SABESP – Companhia de Saneamento Básico do Estado de São Paulo: 1Q19 Results Presentation

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1Q19 Results

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DISCLAIMER

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.

AGENDA

1COMPANY OVERVIEW

2OUR OPERATIONS

3OUR FINANCIAL PERFORMANCE

4SPMR - WATER SITUATION

...ONE OF THE LARGEST WATER AND SEWAGE PROVIDERS IN THE WORLD

COMPANY OVERVIEW

Sabesp is one of the largest water and sewage service providers in the world based on the number of Customers

Provides water to 26.2 million people and sewage services to 22.8million people

Also sells wholesale treated water to 4* municipalities (1.7 million people)

Natural monopoly, low operating risk

Serves the City of São Paulo and 369 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 69.8% of our total revenues

*Operation in Guarulhos started in Jan/2019

**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

MAIN OPERATIONAL INDICATORS(1)

Water

Sewage

Connections (million)(2)

9.5

7.9

Coverage(3)(%)

97

89

Service(4)(%)

94

83

Treatment(5)(%)

76

Billed Volume (m³ million)

532.6

439.8

(1)As of March 31, 2019

(2)Active and Inacttive water connections. It includes Guarulhos

(3)Services Available. It includes Guarulhos

(4)Connected households. It includes Guarulhos

(5)Consumer units connected to the sewage treatment - It does not include Guarulhos

Regional Systems

Metropolitan Region

4

...WITH STRONG CORPORATE GOVERNANCE

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$ 28.7 billion (as of March, 2019)

Law nº 13.303/16 -Government-Controlled Companies Law

OWNERSHIP STRUCTURE % (1)

(¹) March/2019

5

AGENDA

1THE COMPANY

2OUR OPERATIONS

3OUR FINANCIAL PERFORMANCE

4SPMR - WATER SITUATION

DIVERSIFIED CONSUMER BASE

WATER BILLED VOLUME BY TYPE OF CUSTOMER

SEWAGE BILLED VOLUME BY TYPE OF CUSTOMER

80% of water volume and revenue come from residential, commercial and industrial customer

WATER REVENUES BY TYPE OF CUSTOMER*

90% of sewage volume and revenue come from residential, commercial and industrial customer

SEWAGE REVENUES BY TYPE OF CUSTOMER*

*Managerial information

7

BROAD COVERAGE OF MUNICIPALITIES

CONTRACTS

Nº CONTRACTS

% OF REVENUE

Renewed/Secured (Program and Service Contract from 2007 to Mar/2019)

307*

83.6%

Metropolitan Region Without Contract

25

6.9%

Expired Contracts / under negotiation

10

0.9%

To be expired (2019 - 2025)

4

0.2%

To be expired (2026 - 2030)

27

7.5%

Total Retail

373

99.1%

Wholesale

4**

0.9%

Total Sabesp

377

100.0%

* Includes 2 partial contracts with Mogi das Cruzes, Aguaí and Guarulhos ** It does not include the contract with Guarulhos

CONTRACT WITH THE MUNICIPALITY OF SÃO PAULO

30-year-serviceagreement 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

Since May/18 -Pass-through of 4%

TOP 10 CONTRACTS

Municipalities

% of Total Revenue

Remaining

(1Q19)

Period (years)

São Paulo

46.8

21

São Bernardo do Campo

3.8

15

Santos

2.1

26

Osasco

2.1

11

Praia Grande

2.1

29

São José dos Campos

1.8

20

Barueri

1.7

26

Diadema

1.3

25

Itaquaquecetuba

1.2

28

Suzano

1.1

22

Total 10+ / Média

64.1

24

Guarulhos - Operation started in January 2019. Participation of total revenue accounted for 2.4%8

CONTRACT WITH GUARULHOS

TERM OF DEBT ADJUSTMENT

The municipality withdraws pending appeals of Sabesp's collections legal procedings

Sabesp: Court orders debt payments ("Precatórios")

Sabesp suspends the judicial collection of debt

The payments remains suspended during the contract term

The amounts are used as guarantees in the service contract

If the service contract is interrupted, the court orders will be reactivated

Transfer R$ 50 million to the municipality in order to end SAAE's activities

SAAEs employees ceded to Sabesp:

During 6 months - All SAAE's employees will be ceded to Sabesp

From month 7 up to a maximum of 4 years up to 400 employees will continue to be ceded

