Companhia de Saneamento de Minas Gerais - COPASA MG Quarterly information - ITR at September 30, 2017 and report on review of quarterly information

Transcription

1 Companhia de Saneamento de Minas Gerais - COPASA MG Quarterly information - ITR at September 30, 2017 and report on review of quarterly information

2 Report on review of quarterly information To the Board of Directors and Stockholders Companhia de Saneamento de Minas Gerais - COPASA MG Introduction We have reviewed the accompanying parent company and consolidated interim accounting information of Companhia de Saneamento de Minas Gerais COPASA MG ("Company"), included in the Quarterly Information Form (ITR) for the quarter ended September 30, 2017, comprising the balance sheet as at that date and the statements of income and comprehensive income for the quarter and nine-month period then ended, and the statements of changes in equity and cash flows for the nine-month period then ended, as well as a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation of the parent company and consolidated interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC), and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of the review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for 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 Brazilian and International Standards on Auditing and consequently did 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 information Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company and consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM. 2 PricewaterhouseCoopers, Rua dos Inconfidentes 911, 17º e 18º, Belo Horizonte, MG, Brasil , Caixa Postal 289 T: (31) , F: (31) ,

3 Companhia de Saneamento de Minas Gerais - COPASA MG Other matters Statements of value added We have also reviewed the parent company and consolidated statements of value added for the ninemonth period ended September 30, These statements are the responsibility of the Company's management and are presented as supplementary information. These statements have been subjected to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, in a manner consistent with the interim financial information taken as a whole. Belo Horizonte, October 26, 2017 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 F MG Guilherme Campos e Silva Contador CRC 1SP218254/O-1 "S" MG 3

4 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 Contents Information General information 1 Address 2 Securities 3 Auditor 4 Share registrar 5 Investor relations officer or equivalent 6 Stockholders' department 7

5 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 1. General Information Corporate name COMPANHIA DE SANEAMENTO DE MINAS GERAIS Date of adoption of the 11/14/1974 corporate name Type Previous corporate name Publicly-traded corporation COMPANHIA MINEIRA DE ÁGUA E ESGOTO - COMAG Date of establishment 7/5/1963 Federal Corporate Taxpayers' Registration Number (CNPJ) Brazilian Securities Commission (CVM) code / CVM registration date 9/17/2003 CVM registration status Active Date of effectiveness of status 9/17/2003 Home country Country in which the securities are held in custody Brazil Brazil Other countries in which the securities can be traded Country Date of admission Activity sector Sanitation, water and gas services Description of activities Issuer category Date of registration in the current category Issuer status Provision of sanitation services Category A 1/1/2010 Operating phase Date of effectiveness of status 9/17/2003 Type of ownership control State-owned Date of last change in 7/5/1963 ownership control Date of last change of 7/5/1963 the fiscal year Month/day of the end of 12/31 the fiscal year Issuer's website on the Internet Newspapers in which the issuer Names of newspapers in which the issuer discloses its information State discloses its information Diário Oficial de Minas Gerais (Minas Gerais Official Gazette) MG O Tempo Newspaper MG Page 1 of 7

6 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 2. Address Mail address Rua Mar de Espanha, 525, Santo Antônio, Belo Horizonte, MG, Brazil, CEP , Telephone (031) , Fax (31) , ri@copasa.com.br Headquarters' address Rua Mar de Espanha, 525, Santo Antonio, Belo Horizonte, MG, Brazil, CEP , Telephone (031) , Fax (031) , ri@copasa.com.br Page 2 of 7

7 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 3. Marketable Securities Shares Trading Listing Market Managing entity Beginning End Trading segment Beginning End Stock Exchange BM&FBOVESPA 02/08/2006 New Market 02/08/2006 Page 3 of 7

8 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 4. Auditor Does the Issuer have an auditor? YES CVM code Type of auditor National Name/Corporate name PricewaterhouseCoopers Auditores Independentes Individual Taxpayers' Registration Number (CPF)/ Federal Corporate Taxpayers' Registration Number (CNPJ) / Period of services 3/15/2013 Partner responsible Period of services CPF Guilherme Campos e Silva 7/4/ Page 4 of 7

