of which R$ 468
     (US$ 450) was credited to net income for the year.

(c)  The  company  prepaid at a discount  Income  Tax on  inflationary  gains as
     permitted by paragraph 3 of Article 7 of Law 9249/95.  This option  reduced
     the provision for deferred  income tax by R$ 8,082 (US$ 7,776),  related to
     realizations  occurred in 1996. The most  significant  effects arising from
     this option were recorded in the year ended December 31, 1995.

(d)  The  company  reversed  Income Tax and Social  Contribution  on the Special
     Price-Level Restatement of Special Contributions due to the non-realization
     of these  taxes  because of the  specific  characteristics  of the  special
     contributions.  The  reversals  of R$  38,877  (US$37,4O4)  and  R$  12,439
     respectively, were made against the Special Price-level Restatement Reserve
     Account.

12   TAX LOSSES FOR OFFSET AND TIMING DIFFERENCES

     The company  recorded  in the  Taxable  Income  Control  Register  (LALUR),
     accumulated tax losses and timing  differences  which may be offset against
     future  taxable  income and  amount to R$ 1,924  (US$  1,851) and R$ 41,999
     respectively.

13   SPECIAL CONTRIBUTIONS

<TABLE>
<CAPTION>

                                                          R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
<S>                                            <C>              <C>              <C>     

       Consumer contributions                1,134,496        1,032,543        1,091,492 
       Federal Government participations         8,804            8,804            8,470 
       Others                                       50               5O               48 
                                             ----------       -----------     -----------

                                             1,143,350        1 041.397        1,100,010 
                                             ==========       ===========     ===========
</TABLE>


     Consumer  contributions  represent  funds received to finance  expansion to
     enable the company to meet increased demands for the supply of electricity.
     Because of their  nature these  contributions  do not  represent  effective
     financial  obligations  and,  accordingly,  should  not  be  considered  as
     liabilities when calculating economic-financial ratios.





<PAGE>





COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


14   STOCKHOLDERS' EQUITY

     Fully   subscribed  and  paid-up  capital  amounts  to  R$  1,736,116  (US$
     1,670,306).  Shares have a nominal value of R$ 0.01 (US$ 0.01) each and are
     held as follows:
<TABLE>
<CAPTION>

                            NUMBER OF SHARES IN 1996
     STOCKHOLDERS         ORDINARY           %          PREFERRED          %             TOTAL                  %
                       ----------------   -------   -----------------   ------    -----------------       ---------

<S>                      <C>                 <C>       <C>                 <C>       <C>                      <C>
     Minas Gerais
        State            28,938,227,169      51        3,948,482,470       5         32,886,709,639           25

     MGI                 18,719,600,000      33        2,608,329,828       4         21,327,929,828           16

     ELETROBRAS             831,165,440       1                                         831,165,440            1

     Others
        Local             6,701,522,734      12       15,216,956,279       21        21,918,479,013           17
        Foreign           1,597,5O6,860      35       51,364,174,420       70        52,961,681,280           41
                       ----------------   -------   -----------------   ------    -----------------       ---------

     Total               56,788,022,203     100       73,137,942,997      100       129,925,965,200          100
                       ================   =======   =================   ======    =================       =========
</TABLE>










<PAGE>





COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                            NUMBER OF SHARES IN 1995
     STOCKHOLDERS         ORDINARY           %          PREFERRED          %             TOTAL                  %
                       ----------------   -------   -----------------   ------    -----------------       ---------

<S>                    <C>                 <C>       <C>                 <C>       <C>                      <C>
     Minas Gerais
        State            34,070,765,444      60      12,989,050,573        18        47,059,816,017           36

     MGI                 13,587,OOO,OOO      24                                      13,587,000,000           1O

     ELETROBRAS             831,165,440       1       1,269,618,153         2         2,100,783,593            2

     Others
        Local             7,641,965,418      14      20,748,409,835        28        28,390,375,253           22
        Foreign             610,744,695       1      38,071,134,442        52        38,681,879,137           30
                       ----------------   -------   -----------------   ------    -----------------       ---------

     Total               56,741,640,997     100      73,078,213,003       100       129,819,854 000          100
                       ================   =======   =================   ======    =================       =========
</TABLE>


Preference  shares  have  priority  in the return of capital  and the right to a
minimum annual  dividend equal to 1O% of their nominal value,  and share equally
with the ordinary  shares when the ordinary  stockholders  receive  dividends in
excess of 10% However,  such  dividends can never be less than 25% of net income
for the  year as  adjusted  by  law.  In  accordance  with  legislation  and the
company's statutes,  the issue of stock dividends up on capitalizing the reserve
resulting  from the  price-level  restatement  of capital  must  comply with the
following:

*    Preference  shares are to be treated in the same manner as ordinary shares.

*    New  shares  may be  issued  or the  value  of  those  already  held may be
     increased.

*    Capitalization  is  subject  to the  decision  of  shareholders  in General
     Meeting,  but is  mandatory  once the  balance of the  restatement  reserve
     account exceeds 50% of capital.

The  company's  statutes  assure,  and the  State  of  Minas  Gerais  guarantees
(pursuant to Article 9 of State Law 828, of December  14,1951,  and Article I of
State Law 8796 of April  29,1985)  that private  stockholders  are entitled to a
minimum  dividend  of 6% per  year  in the  years  the  company  does  not  have
sufficient profits to pay dividends to its stockholders.





<PAGE>






COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------


     Proposed  1996  dividends  are  equivalent  to 10% of the total  capital of
     R$1,736,116  (US$  1,670,306),  excluding the treasury  stock whose nominal
     value is R$ 554 (US4 533), appropriated from:

                                                          R$              US$
                                                      -----------    ----------
     Realization of unrealized profits reserves          41,388         39,819
     Part of net income for the year                     88,483         85,129
                                                      -----------    ----------
                                                        129,871        124,948


     The amount  transferred  to the  Retained  Profits  Reserve is  intended to
     strengthen   working  capital  as  well  as  to  set  aside  resources  for
     investments in generating, transmission and distribution projects.

     Treasury  stock  relates to the transfer of shares  originating  from funds
     invested in the company's projects in the SUDENE area  (Superintendency for
     the Development of the Northeast) by the Northeast Investment Fund (FINOR),
     as fiscal incentives.




























<PAGE>

 
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
The composition of other Capital Reserves and Revenue Reserves is as follows:
                                                             

                                                       R$        US$
                                   ----------------------  ----------
                                         1996        1995       1996  
                                   ----------  ----------  ---------- 

Other capital reserves
   Capital restatement - Special
    price-level restatement
    reserve - Law 8.200/91          1,537,412   1,539,033   1,479,134 
   Remuneration of construction
    in progress financed
    by own resources                1,303,225   1,146,252   1,253,824 
   Investment credits               2,931,367   2,926,563   2,820,249 
   Premium on capital
    subscription                       75,333      72,122      72,477 
   Treasury stock                      (1,145)                 (1,101)
                                   ----------  ----------  ---------- 
                                    5,846,192   5,683,970   5,624,583 
                                   ----------  ----------  ---------- 


                                                       R$             
                                   ----------------------  ---------- 
                                         1996        1995       1996  
                                   ----------  ----------  ---------- 

Revenue reserves
  Legal                               102,829     102 829      98,931 
  Unrealized profits                  941,473     982 861     905,785 
  Retained profits                    878,230     854,482     844,939 
  Other                                 6,769       6,769       6,513 
                                   ----------  ----------  ---------- 

                                    1,929,301   1,946,941   1,856,168 
                                   ----------  ----------  ---------- 





<PAGE>

COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
15    ELECTRICITY SALES
<TABLE>
<CAPTION>

      Electric power sales, analyzed by class of consumer, are as follows:                                   

                                                          MWH                         R$        US$
                                -----------------------------     ----------------------  -----------
                         NUMBER OF
                         CONSUMERS         1996          1995           1996        1995       1996  
                         ---------   ----------   -----------     ----------  ----------  ---------- 
                                    
<S>                      <C>          <C>           <C>              <C>         <C>         <C>     
Residential              3,501,576    6,331,111     5,826,442        767,569     580,541     738,473 
Industrial                  53,715   20,948,387    20,685,703      1,090,626   1,117,702   1,049,284 
Commercial,
services and other
activities                 400,873    2,601,781     2,395,838        320,316     292,424     308,174 
Rural                      245,899    1,268,356     1,157,049         99,976      96,247      96,186 
Public authorities          35,960      453,092       419,562         51,831      51,737      49,866 
Streetlighting               3,748      812,125       770,105         60,284      53,790      58,000 
Public services              4,660      824,193       780,319         57,572      57,371      55,390 
Own consumption              1,638       77,052        78,020                      7,444             
                         ---------   ----------   -----------     ----------  ----------  ---------- 
                         4,248,069   33,316,097    32,113,038      2,448,174   2,257,256   2,355,373 
                         ---------   ----------   -----------     ----------  ----------  ---------- 
Supply                          11    4,219,122     3,791,983         98,868      79,920      95,120 
                         ---------   ----------   -----------     ----------  ----------  ---------- 
                         4,248,080   37,535,219    35,905,021      2,547,042   2,337,176   2,450,493 
Power supplied
  not yet billed                                                      14,503      18,990       13,953
Other income                                                          42,582      30,874       40,968
                                                                  ----------  ----------  ---------- 
                                                                   2,604,127   2,387,040    2,505,414

Deductions from
  operating revenue                                                 (648,395)   (661,106)    (623,817)
                         ---------   ----------   -----------     ----------  ----------  ---------- 

Total                    4,248,080    37,535219    35,905,021      1,955,732   1,725,934    1,881,597
                         ---------   ----------   -----------     ----------  ----------  ---------- 
</TABLE>

16    DEDUCTIONS FROM OPERATING REVENUE

     As from  1996,  the  Global  Reversal  of  Reserve  quota  (RGR)  is  being
     calculated in accordance with the requirements of Decree 1771/96 of January
     3, 1996,  which  determined  the rate of 2.5% on assets subject to reversal
     but limited to 3% of annual sales of the concessionaire. In prior years the
     RGR was calculated at 3% of such assets limited to 12% of annual sales.




<PAGE>

COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

17    PROFIT SHARING

      The collective  labor  agreement  established the criteria for determining
      employees' profit sharing and defined the parameters for establishing this
      amount, to include:  Investment  Remuneration Rate, Consumers Satisfaction
      Index,  Electricity Billed per Employee,  Time Equivalent  Interruption by
      Consumer and Voluntary  Absenteeism.  Based on this criteria,  a provision
      for profit  sharing in 1996 was set up of R$ 13,118 (US$ 12,620).  

      Also in 1996, the 1995  Employees'  Profit Sharing of R$ 8,296 (US$ 7,982)
      was paid.  Since the  profit  sharing  agreement  was  signed in May 1996,
      performance targets in 1995 were not established.

18    RELATED PARTY TRANSACTIONS

      The principal transactions with related parties are the financing received
      from  ELETROBRAS  and FORLUZ  (Note 9) and  negotiation  of the  remaining
      balance of the Compensation of Rate Shortfalls Account (CRC), as described
      in Note 21.  Transactions with Minas Gerais State Government entities were
      carried out at normal market prices.  No other related party  transactions
      are significant apart from those referred to above.

19    SUPPLEMENTARY RETIREMENT AND PENSION PLAN

      Since  1973,  the  company  has  sponsored  the  Fundacao   Forluminas  de
      Seguridade  Social -  FORLUZ,  a  non-profit  making  entity,  whose  main
      objective  is  to  supplement  the  social  security   benefits  of  CEMIG
      employees.  FORLUZ bases the  calculation  and  accumulation  of the funds
      required by its benefit plans on the  "Established  Benefits Plan" and the
      "Financial  Capitalization  System".  Accordingly,  regular  contributions
      (from the sponsor and  participants) are used to cover, at present values,
      the benefits  payable to  participants,  accumulated as from the date they
      joined the plan,  and also to amortize  benefits  related to prior periods
      which were not covered by additional  contributions from the sponsor.  The
      last  actuarial  review was  carried out in December  1996.  The  benefits
      related to prior  periods,  estimated  at R$ 472,521  (US$  454,609) as of
      December  31,  1996  and R$  431,226  at  December  31,  1995,  are  being
      amortized.   through  additional  monthly   contributions   based  on  the
      consistent  installments system (Price Table) with interest of 6% per year
      and  readjusted  yearly  based  on the  General  Price  Index  -  Internal
      Availability  (IGP-DI)  variation.  This  amortization  system has been in
      effect since July 1996.  CEMIG is responsible  for the  differences in the
      mathematical reserve,  actuarially calculated,  of R$ 113,182 (US 108,892)
      at December  31, 1996  related to the  granting of special  retirement  in
      anticipation   of  length  of   service   retirement,   except  for  those
      participants  enrolled  after  January 29,  1996.  The balance  related to
      unamortized  reserves  must  be  amortized  during  a  period  actuarially
      prescribed of no




<PAGE>
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

      longer than 28 years. Additional  contributions from the company to FORLUZ
      amounted  to R$$ 44,472  (US$  42,786) in 1996 and R$ 23,060 in 1995,  for
      normal cost R$ 25,065  (US$  24,115) in 1996 and R$ 19,460 in 1995 and for
      special retirement,  R$ 24,578. These amounts were charged against the net
      income of CEMIG. Any  insufficiency in the reserves for  beneficiaries are
      the  responsibility of the sponsor.  Financial  information on the plan at
      December 31,1996, prepared by independent actuaries is as follows:

                                                       R$        US$
                                   ----------------------  ----------
                                         1996        1995       1996  
                                   ----------  ----------  ---------- 

TECHNICAL RESERVES                    829,904     621,359     798,445 
MATHEMATICAL RESERVES
  Benefits granted                  1,038,092     682,063     998,742 
  Benefits to be granted              430,784     450 398     414,454 
                                   ----------  ----------  ---------- 
                                    1,468,876   1,132,461   1,413,196 
UNAMORTIZED RESERVES                 (585,703)   (431,226)   (563,501)
TECHNICAL DEFICIT
  FOR THE YEAR                        (53,269)    (79,876)    (51,250)
                                   ----------  ----------  ---------- 

      As from 1997,  all  expenses  previously  covered by the health  plans for
      retired employees will no longer be the responsibility of CEMIG, including
      any   possible   insufficiency   in  this   program.   CEMIG  still  pays,
      independently  part of the life insurance  premium for retired  employees.
      The actuarial  estimate  corresponding  to potential  liabilities for this
      benefit amounts to R$ 141,642 (US$ 136,273) at December 31,1996.

