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2Q14 Results
August 2014- 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 Overview 1
Our Operations 2
Our Financial Performance 3
Sabesp is one of the largest water and sewage
service providers in the world based on the
number of Customers
Provides water to 25.1 million people and sewage
services to 22.1 million people
Also sells wholesale treated water to 5
municipalities (3.1 million people)
Natural monopoly, low operating risk
Serves the City of São Paulo and 363 out of 645
municipalities in the State
Covers 59% of State's urban population
Operations in the São Paulo Metropolitan Region*
represent 70,9% of our total revenues
(1) As of June 30, 2014
(2) Treated sewage as percentage of collected sewage
São Paulo Regional 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 represent the total cities served by the
Company’s Metropolitan Division
4
Main Operational Indicators(1) Company Overview
Water Sewage
Connections (million) 8.1 6.5
Coverage (%) 100 84
Treatment (%) 100 78(²)
Billed Volume (m³ million) 1,066.0 797.8
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
Listed on the “Novo Mercado” and NYSE, to the highest corporate governance standards. We are
also part of BM&FBovespa’s Sustainability Index – ISE
100% common shares
Market Cap: R$ 16.1 billion (as of June, 2014)
(1) As of June, 2014
…with strong corporate governance
5
Ownership Structure(1)
24,0%
25,7%
50,3%
Agenda
6
3
Our Operations 2
Our Company 1
Our Financial Performance
Diversified customer base
7
Water Volume by Type of Customer Sewage 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
Residential 74%
Commercial 8%
Industrial 2%
Public 3%
Whosale 13%
Residential83%
Commercial10%
Industrial 3%
Public 2%
Whosale 2%
Broad coverage of municipalities
8
Contracts
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, approximately R$ 600 million/year -
R$ 16.9 billion in 30 years
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
Diadema – From wholesale to retail
Full operation of water supply and sewage services – 30-year contract
Contract signed in March 2014
386,000 population - 100% water and 96% sewage coverage
Nº of
municipalities
% of revenue
Renewed/Secured (Program and Service Contract) 273 74.1%
Metropolitan Region Without Contract 20 11.3%
Expired/Under Negotiations 34 3.8%
To be expired:
Today to 2023 10 1.7%
2024 to 2034 27 7.5%
Total Retail 364 98.3%
Wholesale 5 1.7%
Total Sabesp 369 100.0%
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 Deadline 2015
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
May 18, 2011 ARSESP discloses WACC of 8.06% (RTS/01/2011)
Apr 16, 2012 ARSESP’s discloses detailed Tariff Methodology (RTS/ 01/2012)
Aug 30, 2012 Sabesp submits to ARSESP the Regulatory Asset Base (RAB) and the detailed Business Plan
Nov 13, 2012 ARSESP discloses the proposed preliminary Initial Maximum Average Tariff (P0) and Efficiency Gain Factor (X Factor)
Mar 22, 2013 ARSESP discloses Tariff Review Results relating to preliminary P0 and X Factor (RTS/01/2013)
