sbsitr3q17_6k.htm - Generated by SEC Publisher for SEC Filing  
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 

 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For December, 2017
(Commission File No. 1-31317)
 

 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
(Exact name of registrant as specified in its charter)
 
Basic Sanitation Company of the State of Sao Paulo - SABESP
(Translation of Registrant's name into English)
 


 
Rua Costa Carvalho, 300
São Paulo, S.P., 05429-900
Federative Republic of Brazil
(Address of Registrant's principal executive offices)



Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1)__.
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7)__.

Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes ______ No ___X___

If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):

 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Table of Contents

 

Company Information   
Capital Breakdown  1 
Cash Proceeds  2 
Parent Companys Financial Statements   
Statement of Financial Position - Assets  3 
Statement of Financial Position - Liabilities  4 
Income Statement  6 
Statement of Comprehensive Income  8 
Statement of Cash Flows  9 
Statement of Changes in Equity   

1/01/2017 to 9/30/2017 

11 

1/01/2016 to 9/30/2016 

12 
Statement of Value Added  13 
Comments on the Companys Performance  14 
Notes to the Interim Financial Information  22 
Comments on the Companys Projections  81 
Other Information Deemed as Relevant by the Company  82 
Reports and Statements   
Unqualified Reports on Special Review  84 

 

 

 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Company Information / Capital Breakdown

 

 

Number of Shares

Current Quarter

(Units)

9/30/2017

Paid-in Capital

 

Common

683,509,869

Preferred

0

Total

683,509,869

Treasury Shares

 

Common

0

Preferred

0

Total

0

 

 

 

 

PAGE 1 of 84


 
 

        

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

Company Information / Cash Proceeds

 

Event  Approval  Proceeds  Date of Payment  Type of Share  Class of Share  Earnings per share 
            (Reais / share) 
Board of Directors’  3/27/2017  Interest on Capital  6/27/2017  Common     
Meeting             

 

 

PAGE: 2 of 84


 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Parent Company’s Financial Statements / Statement of Financial Position – Assets

 

(R$ thousand)     
Code  Description  Current Quarter  Previous Year 
    9/30/2017  12/31/2016 
1  Total Assets  38,373,427  36,745,034 
1.01  Current Assets  4,113,112  3,823,635 
1.01.01  Cash and Cash Equivalents  2,101,000  1,886,221 
1.01.03  Accounts Receivable  1,758,262  1,760,025 
1.01.03.01  Trade Receivables  1,581,066  1,557,472 
1.01.03.02  Other Receivables  177,196  202,553 
1.01.03.02.01 Related-Party Balances  177,196  202,553 
1.01.04  Inventories  123,238  58,002 
1.01.06  Recoverable Taxes  11,047  42,633 
1.01.06.01  Current Recoverable Taxes  11,047  42,633 
1.01.08  Other Current Assets  119,565  76,754 
1.01.08.03  Other  119,565  76,754 
1.01.08.03.01 Restricted Cash  15,229  24,078 
1.01.08.03.20   Other Receivables 104,336  52,676 
1.02  Noncurrent Assets  34,260,315  32,921,399 
1.02.01  Long-Term Assets  1,222,464  1,283,164 
1.02.01.03  Accounts Receivable  157,867  153,834 
1.02.01.03.01   Trade Receivables 157,867  153,834 
1.02.01.06  Deferred Taxes  108,550  186,345 
1.02.01.06.01 Deferred Income Tax and Social Contribution  108,550  186,345 
1.02.01.08  Receivables from Related Parties  649,334  669,156 
1.02.01.08.03 Receivables from Controlling Shareholders  649,334  669,156 
1.02.01.09  Other Noncurrent Assets  306,713  273,829 
1.02.01.09.04 Escrow Deposits  105,708  77,915 
1.02.01.09.05   ANA – Water National Agency 73,363  81,221 
1.02.01.09.20   Other Receivables 127,642  114,693 
1.02.02  Investments  93,695  89,064 
1.02.02.01  Equity Investments  35,795  31,096 
1.02.02.01.04 Other Equity Investments  35,795  31,096 
1.02.02.02  Investment Properties  57,900  57,968 
1.02.03  Property, Plant and Equipment  259,737  302,383 
1.02.04  Intangible Assets  32,684,419  31,246,788 
1.02.04.01  Intangible Assets  32,684,419  31,246,788 
1.02.04.01.01   Concession Contracts 8,887,097  8,864,607 
1.02.04.01.02 Program Contracts  7,860,371  7,399,237 
1.02.04.01.03 Services Contracts  15,489,172  14,552,707 
1.02.04.01.04 Software License  447,779  430,237 

PAGE: 3 of 84


 
 

 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

Parent Company’s Financial Statements / Statement of Financial Position – Assets (R$ thousand)

 

 

(R$ thousand)     
Code  Description  Current Quarter  Previous Year 
    9/30/2017  12/31/2016 
2  Total Liabilities  38,373,427  36,745,034 
2.01  Current Liabilities  3,724,837  4,302,508 
2.01.01  Labor and Pension Plan Liabilities  598,330  458,299 
2.01.01.01  Social Security Liabilities  12,192  43,257 
2.01.01.02  Labor Liabilities  586,138  415,042 
2.01.02  Trade Payable  284,833  311,960 
2.01.02.01  Domestic Suppliers  284,833  311,960 
2.01.03  Tax Liabilities  128,115  168,757 
2.01.03.01  Federal Tax Liabilities  120,613  159,176 
2.01.03.01.01 Income Tax and Social Contribution Payable  15,107  0 
2.01.03.01.02 PIS-PASEP and COFINS Payable  59,722  49,132 
2.01.03.01.03 INSS (social security contribution) Payable  34,676  35,376 
2.01.03.01.20 Other Federal Taxes  11,108  74,668 
2.01.03.03  Municipal Tax Liabilities  7,502  9,581 
2.01.04  Borrowings and Financing  1,388,013  1,246,567 
2.01.04.01  Borrowings and Financing  721,166  635,701 
2.01.04.01.01 In Domestic Currency  274,439  269,042 
2.01.04.01.02 In Foreign Currency  446,727  366,659 
2.01.04.02  Debentures  647,791  595,952 
2.01.04.03  Financing through Finance Lease  19,056  14,914 
2.01.05  Other Liabilities  666,925  1,386,591 
2.01.05.01  Payables to Related Parties  881  1,853 
2.01.05.01.03   Payables to Controlling Shareholders 881  1,853 
2.01.05.02  Other  666,044  1,384,738 
2.01.05.02.01 Dividends and Interest on Capital Payable  276  700,034 
2.01.05.02.04   Services Payable 386,209  460,054 
2.01.05.02.05 Refundable Amounts  11,014  12,240 
2.01.05.02.06 Program Contract Commitments  129,425  109,042 
2.01.05.02.07   Public-Private Partnership - PPP 33,865  31,898 
2.01.05.02.09 Indemnities  10,567  9,379 
2.01.05.02.20   Other Liabilities 94,688  62,091 
2.01.06  Provisions  658,621  730,334 
2.01.06.01  Tax, Social Security, Labor and Civil Provisions  184,921  180,165 
2.01.06.01.01 Tax Provisions  36,466  27,677 
2.01.06.01.02 Social Security and Labor Provisions  47,428  47,873 
2.01.06.01.04 Civil Provisions  101,027  104,615 
2.01.06.02  Other Provisions  473,700  550,169 
2.01.06.02.03   Provisions for Environmental Liabilities and Decommissioning 17,475  10,691 
2.01.06.02.04 Provisions for Customers  380,616  462,965 
2.01.06.02.05 Provisions for Suppliers  75,609  76,513 
2.02  Noncurrent Liabilities  17,385,403  17,023,315 
2.02.01  Borrowings and Financing  10,499,758  10,717,576 
2.02.01.01  Borrowings and Financing  7,077,838  7,244,771 
2.02.01.01.01 In Domestic Currency  2,120,641  1,951,067 
2.02.01.01.02 In Foreign Currency  4,957,197  5,293,704 
2.02.01.02  Debentures  2,881,944  2,935,203 

 

 

PAGE 4 of 84


 
   

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1


 

Parent Company’s Financial Statements / Statement of Financial Position – Liabilities (R$ thousand)

 

(R$ thousand)     
Code  Description  Current Quarter  Previous Year 
    9/30/2017  12/31/2016 
2.02.01.03  Financing through Finance Lease  539,976  537,602 
2.02.02  Other Liabilities  6,442,485  5,862,998 
2.02.02.02  Other  6,442,485  5,862,998 
2.02.02.02.04 Pension Plan Liabilities  3,332,955  3,265,250 
2.02.02.02.05 Program Contract Commitments  81,872  69,051 
2.02.02.02.06 Public-Private Partnership - PPP  2,749,339  2,217,520 
2.02.02.02.07 Indemnities  26,836  11,247 
2.02.02.02.08 Labor Liabilities  6,247  29,625 
2.02.02.02.09   Deferred COFINS/PASEP 132,243  138,071 
2.02.02.02.20 Other Liabilities  112,993  132,234 
2.02.04  Provisions  443,160  442,741 
2.02.04.01  Tax, Social Security, Labor and Civil Provisions  287,428  287,590 
2.02.04.01.01 Tax Provisions  39,780  39,234 
2.02.04.01.02 Social Security and Labor Provisions  239,760  234,338 
2.02.04.01.04 Civil Provisions  7,888  14,018 
2.02.04.02  Other Provisions  155,732  155,151 
2.02.04.02.03   Provisions for Environmental Liabilities and Decommissioning 145,250  138,431 
2.02.04.02.04 Provisions for Customers  6,265  12,074 
2.02.04.02.05 Provisions for Suppliers  4,217  4,646 
2.03  Equity  17,263,187  15,419,211 
2.03.01  Paid-Up Capital  10,000,000  10,000,000 
2.03.04  Profit Reserve  6,182,140  6,244,859 
2.03.04.01  Legal Reserve  932,310  932,310 
2.03.04.08  Additional Dividend Proposed  0  62,719 
2.03.04.10  Reserve for Investments  5,249,830  5,249,830 
2.03.05  Retained Earnings/Accumulated Losses  1,906,695  0 
2.03.06  Equity Valuation Adjustments  -825,648  -825,648 

PAGE 5 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Parent Company’s Financial Statements / Statement of Financial Position – Liabilities (R$ thousand)

(R$ thousand)         
Code  Description 

Current Quarter
7/01/2017 to 9/30/2017

YTD Current Year
1/01/2017 to 9/30/2017 
Same Quarter
Previous Year
7/01/2016 to 9/30/2016 
YTD Previous Year
1/01/2016 to 9/30/2016 
   
         
3.01  Revenue from Sales and/or Services  3,536,444  10,589,904  3,745,807  10,212,238 
3.02  Cost of Sales and/or Services  -2,047,318  -6,350,177  -2,236,740  -6,445,167 
3.02.01  Cost of Sales and/or Services  -1,352,848  -4,184,251  -1,163,280  -3,881,934 
3.02.02  Construction Cost  -694,470  -2,165,926  -1,073,460  -2,563,233 
3.03  Gross Profit  1,489,126  4,239,727  1,509,067  3,767,071 
3.04  Operating Income/Expenses  -342,671  -1,301,297  -445,478  -1,235,752 
3.04.01  Selling Expenses  -124,619  -576,737  -234,226  -574,446 
3.04.02  General and Administrative Expenses  -233,926  -766,974  -218,041  -691,513 
3.04.04  Other Operating Income  22,852  46,135  12,671  42,421 
3.04.04.01  Other Operating Income  27,601  56,884  16,150  53,421 
3.04.04.02  COFINS and PASEP  -4,749  -10,749  -3,479  -11,000 
3.04.05  Other Operating Expenses  -8,210  -8,420  -6,407  -14,492 
3.04.05.01  Loss on Write-off of Property, Plant and Equipment Items  -119  1,853  -2,826  -7,310 
3.04.05.03  Tax Incentives  -7,248  -7,980  -3,570  -3,570 
3.04.05.04  Surplus Cost of Electricity Sold  -145  -1,396  0  -3,102 
3.04.05.20  Other  -698  -897  -11  -510 
3.04.06  Equity Results  1,232  4,699  525  2,278 
3.05  Income before Financial Result and Taxes  1,146,455  2,938,430  1,063,589  2,531,319 
3.06  Financial Result  222,869  -54,549  -176,810  536,070 
3.06.01  Financial Income  105,842  284,960  94,207  339,340 
3.06.01.01  Financial Income  109,762  297,251  98,684  356,354 
3.06.01.02  Exchange Gains  0  347  112  223 
3.06.01.03  COFINS and PASEP  -3,920  -12,638  -4,589  -17,237 
3.06.02  Financial Expenses  117,027  -339,509  -271,017  196,730 
3.06.02.01  Financial Expenses  -136,131  -469,978  -191,812  -668,146 
3.06.02.02  Exchange Losses  253,158  130,469  -79,205  864,876 
3.07  Earnings before Income Tax  1,369,324  2,883,881  886,779  3,067,389 
3.08  Income Tax and Social Contribution  -468,799  -977,186  -312,892  -1,067,182 

 

PAGE 6 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

Parent Company’s Financial Statements / Income Statement (R$ thousand)

(R$ thousand)         
Code  Description  Current Quarter
7/01/2017 to 9/30/2017
YTD Current Year
1/01/2017 to 9/30/2017
Same Quarter
Previous Year
7/01/2016 to 9/30/2016
YTD Previous Year
1/01/2016 to 9/30/2016
   
         
3.08.01  Current  -406,548  -899,391  -243,481  -994,684 
3.08.02  Deferred  -62,251  -77,795  -69,411  -72,498 
3.09  Net Result from Continued Operations  900,525  1,906,695  573,887  2,000,207 
3.11  Profit/Loss for the Period  900,525  1,906,695  573,887  2,000,207 
3.99  Earnings per Share - (Reais/Share)         
3.99.01  Basic Earnings per Share         
3.99.01.01  Common Share  1.31750  2.78957  0.83962  2.92638 
3.99.02  Diluted Earnings per Share         
3.99.02.01  Common Share  1.31750  2.78957  0.83962  2.92638 

 

 

PAGE 7 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Parent Company’s Financial Statements / Income Statement (R$ thousand)

 

(R$ thousand)         
Code  Description  Current Quarter
7/01/2017 to 9/30/2017
YTD Current Year
1/01/2017 to 9/30/2017
Same Quarter
Previous Year
7/01/2016 to 9/30/2016
YTD Previous Year
1/01/2016 to 9/30/2016
   
         
4.01  Net Income for the Period  900,525  1,906,695  573,887  2,000,207 
4.02  Other Comprehensive Income  0  0  -181,073  -181,073 
4.02.01  Actuarial Gains and (Losses) on Defined Benefit Pension Plans  0  0  -181,073  -181,073 
4.03  Comprehensive Income for the Period  900,525  1,906,695  392,814  1,819,134 

 

PAGE 8 of 84


 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Parent Company’s Financial Statements / Statement of Comprehensive Income (R$ thousand)

 

(R$ thousand)     
Code  Description  YTD Current Year  YTD Previous Year 
    1/01/2017 to 9/30/2017  1/01/2016 to 9/30/2016 
6.01  Net Cash from Operating Activities  2,339,196  2,028,835 
6.01.01  Cash from Operations  4,659,239  3,562,907 
6.01.01.01  Profit (loss) before Income Tax and Social  2,883,881  3,067,389 
  Contribution     
6.01.01.02  Provision and Inflation Adjustments on Provisions  138,571  207,313 
6.01.01.03  Pension Plan Liabilities – Early Reduction  0  -334,152 
  (Curtailment)     
6.01.01.04  Finance Charges from Customers  -169,194  -158,219 
6.01.01.05  Residual Value of Property, Plant and Equipment,  11,528  7,211 
  Intangible Assets and Investment Properties Written-off     
6.01.01.06  Depreciation and Amortization  974,487  859,055 
6.01.01.07  Interest on Borrowings and Financing Payable  296,665  352,665 
 
6.01.01.08  Monetary and Exchange Change on Borrowings  -86,081  -754,853 
  and Financing     
6.01.01.09  Interest and Monetary Changes on Liabilities  6,948  21,434 
6.01.01.10  Interest and Monetary Changes on Assets  -28,710  -69,272 
6.01.01.11  Allowance for Doubtful Accounts  87,480  110,181 
6.01.01.12  Provision for Consent Decree (TAC)  60,670  12,229 
6.01.01.13  Equity Results  -4,699  -2,278 
6.01.01.14  Provision for Sabesprev Mais  0  235 
6.01.01.15  Other Adjustments  -10,332  -6,466 
6.01.01.16  Transfer of Funds to São Paulo Municipal Government  318,920  19,089 
6.01.01.17  Construction Margin over Intangible Assets Resulting from  -49,299  -57,006 
  Concession Contracts     
6.01.01.18  Pension Plan Liabilities  228,404  288,352 
6.01.02  Changes in Assets and Liabilities  -1,040,984  -173,827 
6.01.02.01  Trade Receivables  49,471  -28,316 
6.01.02.02  Related-Party Balances and Transactions  68,390  -3,597 
6.01.02.03  Inventories  -65,200  13,385 
6.01.02.04  Recoverable Taxes  31,586  65,244 
6.01.02.05  Other Receivables  -56,751  88,705 
6.01.02.06  Escrow Deposits  -17,678  31,740 
6.01.02.08  Contractors and Suppliers  -217,200  -9,720 
6.01.02.09  Payroll, Provisions and Social Contribution  79,361  59,815 
6.01.02.10  Pension Plan Liabilities  -160,699  -134,274 
6.01.02.11  Taxes and Contributions Payable  -151,611  -106,825 
6.01.02.12  Services Payable  -392,765  -27,537 
6.01.02.13  Other Liabilities  7,805  5,144 
6.01.02.14  Provisions  -209,865  -131,711 
6.01.02.15  Deferred Cofins/Pasep  -5,828  4,120 
6.01.03  Other  -1,279,059  -1,360,245 
6.01.03.01  Interest Paid  -494,094  -535,299 
6.01.03.02  Income Tax and Social Contribution Paid  -784,965  -824,946 
6.02  Net Cash from Investing Activities  -1,237,362  -1,444,922 
6.02.01  Acquisition of Intangible Assets  -1,233,769  -1,432,336 
6.02.02  Acquisition of Property, Plant and Equipment  -12,442  -23,313 

PAGE 9 of 84


 
   

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method (R$ thousand)

 

(R$ thousand)     
Code  Description  YTD Current Year  YTD Previous Year 
    1/01/2017 to 9/30/2017  1/01/2016 to 9/30/2016 
6.02.04  Restricted Cash  8,849  10,727 
6.03  Net Cash from Financing Activities  -887,055  -807,662 
6.03.01  Funding  893,178  493,863 
6.03.02  Amortization  -953,482  -968,124 
6.03.03  Payment of Interest on Equity  -765,933  -139,399 
6.03.04  Public-Private Partnership - PPP  -23,528  -22,865 
6.03.05  Program Contract Commitments  -37,290  -171,137 
6.05  Increase (Decrease) in Cash and Cash Equivalents  214,779  -223,749 
6.05.01  Opening Cash and Cash Equivalents  1,886,221  1,639,214 
6.05.02  Closing Cash and Cash Equivalents  2,101,000  1,415,465 

PAGE 10 of 84


 

 

 

 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Parent Company’s Financial Statements / Statement of Changes in Equity / 1/01/2017 to 9/30/2017 (R$ thousand)

 

 

(R$ thousand)             
Code  Description  Paid-up
Capital
Capital Reserves,
Options Granted and
Treasury Shares
Profit Reserves Retained
Earnings/Accumulated
Losses
Other Comprehensive
Income
Equity
     
         
5.01  Opening Balances  10,000,000  0  6,244,859  0  -825,648  15,419,211 
5.03  Restated Opening Balances  10,000,000  0  6,244,859  0  -825,648  15,419,211 
5.04  Capital Transactions with Partners  0  0  -62,719  0  0  -62,719 
5.04.08  Additional Dividends Approved  0  0  -62,719  0  0  -62,719 
5.05  Total Comprehensive Income  0  0  0  1,906,695  0  1,906,695 
5.05.01  Net Income for the Period  0  0  0  1,906,695  0  1,906,695 
5.07  Closing Balances  10,000,000  0  6,182,140  1,906,695  -825,648  17,263,187 