20    INSURANCE

      Insurance cover, mainly against fire, is maintained in conformity with the
      company's  policy of considering the degree of risk to which each asset is
      exposed, individually, and the cost of the insurance premium.




<PAGE>




COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

21   Financial Instruments

(a)  The present  value at December 31, 1996 of the main  financial  instruments
     which are recorded in the account  "other  receivables",  is  calculated as
     prescribed  by  Article  3 of the  Brazilian  Securities  Commission  (CVM)
     Instruction  235 of March 23, 1995 based on the discounted cash flow method
     using a discount rate of 12% a year, as shown below:

                                             R$                    US$
                                     ---------------------  --------------------
                                                 Contracts             Contracts
                                       Book      - present    Book    - present
                                      value        value      value      value
                                    ---------  -----------  -------- -----------
      Renegotiated contract with
      private sector consumers        79,300       53,820      76,294     51,780
      Credit assignment contract
      of the balance of the
      Compensation of Rate
      Shortfall Account (CRC)
      to the Government of the
      State of Minas Gerais          855,860      544,159     823,417   523,532
                                    ---------  -----------  -------- -----------
                                     935,160      597,979     899,711   575,312
                                    ---------  -----------  -------- -----------

     R$ 4,956 (US4  4,768) of the  renegotiated  contract  with  private  sector
     consumers is short-term.

     The remaining credit balance of the Compensation of Rate Shortfall  Account
     (CRC)  was  transferred  to the  Government  of the  State of Minas  Gerais
     through a credit assignment contract under the terms of Law 8724/93, with a
     grace period of three years after which time the amount will be received in
     monthly  installments  over a period of seventeen  years. The receivable is
     subject to restatement  based on the Fiscal Reference Unit (UFIR) variation
     and to interest of 6 % a year as from May 2, 1995 and is  guaranteed by the
     State  Government's   participation  in  taxes  collected  by  the  Federal
     Government (FPE).

(b)  Swap  operations,  in which  pre-fixed  interest  rates are  exchanged  for
     post-fixed  rates, are recorded in the amount of R$ 9,488 (US$ 9,128) which
     represents market value.

     Management of financial  instruments  is  accomplished  by using  operating
     strategies and controls to achieve liquidity, profitability and security.



<PAGE>


COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

22   CONTINGENCIES

     Several  industrial  consumers  took legal  action  against the increase in
     tariffs  approved by DNAEE  Regulations  O38/86 and O45/86 - Cruzado  Plan.
     Based on the opinion of its legal advisors, the company expects no loss and
     does not consider it necessary to make any provision for contingencies.

23   OTHER INFORMATION

     On December  27, 1996,  Law 9430 was  approved  and changed  income tax and
     social  contribution   legislation,   and  also  introduced  other  changes
     effective as from January 1, 1997. The main changes are as follows:

     o    The option to prepare  quarterly  or annual  tax  computations.  

     o    The  creation of a system of  transfer  prices for  transactions  with
          related parties in local and foreign markets;

     o    The  deductibility  limit of the allowance  for doubtful  accounts was
          changed;

     o    The full deductibility of directors' remuneration is permitted.





















<PAGE>
a.(ii)    The following condensed  unaudited quarterly financial  information of
          Companhia  Energetica de Minas Gerais - CEMIG as of March 31, 1997 and
          for the quarters ended March 31, 1997 and 1996 have been  derived from
          the  financial  report  prepared  by  CEMIG  to meet  their  statutory
          reporting  requirements  stipulated by Comissao de Valores Mobiliarios
          ("CVM"), the governmental body which regulates securities in Brazil.



<PAGE>

                  COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(Expressed in thousands of Brazilian Reais, except per share amounts)

                                                1997            1996
                                                ----            ----

Net Sales                                  R$484,284       R$451,761

Operating Costs and Expenses                 423,123         386,708
                                        -------------   -------------

Operating Income                              61,161          65,053

Interest Expense                            (35,032)        (31,084)
Interest Income                               34,706          43,040
Other Income (Expense)                      (20,859)        (16,838)
                                        -------------   -------------

Income Before Taxes                           39,976          60,171

Income Taxes                                  13,272          18,185
                                        -------------   -------------

NET INCOME                                  R$26,704        R$41,986
                                        =============   =============

Income Per 1,000 Shares                       R$0.21          R$0.32
                                        =============   =============




See Notes to Condensed Unaudited Financial Information



<PAGE>



                  COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


CONDENSED  UNAUDITED  BALANCE  SHEETS  FOR  MARCH 31,  1997 AND  MARCH 31,  1996
(Expressed in thousands of Brazilian Reais)

                                                  1997               1996
                                                  ----               ----
ASSETS

CURRENT ASSETS
Cash and cash equivalents                     R$61,885           R$36,409
Investments                                    234,299            117,939
Receivables                                    439,006            500,730
Inventories                                     55,432             54,602
Prepaid and other                                1,278              3,161
                                        ---------------   ----------------

         Total current assets                  791,900            712,841
                                        ---------------   ----------------

Fixed Assets                                10,481,843         10,401,464
Investments                                    100,843            100,290
Receivables                                    958,310          1,070,676
Deferred Charges                                 4,373              4,678

         TOTAL ASSETS                     R$12,337,269       R$12,289,949
                                        ===============   ================




See Notes to Condensed Unaudited Financial Information




<PAGE>



                  COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


CONDENSED  UNAUDITED  BALANCE  SHEETS  FOR  MARCH 31,  1997 AND  MARCH 31,  1996
(Expressed in thousands of Brazilian Reais)

                                                       1997               1996
                                                       ----               ----
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Trade payables                                    R$136,570          R$136,884
Accrued taxes                                       206,651            181,308
Other accrued liabilities                           658,142            679,362
                                             ---------------   ----------------

         Total current liabilities                1,001,363            997,554
                                             ---------------   ----------------

LONG-TERM LIABILITIES
Debt                                                869,884            879,807
Other                                             1,652,275          1,659,554
                                             ---------------   ----------------

         Total long-term liabilities              2,522,159          2,539,361
                                             ---------------   ----------------

STOCKHOLDERS' EQUITY

Capital                                           1,299,260          1,299,260
Capital reserves                                  5,696,741          5,662,732
Revenue reserves                                  1,766,072          1,766,072
Retained earnings                                    51,674             24,970
                                             ---------------   ----------------

         Total stockholders' equity               8,813,747          8,753,034
                                             ---------------   ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     R$12,337,269       R$12,289,949
                                             ===============   ================




See Notes to Condensed Unaudited Financial Information


<PAGE>



                  COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG


NOTES TO THE CONDENSED UNAUDITED FINANCIAL INFORMATION

1.       Basis of Presentation

         The condensed unaudited quarterly financial information is derived from
         the Company's  March 31, 1997 statutory  report filed with the CVM. All
         amounts are in  Brazilian  reais and have been  prepared in  conformity
         with accounting principles generally accepted in Brazil.

2.       Subsequent Event

         At an auction on May 28, 1997 at Rio de Janeiro Stock Exchange, a group
         of  investors  headed by  Southern  Electric  and AES bought 33% of the
         Company's common shares for  R$1,130,000.  These shares were offered by
         the  Government  of the State of Minas  Gerais in  accordance  with the
         tender and stockholders'  agreement  published in Minas Gerais on March
         12, 1997.

<PAGE>

b.  Unaudited Pro Forma Consolidated Financial Information

On June 18, 1997,  AES together  with The Southern  Company and the  Opportunity
Fund, a Brazilian investment Fund (collectively, the "AES Consortium"), acquired
14.41% of Companhia Energtica de Minas Gerais ("CEMIG"),  an integrated electric
utility serving the State of Minas Gerais in Brazil,  for a total purchase price
of approximately  $1.056 billion.  Initially,  AES and the Opportunity Fund will
have a 90.6% and a 9.4% economic  interest in the AES Consortium,  respectively.
The Southern Company has an option until January 9, 1998 to purchase up to a 25%
interest in the AES Consortium  from AES.  Pursuant to a shareholders  agreement
between  the AES  Consortium  and the  State of  Minas  Gerais,  AES  will  have
significant operating influence. The foregoing transaction is referred to herein
as the "CEMIG Acquisition."

The following tables and related notes present financial  information at and for
the  periods  presented  herein to give effect on a pro forma basis to the CEMIG
Acquisition.  The  unaudited  pro forma  adjustments  are based  upon  available
information and certain assumptions and estimates which the Company believes are
reasonable  under the  circumstances.  The  unaudited  pro forma  results do not
purport to be  indicative  of the results that would have been  obtained had the
CEMIG Acquisition  occurred at the beginning of the periods  presented,  nor are
they  intended to be a projection  of future  results.  The  unaudited pro forma
financial information should be read in conjunction with the notes hereto.

The  following  unaudited  pro  forma  consolidated   statements  of  operations
information combine the results of AES's investment in the CEMIG Acquisition for
the year ended  December  31, 1996 and the  quarter  ended March 31, 1997 on the
equity method as if the CEMIG  Acquisition  had occurred at the beginning of the
periods.
<TABLE>
<CAPTION>

                                                         YEAR ENDED DECEMBER 31, 1996(1)(2)(3)
                                                         ------------------------------------
                                                                   ADJUSTMENTS
                                                                     FOR THE
                                                                      CEMIG       PRO FORMA
                                                          ACTUAL   ACQUISITION   AS ADJUSTED
                                                         -------- ------------- -------------
<S>                                                      <C>        <C>           <C>
In millions except per share data

Statement of Operations Data:

Total revenues.........................................  $ 835      $  --         $ 835
Total operating cost and expenses......................    557         --           557
                                                         -------- ------------- -------------
Operating income.......................................    278         --           278
Other income and (expense):
 Interest expense......................................   (144)       (56)(d)      (200)
 Interest income.......................................     24         --            24
Equity in earnings of affiliates.......................     35         50 (c)        85
                                                         -------- ------------- -------------
Income (loss) before income taxes and minority

 interest..............................................    193        (6)          187
Income taxes...........................................     60       (22)(e)        38
Minority interest......................................      8         5 (f)        13
                                                         -------- ------------- -------------
Net income (loss)......................................  $ 125     $  11         $ 136
                                                         ======== ============= =============
Net income (loss) per share............................  $1.62     $0.14         $1.76
                                                         ======== ============= =============
</TABLE>




<PAGE>
<TABLE>
<CAPTION>
                                                  QUARTER ENDED MARCH 31, 1997(1)(2)(3)
                                                  ------------------------------------
                                                            ADJUSTMENTS
                                                              FOR THE
                                                               CEMIG       PRO FORMA
                                                   ACTUAL   ACQUISITION   AS ADJUSTED
                                                  -------- ------------- -------------
<S>                                               <C>         <C>           <C>
Statement of Operations Data:
Total revenues..................................  $ 261        $   --        $   261
Total operating cost and expenses...............    183            --            183
                                                  -------- ------------- -------------
Operating income................................     78            --             78
Other income and (expense):
 Interest expense...............................    (44)          (13)(d)         (57)
 Interest income................................      8            --              8
Equity in earnings of affiliates................     16             3 (c)         19
                                                  -------- ------------- -------------
Income before income taxes and minority
 interest.......................................     58           (10)            48
Income taxes....................................     16            (5)(e)         11
Minority interest...............................      2            -- (f)          2
                                                  -------- ------------- -------------
Net income......................................  $  40        $   (5)       $    35
                                                  ======== ============= =============
Net income per share............................  $0.50        $(0.06)       $  0.44
                                                  ======== ============= =============

</TABLE>

The  following  unaudited  pro  forma  consolidated  balance  sheet  information
represents  AES's financial  position at March 31, 1997 as if the acquisition by
the Company of the CEMIG Interest had occurred on that date.

<TABLE>
<CAPTION>
                                               AS OF MARCH 31, 1997 (1)(2)(3)
                                            ------------------------------------
                                                      ADJUSTMENTS
                                                        FOR THE
                                                         CEMIG       PRO FORMA
                                             ACTUAL   ACQUISITION   AS ADJUSTED
                                            -------- ------------- -------------
<S>                                         <C>      <C>           <C>
In millions except ratios

Balance Sheet Data:
Assets
Current Assets:
Cash and cash equivalents...............   $  423   $    --    $  423
Other current assets....................      307        --       307
                                          -------- ---------- --------
Total Current Assets....................      730        --       730
Property, plant and equipment, net .....    2,304        --     2,304
Investments in and advances to
  affiliates............................      590    1,077(a)   1,667
Other assets............................      454       --        454
                                          -------- ---------- --------
     Total..............................   $4,078   $1,077     $5,155
                                          ======== ========== ========

Current Liabilities:
Other notes payable.....................   $   --      134(b)    134
Project financing debt..................      110      250(b)    360
Other current liabilities...............      166       --       166
                                          -------- ---------- --------
Total current liabilities...............      276      384       660
                                          -------- ---------- --------
Long-Term Liabilities:
Other notes payable.....................      325       --       325
Project financing debt..................    1,841      654(b)  2,495
Other long-term liabilities.............      284       --       284
                                          -------- ---------- --------
Total long-term liabilities.............    2,450      654     3,104
                                          -------- ---------- --------
Minority interest.......................      211       39(f)    250
Company-obligated mandatorily
Redeemable Preferred Securities of AES
Trust I.................................      250        --      250
Stockholders' equity....................      891        --      891
                                          -------- ---------- --------
Total Liabilities & Stockholders
  Equity................................   $4,078    $1,077   $5,155
                                          ======== ========== ========
</TABLE>






-------------
(1)  Basis of presentation. Pursuant to a shareholders agreement between the AES
     Consortium  and the State of Minas  Gerais,  the AES  consortium  will have
     significant  operating influence,  including the right to appoint the chief
     operating  officer of CEMIG, and will otherwise share control of CEMIG with
     the  State  of  Minas  Gerais.  The AES  Consortium  will  account  for its
     investment in CEMIG using the equity  method.  AES will reflect in minority
     interest  its  non-owned  portion of the earnings and net assets of the AES
     Consortium.