Apr 30, 2013 SABESP requests postponement of its Tariff Structure to April /14 – Accepted by ARSESP in June /13
Ago 2, 2013 ARSESP discloses Resolution nº 427 alleging that found inconsistencies in the RAB and maintained tariff revision suspended
Ago 16, 2013 SABESP files request for tariff adjustment by 6.27% (IPCA index) - 2.35% = 3.83%
Sep 2, 2013 SABESP requests ARSESP three months to revise the RAB – Accepted in September 6
Nov 1, 2013
Resolution nº 435 : ARSESP authorizes a tariff adjustment of 3.1451% as of December 11, 2013 (NT/F/007/2013)
Resolution nº 434 :
ARSESP fixes the date of March 10, 2014 for the publication of the definitive Initial Maximum Tariff Price (P0) and the Efficiency
Factor (X Factor)
Dec 4, 2013 SABESP delivers the RAB revised
Feb 11, 2014 ARSESP discloses proposal of First Tariff Revision of Sabesp - calculation of P0, P1, and X Factor (RTS/001/2014)
Mar 12, 2014 Public Hearing and related to calculation of P0, P1, and X Factor (RTS/001/2014)
Apr 17, 2014
Resolution nº 484: ARSESP discloses First Tariff Revision of Sabesp - calculation of P0, P1, and X Factor (RTS/004/2014)
• repositioning index = 5.4408%
• X Factor = 0.9386%
• Future annual tariff adjustments = April 11 of 2015 and 2016
• Next tariff revision = April 11, 2017
May 17, 2014 Resolution nº 488: ARSESP maintains the suspension of the effectiveness of Resolution nº 407 postponing the authorization of
the pass through to the service bill the 7.5%
Tariff Revision
10
RAB0 CAPEX + OPEX + IRCS + ∆ CG
RABT = RAB0 + ∑(CAPEX+∆ CG-DEP) Volume (M3)
P0 TIR = WACC
Tariff adjustments
11
Annual tariffs adjustments vs. inflation (%)
Annual tariffs adjustment formula
Productivity
Factor New Average
Tariff = 1
Inflation
(IPCA)
100 x
Previous
Average Tariff Quality
Factor - -
+
November 1, 2013 ARSESP authorizes a tariff adjustment of 3.1451% as of December 11, 2013
13.05%
8.22%
18.95%
6.78%
9.00%
6.71%
4.12% 5.10% 4.43% 4.05%
6.83%5.15%
2.35%
3.15%
13.74%
7.66%
15.43%
6.81% 6.57%
3.97% 3.74%
6.37%
4.50% 4.60%
6.87%
5.20%6.27%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Adjustment established by ARSESP Sabesp Formula
Apr/22/13
Dec/11/13
Annual Adjustment IPCA
12
Water Connection Evolution (million) Water Coverage (Connections in ´000s)
Evolution of operations
Sewage Connection Evolution (million) Sewage Coverage (Connections in ´000s)
Add 1.7 million new connections by 2020
Collection: 95% in 2020
Treatment: 95% in 2020
Add 1.2 million new connections by 2020
180 177 172
644
2014 2015 2016 2017 - 2020
237 246 243
928
2014 2015 2016 2017 - 2020
6.6 6.8 6.9 7.1 7.3 7.5 7.7 7.9 8.1
2006 2007 2008 2009 2010 2011 2012 2013 1S14
5.0
5.2 5.3 5.5
5.7 5.9
6.1 6.3 6.5
2006 2007 2008 2009 2010 2011 2012 2013 1S14
Capex plan
13
Capex Plan of R$ 12.8 billion from 2014 to 2018
Metropolitan Water Program
Tietê Project
Corporate Program for Water Loss Reduction
Clean Wave Program
Coastal Water Program
Main Programs
R$ million
1,139 1,129 1,087 956 974
1,092 1,069 889
893 1,107
411 478 553 647 339
2,642 2,676 2,529 2,496 2,420
2014 2015 2016 2017 2018
Water Suply Sewage collection Collected sewage treatment