CONTRACT

40-yearservice contract

Water Supply Service

Sewage collection, removal and treatment services(*)

(*)Part of the removal and treatment services will be remaine under the municipality's direct and indirect responsibility

Contract signing parties: State, Municipality and Sabesp

Planning shared among State and Municipality (SPMR)

Regulator: ARSESP Tariff, control and monitoring

Tariff: the same as SPMR (adjustment -catch-up period of approximately 2 years)

Expected investment of R$ 2 billion over 40 years

Transfers to the Municipal Fund for Environmental Sanitation and Infrastructure

R$ 150 million in 5 years (R$ 30 million per year)

4% of net revenue

9

REGULATORY FRAMEWORK

FEDERAL LAW 11.445/07 / FEDERAL DECREES: 7.217/10, 8.211/14, 8.629/15, 9.254/17

Obligatory creation of a Regulatory Agency → Municipal or State level

Clarifies the payment conditions ofnon-amortized investments → up to 4 years

Disbursement of federal funds conditioned to the existence of a sanitation plan

CONCESSION POWER IN METROPOLITAN REGIONS

Legal proceeding related to this matter under Supreme Court (STF) appraisal was ruled in March 2013

The decision was released in September 2013

Sanitation services in metro regions are subject toshared responsibilitybetween State and Municipality

State Legislative has to create an entity and mechanisms to implement the ruling to adjust to the legislation

PROVISIONAL MEASURE Nº 868

The Provisional Measure Nº 868 of December 28, 2018, provides changes on the following Laws:

9,8984/2000 - Creation of the Brazilian National Water Agency (ANA)

10,768/2003 - Disposal of Staff for the Brazilian National Water Agency (ANA)

11,445/2007 - National Guidelines for the Basic Sanitation

13,529/2017 - Authorizes the Federal Government to participate in fund to finance specialized

.....

..technical services

The Proposed Bill was approved by the Joint Commission on May 7. The deadline to be voted by the Lower House and Senate is June 3, otherwise will lose its effectiveness

10

TARIFF REVIEW

METHODOLOGY OF TARIFF REVIEW (PRICE CAP)

Required Revenue

=

+

RABt- RAB0

OPEX

CAPEX

+

Taxes

+

WACC

Average

Personnel

Water

Income

Cost of Equity

Billed

Energy

Amortization

Tariff (P0)

Sewage

Taxes

Cost of Debt

Volume

Materials

Rate

PRICE CAP

Others

Revenue

Others

Taxes

Reduced by X

Sabesp 4 year Business Plan

Asset

Output of

Arsesp

Factor Xdefined by

+

Useful Life

the Model

Technical

Arsesp (after year1)

Arsesp Review

Note

ANNUAL TARIFF ADJUSTMENT FORMULA

Inflation

-

New Average

(IPCA)

= 1+

Tariff

100

Productivity Factor

(0.8885%)

Previous

Quality

x

-

Average Tariff

Factor*

*Not defined yet

11

TARIFF READJUSTMENTS AND REVISIONS

READJUSTMENTS AND REVISIONS INDEXES

IPCA Index - Between the readjustement/revision periods

OTR- Ordinary Tariff Revision

ETR- Extraordinary Tariff Revision

2015 -Readjustment + Residual + ETR = 15.24%

ORDINARY TARIFF REVISION (OTR) - 2º CYCLE FROM 2017 TO 2020

Initial Phase - Oct/2017

Final Phase- May/2018

Preliminary

Final

Preliminary

Final

RAB(1)(R$ Billion)

40.3

40.3

38.4

39.0

WACC (%)

8.01

8.11

8.11

8.11

Current Average Tariff (R$/m³ )

3.47484

3.37255

3.6466

3.6425

X Factor(%)

-

-

0.9287

0.8885

P0 (R$/m³ )

3.62652

3.63861

3.8207

3.7702

TRI(2)(%)

4.365

7.8888

4.7744

3.507

ARSESP's responds to the requests filed by Sabesp:

Reconsideration request Not accepted

Clarification and revision request Partially accepted (Adjustment of 0.8408% in May 2019)

ARSESP's Resolutions nº 865 and nº 866 → Tariff Structure Revision (to be defined by June 2020)

(1)Regulatory Asset Base

(2)Tariff Repositioning Index

12

WATER AND SEWAGE OPERATIONS

WATER CONNECTION EVOLUTION (million)