 

PAGE 11 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Parent Company’s Financial Statements / Statement of Changes in Equity / 1/01/2016 to 9/30/2016 (R$ thousand)

 

(R$ thousand)             
Code  Description  Paid-up
Capital
Capital Reserves,
Options Granted and
Treasury Shares
Profit Reserves Retained
Earnings/Accumulated
Losses
Other Comprehensive
Income
Equity
   
5.01  Opening Balances  10,000,000  0  4,069,988  0  -353,382  13,716,606 
5.03  Restated Opening Balances  10,000,000  0  4,069,988  0  -353,382  13,716,606 
5.04  Capital Transactions with Partners  0  0  -11,453  0  0  -11,453 
5.04.08  Additional Dividends Approved  0  0  -11,453  0  0  -11,453 
5.05  Total Comprehensive Income  0  0  0  2,000,207  -181,073  1,819,134 
5.05.01  Net Income for the Period  0  0  0  2,000,207  0  2,000,207 
5.05.02  Other Comprehensive Income  0  0  0  0  -181,073  -181,073 
5.05.02.06  Actuarial Gains and Losses  0  0  0  0  -181,073  -181,073 
5.07  Closing Balances  10,000,000  0  4,058,535  2,000,207  -534,455  15,524,287 
 

 

PAGE 12 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

Parent Company’s Financial Statements / Statement of Value Added (R$ thousand)

 

Code

Description

YTD Current Year

YTD Previous Year

 

 

1/01/2017 to 9/30/2017

1/01/2016 to 9/30/2016

7.01

Revenue

11,115,257

10,711,651

7.01.01

Goods, Products and Services Sold

8,930,628

8,148,172

7.01.02

Other Revenue

56,884

53,421

7.01.03

Revenue from Construction of own Assets

2,215,225

2,620,239

7.01.04

Allowance for/Reversal of  Doubtful Accounts

-87,480

-110,181

7.02

Inputs Acquired from Third Parties

-3,921,047

-4,445,400

7.02.01

Costs of Sales and  Services

-3,259,707

-3,801,316

7.02.02

Materials, Electricity, Outside Services and Others

-652,920

-629,592

7.02.04

Other

-8,420

-14,492

7.03

Gross Value Added

7,194,210

6,266,251

7.04

Retentions

-974,487

-859,055

7.04.01

Depreciation, Amortization and Depletion

-974,487

-859,055

7.05

Net Value Added Produced

6,219,723

5,407,196

7.06

Wealth Received in Transfer

302,297

358,855

7.06.01

Equity Results

4,699

2,278

7.06.02

Financial Income

297,598

356,577

7.07

Total Value Added to Distribute

6,522,020

5,766,051

7.08

Value Added Distribution

6,522,020

5,766,051

7.08.01

Personnel

1,779,458

1,351,586

7.08.01.01

Salaries and Wages

1,160,465

1,069,596

7.08.01.02

Benefits

457,107

187,243

7.08.01.03

Government Severance Indemnity Fund for Employees (FGTS)

161,886

94,747

7.08.02

Taxes and Contributions

1,964,668

2,045,460

7.08.02.01

Federal

1,859,833

1,954,985

7.08.02.02

State

73,653

61,118

7.08.02.03

Municipal

31,182

29,357

7.08.03

Value Distributed to Providers of Capital

871,199

368,798

7.08.03.01

Interest

816,233

299,777

7.08.03.02

Rental

54,966

69,021

7.08.04

Value Distributed to Shareholders

1,906,695

2,000,207

7.08.04.03

Retained Earnings/Accumulated Loss for the Period

1,906,695

2,000,207

 

PAGE 13 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1


Comments on the Company’s Performance
 

1.     Financial highlights

 

R$ million

 

 

 

Chg. (R$)

 

 

Chg. (R$)

 

3Q17

3Q16

R$

%

9M17

9M16

R$

%

Gross operating revenue

2,999.7

2,854.1

145.6

5.1

8,930.6

8,148.2

782.4

9.6

Construction revenue

712.9

1,097.8

(384.9)

(35.1)

2,215.2

2,620.2

(405.0)

(15.5)

COFINS and PASEP taxes

(176.1)

(206.1)

30.0

(14.6)

(555.9)

(556.2)

0.3

(0.1)

(=) Net operating revenue

3,536.5

3,745.8

(209.3)

(5.6)

10,589.9

10,212.2

377.7

3.7

Costs and expenses

(1,711.4)

(1,615.5)

(95.9)

5.9

(5,528.0)

(5,147.9)

(380.1)

7.4

Construction costs

(694.5)

(1,073.5)

379.0

(35.3)

(2,165.9)

(2,563.2)

397.3

(15.5)

Equity result

1.2

0.5

0.7

140.0

4.7

2.3

2.4

104.3

Other operating revenue (expenses), net

14.6

6.3

8.3

131.7

37.7

27.9

9.8

35.1

(=) Earnings before financial result, income tax and social contribution

1,146.4

1,063.6

82.8

7.8

2,938.4

2,531.3

407.1

16.1

Financial result

222.9

(176.8)

399.7

(226.1)

(54.5)

536.1

(590.6)

(110.2)

(=) Earnings before income tax and social contribution

1,369.3

886.8

482.5

54.4

2,883.9

3,067.4

(183.5)

(6.0)

Income tax and social contribution

(468.8)

(312.9)

(155.9)

49.8

(977.2)

(1,067.2)

90.0

(8.4)

(=) Net income

900.5

573.9

326.6

56.9

1,906.7

2,000.2

(93.5)

(4.7)

Earnings per share (R$)*

1.32

0.84

 

 

2.79

2.93

 

 

 

* Total shares = 683,509,869

 

Adjusted EBITDA Reconciliation (Non-accounting measures)


 

R$ million

 

 

 

Chg. (R$)

 

 

Chg. (R$)

 

3Q17

3Q16

R$

%

9M17

9M16

R$

%

Net income

900.5

573.9

326.6

56.9

1,906.7

2,000.2

(93.5)

(4.7)

Income tax and social contribution

468.8

312.9

155.9

49.8

977.2

1,067.2

(90.0)

(8.4)

Financial result

(222.9)

176.8

(399.7)

(226.1)

54.5

(536.1)

590.6

(110.2)

Other operating revenue (expenses), net

(14.6)

(6.3)

(8.3)

131.7

(37.7)

(27.9)

(9.8)

35.1

(=) Adjusted EBIT*

1,131.8

1,057.3

74.5

7.0

2,900.7

2,503.4

397.3

15.9

Depreciation and amortization

324.5

280.2

44.3

15.8

974.5

859.1

115.4

13.4

(=) Adjusted EBITDA **

1,456.3

1,337.5

118.8

8.9

3,875.2

3,362.5

512.7

15.2

(%) Adjusted EBITDA margin

41.2

35.7

 

 

36.6

32.9

 

 

(*) Adjusted EBIT is net income before: (i) other operating revenues/expenses, net; (ii) financial result; and (iii) income tax and social contribution.

(**) Adjusted EBITDA is net income before: (i) depreciation and amortization expenses; (ii) income tax and social contribution;

(iii) financial result; and (iv) other operating revenues/expenses, net.

 

 

In 3Q17, net operating revenue, including construction revenue, reached R$ 3,536.5 million; a 5.6% decrease compared to the same period in 2016.

Costs and expenses, including construction costs, totaled R$ 2,405.9 million, 10.5% lower than in 3Q16.

Adjusted EBIT, in the amount of R$ 1,131.8 million, increased 7.0% from R$ 1,057.3 million recorded in 3Q16.

Adjusted EBITDA, in the amount of R$ 1,456.3 million, increased 8.9% from R$ 1,337.5 million recorded in 3Q16.
(R$ 5,084.3 million in the last twelve months).

The adjusted EBITDA margin was 41.2% in 3Q17 against 35.7% in 3Q16 (35.1% in the last twelve months).

Excluding construction revenues and construction costs, the adjusted EBITDA margin was 50.9% in 3Q17 (49.6% in 3Q16 and 44.9% in the last twelve months).

In 3Q17 the Company recorded a net income of R$ 900.5 million, in comparison to a net income of R$ 573.9 million in 3Q16.

 

 

2.     Gross operating revenue

Gross operating revenue from sanitation services, not including construction revenue, totaled R$ 2,999.7 million, an increase of R$ 145.6 million or 5.1%, when compared to the R$ 2,854.1 million recorded in 3Q16.

The main factors that led to this variation were:

PAGE 14 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

·         Increase of 4.8% in the Company’s total billed volume (5.0% in water and 4.6% in sewage); and

·         Lower estimated loss of wholesale revenue in 3Q17, in the amount of R$ 16.7 million, due to the payment received in the period, especially from the Guarulhos municipal government.

 

 

3.    Construction revenue

Construction revenue decreased R$ 384.9 million or 35.1%, when compared to 3Q16. The variation was mainly due to lower investments in the municipalities served by the Company.

PAGE 15 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

4.    Billed volume

 

The following tables show the water and sewage billed volume, on quarter-on-quarter and year-to-date basis, per customer category and region.

 

 

WATER AND SEWAGE BILLED VOLUME(1) PER CUSTOMER CATEGORY – million m3

QUARTER

 

Water

Sewage

Water + Sewage

Category

3Q17

3Q16

% Chg.

3Q17

3Q16

% Chg.

3Q17

3Q16

% Chg.

Residential

394.2

377.6

4.4

336.3

321.0

4.8

730.5

698.6

4.6

Commercial

41.6

40.3

3.2

40.1

38.5

4.2

81.7

78.8

3.7

Industrial

7.8

8.0

(2.5)

9.4

9.5

(1.1)

17.2

17.5

(1.7)

Public

10.2

10.2

-

9.2

9.0

2.2

19.4

19.2

1.0

Total retail

453.8

436.1

4.1

395.0

378.0

4.5

848.8

814.1

4.3

Wholesale (3)

65.4

58.4

12.0

8.6

7.9

8.9

74.0

66.3

11.6

Total

519.2

494.5

5.0

403.6

385.9

4.6

922.8

880.4

4.8

JANUARY TO SEPTEMBER

 

Water

Sewage

Water + Sewage

Category

9M17

9M16

% Chg.

9M17

9M16

% Chg.

9M17

9M16

% Chg.

Residential

1,177.9

1,135.6

3.7

1,002.7

961.4

4.3

2,180.6

2,097.0

4.0

Commercial

123.9

121.7

1.8

118.9

115.7

2.8

242.8

237.4

2.3

Industrial

23.6

23.7

(0.4)

28.1

28.8

(2.4)

51.7

52.5

(1.5)

Public

30.6

30.5

0.3

27.1

26.8

1.1

57.7

57.3

0.7

Total retail

1,356.0

1,311.5

3.4

1,176.8

1,132.7

3.9

2,532.8

2,444.2

3.6

Wholesale (3)

191.6

167.1

14.7

26.5

21.1

25.6

218.1

188.2

15.9

Total

1,547.6

1,478.6

4.7

1,203.3

1,153.8

4.3

2,750.9

2,632.4

4.5

WATER AND SEWAGE BILLED VOLUME (1) PER REGION - million m3

QUARTER

 

Water

Sewage

Water + Sewage

Region

3Q17

3Q16

% Chg.

3Q17

3Q16

% Chg.

3Q17

3Q16

% Chg.

Metropolitan

295.1

283.5

4.1

257.6

246.8

4.4

552.7

530.3

4.2

Regional (2)

158.7

152.6

4.0

137.4

131.2

4.7

296.1

283.8

4.3

Total retail

453.8

436.1

4.1

395.0

378.0

4.5

848.8

814.1

4.3

Wholesale (3)

65.4

58.4

12.0

8.6

7.9

8.9

74.0

66.3

11.6

Total

519.2

494.5

5.0

403.6

385.9

4.6

922.8

880.4

4.8

JANUARY TO SEPTEMBER

 

Water

Sewage

Water + Sewage

Region

9M17

9M16

% Chg.

9M17

9M16

% Chg.

9M17

9M16

% Chg.

Metropolitan

877.5

846.0

3.7

763.9

735.1

3.9

1,641.4

1,581.1

3.8

Regional (2)

478.5

465.5

2.8

412.9

397.6

3.8

891.4

863.1

3.3

Total retail

1,356.0

1,311.5

3.4

1,176.8

1,132.7

3.9

2,532.8

2,444.2

3.6

Wholesale (3)

191.6

167.1

14.7

26.5

21.1

25.6

218.1

188.2

15.9

Total

1,547.6

1,478.6

4.7

1,203.3

1,153.8

4.3

2,750.9

2,632.4

4.5

(1) Unaudited

(2) Including coastal and interior region

(3) Reused water volume and non-domestic sewage are included in

PAGE 16 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

5.    Costs, administrative & selling expenses and construction costs

Costs, administrative & selling expenses as well as construction costs decreased 10.5% in 3Q17 (R$ 283.1 million). Excluding construction costs, costs and expenses increased by 5.9% (R$ 95.9 million).

As a percentage of net revenue, costs and expenses were 68.0% in 3Q17 compared to 71.8% in 3Q16.

 

R$ million

 

 

 

Chg.

 

 

Chg.

 

3Q17

3Q16

R$

%

9M17

9M16

R$

%

Salaries and payroll charges and Pension plan obligations

623.4

292.3

331.1

113.3

1,927.8

1,488.0

439.8

29.6

General supplies

39.8

45.6

(5.8)

(12.7)

117.4

124.5

(7.1)

(5.7)

Treatment supplies

60.1

64.0

(3.9)

(6.1)

198.9

205.3

(6.4)

(3.1)

Services

288.4

347.1

(58.7)

(16.9)

920.9

945.8

(24.9)

(2.6)

Electricity

203.6

224.7

(21.1)

(9.4)

591.2

707.9

(116.7)

(16.5)

General expenses

184.4

249.3

(64.9)

(26.0)

633.9

640.6

(6.7)

(1.0)

Tax expenses

21.6

22.6

(1.0)

(4.4)

75.9

66.5

9.4

14.1

Sub-total

1,421.3

1,245.6

175.7

14.1

4,466.0

4,178.6

287.4

6.9

Depreciation and amortization

324.5

280.2

44.3

15.8

974.5

859.1

115.4

13.4

Allowance for doubtful accounts

(34.4)

89.7

(124.1)

(138.4)

87.5

110.2

(22.7)

(20.6)

Sub-total

290.1

369.9

(79.8)

(21.6)

1,062.0

969.3

92.7

9.6

Costs, administrative and selling expenses

1,711.4

1,615.5

95.9

5.9

5,528.0

5,147.9

380.1

7.4

Construction costs

694.5

1,073.5

(379.0)

(35.3)

2,165.9

2,563.2

(397.3)

(15.5)

Costs, adm & selling expenses and construction costs

2,405.9

2,689.0

(283.1)

(10.5)

7,693.9

7,711.1

(17.2)

(0.2)

% of net revenue

68.0

71.8

 

 

72.7

75.5

 

 

 

5.1.  Salaries and payroll charges and Pension plan obligations

 

There was an increase of R$ 331.1 million in 3Q17, mainly due to:

 

·                    Increase of R$ 34.5 million, mostly due to the 1% increase related to the Career and Salary Plan since December 2016 and the 3.71% pay rise in May 2017; and

·         Migration of 3,572 participants from the Defined Benefit Plan (G1) to the Defined Contribution Plan (Sabesprev Mais) in 3Q16, generating an early reduction of R$ 334.2 million in the actuarial deficit, offset by an incentive and extraordinary contribution of R$ 26.8 million, resulting in a net reduction of R$ 307.4 million in expenses in that period.

 

 

5.2.  Services

 

Services expenses totaled R$ 288.4 million, R$ 58.7 million less than the R$ 347.1 million recorded in 3Q16. This decline was distributed in several items, including:

 

 

·         Marketing campaigns, in the amount of R$ 10.9 million;

·         Nautical services related to the application of chemicals in the water reservoirs, in the amount of R$ 10.1 million;

·         Leasing of machinery and equipment, in the amount of R$ 4.3 million; and

·         Telephony, in the amount of R$ 3.2 million.

 

5.3.  Electricity

 

Electricity expenses totaled R$ 203.6 million in 3Q17, a decrease of R$ 21.1 million or 9.4% in comparison to the R$ 224.7 million in 3Q16. The main factors that contributed to this decrease were:

PAGE 17 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

·         Average reduction of 12.1% in the free market tariffs, with an 14.6% increase in consumption;

·         Average reduction of 29.4% in the grid market tariff (TUSD), with a 19.6% rise in consumption; and

·         Average reduction of 3.0% in the regulated market tariffs, with a 3.0%.decrease in consumption.

In 3Q17, the free market accounted for 35.2% of the total electricity consumed by the Company, the grid market accounted for 31.9% and the regulated market accounted for 32.9% of total consumption.

 

 

5.4.  General expenses

 

General expenses decreased R$ 64.9 million, or 26.0%, totaling R$ 184.4 million in 3Q17, versus the
R$ 249.3 million recorded in 3Q16, mainly due to the following reasons:

 

 

·         Higher provisioning for lawsuits in 3Q16, totaling R$ 31.6 million; and

·         Non-recurring provisioning of R$ 38.1 million in 3Q16, related to the agreement with Empresa Metropolitana de Águas e Energia – EMAE.

 

 

5.5.  Depreciation and amortization

 

Depreciation and amortization increased R$ 44.3 million or 15.8%, reaching R$ 324.5 million in 3Q17 in comparison to the R$ 280.2 million recorded in 3Q16, largely due to the beginning of operations of intangible assets, in the amount of R$ 1.6 billion.

 

 

5.6.  Allowance for doubtful accounts

 

The allowance for doubtful accounts fell R$ 124.1 million, mainly due to lower default rates in the period.

 

 

6.    Other operating revenue (expenses), net

There was an R$ 8.3 million increase in this line, mostly due to the payment of R$ 9.2 million received under the Water Basin Clean up Program.

 

 

 

7. Financial result

 

 

 

 

 

R$ million

 

3Q17

3Q16

Chg.

%

Financial expenses, net of income

(44.5)

(91.7)

47.2

(51.5)

Net monetary and exchange variation

267.4

(85.1)

352.5

(414.2)

Financial Result

222.9

(176.8)

399.7

(226.1)

PAGE 18 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

7.1. Financial income and expenses

 

 

 

 

 

R$ million

 

3Q17

3Q16

Chg.

%

Financial expenses

Interest and charges on international loans and financing

 

(28.7)

 

(28.5)

 

(0.2)

 

0.7

Interest and charges on domestic loans and financing

(72.4)

(80.5)

8.1

(10.1)

Other financial expenses

(30.6)

(49.2)

18.6

(37.8)

Total financial expenses

(131.7)

(158.2)

26.5

(16.8)

Financial income

87.2

66.5

20.7

31.1

Financial expenses, net of income

(44.5)

(91.7)

47.2

(51.5)

 

7.1.1. Financial expenses

 

 

 

 

 

Decrease of R$ 26.5 million, mainly due to the following events:

 

·         Interest and charges on domestic loans and financing: decline of R$ 8.1 million, mainly due to the lower CDI rate in 3Q17, compared with 3Q16 (8.14% and 14.13%, respectively); and

·         Other financial expenses: reduction of R$ 18.6 million, mostly due to lower provisioning for interest on court proceedings in 3Q17.

 

7.1.2. Financial income

 

Financial income moved up R$ 20.7 million, mostly due to the higher recognition of interest on installment agreements in 3Q17.

 

 

7.2. Monetary and exchange rate variation on assets and liabilities

 

 

 

 

R$ million

 

3Q17

3Q16

Chg.