1,282
Real
Capex financing
14
2014 to 2018 – R$ 12.8 billion
CAIXA R$ 2.18 bn BNDES R$ 1.45 bn IDB R$ 871 mn JICA R$ 728 mn IBRD R$ 127 mn
CAIXA and BNDES
Company Funds R$ 6.4 bi 50.2 %
Contrated R$ 5.4 bi
84.6%
Under Negociation R$ 977.6mn
15.4%
Financing R$ 6.3 bi 49.8 %
15
Our Company 1
Our Operations 2
Our Financial Performance 3
Agenda
0
150
300
450
600
750900
1,050
1,200
1,350
1,500
1,650
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026+
279
1,059 990
1,235
873 949
1,302
431 390 354 262 208
1,487 Local Currency Foreign Currency
16
Long term and low cost funding
R$ million
Total debt breakdown Total debt by currency
Debt amortization profile
(*) IDB 713 agreement
JICA 9.8%
IDB 14.8%
Eurobônus 11.0%
Debêntures 30.0%
BNDES 12.9%
CEF 16.0%
BIRD 1.0%
Others 4.4%
Local Currency
63.4%
US Dollar 24.9%
Yen 9.7%
Currency Basket*
2.0%
17
Net Revenues (R$ million)
Adjusted EBITDA (R$ million)
Consistent performance
Net Income (R$ million)
2007 2008 2009 2010 2011 2012 2013
Dividend
Declared 1.32 1.30 1.73 2.00 2.54 2.35 0.78
Pay Out
% 28.5 34.3 26.1 27.9 47.3 27.9 27.9
Dividends/Pay Out
5,527 5,971
7,809* 8,580* 9,231*9,927*
10,738* 11,316*
5,546*
6,1326,540 7,099
7,703
8,273 8,871
4,336
2006 2007 2008 2009 2010 2011 2012 2013 1S14
*Since 2008 calculated in accordance with CPCs / IFRS, which includes construction Costs
Net Renevues Net Renevues Without Construction
7891,055
863*
1,508* 1,631*
1,381*
1,912*1,924*
780*
2006 2007 2008 2009 2010 2011 2012 2013 1S14
*Since 2008 calculated in accordance with CPCs / IFRS, which includes construction Costs
2,865 2,7273,222* 3,371*
3,605*4,007* 3,851*
36.7% 31.8% 34.9% 34.0%33.6% 35.4% 30.2%
44.7% 43.2% 43.0% 44.6%38.1%
2008 2009 2010 2011 2012 2013 1S14
* Since 2008 calculated in accordance with CPCs / IFRS, which includes construction Costs
Adjusted EBITDA Adjusted EBITDA Margin Adjusted EBITDA Margin Without Constrution
18
* Adjusted EBITDA – LTM ** Financial Exenses - LTM Calculated in accordance with CPCs/IFRS
Historical leverage metrics (R$ million)
Net Debt vs. Adjusted EBITDA* Net Debt vs. Shareholders’ Equity
5,2205,787
6,221 6,2816,959
7,6687,995
2,865 2,7273,222 3,371 3,605
4,007 3,851
1.8x
2.1x1.9x
1.9x
1.9x1.9x
2.1x
2008 2009 2010 2011 2012 2013 1S14
Net Debt Adjusted EBITDA Net Debt/Adjusted EBITDA
5,220 5,7876,221 6,281
6,9597,668 7,995
6,758
8,439
9,68210,546
11,256
12,93113,668
0.8x0.7x 0.6x
0.6x 0.6x 0.6x 0.6x
2008 2009 2010 2011 2012 2013 1S14
Net Debt Shareholders' Equity Net Debt/SE
Total Debt vs. Adjusted EBITDA* Adjusted EBITDA* vs. Financial Expenses**
5,678
6,558
8,209 8,423 8,875
9,450 9,819
2,865 2,727 3,222 3,371 3,605
4,007 3,851
2.0x2.4x
2.5x 2.5x 2.5x 2.4x2.5x
2008 2009 2010 2011 2012 2013 1S14
Total Debt Adjusted EBITDA Total Debt/Adjusted EBITDA
2,865 2,727
3,222 3,371
3,605 4.007 3.851
843 765 789 702 578 603 677
3.4x 3.6x 4.1x 4.8x6.2x 6.4x 5.5x
2008 2009 2010 2011 2012 2013 1S14
Adjusted EBITDA
Financial Expenses
Adjusted EBITDA/Financial Expenses
Financial Highlights
19
* In accordance with CPCs / IFRS, which includes Construction Costs.