WATER COVERAGE (Connection in 000's)

Add 954 thousand new connections by 2023

SEWAGE CONNECTION EVOLUTION (million)

SEWAGE COVERAGE (´000s)

Add 1.2 million new connections by 2023 Coverage: 93% in 2023

Treatment: 84% in 2023

13

CAPEX AND FINANCING

CAPEX PLAN OF R$ 18.7 BILLION FROM 2019 TO 2023

Financial Values (in R$ million)

788*

228**

(*) Book Value - Includes non-cash items (**) Book Value - Items that affected cash - Additional information is presented in

Note 31 of the 1Q19 Financial Information

FINANCING

MAIN PROGRAMS

Metropolitan Water Program

Tietê Project

Corporate Program for Water Loss Reduction

Clean Stream Program

Clean Wave Program

14

AGENDA

1COMPANY OVERVIEW

2OUR OPERATIONS

3OUR FINANCIAL PERFORMANCE

4SPMR - WATER SITUATION

LONG TERM AND LOW COST FUNDING

TOTAL DEBT BREAKDOWN

TOTAL DEBT BY CURRENCY

DEBT AMORTIZATION PROFILE (R$ million)

16

CONSISTENT PERFORMANCES

NET REVENUE (R$ million)

NET INCOME (R$ million)

ADJUSTED EBITDA (R$ million)

DIVIDENDS / PAY OUT

2013 2014 2015 2016 2017 2018

Dividends declared (R$)

0.8

0.4

0.2

1.2

1.0

1.2

Pay Out %

27.9

27.9

27.9

27.9

27.9

27.9

Outstanding Shares

683.5 683.5 683.5 683.5 683.5 683.5

(million)

Adjusted EBITDA - Last 12 months Adjusted EBTIDA Margin - Last 12 months Adjusted EBITDA Margin Without Construction - Last 12 months

17

HISTORICAL LEVERAGE (R$ million)

ADJUSTED TOTAL DEBT VS. ADJUSTED EBITDA*

ADJUSTED EBITDA* VS. FINANCIAL EXPENSES**

Covenant: 2.35

Covenant: 3.65

Adjusted Total Debt = Total Debt - Interest

NET DEBT VS. ADJUSTED EBITDA*

NET DEBT VS. EQUITY

Covenant: 3.50

* Adjusted EBITDA - LTM

** Financial Explosures paid - LTM

18

Calculated in accordance with CPCs/IFRS

COVENANT - ADJUSTED NET DEBT vs. EBITDA

19

COVENANT - ADJUSTED TOTAL DEBT vs. EBITDA

20

FINANCIAL HIGHLIGHTS (R$ million)

2002

2003

2004

2005

2006

2007

2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

2016*

2017*

2018*

1Q19

Gross Revenues w/ construction

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

15,375

17,056

4,140

Net Revenues

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

14,608

16,085

3,879

Adjusted EBITDA

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

5,269

6,541

1,545

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

36.1

40.7

39.8

Adjusted EBITDA without

Construction Margin

46.3

41.2

44.7

43.2

43.0

44.6

34.4

46.6

43.3

45.4

48.8

46.8

Net Income

(651)

833

513

866

789

1,055

863

1,508

1,630

1,381

1,912

1,924

903

536

2,947

2,519

2,835

647

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

17.2

17.6

16.7

Total Assets

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

39,546

43,565

43,313

Total Debt

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

12,101

13,153

12,181

Short-term Debt

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

1,747

2,104

1,488

Long-Term Debt

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

10,354

11,049

10,693

Foreign Currency Debt

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

5,673

6,669

6,609

Shareholders' Equity

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

17,513

19,552

20,199

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

42

45

48.9

43.7

40.9

40.2

37.6

Investments

619

594

601

678

905

921

1,734

2,059

2,194

2,440

2,536

2,716

3,211

3,482

3,878

3,388

4,177

788

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

1.0

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

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

3.0

3.8

-

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

683.5

683.5

*In accordance with CPCs / IFRS, which includes Construction Costs.