          The unaudited pro forma  financial  information  presented is based on
     CEMIG's  financial  position and results of operations as of March 31, 1997
     and for the  periods  ended  December  31,  1996 and  March 31,  1997.  The
     unaudited pro forma  financial  information  has been prepared based on the
     Company's  estimate of CEMIG's financial  position and results of operation
     in conformity with U.S. generally accepted accounting principles.
<PAGE>

   Equity in  earnings  of CEMIG for the year ended  December  31, 1996 has been
translated  into U.S.  dollars at the average  rate during the year of R$1.04 to
U.S.$1.00,  and at the average  rate for the quarter  ended March 31,  1997,  of
R$1.07 to U.S.$1.00.

   (2) Goodwill.  The estimated  excess of the purchase price over the Company's
proportionate  share of the net assets  acquired is being  amortized over its 40
year life.

   (3) Financing.  For purposes of the unaudited pro forma financial information
presented  herein,  the  acquisition of the CEMIG Interest was funded at the AES
level  assuming the use of the CEMIG Bridge of $250 million at an interest  rate
of 8.25%,  a portion of the AES Bridge Loan of $200 million at an interest  rate
of 7.75%,  and project  financing of $126 million at an interest  rate of 9.75%,
provided by BNDES, the State  Development Bank of Brazil.  The remaining portion
of the purchase price amounting to  approximately  $528 million is deferred,  by
contract,  for a period of one year. Such  obligation  bears no interest and has
been  guaranteed by BNDES for a fee of 1% per year which is included in interest
expense.  No  additional  subsequent  financing  costs are  assumed in these pro
formas.


   (4) Description of unaudited pro forma entries.

  (a) Represents the CEMIG Investment of $1,056 million and costs of $21 million
financed by borrowings described in (3), above.
  (b) Represents the financing of the transaction described in (3), above.
  (c) Represents equity in earnings of CEMIG, net of goodwill amortization.
  (d) Represents  interest expense associated  with the  borrowings described in
(3), above.
  (e) Represents the income tax benefit related to the interest costs.
  (f) Represents the  minority  interest of  The Opportunity Fund,  which  has a
9.4% interest in the AES consortium.


<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                            THE AES CORPORATION
                                            -------------------
                                                (Registrant)

Date: July 16, 1997                          By /s/ Barry J. Sharp
                                              ---------------------------
                                               Barry J. Sharp
                                               Chief Financial Officer
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 131510}]
{"company-data": {"conformed-name": "AES CORPORATION", "cik": "0000874761", "assigned-sic": "4991", "irs-number": "541163725", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-12291", "film-number": "97641630"}, "business-address": {"street1": "1001 N 19TH ST", "city": "ARLINGTON", "state": "VA", "zip": "22209", "phone": "7035221315"}}
SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15 (D) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of Report (date of earliest event reported): June 18, 1997

                               THE AES CORPORATION
             (exact name of registrant as specified in its charter)

       DELAWARE                   333-15487                    54-1163725
     (State  of               (Commission File No.)           (IRS Employer 
    Incorporation)                                         Identification No.)

                       1001 North 19th Street, Suite 2000
                            Arlington, Virginia 22209
          (Address of principal executive offices, including zip code)

               Registrant's telephone number, including area code:
                                 (703) 522-1315

                                 NOT APPLICABLE

          (Former Name or Former Address, if changed since last report)
ITEM 2.  ACQUISITION OF DISPOSITION OF ASSETS

On June 18, 1997,  AES together  with The Southern  Company and The  Opportunity
Fund,  a  Brazilian  investment  fund,  (collectively,  the  "AES  Consortium"),
acquired 14.41% of Companhia Energtica de Minas Gerais ("CEMIG"),  an integrated
electric  utility  serving  the  State of Minas  Gerais in  Brazil,  for a total
purchase price of  approximately  $1.056 billion,  $654 million of the financing
for which was in the form of non-recourse  financing  provided by Banco Nacional
de Desenvolvimento  Economico e Social ("BNDES").  AES's portion of the purchase
price was approximately $364 million after  consideration of the BNDES facility.
The shares of CEMIG,  which represent  approximately 33% of the voting interest,
have been purchased from the State of Minas Gerais in a partial privatization of
CEMIG.  Initially,  AES and The  Opportunity  Fund  will have a 90.6% and a 9.4%
economic interest in the AES Consortium,  respectively. The Southern Company has
an option  until  January 9, 1998 to  purchase  up to a 25%  interest in the AES
Consortium  from AES.  Pursuant  to a  shareholders  agreement  between  the AES
Consortium and the State of Minas Gerais,  AES will have  significant  operating
influence,  including the right to appoint the chief operating officer of CEMIG,
and will otherwise share control of CEMIG with the State of Minas Gerais.  CEMIG
owns  approximately  5,000 MW of generating  plants and serves  approximately  4
million  customers.   The  foregoing  transaction  and  the  financing  therefor
described below are referred to herein as the "CEMIG Acquisition".

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

a.(i) Financial statements of Businesses Acquired

      The  following  audited  financial  statements  of  Companhia   Energetica
de Minas  Gerais - CEMIG as of and for the years  ended  December  31,  1996 and
1995, together with the Independent  Auditors' Report are prepared in accordance
with generally accepted accounting principles in Brazil.
Rua dos Inconfidentes, 1190 9'   Telefone (031) 261-6322
                        Caixa Postal 289                      Fax (031) 261-6950
                        30161-970     Belo Horizonte, MG-Brasil

Price Waterhouse

Report of Independent Accountants

February 28, 1997

To the Board of Directors and Stockholders
Companhia Energetica de Minas Gerais - CEMIG

1    We have audited the accompanying  balance sheets of Companhia Energetica de
     Minas  Gerais  - CEMIG as of  December  31,  1996 and 1995 and the  related
     statements of income, of changes in stockholders'  equity and of changes in
     financial  position  for the years then  ended,  expressed  in  currency of
     constant   purchasing   power.   These   financial   statements   are   the
     responsibility  of  the  company's  management.  Our  responsibility  is to
     express an opinion on these financial statements.

2    We conducted  our audits in accordance  with  Brazilian  approved  auditing
     standards  which  require  that we perform  the audit to obtain  reasonable
     assurance  about whether the financial  statements are fairly  presented in
     all  material  respects.   Accordingly,  our  work  included,  among  other
     procedures:   (a)  planning  our  audits  taking  into   consideration  the
     significance of balances, the volume of transactions and the accounting and
     internal  control systems of the company;  (b) examining,  on a test basis,
     evidence  and  records  supporting  the  amounts  and  disclosures  in  the
     financial  statements;  and (c) assessing the accounting practices used and
     significant estimates made by management, as well as evaluating the overall
     financial statement presentation.

3    In our opinion,  the financial  statements audited by us present fairly, in
     all material respects,  the financial  position of Companhia  Energetica de
     Minas  Gerais - CEMIG at December  31, 1996 and 1995 and the results of its
     operations,  the  changes in  stockholders'  equity and the  changes in its
     financial  position for the years then ended, in conformity with accounting
     principles generally accepted in Brazil.

4    The U. S. dollar amounts shown in these financial  statements are presented
     solely for the convenience of the reader.  These amounts were translated on
     the bases explained in Note 2.2 to the financial statements.

/s/ Price Waterhouse

Price Waterhouse
Auditores Independentes
CRC--SP-16O "S" MG

/s/ Jorge R. Manoel
Jorge R. Manoel
Partner
Contador CRC-SP-110.719 "T" MG
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET                         
                                      
AT DECEMBER 31, 1996 AND 1995         
                                      
IN  THOUSANDS  OF  REAIS  AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
R$                    US$
                                                  --------------------------    ------------
ASSETS                                                1996          1995             1996      
                                                  ------------  ------------    ------------   
CURRENT ASSETS
   Cash and banks                                     154,348       160,481          148,497   
                                                  ------------  ------------    ------------
Accounts receivable, securities
      and other assets
   Consumers and dealers                              338,157       305,060          325,339   
   Income receivable                                    6,329        l0,815            6,089   
   Recoverable taxes and social contribution           99,960        59,569           96,171   
   Sundry debtors                                      56,226        24,646           54,094   
   Other receivables                                   14,543         2,038           13,992   
   Allowance for doubtful
      accounts                                        (31,223)      (15,336)         (30,039)  
   Stores                                              94,918        84,292           91,320   
   Services in process                                 13,919         5,727           13,391   
                                                  ------------  ------------    ------------   
                                                      592,829       476,811          570,357   
                                                  ------------  ------------    ------------   
   Prepaid expenses                                     3,161         3,262            3,041   
                                                  ------------  ------------    ------------   
                                                      750,338       640,554          721,895   
                                                  ------------  ------------    ------------   
LONG-TERM RECEIVABLES
   Securities                                         135,461                        130,327
   Judicial deposits                                    1,714         1,816            1,649   
   Other receivables                                  933,501       880,346          898,115   
                                                  ------------  ------------    ------------   
                                                    l,070,676       882,162        l,030,091   
                                                  ------------  ------------    ------------   
PERMANENT ASSETS
   Investments                                        l08,917        91,842          104,788   
   Property, plant and equipment                   11,268,491     9,431,734       10,841,342   
   Deferred charges                                     5,170     1,548,709            4,974   
                                                  ------------  ------------    ------------   
                                                   11,382,578    ll,072,285       l0,951,104   
                                                  ------------  ------------    ------------   
TOTAL  ASSETS                                      13,203,592    12,595,001       12,703,090
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET
AT DECEMBER 31, 1996 AND 1995
IN THOUSANDS OF REAIS AND IN
   THOUSANDS OF U.S. DOLLARS                                         (continued)
--------------------------------------------------------------------------------
R$                 US$
LIABILITIES AND STOCKHOLDERS' EQUITY               1996         1995        1996     
                                              ------------  ----------  -----------
CURRENT LIABILITIES
    Suppliers                                     118,876      128,186      114,370  
    Payroll                                         2,486        6,900        2,392  
    Financial charges                              l0,909       10,067       10,495  
    Taxes and social contribution                 185,617      148,634      178,581  
    Proposed dividends                            130,787      141,903      125,829  
    Loans and financings                          141,029       79,291      135,683  
    Accrued liabilities                           182,014      189,683      175,115  
    Taxes charged to consumers                     66,057       75,134       63,553  
    Profit sharing                                 12,918                    12,428
    Advance billing of electric power              47,832        3,337       46,019  
    Other                                          94,306       74,266       90,731  
                                              ------------  ----------  -----------  
                                                  992,831      857,401      955,196  
                                              ------------  ----------  -----------  
LONG-TERM LIABILITIES
    Loans and financings                          879,807      746,634      846,456  
    Deferred taxes                                523,720      492,098      503,868  
    Advance billing of electric power              64,315                    61,877
    Other                                          30,374       64,556       29,223  
                                              ------------  ----------  -----------  
                                                1,498,216    1,303,288    1,441,424  
    Special contributions                       1,143,350    1,041,397    l,l00,0l0  
                                              ------------  ----------  -----------  
                                                2,641,566    2,344,685    2,541,434  
                                              ------------  ----------  -----------  
STOCKHOLDERS' EQUITY
    Capital                                     1,736,116    1,735,045    1,670,306  
    Capital reserves                            5,846,192    5,683,970    5,624,583  
    Revenue reserves                            1,929,301    1,946,941    1,856,168  
    Retained earnings                              45,989       15,396       44,246  
                                              ------------  ----------  -----------  
                                                9,557,598    9,381,352    9,195,303  
    Funds for future capital
       increase                                    11,597       11,563       11,157  
                                              ------------  ----------  -----------  
                                                9,569,195    9,392 915    9,206,460  
                                              ------------  ----------  -----------  
TOTAL LIABILITIES                              13,203,592   12,595,001   12,703,090  
                                              ============  ==========  ===========
The accompanying notes are an integral part of these financial statements.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET                          
                                       
AT DECEMBER 31, 1996 AND 1995          
                                       
IN  THOUSANDS  OF  REAIS  AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
R$                             US$
                                               -------------------------            ---------
                                                   1996          1995                  1996   
                                               -----------  ------------            ---------
OPERATING REVENUE
     Electricity sales
        to final consumers                      2,462,677     2,276,246             2,369,326 
     Electricity sales to the Interconnected
        Power System and other
        concessionaires                            98,868        79,920                95,120 
     Other                                         42,582        30,874                40,968 
                                               -----------  ------------            --------- 
                                                2,604,127     2,387,040             2,505,414 
     Deduction from operating revenue
        Global reversal of reserve quota          (60,401)     (121,781)              (58,112)
        Fuel consumption account quota            (81,806)      (75,983)              (78,705)
        Taxes and contributions on revenue       (506,188)     (463,342)             (487,000)
                                               -----------  ------------            --------- 
                                                 (648,395)     (661,106)             (623,817)
                                               -----------  ------------            --------- 
NET OPERATING REVENUE                           1,955,732     1,725,934             1,881,597 
                                               -----------  ------------            --------- 
OPERATING EXPENSES
     Personnel                                   (553,328)     (509,730)             (535,353)   
     Supplies                                     (38,921)      (35,842)              (37,446)   
     Third-party services                        (129,070)     (ll0,267)             (124,177)  
     Electric power purchased
        for resale                               (435,253)     (461,733)             (418,754)   
     Depreciation and amortization               (441,436)     (466,480)             (424,703)   
     Royalties for the use of
        water resources                           (24,637)      (25,375)              (23,703)   
     Leasing, rents and loans of assets           (16,104)      (15,631)              (15,494)   
     Formation of operating provisions            (39,901)      (19,667)              (38,389)   
     Other expenses, net                          (42,651)      (66,139)              (41,034)   
                                               -----------  ------------            ---------    

