2016 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 Overview 1
Our Operations 2
Our Financial Performance 3
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 24.7 million people and sewage
services to 21.2 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 365 out of 645
municipalities in the State
Covers around 66% of State's urban population
Operations in the São Paulo Metropolitan Region*
represent 70% of our total revenues
(1) As of December 31, 2016
(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 represents the municipalities served by
the Company’s Metropolitan Division
4
Main Operational Indicators(1) Company Overview
Water Sewage
Connections (million) 8.7 7.1
Coverage (%) 100 87
Treatment (%) 100 79(²)
Billed Volume (m³ million) 1,990.3 1,552.2
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$ 19.7 billion (as of December, 2016)
(1) As of December, 2016
…with strong corporate governance
5
Ownership Structure % (1)
Agenda
6
3
Our Operations 2
Our Company 1
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
Nº of
contracts
% of revenue
Renewed/Secured (Program and Service Contract) 281 80.3%
Expired Contracts 54 12.2%
To be expired (2017 - 2030) 34 6.7%
Total Retail 369* 99.2%
Wholesale 5 0.8%
Total Sabesp 374 100.0%
*Incluides 2 partial contracts with Mogi das Cruzes and Santa Branca with operations starting in 2017
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
Tariff Revision
10
RAB0 CAPEX + OPEX + IRCS + ∆ CG
RABT = RAB0 + ∑(CAPEX+∆ CG-DEP) Volume (M3)
P0 IRR = WACC (8.06%)
ARSESP: Recent Resolutions / Public Consultation 03/31/16 Resolutions nº 640 e nº 641: ARSESP authorizes the cancelation of the Contingency Tariff and Consumption Reduction Incentive Program –
Bonus In effect since 05/01/2016
03/31/16 Arsesp discloses the RAB
04/11/16 ARSESP authorizes the tariff adjustment of 8.4478% in effect since 05/12/16
06/30/16 Update of the Methodology and general criteria for the definition of SABESP’s Regulatory Asset Base Start of the 2nd Ordinary Tariff Revision
08/30/16 Methodology Update and criteria for the definition of the RAB → ARSESP disclosed the Detailed Public Consultation Report
01/19/17 ARSESP approves the beginning of the 2nd Ordinary Tariff Revision and discloses the timeline for the 1st stage that will be performed as the
following:
• First stage preliminary June 2017
• Second stage final April de 2018 Timeline for the 1st stage of the 2nd Tariff Revision Stage No. Description Beginning Conclusion
1 Submission of the Business Plan by Sabesp Jan 23, 2017 Jan 31, 2017
2 Analysis of Sabesp's data Jan 23, 2017 Mar 31, 2017
3 Delivery of the Appraisal Report of the RAB by Sabesp Mar 31, 2017
4 Validation of the RAB by ARSESP: reinforced base + partial incremental Apr 1, 2017 May 15, 2017
5 Receipt of SABESP's final data (historical) Mar 1, 2017
6 Development of the Initial Technical Note with Initial P0 and Weighted Average Cost of Capital (WACC) Apr 1, 2017 Apr 26, 2017
7 Opening of Public Consultation and Public Hearing - Initial Tariff P0 and WACC Apr 27, 2017 May 19, 2017
8 Analysis of the contributions received, development of the Final Technical Note and Detailed Report - Initial Tariff P0 and
WACC May 22, 2017 Jun 8, 2017
9 Approval of the Final Technical Note, Detailed Report and Publication of the Resolution with the Preliminary Tariff P0 Jun 9, 2017 Jun 10, 2017
Tariff Adjustment and Revisions
11
Annual tariff adjustment formula
Productivity
Factor
(0.9386%) New Average
Tariff = 1
Inflation
(IPCA)
100 x
Previous
Average Tariff Quality
Factor * - -
+
ARSESP’s Adjustments and Revisions Sabesp’s Formula
ETR – Extraordinary Tariff Revision IPCA – Amplified Consumer Price Index as of Mar/16
* Not yet defined
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
Collection: 93% in 2021
Treatment: 83% in 2021
7.5 7.7
7.9 8.2
8.4 8.7
2011 2012 2013 2014 2015 2016
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) 3,900*
2,136**
(*) Book Value – Includes non-cash items
(**) Book Value – Items that affected cash
- Additional information is presented in
Note 31 of the 2016 Financial Information
Investment Plan – Financing
14
2017 to 2021 – R$ 13.9 billion
Company’s Funds R$ 10.2 bi
73.7 %
Contracted R$ 3.5 bi
95.9%
Financing R$ 3.6 bi 26.3 %
Under Negotiation R$ 0.1 bi 4.1%
BNDES R$ 1.3B CAIXA R$ 1.1B BID R$ 580MM JICA R$ 350MM BIRD R$ 70 MM FINEP R$ 40 MM
CAIXA
15
Our Company 1
Our Operations 2
Our Financial Performance 3