(R$ million)
** R$ / 000 shares
2002 2003 2004 2005 2006 2007 2008* 2009* 2010* 2011* 2012* 2013* 1S14*
Net Revenues (R$) 3,767.1 4,130.8 4,397.1 4,953.4 5,527.3 5,970.8 7,809.3 8,579.5 9,230.4 9,927.4 10,737.6 11,315.6 5,546.1
Adjusted EBITDA (R$) 1,860.0 2,076.5 1,927.0 2,285.6 2,446.1 2,698.9 2,865.1 2,727.3 3,222.5 3,371.0 3,605.0 4,006.6 1,677.6
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 30.2
Net Income (R$) (651.0) 833.3 513.1 865.6 789.4 1,055.3 862.9 1,507.7 1,630.4 1,380.9 1,911.9 1,923.6 780.0
Net Margin (%) - 20.2 11.7 17.5 14.3 17.7 11.0 17.6 17.7 13.9 17.8 17.0 14.1
Total Assets (R$) 16,331.9 16,590.1 16,783.8 17,431.1 17,999.9 18,659.9 17,206.0 20,242.9 23,293.1 24,983.2 26,476.1 28,274.3 28,983.5
Total Debt (R$) 7,925.1 7,264.3 7,050.7 6,664.2 6,326.7 5,685.2 6,865.0 6,558.0 8,209.3 8,423.3 8,875.3 9,450.1 9,818.7
Short-term Debt (R$) 1,132.4 997.0 1,496.8 759.0 852.5 742.1 1,449.0 1,009.9 1,242.1 1,629.2 1,342.6 640.9 637.9
Long-Term Debt (R$) 6,592.6 6,267.3 5,553.8 5,905.2 5,474.2 4,943.1 5,416.0 5,548.0 7,022.5 6,794.1 7,532.7 8,809.2 9,180.8
Foreign Currency Debt (R$) 3,708.0 3,012.7 2,680.9 1,575.9 1,472.2 1,242.3 2,281.0 1,745.6 2,249.9 3,053.4 3,215.8 3,698.6 3,593.6
Shareholders' Equity (R$) 4,217.1 7,576.9 7,951.6 8,482.5 9,018.5 9,780.5 6,758.0 8,439.0 9,682.0 10,546.0 11,256.8 12,930.8 13,667.9
Total Debt/Total Cap. (%) 65.3 48.9 47.0 44.0 41.2 36.8 50.4 43.7 45.9 44.4 44.1 42.2 41.8
Investments (R$) 619 594 601 678 905 921 1,734 2,059 2,194 2,440 2,536 2,716 1,282
Dividend Declared (R$/ share) - 17,7** 5,4** 12,23** 9,51** 1.3 1.3 1.7 2.0 2.5 2.35 0.78 -
Pay Out (%) - 60.5 29.8 40.2 34.7 28.5 34.3 26.1 28.0 41.9 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 2.9 -
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 -
Extra Slides
As of October, 10th 2014
Reservoirs levels
1
CANTAREIRA SYSTEM (%)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 22.2 16.4 13.4 10.7 24.9 20.6 15.4 11.0 6.9 5.8
RIO GRANDE SYSTEM (%)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
92.7 94.3 94.6 95.8 94.2 92.0 86.0 80.4 77.0 76.3
RIO CLARO SYSTEM (%)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
98.7 93.0 96.6 101 102 99.0 83.0 74.9 61.8 58.5
GUARAPIRANGA SYSTEM (%)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
67.2 66.7 77.0 77.9 74.3 71.8 65.0 57.3 52.1 49.9
ALTO TIETÊ SYSTEM (%)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
44.7 38.8 37.3 36.0 30.8 26.0 20.8 15.6 12.5 11.7
ALTO COTIA SYSTEM (%)
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
63.2 55.8 56.8 50.6 48.4 46.7 43.0 38.0 35.7 34.5
2
The Path of the Waters
Cantareira System
PCJ Water Basin Alto Tietê Water Basin
19.7 m³/s
Measures taken by the Company due to the compulsory reduction of water withdrawal from the
PCJ Water Basin to Cantareira from 33m ³/s to 19.7 m³/s: Bonus Program: 20% reduction in water consumption 30% discount on water and sewage bill
Use of Alto Tietê, Guarapiranga, Rio Claro and Rio Grande water systems more than 2.3 million people prior served
by the Cantareira Systems