9 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 5. Share Registrar Does the Company have a service provider? Corporate name YES Itaú Unibanco S.A. CNPJ / Period of services 1/1/2013 Service address Praça Alfredo Egydio de Souza Aranha, 100, Torre Olavo Setubal, São Paulo, SP, Brazil, CEP , Telephone (11) , Fax (11) , escrituracaoacoes@itau-unibanco.com.br Page 5 of 7

10 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 6. Investor Relations Officer or Equivalent Name Edson Machado Monteiro Investor Relations Officer CPF/CNPJ Mail address Rua Mar de Espanha, 525, Santo Antonio, Belo Horizonte, MG, Brasil, CEP , Telephone (031) , Fax (031) , ri@copasa.com.br Date when the person assumed the position 2/25/2015 Date when the person left the position Page 6 of 7

11 Registration Form COMPANHIA DE SANEAMENTO DE MINAS GERAIS Version: 3 7. Stockholders' Department CONTACT Edson Machado Monteiro Date when the person assumed the position 2/25/2015 Date when the person left the position Mail address Rua Mar de Espanha, 525, Santo Antônio, Belo Horizonte, MG, Brazil, CEP , Telephone (031) , Fax (31) , ri@copasa.com.br Page 7 of 7

12 Contents Company information Capital composition 1 Parent company financial statements Balance sheet - assets 2 Balance sheet - liabilities and equity 3 Statement of income 4 Statement of comprehensive income 5 Statement of cash flows - indirect method 6 Statement of changes in equity 1/1/2017 to 9/30/ /1/2016 to 9/30/ Statement of value added 9 Consolidated financial statements Balance sheet - assets 10 Balance sheet - liabilities and equity 11 Statement of income 12 Statement of comprehensive income 13 Statement of cash flows - indirect method 14 Statement of changes in equity 1/1/2017 to 9/30/ /1/2016 to 9/30/ Statement of value added 17 Comments on company performance 18 Notes to the quarterly information 42 Comments on the behavior of business projections 73

13 Company information/capital composition Number of shares Current quarter (in thousands) 9/30/2017 Paid-up capital Common shares 126,751 Preferred shares 0 Total 126,751 Treasury shares Common shares 357 Preferred shares 0 Total 357 Page 1 of 73

14 Parent company financial statements/balance sheet - assets (R$ thousand) 1 - Code 2 - Description Current quarter 9/30/2017 Prior year 12/31/ Total assets 10,969,232 10,940, Current assets 1,863,861 1,696, Cash and cash equivalents 617, , Accounts receivable 1,185,402 1,018, Trade receivables 1,064, , Other receivables 120,677 96, Taxes to be offset 23,220 25, Technical cooperation agreements 67,717 34, Banks and investments in connection with agreements 29,740 37, Inventories 42,577 39, Other current assets 18,342 17, Other 18,342 17, Advances to employees 14,840 12, Sundry 3,502 4, Non-current assets 9,105,371 9,243, Long-term receivables 1,202,795 1,250, Accounts receivable 348, , Trade receivables 95, , Other receivables 252, , Deferred taxes 158, , Deferred income tax and social contribution 158, , Other non-current assets 695, , Financial assets - concession agreements 620, , Available-for-sale financial assets 74,366 59, Investments 44,034 34, Corporate investments 44,034 34, Investments in subsidiaries 43,774 34, Investments in other companies Property, plant and equipment 1,786, , Property, plant and equipment in operation 1,786, , Intangible assets 6,072,097 7,820, Intangible assets 6,072,097 7,820, Concession agreements 5,136,837 6,679, Intangible assets in progress 935,260 1,141,245 Page 2 of 73

15 Parent company financial statements/balance sheet - liabilities and equity (R$ thousand) 1 - Code 2 - Description Current quarter 9/30/2017 Prior year 12/31/ Total liabilities and equity 10,969,232 10,940, Current liabilities 1,286,051 1,124, Trade payables 171, , Domestic suppliers 171, , Tax obligations 86,646 57, Federal tax obligations 84,919 55, Other federal obligations 84,919 55, Municipal tax obligations 1,727 1, Borrowings 585, , Borrowings 163, , In local currency 118, , In foreign currency 44,602 33, Debentures 422, , Non-convertible 422, , Other obligations 190, , Other 190, , Dividends and interest on capital payable 55,557 65, Pension plan obligations 29,162 33, Public-Private Partnership 78, , Sundry obligations 27,649 15, Provision 251, , Provision for tax, social security, labor and civil contingencies 251, , Taxes payable in installments 67,615 64, Provision for vacation pay and 13 th month salary 156,021 99, Employee profit-sharing 27,624 18, Non-current liabilities 3,444,790 3,876, Borrowings 2,598,984 2,918, Borrowings 1,244,946 1,252, In local currency 968, , In foreign currency 276, , Debentures 1,354,038 1,665, Non-convertible 1,354,038 1,665, Other obligations 603, , Other 603, , Pension plan obligations 117, , Deposits for construction 77,144 79, Public-Private Partnership 404, , Sundry 4,591 1, Provision 241, , Provision for tax, social security, labor, and civil contingencies 241, , Taxes payable in installments 95, , Provision for lawsuits 146, , Equity 6,238,391 5,939, Paid-up capital 3,402,385 3,402, Capital reserves -8,576-8, Treasury shares -8,576-8, Revenue reserves 2,528,663 2,528, Legal reserve 253, , Profit retention reserve 2,236,289 2,236, Tax benefit reserve 39,314 39, Retained earnings 302, Carrying value adjustments 13,783 17,215 Page 3 of 73

16 Parent company financial statements/statement of income (R$ thousand unless otherwise stated) Current quarter 7/1/2017 to 9/30/2017 Accumulated - current year 1/1/2017 to 9/30/2017 Same quarter of prior year 7/1/2016 to 9/30/2016 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 3.01 Revenue from sales and/or services 1,103,132 3,132,913 1,038,167 3,010, Water supply services 667,504 1,906, ,376 1,752, Sewage services 362,604 1,036, , , Construction revenue 73, ,516 65, , Cost of sales and/or services -672,655-1,771, ,343-1,882, Cost of sales and/or services -599,631-1,580, ,402-1,567, Construction costs -73, ,516-65, , Gross profit 430,477 1,361, ,824 1,128, Operating expenses -189, , , , Selling expenses -102, ,720-86, , General and administrative expenses -55, , , , Other operating income 60, ,805 36, , Other operating expenses -89, ,364-93, , Other operating expenses -80, ,889-86, , Employee profit sharing -9,424-25,475-6,865-18, Equity in the results of subsidiaries -2,204-5, , Profit before finance result and taxation 241, , , , Finance result -35, ,337-58, , Finance income 28, ,447 29, , Finance costs -64, ,784-87, , Profit before income tax and social contribution 205, , , , Income tax and social contribution -55, ,041-38, , Current -52, ,299-62, , Deferred -3,357 2,258 23,944 13, Profit for the period from continuing operations 149, , , , Profit for the period 149, , , , Earnings per share (R$/share) Basic earnings per share Common shares 1, , , , Diluted earnings (loss) per share Common shares 0, , , ,53000 Page 4 of 73

17 Parent company financial statements/statement of comprehensive income (R$ thousand) Current quarter 7/1/2017 to 9/30/2017 Accumulated - current year 1/1/2017 to 9/30/2017 Same quarter of prior year 7/1/2016 to 9/30/2016 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 4.01 Profit for the period 149, , , , Other comprehensive loss -4,192-2,773 7, Fair value of investment in Foz de Jeceaba 0 9,769 11,693 11, Actuarial loss on retirement benefits -4,192-12,542-4,121-12, Comprehensive income for the period 145, , , ,993 Page 5 of 73

18 Parent company financial statements/statement of cash flows - indirect method (R$ thousand) Accumulated - current year 1/1/2017 to 9/30/2017 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 6.01 Net cash provided by operating activities 773, , Cash from operations 1,214,890 1,084, Profit for the period 409, , Provision for impairment of trade receivables 148, , Recovery of accounts written-off -55,419-54, Charges and monetary and foreign exchange rate variations, net 17,298-16, Interest income and expenses 195, , Deferred income tax and social contribution -2,258-13, Equity in the results of subsidiaries 5,621 4, Disposals of intangible assets and property, plant and equipment 19,119 8, Depreciation and amortization 422, , Constitution of provision 26,558 64, Provision for retirement benefits 35,191 25, Deferred revenue -7,041-3, Changes in assets and liabilities -441, , Trade receivables -216, , Inventories -2,803 2, Taxes recoverable 2,075 38, Banks and investments in connection with agreements 7,474-11, Collateral for borrowings 5,575 28, Redemption of marketable securities/restricted financial investment 653 6, Receivables from subsidiaries , Other financial assets 3,843-12, Other 5,041-10, Trade payables 32,486-29, Taxes and contributions 140,298 72, Provision for vacation pay and 13 th month salary 56,184 41, Employee profit sharing 9,289 9, Technical cooperation agreements -33,255 31, Contingencies -65,804-9, Pension plan obligations -31,635-30, Electric power and other 4, , Interest paid -219, , Payment of actuarial liability -19,003-18, Payment of Income tax and social contribution -119,257-55, Net cash used in investing activities -403, , Payment to the Public Private Partnership (PPP) -80,051-62, Investments in subsidiaries -15,365-8, Purchase of intangible assets -312, , Purchase of property, plant and equipment 4,022 5, Net cash used in financing activities -374, , New borrowings and debentures 103, , Repayment of borrowings and debentures -367, , Interest on capital paid -110,153-10, Increase (decrease) in cash and cash equivalents -4,133 60, Cash and cash equivalents at the beginning of the period 621, , Cash and cash equivalents at the end of the period 617, ,424 Page 6 of 73

19 Parent company financial statements/statement of changes in equity - 1/1/2017 to 9/30/2017 (R$ thousand) Capital reserves, options granted and treasury shares Other comprehensive income 1 - Code 2 - Description Paid-up capital Revenue reserves Retained earnings Equity 5.01 Opening balances 3,402,385-8,576 2,528, ,215 5,939, Adjusted opening balances 3,402,385-8,576 2,528, ,215 5,939, Total comprehensive income (loss) ,648-2, , Profit for the period , , Other comprehensive income (loss) ,773-2, Actuarial loss on pension benefits ,003-19, Fair value on available-for-sale financial assets ,769 9, Income tax and social contribution on actuarial loss on pension benefits ,461 6, Changes in equity , , Interest on capital , , Amortization of monetary restatement of adjusted assets - 96/ Deferred income tax and social contribution on adjusted assets - 96/ Closing balances 3,402,385-8,576 2,528, ,136 13,783 6,238,391 Page 7 of 73

20 Parent company financial statements/statement of changes in equity - 1/1/2016 to 9/30/2016 (R$ thousand) Capital reserves, options granted and treasury shares Other comprehensive income 1 - Code 2 - Description Paid-up capital Revenue reserves Retained earnings Equity 5.01 Opening balances 2,773, ,824 2,710, ,161 5,646, Adjusted opening balances 2,773, ,824 2,710, ,161 5,646, Capital transactions with stockholders 128, , Funds for capital increase 128, , Total comprehensive income (loss) , , Profit for the period , , Other comprehensive income (loss) Actuarial loss on pension benefits ,347-18, Fair value of the financial assets available for sale ,693 11, Income tax and social contribution on actuarial loss with pension benefits ,238 6, Internal changes in equity 500, ,000-80,838-2,573-83, Capital increase with revenue reserves 500, , Interest on capital , , Amortization of monetary restatement on adjusted assets 96/ ,899-3, Deferred income tax and social contribution on restated assets 96/ ,326 1, Closing balances 3,402,385-8,576 2,210, ,571 39,172 5,865,432 Page 8 of 73

21 Parent company financial statements/statement of value added (R$ thousand) Accumulated - current year 1/1/2017 to 9/30/2017 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 7.01 Revenue 3,481,391 3,270, Sales of products and services 3,242,310 2,969, Other revenue 196, , Other operating income 141,386 48, Recovery of accounts written-off 55,419 54, Revenue from construction of Company's assets 190, , Provision for impairment of trade receivables -148, , Inputs acquired from third parties -1,156,088-1,181, Cost of sales and services -889, , Materials, energy, outsourced services and other -101,635-93, Other -165, , Gross value added 2,325,303 2,089, Retentions -422, , Depreciation, amortization and depletion -422, , Net value added generated 1,902,784 1,647, Value added received through transfers 108, , Equity in the results of subsidiaries -5,621-4, Finance income 113, , Total value added to distribute 2,010,793 1,797, Distribution of value added 2,010,793 1,797, Personnel 779, , Direct remuneration 500, , Benefits 211, , Government Severance Indemnity Fund for Employees (FGTS) 42,308 42, Other 25,475 18, Employee profit-sharing 25,475 18, Taxes and contributions 544, , Federal 513, , State 28,980 26, Municipal 1,909 1, Remuneration of third-party capital 277, , Interest 252, , Rentals 24,657 17, Remuneration of own capital 409, , Interest on capital 108,171 83, Retained earnings for the period 301, ,998 Page 9 of 73

22 Consolidated financial statements/balance sheet - assets (R$ thousand) 1 - Code 2 - Description Current quarter 9/30/2017 Prior year 12/31/ Total assets 10,976,748 10,947, Current assets 1,889,793 1,724, Cash and cash equivalents 625, , Accounts receivable 1,204,080 1,028, Trade receivables 1,070, , Other receivables 133, , Taxes to be offset 23,795 25, Technical cooperation agreements 80,218 40, Banks and investments in connection with agreements 29,839 37, Inventories 43,391 40, Other current assets 17,008 16, Other 17,008 16, Advances to employees 14,945 12, Sundry 2,063 3, Non-current assets 9,086,955 9,222, Long-term receivables 1,202,795 1,250, Accounts receivable 348, , Trade receivables 95, , Other receivables 252, , Deferred taxes 158, , Deferred income tax and social contribution 158, , Other non-current assets 695, , Financial assets - concession agreements 620, , Available-for-sale assets 74,366 59, Investments Investments in subsidiaries Investments in other companies Property, plant and equipment 1,786, , Property, plant and equipment in operation 1,786, , Intangible assets 6,097,455 7,833, Intangible assets 6,097,455 7,833, Concession agreements 5,136,837 6,679, Intangible assets in progress 960,618 1,154,470 Page 10 of 73

23 Consolidated financial statements/balance sheet - liabilities and equity (R$ thousand) 1 - Code 2 - Description Current quarter 9/30/2017 Prior year 12/31/ Total liabilities and equity 10,976,748 10,947, Current liabilities 1,293,920 1,131, Trade payables 177, , Domestic suppliers 177, , Tax obligations 87,197 58, Federal tax obligations 85,470 56, Other federal obligations 85,470 56, Municipal tax obligations 1,727 1, Borrowings 585, , Borrowings 163, , In local currency 118, , In foreign currency 44,602 33, Debentures 422, , Non-convertible 422, , Other obligations 190, , Other 190, , Dividends and interest on capital payable 55,557 65, Pension plan obligations 29,162 33, Public-Private Partnership 78, , Sundry obligations 27,798 15, Provision 252, , Provision for tax, social security, labor and civil contingencies 252, , Taxes payable in installments 67,615 64, Provision for vacation pay and 13 th month salary 157, , Employee profit sharing 27,624 18, Non-current liabilities 3,444,437 3,876, Borrowings 2,598,984 2,918, Borrowings 1,244,946 1,252, In local currency 968, , In foreign currency 276, , Debentures 1,354,038 1,665, Non-convertible 1,354,038 1,665, Other obligations 603, , Other 603, , Pension plan obligations 117, , Deposits for construction 77,144 79, Public-Private Partnership 404, , Sundry 4,591 1, Provisions 241, , Provisions for tax, social security, labor and civil contingencies 241, , Taxes payable in installments 95, , Provision for lawsuits 145, , Consolidated equity 6,238,391 5,939, Paid-up capital 3,402,385 3,402, Capital reserves -8,576-8, Treasury shares -8,576-8, Revenue reserves 2,528,663 2,528, Legal reserve 253, , Profit retention reserve 2,236,289 2,236, Tax incentive reserve 39,314 39, Retained earnings 302, Carrying value adjustments 13,783 17,215 Page 11 of 73

24 Consolidated financial statements/statement of income (R$ thousand unless otherwise stated) Current quarter 7/1/2017 to 9/30/2017 Accumulated - current year 1/1/2017 to 9/30/2017 Same quarter of prior year 7/1/2016 to 9/30/2016 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 3.01 Revenue from sales and/or services 1,109,160 3,151,385 1,043,633 3,029, Water supply services 672,148 1,920, ,547 1,765, Sewage services 363,988 1,040, , , Construction revenue 73, ,516 65, , Revenue from finished products Cost of sales and/or services -679,619-1,792, ,899-1,900, Cost of sales and/or services -606,595-1,602, ,958-1,584, Construction cost -73, ,516-65, , Gross profit 429,541 1,358, ,734 1,128, Operating expenses -188, , , , Selling expenses -103, ,009-87, , General and administrative expenses -57, , , , Other operating income 61, ,822 36, , Other operating expenses -89, ,118-94, , Other operating expenses -80, ,643-87, , Employee profit sharing -9,424-25,475-6,865-18, Profit before finance result and taxation 240, , , , Finance result -35, ,489-57, , Finance income 28, ,324 31, , Finance costs -64, ,813-88, , Profit before income tax and social contribution 205, , , , Income tax and social contribution -55, ,041-38, , Current -52, ,299-62, , Deferred -3,357 2,258 23,944 13, Profit for the period from continuing operations 149, , , , Consolidated profit for the period 149, , , , Attributable to the owners of the parent company 149, , , , Earnings per share (R$/share) Basic earnings per share Common shares 1, , , , Diluted earnings (loss) per share Common shares 0, , , ,53000 Page 12 of 73

25 Consolidated financial statements/statement of comprehensive income (R$ thousand) Current quarter 7/1/2017 to 9/30/2017 Accumulated - current year 1/1/2017 to 9/30/2017 Same quarter of prior year 7/1/2016 to 9/30/2016 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 4.01 Consolidated profit for the period 149, , , , Other comprehensive loss -4,192-2,773 7, Fair value of investment in Foz de Jeceaba 0 9,769 11,693 11, Actuarial loss on retirement benefits -4,192-12,542-4,121-12, Consolidated comprehensive income for the period 145, , , , Attributable to the owners of the parent company 145, , , ,993 Page 13 of 73

26 Consolidated financial statements/statement of cash flows - indirect method (R$ thousand) Accumulated - current year 1/1/2017 to 9/30/2017 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 6.01 Net cash provided by operating activities 761, , Cash from operations 1,209,822 1,083, Profit for the period 409, , Provision for impairment of trade receivables 150, , Recovery of accounts written-off -56,874-55, Charges and monetary/foreign exchange variations, net 17,298-15, Interest income and expenses 195, , Deferred income tax and social contribution -2,258-13, Disposals of intangible assets and property, plant and equipment 19,119 8, Depreciation and amortization 422, , Constitution of provisions 26,405 65, Provision for pension benefits 35,191 25, Deferred revenue -7,041-3, Changes in assets and liabilities -448, , Trade receivables -218, , Inventories -2,487 4, Taxes recoverable 1,694 38, Banks and investments in connection with agreements 7,336-6, Collateral for borrowings 5,575 28, Redemption of financial assets/restricted financial investment 653 6, Other financial assets 3,843-12, Other 5,048-10, Trade payables 32,658-19, Taxes and contributions 140,299 71, Provision for vacation pay and 13 th month salary 56,829 42, Employee profit sharing 9,289 9, Technical cooperation agreements -40,046 14, Contingencies -66,217-10, Pension plan obligations -31,635-30, Electric power and other 4, , Interest paid -219, , Payment of actuarial liabilities -19,003-18, Payment of income tax and social contribution -119,257-55, Net cash used in investing activities -400, , Payment to the Public-Private Partnership -80,051-62, Purchase of intangible assets and property, plant and equipment -324, , Amount received for the sale of property, plant and equipment 4,022 5, Net cash used in financing activities -374, , New borrowings and debentures 103, , Repayment of borrowings and debentures -367, , Interest on capital paid -110,153-10, Increase (decrease) in cash and cash equivalents -13,429 66, Cash and cash equivalents at the beginning of the period 638, , Cash and cash equivalents at the end of the period 625, ,223 Page 14 of 73

27 Consolidated financial statements/statement of changes in equity - 1/1/2017 to 9/30/2017 (R$ thousand) Capital reserves, options granted and treasury shares Retained earnings (accumulated losses) Other comprehensive income Noncontrolling interests 1 - Code 2 - Description Paid-up capital Revenue reserves Equity Consolidated equity 5.01 Opening balances 3,402,385-8,576 2,528, ,215 5,939, ,939, Adjusted opening balances 3,402,385-8,576 2,528, ,215 5,939, ,939, Total comprehensive income (loss) ,648-2, , , Profit for the period , , , Other comprehensive income (loss) ,773-2, , Actuarial loss on pension benefits ,003-19, , Fair value of available-for sale financial assets ,769 9, , Income tax and social contribution on actuarial loss on pension benefits ,461 6, , Changes in equity , , , Interest on capital , , , