Improving the Governance of State Owned Enterprises

Transcription

1 Improving the Governance of State Owned Enterprises by Liège Ayub for World Bank Int l Conference on Alternative Approaches for Increasing Infrastructure in Latin America and the Caribbean Lima, Peru on July 10 and 11,

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 2

3 Agenda 1 Company Overview 2 Commitment to Corporate Governance 3 Corporate Governance Challenges 4 OECD Guidelines X Sabesp 3 3

4 One of the largest water and sewage service providers in the world Company Overview One of the largest water and sewage service providers in the world based on the number of customers Provides water to 23.0 million people and sewage services to 18.9 million people Sells wholesale treated water to 6 municipalities (3.3 million people) 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 75.8% of revenues Main Operational Indicators (1) Water (1) As of March 31, 2008 (2) Treated sewage as percentage of collected sewage São Paulo Brazil Sewage Connections (million) Coverage (%) 100% 79% Treatment (%) 100% 69%(²) Volume Billed (m³ million) 469,0 330,2 Network (km thousand) Regional Systems Metropolitan Region 4 4

5 Ownership Structure Mixed capital company, majority-owned by the State of São Paulo, with significant private ownership Corporate by-laws and State law require 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 100% common shares 5 5

6 Financial Highlights (In R$ million) Q08 Net Revenues (R$) 4, , , , , ,540.1 EBITDA (R$) 2, , , , , EBITDA Margin (%) Net Income (R$) , Net Margin (%) Total Assets (R$) 16, , , , , ,590.2 Total Debt (R$) 7, , , , , ,691.6 Short-term Debt (R$) , Long-Term Debt (R$) 6, , , , , ,711.5 Foreign Currency Debt (R$) 3, , , , , ,289.9 Shareholders' Equity (R$) 7, , , , , ,087.7 Total Debt/Total Cap. (%) Investments (R$) Dividend Declared (R$/000 shares) ,32* - Pay Out (%) Dividend Yield (%) Note: Financials are in Brazilian Corporate Law. *earnings per share 6 6

7 Corporate Relevant Events Creation of Sabesp as a non-public Company Shares Traded in the OTC Market - Quarterly Financial Statement Disclosure New Organizational Structure (Business Units) Shares Traded on the BOVESPA Incorporated into the IBOVESPA Index (14.7% of free float) Joined the Novo Mercado Segment First SOE to join - Listed on the NYSE (ADR level III) (28.6% of free float) Financial Statements in accordance with US GAAP 7

8 Corporate Relevant Events Second Public Share Offering (Secondary) Set up of the Audit Committee Certified by the Outside Auditors (Internal Controls) - Issued a Code of Conduct and Ethics Incorporated into the ISE Index of BOVESPA (*) - Federal Sanitation Framework - Criation of the Regulatory Sanitation Agency Corporate Sustainability Report - GRI Format - Risk Management Committee (*) Sabesp also outperforms the IGC, ITAG, IBrX, and IVBx-2 Indexs 8

9 Governance Structure State (50.3%) Secretary of Treasury Shareholders General Meeting Secretary of Sanitation&Energy Chairman Board of Directors (up to 11 members) Executive Committee (6 members) Audit Committee (3 members) Fiscal Board (5 members) Independent Auditors CEO Internal Audit Corporate Management Financial & IR Technology Environment Metropolitan Region Regional Systems 9

10 Commitment to Corporate Governance Ownership One Share = One Vote Adherence to Market Arbitration By-laws Chamber Cancellation of registration as a By-laws publicly-held company or delisting from Appraisal Report the Novo Mercado segment Public Tender Offer Free Float - 49,7% Minimum required = 25% Tag Along rights By-laws Best effort to achieve widely dispersed share ownership Ownership Disclosure > 5 % Public Offering in 2002 and

11 Commitment to Corporate Governance Board of Directors Chairman and CEO are separate Composition (up to 11 members, serving in an unified term of 1 year, with reelection allowed) Duties and Responsibilities 3 Independent members (*) 1 minority shareholder s representative By-laws and Charter Employee representation is allowed Currently the seat is empty Independent Auditor Accountable to the Audit Committee and Board of Directors (*) according to Novo Mercado Listing Rules 11