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)
2010 2011 2012 2013 2014 2015 2016
Dividend Declared
(R$)
2.00 2.54 2.35 0.78 0.37 0.22 1.20
Pay Out % 27.9 47.3 27.9 27.9 27.9 27.9 27.9
Outstanding Shares
(million) 227.8 227.8 227.8 683.5 683.5 683.5 683.5
Dividends/Pay Out
Adjusted EBITDA Ajustado – Last 12 months Adjusted EBTIDA Margin – Last 12 months Adjusted EBITDA Margin Without Construction – Last 12 months
18
* Adjusted EBITDA – LTM ** Financial Explosures paid - LTM Calculated in accordance with CPCs/IFRS
Historical leverage metrics (R$ 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
Covenants – Total Adjusted Debt vs EBITDA
19
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*
Net Revenues (R$) 3,767 4,131 4,397 4,953 5,527 5,971 7,809 8,580 9,230 9,927 10,738 11,316 11,213 11,712 14,098
Adjusted EBITDA (R$) 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
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
Adjusted EBITDA w ithout Construction Margin (%)- - - - - - - 41.2 44.7 43.1 43.0 44.6 34.4 46.6 43.3
Net Income (R$) (651) 833 513 866 789 1,055 863 1,508 1,630 1,381 1,912 1,924 903 536 2,947
Net Margin (%) - 20.2 11.7 17.5 14.3 17.7 11.0 17.6 17.7 13.9 17.8 17.0 8.1 4.6 20.9
- - - - - - - - - - - - - - -
Total Assets (R$) 16,332 16,590 16,784 17,431 18,000 18,660 17,206 20,243 23,293 24,983 26,476 28,274 30,355 33,707 36,745
Total Debt (R$) 7,878 7,264 7,051 6,664 6,327 5,685 6,865 6,560 8,209 8,423 8,875 9,450 10,786 13,122 11,964
Short-term Debt (R$) 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
Long-Term Debt (R$) 6,593 6,267 5,554 5,905 5,474 4,943 5,416 5,548 6,970 6,794 7,533 8,809 9,579 11,595 10,718
Foreign Currency Debt (R$) 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
Shareholders' Equity (R$) 4,217 7,577 7,952 8,483 9,019 9,781 6,758 8,439 9,682 10,546 11,257 12,931 13,304 13,717 15,419
Total Debt/Total Cap. (%) 65.1 48.9 47.0 44.0 41.2 36.8 50.4 43.7 45.9 44.4 44.1 42.2 44.8 48.9 43.7
Investments (R$) 619 594 601 678 905 921 1,734 2,059 2,194 2,440 2,536 2,716 3,211 3,522 3,878
- - - - - - - - - - - - - - -
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
Our Company 1
Our Operations 2
Our Financial Performance 3
SPMR – Water Situation 4
Agenda
Cantareira System – Rainfall (mm)
22
OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP
Historical avg. 130.8 161.2 226.8 265.9 206.5 184.1 89.2 83.2 56.0 49.9 36.9 91.9
Historical low 21.4 52.4 104.5 111.8 40.2 55.8 7.6 8.8 0.0 0.0 0.1 0.9
2016/17 175.3 170.8 158.4 393.1 94.2 113.4
March, 23rd
March
2014: 193.3 mm
2015: 189.9 mm
2016: 179.6 mm
Oct-Feb
Média: 991.2 mm
Mínima: 330.3 mm
2013/14: 444.1 mm
2014/15: 813.6 mm
2015/16: 1.058.3 mm
2016/17: 991.8 mm
Cantareira System – Water inflow (m³/s)
23
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Historical avg. 30.6 35.0 53.1 70.9 73.9 66.9 48.4 38.4 35.3 28.8 24.5 25.6
Historical low 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
2013/14 25.1 22.1 22.5 15.4 10.5 18.9 17.2 10.1 10.0 6.4 8.2 9.0
2014/15 5.2 8.8 16.0 11.5 40.7 42.6 18.1 14.0 16.2 11.3 5.8 18.3
2015/16 14.8 27.1 52.3 73.8 49.6 69.8 24.1 25.0 62.9 19.4 19.3 15.3
2016/17 24.2 29.5 30.2 76.0 36.4 42.9
Inflow Oct-Jan/17:
75% of Historical Average Inflow
March, 23rd
Historical Average Inflow October-January: 52.7 m³/s
Inflow (Oct-Jan) 1953 : 27.3m³/s
Inflow (Oct-Jan) 2013/14 : 19.1 m³/s
Inflow (Oct-Jan) 2014/15 : 16.4m³/s
Inflow (Oct-Jan) 2015/16 : 43.5 m³/s
Inflow (Oct-Jan) 2016/17 : 39.3 m³/s
Cantareira’s Monthly Production vs Average (m³/s)
24
March, 23rd
Average production
Actual production
25
March, 23rd
Operating volume available at SPMR’s Reservoirs
Current operating volume as of June, 7th , 2013
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Water Plan for the SPMR – 2015 to 2019 (main initiatives)
26
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 m³/s 6 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
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 20,63
Initiatives accomplished in 2015
Initiative planned for 2017
◦ Recover the storage volume and ensure
Alto Tietê's water source
Initiative planned for 2019
Purpose StatusDescription Est.
Initiatives planned for 2018
www.sabesp.com.br
IR Contacts
Mario Azevedo de Arruda Sampaio Angela Beatriz Airoldi Head of Capital Markets and Investor Relations Investor Relations Manager [email protected] [email protected] +55 (11) 3388-8664 +55 (11) 3388-8793