%

Monetary variation on loans and financing

(3.6)

(24.4)

20.8

(85.2)

Currency exchange variation on loans and financing

253.2

(79.2)

332.4

(419.7)

Other monetary variations

(0.9)

(9.1)

8.2

(90.1)

Monetary/exchange rate variation on liabilities

248.7

(112.7)

361.4

(320.7)

Monetary/Exchange rate variation on assets

18.7

27.6

(8.9)

(32.2)

Monetary/exchange rate variation, net

267.4

(85.1)

352.5

(414.2)

 

7.2.1. Monetary and exchange rate variation on liabilities

 

 

 

 

 

The effect of monetary and currency variations in 3Q17 was R$ 361.4 million lower than in 3Q16, mainly due to:

 

·         Reduction of R$ 20.8 million in expenses with monetary variation on loans and financing, due to the lower variation in the IPCA in 3Q17 compared with 3Q16 (0.6% and 1.0%, respectively); and;

·         Decrease of R$ 332.4 million in exchange variation on loans and financing, as a result of the devaluation of dollar and yen against the real in 3Q17 (-4.2% and -4.5%, respectively), versus an appreciation of 1.1% and 2.7%, respectively, in 3Q16).

PAGE 19 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

8.    Income tax and social contribution

Increase of R$ 155.9 million, mainly due to the higher taxable result reported in the period, which was mostly impacted by the devaluation of dollar and yen against the real in 3Q17, versus an appreciation in 3Q16.

 

 

9.    Indicators

 

9.1.  Operating

 

Operating indicators(*)

3Q17

3Q16

%

Water connections(1)

8,807

8,595

2.5

Sewage connections (1)

7,247

7,036

3

Population directly served - water (2)

24.9

24.6

1.2

Population directly served - sewage (2)

21.5

21.1

1.9

Number of employees

13,901

14,172

(1.9)

Water volume produced - quarter (3)

695

670

3.8

Water volume produced in 9M (3)

2,082

2,006

3.8

IPM - Measured water loss (%)

31.1

31.3

(0.6)

IPDt (liters/connection x day)

306

298

2.7

 

(1) Total connections, active and inactive, in thousand units at the end of the period

(2) In million inhabitants, at the end of the period. Not including wholesale

(3) In millions of cubic meters

(*) Unaudited

 

 

 

 

9.2.  Financial

 

Economic Variables at the close of the quarter(*)

3Q17

3Q16

Amplified Consumer Price Index Variation (%)(1)

0.59

1.04

Referential Rate Variation (%)(1)

0.1132

0.5752

Interbank Deposit Certificate (%)(2)

8.14

14.13

US DOLLAR (3)

3.1680

3.2462

YEN (3)

0.02813

0.03207

 

(1) Quarterly rate

(2) Last day average

(3) R$/previous day price

(*) Unaudited

PAGE 20 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

10.    Loans and financing

R$ million

INSTITUTION

2017

2018

DEBT PROFILE

2021

2022

2023 onwards

Total

 2019          2020

Local Currency

 

 

 

 

 

 

 

 

Brazilian Federal Savings Bank

15.9

66.9

69.1

71.5

75.2

79.2

838.4

1,216.2

Debentures

58.7

897.8

1,015.7

573.2

374.6

353.8

255.9

3,529.7

BNDES

22.1

98.3

112.3

94.2

93.8

93.8

538.1

1,052.6

Leasing

4.2

30.3

31.8

33.4

35.1

37.0

387.2

559.0

Others

0.2

1.5

1.4

1.4

1.4

1.3

4.0

11.2

Interest and other charges

50.3

64.8

-

-

-

-

-

115.1

Total Local Currency

151.4

1,159.6

1,230.3

773.7

580.1

565.1

2,023.6

6,483.8

Foreign Currency

IADB

39.8

107.4

107.4

107.4

107.4

107.4

1,056.4

1,633.2

IBRD

-

-

9.6

19.3

19.3

19.3

221.4

288.9

Deutsche Bank 350

-

237.6

230.9

-

-

-

-

468.5

Eurobond

-

-

-

1,106.1

-

-

-

1,106.1

JICA

1.2

64.0

108.8

108.8

108.8

108.8

1,108.6

1,609.0

BID 1983AB

-

75.6

56.0

54.6

24.4

24.4

22.4

257.4

Interest and other charges

36.0

4.8

-

-

-

-

-

40.8

Total in foreign currency

77.0

489.4

512.7

1,396.2

259.9

259.9

2,408.8

5,403.9

Total

228.4

1,649.0

1,743.0

2,169.9

840.0

825.0

4,432.4

11,887.7

 

 

11.    Capex

 

 

In 9M17, capex reached R$ 2.3 billion, including R$ 0.6 billion related to the São Lourenço PPP. Out of the total amount invested by the Company, R$ 1.1 billion has not affected the Company’s cash.

PAGE 21 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

1                    Operations

 

Companhia de Saneamento Básico do Estado de São Paulo ("SABESP" or the "Company") is a mixed-capital company headquartered in São Paulo, at Rua Costa Carvalho, 300, CEP 05429-900, controlled by the São Paulo State Government. The Company is engaged in the provision of basic and environmental sanitation services in the State of São Paulo, as well as it supplies treated water and sewage services on a wholesale basis.

 

In addition to providing basic sanitation services in the State of São Paulo, SABESP may perform these activities in other states and countries, and can operate in drainage, urban cleaning, solid waste handling and energy markets. SABESP aims to be a world reference in the provision of sanitation services, in a sustainable, competitive and innovative manner, with a focus on customers.

 

As of September 30, 2017, the Company operated water and sewage services in 367 municipalities of the State of São Paulo. Most of these municipalities operations are based on 30-year concession, program and services contracts. The Company has two partial contracts with the municipality of Mogi das Cruzes, however, since most of municipality is serviced by wholesale, it was not included in the 367 municipalities. As of September 30, 2017, the Company had 369 contracts.

 

SABESP is not temporarily operating in the municipalities of Macatuba and Cajobi due to judicial orders. The lawsuits are in progress and the carrying amount of these municipalities’ intangible assets was R$ 4,345 as of September 30, 2017 (R$ 4,345 as of December 31, 2016).

 

As of September 30, 2017, 53 concession agreements (54 as of December 31, 2016) had expired and are being negotiated. From October 1, 2017 to 2030, 32 concession agreements will expire. Management believes that concession agreements expired and not yet renewed will result in new contracts, disregarding the risk of discontinuity in the provision of municipal water supply and sewage services. By September 30, 2017, 284 program and services contracts were signed (281 contracts as of December 31, 2016).

 

As of September 30, 2017, the carrying amount of the underlying assets used in the 53 municipalities under negotiation totaled R$ 6,616,613, accounting for 20.24% of the total, and the related gross revenue for the nine-month period ended September 30, 2017 totaled R$ 1,255,378, accounting for 11.26% of the total.

 

The Company’s operations are concentrated in the municipality of São Paulo, which represents 53.64% of the gross revenues on September 30, 2017 (55.35% on September 30, 2016) and 48.46% of intangible assets (46.57% on December 31, 2016).

 

On June 23, 2010, the State of São Paulo, the Municipality of São Paulo, the Company and the regulatory agency “Sanitation and Energy Regulatory Agency – ARSESP” signed an agreement to share the responsibility for water supply and sewage services to the Municipality of São Paulo based on a 30-year concession agreement. This agreement is extendable for another 30 years, pursuant to the law. This agreement sets forth SABESP as the exclusive service provider and designates ARSESP as regulator, establishing prices, controlling and monitoring services. On the same date, the State of São Paulo, the Municipality of São Paulo and SABESP signed the “Public service provision agreement of water supply and sewage services”, a 30-year concession agreement which is extendable for another 30 years. This agreement involves the following activities:

PAGE 22 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

i. protection of the sources of water in collaboration with other agencies of the State and the City;

ii. capture, transport and treatment of water;

iii. collect, transport, treatment and final dispose of  sanitary sewage; and

iv. adoption of other actions of basic and environmental sanitation.

 

The Company operates under an authorization by public deed in some municipalities in the Santos coast region and in the Ribeira Valley, where the Company started to operate after the merger of the companies that formed it. In September 2015, the Company entered into a water supply and sewage public utility services agreement with the municipality of Santos; the gross revenue calculated in the nine-month period ended September 30, 2017 totaled R$ 251,212 (R$ 206,908 in the period ended September 30, 2016) and the intangible asset was R$ 299,011 on September 30, 2017 (R$ 303,540 on December 31, 2016).

 

Article 58 of Law 11,445/07 determines that precarious and overdue concessions, as well as those effective for an undetermined period of time, including those that do not have an instrument formalizing them, will be valid until December 31, 2010. However, Article 2 of Law 12,693 of July 24, 2012, which amended Article 7-A of Law 11,578, of November 26, 2007, allowed the provision of public basic sanitation services to be executed until December 31, 2016. The Company’s Management understands that in the municipalities where the concession agreements were not yet renewed, the operation is governed by Laws 8,987/95 and 11,445/07, including those municipalities served without an agreement.

 

Public deeds are valid and governed by the Brazilian Civil Code.

 

 

The Company's shares have been listed in the Novo Mercado segment of B3 under the ticker symbol SBSP3 since April 2002 and on the New York Stock Exchange (NYSE) as American Depositary Receipts (“ADRs”) Level III, under the SBS code, since May 2002.

 

Since 2008, the Company has been setting up partnerships with other companies, which resulted in the following companies: Sesamm, Águas de Andradina, Saneaqua Mairinque, Aquapolo Ambiental, Águas de Castilho, Attend Ambiental and Paulista Geradora de Energia. Although SABESP has no majority interest in the capital stock of these companies, the shareholders’ agreements provide for the power of veto and casting vote in certain issues jointly with associates, indicating the shared control in the management of investees.

 

In September 2017, the reservoirs of the São Paulo Metropolitan Region stored approximately 996.7 billion liters of treatment water, versus approximately 831.9 billion litters in September 2016. The month of October marks the beginning of a new hydrological year, 2017/2018 which, under normal conditions, the period from October to March presents the highest rainfall and, consequently, the highest water inflow into the reservoirs. The water year ended in September recorded rainfall indexes close to the historical average, with the Cantareira System receiving 91% of the expected rainfall, while the Alto Tietê System received 80% and the Guarapiranga System 106%. Together, these are the main systems of the São Paulo Metropolitan Region.

PAGE 23 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

At the end of 2017 and beginning of 2018 two important projects aimed to increase water security in the São Paulo Metropolitan Region are expected to be concluded, as follows: (i) the Jaguarí-Atibainha interconnection, which will allow the transfer of an average annual outflow of 5.13 cubic meters per second (m³/s) and a maximum outflow of 8.5 m³/s from the Paraíba do Sul Basin to the Cantareira System, and which is 90.3% complete; and (ii) the construction of the São Lourenço Production System, which will expand water production and capacity by 6.4 m³/s, and which is 81.1% complete.

 

Management expects that with the normalization of rainfall, the generation of operating cash and the credit lines available for investment, the Company will have sufficient funds to meet its commitments and not compromise its necessary investments.

 

Corporate restructuring

 

As of May 12, 2017, the Board of the State Privatization Program approved:

 

(i) the conducting of studies for SABESP’s Capitalization (as defined below);

 

(ii)     the hiring, by SABESP, of the International Finance Corporation, which is associated with the World Bank;

 

(iii)   the execution of an agreement between SABESP and the State Government through the Water Resources and Sanitation Department and the Treasury Department, in order to define the scope of the contract and control the relationship between the parties, including a proportional expense reimbursement.

 

The proposed Capitalization provides for the creation of a corporation to directly control SABESP through the transfer of the shares held by the State of São Paulo to the capital stock of the new corporation. The State of São Paulo will continue holding a sufficient number of shares to ensure SABESP’s control, as provided for in law. The objective of the Capitalization is to overcome a situation that restricts investments designed to preserve the expansion of activities to ensure the universalization of basic sanitation services offered by the Company.

 

The Capitalization may provide for the admission of institutional investors to contribute financial resources to the capital stock of the new company, strengthening SABESP’s corporate governance and business efficiency in order to promote and accelerate the universalization of sanitation services in the State of São Paulo.

 

As of  September 15, 2017, Law 16,525 was sanctioned, enacted and published; it provides for the corporate reorganization of Companhia de Saneamento Básico de São Paulo - SABESP and sets forth other provisions.

 

The main provisions of the Law are:

 

·         The Executive branch is authorized to establish a corporation, governed by Federal Law 6,404/76, to hold basic sanitation and other assets, whose exploration relates to its main purpose ("Parent Company");

 

·         The objective of the Parent Company is, among others:

 

(i)        Control SABESP;

PAGE 24 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

(ii)      Hold the ownership, manage and explore assets of any nature, aiming the universalization and efficiency of basic sanitation services in the State of São Paulo;

 

(iii)    Structure and implement funding operations to strengthen its ability to execute strategies and initiatives in the basic sanitation sector;

 

(iv)    Assist the State of São Paulo and other federal entities in the implementation of public policies in the basic sanitation sector;

 

(v)      Explore other business opportunities related to the basic sanitation sector inside and outside the State of São Paulo, supported by SABESP;

 

(vi)    Use legally appropriate contractual and corporate arrangements to fulfill its corporate purpose, including the creation of wholly-owned subsidiaries, formation of consortia and holding interests in other public or private companies, provided that approved by the Board of Directors.

 

·         The Government will hold ownership of most of the common shares of the Parent Company; other shareholders may also hold minority interests in the Parent Company;

 

·         Private shareholders will be allowed in the Parent Company in order to contribute capital, add value to the business and strengthen the Company’s and the Parent Company’s corporate governance, provided that they do not restrict the capacity of the São Paulo State Government to guide them in the attainment of the public interest that justified their creation;

 

·         The São Paulo State Government is authorized to pay-in its interest in the Parent Company’s capital through the transfer of the shares it holds in SABESP;

 

·         The Parent Company and SABESP may acquire shares from other state-owned or private companies that have potential synergy with SABESP’s activities;

 

·         The Parent Company may increase SABESP’s capital to pay-in in cash or with assets, inclusive by holding a tender offer in the capital market; and

 

·         The São Paulo State Government is authorized to sell or encumber the Parent Company’s shares or its respective subscription rights, provided that the ownership of most of the common shares is maintained;

 

·         The State Government may waive its preemptive right to subscribe to shares in future capital increases of the Parent Company, in order to enable contributions from new shareholders without losing its the control;

 

·         The São Paulo State Government will mandatorily allocate at least 30% of the proceeds from the sale of the Parent Company’s shares to investments in basic sanitation projects;

 

·         A management agreement will be entered into by the São Paulo State Government, the Parent Company and SABESP to strengthen the companies’ administrative and financial efficiency;

PAGE 25 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

(i)    The execution of the management agreement will be preceded by the assumption of SABESP’s control by the Parent Company and will establish performance targets related to the reduction of water losses and the universalization of basic sanitation services provided by SABESP;

 

(ii)  The management agreement will also provide for the increase in the companies’ managerial autonomy regarding:

 

-  the definition of a personnel policy;

 

-  procedures for bids and the contracting of suppliers and service providers;

 

-  cash management, treasury operations, bank payments of salaries and suppliers; and

 

-    autonomy for the general shareholders’ meeting to establish the salaries and other types of compensation to members of management, based on the limits and parameters established in the management agreement;

 

(iii) The agreement will be valid for five years, but may be renegotiated and successively renewed.

 

The interim financial information was approved by the Board of Directors on November 14, 2017.

 

 

2                   Basis of preparation and presentation of the financial statements

 

Presentation of the interim financial information

 

The interim financial information as of September 30, 2017, was prepared based on the provisions of CPC 21 (R1) – Interim Financial Information and the international standard IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), applicable to the preparation of Quarterly Information Form– ITR and they are fairly presented consistent with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Therefore, this interim financial information takes into consideration the official letter CVM/SNC/SEP 003 of April 28, 2011, which allows the entities to present selected notes to the financial statements, in cases of redundant information already disclosed in the Annual Financial Statements. The interim financial information for September 30, 2017, therefore, does not include all the notes and reporting required by the annual financial statements, and accordingly, shall be read jointly with the Annual Financial Statements as of December 31, 2016, prepared pursuant to the International Financial Reporting Standards – IFRS, issued by the International Accounting Standards Board – IASB and pursuant to the accounting practices adopted in Brazil which observe the pronouncements issued by the Brazilian Accounting Pronouncements Committee - CPC. Therefore, the interim financial information as of September 30, 2017 was not fully completed due to redundancies with the information presented in the annual financial statements of December 31, 2016 and, as provided for in Official Letter/CVM/SNC/SEP no. 003/2011. In this interim financial information, the notes below was either not presented or are not as detailed as those in the annual financial statements:

 

i.       Summary of significant accounting policies (Note 3);

ii.       Changes in accounting practices and disclosures (Note 4);

iii.       Risk Management – Financial Instruments (Note 5.4);

iv.       Key Accounting Estimates and Judgments (Note 6);

PAGE 26 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

v.       Related-Party Balances and Transactions (Note 10);

vi.       Investments (Note 12);

vii.      Intangible Assets (Note 14);

viii.      Borrowings and Financing (Note 16);

ix.       Deferred Taxes and Contributions (Note 18);

x.       Provisions (Note 19);

xi.       Employees Benefits (Note 20);

xii.       Equity (Note 22);

xiii.      Insurance (Note 25);

xiv.      Financial Income (Expenses) (Note 28).

 

All material information related to the financial statements, and this information alone, is being disclosed and corresponds to the information used by the Company’s Management in its administration.

 

 

3                   Summary of significant accounting policies

 

The accounting policies used in the preparation of the interim financial information for the quarter ended September 30, 2017 are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2016. These policies are disclosed in Note 3 to the Annual Financial Statements.

 

 

4                   Risk management

 

4.1 Financial Risk Management  

Financial risk factors

The Company's activities are affected by Brazilian economic scenario, making it exposed to market risk (exchange rate and interest rate), credit risk and liquidity risk. The Company’s financial risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

 

The Company has not utilized derivative instruments in any of the reported periods.

 

(a)          Market risk

Foreign currency risk

SABESP’s foreign exchange exposure implies market risks associated with currency fluctuations, since the Company has foreign currency-denominated liabilities, mainly US dollar and yen-denominated short and long-term borrowings.

 

The management of SABESP’s foreign currency exposure considers several current and projected economic factors, besides market conditions.

PAGE 27 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

This risk arises from the possibility that the Company may incur in losses due to exchange rate fluctuations that would impact liability balances of foreign currency-denominated borrowings and financing raised in the market and related financial expenses. The Company does not maintain hedge or swap contracts or any derivative financial instrument to hedge against this risk.

 

A significant amount of the Company’s financial debt is indexed to the U.S. dollar and Yen, in the total amount of
R$ 5,435,102 as of September 30, 2017 (R$ 5,692,984 as of December 31, 2016). Below, the Company’s exposure to exchange risk:

 

 

September 30, 2017

December 31, 2016

 

Foreign currency

R$

Foreign currency

R$

 

 

 

 

 

Borrowings and financing – US$

1,193,902

3,782,282

1,241,963

4,047,682

Borrowings and financing – Yen

57,304,600

1,611,978

57,643,930

1,609,419

Interest and charges from borrowings and financing – US$

 

37,480

 

25,114

Interest and charges from borrowings and financing – Yen

 

3,362

 

10,769

Total exposure

 

5,435,102

 

5,692,984

Borrowing cost – US$

 

(28,104)

 

(29,650)

Borrowing cost – Yen

 

(3,074)

 

(2,971)

Total foreign currency-denominated borrowings (Note 15)

 

5,403,924

 

5,660,363

 

The 4.5% decrease in foreign-currency denominated debt on September 30, 2017 compared to December 31, 2016, was mainly due to the following:

 

1)         Exchange rate changes, due to the 2.8% depreciation in the US dollar, from R$ 3.2591 as of December 31, 2016 to R$ 3.1680 as of September 30, 2017. The US dollar-denominated debt accounts for 70.2% of foreign currency-denominated debts; and

2)        Partial amortization of the BID 713, BID 2202 and AB Loan agreements.

As of September 30, 2017, if the Brazilian real had depreciated or appreciated by 10%, in addition to the impacts mentioned above, against the US dollar and Yen with all other variables held constant, effects on results before taxes on the nine-month period ended September 30, 2017 would have been R$ 543,510 (R$ 569,298 for the year ended December 31, 2016), lower or higher, mainly as a result of exchange losses or gains on the translation of foreign currency-denominated loans.

