2018 Results. Economic-Financial Office and Investor Relations Office

Transcription

1 2018 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 25.1 million people and sewage services to 21.7 million people Also sells wholesale treated water to 5 municipalities (3.1 million people) Natural monopoly, low operating risk Water Sewage Connections (million) Coverage (2) (%) Service (3) (%) Treatment (4) (%) 76 Billed Volume (m³ million) 2, ,641.0 (1) As of December 31, 2018 (2) Service Available (3) Households connected (4) Consumer units connected to the sewage treatment Serves the City of São Paulo and 369 out of 645 municipalities in the State Covers around 66% of State's urban population, including the wholesale Operations in the São Paulo Metropolitan Region* represent 72.2% 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$ 25.1 billion (as of December, 2018) Law nº /16 Government-Controlled Companies Law OWNERSHIP STRUCTURE % (1) (¹) December/2018 5

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

7 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 7

8 BROAD COVERAGE OF MUNICIPALITIES CONTRACTS Nº CONTRACTS % OF REVENUE Renewed/Secured (Program and Service Contract from 2007 to Dec/2018) 307* 81.2% Metropolitan Region Without Contract % Expired Contracts / under negotiation % To be expired ( ) 4 1.1% To be expired ( ) % Total Retail % Wholesale 4** 1.3% Total Sabesp % 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 Since May/18 Pass-through of 4% * Includes 2 partial contracts with Mogi das Cruzes, Aguaí and Guarulhos ** It does not include the contract with Guarulhos TOP 10 CONTRACTS Municipalities* % of Total Remaining Revenue Period São Paulo 51.5% 21 years São Bernardo do Campo 2.9% 15 years Santos 1.9% 27 years Osasco 1.7% 11 years São José dos Campos 1.7% 20 years Praia Grande 1.3% 30 years Barueri 1.3% 26 years Diadema 1.2% 25 years Suzano 1.0% 23 years Guarujá 0.9% Expired Total 10+ / Average 65.3% 20 years *Operation in Guarulos started in January 1,

9 CONTRACT WITH GUARULHOS TERM OF DEBT ADJUSTMENT The municipality withdraws pending appeals of Sabesp s collections legal procedings Sabesp: Court orders debt payments ( Precatórios ) Sabesp suspends the judicial collection of debt The payments remains suspended during the contract term The amounts are used as guarantees in the service contract If the service contract is interrupted, the court orders will be reactivated Transfer R$ 50 million to the municipality in order to end SAAE s activities SAAEs employees ceded to Sabesp: During 6 months - All SAAE s employees will be ceded to Sabesp From month 7 up to a maximum of 4 years up to 400 employees will continue to be ceded CONTRACT 40-year service contract Water Supply Service Sewage collection, removal and treatment services(*) (*) Part of the removal and treatment services will be remaine under the municipality s direct and indirect responsibility Contract signing parties: State, Municipality and Sabesp Planning shared among State and Municipality (SPMR) Regulator: ARSESP Tariff, control and monitoring Tariff: the same as SPMR (adjustment catch-up period of approximately 2 years) Expected investment of R$ 2 billion over 40 years Transfers to the Municipal Fund for Environmental Sanitation and Infrastructure R$ 150 million in 5 years (R$ 30 million per year) 4% of net revenue 9

10 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 PROVISIONAL PRESIDENTIAL DECREE 868 The Provisional Presidential Decree 868 of December 28, 2018, provides changes on the following Laws: 9,8984/2000 Creation of the Brazilian National Water Agency (ANA) 10,768/2003 Disposal of Staff for the Brazilian National Water Agency (ANA) 11,445/2007 National Guidelines for the Basic Sanitation 13,529/2017 Authorizes the Federal Government to participate in fund to finance specialized.....technical services 10

11 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 (0.8885%) x Previous Average Tariff - Quality Factor* *Not defined yet 11

12 TARIFF AJUSTMENTS AND REVISIONS ADJUSTMENTS AND REVISIONS INDEXES OTR- Ordinary Tariff Revision ETR- Extraordinary Tariff Revision % on Apri % on Dec Adjustment + Residual + ETR = 15.24% IPCA up to Dec 2018 ORDINARY TARIFF REVISION (OTR) - 2º CYCLE FROM 2017 TO 2020 ARSESP s responds to the requests filed by Sabesp: Reconsideration request Not accepted Clarification and revision request Partially accepted Initial Phase - Oct/2017 Final Phase- May/2018 Preliminary Final Preliminary Final RAB (1) (R$ Billion) WACC (%) Current Average Tariff (R$/m³) X Factor(%) P0 (R$/m³) TRI (2) (%) (1) Regulatory Asset Base (2) Tariff Repositioning Index 12

