2Q18 Results. Economic-Financial Office and Investor Relations Office

Transcription

1 2Q18 Results Economic-Financial Office and Investor Relations Office

2 DISCLAIMER This presentation may contain forward-looking statements referring to SABESP s business outlook, operating and financial results estimates, and growth prospects. These are only forecasts, and as such, they are exclusively based on SABESP s management expectation in relation to the future of business and its continuous access to capital to finance the Company s business plan. These forward-looking statements largely depend on changes in market conditions, governmental rules, industry performance and the Brazilian economy, among other factors, in addition to risks exhibited in disclosure documents filed by SABESP. Therefore, they are subject to changes without prior notice.

3 AGENDA 1 COMPANY OVERVIEW 2 OUR OPERATIONS 3 OUR FINANCIAL PERFORMANCE 4 SPMR WATER SITUATION

4 ...ONE OF THE LARGEST WATER AND SEWAGE PROVIDERS IN THE WORLD COMPANY OVERVIEW MAIN OPERATIONAL INDICATORS (1) Sabesp is one of the largest water and sewage service providers in the world based on the number of Customers Provides water to 24.9 million people and sewage services to 21.7 million people Also sells wholesale treated water to 5 municipalities (3.0 million people) Natural monopoly, low operating risk Water Sewage Connections (million) Coverage (2) (%) Service (3) (%) Treatment (4) (%) 75 Billed Volume (m³ million) 1, (1) As of June 30, 2018 (2) Service Available (3) Households connected (4) Consumer units connected to the sewage treatment Serves the City of São Paulo and 367 out of 645 municipalities in the State Covers around 60% of State's urban population, including the wholesale Operations in the São Paulo Metropolitan Region* represent 70.1% of our total revenues *The Metropolitan Region we consider for this estimate, includes 8 municipalities outside the legal boundaries of the São Paulo Metropolitan Region and represents the municipalities served by the Company s Metropolitan Division Regional Systems Metropolitan Region 4

5 ...WITH STRONG CORPORATE GOVERNANCE We are a mixed capital company, majority-owned by the State of São Paulo, with significant private ownership State law requires the State of São Paulo to own at least 50% + 1 voting shares at all times Currently the Government of São Paulo has 50.3% share 100% common shares Market Cap: R$ 15.9 billion (as of June, 2018) Law nº /16 Government-Controlled Companies Law OWNERSHIP STRUCTURE % (1) (¹) June/2018 5

6 THE POTENTIAL TRANSACTION TRANSACTION OVERVIEW USE OF PROCEEDS The proceeds of the Transaction may allow: The Transaction involves: Sabesp to raise capital to provide additional funding for expansion and investment plans GESP to raise resources for the state (through the proceeds of the sale of GESP s shares in Holdco), while helping Sabesp to accelerate its investment program, and maintaining control of Sabesp Sabesp to raise capital to provide additional funding for expansion and investment plans GESP to raise resources for the state (through the proceeds of the sale of GESP s shares in Holdco), while helping Sabesp to accelerate its investment program, and maintaining control of Sabesp Government of São Paulo Government of São Paulo Government of São Paulo Potential Investor OS: 100.0% PS: 0.0% HoldCo. HoldCo. State law requires the State of São Paulo to own at least 50% +1 voting shares at all times 50.3% 49.7% Listed in the Novo Mercado segment of B3 under the ticker symbol SBSP3 since April 2002 Listed in the New York Stock Exchange (NYSE) as American Depositary Receipts ( ADRs ) Level III, under the SBS code, since May 2002 Holding Company is created to house all capital stock of the GESP, and is owned 100% by GESP GESP remains in control of Sabesp A capitalization may be launched at Sabesp level with the subscription proceeds (primary component) raised at the HoldCo level. Proceeds may fund Sabesp expansion and investment plans Should the capitalization be done through issuance of ordinary shares of Sabesp, existing shareholders have the right to subscribe to a follow-on capital increase in the proportion of their stake in Sabesp. 6