                                               (1,721,301)   (1,710,864)           (1,656,053)   
                                               -----------  ------------            ---------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
STATEMENT OF INCOME
YEARS DECEMBER 31, 1996 AND 1995
IN THOUSANDS OF REAIS AND IN
   THOUSANDS OF U.S. DOLLARS                                         (continued)
--------------------------------------------------------------------------------
R$                 US$
                                        ---------------------    ---------
                                           1996        1995        1996   
                                        ---------   ---------    ---------
FINANCIAL INCOME (EXPENSES)
   Income from financial investments      32,394      70,065      31,166  
   Interest on electricity bills
      paid in arrears                     59,484      60,044      57,229  
   Finance charges                       (57,546)    (66,475)    (55,364) 
   Net monetary variations and others     61,276      43,513      58,953  
                                        ---------   ---------    ---------

                                          95,608     107,147      91,984  
                                        ---------   ---------    ---------

OPERATING PROFIT                         330,039     122,217     317,528  
                                        ---------   ---------    ---------
Non-operating income                      17,001      19,546      16,357  
Non-operating expenses                   (13,982)    (26,448)    (13,452) 
                                        ---------   ---------    ---------
                                           3,019      (6,902)      2,905  
                                        ---------   ---------    ---------

INCOME BEFORE TAXATION
   AND PROFIT SHARING                    333,058     115,315     320,433  

INCOME TAX AND SOCIAL CONTRIBUTION       (78,151)    (68,160)    (75,189) 

REVERSAL OF DEFERRED TAXES                 8,082     189,873       7,776  

EMPLOYEES' PROFIT SHARING                (21,414)                (20,602)
                                        ---------   ---------    ---------

NET INCOME FOR THE YEAR                  241,575     237,028     232,418  
                                       =========   =========    ========= 

NET INCOME PER THOUSAND
   SHARES R$/US$                            1.86        1.83        1.79  
                                       ---------   ---------    ---------
The accompanying notes are an integral part of these financial statements.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
STATEMENT  OF  CHANGES IN  STOCKHOLDERS' EQUITY                                  
YEARS ENDED DECEMBER 31, 1996 AND 1995                                           
IN THOUSANDS OF REAIS                                                           
------------------------------------------------------------------------------------------------------------------------------------
FUNDS
                                                         RESTATED        OTHER                                FOR FUTURE
                                                          PAID-UP      CAPITAL      REVENUE      RETAINED        CAPITAL
                                                          CAPITAL     RESERVES     RESERVES      EARNINGS       INCREASE       TOTAL
                                                      -----------   ----------   ----------    ----------   ------------ -----------
AT DECEMBER 31, 1995                                    1,735,045    5,683,970    1,946,941       15,396        11,563    9,392,915
                                                      -----------   ----------   ----------    ----------   ------------ -----------
                                                
Capital increase (EGM of 11.08.96)                          1,071                                               (1,071)
Premium on share subscription                                            3,211                                  (3,211)
Remuneration of construction in progress
   financed by own resources                                           156,973                                              156,973
Funds for capital increase - advances received                                                                   4,316        4,316
Reversal of income tax and social contribution
   on special restatement of special contributions                     (51,316)                                             (51,316)
Difference in social contribution rate                                 (49,113)                                             (49,113)
Transfer relating to reduction in 1992 income tax rate                  98,807      (98,807)
Investment credits                                                       4,805                                                4,805
Treasury stock                                                          (1,145)                                              (1,145)
Reversal of dividends relating to treasury stock                                         56                                      56
Net income for the year                                                                          241,575                    241,575
Transfer to retained profits reserve                                                122,499     (122,499)
Reversal of unrealized profits reserve                                              (41,388)      41,388
Proposed dividends R$ 1.00 per thousand shares)                                                 (129,871)                  (129 871)
                                                      -----------   ----------   ----------    ----------   ------------ -----------

AT DECEMBER 31, 1996                                    1,736,116  5,846,192      1,929,301       45,989         11,597   9,569,195
                                                      -----------   ----------   ----------    ----------   ------------ -----------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG   
STATEMENT  OF  CHANGES IN  STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995         
IN THOUSANDS OF REAIS                                                                                              (CONTINUED)

------------------------------------------------------------------------------------------------------------------------------------
FUNDS             
                                                        RESTATED        OTHER                                FOR FUTURE             
                                                         PAID-UP      CAPITAL      REVENUE      RETAINED        CAPITAL             
                                                         CAPITAL     RESERVES     RESERVES      EARNINGS       INCREASE       TOTAL 
                                                     -----------   ----------   ----------    ----------   ------------ -----------
AT DECEMBER 31, 1994                                   1,666,410    4,370,666      891,643       969,817        130,710   8,029,246
                                                     -----------   ----------   ----------    ----------   ------------ ----------- 

Capital increase (AGM de 03.27.95 e EGM 12.11.95)         68,635                                                (68,635)
Premium on share subscription                                          72,122                                   (72,122)
Remuneration of construction in progress
  financed by own resources                                           134,587                                               134,587
Funds for capital increase - advances received                                                                   21,610      21,610
Income tax on special restatement - adjustment
  of rate - Law 9249/95                                               328,036                                               328,036
Investment credits
  Credit assignment of results account for offset - CRC               771,745                                               771,745
  Others                                                                6,814                                                 6,814
Adjustment of deferred taxes                                                                       5,606                      5,606
Net income for the year                                                                          237,028                    237,028
Transfer to reserves:
  Legal                                                                             11,849       (11,849)
  Retained profits                                                                 854,482      (854,482)
  Unrealized profits                                                               225,134      (225,134)
Reversal of unrealized profits reserve                                             (36,167)       36,167
Proposed dividends (R$ 1.OO per thousand shares)                                                (141,757)                  (141.757)
                                                     -----------   ----------   ----------    ----------   ------------ ----------- 

AT DECEMBER 31, 1995                                   1,735,045    5,683,970    1,946,941        15,396         11,563   9,392,915
                                                    -----------   ----------   ----------    ----------   ------------ ------------
The accompanying notes are an integral part of these financial statements.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG        
STATEMENT  OF  CHANGES IN  STOCKHOLDERS' EQUITY                                 
YEARS ENDED DECEMBER 31, 1996 AND 1995                                          
IN THOUSANDS OF U.S. DOLLARS
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                FUNDS             
                                                       RESTATED        OTHER                                FOR FUTURE            
                                                        PAID-UP      CAPITAL      REVENUE      RETAINED        CAPITAL            
                                                        CAPITAL     RESERVES     RESERVES      EARNINGS       INCREASE       TOTAL
                                                    -----------   ----------   ----------    ----------   ------------ -----------
AT DECEMBER 31, 1995                                  1,669,276    5,468 511    1,873,139        14,812         11,125    9,036,863
                                                    -----------   ----------   ----------    ----------   ------------ -----------

Capital increase (EGM of 11.08.96)                        1,030                                                 (1,030)
Premium on share subscription                                          3,089                                    (3,089)
Remuneration of construction in progress financed by
own resources                                                        151,023                                                151,023
Funds for capital increase - advances received                                                                   4,151        4,151
Reversal of income tax and social contribution on
  special restatement of special contributions                       (49,371)                                               (49,371)
Difference in social contribution rate                               (47,251)                                               (47,251)
Transfer relating to reduction in 1992 income tax rate                95,061      (95,061)
Investment credits                                                     4,623                                                  4,623
Treasury stock                                                        (1,102)                                                (1,102)

Reversal of dividends relating to treasury stock                                       54                                        54
Net income for the year                                                                         232,418                     232,418

Transfer to retained profits reserve                                              117,855      (117,855)
Reversal of unrealized profits reserve                                            (39,819)       39,819
Proposed dividends (US$ 0 96 per thousand shares)                                              (124,948)                   (124,948)
                                                    -----------   ----------   ----------    ----------   ------------ ------------

AT DECEMBER 31, 1996                                  1,670,306    5,624,583    1,856,168        44,246         11,157    9,206,460
                                                    -----------   ----------   ----------    ----------   ------------ ------------
The accompanying notes are an integral part of these financial statements.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
BALANCE SHEET                          
                                       
AT DECEMBER 31, 1996 AND 1995          
                                       
IN  THOUSANDS  OF  REAIS  AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
R$                          US$
                                                                  -------------------------           ------------
                                                                      1996         1995                  1996     
                                                                  -----------  ------------           ------------
FINANCIAL RESOURCES WERE PROVIDED BY:
Operations                
   Net income for the year                                           241,575       237,028              232,418   
   Expenses (income) not affecting
     working capital:                                                441,436       466,480              424,703   
   Depreciation and amortization                                          21          (416)                  20   
   Allowance for doubtful accounts - long-term                                     (15,561)                       
   Remuneration of construction in progress                          (13,967)        6,073              (13,437)  
   Increase in deferred income tax
   Equity in the earnings of subsidiary                                 (501)       (4,810)                (482)  
     company                                                         (80,724)      (23,354)             (77,664)  
   Long-term gains and losses                                         14,110        25,002               13,575   
   Residual value of asset disposals                                   9,680        12,637                9,313   
   Adjustments to present value -
     long-term receivables                                            (8,082)     (189,873)              (7,776)  
   Reversal of deferred taxes
   Interest and charges on
     long-term receivables                                           (62,629)      (31,907)             (60,255)  
                                                                  -----------  ------------           ------------
                                                                     540,919       481,299              520,415   
                                                                  -----------  ------------           ------------

Stockholders
   Advances for future capital increase                                4,316        21,61O                4,151   
                                                                  -----------  ------------           ------------
Third-parties
   Financing                                                         292,984       210,368              281,879   
   Transfer from current to long-term                                              120,132                        
     financing - renegotiations                                        4,805         1,615                4,623   
   Investment credits
   Write down of fixed assets on discontinued                         25,539         2,714               24,571   
     operations                                                      101,953        91,420               98,088   
   Special contributions
   Increase in other long-term
     liabilities                                                      69,192         2,043               66,569   

   Other                                                                  56            27                   54   
                                                                  -----------  ------------           ------------
                                                                     494,529       428,319              475,783   
                                                                  -----------  ------------           ------------

TOTAL FUNDS PROVIDED                                               1,039,764       931,228            1,000,350   
                                                                  -----------  ------------           ------------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEARS ENDED DECEMBER 31, 1996 AND 1995
IN THOUSANDS OF REAIS AND IN
   THOUSANDS OF U.S. DOLLARS                                         (continued)
--------------------------------------------------------------------------------
R$                   US$
                                        ------------------------   -----------
                                            1996         1995           1996  
                                        ----------    ----------   -----------
FINANCIAL RESOURCES WERE USED FOR:
Property, plant end equipment             624,798       642,943       601,114 
  Proposed dividends                      129,871       141,757       124,948 
  Increase in long-term receivables       127,674        75,304       122,834 
  Increase in investments                   8,480         2,982         8,158 
  Transfer from long-term to current
  liabilities
  Deferred taxes                            5,181        73,064         4,985 
  Loans and Financing                     145,163        82,748       139,660 
  Other                                    23,041        17,728        22,168 
  Increase in deferred charges                 57            60            55 
  Treasury stock                            1,145                       1,102
                                        ----------    ----------   -----------
TOTAL FUNDS USED                        1,065,410     1,036,586     1,025,024 
                                        ----------    ----------   -----------

DECREASE IN WORKING CAPITAL               (25,646)     (105,358)      (24,674)
                                        ----------    ----------   -----------

CHANGES IN WORKING CAPITAL

CURRENT ASSETS
At the beginning of the  year             640,554       536,166       616,273 
At the end of the year                    750,338       640,554       721,895 
                                        ----------    ----------   -----------

                                          109,784       104,388       105,622 
                                        ----------    ----------   -----------
CURRENT LIABILITIES
At the beginning of the year              857,401       647,655       824,900 
At the end of the year                    992,831       857,401       955,196 
                                        ----------    ----------   -----------
                                          135,430       209,746       130,296 
                                        ----------    ----------   -----------
DECREASE IN WORKING CAPITAL               (25,646)     (105,358)      (24,674)
                                        ==========    ==========   ===========
The accompanying notes are an integral part of these financial statements.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

1    OPERATIONS

     Companhia   Energetica  de  Minas  Gerais  -  CEMIG,  a  Brazilian   listed
     corporation  registered under GEMEC/RCA  certificate No. 200-75/109 and the
     General Taxpayers' Register (C.G.C) No. 17.155.730/0001 -64, is an electric
     power public  utility  concessionaire  controlled by the Minas Gerais State
     Government.  Its principal  business  activities are the  construction  and
     operation of systems used in the generation, transformation,  transmission,
     distribution  and sale of electric  power,  as well as the  development  of
     activities in diverse energy-related areas for business purposes.

     The concession area held by CEMIG covers 562,762 km(2),  approximately  97%
     of the  territory  of the State of Minas  Gerais,  providing  power to some
     4,248 thousand (1995 - 4,049 thousand)  consumers.  It has 35 power plants,
     mainly hydroelectric,  with a generating capacity of approximately 5,068 MW
     (1995 - 4,962 MW).

     The  construction of the following  hydroelectric  power plants is still in
     progress:

     *    Miranda, with a generating  capacity of 390 MW. Start-up of operations
          of the first unit is programmed for 1997. The total  estimated cost is
          R$ 848,628 (US$  816,459),  which is being financed with the company's
          own funds and funds from  Eletrobras  and from IMPSA.  R$ 618,820 (US$
          595,363) of this  amount has already  been  expended  to date,  net of
          interest on construction.

