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2Q17 Results
Economic-Financial Office and Investor Relations Office
This presentation may contain forward-looking statements referring to
SABESP’s business outlook, operating and financial results estimates, and growth
prospects. These are only forecasts, and as such, they are exclusively based on
SABESP’s management expectation in relation to the future of business and its
continuous access to capital to finance the Company’s business plan. These
forward-looking statements largely depend on changes in market conditions,
governmental rules, industry performance and the Brazilian economy, among
other factors, in addition to risks exhibited in disclosure documents filed by
SABESP. Therefore, they are subject to changes without prior notice.
Disclaimer
Agenda
Company Overview1
Our Operations2
Our Financial Performance3
4 SPMR – Water Situation
Sabesp is one of the largest water and sewage
service providers in the world based on the
number of Customers
Provides water to 24.8 million people and sewage
services to 21.4 million people
Also sells wholesale treated water to 5
municipalities (3.0 million people)
Natural monopoly, low operating risk
Serves the City of São Paulo and 366 out of 645
municipalities in the State
Covers around 66% of State's urban population,
including the wholesale
Operations in the São Paulo Metropolitan Region*
represent 70.2% of our total revenues
(1) As of June 30, 2017 (2) Service Available
(3) Households connected (4) Consumer units connected to the
sewage treatment
São PauloRegional Systems
Metropolitan Region
One of the largest water and sewage service
providers in the world…
*The Metropolitan Region we consider for this estimate, includes 8
municipalities outside the legal boundaries of the São Paulo
Metropolitan Region and represents the municipalities served by
the Company’s Metropolitan Division
4
Main Operational Indicators(1)Company Overview
Water Sewage
Connections (million) 8.7 7.2
Coverage(2) (%) 98 89
Service(3) (%) 95 82
Treatment(4)(%) 74
Billed Volume (m³ million) 1,028.4 799.7
We are a mixed capital company, majority-owned by the State of São Paulo, with significant private
ownership
State law requires the State of São Paulo to own at least 50% + 1 voting shares at all times
Currently the Government of São Paulo has 50.3% share
100% common shares
Market Cap: R$ 21.6 billion (as of June, 2017)
(1) As of June, 2017
…with strong corporate governance
5
Ownership Structure % (1)
Agenda
6
3
Our Operations2
Our Company1
Our Financial Performance
4 SPMR – Water Situation
Diversified customer base
7
Water Billed Volume by Type of Customer Sewage Billed Volume by Type of Customer
Over 80% of water volume comes from residential,
commercial and industrial customer Over 90% of sewage volume comes from residential,
commercial and industrial customer
Water Revenues by Type of Customer Sewage Revenues by Type of Customer
Broad coverage of municipalities Municipalities
8
30-year-service agreement between Sabesp, Municipality of São Paulo and State Government (expires
in 2040)
Minimum investment of 13% of the Gross Revenue, net of Cofins and Pasep
Transfer of 7.5% of the Gross Revenue, net of Cofins and Pasep, to the Municipal Environmental
Sanitation and Infrastructure Fund – to be recovered in tariff
Contract with the Municipality of São Paulo
*Incluides 2 partial contracts with Mogi das Cruzes
Nº of contracts % of revenue
Renewed/Secured (Program and Service Contract – 2007-2Q17) 282 79,1%
Metropolitan Region Without Contract 38 11.6%
Expired Contracts 16 0.6%
To be expired (2017 - 2030) 33 6.6%
Total Retail 369* 97.9%
Wholesale 5 2.1%
Total Sabesp 374 100.0%
9
Regulatory Framework
Concession Power in Metropolitan Regions
Legal proceedings related to this matter under Supreme Court (STF) appraisal were ruled in
February 2013
Final decision released in September 2013:
Sanitation services in metro regions are subject to shared responsibility between State and
Municipality
State Legislative has two years to adjust the legislation, create entities and mechanisms to
implement the ruling
Obligatory creation of a Regulatory Agency Municipal or State level
Clarifies the payment conditions of non-amortized investments up to 4 years
Disbursement of federal funds conditioned to the existence of a sanitation plan
Federal Law # 11,445/07 Federal Decree 7,217/10 and Federal Decree 8,211/14
Regulation activities and responsibilities include:
Service quality
Tariff structure and reviews
Planning is a concession holder attribution
ARSESP´s attribution
2nd Ordinary Tariff Revision
10
RAB0CAPEX + OPEX + IRCS + ∆ WC
RABT = RAB0 + ∑(CAPEX+∆ WC-DEP)Volume (M3)
P0 IRR = WACC (8.01%)
ARSESP: Recent Resolutions 14/10/2016 Resolution 672 → Arsesp discloses the Methodology for the update of Sabesp’s Regulatory Asset Base (RAB) for 2nd Ordinary Tariff Revision
19/01/2017 Resolution 706 → Arsesp approves the beginning of Sabesp’s 2nd Tariff Revision in two stages
27/04/2017 Resolution 720 → Arsesp postpones the timeline of stages of the Tariff Revision
10/05/2017 Sabesp request to Arsesp to postpone for 30 days the ongoing Tariff Revision
07/08/2017 Resolution 748 → Arsesp discloses the timeline for the initial stage of the 2nd Tariff Revision
• Maximum Average Preliminary Tariff (Preliminary P0) – until October, 03, 2017
• Final Maximum Average Tariff (Final P0) – until April, 10th, 2018
11/08/2017 Arsesp discloses the Preliminary Technical Note NT/F/003/2017 and opens for Public Consultation
• RAB = R$ 40.3 bi
• WACC = 8.01%
• Preliminary P0 = R$ 3.62652/m³ updated to the price of March, 2017
• Repositioning Index = 4.37%
Timeline for the 2nd Tariff Revision
Stage No. Description Start End7 Opening of the Public Consultation and Public Hearing - Preliminary Tariff P0 and WACC Aug 14, 2017 Sep 04, 2017
8Analysis of the contributions received, development of the Final Technical Note and Detailed Report - Preliminary Tariff P0 and WACC
Sep 27, 2017
9Approval and disclosure of the Detailed Report and Approval of the Financial Technical Note and of the Resolution with the Preliminary Tariff P0
Oct 2, 2017
10 Disclosure of the Final Technical Note and Publication of the Resolution with the Preliminary Tariff P0 Oct 3, 2017
Tariff Adjustment and Revisions
11
Annual tariff adjustment formula
Productivity
Factor
(0.9386%)New Average
Tariff = 1
Inflation
(IPCA)
100x
Previous
Average TariffQuality
Factor *--
+
OTR – Ordinary Tariff Revision ETR – Extraordinary Tariff Revision IPCA – Amplified Consumer Price Index as of May/16
* Not yet defined
1) 3.15% in April, 22nd plus 2.35% in December, 11th
2) Adjusment + Residual + ETR = 15.25%
1 2
12
Water Connection Evolution (million) Water Coverage (Connections in ´000s)
Water and Sewage Operations
Sewage Connection Evolution (million) Sewage Coverage (Connections in ´000s)
Add 1.0 million new connections by 2022
Add 1.3 million new connections by 2022
Coverage: 93% in 2021
Treatment: 83% in 2021
