Agenda. Company Overview. Our Operations. Our Financial Performance

Transcription

1 SABESP 1 st Quarter, Results March 2008 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 projections, 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. amongst other factors, in addition to risks exhibited in disclosure documents filed by SABESP. Therefore, they are subject to changes without prior notice. 2

3 Agenda 1 Company Overview 2 Our Operations 3 Our Financial Performance 3

4 One of the largest water and sewage service providers in the world Company Overview Sabesp is one of the largest water and sewage service providers in the world based on the number of customers Provides water to 23.2 million people and sewage services to 19.2 million people Also sells wholesale treated water to 6 municipalities (3.3 million people) Natural monopoly, low operating risk Serves the City of São Paulo and 365 out of 645 municipalities in the State Covers 60% of State's urban population Operations in the São Paulo Metropolitan Region* represent 76,2% 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 represent the total cities served by the Company s Metropolitan Division Main Operational Indicators (1) Water Sewage Connections (million) Coverage (%) 100% 79% Treatment (%) 100% 72%(²) Volume Billed (m³ million) 1, ,330.4 Network (km thousand) (1) As of December 31, 2008 (2) Treated sewage as percentage of collected sewage São Paulo Brazil 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 Corporate by-laws and State law requires the State of São Paulo to own at least 50% + 1 voting shares at all times In 2004, the Government of São Paulo completed a public share offering to sell its excess holdings, which resulted in its current ownership of 50.3% share Listed on the Novo Mercado and NYSE, to highest corporate governance standards. We are also part of Bovespa s Sustentability Index - ISE 100% common shares Ownership structure¹ Source: The Company (1) As of February

6 Agenda 1 Our Company 2 3 Our Operations Our Financial Performance 6

7 Diversified customer base Water Volume by Type of Customer Sewage Volume by Type of Customer Commercial Industrial Public Commercial Residential Wholesale Reused Water Residential Industrial Public Wholesale Water Revenues by Type of Customer Sewage Revenues by Type of Customer Commercial Commercial Residential Industrial Residential Industrial Wholesale Public Over 80% of water volume and water revenue come from residential, commercial and industrial customer Public Wholesale Over 90% of sewage volume and sewage revenue come from residential, commercial and industrial customer 7

8 Metropolitan Region water resources The São Paulo Metropolitan Region represents 72% of the total billed water volume Operational flexibility to guarantee continued services for the growing demand Water production capacity of 67.7 m³/s, increasing by 8.6 m³/s until the end of water production systems,192 reservoirs of treated water and 20 reservoirs of nontreated water Water Production (65.7 m³/s) Distribution Systems Metropolitan Region F. DA F. MORATO ROCHA MAIRIPORÃ STA. ISABEL CAJAMAR R. Juqueri P. B. JESUS CAIEIRAS R. Águas ARUJÁ Claras GUARULHOS GUARAREMA S. DO ITAQUA MOGI DAS CRUZES PARNAÍBA BARUERI POÁ R.Paraitinga JANDIRAOSASCO FERRAZ SALESÓPOLIS ITAPEVI CARAPI- SÃO PAULO VASC. CUÍBA. BIRITIBA S. C. SUZANO R.P. Nova V.GDE. SUZANO MIRIM T.DA DO SUL R. R. do PAUL. COTIA EMBU SERRA STO. MAUÁ R.Taiaçupeba R.Biritiba Campo DIADEMA. ANDRÉ R. da R.Jundiaí Graça R.PIRES Mirim ITAP. DA R. P. Beicht SERRA EMBU S. LOURENÇO GUAÇU DA SERRA Barr. do França R. Juquitiba JUQUITIBA R.Guarapiranga piranga S.B.DO CAMPO R.Billings R. GDE. SERRA Note: Average of the 12 months ended December

9 Broad coverage of municipalities We currently serve 366 municipalities, mostly through concession contracts Of the 178 concessions that matured up to 2008, 125 were renewed In addition, 35 concessions with maturity after 2008 have already been renewed (includes 12 municipalities that we did not have a formal contract) Municipalities with concessions not renewed continue to be served by us with a short term contract Currently we have 31 municipalities, including the municipality of São Paulo, without formal contract. We own all the assets in these municipalities Concession maturity profile 9

10 Regulatory Framework Federal Law # 11,445/07 Effective as of March 2007 Obligatory creation of a Regulatory Agency Municipal or State level Defines Program Contract as the contractual base to be utilized between Sabesp and a Municipality. Defines a deadline for the establishment of formal contractual relationship - year 2010 Clarifies the payment conditions of the agreements executed prior to the law up to 4 years Discussion on Power of Concession Basic discussion: sanitation services are of local interest or common interest. Two legal proceedings under Supreme Court (STF) appraisal State Regulatory Agency - ARSESP Municipalities need to delegate sanitation regulation to State Regulatory Agency A Cooperation Agreement is needed between the Municipality and the State Commitment Partnership between the Municipality of São Paulo and Sabesp Final objective is to sign a Metropolitan Program Contract Immediately settle all financial outstanding debt; General guideline shared responsibility 10

11 Tariff adjustments Until 2007 tariffs were adjusted every year by using a formula which adjusts our controllable costs by inflation and contemplates a pass-through of non-controllable costs As of 2008 the tariffs will be established by ARSESP. For this year the Agency maintained the formula previously used by Sabesp. Annual Tariffs Adjustments vs. Inflation (%) Sabesp Annual Tariffs Adjustment Part A Part B Tariffs revision - Sabesp formula Adjustment established by ARSESP Full Pass-Through of Non-Controllable Costs Includes: Electricity Treatment materials Taxes Use of water resources Inflation (IPCA) X Controllable Costs 11