     *    Igarapava,  with a generating  capacity of 210 MW, is a joint  venture
          with private  enterprise.  The total estimated cost is R$ 243,599 (US$
          234,365), of which CEMIG's participation is 14.5%.

     The  company  has 14,923  employees  (16,452 in 1995) and the  minimum  and
     maximum  monthly  salaries in December 1996 were R$ 389.00 (US$ 374.25) and
     R$ 8,943.00 (US$ 8,604.00), respectively.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

2    PRESENTATION OF THE FINANCIAL STATEMENTS

     The financial  statements were prepared in conformity with the requirements
     of Brazilian corporate  legislation and the Brazilian Securities Commission
     (CVM). The procedures adopted may be summarized as follows:

     MONETARY ITEMS

     Monetary  items which  include  anticipated  inflation  and  interest  were
     adjusted to present value by using the National  Association  of Investment
     Banks and Securities Dealers (ANBID) rate.

     Monetary  gains and losses,  as well as the  adjustments  to present value,
     were  allocated  to the  statement  of income  accounts  according to their
     nature. In the specific cases of suppliers, consumers and dealers, monetary
     gains and losses were allocated to the financial income (expense) accounts.

     NON-MONETARY ITEMS

     These  are  shown at  restated  cost  expressed  in  currency  of  constant
     purchasing power at December 31, 1996.

     ITEMS IN THE STATEMENTS OF INCOME,  OF CHANGES IN STOCKHOLDERS'  EQUITY AND
     OF CHANGES IN FINANCIAL POSITION

     These are  restated  as from the date or month they were  recorded  through
     December 31, 1996, adjusted both for gains and losses on monetary items and
     for the adjustment to present value of receivables and payables.

     COMPARATIVE FINANCIAL STATEMENTS

     The financial statements for the year ended December 31, 1995 were adjusted
     for  comparative  purposes  to currency  of  constant  purchasing  power at
     December 31, 1996,  using the  variation of the General  Market Price Index
     (IGP-M) in 1996 as the basis for restatement.

     Monetary gains and losses, adjustments to present value and the restatement
     of inventories  and monetary items were allocated to the income and expense
     accounts to which they relate as follows:

     GAINS AND LOSSES NET OF RESTATEMENTS (1996)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
INCOME AND EXPENSE ACCOUNTS                        R$            US$                   MONETARY ITEMS
------------------------------------------------------------------------------------------------------------------------------------
Deductions from operating revenue
    Reserve/fuel consumption quotas               5,590        5,378          Taxes charged to consumers
    Taxes and contributions on revenue            3,766        3,623          Taxes and social contributions - ICMS

OPERATING EXPENSES
    Personnel                                     8,664        8,336          Payroll and social security contributions
    Supplies                                     (5,001)      (4,811)         Stores
    Third party services                         (1,146)      (1,103)         Services in progress
    Royalties for the use of
    water resources                                 380          366          Water resources
    Other operating expenses                     35,371       34,030          Sundry

FINANCIAL INCOME (EXPENSES)
    Finance charges                                 646          622          Finance charges payable
    Other                                        10,626       10,223          Sundry

NON-OPERATING INCOME                               (554)        (533)         Services in progress
PROVISION FOR INCOME TAX                         41,596       40,019          Provision for income tax
------------------------------------------------------------------------------------------------------------------------------------
GAINS AND LOSSES NET OF RESTATEMENTS (1995)
------------------------------------------------------------------------------------------------------------------------------------
INCOME AND EXPENSE ACCOUNTS                        R$                                  MONETARY ITEMS
------------------------------------------------------------------------------------------------------------------------------------
Deductions from operating revenue
   Reserve/fuel consumption quotas                 6,745                      Taxes charged to consumers
   Taxes and contributions on revenue             12,316                      Taxes and social contributions - ICMS

OPERATING EXPENSES
   Personnel                                      24,984                      Payroll and social security contributions
   Supplies                                       (9,488)                     Stores
   Third party services                           (2,181)                     Services in progress
   Royalties for the use of
      water resources                                934                      Water resources
   Social charges not related
      to payroll                                     195                      Taxes and social charges payable
   Other operating expenses                       13,256                      Sundry

FINANCIAL INCOME (EXPENSES)
   Finance charges                                   871                      Finance charges payable
   Other                                          10,873                      Sundry

NON-OPERATING INCOME                                (177)                     Services in progress
PROVISION FOR INCOME TAX                           3,108                      Provision for income tax
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

ADJUSTMENT TO PRESENT VALUE AND RESTATEMENT OF INVENTORIES (1996)
OPERATING REVENUE                                     R$               US$
------------------------------------------------------------------------------------------------------------
Electricity sales                                  (28,076)         (27,012)  Consumers and dealers
OPERATING EXPENSES
  Supplies                                           8,259            7,946   Stores - special restatement
                                                       126              121   Suppliers
  Third-party services                               1,875            1,804   Suppliers
  Electric power purchased for resale                1,040            1,001   Suppliers
  Other expenses                                       471              453   Suppliers

FINANCIAL INCOME (EXPENSES)
  Commercial financial income                       28,390           27,314   Consumers and dealers
  Commercial financial expense                     (11,055)         (10,636)  Suppliers
                                                 ----------        --------
                                                     1,030              991
EFFECT OF INCOME TAX                                  (315)            (303)
                                                 ----------        --------
                                                       715              688
                                                 ==========        ========
ADJUSTMENTS TO PRESENT VALUE AND RESTATEMENT OF INVENTORIES (1995)

OPERATING REVENUE                                     R$            
---------------------------------------------------------------------------------------------------
Electricity sales                                  (46,193)                   Consumers and dealers          
                                                                                                             
OPERATING EXPENSES                                                                                           
  Supplies                                          14,816                    Stores - special restatement   
                                                       286                    Suppliers                      
  Third-party services                               2,808                    Suppliers                      
  Electric power purchased                                                                                   
     for resale                                      1,797                    Suppliers                      
  Other expenses                                       606                    Suppliers                      
                                                                                                             
FINANCIAL INCOME (EXPENSES)                                                                                  
  Commercial financial income                       46,310                    Consumers and dealers          
  Commercial financial expense                     (20,364)                   Suppliers                      
                                                 ----------                   
                                                        66          
  EFFECT OF INCOME TAX                                 (21)         
                                                 ----------        
                                                        45          
                                                 ==========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

2.1  SIGNIFICANT ACCOUNTING PRINCIPLES

     The  accounting  principles  comply  with  the  requirements  of  Brazilian
     corporate  legislation,  of the Brazilian  Securities  Commission (CVM) and
     with those of the  regulatory  authority - the National  Water and Electric
     Power Department - DNAEE. The main principles are the following:

     *    Assets and  liabilities in foreign  currency are restated based on the
          exchange rates ruling at the balance sheet dates;

     *    Other assets and liabilities,  subject to monetary correction by force
          of law or contract,  are restated to show amounts at the balance sheet
          dates, using the indices determined by law or the related contracts;

     *    The electric  power  supplied at the balance sheet dates,  but not yet
          billed, was accounted for on the accrual basis;

     *    The  allowance  for  doubtful   accounts  is  recorded  at  an  amount
          considered  sufficient  to  cover  probable  losses,  both  short  and
          long-term;

     *    Inventories of materials,  classified as current assets, are stated at
          their average cost;

     *    Investment in  subsidiary  company is recorded on the equity method of
          accounting;

     *    Property,   plant  and  equipment  in  use  is   depreciated   on  the
          straight-line  basis at rates determined by the regulatory  authority.
          Depreciation is charged to operating expenses or the cost of expansion
          projects, depending on the use of the assets concerned.

     *    Remuneration  of own resources used to finance  construction of assets
          and  installations  is based on the  Long-term  Interest  Rate (TJLP),
          limited to 10% a year and  recorded in property,  plant and  equipment
          with counter entries credited to stockholders' equity.

     *    Interest and other  financial  charges on financing from third parties
          related to  construction  in progress were  appropriated  to property,
          plant and equipment during the course of construction.

     *    The provision for income tax is recorded gross and is charged  against
          results  for the year net of  credits  from  tax  losses  and from the
          effects of tax temporary differences.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

2.2  TRANSLATION INTO U.S. DOLLARS

     The amounts in U.S. dollars in these financial statements as at and for the
     years ended December  31,1996 were translated from the amounts in the reais
     financial  statements expressed in constant currency at December 31,1996 at
     the exchange rate of R$ 1.0394 to US$ 1.00. Such translation  should not be
     construed as representing that the reais amounts  represent or have been or
     could be converted into U.S. dollars at that or any other rate.

3    CONSUMERS AND DEALERS
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
Consumers - Invoices rendered             159,858          142,848          153,799 
     Consumers - Invoices not yet rendered     108,637          103,727          104,519 
     Consumers - Renegotiated receivables       33,817           41,096           32,535 
     Dealers - Billed                            9,968           10,708            9,590 
     Other                                      25,877            6,681           24,896 
                                             ----------       -----------     -----------
                                               338,157          305,060          325,339 
                                             ==========       ===========     ===========
4    OTHER LONG-TERM RECEIVABLES
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
Renegotiated contracts with consumers      77,025           77,735           74,105 

     Credit assignment contracts (CRC)         855,860          802,185          823,417 

     Other                                         616              426              593 
                                             ----------       -----------     -----------
                                               933,501          880,346          898,115 
                                             ==========       ===========     ===========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

5    INVESTMENTS
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
Long-term equity investments               36,939           30,366           35,539 
     (-) Provision for loss                       (357)            (357)            (343)
     Project studies                            50,645           40,004           48,725 
     Jequitinhonha river control project        13,548           14,009           13,034 
     Other investments                           8,142            7,820            7,833 
                                             ----------       -----------     -----------

                                               108,917           91,842          104,788 
                                             ==========       ===========     ===========
Long-term equity investments include R$ 31,215 (US$ 30,032)  representing a
     95.05% holding in the capital of Companhia de Gas de Minas Gerais - GASMIG.
     CEMIG  intends to sell  control of this  subsidiary  company,  approval for
     which was given in State Law 12279 of July 29, 1996.

     Project  studies relate to expenses for technical and economic  feasibility
     studies  for  the   construction   of  power   plants  and   installations,
     sub-stations  and  transmission  lines to be carried  out in the  company's
     concession  area and in  particular  with the  Formoso,  Bocaina  and Irape
     projects.  Once projects start, expenses are transferred to construction in
     progress accounts.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

6    PROPERTY, PLANT AND EQUIPMENT
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
In operation
     Generation
       Thermoelectric plants                   141,253          148,430          135,899 
        Hydroelectric plants and other       5,376,803        4,349,675        5,172,987 
     Transmission                            2,656,873        2,403,098        2,556,160 
     Distribution                            5,076,539        4,545,913        4,884,105 
     Intangibles                                19,185           17,796           18,458 
     Other                                   1,077,030        1,031,339        1,036,204 
                                            ----------       -----------     ----------- 
                                            14,347,683       12,496,251       13,803,813 
     (-) Accumulated depreciation
         and amortization                   (5,246,872)      (4,456,105)      (5,047,982)
                                            ----------       -----------     ----------- 
                                             9,l00,811        8,040,146        8,755,831 
     Constructions in progress               2,167,680        1,391,588        2,085,511 
                                            ----------       -----------     ----------- 
                                            11,268,491        9,431,734       10,841,342 
                                            ==========       ===========     ===========
Depreciation  and amortization are calculated at the following annual rates
     specifically established for electric power concessionaires: Thermoelectric
     plants and intangibles -5%;  distribution assets -4% and all other assets -
     3%.

     Construction in progress relates mainly to the expansion of the generation,
     transmission and distribution systems, as follows:
R$                       US$
                                            -----------------------------     ------------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
Generation                              1,080,018          405,251        1,039,078 
     Transmission                              485,790          322,977          467,376 
     Distribution                               14,531           28,320           13,980 
     Material in stores                        125,506          111,888          120,749 
     Dams for river control                    253,353          222,381          243,749 
     Other                                     208,482          300,771          200,579 
                                             ----------       -----------     -----------
                                             2,167,680        1,391,588        2,085,511 
                                             ==========       ===========     ===========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

     As  prescribed in articles 63 and 64 of Decree 41,019 of February 26, 1957,
     assets  and  installations   used  in  the  generation,   transmission  and
     distribution  of electricity  cannot be withdrawn,  sold, lent or mortgaged
     without prior specific authorization by the regulatory authority.

     As  from  1996,  the  company  is   capitalizing   financial   charges  and
     inflationary  effects on the construction  financing as part of the cost of
     property,  plant  and  equipment  as  prescribed  in  Article  2  of  DNAEE
     Administrative  Rule 526, of November 22, 1995, The following  amounts were
     capitalized in 1996:

                                                           R$            US$
                                                       ---------      ---------

     Financial charges                                   21,440         20,627
     Inflationary effects                                11,035         10,617
                                                       ---------      ---------
                                                         32,475         31,244
                                                       =========      =========

     Expenses  have been  incurred on river  control works which are included in
     the  property,  plant and  equipment  accounts.  The  company  has  started
     negotiations with the State Government for their transfer.  At December 31,
     1996, amounts incurred are as follows:

                                                          R$            US$
                                                       ---------      ---------

     Investments                                        13,548        13,035
     Constructions in progress                         253,353       243,749
                                                      ---------      ----------
                                                       266,901       256,784
                                                      ==========     ==========
     These  amounts  include  approximately  R$ 80,000 (US$  76,967)  related to
     interest capitalized on construction.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

7    DEFERRED CHARGES
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
Expenses on remuneration of
       construction in progress                                1,880,164                 

     Financial charges and
       inflationary effects                                      102,309                 

     Other deferred items                        11,053           22,127          10,634 
                                             ----------       -----------     -----------

                                                 11,053        2,004,600          10,634 
     (-) Accumulated amortization                (5,883)        (455,891)         (5,660)
                                             ----------       -----------     -----------

                                                  5,170        1,548,709           4,974 
                                             ==========       ===========     ===========
Expenses on remuneration of construction in progress, financial charges and
     inflationary  effects  recorded as deferred charges up to December 31, 1995
     were  transferred to the respective  Construction  in progress and Services
     accounts  in 1996,  under the terms of DNAEE  Administrative  Rule 526,  of
     November 22, 1995.

8    ADVANCE BILLING OF ELECTRIC POWER

     In October 1996,  the company sold 3,980,400 MW of electricity to a private
     sector  consumer  over a 30-month  period.  The amount  agreed  between the
     parties of R$ 118,572 (US$ 114,077) was fully received and is substantially
     invested in long-term securities. 

     At December  31, 1996,  the amount  related to future sales is reflected in
     liabilities as follows:

                                                          R$            US$
                                                       ---------      ---------

     Short-term                                         47,832        46,019
     Long-term                                          64,315        61,877
                                                       ---------      ---------
                                                       112,147       107,896
                                                       =========      =========

     Balances are subject to restatement based on the U. S. dollar variation.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

9    LOANS AND FINANCING

     Most of the loans and financing are secured by guarantees  from the Federal
     and State  Governments and were  contracted in order to generate  resources
     for the  expansion of the  generation,  transmission  and  distribution  of
     electric power systems in its concession area.

     The composition of loans and financing  outstanding at December 31, 1996 is
     presented as follows:
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS
FOREIGN CURRENCY DEBT (1)                                                                                           1996  
                                                                                           ------------------------------ 
                                                                    ANNUAL                   SHORT        LONG
INSTITUTIONS                                    DUE DATE        INTEREST(%)     CURRENCY      TERM        TERM     TOTAL  
--------------------------------------------  -------------  -----------------  ---------  ---------  --------- ---------
Interamerican Development Bank (BID)           1984/2O06        4.0 to 9.25       Sundry    26,496      90,235   116,731  

International Bank for Reconstruction 
  and Development (IBRD)                       1981/2002               7.25       Sundry     5,141      28,791    33,932  

Chase Manhattan Bank                           1997/1998            9.88125          US$    34,647      17,323    51,970  

IMPSA - Industria Metalurgica Pescarmona S/A   1999/2003                9.8          US$                43,776    43,776  

Banco do Brasil S/A (2)                        1997/2024             Sundry          US$       370     111,354   111,724  
  
Citibank N.A.                                       1997             8.8125          US$     2,868                 2,868

Sundry (3)                                          2004              9.125          US$               l55,9l0   l55,9l0

Autotrol S.A.C.I.A.F. & I                      1999/2002               12.0          US$                   215       215

Bank Boston                                         1997  5.8125 and 5.8750          US$     4,307                 4,307

S.B.E./Asea                                    1997/1999               10.5          US$    26,207      50,846     77,053 

Siemens S/A                                         2000               9.97          US$                 1,205      1,205 

Nativa S/A                                          2000               9.97          US$                 2,641      2,641
                                                                                         ---------   ---------  --------- 

Total foreign currency debt                                                                100,036     502,296    602,332 
                                                                                         ---------   --------- - --------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS
LOCAL CURRENCY DEBT                                                                                          1996    
                                                                                      ------------------------------ 
                                                                          ANNUAL         SHORT        LONG
INSTITUTIONS                                          DUE DATE        INTEREST(%)         TERM        TERM     TOTAL 
--------------------------------------------     -------------  -----------------     ---------  --------- ---------
Centrais Eletricas Brasileiras S/A - ELETROBRAS      1995/2024           5 to 10        38,715     365,584   404,299 
Fundacao Forluminas de Seguridade Social - FORLUZ    1985/1996              10.0                                     
Major consumers - TELEMIG / CVRD                     1982/1998            Sundry         1,367      10,886    12,253 
Consumers - RECON/REDES A. PARTICULARES              1994/1997               6.0           773                   773 
FINEP                                                1997/2000              10.0           138         734       872
INEPAR                                               1998/2002             14.48                       307       307
                                                                                   -----------   ---------  -------- 

Total local currency debt                                                               40,993     377,511   418,504 
                                                                                   -----------   ---------  -------- 

Total debt (4)                                                                         141,029     879,807 1,020,836 
                                                                                   -----------   ---------  -------- 
     

The long-term amounts fall due as follows:       1) Amounts  are  payable  in  foreign  currency,  however,  in  order to facilitate
                                                    presentation they were translated into reais.
                     1996               1995     2) Interest rates vary: - 4% to 8% a year
                  -------            -------        - LIBOR readjusted half-yearly, plus interest from O.8125 to 0.8750% a year
1997                                 134,513     3) In 1996, the company raised  funds in foreign markets through the issue of fixed
1998              167,861            117,450        rate notes and the balance at December 31, 1996 amounts to R$ 155,910.
1999               93,348             95,165     4) At December 31, 1996, in addition  to these loans and financing, the company had
2000               85,366             78,180        unused  lines  of  credit  of  R$ 158,990,  of  which  R$ 71,235  in  Brazil and
2001 to 2004      533,232            321,326        R$ 87,755 abroad, which are to be used in the construction program.
                  -------            -------

                  879,807            746,634                        
                  -------            -------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF U.S. DOLLARS
FOREIGN CURRENCY DEBT (1)                                                                                           1996 
                                                                                -----------------------------------------
                                                                    ANNUAL                   SHORT        LONG
INSTITUTIONS                                    DUE DATE        INTEREST(%)     CURRENCY      TERM        TERM     TOTAL 
--------------------------------------------  -------------  -----------------  ---------  ---------  --------- ---------
Interamerican Development Bank (BID)           1984/2006        4.0 to 9.25       Sundry    25,491      86,815   112,306 

International Bank for Reconstruction 
  and Development (IBRD)                       1981/2002               7.25       Sundry     4,946      27,700    32,646 

Chase Manhattan Bank                           1997/1998            9.88125          US$    33,334      16,666    50,000 

IMPSA - Industria Metalurgica Pescarmona S/A   1999/2003                9.8          US$                42,117    42,117 

Banco do Brasil S/A (2)                        1997/2024             Sundry          US$       356     107,133   107,489 
  
Citibank N.A.                                       1997             8.8125          US$     2,759                 2,759

Sundry (3)                                          2004              9.125          US$               l50,000   l50,000

Autotrol S.A.C.I.A.F. & I                      1999/2002               12.0          US$                   207       207

Bank Boston                                         1997  5.8125 and 5.8750          US$     4,144                 4,144

S.B.E./Asea                                    1997/1999               10.5          US$    25,213      48,919     74,132

Siemens S/A                                         2000               9.97          US$                 1,159      1,159

Nativa S/A                                          2000               9.97          US$                 2,541      2,541
                                                                                         ---------   ---------  ---------

Total foreign currency debt                                                                 96,243     483,257    579,500
                                                                                         ---------   ---------  ---------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF U.S. DOLLARS
LOCAL CURRENCY DEBT (1)                                                                                         1996  
                                                                                      ------------------------------- 
                                                                          ANNUAL         SHORT        LONG
INSTITUTIONS                                          DUE DATE        INTEREST(%)         TERM        TERM     TOTAL  
--------------------------------------------     -------------  -----------------     ---------  --------- ---------
Centrais Eletricas Brasileiras S/A - ELETROBRAS      1995/2024           5 to 10        37,247     351,726   388,973  
Fundacao Forluminas de Seguridade Social - FORLUZ    1985/1996              10.0                                      
Major consumers - TELEMIG / CVRD                     1982/1998            Sundry         1,315      10,473    11,788  
Consumers - RECON/REDES A. PARTICULARES              1994/1997               6.0           744                   744  
FINEP                                                1997/2000              10.0           133         706       839
INEPAR                                               1998/2002             14.48                       294       295
                                                                                   -----------   ---------  --------  

Total local currency debt                                                               39,439     363,199   402,639  
                                                                                   -----------   ---------  --------  

Total debt (4)                                                                         135,682     846,456   982,139  
                                                                                   -----------   ---------  --------  
     

The long-term amounts fall due as follows:       1) Amounts  are  payable  in   local  currency,  however,  in  order to facilitate
                                                     presentation they were translated into U.S. dollars.
                     1996               1995     2) Interest rates vary: - 4% to 8% a year
                  -------            -------                             - LIBOR readjusted half-yearly, plus from 0.8125 to 0.8750%
1997                                 129,414                               a year
1998              161,498            112,998     3) In 1996, the company raised funds in foreign markets through  the issue of fixed
1999               89,810             91,558         rate notes and the balance at December 31, 1996 amounts to US$ 150,000.        
2000               82,130             75,216     4) At December 31, 1996, in addition  to these loans and financing, the company had
2001 to 2004      513,019            309,146        unused  lines  of  credit  of  US$ 152,963,  of  which US$ 68,535  in Brazil and
                  -------            -------        US$ 84,428 abroad, which are to be used in the construction program.
                  846,457            718,332 
                  -------            -------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

     Percentage  participation  of currencies in loans and financing at December
     31, 1996.

                    ABROAD                                      BRAZIL
      -----------------------------------------------    ----------------------
      CURRENCY         %      CURRENCY              %     INDEX              %
      --------       -----    ---------          ------  -------          ------
      US$             81        FLS                 1     IGP-M              57
      DM               3        SWFR                4     FINEL              37
      Y                2        Unit of account     9     Other               6

     The percentage  variations in the principal  currencies and indexes used to
     adjust loans and financing during 1996 were as follows:

      CURRENCY/INDEX          VARIATION %  CURRENCY/INDEX       VARIATION %
      --------------          -----------  --------------       ------------
      FINEL                      1.78      DM                        (1.25)
      IGP-M                      9.19      SWFR                      (8.60)
      US$                        6.88      SRLS                      (6.88)
      Y                        (5.28)      FLS                        (162)
                                           Accounting Monetary Unit (UMC)(1.06)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

10   DEFERRED TAXES
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
INCOME TAX
       Inflationary gain                                         14,711                  
       Result of the special
         restatement                           426,886          413,109          410,704 
                                               426,886          427,820          410,704 
       Tax credits (temporary timing
         differences and tax losses)           (43,923)         (64,764)         (42,258)
       Adjustments on inflationary effects      15,753                            15,156
       Effects of present value adjustments
         and restatement of inventories         (5,271)          (5,586)          (5,071)
                                               393,445          357,470          378,531 

       SOCIAL CONTRIBUTION
         Result of special restatement         136,605          134,628          131,427 
         Tax credits on temporary
           timing differences                   (6,330)                          (6,090)
                                             ----------       -----------     -----------

                                               523,720          492,098         503,868  
                                             ==========       ===========     ===========
11   INCOME TAX AND SOCIAL CONTRIBUTION

     The main effects on the 1996 financial statements are the following:

(a)  Income tax - due to the  non-deductibility  of the social  contribution  as
     from 1997 when  determining  taxable  income as  prescribed  in Law 9316 of
     November 22,1996,  the balance of the Income Tax on the Special Price-level
     Restatement was increased by R$ 38,9O7(US$ 37,432), with a counter entry to
     the Special Price-Level Restatement Reserve account.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

(b)  Social  Contribution - due to the increase in the Social  Contribution rate
     from 7.4O7% to 8% as from 1997,  the  deferred  Social  Contribution  asset
     balance and the Special  Price-Level  Restatement balance were increased by
     R$ 468 (US$ 450) and R$ 10,206 (US$  9,819),  respectively  of which R$ 468
     (US$ 450) was credited to net income for the year.

(c)  The  company  prepaid at a discount  Income  Tax on  inflationary  gains as
     permitted by paragraph 3 of Article 7 of Law 9249/95.  This option  reduced
     the provision for deferred  income tax by R$ 8,082 (US$ 7,776),  related to
     realizations  occurred in 1996. The most  significant  effects arising from
     this option were recorded in the year ended December 31, 1995.

(d)  The  company  reversed  Income Tax and Social  Contribution  on the Special
     Price-Level Restatement of Special Contributions due to the non-realization
     of these  taxes  because of the  specific  characteristics  of the  special
     contributions.  The  reversals  of R$  38,877  (US$37,4O4)  and  R$  12,439
     respectively, were made against the Special Price-level Restatement Reserve
     Account.

12   TAX LOSSES FOR OFFSET AND TIMING DIFFERENCES

     The company  recorded  in the  Taxable  Income  Control  Register  (LALUR),
     accumulated tax losses and timing  differences  which may be offset against
     future  taxable  income and  amount to R$ 1,924  (US$  1,851) and R$ 41,999
     respectively.

13   SPECIAL CONTRIBUTIONS
R$                       US$
                                            -----------------------------     -----------

                                                1996              1995            1996   
                                             ----------       -----------     -----------
Consumer contributions                1,134,496        1,032,543        1,091,492 
       Federal Government participations         8,804            8,804            8,470 
       Others                                       50               5O               48 
                                             ----------       -----------     -----------

                                             1,143,350        1 041.397        1,100,010 
                                             ==========       ===========     ===========
Consumer  contributions  represent  funds received to finance  expansion to
     enable the company to meet increased demands for the supply of electricity.
     Because of their  nature these  contributions  do not  represent  effective
     financial  obligations  and,  accordingly,  should  not  be  considered  as
     liabilities when calculating economic-financial ratios.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

14   STOCKHOLDERS' EQUITY

     Fully   subscribed  and  paid-up  capital  amounts  to  R$  1,736,116  (US$
     1,670,306).  Shares have a nominal value of R$ 0.01 (US$ 0.01) each and are
     held as follows:
NUMBER OF SHARES IN 1996
     STOCKHOLDERS         ORDINARY           %          PREFERRED          %             TOTAL                  %
                       ----------------   -------   -----------------   ------    -----------------       ---------
Minas Gerais
        State            28,938,227,169      51        3,948,482,470       5         32,886,709,639           25

     MGI                 18,719,600,000      33        2,608,329,828       4         21,327,929,828           16

     ELETROBRAS             831,165,440       1                                         831,165,440            1

     Others
        Local             6,701,522,734      12       15,216,956,279       21        21,918,479,013           17
        Foreign           1,597,5O6,860      35       51,364,174,420       70        52,961,681,280           41
                       ----------------   -------   -----------------   ------    -----------------       ---------

     Total               56,788,022,203     100       73,137,942,997      100       129,925,965,200          100
                       ================   =======   =================   ======    =================       =========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
NUMBER OF SHARES IN 1995
     STOCKHOLDERS         ORDINARY           %          PREFERRED          %             TOTAL                  %
                       ----------------   -------   -----------------   ------    -----------------       ---------
Minas Gerais
        State            34,070,765,444      60      12,989,050,573        18        47,059,816,017           36

     MGI                 13,587,OOO,OOO      24                                      13,587,000,000           1O

     ELETROBRAS             831,165,440       1       1,269,618,153         2         2,100,783,593            2

     Others
        Local             7,641,965,418      14      20,748,409,835        28        28,390,375,253           22
        Foreign             610,744,695       1      38,071,134,442        52        38,681,879,137           30
                       ----------------   -------   -----------------   ------    -----------------       ---------

     Total               56,741,640,997     100      73,078,213,003       100       129,819,854 000          100
                       ================   =======   =================   ======    =================       =========
Preference  shares  have  priority  in the return of capital  and the right to a
minimum annual  dividend equal to 1O% of their nominal value,  and share equally
with the ordinary  shares when the ordinary  stockholders  receive  dividends in
excess of 10% However,  such  dividends can never be less than 25% of net income
for the  year as  adjusted  by  law.  In  accordance  with  legislation  and the
company's statutes,  the issue of stock dividends up on capitalizing the reserve
resulting  from the  price-level  restatement  of capital  must  comply with the
following:

*    Preference  shares are to be treated in the same manner as ordinary shares.

*    New  shares  may be  issued  or the  value  of  those  already  held may be
     increased.

*    Capitalization  is  subject  to the  decision  of  shareholders  in General
     Meeting,  but is  mandatory  once the  balance of the  restatement  reserve
     account exceeds 50% of capital.

The  company's  statutes  assure,  and the  State  of  Minas  Gerais  guarantees
(pursuant to Article 9 of State Law 828, of December  14,1951,  and Article I of
State Law 8796 of April  29,1985)  that private  stockholders  are entitled to a
minimum  dividend  of 6% per  year  in the  years  the  company  does  not  have
sufficient profits to pay dividends to its stockholders.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

     Proposed  1996  dividends  are  equivalent  to 10% of the total  capital of
     R$1,736,116  (US$  1,670,306),  excluding the treasury  stock whose nominal
     value is R$ 554 (US4 533), appropriated from:

                                                          R$              US$
                                                      -----------    ----------
     Realization of unrealized profits reserves          41,388         39,819
     Part of net income for the year                     88,483         85,129
                                                      -----------    ----------
                                                        129,871        124,948

     The amount  transferred  to the  Retained  Profits  Reserve is  intended to
     strengthen   working  capital  as  well  as  to  set  aside  resources  for
     investments in generating, transmission and distribution projects.

     Treasury  stock  relates to the transfer of shares  originating  from funds
     invested in the company's projects in the SUDENE area  (Superintendency for
     the Development of the Northeast) by the Northeast Investment Fund (FINOR),
     as fiscal incentives.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
The composition of other Capital Reserves and Revenue Reserves is as follows:
                                                             

                                                       R$        US$
                                   ----------------------  ----------
                                         1996        1995       1996  
                                   ----------  ----------  ---------- 

Other capital reserves
   Capital restatement - Special
    price-level restatement
    reserve - Law 8.200/91          1,537,412   1,539,033   1,479,134 
   Remuneration of construction
    in progress financed
    by own resources                1,303,225   1,146,252   1,253,824 
   Investment credits               2,931,367   2,926,563   2,820,249 
   Premium on capital
    subscription                       75,333      72,122      72,477 
   Treasury stock                      (1,145)                 (1,101)
                                   ----------  ----------  ---------- 
                                    5,846,192   5,683,970   5,624,583 
                                   ----------  ----------  ---------- 

                                                       R$             
                                   ----------------------  ---------- 
                                         1996        1995       1996  
                                   ----------  ----------  ---------- 

Revenue reserves
  Legal                               102,829     102 829      98,931 
  Unrealized profits                  941,473     982 861     905,785 
  Retained profits                    878,230     854,482     844,939 
  Other                                 6,769       6,769       6,513 
                                   ----------  ----------  ---------- 

                                    1,929,301   1,946,941   1,856,168 
                                   ----------  ----------  ----------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------
15    ELECTRICITY SALES
Electric power sales, analyzed by class of consumer, are as follows:                                   

                                                          MWH                         R$        US$
                                -----------------------------     ----------------------  -----------
                         NUMBER OF
                         CONSUMERS         1996          1995           1996        1995       1996  
                         ---------   ----------   -----------     ----------  ----------  ----------
Residential              3,501,576    6,331,111     5,826,442        767,569     580,541     738,473 
Industrial                  53,715   20,948,387    20,685,703      1,090,626   1,117,702   1,049,284 
Commercial,
services and other
activities                 400,873    2,601,781     2,395,838        320,316     292,424     308,174 
Rural                      245,899    1,268,356     1,157,049         99,976      96,247      96,186 
Public authorities          35,960      453,092       419,562         51,831      51,737      49,866 
Streetlighting               3,748      812,125       770,105         60,284      53,790      58,000 
Public services              4,660      824,193       780,319         57,572      57,371      55,390 
Own consumption              1,638       77,052        78,020                      7,444             
                         ---------   ----------   -----------     ----------  ----------  ---------- 
                         4,248,069   33,316,097    32,113,038      2,448,174   2,257,256   2,355,373 
                         ---------   ----------   -----------     ----------  ----------  ---------- 
Supply                          11    4,219,122     3,791,983         98,868      79,920      95,120 
                         ---------   ----------   -----------     ----------  ----------  ---------- 
                         4,248,080   37,535,219    35,905,021      2,547,042   2,337,176   2,450,493 
Power supplied
  not yet billed                                                      14,503      18,990       13,953
Other income                                                          42,582      30,874       40,968
                                                                  ----------  ----------  ---------- 
                                                                   2,604,127   2,387,040    2,505,414

Deductions from
  operating revenue                                                 (648,395)   (661,106)    (623,817)
                         ---------   ----------   -----------     ----------  ----------  ---------- 

Total                    4,248,080    37,535219    35,905,021      1,955,732   1,725,934    1,881,597
                         ---------   ----------   -----------     ----------  ----------  ----------
16    DEDUCTIONS FROM OPERATING REVENUE

     As from  1996,  the  Global  Reversal  of  Reserve  quota  (RGR)  is  being
     calculated in accordance with the requirements of Decree 1771/96 of January
     3, 1996,  which  determined  the rate of 2.5% on assets subject to reversal
     but limited to 3% of annual sales of the concessionaire. In prior years the
     RGR was calculated at 3% of such assets limited to 12% of annual sales.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

17    PROFIT SHARING

      The collective  labor  agreement  established the criteria for determining
      employees' profit sharing and defined the parameters for establishing this
      amount, to include:  Investment  Remuneration Rate, Consumers Satisfaction
      Index,  Electricity Billed per Employee,  Time Equivalent  Interruption by
      Consumer and Voluntary  Absenteeism.  Based on this criteria,  a provision
      for profit  sharing in 1996 was set up of R$ 13,118 (US$ 12,620).  

      Also in 1996, the 1995  Employees'  Profit Sharing of R$ 8,296 (US$ 7,982)
      was paid.  Since the  profit  sharing  agreement  was  signed in May 1996,
      performance targets in 1995 were not established.

18    RELATED PARTY TRANSACTIONS

      The principal transactions with related parties are the financing received
      from  ELETROBRAS  and FORLUZ  (Note 9) and  negotiation  of the  remaining
      balance of the Compensation of Rate Shortfalls Account (CRC), as described
      in Note 21.  Transactions with Minas Gerais State Government entities were
      carried out at normal market prices.  No other related party  transactions
      are significant apart from those referred to above.

19    SUPPLEMENTARY RETIREMENT AND PENSION PLAN

      Since  1973,  the  company  has  sponsored  the  Fundacao   Forluminas  de
      Seguridade  Social -  FORLUZ,  a  non-profit  making  entity,  whose  main
      objective  is  to  supplement  the  social  security   benefits  of  CEMIG
      employees.  FORLUZ bases the  calculation  and  accumulation  of the funds
      required by its benefit plans on the  "Established  Benefits Plan" and the
      "Financial  Capitalization  System".  Accordingly,  regular  contributions
      (from the sponsor and  participants) are used to cover, at present values,
      the benefits  payable to  participants,  accumulated as from the date they
      joined the plan,  and also to amortize  benefits  related to prior periods
      which were not covered by additional  contributions from the sponsor.  The
      last  actuarial  review was  carried out in December  1996.  The  benefits
      related to prior  periods,  estimated  at R$ 472,521  (US$  454,609) as of
      December  31,  1996  and R$  431,226  at  December  31,  1995,  are  being
      amortized.   through  additional  monthly   contributions   based  on  the
      consistent  installments system (Price Table) with interest of 6% per year
      and  readjusted  yearly  based  on the  General  Price  Index  -  Internal
      Availability  (IGP-DI)  variation.  This  amortization  system has been in
      effect since July 1996.  CEMIG is responsible  for the  differences in the
      mathematical reserve,  actuarially calculated,  of R$ 113,182 (US 108,892)
      at December  31, 1996  related to the  granting of special  retirement  in
      anticipation   of  length  of   service   retirement,   except  for  those
      participants  enrolled  after  January 29,  1996.  The balance  related to
      unamortized  reserves  must  be  amortized  during  a  period  actuarially
      prescribed of no
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG 

NOTES TO THE FINANCIAL STATEMENTS 
AT DECEMBER 31, 1996 AND 1995 
IN THOUSANDS OF REAIS AND
IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

      longer than 28 years. Additional  contributions from the company to FORLUZ
      amounted  to R$$ 44,472  (US$  42,786) in 1996 and R$ 23,060 in 1995,  for
      normal cost R$ 25,065  (US$  24,115) in 1996 and R$ 19,460 in 1995 and for
      special retirement,  R$ 24,578. These amounts were charged against the net
      income of CEMIG. Any  insufficiency in the reserves for  beneficiaries are
      the  responsibility of the sponsor.  Financial  information on the plan at
      December 31,1996, prepared by independent actuaries is as follows:

                                                       R$        US$
                                   ----------------------  ----------
                                         1996        1995       1996  
                                   ----------  ----------  ---------- 

TECHNICAL RESERVES                    829,904     621,359     798,445 
MATHEMATICAL RESERVES
  Benefits granted                  1,038,092     682,063     998,742 
  Benefits to be granted              430,784     450 398     414,454 
                                   ----------  ----------  ---------- 
                                    1,468,876   1,132,461   1,413,196 
UNAMORTIZED RESERVES                 (585,703)   (431,226)   (563,501)
TECHNICAL DEFICIT
  FOR THE YEAR                        (53,269)    (79,876)    (51,250)
                                   ----------  ----------  ---------- 

      As from 1997,  all  expenses  previously  covered by the health  plans for
      retired employees will no longer be the responsibility of CEMIG, including
      any   possible   insufficiency   in  this   program.   CEMIG  still  pays,
      independently  part of the life insurance  premium for retired  employees.
      The actuarial  estimate  corresponding  to potential  liabilities for this
      benefit amounts to R$ 141,642 (US$ 136,273) at December 31,1996.

20    INSURANCE

      Insurance cover, mainly against fire, is maintained in conformity with the
      company's  policy of considering the degree of risk to which each asset is
      exposed, individually, and the cost of the insurance premium.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

21   Financial Instruments

(a)  The present  value at December 31, 1996 of the main  financial  instruments
     which are recorded in the account  "other  receivables",  is  calculated as
     prescribed  by  Article  3 of the  Brazilian  Securities  Commission  (CVM)
     Instruction  235 of March 23, 1995 based on the discounted cash flow method
     using a discount rate of 12% a year, as shown below:

                                             R$                    US$
                                     ---------------------  --------------------
                                                 Contracts             Contracts
                                       Book      - present    Book    - present
                                      value        value      value      value
                                    ---------  -----------  -------- -----------
      Renegotiated contract with
      private sector consumers        79,300       53,820      76,294     51,780
      Credit assignment contract
      of the balance of the
      Compensation of Rate
      Shortfall Account (CRC)
      to the Government of the
      State of Minas Gerais          855,860      544,159     823,417   523,532
                                    ---------  -----------  -------- -----------
                                     935,160      597,979     899,711   575,312
                                    ---------  -----------  -------- -----------

     R$ 4,956 (US4  4,768) of the  renegotiated  contract  with  private  sector
     consumers is short-term.

     The remaining credit balance of the Compensation of Rate Shortfall  Account
     (CRC)  was  transferred  to the  Government  of the  State of Minas  Gerais
     through a credit assignment contract under the terms of Law 8724/93, with a
     grace period of three years after which time the amount will be received in
     monthly  installments  over a period of seventeen  years. The receivable is
     subject to restatement  based on the Fiscal Reference Unit (UFIR) variation
     and to interest of 6 % a year as from May 2, 1995 and is  guaranteed by the
     State  Government's   participation  in  taxes  collected  by  the  Federal
     Government (FPE).

(b)  Swap  operations,  in which  pre-fixed  interest  rates are  exchanged  for
     post-fixed  rates, are recorded in the amount of R$ 9,488 (US$ 9,128) which
     represents market value.

     Management of financial  instruments  is  accomplished  by using  operating
     strategies and controls to achieve liquidity, profitability and security.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE FINANCIAL STATEMENTS AT
DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF
REAIS AND IN THOUSANDS OF U.S. DOLLARS
--------------------------------------------------------------------------------

22   CONTINGENCIES

     Several  industrial  consumers  took legal  action  against the increase in
     tariffs  approved by DNAEE  Regulations  O38/86 and O45/86 - Cruzado  Plan.
     Based on the opinion of its legal advisors, the company expects no loss and
     does not consider it necessary to make any provision for contingencies.

23   OTHER INFORMATION

     On December  27, 1996,  Law 9430 was  approved  and changed  income tax and
     social  contribution   legislation,   and  also  introduced  other  changes
     effective as from January 1, 1997. The main changes are as follows:

     o    The option to prepare  quarterly  or annual  tax  computations.  

     o    The  creation of a system of  transfer  prices for  transactions  with
          related parties in local and foreign markets;

     o    The  deductibility  limit of the allowance  for doubtful  accounts was
          changed;

     o    The full deductibility of directors' remuneration is permitted.
a.(ii)    The following condensed  unaudited quarterly financial  information of
          Companhia  Energetica de Minas Gerais - CEMIG as of March 31, 1997 and
          for the quarters ended March 31, 1997 and 1996 have been  derived from
          the  financial  report  prepared  by  CEMIG  to meet  their  statutory
          reporting  requirements  stipulated by Comissao de Valores Mobiliarios
          ("CVM"), the governmental body which regulates securities in Brazil.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(Expressed in thousands of Brazilian Reais, except per share amounts)

                                                1997            1996
                                                ----            ----

Net Sales                                  R$484,284       R$451,761

Operating Costs and Expenses                 423,123         386,708
                                        -------------   -------------

Operating Income                              61,161          65,053

Interest Expense                            (35,032)        (31,084)
Interest Income                               34,706          43,040
Other Income (Expense)                      (20,859)        (16,838)
                                        -------------   -------------

Income Before Taxes                           39,976          60,171

Income Taxes                                  13,272          18,185
                                        -------------   -------------

NET INCOME                                  R$26,704        R$41,986
                                        =============   =============

Income Per 1,000 Shares                       R$0.21          R$0.32
                                        =============   =============

See Notes to Condensed Unaudited Financial Information
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

CONDENSED  UNAUDITED  BALANCE  SHEETS  FOR  MARCH 31,  1997 AND  MARCH 31,  1996
(Expressed in thousands of Brazilian Reais)

                                                  1997               1996
                                                  ----               ----
ASSETS

CURRENT ASSETS
Cash and cash equivalents                     R$61,885           R$36,409
Investments                                    234,299            117,939
Receivables                                    439,006            500,730
Inventories                                     55,432             54,602
Prepaid and other                                1,278              3,161
                                        ---------------   ----------------

         Total current assets                  791,900            712,841
                                        ---------------   ----------------

Fixed Assets                                10,481,843         10,401,464
Investments                                    100,843            100,290
Receivables                                    958,310          1,070,676
Deferred Charges                                 4,373              4,678

         TOTAL ASSETS                     R$12,337,269       R$12,289,949
                                        ===============   ================

See Notes to Condensed Unaudited Financial Information
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

CONDENSED  UNAUDITED  BALANCE  SHEETS  FOR  MARCH 31,  1997 AND  MARCH 31,  1996
(Expressed in thousands of Brazilian Reais)

                                                       1997               1996
                                                       ----               ----
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Trade payables                                    R$136,570          R$136,884
Accrued taxes                                       206,651            181,308
Other accrued liabilities                           658,142            679,362
                                             ---------------   ----------------

         Total current liabilities                1,001,363            997,554
                                             ---------------   ----------------

LONG-TERM LIABILITIES
Debt                                                869,884            879,807
Other                                             1,652,275          1,659,554
                                             ---------------   ----------------

         Total long-term liabilities              2,522,159          2,539,361
                                             ---------------   ----------------

STOCKHOLDERS' EQUITY

Capital                                           1,299,260          1,299,260
Capital reserves                                  5,696,741          5,662,732
Revenue reserves                                  1,766,072          1,766,072
Retained earnings                                    51,674             24,970
                                             ---------------   ----------------

         Total stockholders' equity               8,813,747          8,753,034
                                             ---------------   ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     R$12,337,269       R$12,289,949
                                             ===============   ================

See Notes to Condensed Unaudited Financial Information
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG

NOTES TO THE CONDENSED UNAUDITED FINANCIAL INFORMATION

1.       Basis of Presentation

         The condensed unaudited quarterly financial information is derived from
         the Company's  March 31, 1997 statutory  report filed with the CVM. All
         amounts are in  Brazilian  reais and have been  prepared in  conformity
         with accounting principles generally accepted in Brazil.

2.       Subsequent Event

         At an auction on May 28, 1997 at Rio de Janeiro Stock Exchange, a group
         of  investors  headed by  Southern  Electric  and AES bought 33% of the
         Company's common shares for  R$1,130,000.  These shares were offered by
         the  Government  of the State of Minas  Gerais in  accordance  with the
         tender and stockholders'  agreement  published in Minas Gerais on March
         12, 1997.
b.  Unaudited Pro Forma Consolidated Financial Information

On June 18, 1997,  AES together  with The Southern  Company and the  Opportunity
Fund, a Brazilian investment Fund (collectively, the "AES Consortium"), acquired
14.41% of Companhia Energtica de Minas Gerais ("CEMIG"),  an integrated electric
utility serving the State of Minas Gerais in Brazil,  for a total purchase price
of approximately  $1.056 billion.  Initially,  AES and the Opportunity Fund will
have a 90.6% and a 9.4% economic  interest in the AES Consortium,  respectively.
The Southern Company has an option until January 9, 1998 to purchase up to a 25%
interest in the AES Consortium  from AES.  Pursuant to a shareholders  agreement
between  the AES  Consortium  and the  State of  Minas  Gerais,  AES  will  have
significant operating influence. The foregoing transaction is referred to herein
as the "CEMIG Acquisition."

The following tables and related notes present financial  information at and for
the  periods  presented  herein to give effect on a pro forma basis to the CEMIG
Acquisition.  The  unaudited  pro forma  adjustments  are based  upon  available
information and certain assumptions and estimates which the Company believes are
reasonable  under the  circumstances.  The  unaudited  pro forma  results do not
purport to be  indicative  of the results that would have been  obtained had the
CEMIG Acquisition  occurred at the beginning of the periods  presented,  nor are
they  intended to be a projection  of future  results.  The  unaudited pro forma
financial information should be read in conjunction with the notes hereto.

The  following  unaudited  pro  forma  consolidated   statements  of  operations
information combine the results of AES's investment in the CEMIG Acquisition for
the year ended  December  31, 1996 and the  quarter  ended March 31, 1997 on the
equity method as if the CEMIG  Acquisition  had occurred at the beginning of the
periods.
YEAR ENDED DECEMBER 31, 1996(1)(2)(3)
                                                         ------------------------------------
                                                                   ADJUSTMENTS
                                                                     FOR THE
                                                                      CEMIG       PRO FORMA
                                                          ACTUAL   ACQUISITION   AS ADJUSTED
                                                         -------- ------------- -------------
In millions except per share data

Statement of Operations Data:

Total revenues.........................................  $ 835      $  --         $ 835
Total operating cost and expenses......................    557         --           557
                                                         -------- ------------- -------------
Operating income.......................................    278         --           278
Other income and (expense):
 Interest expense......................................   (144)       (56)(d)      (200)
 Interest income.......................................     24         --            24
Equity in earnings of affiliates.......................     35         50 (c)        85
                                                         -------- ------------- -------------
Income (loss) before income taxes and minority

 interest..............................................    193        (6)          187
Income taxes...........................................     60       (22)(e)        38
Minority interest......................................      8         5 (f)        13
                                                         -------- ------------- -------------
Net income (loss)......................................  $ 125     $  11         $ 136
                                                         ======== ============= =============
Net income (loss) per share............................  $1.62     $0.14         $1.76
                                                         ======== ============= =============
QUARTER ENDED MARCH 31, 1997(1)(2)(3)
                                                  ------------------------------------
                                                            ADJUSTMENTS
                                                              FOR THE
                                                               CEMIG       PRO FORMA
                                                   ACTUAL   ACQUISITION   AS ADJUSTED
                                                  -------- ------------- -------------
Statement of Operations Data:
Total revenues..................................  $ 261        $   --        $   261
Total operating cost and expenses...............    183            --            183
                                                  -------- ------------- -------------
Operating income................................     78            --             78
Other income and (expense):
 Interest expense...............................    (44)          (13)(d)         (57)
 Interest income................................      8            --              8
Equity in earnings of affiliates................     16             3 (c)         19
                                                  -------- ------------- -------------
Income before income taxes and minority
 interest.......................................     58           (10)            48
Income taxes....................................     16            (5)(e)         11
Minority interest...............................      2            -- (f)          2
                                                  -------- ------------- -------------
Net income......................................  $  40        $   (5)       $    35
                                                  ======== ============= =============
Net income per share............................  $0.50        $(0.06)       $  0.44
                                                  ======== ============= =============
The  following  unaudited  pro  forma  consolidated  balance  sheet  information
represents  AES's financial  position at March 31, 1997 as if the acquisition by
the Company of the CEMIG Interest had occurred on that date.
AS OF MARCH 31, 1997 (1)(2)(3)
                                            ------------------------------------
                                                      ADJUSTMENTS
                                                        FOR THE
                                                         CEMIG       PRO FORMA
                                             ACTUAL   ACQUISITION   AS ADJUSTED
                                            -------- ------------- -------------
In millions except ratios

Balance Sheet Data:
Assets
Current Assets:
Cash and cash equivalents...............   $  423   $    --    $  423
Other current assets....................      307        --       307
                                          -------- ---------- --------
Total Current Assets....................      730        --       730
Property, plant and equipment, net .....    2,304        --     2,304
Investments in and advances to
  affiliates............................      590    1,077(a)   1,667
Other assets............................      454       --        454
                                          -------- ---------- --------
     Total..............................   $4,078   $1,077     $5,155
                                          ======== ========== ========

Current Liabilities:
Other notes payable.....................   $   --      134(b)    134
Project financing debt..................      110      250(b)    360
Other current liabilities...............      166       --       166
                                          -------- ---------- --------
Total current liabilities...............      276      384       660
                                          -------- ---------- --------
Long-Term Liabilities:
Other notes payable.....................      325       --       325
Project financing debt..................    1,841      654(b)  2,495
Other long-term liabilities.............      284       --       284
                                          -------- ---------- --------
Total long-term liabilities.............    2,450      654     3,104
                                          -------- ---------- --------
Minority interest.......................      211       39(f)    250
Company-obligated mandatorily
Redeemable Preferred Securities of AES
Trust I.................................      250        --      250
Stockholders' equity....................      891        --      891
                                          -------- ---------- --------
Total Liabilities & Stockholders
  Equity................................   $4,078    $1,077   $5,155
                                          ======== ========== ========
-------------
(1)  Basis of presentation. Pursuant to a shareholders agreement between the AES
     Consortium  and the State of Minas  Gerais,  the AES  consortium  will have
     significant  operating influence,  including the right to appoint the chief
     operating  officer of CEMIG, and will otherwise share control of CEMIG with
     the  State  of  Minas  Gerais.  The AES  Consortium  will  account  for its
     investment in CEMIG using the equity  method.  AES will reflect in minority
     interest  its  non-owned  portion of the earnings and net assets of the AES
     Consortium.

          The unaudited pro forma  financial  information  presented is based on
     CEMIG's  financial  position and results of operations as of March 31, 1997
     and for the  periods  ended  December  31,  1996 and  March 31,  1997.  The
     unaudited pro forma  financial  information  has been prepared based on the
     Company's  estimate of CEMIG's financial  position and results of operation
     in conformity with U.S. generally accepted accounting principles.
Equity in  earnings  of CEMIG for the year ended  December  31, 1996 has been
translated  into U.S.  dollars at the average  rate during the year of R$1.04 to
U.S.$1.00,  and at the average  rate for the quarter  ended March 31,  1997,  of
R$1.07 to U.S.$1.00.

   (2) Goodwill.  The estimated  excess of the purchase price over the Company's
proportionate  share of the net assets  acquired is being  amortized over its 40
year life.

   (3) Financing.  For purposes of the unaudited pro forma financial information
presented  herein,  the  acquisition of the CEMIG Interest was funded at the AES
level  assuming the use of the CEMIG Bridge of $250 million at an interest  rate
of 8.25%,  a portion of the AES Bridge Loan of $200 million at an interest  rate
of 7.75%,  and project  financing of $126 million at an interest  rate of 9.75%,
provided by BNDES, the State  Development Bank of Brazil.  The remaining portion
of the purchase price amounting to  approximately  $528 million is deferred,  by
contract,  for a period of one year. Such  obligation  bears no interest and has
been  guaranteed by BNDES for a fee of 1% per year which is included in interest
expense.  No  additional  subsequent  financing  costs are  assumed in these pro
formas.

   (4) Description of unaudited pro forma entries.

  (a) Represents the CEMIG Investment of $1,056 million and costs of $21 million
financed by borrowings described in (3), above.
  (b) Represents the financing of the transaction described in (3), above.
  (c) Represents equity in earnings of CEMIG, net of goodwill amortization.
  (d) Represents  interest expense associated  with the  borrowings described in
(3), above.
  (e) Represents the income tax benefit related to the interest costs.
  (f) Represents the  minority  interest of  The Opportunity Fund,  which  has a
9.4% interest in the AES consortium.
SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                            THE AES CORPORATION
                                            -------------------
                                                (Registrant)

Date: July 16, 1997                          By /s/ Barry J. Sharp
                                              ---------------------------
                                               Barry J. Sharp
                                               Chief Financial Officer