Partial use of the Technical Reserve 286.5 billion liters
100%
0%
182.5 billion liters
SPMR
Campinas
Operational
Capacity 982.7 billion liters
Technical Reserve 510.9 billion liters
Cantareira’s Operational Capacity and Technical Reserve
3
+ 106.0 billion liters Authorized use 286.5 billion liters
4
Cantareira System – Rainfall (mm)
Up to October 6, 2014
Out Nov Dez Jan Fev Mar Abr Mai Jun Jul Ago Set
Média Histórica 130,8 163,8 226,8 265,9 206,5 184,1 89,2 83,2 56,0 49,9 36,9 91,9
Minima Histórica 21,4 52,4 104,5 111,8 40,2 55,8 7,6 8,8 0,0 0,0 0,1 0,9
2013/14 123,4 97,0 62,9 87,8 73,0 193,3 85,7 37,3 15,8 40,4 22,6 66,0
2014/15 0,4
93%
59%
28%
33% 35%
105%
96%
45%
28%
81% 61%
72%
0% 0,0
50,0
100,0
150,0
200,0
250,0
300,0
mm
Out Nov Dez Jan Feb Mar Abr Mai Jun Jul Ago Set
Média Histórica 130,8 163,8 226,8 265,9 206,5 184,1 89,2 83,2 56,0 49,9 36,9 91,9
Mínima Histórica 21,4 52,4 104,5 111,8 40,2 55,8 7,6 8,8 0,0 0,0 0,1 0,9
2013/14 123,4 97,0 62,9 87,8 73,0 193,3 85,7 37,3 15,8 40,4 22,6 66,0
2014/15 0,4
outubro novembro dezembro janeiro fevereiro março abril maio junho julho agosto setembro
Média Histórica 30,6 35,0 53,1 70,9 73,9 66,9 48,4 38,4 35,3 28,8 24,5 25,6
Mínima Histórica 14,0 14,0 21,8 26,9 27,6 28,1 24,7 19,9 16,5 13,9 12,0 11,8
1953 17,5 26,0 31,5 26,9 34,5 29,8 34,6 23,8 20,7 17,6 16,3 16,2
2013/2014 25,1 22,1 22,5 15,4 10,5 18,9 17,2 10,1 10,0 6,4 8,2 8,5
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
Out Nov Dez Jan Fev Mar Abr Mai Jun Jul Ago Set
Média Histórica 30,6 35,0 53,1 70,9 73,9 66,9 48,4 38,4 35,3 28,8 24,5 25,6
Mínima Histórica 14,0 14,0 21,8 26,9 27,6 28,1 24,7 19,9 16,5 13,9 12,0 11,8
1953 17,5 26,0 31,5 26,9 34,5 29,8 34,6 23,8 20,7 17,6 16,3 16,2
2013/2014 25,1 22,1 22,5 15,4 10,5 18,9 17,2 10,1 10,0 6,4 8,2 8,5
5
Cantareira System – Water inflow (m³/s)
Affluence between January and September, 30 2014
¼ of the historical average
-2,5
+0,4
-0,6
+3,8 +2,5
+0,9
+0,7
0,0 +0,6
+0,6
+0,6
+1,2
15,00
17,00
19,00
21,00
23,00
25,00
27,00
29,00
out/13 nov/13 dez/13 jan/14 fev/14 mar/14 abr/14 mai/14 jun/14 jul/14 ago/14 set/14
2014 2013
6
Temperature - 2013/2014
OCT/13 NOV/13 DEC/13 JAN/14 FEB/14 MAR/14 APR/14 MAY/14 JUN/14 JUL/14 AUG/14 SEP/14
ºC
7
Bonus Program
Reduced consumption and reached the bonus
Reduced consumption but not the bonus
Increased consumption
SPMR - Bonus Program Balance
Up to September 30, 2014
45%
52% 46%
51% 49%
31% 27% 28%
25% 26% 24% 21%
26% 24% 25%
mai jun jul ago setMAY/14 JUN/14 JUL/14 AUG/14 SEP/14
20% water bill savings = 30% discount on water and sewage bill
Scope:
Since February consumers served by the Cantareira System
Since April all consumers directly served in the SPMR
Since May 12 municipalities served by Sabesp in the Piracicaba, Capivari and Jaguari
Water Basin
Integration Jaguari – Atibainha
8
Capex: R$ 800 million
Up to 8.5 m³/s (5 m³/s average)
www.sabesp.com.br
IR Contacts
Mario Azevedo de Arruda Sampaio Angela Beatriz Airoldi maasampaio@sabesp.com.br abairoldi@sabesp.com.br (55 11) 3388 8664 (55 11) 3388 8793
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