**R$ / 000 shares

21

AGENDA

1COMPANY OVERVIEW

2OUR OPERATIONS

3OUR FINANCIAL PERFORMANCE

4SPMR - WATER SITUATION

SPMR - WATER SITUATION

RAINFALL IN THE MAIN WATER PRODUCTION SYSTEMS (mm)

Cantareira

Guarapiranga

Alto Tietê

300,0

105%

400,0

400,0

LTA

177%

188%

LTA

350,0

213%

250,0

116%

LTA

350,0

149%

85%

2017/2018

300,0

2017/2018

300,0

2017/2018

200,0

82%

2018/2019

2018/2019

2018/2019

101%

91%93%

250,0

250,0

133%

149%

94%

86%

173%

80%

120%

150,0

82%

200,0

139%

79%

76%

58%

47%

150,0

111% 82%

200,0

122%

80%

100,0

88%

82%

157%

150,0

62%

112%

213%

100,0

53%

92%

87%

71%49%

61%

100,0

50,0

26%

81%

51%

28%

70%

120%50%

50,0

34%45%

26%

32%

17%

24%

27%

50,0

31%

-

3%

-

11%

18%21%

27%

-

OCT

NOV

DEC

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

Long Term Average - Sep/17 to Oct/18

VOLUME STORAGE (%)

AVERAGE PRODUCTION (m³/s)

Until May 08, 2019

23

SPMR - WATER SITUATION

WATER SUPPLY SYSTEM STRONGER THAN BEFORE THE WATER CRISIS OF 2014/2015

RESERVOIRS

2013

2019

Var. %

Reservoirs (water right) (m³ /s)

70.4

80.3

14%

Maximum storage capacity (hm³

)

1,816

2,106

16%

(without the technical reserve)

Transfers between reservoirs (m³

/s)

13.2

35.4

168%

PRODUCTION AND DISTRIBUTION

2013

2019

Var. %

Urban population in the area served (source: SEADE)

20.1

20.9

3.6%

(million inhabitants)

730,000 inhab.

Total water treatment capacity (m³ /s)

73.4

82.3

12%

Water production systems

8

9

-

Average monthly production (m³

/s)

69.1

63.4

(8%)

Average residential consumption (m³ /month)

13.0

10.8

(17%)

Treated water transfers between the systems (m³ /s)

Up to 3

Up to 12

300%

IPDT (water loss per connection per day) in the SPMR

434

322

(26%)

24

SPMR- WATER SITUATION

WATER PLAN FOR SPMR - FROM 2015 TO 2019 (MAIN ACTIONS)

FLOW (m³ /s)

DESCRIPTION

AVAILABILITY/

PREV.

PURPOSE

STATUS

SECURITY

INITIATIVES ACCOMPLISHED IN 2015

Reversal increase from Guaratuba River to the Ponte Nova

0.5

Jan-15

completed

reservoir by 0.5 ³m /s

Recover the storage volume and ensure

Reversal from the Guaió River to the Taiaç upeba reservoir: 1

1

May-15

Alto Tietê 's water source

completed

³m /s

Increase of the ABV Water Treatment Station production

Jun-15

Transfer water from Guarapiranga to the

completed

from 15 to 16 ³m /s

Cantareira area via the aqueduct system

Interconnection between: Pequeno River→

Grande River

Recover the storage volume and ensure

4

Sep-15

the Alto Tietê reservoir

completed

(Billings)→ Taiaç upeba (Alto Tietê ) 4 ³m /s

Transfer water to Cantareira'

s area

1 ³m /s transfer increase from Taquacetuba to Guarapiranga

1

Dec-15

Ensure Guarapiranga's water source

completed

(from 4 to 5 ³m /s)

Transfer water to Cantareira'

s area

TOTAL 2015

6.5

INITIATIVES ACCOMPLISHED IN 2018

Jaguari→ Atibainha Interconnection: 5.13 ³m /s to the

5.13

mar/18

Recover storage volume and ensure the

completed

Cantareira system (security increase)

Cantareira System's water source

6.4

abr/18

completed

TOTAL 2018

11.53

INITIATIVE PLANNED FOR 2019

2

2019

Recover the storage volume and assure

under development

Alto Tietê 's water source

TOTAL 2019

2

25

TOTAL 2015- 2019

20.03

www.sabesp.com.br

IR Contacts

Mario Azevedo de Arruda Sampaio Head of Capital Markets and IR maasampaio@sabesp.com.br +55 (11) 3388-8664

Angela Beatriz Airoldi Investor Relations Manager abairoldi@sabesp.com.br +55 (11) 3388-8793

Disclaimer

SABESP - Companhia de Saneamento Básico do Estado de São Paulo published this content on 14 May 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 14 May 2019 08:08:01 UTC