Capex plan
13
Capex Plan of R$ 13.9 billion from 2017 to 2021
Metropolitan Water Program
Tietê Project
Corporate Program for Reduction of Water Loss
Clean Stream Program
Clean Wave Program
Main Programs
Financial Value (R$ million)
(*) Book Value – Includes non-cash items
(**) Book Value – Items that affected cash
- Additional information is presented in
Note 29 of the 2Q17 Financial Information
1,548*
681**
Investment Plan – Financing
14
2017 to 2021 – R$ 13.9 billion
Company’s FundsR$ 10.2 bn
73.7 %
ContractedR$ 3.5 bn
95.9%
FinancingR$ 3.6 bn
26.3 %
Under Negotiation R$ 0.1 bn 4.1%
BNDES R$ 1.3 bnCAIXA R$ 1.1 bnBID R$ 580 mmJICA R$ 350 mmBIRD R$ 70 mmFINEP R$ 40 mm
CAIXA
15
Our Company1
Our Operations2
Our Financial Performance3
Agenda
4 SPMR – Water Situation
16
Long term and low cost funding
Total debt breakdown Total debt by currency
Debt amortization profile (R$ million)
(*) IDB 713 agreement
17
Net Revenues (R$ million)
Adjusted EBITDA (R$ million)
Consistent performance
Net Income (R$ million)
2012 2013 2014 2015 2016
Dividend Declared (R$) 2.35 0.78 0.37 0.22 1.20
Pay Out % 27.9 27.9 27.9 27.9 27.9
Outstanding Shares (million) 227.8 683.5 683.5 683.5 683.5
Dividends/Pay Out
Adjusted EBITDA – Last 12 months Adjusted EBTIDA Margin – Last 12 months Adjusted EBITDA Margin Without Construction – Last 12 months
18
* Adjusted EBITDA – LTM ** Financial Explosures paid - LTM Calculated in accordance with CPCs/IFRS
Historical leverage metrics (R$ million)
Net Debt vs. Adjusted EBITDA* Net Debt vs. Equity
Adjusted Total Debt vs. Adjusted EBITDA* Adjusted EBITDA* vs. Financial Expenses**
Adjusted Total Debt = Total Debt - Interest
19
* Adjusted EBITDA – LTM ** Financial Explosures paid - LTM Calculated in accordance with CPCs/IFRS
Historical leverage metrics (R$ million)
Adjusted Total Debt vs. Adjusted EBITDA*
Adjusted Total Debt = Total Debt - Interest
Financial Highlights (R$ million)
20
* In accordance with CPCs / IFRS, which includes Construction Costs.
** R$ / 000 shares
2002 2003 2004 2005 2006 2007 2008* 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 1H17*
Gross Revenues (R$) 3.962 4.308 4.642 5.356 5.984 6.448 6.839 9.085 9.787 10.530 11.391 11.985 11.823 12.284 14.855 5.931
Net Revenues (R$) 3.767 4.131 4.397 4.953 5.527 5.971 7.809 8.580 9.231 9.927 10.738 11.316 11.213 11.712 14.098 7.053
Adjusted EBITDA (R$) 1.860 2.076 1.927 2.286 2.446 2.699 2.865 2.727 3.222 3.371 3.605 4.007 2.919 3.974 4.572 2.419
Adjusted EBITDA Margin (%) 49,4 50,3 43,8 46,1 44,3 45,2 36,7 31,8 34,9 34,0 33,6 35,4 26,0 33,9 32,4 34,3
Adjusted EBITDA w ithout Construction Margin (%)- - - - - - 46,3 41,2 44,7 43,2 43,0 44,6 34,4 46,6 43,3 44,5
Net Income (R$) (651) 833 513 866 789 1.055 863 1.508 1.630 1.381 1.912 1.924 903 536 2.947 1.006
Net Margin (%) - 20,2 11,7 17,5 14,3 17,7 11,0 17,6 17,7 13,9 17,8 17,0 8,1 4,6 20,9 14,3
- - - - - - - - - - - - - - - -
Total Assets (R$) 16.332 16.590 16.784 17.431 18.000 18.660 17.206 20.243 23.293 25.019 26.476 28.274 30.355 33.707 36.745 37.136
Total Debt (R$) 7.878 7.264 7.051 6.664 6.327 5.685 6.865 6.560 8.209 8.423 8.875 9.450 10.786 13.122 11.964 11.625
Short-term Debt (R$) 1.132 997 1.497 759 853 742 1.449 1.010 1.240 1.629 1.343 641 1.207 1.526 1.247 1.342
Long-Term Debt (R$) 6.593 6.267 5.554 5.905 5.474 4.943 5.416 5.548 6.970 6.794 7.533 8.809 9.579 11.595 10.718 10.283
Foreign Currency Debt (R$) 3.708 3.013 2.681 1.576 1.472 1.242 2.281 1.746 2.249 3.053 3.216 3.699 4.346 6.618 5.660 5.694