 

Scenario I below presents the effect in income statements for the next 12 months, considering the projected rates of the U.S. dollar and the Yen. Considering the other variables as remaining constant, the impacts for the next 12 months are shown in scenarios II and III with possible depreciations of 25% and 50%, respectively, in the Brazilian real.

PAGE 28 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

Scenario I (Probable)

Scenario II (+25%)

Scenario III (+50%)

 

(*)

 

 

Net currency exposure as of September 30, 2017 (Liabilities) in US$

1,193,902

1,193,902

1,193,902

 

 

 

 

US$ rate as of September 30, 2017

3.1680

3.1680

3.1680

Exchange rate estimated according to the scenario

3.3000

4.1250

4.9500

Differences between the rates

(0.1320)

(0.9570)

(1.7820)

 

 

 

 

Effect on net financial result R$ - (loss)

(157,595)

(1,142,564)

(2,127,533)

 

 

 

 

Net currency exposure as of September 30, 2017 (Liabilities) in Yen

57,304,600

57,304,600

57,304,600

 

 

 

 

Yen rate as of September 30, 2017

0.02813

0.02813

0.02813

Exchange rate estimated according to the scenario

0.02890

0.03613

0.04336

Differences between the rates

(0.00077)

(0.00800)

(0.01523)

 

 

 

 

Effect on net financial result R$ - (loss)

(44,125)

(458,437)

(872,749)

 

 

 

 

Total effect on net financial result in R$ - (loss)

(201,720)

(1,601,001)

(3,000,282)

 

 

 

 

(*) For the probable scenario in US dollar, the exchange rate estimated for September 30, 2018 was used, pursuant to the Focus Report-BACEN of September 30, 2017, while for the Yen, the average exchange rate was considered for the 12-month period after September 30, 2017, according to B3’s Reference Rates report of September 30, 2017.

 

 

PAGE 29 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Interest rate risk

 

This risk arises from the possibility that the Company could incur losses due to fluctuations in interest rates, increasing the financial expenses related to borrowings and financing.

 

The Company has not entered into any derivative contract to hedge against this risk; however continually monitors market interest rates, in order to evaluate the possible need to replace its debt.

 

The table below provides the Company's borrowings and financing subject to variable interest rate:

 

 

September 30, 2017

 

December 31, 2016

TR(i)

1,569,328

 

1,535,030

CDI(ii)

1,144,391

 

1,082,228

TJLP(iii)

1,391,026

 

1,326,631

IPCA(iv)

1,714,665

 

1,697,452

LIBOR(v)

2,673,483

 

2,906,999

Interest and charges

129,017

 

142,644

Total

8,621,910

 

8,690,984

 

(i)  TR – Interest Benchmark Rate

(ii) CDI – (Certificado de Depósito Interbancário), an interbank deposit certificate

(iii) TJLP – (Taxa de Juros a Longo Prazo), a long-term interest rate index

(iv) IPCA – (Índice Nacional de Preços ao Consumidor Amplo), a consumer price index

(v) LIBOR – London Interbank Offered Rate

 

Another risk to which the Company is exposed, is the mismatch of the monetary restatement indices of its debts with those of its service revenues. Tariff adjustments of services provided by the Company do not necessarily follow the increases in the inflation indexes to adjust borrowings, financing and interest rates affecting indebtedness.

 

As of September 30, 2017, if interest rates on borrowings and financing had been 1% higher or lower with all other variables held constant, the effects on profit before taxes for the nine-month period ended September 30, 2017 would have been R$ 86,219 (R$ 86,910 as of December 31, 2016), lower or higher, mainly as a result of lower or higher interest expense on floating rate borrowings and financing.

 

(b)         Credit risk

 

Credit risk arises from cash equivalents, deposits in banks and financial institutions, as well as credit exposures to wholesale basis and retail customers, including outstanding accounts receivable, restricted cash and accounts receivable from related parties. Credit risk exposure to customers is mitigated by sales to a dispersed base.

 

The maximum exposures to credit risk as of September 30, 2017 are the carrying amounts of instruments classified as cash equivalents, deposits in banks and financial institutions, restricted cash, trade receivables and accounts receivable from related parties at the end of reporting period. See additional information in Notes 6, 7, 8 and 9.

PAGE 30 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

Regarding the financial assets held with financial institutions, the credit quality that is not past due or subject to impairment can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. The credit quality of counterparties which are banks, such as deposits and financial investments, the Company considers the lower rating of the counterparty published by three main international rating agencies (Fitch, Moody's and S&P), according to internal policy of market risk management:

 

 

September 30, 2017

 

December 31, 2016

Cash at bank and short-term bank deposits

 

 

 

AA+(bra)

2,055,532

 

1,850,220

AAA(bra)

35,908

 

35,452

Other (*)

9,560

 

549

 

2,101,000

 

1,886,221

 

(*) This category includes current accounts and investment funds in banks (the balances of which were not material).

 

The available credit rating information of the banks, as at September 30, 2017, in which the Company made deposit transactions and financial investments in domestic currency (R$ - domestic rating) during the period is as follows:

 

Banks

Fitch

Moody's

Standard Poor's

Banco do Brasil S/A

AA+(bra)

Aa1.br

-

Banco Santander Brasil S/A

-

Aaa.br

brAA-

Brazilian Federal Savings Bank

AA+(bra)

Aa1.br

brAA-

Banco Bradesco S/A

AAA(bra)

Aa1.br

brAA-

Itaú Unibanco Holding S/A

AAA(bra)

Aa1.br

brAA-

 

 

(c)         Liquidity risk

 

The Company's liquidity is primarily reliant upon cash provided by operating activities, loans from Brazilian Federal and State governmental financial institutions, and financing in the domestic and international capital markets. The liquidity risk management considers the assessment of its liquidity requirements to ensure it has sufficient cash to meet its operating and capital expenditures needs, as well as the payment of debts.

 

The funds held by the Company are invested in interest-bearing current accounts, time deposits and securities, selecting instruments with appropriate maturity or liquidity sufficient to provide margin as determined by projections mentioned above.

 

The table below shows the financial liabilities of the Company, into relevant maturities, including the installment of principal and future interest to be paid according to the agreement.

PAGE 31 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

October to

December

 

 

 

 

 

2022

 

2017

2018

2019

2020

2021

onwards

Total

As at September 30, 2017

 

 

 

 

 

 

 

 

Liabilities

Borrowings and financing

 

 

304,994

 

 

2,186,206

 

 

2,285,252

 

 

2,601,131

 

 

1,116,159

 

 

6,362,472

 

 

14,856,214

Trade payables and contractors

284,833

-

-

-

-

-

284,833

Services payable

386,209

-

-

-

-

-

386,209

Public-Private Partnership – PPP (*)

13,562

363,237

363,237

363,237

363,237

5,452,092

6,918,602

Program contract commitments

69,747

79,123

64,860

884

1,023

16,906

232,543

 

(*) The Company also considered future commitments (construction not yet performed) still not recognized in the financial statements related to São Lourenço PPP, due to the relevance of future cash flows, the impacts on its operations and the fact the Company already has formalized this commitment through an agreement signed by the parties.

 

Future interest

 

Future interest was calculated based on the contractual clauses for all agreements. For agreements with floating interest rate, the interest rates used correspond to the base dates above.

 

Cross default

 

The Company has borrowings and financing agreements including cross default clauses, i.e., the early maturity of any debt, may imply the early maturity of these agreements. The indicators are continuously monitored in order to avoid the execution of these clauses.

 

(d) Sensitivity analysis on interest rate risk

 

The table below shows the sensitivity analysis of the financial instruments, prepared in accordance with CVM Rule 475/2008 in order to evidence the balances of main financial assets and liabilities, calculated at a rate projected for the twelve-month period after September 30, 2017, or until the final settlement of each contract, whichever is shorter, considering a probable scenario (scenario I), appreciation of 25% (scenario II) and 50% (scenario III).

 

The purpose of the sensitivity analysis is to measure the impact of changes in the market over the financial instruments of the Company, considering constant all other variables. In the time of settlement the amounts can be different from those presented, due to the estimates used in the measurement.

PAGE 32 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

September 30, 2017

Indicators

Exposure

Scenario I

(Probable) (i)

Scenario II

 25%

Scenario III

50%

 

 

 

 

 

Assets

 

 

 

 

CDI

2,017,665

7.0000%(*)

5.2500%

3.5000%

Financial income

 

141,237

105,927

70,618

 

 

 

 

 

Liabilities

 

 

 

 

CDI

(1,144,391)

7.0000%(*)

5.2500%

3.5000%

Interest to be incurred

 

(80,107)

(60,081)

(40,054)

 

 

 

 

 

CDI net exposure

873,274

61,130

45,846

30,564

 

 

 

 

 

Liabilities

 

 

 

 

TR

(1,569,328)

0.0001%(***)

0.0001%

0.0002%

Expenses to be incurred

 

(2)

(2)

(3)

 

 

 

 

 

IPCA

(1,714,665)

4.0600%(*)

5.0750%

6.0900%

Expenses to be incurred

 

(69,615)

(87,019)

(104,423)

 

 

 

 

 

TJLP

(1,391,026)

7.0000% (*)

8.7500%

10.5000%

Interest to be incurred

 

(97,372)

(121,715)

(146,058)

 

 

 

 

 

LIBOR

(2,673,483)

1.5572% (**)

1.9466%

2.3359%

Interest to be incurred

 

(41,631)

(52,042)

(62,450)

 

 

 

 

 

Total net expenses to be incurred

 

(147,490)

(214,932)

(282,370)

 

 

 

 

 

(*)     Source: CDI and IPCA rates (Focus Report – BACEN, September 30, 2017) and long-term interest rate at September 30, 2017 (BACEN).

(**)   Source: Bloomberg

(***)Source: B3

 

(i)  Refers to the scenario of interest to be incurred for the 12 months as of September 30, 2017 or until the maturity of the agreements, whichever is shorter.

 

 

4.2  Capital management

 

The Company’s objectives when managing capital are ensure its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

PAGE 33 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

The Company monitors capital based on the leverage ratio. This ratio corresponds to net debt divided by total capital. Net debt corresponds to total borrowings and financing less cash and cash equivalents. Total capital is calculated as total equity as shown in the balance sheet plus net debt.

 

 

 

September 30, 2017

December 31, 2016

 

 

Total borrowings and financing (Note 15)

 

 

11,887,771

 

 

11,964,143

(-) Cash and cash equivalents (Note 6)

(2,101,000)

(1,886,221)

 

 

Net debt

 

 

9,786,771

 

 

10,077,922

Total equity

17,263,187

15,419,211

 

 

Total capital

 

 

27,049,958

 

 

25,497,133

 

 

Leverage ratio

 

 

36%

 

 

40%

 

 

As of September 30, 2017, the leverage ratio decreased to 36% from the 40% as of December 31, 2016, mainly due to the increase in shareholders’ equity, generated by the result recorded from January to September 2017.

 

4.3  Fair value estimates

 

It is assumed that balances from trade receivables (current) and accounts payable to suppliers by carrying amount, less impairment approximate their fair values, considering the short maturity. Long-term trade receivables also approximate their fair values, as they will be adjusted by inflation and/or will bear contractual interest rates over time.

 

4.4  Financial instruments

 

As of September 30, 2017 and December 31, 2016, the Company did not have financial assets classified as fair value through profit or loss, held to maturity and available for sale neither financial liabilities classified as fair value through profit or loss. The Company’s financial instruments included in the borrowings and receivables category comprise cash and cash equivalents, restricted cash, trade receivables, balances with related parties, other receivables, and balances receivable from the Water National Agency – ANA. The financial instruments under the “other liabilities” category comprise accounts payable to contractors and suppliers, borrowings and financing, services payable, balances payable deriving from the Public Private Partnership-PPP and program contract commitments, which are non-derivative financial assets and liabilities with fixed or determinable payments, not quoted in an active market.

PAGE 34 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

The estimated fair values of financial instruments are as follows:

Financial assets

 

September 30, 2017

December 31, 2016

 

Carrying amount

Fair value

Carrying amount

Fair value

   Cash and cash equivalents

2,101,000

2,101,000

1,886,221

1,886,221

   Restricted cash

15,229

15,229

24,078

24,078

   Trade receivables

1,738,933

1,738,933

1,711,306

1,711,306

   Water National Agency – ANA

73,363

73,363

81,221

81,221

   Other receivables

231,978

231,978

167,369

167,369

 

Additionally, SABESP has financial instrument assets receivables from related parties, in the amount of R$ 826,530 as of September 30, 2017 (R$ 871,709 as of December 31, 2016), which were calculated in accordance with the conditions negotiated between related parties. The conditions and additional information referring to these financial instruments are disclosed in Note 9 to this interim financial information and Note 10 to the Annual Financial Statements of December 31, 2016. Part of this balance, totaling R$ 728,143 (R$ 788,180 as of December 31, 2016), refers to reimbursement of additional retirement and pension plan - G0 and is indexed by IPCA plus simple interest of 0.5% p.m. This interest rate approximates that one practiced by federal government bonds (NTN-b) with terms similar to those of related-party transactions.

 

Financial liabilities

 

 

September 30, 2017

December 31, 2016

 

Carrying amount

Fair value

Carrying amount

Fair value

   Borrowings and financing

11,887,771

11,882,054

11,964,143

11,776,178

   Trade payables and contractors

284,833

284,833

311,960

311,960

   Services payable

386,209

386,209

460,054

460,054

   Program contract commitments

211,297

211,297

178,093

178,093

   Public-Private Partnership - PPP

2,783,204

2,783,204

2,249,418

2,249,418

 

 

The criteria adopted to obtain the fair values of borrowings and financing, in preparing the interim financial information as of September 30, 2017, are consistent with those adopted in the Annual Financial Statements for the fiscal year ended December 31, 2016. In the Annual Financial Statements, these criteria are disclosed in Note 5.4.

 

Considering the nature of other financial instruments, assets and liabilities of the Company, the balances recognized in the balance sheet approximate the fair values, taking into account the maturities close to the end of the reporting period, comparison of contractual interest rates with market rates in similar operations at the end of the reporting period, their nature and maturity terms.

PAGE 35 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

5                   Key accounting estimates and judgments

 

Estimates and judgments are continually evaluated and are based on historical experience and on other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The key accounting estimates and judgments are: (i) allowance for doubtful accounts, (ii) intangible assets resulting from concession and program contracts, (iii) provisions, (iv) pension benefits, and (v) deferred income tax and social contribution, and are disclosed in Note 6 to the Annual Financial Statements as of December 31, 2016.

 

 

6                   Cash and cash equivalents

 

 

September 30, 2017

December 31, 2016

Cash and banks

83,335

137,395

Cash equivalents

2,017,665

1,748,826

 

2,101,000

1,886,221

 

Cash and cash equivalents include cash, bank deposits and high-liquidity short-term financial investments, mainly represented by repurchase agreements (remunerated based on the variation of the Interbank Deposit Certificates (CDI) interest rates), entered into with Banco do Brasil, whose original maturities are lower than three months, which are convertible into a cash amount and subject to an insignificant risk of change in value.

 

As of September 30, 2017, the average yield of financial investments corresponds to 99.45% of CDI (99.24% as of December 31, 2016).

 

 

7                    Restricted cash

 

 

September 30, 2017

December 31, 2016

 

 

 

Agreement with the São Paulo municipal government (i)

7,931

15,858

Brazilian Federal Savings Bank – escrow deposits (ii)

1,777

2,989

Other

5,521

5,231

 

15,229

24,078

 

(i)      Refers to the amount deducted from the 7.5% of Municipal revenue transferred to the Municipal Fund, corresponding to eventual amounts unpaid by direct management bodies, foundations and government agencies, as established in the agreement entered into with the municipal government of São Paulo; and

(ii)    Refers to savings account for receiving escrow deposits regarding lawsuits with final and unappealable decisions in favor of the Company, which are blocked as per contractual clause.

PAGE 36 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

8

Trade receivables

 

(a)      Statement of financial position details

 

 

 

 

September 30, 2017

 

 

 

 

 

December 31, 2016

 

Private sector:

 

 

 

 

General and special customers (i) (ii)

1,162,777

 

1,205,498

 

Agreements (iii)

330,856

 

315,351

 

 

 

 

1,493,633

 

 

 

1,520,849

 

Government entities:

 

 

 

 

Municipal

537,441

 

520,950

 

Federal

4,028

 

3,414

 

Agreements (iii)

288,535

 

279,449

 

 

 

 

830,004

 

 

 

803,813

 

Wholesale customers – Municipal governments: (iv)

 

 

 

 

Guarulhos

783,555

 

778,106

 

Mauá

514,875

 

467,775

 

Mogi das Cruzes

2,684

 

2,527

 

Santo André

1,022,367

 

946,045

 

São Caetano do Sul

5,147

 

2,371

 

Diadema

222,671

 

222,671

 

 

 

Total wholesale customers – Municipal governments

 

 

2,551,299

 

 

 

2,419,495

 

 

 

Unbilled supply

 

 

511,776

 

 

 

481,389

 

 

 

Subtotal

 

 

5,386,712

 

 

 

5,225,546

 

Allowance for doubtful accounts

(3,647,779)

 

(3,514,240)

 

 

 

Total

 

 

1,738,933

 

 

 

1,711,306

 

 

 

Current

 

 

1,581,066

 

 

 

1,557,472

 

Noncurrent

157,867

 

153,834

 

 

 

 

1,738,933

 

 

 

1,711,306

PAGE 37 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

(i)    General customers - residential and small and mid-sized companies

 

(ii)   Special customers – large consumers, commercial industries, condominiums and special billing consumers (fixed demand agreements, industrial waste, wells, etc.);

(iii)Agreements - installment payments of past-due receivables, plus monetary restatement and interest, when provided for in the agreements; and

(iv) Wholesale basis customers - municipal governments - This balance refers to the sale of treated water to municipalities, which are responsible for distributing to, billing and charging final customers. Some of these municipalities are questioning in court the tariffs charged by SABESP, which have full allowance for doubtful accounts. Additionally, the overdue amounts are included in the allowance for doubtful accounts.

 

As of August 28, 2017, the Company and the Guarulhos Water and Sewage Autonomous Service ("SAAE"), resolved to continue preparing: (i) a legal agreement for the installment payment of SAEE’s debits with SABESP; and (ii) interdependence agreement to regulate wholesale water supply by SABESP.

 

The main items of the Proposal for the Debt Negotiation Agreement are:

 

I. Interdependence agreement to regulate wholesale water supply by SABESP:

 

a)      Creation of a guarantee of payment to SABESP for the fiduciary sale of SAAE receivables, with automatic separation of the amounts due to SABESP by the bank centralizing payments to SAEE; and

 

b)     As a result of the provision of the guarantee and the automatic payment, there will be a 20% discount on the monthly billed amount of wholesale water supply services.

 

II.  Legal agreement for the installment payment of SAEE’s debits with SABESP:

 

a)      Debt payment in 480 monthly installments, at an interest rate of 0.5% p.m., adjusted by the IPCA inflation index; and

 

b)     A 30% discount on the municipality’s debt of R$ 2.9 billion with SABESP, subject to timely payment during the installment period.

 

It is worth noting that the implementation of the items above depends on prior approval by SABESP’s Board of Directors, as well as other approvals to be established by each party and obtained prior to the signature of any binding document.

PAGE 38 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

(b)         The aging of trade receivables is as follows

 

 

 

September 30, 2017

December 31, 2016

 

 

Current

 

 

1,382,862

 

 

1,337,503

Past-due:

 

 

Up to 30 days

288,285

263,157

From 31 to 60 days

88,467

148,927

From 61 to 90 days

69,083

53,268

From 91 to 120 days

54,087

109,138

From 121 to 180 days

126,474

124,001

From 181 to 360 days

198,138

203,837

Over 360 days

3,179,316

2,985,715

 

 

Total past-due

 

 

4,003,850

 

 

3,888,043

 

 

Total

 

 

5,386,712

 

 

5,225,546

 

 

The increase in the overdue balance was mainly due to the default of the municipalities that purchased water on a wholesale basis, given that they are challenging the tariffs charged by SABESP in court.

 

(c)         Allowance for doubtful accounts

 

 

 

January to September 2017

January to September 2016

 

 

 

Balance at beginning of the period

3,514,240

3,307,793

Private sector /government entities

57,170

121,930

Recoveries

(99,197)

(141,698)

Wholesale customers

182,149

231,891

 

 

 

Net additions for the period

140,122

212,123

 

 

 

Write-offs in the period referring to accounts receivable

(6,583)

(19,603)

 

 

 

Balance at the end of the period

3,647,779

3,500,313

 

 

 

PAGE 39 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

Reconciliation of estimated losses

 of income

July to

 September 2017

January to

 September 2017

July to

 September 2016

January to

 September 2016

 

 

 

 

 

Write-offs

(31,065)

(133,035)

(45,956)

(128,088)

Losses/(reversal) with state entities (related parties)

23,082

23,211

(842)

(4,403)

Losses/(reversal) with private sector/government entities

(8,889)

(57,170)

(91,199)

(121,930)

Losses/(reversal) with wholesale customers

(18,456)

(19,683)

-

2,542

Recoveries

69,708

99,197

48,289

141,698

 

 

 

 

 

Amount recorded as selling expenses

34,380

(87,480)

(89,708)

(110,181)

 

 

Wholesale sales losses, amounting to R$ 66,776 from July to September 2017 and R$ 162,466 from January to September 2017 (R$ 83,463 from July to September 2016 and R$ 234,433 from January to September 2016), were also recorded as revenue reduction.

 

The Company does not have customers representing 10% or more of its total revenues.

PAGE 40 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

9                   Related-Party Balances and Transactions

 

The Company is a party to transactions with its controlling shareholder, the State Government, and companies related to it.

 

(a)         Accounts receivable, interest on capital payable, revenue and expenses with the São Paulo State Government

 

 

September 30, 2017

December 31, 2016

Accounts receivable

 

 

Current:

 

 

   Sanitation services

105,833

134,005

   Allowance for losses

(33,413)

(56,624)

  Reimbursement for retirement and pension benefits paid (G0)

 

 

      - monthly flow (payments)

15,441

22,696

     - GESP Agreement – 2008

32,966

56,512

      - GESP Agreement – 2015

54,379

39,816

   “Se Liga na Rede” program (l)

1,990

6,148

 

 

 

Total current

177,196

202,553

 

 

 

Noncurrent:

 

 

   Agreement for the installment payment of sanitation services

23,977

-

   Reimbursement for retirement and pension benefits paid (G0)

 

 

      - GESP Agreement – 2008

-

18,838

      - GESP Agreement – 2015

625,357

650,318

 

 

 

Total noncurrent

649,334

669,156

 

 

 

Total receivables from shareholders

826,530

871,709

 

 

 

Assets:

 

 

Sanitation services

96,397

77,381

Reimbursement of additional retirement and pension benefits (G0)

728,143

788,180

“Se Liga na Rede” program (l)

1,990

6,148

 

 

 

Total

826,530

871,709

 

 

 

Liabilities:

 

 

Interest on capital payable to related parties

-

351,788

Other (g)

881

1,853

 

 

 

 

 

 

PAGE 41 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

July to

September 2017

January to

September 2017

July to

September 2016

January to

September 2016

 

 

 

 

 

Revenue from sanitation services

110,927

341,789

113,740

326,513

Payments received from related parties

(116,267)

(351,764)

(108,459)

(305,098)

 

 

 

 

 

Receipt of GESP reimbursement referring to Law 4819/58

(42,038)

(127,942)

(32,267)

(104,592)

 

 

 

(b)         Contingent assets - GESP (not recorded)

 

As of September 30, 2017 and December 31, 2016, SABESP had contingent assets with GESP, not recorded in assets referring to the additional retirement and pension paid (Law 4,819/58), named “Disputed amounts receivable”, totaling R$ 995,351 and R$ 937,035, respectively.

 

(c)         Use of reservoirs – EMAE

 

Empresa Metropolitana de Águas e Energia S.A. (“EMAE”) planned to receive for the credit and obtain financial compensation for alleged past and future losses in electricity generation, due to water collection, and compensation for costs already incurred and to be incurred with the operation, maintenance and inspection of the Guarapiranga and Billings reservoirs used by SABESP in its operations.

 

Several lawsuits were filed by EMAE, among which an arbitration proceeding related to the Guarapiranga reservoir and a lawsuit related to the Billings reservoir, both pleading for financial compensation due to SABESP’s water collect for public supply, alleging that this conduct has been causing permanent and growing loss in the capacity of generating electricity of Henry Borden hydroelectric power plant, resulting in financial losses.

 

As of April 10, 2014, the Company issued a Notice to the Market including the information about an eventual future agreement.

 

As of October 28, 2016, the Company entered into an agreement based on a Private Transaction Agreement and Other Adjustments with EMAE aimed to fully and completely settle the disputes involving the two companies.

 

Pursuant to the terms of Clause Two of the agreement, the transaction was subject to the condition precedent of approval by the competent bodies of EMAE. However, on October 19, 2017, SABESP and EMAE entered into the First Amendment to the Private Transaction Agreement and Other Covenants to remove the condition precedent related to the need for approval of the Agreement by EMAE’s shareholders’ meeting; the other terms and conditions of the transaction were maintained.

 

All litigation between SABESP and EMAE will cease permanently after ratification of the agreement, which has already occurred on the Arbitration Chamber.

 

The agreement involves the payment by SABESP to EMAE of the following amounts:

PAGE 42 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

-  R$ 6,610 annually, adjusted for inflation from the signature date of this instrument, based on the IPCA or on any other index that may replace it, to the last business day of October of each fiscal year, of which (i) the first annual payment until the last business day of October 2017 and (ii) the last payment until the last business day of October 2042; and

 

-   R$ 46,270, in five annual and successive installments, adjusted for inflation based on the IPCA, or on any other index that may replace it, the first installment of R$ 9,254 maturing on April 30, 2017 which was paid after occurrence of the conditions precedent, and the remaining 4 (four) installments, of the same amount, due on every April 30 (thirty) of the subsequent years, or the first subsequent business day.

 

In October 2017, the first installments mentioned above were paid.

 

At the same time, on April 11, 2016, the Company was served with process filed by EMAE’s minority shareholders against the São Paulo State. The plaintiffs of these lawsuits are seeking a decision that requires the State to prohibit SABESP from extracting water from these reservoirs without paying a financial compensation to EMAE and that allows EMAE to pump water from the reservoirs to its hydroelectric power plant. The plaintiffs of this lawsuit claim that the State, as EMA’s controlling shareholder, acted against EMAE and in favor of SABESP.

 

As of August 7, 2017, the Company was once again served with process in a citizen suit filed by Alvaro Luiz de Lima de Alvares Otero against ANEEL, EMAE and SABESP requesting the annulment of ANEEL order 3,431/16, which consents to the above transaction. The plaintiff claims that the act is illegal and harmful, compromises the operational feasibility of the Henry Borden hydroelectric power plant and jeopardizes the energy security of the São Paulo State, the Southeast region and Brazil. Finally, the plaintiff requests SABESP to indemnify EMAE, at an amount to be calculated.

 

If SABESP can no longer extract water from these reservoirs, it will have to transport water from more distant places, increasing water transportation costs, which may jeopardize the Company’s ability to provide an appropriate service in the region.

 

(d)        Agreements with reduced tariffs with State and Municipal Government Entities that joined the Rational Water Use Program (PURA)

 

The Company has signed agreements with government entities related to the State Government and municipalities where it operates that benefit from a reduction of 25% in the tariff of water supply and sewage services when they are not in default. These agreements provide for the implementation of the rational water use program, which takes into consideration the reduction in water consumption.

 

(e)         Guarantees

 

The State Government provides guarantees for some borrowings and financing of the Company and does not charge any fee with respect to such guarantees.

PAGE 43 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

(f)          Personnel assignment agreement among entities related to the State Government

 

The Company has personnel assignment agreements with entities related to the State Government, whose expenses are fully passed on and monetarily reimbursed. From July to September 2017 and in the same period in 2016, the expenses related to personnel assigned by SABESP to other state government entities amounted to R$ 2,102 and
R$ 2,449, respectively, and, from January to September 2017 and 2016, they amounted to R$ 7,237 and R$ 7,659, respectively.

 

From July to September 2016 and 2017, and from January to September 2017 there were no expenses related to employees assigned by other entities, but totaled R$ 10 from January to September 2016.

 

(g)         Services obtained from state government entities

 

As of September 30, 2017 and December 31, 2016, SABESP had an outstanding amount payable of R$ 881 and
R$ 1,853, respectively, for services rendered by São Paulo State Government entities.

 

(h)        Non-operating assets

 

As of September 30, 2017 and December 31, 2016, the Company had an amount of R$ 969 related to a free land lent to DAEE (Department of Water and Electricity).

 

(i)          Sabesprev

 

The Company sponsors a private defined benefit pension plan, which is operated and administered by Sabesprev. The net actuarial liability recognized as of September 30, 2017 amounted to R$ 747,496 (R$ 753,170 as of December 31, 2016), according to Note 19 (b).

 

(j)          Compensation of Management Key Personnel

 

Expenses related to the compensation to the members of its Board of Directors, Fiscal Council and Board of Executive Officers from July to September 2017 amounted to R$ 989 (R$ 951 from July  to September 2016). From January to September 2017, these expenses totaled R$ 2,884 (R$ 2,874 from January to September 2016). An additional amount of R$ 124, related to the bonus program paid to Executive Officers, was recorded from July to September 2017 (R$ 124 from July to September 2016). From January to September 2017, the bonus totaled R$ 432 (R$ 371 from January to September 2016).

 

(k)         Loan agreement through credit facility

 

The Company holds interest in certain Special Purpose Entities (SPEs), not holding the majority interest but with cast vote and power of veto in some issues, with no ability to use such power of veto in a way to affect returns over investments. Therefore, these SPEs are considered for accounting purposes as jointly-owned subsidiaries.

 

The Company entered into a loan agreement through credit facility with the SPEs Aquapolo Ambiental S.A. on March 30, 2012, and with Attend Ambiental S.A. on May 9, 2014, to finance the operations of these companies, until the borrowings and financing requested with financial institutions is cleared.

PAGE 44 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

 

 

These agreements remain with the same characteristics, according to the table below:

 

SPE

 

Principal disbursed amount

 

 

Interest balance

 

 

Total

 

 

Interest rate

 

 

Maturity

Attend Ambiental

 

5,400

 

3,554

 

8,954

 

SELIC + 3.5 % p.a.

 

(i)

Aquapolo Ambiental

 

5,629

 

5,685

 

11,314

 

CDI + 1.2% p.a.

 

(ii)

Aquapolo  Ambiental

 

19,000

 

10,913

 

29,913

 

CDI + 1.2% p.a.

 

(iii)

Total

 

30,029

 

20,152

 

50,181

 

 

 

 

 

(i)  The loan agreement with SPE Attend  Ambiental  S/A  matures  within  180  days,  from  the  date when  the respective amount is available in the borrower’s account, renewable for the same period. The credit has been overdue since May 11, 2015 and is subject to contractual default charges (inflation adjustment considering the IGP-M variation, 2% fine and default interest of 1% p.m.). The agreement has been renegotiated between the parties.

(ii)   The R$ 5,629 loan agreement originally expired on April 30, 2016. As of April 7, 2016, an amendment to the agreement changed the payment schedule for four annual installments, the first of which maturing on December 30, 2018 and the last on December 30, 2021; and

(iii) The loan agreement totaling R$ 19,000 originally expired on April 30, 2015, but was extended to October 30, 2015. On April 7, 2016 a new amendment changed the payment schedule for three annual installments, the first of which maturing on December 30, 2021 and the last on December 30, 2023.

As a result of the renegotiations, the principal, in the amount of R$ 30,029, and interest, in the amount of R$ 20,152, that used to be recognized in current assets, under “other receivables”, were reclassified to the same group of noncurrent assets until new payment conditions are agreed upon. As of September 30, 2017, the balance of principal and interest rates of these agreements was R$ 50,181 (R$ 52,407 as of December 31, 2016). From January to September 2017, a financial income recognized was R$ 3,881 (R$ 6,096 from January to September 2016).

 

(l)          “Se Liga na Rede” (Connect to the Network Program)

 

The State Government enacted the State Law no. 14,687/12, creating the pro-connection program, destined to financially subsidize the execution of household branches necessary to connect to the sewage collecting networks, in low income households which agreed to adhere to the program. The program expenditures, except for indirect costs, construction margin and borrowing costs are financed with 80% of funds deriving from the State Government and the remaining 20% invested by SABESP, which is also liable for the execution of works. As of September 30, 2017, the program total amount was R$ 81,080 (R$ 79,274 as of December 31, 2016), R$ 1,990 (R$ 6,148 as of December 31, 2016) recorded in balances receivable from related parties, the amount of R$ 36,721 (R$ 34,915 as of December 31, 2016) recorded in the group of intangible assets and R$ 42,369 (R$ 38,211 as of December 31, 2016) reimbursed by GESP.

 

 

 

10                Water National Agency – ANA

 

The Company has agreements executed within the scope of the Hydrographic Basin Depollution Program (PRODES), also known as "Treated Sewage Purchase Program ".

 

This program does not finance works or equipment, remunerates by results achieved, i.e., by effectively treated sewage. In this program, the Water National Agency (ANA) makes available funds, which are restricted to a specific current account and applied in investment funds at the Brazilian Federal Savings Banks (CEF), until the fulfillment of treated sewage volume is evidenced, as well as, the reduction of polluting cargoes of each agreement.

 

 

 

PAGE 45 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

When resources are made available, liabilities are recorded until funds are released by ANA. After the evidence of targets stipulated in each contract, the revenue deriving from these funds is recognized, but if these targets are not met, funds will return to the National Treasury with the appropriate funds earnings. As of September 30, 2017, the balances of assets and liabilities were R$ 73,363 (R$ 81,221 as of December 31, 2016), and the liabilities are recorded under "other liabilities" of noncurrent liabilities.

 

 

11                 Investments

 

The Company holds interest in certain Special Purpose Entities (SPE). Although SABESP has no majority shares of its investees, the shareholders’ agreement provides for the power of veto in certain management issues, however, with no ability to use such power of veto in a way to affect returns over investments, indicating participating shared control (joint venture – CPC 19(R2)).

 

The Company holds interest valued by the equity method.

 

See additional information on the operations of each investee in Note 12 to the Annual Financial Statements as of December 31, 2016.

 

(a)         Summary of the investees’ financial statements and SABESP’s equity interest:

 

Company

Equity

Profit (loss) for the period

 

September

30,

2017

December 

31,

2016

January

 to September

2017

January

 to September

2016

Sesamm

42,432

37,198

5,234

4,368

Águas de Andradina

16,157

16,161

(4)

1,507

Águas de Castilho

4,377

3,706

671

573

Saneaqua Mairinque

4,641

4,090

551

383

Attend Ambiental

7,058

3,925

3,133

492

Aquapolo Ambiental

14,472

12,340

2,132

(501)

Paulista Geradora de Energia

8,450

8,469

(19)

(37)

 

 

Company

Investments

Equity in the earnings (losses) of subsidiaries

Interest percentage

 

September

 30,

2017

December

 31,

2016

January to

September

2017

January to

September

2016

September

 30,

2017

December

 31,

2016

Sesamm

15,275

13,391

1,884

1,572

36%

36%

Águas de Andradina

4,848

4,849

(1)

452

30%

30%

Águas de Castilho

1,313

1,112

201

172

30%

30%

Saneaqua Mairinque

1,392

1,227

165

115

30%

30%

Attend Ambiental

3,176

1,766

1,410

221

45%

45%

Aquapolo Ambiental

7,092

6,047

1,045

(245)

49%

49%

Paulista Geradora de Energia

2,112

2,117

(5)

(9)

25%

25%

Total

35,208

30,509

4,699

2,278

 

 

 

Other investments

587

587

 

 

 

 

 

Overall total

35,795

31,096

 

 

 

 

 

PAGE 46 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

12                Investment properties

 

As of September 30, 2017, the balance of “Investment properties”, mainly composed of land, is R$ 57,900 (December 31, 2016 – R$ 57,968). As of September 30, 2017 and December 31, 2016, the market value of these properties is approximately R$ 402,000 and R$ 404,000, respectively.

 

 

December 31,

 2016

Write-offs and disposals

Depreciation

September 30,

 2017

 

 

 

 

 

Investment properties

57,968

(8)

(60)

57,900

Total

57,968

(8)

(60)

57,900

 

 

December 31,

 2015

Transfers

Reversal of allowance for losses

Depreciation

September 30,

2016

 

 

 

 

 

 

Investment properties

56,957

1,647

9

(79)

58,534

Total

56,957

1,647

9

(79)

58,534

 

 

 

PAGE 47 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

13                Intangible Assets

 

(a)         Statement of financial position details

 

 

 

September 30, 2017

December 31, 2016

 

Cost

Accumulated amortization

Net

Cost

Accumulated amortization

Net

Intangible right arising from:

 

 

 

 

 

 

Agreements – equity value

9,235,564

(1,799,392)

7,436,172

9,222,543

(1,739,588)

7,482,955

Agreements – economic value

2,065,930

(615,005)

1,450,925

1,925,361

(543,709)

1,381,652

Program contracts

9,905,536

(2,909,000)

6,996,536

9,209,367

(2,633,346)

6,576,021

Program contracts – commitments

1,057,494

(193,659)

863,835

991,848

(168,632)

823,216

Services contracts – São Paulo

18,816,161

(3,326,989)

15,489,172

17,457,658

(2,904,951)

14,552,707

Software license

650,043

(202,264)

447,779

575,494

(145,257)

430,237

Total

41,730,728

(9,046,309)

32,684,419

39,382,271

(8,135,483)

31,246,788

 

 

(b)         Changes

 

 

 

December 31,

 2016

Additions

Contract renewal

Reversal of estimated losses

Transfers

Write-offs and disposals

Amortization

September 30,

 2017

Intangible right arising from:

 

 

 

 

 

 

 

 

Agreements – equity value 

7,482,955

299,967

(250,679)

2,078

25,734

(1,892)

(121,991)

7,436,172

Agreements – economic value 

1,381,652

139,710

-

8

2,612

(1,008)

(72,049)

1,450,925

Program contracts

6,576,021

398,614

250,679

4,834

(1,784)

(3,690)

(228,138)

6,996,536

Program contracts – commitments 

823,216

65,647

-

-

-

-

(25,028)

863,835

Services contracts – São Paulo

14,552,707

1,386,417

-

6,460

(18,929)

(4,816)

(432,667)

15,489,172

Software license

430,237

64,755

-

-

6,489

-

(53,702)

447,779

Total

31,246,788

2,355,110

-

13,380

14,122

(11,406)

(933,575)

32,684,419

 

 

 

 

PAGE 48 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

December 31, 2015

Additions

Contract renewal

Allowance for losses

Transfers

Write-offs and disposals

Amortization

September 30,

 2016

Intangible right arising from:

 

 

 

 

 

 

 

 

Agreements – equity value

7,287,630

209,580

(5,253)

(1,214)

18

(4,856)

(125,285)

7,360,620

Agreements – economic value

1,353,020

83,585

-

-

(23)

(1)

(56,482)

1,380,099

Program contracts

6,288,575

377,176

5,253

(634)

1,324

(1,532)

(198,600)

6,471,562

Program contracts – commitments

850,530

4,832

-

-

-

-

(24,825)

830,537

Services contracts – São Paulo

12,367,017

1,940,775

-

1,749

8,707

(713)

(398,381)

13,919,154

Software license

366,854

65,290

-

-

(167)

-

(27,749)

404,228

Total

28,513,626

2,681,238

-

(99)

9,859

(7,102)

(831,322)

30,366,200

 

 

In February 2017, the Company started operations in the municipality of Santa Branca and, in the second quarter of 2017, it entered into a contract program with the municipalities of Santa Cruz do Rio Pardo and Cândido Rodrigues. In the third quarter of 2017, the Company renewed a program contract with the municipality of Itaquaquecetuba; all these contracts are valid for 30 years.

 

(c)         General information

 

During the period ended September 30, 2017 there were no relevant changes in the criteria to account for intangible assets and types of contracts. Further information is included in Note 14 (d) to the Annual Financial Statements as of December 31, 2016.