12 Evolution of operations water Water Connection Evolution (million) Water Coverage (thousand connections) Adding 1,570 new connections through 2018 to match organic population growth Sewage Connection Evolution (million) Sewage Coverage (thousand connections) Increase coverage by adding 1,800 connections 12

13 Expansion opportunities New Contracts New Businesses Target new municipalities within the State of São Paulo (16 million people urban population including wholesale); Since March 2006 we are allowed to operate outside of the São Paulo State and abroad. As of December 2007 we are also allowed to: Establish subsidiaries, as well as to take a stake in other companies with similar corporate purpose, in Brazil and abroad. Increase the scope of services that can be rendered by Sabesp: Urban rainwater drainage and management; Urban cleaning and solid waste management; Unrestricted operation of power generation, storage, conservation and energy activities New business: In July 2008, the first installment with the private sector (SPE) was constituted for sewage treatment in the city of Mogi-Mirim. Cooperation agreements with 5 state sanitation companies. First international agreement - Instituto Costarricence de Acueductos y Alcantarillados (AyA) Costa Rica Sanitary landfill operation: initiatives for operation with garbage in 2 cities in the State of São Paulo 13

14 Expansion opportunities Move Wholesale Customers to Retail Target municipalities: those currently served on a wholesale basis million population Direct access to customers Sell water directly to end user Provide sewage collection and treatment services Significantly improve collection rates, Use of accounts receivable as consideration for acquisitions New developments Diadema: In December 2008, the protocol of intentions was executed between Sabesp and the Municipal Government to operate the sanitation services Guarulhos: Execution of Agreement to treat 12% of the city s sewage system. 14

15 Water Loss Program Water Losses Target (%) Strategy to reduce water loss In December 2008: 27.7% Physical losses Replacement and repair of water pipes and mains; Installation of probing and pressureregulating valves; Preventive maintenance of existing and newly installed water meters; Goal in December : 20.0% 26.0 Non physical losses Goal in December 2018: 14.0% R$ 912 million investments in the Water Loss Program forecast for Improvement in the quality of the materials. Non-visible leak research; Selective change of network and ramifications. Replacement of inaccuracy water meters; Expand personnel who work on anti-fraud actions; Preventing frauds; Control of inactive connections. 15

16 Capex plan Total investment plan of R$ 8.6 billion for 2009 to

17 Capex financing Funds from Company Cash flow R$ 4 billion = 46.5% Financing by case Funds from Financing R$ 4.6 billion = 53.5% R$ 3.5 billion 41.1% CEF R$ 1.3 bi BNDES R$ 105 mi JBIC R$ 150 mi BID R$ 318 mi Outros R$ 15 mi BNDES R$ 533 mi BID R$ 640 mi BIRD R$ 115 mi JBIC R$ 317 mi CEF / BNDES BID / JBIC Total Financed Investments - Total Amount = R$ 6.1 bi - Financed Amount = R$ 3.6 bi - Matching Funds = R$ 1.5 bi - Leverage = 75% 17

18 Access to long term, low cost financing Solid capital structure, strong credit profile Total debt / total book capitalization ratio below 50% Sabesp has reduced its debt leverage from 3.6x in 2004 to 2.1x in December 2008 Access to international and domestic capital markets and multilateral financing 85% of foreign currency debt is from multilateral financings Total Debt Breakdown Total Debt by Currency 3% Others Foreign Currency Gov. Ag. Foreign 28% 33% CEF and BB 33% Gov. Ag. Local 3% 5% 67% Local Currency Foreign Capital Markets 28% Local Capital Markets 18

19 Debt amortization profile The US dollar-denominated debt is long-term and low cost (multilateral agencies). Currently, SABESP s credit rating by S&P is bra+ (domestic) and BB- (international). Year Local Debt 1, Foreign Debt Total 1, ,

20 Agenda 1 Our Company 2 3 Our Operations Our Financial Performance 20

21 Consistent performance Net Revenues (R$ million) Gross Profit (R$ million) EBITDA (R$ million) Net Income (R$ million) 21

22 Financial Highlights (In R$ million) Net Revenues (R$) 4, , , , , ,351.7 EBITDA (R$) 2, , , , , ,840.3 EBITDA Margin (%) Net Income (R$) , ,008.1 Net Margin (%) Total Assets (R$) 16, , , , , ,523.0 Total Debt (R$) 7, , , , , ,865.1 Short-term Debt (R$) , ,448.9 Long-Term Debt (R$) 6, , , , , ,416.2 Foreign Currency Debt (R$) 3, , , , , ,281.0 Shareholders' Equity (R$) 7, , , , , ,492.4 Total Debt/Total Cap. (%) Investments (R$) ,708.0 Dividend Declared (R$/000 shares) ,32* 1,30* Pay Out (%) Dividend Yield (%) Outstanding shares Shares:ADR rate = 2:1 Note: Financials are in Brazilian Corporate Law. *earnings per share 22

23 Historical leverage metrics New Debt vs. Amortization (R$ million) Capital structure has remained consistent with operating cash generation and capitalization Net Debt vs. EBITDA* (R$ million) Net Debt vs. Shareholders Equity (R$ million) * EBITDA - LTM 23

24 IR Contacts Mario Azevedo de Arruda Sampaio Angela Beatriz Airoldi (55 11) (55 11)