Shareholders' Equity (R$) 4.217 7.577 7.952 8.483 9.019 9.781 6.758 8.439 9.682 10.546 11.257 12.931 13.304 13.717 15.419 16.363
Total Debt/Total Cap. (%) 65,1 48,9 47,0 44,0 41,2 36,8 50,4 43,7 45,9 44,4 44,1 42,2 44,8 48,9 43,7 41,5
Investments (R$) 619 594 601 678 905 921 1.734 2.059 2.194 2.440 2.536 2.716 3.211 3.482 3.878 1.548
- - - - - - - - - - - - - - - -
Dividend Declared (R$/ share) - 17,7 5,4 12,2 9,5 1,3 1,3 1,7 2,0 2,5 2,3 0,8 0,4 0,2 1,2 -
Pay Out (%) - 60,5 29,8 40,2 34,7 28,5 34,3 26,1 28,0 47,3 27,9 27,9 27,9 27,9 27,9 -
Dividend Yield (%) - 10,8 3,4 7,8 3,2 3,2 4,7 5,0 4,7 4,9 2,7 3,0 2,2 1,2 4,2 -
Outstanding shares (million) 28,5 28,5 28,5 28,5 28,5 227,8 227,8 227,8 227,8 227,8 227,8 683,5 683,5 683,5 683,5 683,5
Our Company1
Our Operations2
Our Financial Performance3
SPMR – Water Situation4
Agenda
Production Systems RMSP- Storage and Production
22
-10
0
10
20
30
40
50
60
70
80
jan-13 jan-14 jan-15 jan-16 jan-17
Storage (%)Production m³/s
Storage
Production
170176 179 175
169164
147
158153 151
146 145
120
140
160
180
200
Jan Feb Mar Apr May Jun
Consumption l/hab.day
2013 2017
Rainfall (mm) Reservoirs’ Storage
Water Inflow (m³/s) Monthly Average Production
23
Hidrological Status in SPMR
Rainfall in Hidrological Year - Average since 1953Rainfall in Hidrological Year 2016/17
Reservoirs Storage
Active volume Stored/ Total active volume
Technical Reserves were used between May, 15th, 2014 and December 12th, 2015 which were not considered above
Monthly Average Production
Rainfall in Hidrological Year - Average since 1953Rainfall in Hidrological Year 2016/17
Water Plan for the SPMR - 2015 to 2019 (main initiatives)
24
flow (m³/s)
Availability /
security
Reversal increase from Guaratuba River to the Ponte Nova
reservoir by 0.5 m³/s0.5 Jan/15 completed
Reversal from the Guaió River to the Taiaçupeba reservoir: 1
m³/s1 May/15 completed
Increase of the ABV Water Treatment Station production
from 15 to 16 m³/s Jun/15
◦ Transfer water from Guarapiranga to the
Cantareira area via the aqueduct system completed
Interconnection between: Pequeno River → Grande River
(Billings) → Taiaçupeba (Alto Tietê) 4 m³/s 4 Sep/15
◦ Recover the storage volume and ensure
the Alto Tietê reservoir completed
1 m³/s transfer increasefrom Taquacetuba to Guarapiranga
(from 4 to 5 m³/s)1 Dec/15 ◦ Assure Guarapiranga's water source completed
total 2015 6.5
Jaguari → Atibainha Interconnection: 5.13 m³/s to the
Cantareira system (security increase)5.13 2017
◦ Recover storage volume and ensure the
Cantareira System's water sourceworks in progress
total 2017 5.13
São Lourenço Production System: 6.4 m³/s 6.4 2018◦ Produce 6.4 m³/s for the Greater São
Paulo's western regionworks in progress
Reversal from Itapanhaú River (Ribeirão Sertãozinho) to the
Biritiba reservoir2 2018
◦ Recover the storage volume and assure
Alto Tietê's water sourceunder development
total 2018 8.4
Reversal of 1 m³/ sfrom Alto Juquiá to Ribeirão Santa Rita
(Guarapiranga basin)1 2019 ◦ Increase Guarapiranga's water source under development
total 2019 1
Total 2015 - 2019 21.03
Purpose StatusDescription Est.
Initiatives planned for 2018
Initiatives accomplished in 2015
Initiative planned for 2017
◦ Recover the storage volume and ensure
Alto Tietê's water source
Initiative planned for 2019
www.sabesp.com.br
IR Contacts
Mario Azevedo de Arruda Sampaio Angela Beatriz AiroldiHead of Capital Markets and Investor Relations Investor Relations [email protected] [email protected]+55 (11) 3388-8664 +55 (11) 3388-8793