12 Commitment to Corporate Governance Board of Directors Responsible for approving and Chairman and CEO keeping are separate track of the company s strategy as well its annual budgets Composition and investment programs 3 Independent members (*) (up to 11 members, serving established in an in the action 1 minority plan shareholder s unified term of 1 year, prepared with reelection by the executive representative officers. allowed) Duties and Responsibilities By-laws and Charter Employee representation is allowed Currently the seat is empty Independent Auditor Accountable to the Audit Committee and Board of Directors (*) according to Novo Mercado Listing Rules 12

13 Commitment to Corporate Governance Transparency General Meetings Investor Relations Department (Stakeholders can access financial information on Sabesp s Investor website) Quarterly Conference-call (Portuguese and English) Compensation disclosure all combined Annual Corporate Calendar Announced 30 days in advance Public meeting with analysts and other stakeholders Financial and non-financial information disclosure Board of Directors, Executive Officers, and Fiscal Board The schedule of corporate events 13

14 Commitment to Corporate Governance Accountability Audit Committee (3 Independent Board members) Board of Directors, Audit Committee, and Independent Auditor Non-Audit Service All members are financially literate 1 member has financial expertise Quarterly meetings Approved by the Audit Committee Internal Controls process Fiscal Board Annually reviewed by the Board of Directors, Audit Committee, Executive Officers, and Independent Auditors (5 members, 1 member is the representative of the minority shareholders) 14

15 Commitment to Corporate Governance Accountability cont. Quarterly and Annual Financial Statements reported simultaneously in BR GAAP and US GAAP/IFRS (*) Internal Controls Certification Cash Flow Statement CEO, CFO and Independent Auditor Published Quarterly (*) IFRS will start in

16 Commitment to Corporate Governance Conduct and Conflicts of Interest Adherence to Novo Mercado Listing segment of the BOVESPA (*) Disclosure of Governance Model Material Facts Policy Insider Trading Policy Disclosure of Related Party Contracts Prohibition on Personal Loans Code of Conduct and Ethics Whistle-blower system Annual and Corporate Sustainability Reports, and website Pursuant to guidelines set forth by the CVM (**) Company X Controlling Shareholder and Associated Companies Board Directors and Executive Officers Signed by Board members, Officers and employees Allows anonymous reporting (*) 100 listed companies in June, Source: Bovespa (**) CVM Comissão de Valores Mobiliários 16

17 Commitment to Corporate Governance Sustainability Incorporated into the ISE(*) Index of BOVESPA Sustainability Forum Social Responsibility New Environmental Policy Corporate Sustainability Report Public Hearing GRI Format Channels of Dialog with Customers Risk Management Committee (*) Indice de Sustentabilidade Empresarial da Bovespa 17

18 Challenges... Board of Directors and CEO self-evaluation system Board of Directors and CEO performance evaluation Succession plan down to the managerial level Internal audit function reporting directly to the Board and the Audit Committee Board Directors and Executive Officers compensation - separately State ownership policy Board of Directors Executive Sessions... 18

19 OECD Guidelines Sabesp Assessment Section I: I: Ensuring na na effective legal and and regulatory framework for for SOEs Largely Observed 19

20 OECD Guidelines Sabesp Assessment Section II: II: The The state acting as as an an owner Ensuring na na effective legal and and regulatory framework for for SOEs Largely Observed 20

21 OECD Guidelines Sabesp Assessment Section III: III: Equitable treatment of of shareholders The The state acting as as na na owner Partially Observed Ensuring na na effective legal and and regulatory framework for for SOEs 21

22 OECD Guidelines Sabesp Assessment Section IV: IV: Relations with with stakeholders Equitable treatment of of shareholders The The state acting as as na na owner Largely Observed Ensuring na na effective legal and and regulatory framework for for SOEs 22

23 OECD Guidelines Sabesp Assessment Section V: V: Transparency and and disclosure Relations with with stakeholders Largely Observed Equitable treatment of of shareholders The The state acting as as na na owner Ensuring na na effective legal and and regulatory framework for for SOEs 23

24 OECD Guidelines Section VI: VI: The The responsibilities of of the the Transparency boards and of and of disclosure SOEs Sabesp Assessment Largely Observed Relations with with stakeholders Equitable treatment of of shareholders The The state acting as as na na owner Ensuring na na effective legal and and regulatory framework for for SOEs 24

25 Thanks! 25