 

The Company has obligations recorded in “Program Contract– Commitments” in current liabilities in the amount of R$ 129,425 and R$ 109,042 as of September 30, 2017 and December 31, 2016, respectively, and noncurrent liabilities in the amount of R$ 81,872 and R$ 69,051 as of September 30, 2017 and December 31, 2016, respectively.

 

(d)        Capitalization of interest and other finance charges

 

From January to September 2017, the Company capitalized interest and inflation adjustment in concession intangible assets totaling R$ 476,719, including the São Lourenço Production System and Leases (R$ 496,507 from January to September 2016), during the construction period.

 

(e)         Construction margin

 

The Company acts as a primary responsible to construct and install the infrastructure related to the concession, using own efforts or hiring outsourcing services, receiving the risks and benefits.

PAGE 49 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

As a consequence, the Company recognizes revenue from construction service corresponding to the cost of construction increased by margin. Generally, the constructions related to the concessions are performed by  third parties, in such case, the margin of the Company  is lower, normally, to cover eventual administration costs, and the responsibility of the primary risk. As of September 30, 2017 and 2016, the margin was 2.3%.

 

Construction margin from July to September and the same period in 2016 was R$ 18,405 and R$ 24,339, respectively, and from January to September 2017 and the same period in 2016, was R$ 49,299 and
R$ 57,006, respectively.

 

The amounts related to revenue and construction costs are presented in Note 23.

 

(f)          Expropriations

 

As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate third-parties' properties, and the owners of these properties will be compensated either amicably or through courts.

 

The costs of these expropriations are recorded as concession intangible assets after the transaction is concluded. From July to September 2017, the total amount related to expropriations was R$ 8,111 and from January to September 2017, expropriations totaled R$ 12,894 (R$ 5,466 from July to September 2016 and R$ 33,880 from January to September 2016).

 

(g)         Public-Private Partnership - PPP

 

SABESP carries out operations related to the PPPs mentioned below. These operations and their respective obligations and guarantees are supported by agreements executed according to Law 11,079/04.

 

Alto Tietê Production System

 

As of September 30, 2017 and December 31, 2016, the amounts recognized as intangible asset related to this PPP were R$ 373,724 and R$ 382,103, respectively.

 

Between January and September 2017, a discount rate of 8.20% p.a. was used to calculate the adjustment to present value of the agreement. The obligations assumed by the Company as of September 30, 2017 and December 31, 2016 are shown in the next table.

 

On a monthly basis, SABESP assigns funds from tariffs to the SPE SPAT Saneamento S/A (formerly CAB Sistema Produtor Alto Tietê S/A), in the amount of R$ 9,773, corresponding to the monthly remuneration. This amount is annually adjusted by the IPC – FIPE and is recorded in a restricted account, pursuant to the contractual operating proceeding. Should SABESP comply with its monthly obligations with the SPE, the funds from the restricted account will be released.

 

The guarantee is effective since the beginning of the operation and will be valid until the conclusion, termination, intervention, annulment or caducity of the Administrative Concession, or other extinction events provided for in the Concession Agreement or in the law applicable to administrative concessions, including in the event of bankruptcy or extinction of the SPE.

PAGE 50 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

São Lourenço Production System

 

As of September 30, 2017 and December 31, 2016, the carrying amount recorded in the Company’s intangible assets, related to this PPP, totaled R$ 2,521,666 and R$ 1,951,538, respectively. Intangible assets are accounted for based on the physical evolution of the works which, as of September 30, 2017, was approximately 81.10%, with a counter-entry in the Private Public Partnership (PPP) liabilities account. As of September 30, 2017, a discount rate of 7.80% p.a. was used to calculate the adjustment to present value of the agreement.

 

The obligations assumed by the Company as of September 30, 2017 and December 31, 2016 are shown in the table below, and the increase in intangible assets and liabilities was due to the progress of works in 2017.

 

 

September 30, 2017

December 31, 2016

 

Current liabilities

Noncurrent liabilities

Total liabilities

Current liabilities

Noncurrent liabilities

Total liabilities

 

 

 

 

 

 

 

Alto Tietê

33,865

284,363

318,228

31,898

309,858

341,756

São Lourenço

-

2,464,976

2,464,976

-

1,907,662

1,907,662

 

 

 

 

 

 

 

Total

33,865

2,749,339

2,783,204

31,898

2,217,520

2,249,418

 

 

(h)                        Works in progress

 

As of September 30, 2017, the amount of R$ 9,884 million is recorded under intangible assets as work in progress
(R$ 9,156 million as of December 31, 2016), and in the period ended September 30, 2017, the major projects are located in the municipalities of São Paulo, Franca and Itanhaém, totaling R$ 6,222 million (including R$ 2,522 million from PPP São Lourenço), R$ 247 million and R$ 246 million, respectively
.

 

(i)          Amortization of intangible assets

 

The amortization average rate totaled 4.0% and 3.9% as of September 30, 2017 and 2016, respectively.

 

(j)          Software license of use

 

The software license of use is capitalized based on the costs incurred to acquire software and make them ready for use. As of April 10, 2017, the Company implemented the Integrated Business Management System (Enterprise Resource Planning – SAP ERP), which includes the administrative/financial module. The implementation of the commercial module is in progress.

PAGE 51 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

14                Property, plant and equipment

 

(a)         Statement of financial position details

 

 

 

September 30, 2017

December 31, 2016

 

Cost

Accumulated depreciation

Net

Cost

Accumulated depreciation

Net

Land

92,507

-

92,507

92,494

-

92,494

Buildings

79,009

(36,073)

42,936

77,548

(34,286)

43,262

Equipment

326,641

(218,376)

108,265

338,696

(189,556)

149,140

Transportation equipment

10,945

(7,048)

3,897

11,141

(6,610)

4,531

Furniture and fixtures

23,675

(12,459)

11,216

23,633

(11,647)

11,986

Other

1,163

(247)

916

1,181

(211)

970

Total

533,940

(274,203)

259,737

544,693

(242,310)

302,383

 

 

(b)         Changes

 

 

December 31, 2016

Additions

Transfers

Write-offs and disposals

Depreciation

September 30,

 2017

Land

92,494

-

13

-

-

92,507

Buildings

43,262

86

1,355

-

(1,767)

42,936

Equipment

149,140

12,080

(15,445)

(69)

(37,441)

108,265

Transportation equipment

4,531

-

33

(10)

(657)

3,897

Furniture and fixtures

11,986

276

(63)

(35)

(948)

11,216

Other

970

-

(15)

-

(39)

916

Total

302,383

12,442

(14,122)

(114)

(40,852)

259,737

 

 

 

December 31,

 2015

Additions

Transfers

Write-offs and disposals

Depreciation

September 30,

 2016

Land

102,708

-

(10,214)

-

-

92,494

Buildings

45,891

-

54

-

(1,771)

44,174

Equipment

162,218

22,036

(6,007)

(110)

(23,886)

154,251

Transportation equipment

5,692

96

15

-

(705)

5,098

Furniture and fixtures

8,418

336

4,646

(8)

(1,281)

12,111

Other

149

845

-

-

(11)

983

Total

325,076

23,313

(11,506)

(118)

(27,654)

309,111

 

 

(c)         Depreciation

 

The Company annually revises the depreciation rates of: buildings - 3.0%; equipment- 16.7%; transportation equipment - 10% and furniture, fixture and equipment - 6.9%. Lands are not depreciated.

 

The depreciation average rate was 12.7% and 10.8%, as of September 30, 2017 and 2016, respectively.

 

PAGE 52 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

   

 

 


15                Borrowings and Financing

 

 Borrowings and financing outstanding balance

September 30, 2017

December 31, 2016

Financial institution

 

Current

Noncurrent

 

Total

 

Current

Noncurrent

 

Total

Local currency

 

 

 

 

 

 

 10th issue debentures

41,490

103,441

144,931

40,967

120,343

161,310

 12th issue debentures

45,450

306,062

351,512

45,450

340,165

385,615

 14th issue debentures

40,303

146,782

187,085

39,802

178,571

218,373

 15th issue debentures

343,305

342,601

685,906

97,692

672,657

770,349

 17th issue debentures

144,391

774,734

919,125

140,144

904,094

1,044,238

 18th issue debentures

32,852

212,146

244,998

32,436

223,840

256,276

 19th issue debentures

-

-

-

199,461

-

199,461

 20th issue debentures

-

496,545

496,545

-

495,533

495,533

 21st issue debentures

-

499,633

499,633

-

-

-

 Brazilian Federal Savings Bank

65,759

1,150,531

1,216,290

59,199

1,088,160

1,147,359

 Brazilian Development Bank - BNDES BAIXADA SANTISTA

16,742

20,928

37,670

16,603

33,207

49,810

 Brazilian Development Bank - BNDES PAC

11,116

52,682

63,798

10,987

60,293

71,280

 Brazilian Development Bank - BNDES PAC II 9751

4,324

24,010

28,334

4,288

27,007

31,295

 Brazilian Development Bank - BNDES PAC II 9752

2,361

20,069

22,430

2,341

21,659

24,000

 Brazilian Development Bank - BNDES ONDA LIMPA

23,413

151,954

175,367

23,219

168,083

191,302

 Brazilian Development Bank - BNDES TIETÊ III

30,306

287,723

318,029

30,054

307,862

337,916

 Brazilian Development Bank - BNDES 2015

4,010

402,948

406,958

-

233,967

233,967

 Leases

19,056

539,976

559,032

14,914

537,602

552,516

 Other

1,319

9,796

11,115

746

10,829

11,575

 Interest and charges

115,089

-

115,089

121,605

-

121,605

Total in local currency

941,286

5,542,561

6,483,847

879,908

5,423,872

6,303,780

 

 

PAGE 53 of 84


 
 

 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

  Notes to the Interim Financial Information

 Borrowings and financing outstanding balance

September 30, 2017

December 31, 2016

Financial institution

 

Current

Noncurrent

 

Total

 

Current

Noncurrent

 

Total

Foreign currency

 

 

 

 

 

 

 Inter-American Development Bank - BID 713  – US$ 12,549 thousand (US$ 25,097 thousand in December 2016)

39,755

-

39,755

81,794

-

81,794

 Inter-American Development Bank - BID 1212  – US$ 82,225 thousand (US$ 92,503 thousand in December 2016)

32,561

227,927

260,488

33,499

267,979

301,478

 Inter-American Development Bank - BID 2202 – US$ 425,438 thousand (US$ 438,071 thousand in December 2016)

74,877

1,258,191

1,333,068

75,143

1,339,803

1,414,946

 International Bank of Reconstruction and Development -BIRD – US$ 91,286 thousand
(US$ 79,946 thousand in December 2016)

-

288,880

288,880

-

260,224

260,224

 Deutsche Bank – US$ 150,000 thousand (US$ 150,000 thousand in December 2016)

118,800

349,741

468,541

-

480,244

480,244

 Eurobonds– US$ 350,000 thousand (US$ 350,000 thousand in December 2016)

-

1,106,125

1,106,125

-

1,137,395

1,137,395

 JICA 15 – ¥ 13,829,160 thousand (¥ 14,981,590 thousand in December 2016)

32,418

356,596

389,014

32,175

386,111

418,286

 JICA 18 – ¥ 12,433,920 thousand (¥ 13,470,080 thousand in December 2016)

29,147

320,369

349,516

28,930

346,889

375,819

 JICA 17 – ¥ 1,629,365 thousand (¥ 1,596,251 thousand in December 2016)

2,478

42,627

45,105

1,205

42,675

43,880

 JICA 19 – ¥ 29,412,155 thousand (¥ 27,596,009 thousand in December 2016)

-

825,270

825,270

-

768,463

768,463

 BID 1983AB (AB Loan) – US$ 82,404 thousand (US$ 106,346 thousand in December 2016)

75,849

181,471

257,320

78,030

263,921

341,951

 Interest and charges

40,842

-

40,842

35,883

-

35,883

Total in foreign currency

446,727

4,957,197

5,403,924

366,659

5,293,704

5,660,363

 

 

 

 

 

 

 

Total borrowings and financing

1,388,013

10,499,758

11,887,771

1,246,567

10,717,576

11,964,143

Exchange rate as of September 30, 2017: US$ 3.1680; ¥ 0.02813 (as of December 31, 2016: US$ 3.2591; ¥ 0.02792).

As of September 30, 2017, the Company did not record balances of borrowings and financing raised during the year to mature within 12 months.

 

 

 

 

 

 

 

 

PAGE 54 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Notes to the Interim Financial Information


Domestic currency

Guarantees

Maturity

Annual interest rates

Inflation adjustment

 

 

 

 

 

10th issue debentures

Own funds

2020

TJLP +1.92% (Series 1 and 3) and 9.53% (Series 2)

IPCA (series 2)

12th issue debentures

Own funds

2025

 TR + 9.5%

 

14th issue debentures

Own funds

2022

TJLP +1.92% (Series 1 and 3) and 9.19% (Series 2)

IPCA (series 2)

15th issue debentures

Own funds

2019

CDI + 0.99% (Series 1) and 6.2% (Series 2)

IPCA (series 2)

17th issue debentures

Own funds

2023

CDI +0.75 (Series 1) and 4.5% (Series 2) and4.75% (Series 3)

IPCA (series 2 and 3)

18th issue debentures

Own funds

2024

TJLP + 1.92 % (series 1 and 3) and 8.25% (series 2)

IPCA (series 2)

19th issue debentures

Own funds

2017

CDI + 0.80% to 1.08%

 

20th issue debentures

Own funds

2019

CDI + 3.80%

 

21st issue debentures

Own funds

2022

CDI + 0.60% (Series 1) and 0.90% (Series 2)

 

Brazilian Federal Savings Bank

Own funds

2017/2038

5% to 9.5%

TR

Brazilian Development Bank - BNDES BAIXADA SANTISTA

Own funds

2019

2.5%+TJLP

 

Brazilian Development Bank - BNDES PAC

Own funds

2023

2.15%+TJLP

 

Brazilian Development Bank - BNDES PAC II 9751

Own funds

2027

1.72%+TJLP

 

Brazilian Development Bank - BNDES PAC II 9752

Own funds

2027

1.72%+TJLP

 

Brazilian Development Bank - BNDES ONDA LIMPA

Own funds

2025

1.92%+TJLP

 

Brazilian Development Bank - BNDES TIETÊ III

Own funds

2028

1.66%+TJLP

 

Brazilian Development Bank - BNDES 2015

Own funds

2035

2.5%+TJLP

 

Leases

 

2035

7.73% to 10.12%

IPC

Other

Own funds

2018/2025

12% (Presidente Prudente) and TJLP + 1.66% (FINEP)

TR

 

 

 

 

PAGE 55 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 
 

Foreign currency

Guarantees

Maturity

Annual interest rates

Exchange rate changes

 

 

 

 

 

Inter-American Development Bank - BID 713  – US$ 12,549 thousand

Government

2017

4.58% (*)

US$

Inter-American Development Bank - BID 1212  – US$ 82,225 thousand

Government

2025

2.74% (*)

US$

Inter-American Development Bank - BID 2202  – US$ 425,439 thousand

Government

2035

2.25% (*)

US$

International Bank for Reconstruction and Development - BIRD – US$ 91,286 thousand

Government

2034

1.71% (*)

US$

Deutsche Bank US$150,000 thousand

2019

Libor+4.50%(*)

US$

Eurobonds – US$ 350,000 thousand

2020

6.25%

US$

JICA 15 – ¥ 13,829,160 thousand

Government

2029

1.8% and 2.5%

Yen

JICA 18– ¥ 12,433,920 thousand

Government

2029

1.8% and 2.5%

Yen

JICA 17– ¥1,629,365 thousand

Government

2035

1.2% and 0.01%

Yen

JICA 19 – ¥ 29,412,155 thousand

Government

2037

1.7% and 0.01%

Yen

BID 1983AB (AB Loan) – US$ 82,404 thousand

2023

Libor + 1.88% to 2.38% (*)

US$

 

 

 

  

(*) Rates comprising LIBOR + contractually defined spread.

 

PAGE 56 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 
 

 

Notes to the Interim Financial Information

 

 


(i) Payment schedule – accounting balances as of September 30, 2017

 

 

 

2017

2018

2019

2020

2021

2022

2023 to 2038

TOTAL

LOCAL CURRENCY

 

 

 

 

 

 

 

 

Debentures

58,761

897,791

1,015,736

573,186

374,558

353,760

255,943

3,529,735

Brazilian Federal Savings Bank

15,895

66,935

69,072

71,521

75,218

79,213

838,436

1,216,290

BNDES

22,065

98,287

112,323

94,240

93,793

93,793

538,085

1,052,586

Leases

4,175

30,299

31,784

33,398

35,153

37,060

387,163

559,032

Other

196

1,464

1,367

1,367

1,367

1,367

3,987

11,115

Interest and charges

50,284

64,805

-

-

-

-

-

115,089

TOTAL IN LOCAL CURRENCY

151,376

1,159,581

1,230,282

773,712

580,089

565,193

2,023,614

6,483,847

FOREIGN CURRENCY

 

 

 

 

 

 

 

 

BID

39,755

107,438

107,438

107,438

107,438

107,438

1,056,366

1,633,311

BIRD

-

-

9,630

19,260

19,260

19,260

221,470

288,880

Deutsche Bank

-

237,600

230,941

-

-

-

-

468,541

Eurobonds

-

-

-

1,106,125

-

-

-

1,106,125

JICA

1,239

64,043

108,765

108,765

108,765

108,765

1,108,563

1,608,905

BID 1983AB (AB Loan)

-

75,549

56,049

54,606

24,369

24,369

22,378

257,320

Interest and charges

36,005

4,837

-

-

-

-

-

40,842

TOTAL IN FOREIGN CURRENCY

76,999

489,467

512,823

1,396,194

259,832

259,832

2,408,777

5,403,924

Overall Total

228,375

1,649,048

1,743,105

2,169,906

839,921

825,025

4,432,391

11,887,771

 

 

 

 

 

PAGE 57 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

(i)    Main events in the nine-month period ended September 30, 2017

 

(a)         Debentures

 

As of January 16, 2017, the Company paid the second installment of the 17th issue of series 1, totaling R$ 140,144.

 

As of February 15, 2017, the Company fully paid the 15th issue of series 1, totaling R$ 104,809, referring to principal and interest.

 

As of June 20, 2017, the Company fully paid the 19th debenture issue, totaling R$ 212,648, referring to principal and interest.

 

As of July 13, 2017, the Company held the 21st issue of unsecured debentures, not convertible into shares, totaling R$ 500,000, in two series, the first of which totaling R$ 150,000, in a single installment maturing on June 15, 2020 and remuneration by the CDI + 0.60% p.a., and the second series, totaling R$ 350,000, in two installments maturing on June 15, 2021 and June 15, 2022, respectively and remuneration by the CDI + 0.90% p.a. The proceeds of the debenture issue will be allocated to refinance financial commitments maturing in 2017 and to recompose the Company’s cash.

 

The covenants agreed for the 21st issue debentures are:

Calculated every quarter upon the disclosure of interim or annual financial statements:

-  Net debt/EBITDA: lower than or equal to 3.65;

-  Adjusted EBITDA/paid financial expenses: equal to or higher than 1.5;

-  Disposal of operating assets, extinguishment of license, loss of concession or loss of Issuer’s capacity to execute and operate the basic sanitation public utilities in areas of the State of São Paulo territory, which considered individually or jointly during the deed’s effectiveness, result in a reduction of net sales revenue and/or services revenue of the Issuer exceeding twenty-five percent (25%). The limit established above will be calculated quarterly, taking into account the Issuer’s operating income for the twelve (12) months preceding the end of each quarter and applying the financial information disclosed by the Issuer.

Non-compliance with the covenant clauses, during, at least, two consecutive quarters, or also two nonconsecutive quarters within a twelve-month period shall result in the early maturity of the agreement.

The indenture has a cross acceleration clause, i.e., the early maturity of any of the Company’s debts, in and individual or aggregate amount equal to or higher than R$ 145 million, adjusted by the IPCA inflation index as of the issue date, constitutes a default event and may result in the early maturity of the obligations arising from the Debentures.

PAGE 58 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

(b)         BNDES

 

As of March 15, 2017, the Company raised R$ 170,000, corresponding to agreement BNDES 2015.

 

(c)         JICA

 

In 2017, funding totaled R$ 51,113, referring to agreement BZ-P19 (JICA 19).

 

(d)        BID

 

In 2017, funding and amortization totaled R$ 33,346 and R$ 73,001, respectively, referring to agreement BID 2202.

 

In 2017, the partial amortization referring to agreement BID 713 totaled R$ 41,549.

 

(e)         AB LOAN

 

In 2017, the amortization totaled R$ 75,610.

 

(e)         Exchange rate changes

 

The US dollar exchange decreased 2.8%, from R$ 3.2591 as of December 31, 2016 to R$ 3.1680 on September 30, 2017, decreasing debt by R$ 108,764. In the same period, the Yen increased 0.8%, from R$ 0.02792 as of December 31, 2016 to R$ 0.02813 on September 30, 2017, increasing the Yen debt by R$ 12,034.

 

(ii)        Covenants

 

As of September 30, 2017, the Company had met the requirements set forth by its borrowings and financing agreements.

 

(iii)     Borrowings and financing – Credit Limited

 

 

Agent

 

September 30, 2017

 

 

(in millions of reais (*))

Brazilian Federal Savings Bank

 

1,599

Brazilian Development Bank – BNDES

 

1,572

Inter-American Development Bank – BID

 

479

Japan International Cooperation Agency – JICA

 

246

Other

 

38

Total

 

3,934

 

(*) Exchange rate as of September 30, 2017 (US$ 1.00 = R$ 3.1680; ¥ 1.00 = R$ 0.02813).

PAGE 59 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

SABESP in order to comply with its Capex plan relies on a fund-raising plan. Financing resources contracted have specific purposes, which have been released for the execution of their respective investments, according to the progress of the works.

 

Additional information on borrowings and financing is presented in Note 16 to the Annual Financial Statements as of December 31, 2016.

 

 

16                Taxes payable

 

(a)         Current assets

 

 

 

September 30, 2017

December 31, 2016

Recoverable taxes

 

 

Income tax and social contribution

-

32,365

Withholding income tax (IRRF) on financial investments

7,317

7,057

Other federal taxes

3,472

2,961

Other municipal taxes

258

250

Total

11,047

42,633

 

 

The decrease in recoverable taxes was mainly due to the use of recoverable income tax and social contribution to pay said taxes, due in 2017.

 

(b)         Current liabilities

 

 

September 30, 2017

December 31, 2016

Taxes and contributions payable

 

 

Income tax and social contribution

15,107

-

Cofins and Pasep

59,722

49,132

INSS (Social Security contribution)

34,676

35,376

IRRF (withholding income tax)

3,611

62,771

Other

14,999

21,478

Total

128,115

168,757

PAGE 60 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

17           Deferred taxes and contributions

 

(a)              Statement of financial position details

 

 

September 30, 2017

December 31, 2016

Deferred income tax assets

 

 

Provisions

490,112

524,129

Actuarial loss –G1 Plan

85,044

85,044

Pension obligations - G1

165,848

167,922

Donations of underlying asset on concession agreements

55,780

57,317

Credit losses

224,899

266,757

Other

157,783

151,247

Total deferred tax assets

1,179,466

1,252,416

 

 

 

Deferred income tax liabilities

 

 

Temporary difference on concession of intangible asset

(467,886)

(492,341)

Capitalization of borrowing costs

(413,888)

(374,512)

Profit on supply to governmental entities

(85,610)

(92,365)

Construction margin

(89,638)

(91,790)

Borrowing costs

(13,894)

(15,063)

Total deferred tax liabilities

(1,070,916)

(1,066,071)

 

 

 

Deferred tax asset, net

108,550

186,345

 

 

 

PAGE 61 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

(b)              Changes

 

 

 

December 31,

2016

Net

change

September 30,

2017

Deferred income tax assets

 

 

 

Provisions

524,129

(34,017)

490,112

Actuarial loss – G1

85,044

-

85,044

Pension obligations - G1

167,922

(2,074)

165,848

Donations of underlying asset on concession agreements

57,317

(1,537)

55,780

Credit losses

266,757

(41,858)

224,899

Other

151,247

6,536

157,783

Total

1,252,416

(72,950)

1,179,466

 

 

 

 

Deferred income tax liabilities

 

 

 

Temporary difference on concession of intangible asset

(492,341)

24,455

(467,886)

Capitalization of borrowing costs

(374,512)

(39,376)

(413,888)

Profit on supply to governmental entities

(92,365)

6,755

(85,610)

Construction margin

(91,790)

2,152

(89,638)

Borrowing costs

(15,063)

1,169

(13,894)

Total

(1,066,071)

(4,845)

(1,070,916)

 

 

 

 

Deferred tax asset, net

186,345

(77,795)

108,550

PAGE 62 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 
Notes to the Interim Financial Information
 

 

December 31,

2015

Net

change

September 30,

2016

Deferred income tax assets

 

 

 

Provisions

480,378

39,045

519,423

Pension obligations - G1

256,808

(93,414)

163,394

Actuarial loss – G1

-

59,553

59,553

Donations of underlying assets on concession agreements

53,206

4,146

57,352

Credit losses

213,171

38,798

251,969

Tax losses

58,829

(58,829)

-

Other

121,550

23,768

145,318

Total

1,183,942

13,067

1,197,009

 

 

 

 

Deferred income tax liabilities

 

 

 

Temporary difference on concession of intangible asset

(524,495)

23,396

(501,099)

Capitalization of borrowing costs

(309,648)

(43,901)

(353,549)

Profit on supply to governmental entities

(81,055)

(7,089)

(88,144)

Actuarial gain – G1

(33,726)

33,726

-

Construction margin

(94,921)

2,393

(92,528)

Borrowing costs

(11,855)

(811)

(12,666)

Total

(1,055,700)

7,714

(1,047,986)

 

 

 

 

Deferred tax asset, net

128,242

20,781

149,023

 

 

 

September 30,

2017

December 31,

2016

 

 

 

Opening balance

186,345

128,242

Net change in the period:

 

 

 - corresponding entry in the statement of income

(77,795)

(60,667)

 - corresponding entry in equity valuation adjustments

-

118,770

 

 

 

Total change, net

(77,795)

58,103

Closing balance

108,550

186,345

 

 

 

 

PAGE 63 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

(c)               Reconciliation of the effective tax rate

 

 

The amounts recorded as income tax and social contribution expenses in the financial statements are reconciled to the statutory rates, as shown below:

 

 

 

September 30, 2017

 

September 30, 2016

 

Profit before income taxes

 

2,883,881

 

 

3,067,389

Statutory rate

34%

 

34%

 

 

Estimated expense at statutory rate

 

 

(980,520)

 

 

 

(1,042,912)

Tax benefit of interest on equity

42,009

 

7,659

Permanent differences

 

 

 

Provision – Law 4,819/58 (i)

(44,776)

 

(50,956)

Donations

(4,389)

 

(1,873)

Other differences

10,490

 

20,900

 

 

Income tax and social contribution

 

(977,186)

 

 

(1,067,182)

 

 

Current income tax and social contribution

 

 

(899,391)

 

 

 

(994,684)

Deferred income tax and social contribution

(77,795)

 

(72,498)

Effective rate

34%

 

35%

 

(i)       Permanent difference related to the provision for actuarial liability (Note 19 b (iii)).

PAGE 64 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

18                Provisions

 

(a)         Lawsuits and proceedings that resulted in provisions

 

(I)  Statement of financial position details

 

The Company is party to a number of claims and legal proceedings arising in the normal course of business, including civil, tax, labor and environmental matters. Management recognizes provisions consistently with the recognition and measurement criteria established in Note 3.15 to the Annual Financial Statements as of December 31, 2016. Management believes that the provisions are sufficient to cover eventual losses, net of escrow deposits, as follows:

 

 

 

Provisions

Escrow deposits

September 30,

2017

 

Provisions

Escrow deposits

December 31,

2016

Customer claims (i)

447,640

(60,759)

386,881

 

572,210

(97,171)

475,039

Supplier claims  (ii)

336,769

(256,943)

79,826

 

332,667

(251,510)

81,157

Other civil claims (iii)

122,868

(13,953)

108,915

 

131,286

(12,652)

118,634

Tax claims (iv)

79,274

(3,028)

76,246

 

69,898

(2,986)

66,912

Labor claims (v)

292,229

(5,041)

287,188

 

285,413

(3,202)

282,211

Environmental claims (vi)

162,725

-

162,725

 

150,084

(962)

149,122

Total

1,441,505

(339,724)

1,101,781

 

1,541,558

(368,483)

1,173,075

 

 

 

 

 

 

 

 

Current

658,621

-

658,621

 

730,334

-

730,334

Noncurrent

782,884

(339,724)

443,160

 

811,224

(368,483)

442,741

 

 

 

PAGE 65 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

(II)   Changes

 

 

 

December 31, 2016

Additional provisions

Interest and inflation adjustment

Use of the accrual

Amounts not used

(reversal)

September 30,

2017

Customer claims (i)

572,210

22,992

35,925

(124,817)

(58,670)

447,640

Supplier claims  (ii)

332,667

16,392

17,893

(12,368)

(17,815)

336,769

Other civil claims (iii)

131,286

7,879

8,822

(7,338)

(17,781)

122,868

Tax claims (iv)

69,898

4,418

6,152

(251)

(943)

79,274

Labor claims (v)

285,413

42,803

27,876

(37,775)

(26,088)

292,229

Environmental claims (vi)

150,084

23,786

12,125

(20,685)

(2,585)

162,725

Subtotal

1,541,558

118,270

108,793

(203,234)

(123,882)

1,441,505

Escrow deposits

(368,483)

(20,550)

(5,823)

13,919

41,213

(339,724)

Total

1,173,075

97,720

102,970

(189,315)

(82,669)

1,101,781

 

 

 

December 31, 2015

Additional provisions

Interest and inflation adjustment

Use of the accrual

Amounts not used

(reversal)

September 30,

2016

Customer claims (i)

561,061

77,319

67,360

(53,497)

(86,852)

565,391

Supplier claims  (ii)

296,660

12,306

41,685

(20,001)

(346)

330,304

Other civil claims (iii)

124,833

14,153

15,790

(5,893)

(21,278)

127,605

Tax claims (iv)

62,812

20,451

12,986

(4,603)

(15,516)

76,130

Labor claims (v)

283,991

42,906

19,754

(27,899)

(28,064)

290,688

Environmental claims (vi)

83,520

58,222

17,722

-

(21,869)

137,595

Subtotal

1,412,877

225,357

175,297

(111,893)

(173,925)

1,527,713

Escrow deposits

(330,663)

(27,687)

(25,968)

7,869

6,552

(369,897)

Total

1,082,214

197,670

149,329

(104,024)

(167,373)

1,157,816

 

(b)         Lawsuits deemed as contingent liabilities

 

The Company is party to lawsuits and administrative proceedings relating to environmental, tax, civil and labor claims, which are assessed as contingent liabilities in the financial statements, since it either does not expect outflows to be required or the amount of the obligation cannot be reliably measured. Contingent liabilities are represented as follows:

 

 

September 30, 2017

December 31, 2016

Customer claims (i)

223,000

306,500

Supplier claims  (ii)

1,431,300

1,422,000

Other civil claims (iii)

584,600

709,400

Tax claims (iv)

1,275,700

1,143,000

Labor claims (v)

663,500

533,600

Environmental claims (vi)

3,785,100

3,317,600

Total

7,963,200

7,432,100

 

 

 

PAGE 66 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

(c)         Explanation on the nature of main classes of lawsuits

 

(i)         Customer claims

 

Approximately 1,080 lawsuits were filed by commercial customers, which claim that their tariffs should correspond to other consumer categories, and 690 lawsuits in which customers claim a reduction in the sewage tariff due to losses in the system, consequently requesting the refund of amounts charged by the Company and 50 lawsuits in which customers plead the reduction in tariff under the category as “Social Welfare Entity”. The Company was granted both favorable and unfavorable final decisions at several court levels.

 

(ii)        Supplier claims

 

These claims include lawsuits filed by some suppliers alleging underpayment of monetary restatements, withholding of amounts related to the understated inflation rates deriving from Real economic plan, and the economic and financial imbalance of the agreements. These lawsuits are in progress at different courts.

 

(iii)     Other civil claims

 

These mainly refer to indemnities for property damage, pain and suffering, and loss of profits allegedly caused to third parties, filed at different court levels.

 

(iv)       Tax claims

 

Tax claims refer mainly to issues related to tax collections challenged due to differences in the interpretation of legislation by the Company's management.

 

(v)         Labor claims

 

The Company is a party to labor lawsuits, involving issues such as overtime, shift schedule, health hazard premium and hazardous duty premium, prior notice, change of function, salary equalization, service outsourcing and other. Part of the amount involved is in provisional or final execution at various court levels.

 

(vi)       Environmental claims

 

These refer to several administrative proceedings and lawsuits filed by government entities, including Companhia de Tecnologia de Saneamento Ambiental – Cetesb and the Public Prosecution Office of the State of São Paulo, that aim affirmative and negative covenants and penalty is estimated due to failure to comply in addition to the imposition of indemnity due to environmental damages allegedly caused by the Company. The amounts accrued represent the best estimate of the Company at this moment, however, may differ from the amount to be disbursed as indemnity to alleged damages, in view of the current stage of referred proceedings.

 

(d)        Guarantee insurance for escrow deposit

 

The Company contracts guarantee insurance for the issue of policy, which was renewed on May 25, 2017, in the amount of R$ 500 million. Such insurance will be used in legal claims where instead of making immediate cash disbursement by the Company, such insurance is used until the conclusion of these proceedings limited to up to five years.

 

From July to September 2017, the Company used R$ 1,749 (R$ 43,604 from July to September 2016).

 

Additional information on provisions and contingent liabilities is presented in Note 19 to the Annual Financial Statements as of December 31, 2016.

PAGE 67 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

19                Employee benefits

 

(a)         Health benefit plan

 

The health benefit plan is managed by Sabesprev and consists of optional, free choice, health plans sponsored by contributions of SABESP and the active participants, as follows:

 

. Company: 8.3% on average, of gross payroll; and

 

.     Participating employees: 3.21% of base salary and premiums, equivalent to 2.9% of payroll, on average.

 

(b)         Pension plan benefits

 

Amounts recorded in the statement of financial position

 

 

Funded plan – G1

 

 

Pension plan liabilities as of December 31, 2016

 

753,170

Expenses recognized in 2017

 

31,221

Payments made in 2017

 

(36,895)

Pension plan liabilities as of September 30, 2017 (i)

 

747,496

 

 

 

Unfunded plan – G0

 

 

Pension plan liabilities as of December 31, 2016

 

2,512,080

Expenses recognized in 2017

 

197,183

Payments made in 2017

 

(123,804)

Pension plan liabilities as of September 30, 2017 (iii)

 

2,585,459

 

 

 

Total

 

3,332,955

 

 

 

(i)    G1 Plan

 

The Company sponsors a defined benefit pension plan for its employees ("G1 Plan"), which is managed by Sabesprev, receives similar contributions established in a plan of subsidy of actuarial study of SABESPREV, as follows:

 

.   0.99% of the portion of the salary of participation up to 20 salaries; and

 

.   8.39% of the surplus, if any, of the portion of the salary of participation over 20 salaries.

 

As of September 30, 2017, SABESP had a net actuarial liability of R$ 747,496 (R$ 753,170 as of December 31, 2016) representing the difference between the present value of the Company's defined benefit obligations to the participating employees, retired employees, and pensioners; the fair value of the plan’s assets.

PAGE 68 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

(ii)            Private pension plan benefits – Defined contribution

 

As of September 30, 2017, Sabesprev Mais plan, based on defined contribution, had 9,352 active and assisted participants (9,453 as of December 31, 2016).

 

With respect to the Sabesprev Mais plan, the contributions from the sponsor represent 100% over the total basic contribution from the participants.

 

(iii)          Plan Go

 

Pursuant to Law 4,819/58, employees who started providing services prior to May 1974 and were retired as an employee of the Company acquired a legal right to receive supplemental pension payments, which rights are referred as "Plan G0". The Company pays these supplemental benefits on behalf of the State Government and makes claims for reimbursements from the State Government, which are recorded as accounts receivable from related parties, limited to the amounts considered virtually certain that will be reimbursed by the State Government. As of September 30, 2017, the Company recorded a defined benefit obligation for Plan G0 of R$ 2,585,459 (R$ 2,512,080 as of December 31, 2016).

 

(c)    Profit sharing

 

The Company has a profit sharing program in accordance with an agreement with labor union and SABESP. The period covered represents the Company fiscal year, commence in January to December 2017. The limit of the profit sharing is one month salary for each employee, depending on performance goals reached.

 

In the third quarter of 2017, a total of R$ 25,175 was accrued (R$ 20,938 in the third quarter of 2016). From January to September 2017 and 2016, R$ 69,573 and R$ 62,860, respectively, were accrued.

 

 

20               Services payable

 

The services account records the balances payable, mainly from services received from third parties, such as supply of electric power, reading of hydrometers and delivery of water and sewage bills, cleaning, surveillance and security services, collection, legal counsel services, audit, marketing and advertising and consulting services, among others. This account also includes the amounts payable related to transfer of 7.5% of revenue from the São Paulo local government to the Municipal Fund. The balances as of September 30, 2017 and December 31, 2016 were R$ 386,209 and R$ 460,054, respectively.

 

 

 

21                 Equity

 

(a)         Authorized capital

 

The Company is authorized to increase capital by up to R$ 15,000,000, based on a Board of Directors' resolution, after submission to the Fiscal Council.

 

In the event of capital increase, issue of convertible debentures and/or warrants by means of private subscription, shareholders will have preemptive right in the proportion of number of shares held, pursuant to Article 171 of Law 6,404/76.

 

 

 

PAGE 69 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

(b)         Subscribed and paid-in capital

 

Subscribed and paid-in capital is represented by 683,509,869 registered, book-entry common shares without par value as of September 30, 2017 and December 31, 2016, held as follows:

 

 

 

September 30, 2017

December 31, 2016

 

Number of shares

Number of shares

State Department of Finance

343,524,285

50.26%

343,524,285

50.26%

Companhia Brasileira de Liquidação e Custódia

202,336,306

29.60%

206,955,305

30.28%

The Bank Of New York ADR Department   (equivalent in shares) (*)

135,490,413

19.82%

132,401,813

19.37%

Other

2,158,865

0.32%

628,466

0.09%

 

 

 

 

 

 

683,509,869

100.00%

683,509,869

100.00%

  

 

(*)                 each ADR corresponds to 1 share.

 

The Annual Shareholders’ Meeting of April 28, 2017 approved the distribution of dividends as interest on equity totaling R$ 823,493, the transfer of retained earnings balances, in the amount of R$ 1,976,250, to the Reserve for Investments accounts, and the allocation of R$ 147,355 to the Legal Reserve account.

 

The payment of interest on equity totaling R$ 766,109, net of R$ 57,384 of withholding income tax (from a gross amount of R$ 823,493) began in in June 2017, generating a payout of R$ 765,933.

 

Further information about equity, such as shareholder’ compensation, dividends and purpose of reserves, can be found in Note 22 to the Annual Financial Statements as of December 31, 2016.

PAGE 70 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

22               Earnings per share Basic and diluted

Basic earnings per share is calculated by dividing the equity attributable to Company’s owners by the weighted average number of outstanding common shares during the year. The Company does not have potentially dilutive common shares outstanding or debts convertible into common shares. Accordingly, basic and diluted earnings per share are equal.

 

 

 

January to September 2017

January to September 2016

 

 

 

Equity attributable to Company’s owners

1,906,695

2,000,207

Weighted average number of common shares issued

683,509,869

683,509,869

 

 

 

Basic and diluted earnings per share (reais per share)

2.78957

2.92638

 

 

 

23               Operating segment information

 

Management, comprised by the Board of Directors and Board of Executive Officers, has determined the operating segment used to make strategic decisions, as sanitation services.

 

 

July to September 2017

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per financial statements

Gross operating revenue

2,999,747

712,875

3,712,622

Gross sales deductions

(176,178)

-

(176,178)

Net operating revenue

2,823,569

712,875

3,536,444

Costs, selling and administrative expenses

(1,711,393)

(694,470)

(2,405,863)

Income from operations before other operating expenses, net and equity accounting

1,112,176

18,405

1,130,581

Other operating income / (expenses), net

 

 

14,642

Equity accounting

 

 

1,232

Financial result, net

 

 

222,869

Income from operations before taxes

 

 

1,369,324

Depreciation and amortization

324,516

-

324,516

 

 

 

 

PAGE 71 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

Notes to the Interim Financial Information

 

 

January to September 2017

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per financial statements

Gross operating revenue

8,930,628

2,215,225

11,145,853

Gross sales deductions

(555,949)

-

(555,949)

Net operating revenue

8,374,679

2,215,225

10,589,904

Costs, selling and administrative expenses

(5,527,962)

(2,165,926)

(7,693,888)

Income from operations before other operating expenses, net and equity accounting

2,846,717

49,299

2,896,016

Other operating income / (expenses), net

 

 

37,715

Equity accounting

 

 

4,699

Financial result, net

 

 

(54,549)

Income from operations before taxes

 

 

2,883,881

Depreciation and amortization

974,487

-

974,487

 

 

 

July to September 2016

(Restated)

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per financial statements

Gross operating revenue

2,854,083

1,097,799

3,951,882

Gross sales deductions

(206,075)

-

(206,075)

Net operating revenue

2,648,008

1,097,799

3,745,807

Costs, selling and administrative expenses

(1,615,547)

(1,073,460)

(2,689,007)

Income from operations before other operating expenses, net and equity accounting

1,032,461

24,339

1,056,800

Other operating income / (expenses), net

 

 

6,264

Equity accounting

 

 

525

Financial result, net

 

 

(176,810)

Income from operations before taxes

 

 

886,779

Depreciation and amortization

280,217

-

280,217

PAGE 72 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

January to September 2016

(Restated)

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per financial statements

Gross operating income

8,148,172

2,620,239

10,768,411

Gross sales deductions

(556,173)

-

(556,173)

Net operating income

7,591,999

2,620,239

10,212,238

Costs, selling and administrative expenses

(5,147,893)

(2,563,233)

(7,711,126)

Income from operations before other operating expenses, net and equity accounting

2,444,106

57,006

2,501,112

Other operating income / (expenses), net

 

 

27,929

Equity accounting

 

 

2,278

Financial result, net

 

 

536,070

Income from operations before taxes

 

 

3,067,389

Depreciation and amortization

859,055

-

859,055

 

(i)          See note 29 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional to long-lived asset information.

(ii)       Construction revenue and related costs not reported to the Company’s chief operating decision maker.

 

Explanation on the reconciliation items for the Financial Statements. The impacts on gross operating income and costs are as follows:

 

 

July to September 2017

January to September 2017

July to September 2016

January to September 2016

 

 

 

 

 

Gross revenue from construction recognized under ICPC 1 (R1)  (a)

712,875

2,215,225

1,097,799

2,620,239

Construction costs recognized under ICPC 1 (R1) (a)

(694,470)

(2,165,926)

(1,073,460)

(2,563,233)

 

 

 

 

 

Construction margin

18,405

49,299

24,339

57,006

 

 

(a)  Revenue from concession construction contracts is recognized in accordance with CPC 17 (R1), Construction Contracts (IAS 11), using the percentage-of-completion method. See Note 13 (e).

PAGE 73 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

24               Operating revenue

 

 

(a)       Revenue from sanitation services

 

 

July to September 2017

January to September 2017

July to September 2016

January to September 2016

 

 

 

 

 

São Paulo Metropolitan Region

2,125,599

6,296,886

2,010,271

5,663,492

Regional Systems (i)

874,148

2,633,742

843,812

2,484,680

Total (ii)

2,999,747

8,930,628

2,854,083

8,148,172

 

(i)   Including the municipalities operated in the countryside and at the coast of the State of São Paulo; and

 

(ii)                Revenue from sanitation services increased by 5.1 % in the period ended September 30, 2017, in comparison with the same period in 2016, mainly due to the increase in billed volume, totaling 4.8%, of which 5.0% from water and 4.6% from sewage.

 

(b)       Reconciliation between gross operating revenue and net operating revenue:

 

 

 

July to September 2017

January to September 2017

July to September 2016

January to September 2016

 

 

 

 

 

Revenue from sanitation services

2,999,747

8,930,628

2,854,083

8,148,172

Construction revenue (Note 23)

712,875

2,215,225

1,097,799

2,620,239

Sales tax

(176,178)

(555,949)

(206,075)

(556,173)

Net revenue

3,536,444

10,589,904

3,745,807

10,212,238

 

 

 

PAGE 74 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

25       Operating costs and expenses

 

 

July to September 2017

January to September 2017

July to September 2016

January to September 2016

Operating costs

 

 

 

 

     Salaries, payroll charges and benefits

(438,701)

(1,368,180)

(418,015)

(1,228,477)

     Pension obligations

(12,268)

(35,738)

194,843

149,102

     Construction costs (Note 23)

(694,470)

(2,165,926)

(1,073,460)

(2,563,233)

     General supplies

(34,867)

(109,465)

(44,402)

(120,800)

     Treatment supplies

(60,060)

(198,871)

(63,950)

(205,326)

     Outside services

(180,220)

(612,655)

(222,962)

(620,612)

     Electricity

(203,205)

(589,921)

(224,075)

(705,811)

     General expenses

(130,634)

(392,706)

(122,330)

(345,696)

     Depreciation and amortization

(292,893)

(876,715)

(262,389)

(804,314)

 

(2,047,318)

(6,350,177)

(2,236,740)

(6,445,167)

 

 

 

 

 

Selling expenses

 

 

 

 

     Salaries, payroll charges and benefits

(69,083)

(215,917)

(66,799)

(194,902)

     Pension obligations

(1,876)

(5,343)

26,497

20,344

     General supplies

(925)

(2,742)

(818)

(2,502)

     Outside services

(57,979)

(184,377)

(78,066)

(211,331)

     Electricity

(200)

(575)

(152)

(586)

     General expenses

(24,523)

(69,001)

(22,894)

(68,427)

     Depreciation and amortization

(4,413)

(11,302)

(2,286)

(6,861)

           Bad debt expense, net of recoveries (Note 8 (c))

34,380

(87,480)

(89,708)

(110,181)

 

(124,619)

(576,737)

(234,226)

(574,446)

 

 

 

 

 

Administrative expenses

 

 

 

 

     Salaries, payroll charges and benefits

(55,436)

(168,084)

(47,203)

(138,168)

     Pension obligations

(46,059)

(134,635)

18,386

(95,854)

     General supplies

(3,971)

(5,154)

(435)

(1,246)

     Outside services

(50,166)

(123,846)

(46,043)

(113,851)

     Electricity

(227)

(711)

(498)

(1,528)

     General expenses

(29,257)

(172,207)

(104,056)

(226,472)

     Depreciation and amortization

(27,210)

(86,470)

(15,542)

(47,880)

     Tax expenses

(21,600)

(75,867)

(22,650)

(66,514)

 

(233,926)

(766,974)

(218,041)

(691,513)

 

 

 

 

 

Operating costs and expenses

 

 

 

 

     Salaries, payroll charges and benefits

(563,220)

(1,752,181)

(532,017)

(1,561,547)

     Pension obligations

(60,203)

(175,716)

239,726

73,592

     Construction costs (Note 23)

(694,470)

(2,165,926)

(1,073,460)

(2,563,233)

     General supplies

(39,763)

(117,361)

(45,655)

(124,548)

     Treatment supplies

(60,060)

(198,871)

(63,950)

(205,326)

     Outside services

(288,365)

(920,878)

(347,071)

(945,794)

     Electricity

(203,632)

(591,207)

(224,725)

(707,925)

     General expenses

(184,414)

(633,914)

(249,280)

(640,595)

     Depreciation and amortization

(324,516)

(974,487)

(280,217)

(859,055)

     Tax expenses

(21,600)

(75,867)

(22,650)

(66,514)

           Bad debt expense, net of recoveries (Note 8 (c))

34,380

(87,480)

(89,708)

(110,181)

 

(2,405,863)

(7,693,888)

(2,689,007)

(7,711,126)

PAGE 75 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

 

26          Financial income (expenses)

 

 

 

July to September 2017

January to September 2017

July to September 2016

January to September 2016

Financial expenses

 

 

 

 

Interest and charges on borrowings and financing – local currency

(72,389)

(203,199)

(80,481)

(248,809)

Interest and charges on borrowings and financing – foreign currency

(28,622)

(80,240)

(28,462)

(90,420)

Other financial expenses

(27,047)

(78,280)

(21,905)

(70,009)

Income tax over international remittance

(4,226)

(13,226)

(3,839)

(13,436)

Inflation adjustment on loans and financing

(3,597)

(44,442)

(24,388)

(110,163)

Inflation adjustment on Sabesprev Mais deficit

-

-

(136)

(882)

Other inflation adjustments

(6,994)

(23,938)

(6,806)

(23,920)

Interest and inflation adjustments on provisions

6,744

(26,653)

(25,795)

(110,507)

Total financial expenses

(136,131)

(469,978)

(191,812)

(668,146)

 

 

 

 

 

Financial income

 

 

 

 

Inflation adjustment gains

18,670

68,528

27,525

120,122

Income on short-term investments

45,104

156,671

49,863

153,089

Interest income

45,988

71,610

20,762

72,261

Cofins and Pasep

(3,920)

(12,638)

(4,589)

(17,237)

Other

-

442

534

10,882

Total financial income

105,842

284,613

94,095

339,117

 

 

 

 

 

Financial income (expenses), net before exchange rate changes

(30,289)

(185,365)

(97,717)

(329,029)

 

 

 

 

 

Net exchange gains (losses)

 

 

 

 

Exchange rate changes on borrowings and financing (i)

253,158

130,523

(79,198)

865,016

Other exchange rate changes

-

(54)

(7)

(140)

Exchange gains

-

347

112

223

Exchange rate changes, net

253,158

130,816

(79,093)

865,099

 

 

 

 

 

Financial income (expenses), net

222,869

(54,549)

(176,810)

536,070

(i)    The change in expenses mainly reflects the 4.5% depreciation of the Yen and the 1.04% appreciation of the U.S. dollar against the real in 2017, compared to the appreciation presented in the same period in 2016 (2.7% and 1.1%, respectively).

 

 

PAGE 76 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

27                Other operating income (expenses), net

 

 

July to September 2017

January to September 2017

July to September 2016

January to September 2016

 

 

 

 

 

Other net operating income, net

22,852

46,135

12,671

42,421

Other operating expenses

(8,210)

(8,420)

(6,407)

(14,492)

 

 

 

 

 

Other operating income (expenses), net

14,642

37,715

6,264

27,929

 

 

 

Other operating income is comprised by sale of property, plant and equipment, sale of contracts awarded in public bids, right to sell electricity, indemnities and reimbursement of expenses, fines and collaterals, property leases, reuse water, PURA projects and services, net of COFINS and PASEP.

 

Other operating expenses consist mainly of derecognition of concessions due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, provisions and reversals of property, plant and equipment and exceeding cost of electricity sold.

 

 

28               Commitments

 

The Company has agreements to manage and maintain its activities, as well as agreements to build new projects aiming at achieving the objectives proposed in its target plan. Below, the main committed amounts as of September 30, 2017:

 

 

October to December 2017

1-3 years

3-5 years

More than

5 years

Total

Contractual obligations – Expenses

209,318

2,078,318

621,504

2,314,778

5,223,918

Contractual obligations – Investments

149,322

2,386,069

974,152

5,728,413

9,237,956

Total

358,640

4,464,387

1,595,656

8,043,191

14,461,874

 

 

The main commitment refers to São Lourenço PPP. See Note 13 (g).

PAGE 77 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

29           Supplemental cash flow information

 

 

 

January to September 2017

January to September 2016

 

 

 

Total additions to intangible assets (Note 13 (b))

2,355,110

2,681,238

 

 

 

Items not affecting cash (see breakdown below)

(1,121,341)

(1,248,902)

 

 

 

Total additions to intangible assets as per statement of cash flows

1,233,769

1,432,336

 

 

 

Investments and financing operations affecting intangible assets but not cash:

 

 

Interest capitalized in the period (Note 13 (d))

476,719

496,507

Contractors payable

190,073

18,728

Public-Private Partnership – São Lourenço PPP

332,446

662,295

Leases

9,258

10,534

Program contract commitments

63,546

3,832

Construction margin (Note 23)

49,299

57,006

Total

1,121,341

1,248,902

 

 

30          Events after the reporting period

 

                                 ·            SABESP’s Second Ordinary Tariff Revision – Technical Note and Substantiated Report

 

As of October 6, 2017, the Sanitation and Energy Regulatory Agency of the State of São Paulo (ARSESP) published Final Technical Note NT/F/004/2017 and the Substantiated Report referring to the Initial Stage of SABESP’s Second Ordinary Tariff Revision, which authorizes the Company to apply the tariff adjustment index of 7.8888% to the effective tariffs.

 

ARSESP also approved a Resolution containing the new table of tariffs that will be published in the São Paulo State Official Gazette on October 10, 2017 and will be effective 30 days as of its publication.

 

                                 ·            Approval for application of the tariff adjustment index

 

As of October 11, 2017, the Extraordinary Board of Directors’ Meeting approved the application of the tariff adjustment index of 7.8888% of the effective tariffs and the adoption of the new table of tariffs, as authorized by the Sanitation and Energy Regulatory Agency of the State of São Paulo (ARSESP), through Resolution 753, which will become effective as of November 10, 2017.

 

Additionally, as of November 10, 2017, the bills will include the Regulation, Control and Monitoring Rate (TRCF) of zero point five percent (0.5%). This tariff was established by State Complementary Law 1,025/2007 and will be highlighted in the bills of customers residing in the municipalities served by ARSESP, pursuant to paragraph 2, article 2 of ARSESP Resolution 406/2013.

 

 

 

 

 

PAGE 78 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Notes to the Interim Financial Information

 

                                 ·            First Amendment to the Private Transaction Agreement and Other Covenants entered into between SABESP and EMAE

 

As of October 11, 2017, the Company’s Board of Directors approved the signature of the First Amendment to the Private Transaction Agreement and Other Covenants entered into on October 28, 2016 between SABESP and EMAE ("Agreement"), to remove the condition precedent related to the need for approval of the Agreement by EMAE’s shareholders’ meeting; the other terms and conditions of the transaction were maintained.

 

                                 ·            Water Supply and Sewage Service Agreements

 

On October 20, 2017, the Company formalized and renewed the Water Supply and Sewage Services Agreement with the municipalities of Pereiras and Taciba, both for a 30-year term.

 

On November 09, 2017, the Company renewed the Water Supply and Sewage Services Agreement with the municipality of Taubaté for a 30-year term.

PAGE 79 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Comments on the Company’s projections

 

 

 

 

 

 

Comments on the Company’s projections

 

 

The projections presented in the Reference Form are annual and not on a quarterly basis. Therefore, the quarterly comparison between information disclosed in the Reference Form with quarterly results shall not apply.

 

The projections monitoring occurs on annual basis and are disclosed in the Reference Form.

PAGE 80 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Other Information Deemed as Relevant by the Company

 

 

1.         CHANGES IN INTEREST HELD BY CONTROLLING SHAREHOLDER, BOARD MEMBERS AND EXECUTIVE OFFICERS

 

 

CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, MANAGEMENT AND OUTSTANDING SHARES

Position as of September 30, 2017

 

Shareholder

Number of Common Shares (units)

 

%

Total Number of Shares

(units)

 

%

Controlling Shareholder

 

 

 

 

Treasury Department

343,524,285

50.3%

343,524,285

50.3%

Management

 

 

 

 

Board of Directors

-

-

-

-

Executive Officers

-

-

-

-

 

 

 

 

 

Fiscal Council

4

-

4

0.0%

 

 

 

 

 

Treasury Shares

-

-

-

-

 

 

 

 

 

Other Shareholders

 

 

 

 

 

 

 

 

 

Total

343,524,289

50.3%

343,524,289

50.3%

 

 

 

 

 

 

 

 

 

 

Outstanding Shares

339,985,580

49.7%

339,985,580

49.7%

PAGE 81 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

Other Information Deemed as Relevant by the Company

 

CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, MANAGEMENT AND OUTSTANDING SHARES

Position as of 9/30/2016

 

Shareholder

Number of Common Shares (units)

 

%

Total Number of Shares

(units)

 

%

Controlling Shareholder

 

 

 

 

Treasury Department

343,524,285

50.3%

343,524,285

50.3%

Management

 

 

 

 

Board of Directors

 

-

 

-

Executive Officers

-

-

-

-

 

 

 

 

 

Fiscal Council

-

-

-

-

 

 

 

 

 

Treasury Shares

-

-

-

-

 

 

 

 

 

Other Shareholders

 

 

 

 

 

 

 

 

 

Total

343,524,285

50.3%

343,524,285

50.3%

 

 

 

 

 

 

 

 

 

 

 

Outstanding Shares

 

339,985,584

 

49.7%

 

339,985,584

 

49.7%

 

 

 

1.         SHAREHOLDING POSITION

 

 

SHAREHOLDING POSITION OF HOLDERS OF MORE THAN 5% OF EACH TYPE AND CLASS OF COMPANY SHARES, UP TO THE INDIVIDUAL LEVEL

Company:

CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Position as of September 30, 2017

(shares)

 

Common shares

Total

Shareholder

Number of shares

%

Number of shares

%

 

Treasury Department

 

343,524,285

 

50.3

 

343,524,285

 

50.3

PAGE 82 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

Reports and Statements / Unqualified Report on Special Review

 

 

Review report on the interim financial statements – ITR

 

To the Board of Directors and Shareholders

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

São Paulo – SP

 

Introduction

We have reviewed the interim financial information of Companhia de Saneamento Básico do Estado de São Paulo – SABESP (“The Company”), included in the Quarterly Financial Information – ITR referring to the quarter ended September 30, 2017, comprising the balance sheet as of September 30, 2017 and the statement of income and comprehensive income for the three and nine-month periods then ended, and the statements of changes in equity and cash flows for the nine-month period then ended, including the explanatory notes.

 

Management is responsible for the preparation of the interim financial information in accordance with accounting standard CPC 21(R1) - Interim Financial Reporting and IAS 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board - IASB, as well as for the presentation of this information in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM, applicable to the preparation of Quarterly Information - ITR. Our responsibility is to express a conclusion on this interim financial information based on our review.

 

Review scope

We conducted our review in accordance with the Brazilian and International standards on review engagements NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively. A review of interim financial information consists of making inquiries, primarily of persons responsible for the financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the auditing standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion on the interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the Quarterly Information Form - ITR referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by the IASB applicable to the preparation of Quarterly Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM.

 

PAGE 83 of 84


 

ITR – Quarterly Information Form – 9/30/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Version : 1

 

 

 

 

 

 

Other matters

Statement of value added

We have also reviewed the statements of value added (DVA) for the nine-month period ended September 30, 2017, prepared under the responsibility of the Company’s management, whose presentation on the interim financial information is required in accordance with the standards issued by the Brazilian Securities and Exchange Commission – CVM applicable to the preparation of Quarterly Information - ITR, and considered as supplementary information by IFRS, which does not require this disclosure. These statements were subject to the same review procedures described above, and based on our review, nothing has come to our attention that causes us to believe that it is not prepared, in all material respects, in accordance with the interim financial information taken as a whole.

 

 

São Paulo, November 14, 2017

 

KPMG Auditores Independentes

CRC 2SP014428/O-6

 

(Original report in Portuguese signed by)

    

Marcio Serpejante Peppe

Contador CRC 1SP233011/O-8

 

PAGE 84 of 84

 

SIGNATURE  
 
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, thereunto duly authorized, in the city São Paulo, Brazil.
Date: December 1, 2017
 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
By: /s/  Rui de Britto Álvares Affonso    
 
Name: Rui de Britto Álvares Affonso
Title: Chief Financial Officer and Investor Relations Officer
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.