7 AGENDA 1 THE COMPANY 2 OUR OPERATIONS 3 OUR FINANCIAL PERFORMANCE 4 SPMR WATER SITUATION

8 DIVERSIFIED CONSUMER BASE WATER BILLED VOLUME BY TYPE OF CUSTOMER SEWAGE BILLED VOLUME BY TYPE OF CUSTOMER 80% of water volume and revenue come from residential, commercial and industrial customer WATER REVENUES BY TYPE OF CUSTOMER 90% of sewage volume and revenue come from residential, commercial and industrial customer SEWAGE REVENUES BY TYPE OF CUSTOMER 8

9 BROAD COVERAGE OF MUNICIPALITIES *Includes 2 partial contracts with Mogi das Cruzes CONTRACT WITH THE MUNICIPALITY OF SÃO PAULO 30-year-service agreement between Sabesp, Municipality of São Paulo and State Government (expires in 2040) Minimum investment of 13% of the Gross Revenue, net of Cofins and Pasep Transfer of 7.5% of the Gross Revenue, net of Cofins and Pasep, to the Municipal Environmental Sanitation and Infrastructure Fund CONTRACTS Nº OF CONTRACTS % OF REVENUE Renewed/Secured (Program and Service Contract from 2007 to Jun/2018) % Metropolitan Region Without Contract % Expired Contracts / under negotiation % To be expired ( ) 4 0.2% To be expired ( ) % Total Retail 370* 98.6% Wholesale 5 1.4% Total Sabesp % TOP 10 CONTRACTS Municipality % of Total Remaining Revenue Period São Paulo 54.2% 22 years São Bernardo do Campo 2.8% 30 years Santos 2.4% 27 years Osasco 1.8% 21 years São José dos Campos 1.8% 20 years Diadema 1.2% 23 years Barueri 1.1% 26 years Suzano 1.0% 27 years Franca 0.9% 19 years Taubaté 0.8% 29 years Total 10+ / Average 68.1% 24 years 9

10 NEGOTIATION WITH GUARULHOS NEGOTIATION From wholesale to retail Investments of R$ 1.7 bn throughout the contract in: Municipal System Metropolitan Systems Judicial agreement for the suspension of the debt of approximately R$ 3.2 bn Transfer of a percentage of revenue for additional investments to be performed by a municipal fund dedicated to environmental sanitation and infrastructure MUNICIPAL LAW 7,656/18 Term of the contract up to 40 years Regulatory Agency ARSESP Social Control of the public services will be performed by CONESAM State Sanitation Council Creation of FMSAI Municipal Fund for Environmental Sanitation and Infrastructure WATER In 180 days Interconnection to Sabesp s network will enable the end of water rotation in many neighborhoods In one year additional works will enable the end of water rotation in the whole minucipality SEWAGE The current Sabesp s Sewage Treatment Plant will receive sewage from Guarulhos Due to the sewage treatment increase there will be significant descrease of Rio Tiete s pollution 10

11 REGULATORY FRAMEWORK FEDERAL LAW /07 / FEDERAL DECREES: 7.217/10, 8.211/14, 8.629/15, 9.254/17 Obligatory creation of a Regulatory Agency Municipal or State level Clarifies the payment conditions of non-amortized investments up to 4 years Disbursement of federal funds conditioned to the existence of a sanitation plan CONCESSION POWER IN METROPOLITAN REGIONS Legal proceeding related to this matter under Supreme Court (STF) appraisal was ruled in March 2013 The decision was released in September 2013 Sanitation services in metro regions are subject to shared responsibility between State and Municipality State Legislative has to create an entity and mechanisms to implement the ruling to adjust to the legislation ARSESP S ATTRIBUTION As Regulation activities and responsibilities include: Service quality Tariff structure and reviews Planning is a concession holder attribution PROVISIONAL PRESIDENTIAL DECREE 844/18 The Provisional Presidential Decree 844 of July 9, 2018 is pending on the Brazilian Congress and provides change on the following Laws: 9,8984/2000 Creation of the Brazilian National Water Agency (ANA) 10,768/2003 Disposal of Staff for the Brazilian National Water Agency (ANA) 11,445/2007 National Guidelines for the Basic Sanitation 11

12 TARIFF REVIEW METHODOLOGY OF TARIFF REVIEW (PRICE CAP) Required Revenue = OPEX + CAPEX + Taxes + RAB t RAB 0 WACC Average Tariff (P0) PRICE CAP Billed Volume Personnel Energy Materials Others Water Sewage Others Income Taxes Revenue Taxes Amortization Rate Cost of Equity Cost of Debt Output of the Model Reduced by X Factor X defined by Arsesp (after year1) Sabesp 4 year Business Plan + Arsesp Review Asset Useful Life Arsesp Technical Note ANNUAL TARIFF ADJUSTMENT FORMULA New Average Tariff = 1 + Inflation (IPCA) Productivity Factor (0.9386%) x Previous Average Tariff - Quality Factor* *Not defined yet 12

13 TARIFF AJUSTMENTS AND REVISIONS ADJUSTMENTS AND REVISIONS INDEXES OTR- Ordinary Tariff Revision ETR- Extraordinary Tariff Revision IPCA up to June/ Adjustment + Residual + ETR = 15.24% ORDINARY TARIFF REVISION (OTR) - 2º CYCLE FROM 2017 TO 2021 Inicial Stage - Oct/2017 Final Stage - May/2018 Preliminary Final Preliminary Final RAB (1) (R$ Billion) WACC (%) Current Average Tariff (R$/m³) X Fator (%) P0 (R$/m³) TRI (2) (%) (1) Regulatory Asset Base (2) Tariff Repositioning Index 24/05/2018 Sabesp filed at ARSESP: (i) Reconsideration Request (compensatory adjustment in the revenue, cost of electricity and investments in the 1st Cycle); and (ii) Clarification and Revision Request (reasons for the reduction in the OPEX for the period, revision of X Fator, compensatory adjustment for the delay in the application of the 2nd OTR and the calculation of the financial component related to municipal funds) 13

14 WATER AND SEWAGE OPERATIONS WATER CONNECTION EVOLUTION (million) WATER COVERAGE (Connection in 000 s) Add 783 thousand new connections by 2022 SEWAGE CONNECTION EVOLUTION (million) SEWAGE COVERAGE ( 000s) Add 1.1 million new connections by 2022 Coverage: 93% in 2022 Treatment: 83% in

15 INVESTMENT AND FINANCING INVESTMENT PLAN OF R$ 17.3 BILLION FROM 2018 TO 2022 Financial Values (in R$ million) 1,447* 812** (*) Book Value Includes non-cash items (**) Book Value Items that affected cash - Additional information is presented in Note 30 of the 2Q18 Financial Information FINANCING MAIN PROGRAMS Metropolitan Water Program Tietê Project Corporate Program for Water Loss Reduction Clean Stream Program Clean Wave Program 15

16 AGENDA 1 COMPANY OVERVIEW 2 OUR OPERATIONS 3 OUR FINANCIAL PERFORMANCE 4 SPMR WATER SITUATION

17 LONG TERM AND LOW COST FUNDING TOTAL DEBT BREAKDOWN TOTAL DEBT BY CURRENCY DEBT AMORTIZATION PROFILE (R$ million) 17

18 CONSISTENT PERFORMANCES NET REVENUE (R$ million) NET INCOME (R$ million) ADJUSTED EBITDA (R$ million) DIVIDENDS / PAY OUT Dividends declared (R$) Pay Out % Outstanding Shares (million) Adjusted EBITDA Last 12 months Adjusted EBTIDA Margin Last 12 months Adjusted EBITDA Margin Without Construction Last 12 months 18

19 HISTORICAL LEVERAGE (R$ million) ADJUSTED TOTAL DEBT VS. ADJUSTED EBITDA* ADJUSTED EBITDA* VS. FINANCIAL EXPENSES** Covenant: 3.65 Covenant: 2.35 Adjusted Total Debt = Total Debt - Interest NET DEBT VS. ADJUSTED EBITDA* NET DEBT VS. EQUITY Covenant: 3.50 * Adjusted EBITDA LTM ** Financial Explosures paid - LTM Calculated in accordance with CPCs/IFRS 19

20 COVENANT ADJUSTED TOTAL DEBT vs. EBITDA 20

21 FINANCIAL HIGHLIGHTS (R$ million) * 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 1H18* Gross Revenues w / construction 3,962 4,308 4,642 5,356 5,984 6,448 6,839 9,085 9,787 10,530 11,391 11,985 11,823 12,284 14,855 15,375 7,845 Net Revenues 3,767 4,131 4,397 4,953 5,527 5,971 7,809 8,580 9,231 9,927 10,738 11,316 11,213 11,712 14,098 14,608 7,372 Adjusted EBITDA 1,860 2,076 1,927 2,286 2,446 2,699 2,865 2,727 3,222 3,371 3,605 4,007 2,919 3,974 4,572 5,269 2,782 Adjusted EBITDA Margin Adjusted EBITDA w ithout Construction Margin Net Income (651) , ,508 1,630 1,381 1,912 1, ,947 2, Net Margin (%) Total Assets 16,332 16,590 16,784 17,431 18,000 18,660 17,206 20,243 23,293 25,019 26,476 28,274 30,355 33,707 36,745 39,546 40,971 Total Debt 7,878 7,264 7,051 6,664 6,327 5,685 6,865 6,560 8,209 8,423 8,875 9,450 10,786 13,122 11,964 12,101 13,186 Short-term Debt 1, , ,449 1,010 1,240 1,629 1, ,207 1,526 1,247 1,747 1,969 Long-Term Debt 6,593 6,267 5,554 5,905 5,474 4,943 5,416 5,548 6,970 6,794 7,533 8,809 9,579 11,595 10,718 10,354 11,217 Foreign Currency Debt 3,708 3,013 2,681 1,576 1,472 1,242 2,281 1,746 2,249 3,053 3,216 3,699 4,346 6,618 5,660 5,673 6,406 Shareholders' Equity 4,217 7,577 7,952 8,483 9,019 9,781 6,758 8,439 9,682 10,546 11,257 12,931 13,304 13,717 15,419 17,513 18,222 Total Debt/Total Cap. (%) Investments ,734 2,059 2,194 2,440 2,536 2,716 3,211 3,482 3,878 3,388 1,447 Dividend Declared (R$/ share) ** 5.4** 12.2** 9.5** Pay Out (%) Dividend Yield (%) Outstanding shares (million) * In accordance with CPCs / IFRS, which includes Construction Costs. ** R$ / 000 shares 21

22 AGENDA 1 COMPANY OVERVIEW 2 OUR OPERATIONS 3 OUR FINANCIAL PERFORMANCE 4 SPMR WATER SITUATION

23 Volume Stored (%) SPMR WATER SITUATION % 101% 58% 105% Cantareira 47% 91% *Long Term Average Sep/17 to Oct/18 **Sept/17 to Oct/18 RAINFALL IN THE MAIN WATER PRODUCTION SYSTEMS (mm) 26% 17% 32% 24% 213% 124% 61% Oct outnov novdec dezjan janfeb fevmar marapr abrmay mai Jun jun Jul julaug agosep setoct out VOLUME STORAGE (%) - 88% 111% 53% Guarapiranga 80% 26% 120% 92% LTA* = 1,339 17/18** = 947 (71%) 34% 45% 27% 81% 139% 51% out Oct nov Nov dez Dec jan Jan Feb fev Mar mar Apr abr May mai jun Jun Jul jul Aug ago Sep set Oct out % 139% 49% 79% Alto Tietê 28% 80% 70% LTA* = 1,447 17/18** = 966 (67%) 31% 120% 50% 18% 27% 90% Oct outnov nov Dec dez Jan jan Feb fev Mar mar Apr abr mai May jun Junjul Jul Aug ago Sep set out Oct AVERAGE PRODUCTION (m³/s) % 53.7% 51.7% 47.3% 40.6% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct12/Sep13 Oct13/Sep14 Oct14/Sep15 Oct15/Sep16 Oct16/Sep17 Oct17/Sep18 Oct 18/Sep % 7.7% jan Jan fev Feb mar Mar abr Apr mai May jun Jun jul Jul ago Aug set Sep out Oct nov Nov dez Dec Until October 18 23

24 SPMR PRODUCTION SYSTEMS ACCRUED RAINFALL: HYDROLOGICAL YEAR (OCT TO SEP) , , ,545.1 Historical Average= 1,567.3 mm 1, , , Oct12/Sep13 Out12/Set13 Oct13/Sep14 Out13/Set14 Oct14/Sep15 Out14/Set15 Oct15/Sep16 Out15/Set16 Out16/Set17 Oct16/Sep17 Out17/Set18 Oct17/Sep18 Chuva Accrued acumulada rainfall in no Hydrological ano hidrológico Year (mm) média Historical histórica average (mm) (mm) 24

25 Natural Inflow (m 3 /s) SPMR PRODUCTION SYSTEMS 100 NATURAL INFLOW (QN): HYDROLOGICAL YEAR (OCT TO SEP) Qn historical Average = 86.5m 3 /s Oct12/Sep13 Out12/Set13 Oct13/Sep14 Out13/Set14 Oct14/Sep15 Out14/Set15 Oct15/Sep16 Out15/Set16 Out16/Set17 Oct16/Sep17 Oct17/Sep18 Out17/Set18 Qnmédia average ano in Hydrological hidrológico (m3/s) Year (m³/s) média Historical histórica Average (m3/s) (m³/s) 25

26 SPMR WATER SITUATION WATER SUPPLY SYSTEM STRONGER THAN BEFORE THE WATER CRISIS OF 2014/2015 RESERVOIRS Var. % Reservoirs (water right) (m³/s) % Maximum storage capacity (hm³) (without the technical reserve) 1,816 2,106 16% Transfers between reservoirs (m³/s) % PRODUCTION AND DISTRIBUTION Var. % Urban population in the area served (source: SEADE) (million inhabitants) % 734,000 inhab. Total water treatment capacity (m³/s) % Water production systems Average monthly production (m³/s) (12%) Average residential consumption (m³/month) (17%) Treated water transfers between the systems (m³/s) Up to 3 Up to % IPDT (water loss per connection per day) in the SPMR (23%) 26

27 SPMR WATER SITUATION WATER PLAN FOR SPMR FROM 2015 TO 2019 (MAIN ACTIONS) DESCRIPTION Reversal increase from Guaratuba River to the Ponte Nova reservoir by 0.5 m³/s Reversal from the Guaió River to the Taiaçupeba reservoir: 1 m³/s Increase of the ABV Water Treatment Station production from 15 to 16 m³/s Interconnection between: Pequeno River Grande River (Billings) Taiaçupeba (Alto Tietê) 4 m³/s 1 m³/s transfer increase from Taquacetuba to Guarapiranga (from 4 to 5 m³/s) Jaguari Atibainha Interconnection: 5.13 m³/s to the Cantareira system (security increase) FLOW (m³/s) AVAILABILITY/ SECURITY PREV. PURPOSE STATUS INITIATIVES ACCOMPLISHED IN 2015 TOTAL Jan-15 completed Recover the storage volume and ensure Alto Tietê's water source 1 May-15 completed Jun-15 4 Sep-15 1 Dec-15 INITIATIVES ACCOMPLISHED IN mar/18 São Lourenço Production System: 6.4 m³/s 6.4 abr/18 TOTAL INITIATIVE PLANNED FOR 2019 Transfer water from Guarapiranga to the Cantareira area via the aqueduct system Recover the storage volume and ensure the Alto Tietê reservoir Transfer water to Cantareira s area Ensure Guarapiranga's water source Transfer water to Cantareira s area Recover storage volume and ensure the Cantareira System's water source Produce 6.4 m³/s for the Greater São Paulo's western region completed completed completed completed completed Reversal from Itapanhaú River (Ribeirão Sertãozinho) to the Biritiba reservoir Recover the storage volume and assure Alto Tietê's water source under development TOTAL TOTAL

28 IR Contacts Mario Azevedo de Arruda Sampaio Angela Beatriz Airoldi Head of Capital Markets and IR Investor Relations Manager +55 (11) (11)