13 WATER AND SEWAGE OPERATIONS WATER CONNECTION EVOLUTION (million) WATER COVERAGE (Connection in 000 s) Add 954 thousand new connections by 2023 SEWAGE CONNECTION EVOLUTION (million) SEWAGE COVERAGE ( 000s) Add 1.2 million new connections by 2023 Coverage: 93% in 2023 Treatment: 84% in

14 INVESTMENT AND FINANCING INVESTMENT PLAN OF R$ 18.7 BILLION FROM 2019 TO ,177* Financial Values (in R$ million) 2,126** (*) Book Value Includes non-cash items (**) Book Value Items that affected cash - Additional information is presented in Note 33 of the 2018 Financial Information FINANCING MAIN PROGRAMS Metropolitan Water Program Tietê Project Corporate Program for Water Loss Reduction Clean Stream Program Clean Wave Program 14

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

16 LONG TERM AND LOW COST FUNDING TOTAL DEBT BREAKDOWN TOTAL DEBT BY CURRENCY DEBT AMORTIZATION PROFILE (R$ million) 16

17 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 17

18 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 18

19 COVENANT ADJUSTED NET DEBT vs. EBITDA 19

20 COVENANT ADJUSTED TOTAL DEBT vs. EBITDA 20

21 FINANCIAL HIGHLIGHTS (R$ million) * 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* Gross Revenues w/ construction 3,962 4,308 4,642 5,356 5,984 6,448 6,839 9,085 9,787 10,530 11,391 11,985 11,823 12,284 14,855 15,375 17,056 Net Revenues 3,767 4,131 4,397 4,953 5,527 5,971 7,809 8,580 9,231 9,927 10,738 11,316 11,213 11,712 14,098 14,608 16,085 Adjusted EBITDA 1,860 2,076 1,927 2,286 2,446 2,699 2,865 2,727 3,222 3,371 3,605 4,007 2,919 3,974 4,572 5,269 6,541 Adjusted EBITDA Margin Adjusted EBITDA without Construction Margin Net Income (651) , ,508 1,630 1,381 1,912 1, ,947 2,519 2,835 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 43,565 Total Debt 7,878 7,264 7,051 6,664 6,327 5,685 6,865 6,560 8,209 8,423 8,875 9,450 10,786 13,122 11,964 12,101 13,153 Short-term Debt 1, , ,449 1,010 1,240 1,629 1, ,207 1,526 1,247 1,747 2,104 Long-Term Debt 6,593 6,267 5,554 5,905 5,474 4,943 5,416 5,548 6,970 6,794 7,533 8,809 9,579 11,595 10,718 10,354 11,049 Foreign Currency Debt 3,708 3,013 2,681 1,576 1,472 1,242 2,281 1,746 2,249 3,053 3,216 3,699 4,346 6,618 5,660 5,673 6,669 Shareholders' Equity 4,217 7,577 7,952 8,483 9,019 9,781 6,758 8,439 9,682 10,546 11,257 12,931 13,304 13,717 15,419 17,513 19,552 Total Debt/Total Cap. (%) Investments ,734 2,059 2,194 2,440 2,536 2,716 3,211 3,482 3,878 3,388 4,177 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 SPMR WATER SITUATION RAINFALL IN THE MAIN WATER PRODUCTION SYSTEMS (mm) % Cantareira 85% 116% 149% 82% 101% 91% 93% 82% 58% 105% 47% LTA 26% 17% 32% 24% 2017/ / % 61% % 149% 80% 111% 82% 88% 82% 53% Guarapiranga 177% 213% LTA 26% 2017/ % 2018/ % 34%45% 81% 51% 27% % 122% 87% 71% 49% 62% 86% 79% Alto Tietê 188% 28% 133% 80% 70% LTA 2017/ / %50% 18% 31% 27% Long Term Average Sep/17 to Oct/18 VOLUME STORAGE (%) AVERAGE PRODUCTION (m³/s) Until March 26,

24 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) % 730,000 inhab. Total water treatment capacity (m³/s) % Water production systems Average monthly production (m³/s) (13%) 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 (26%) 24

25 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

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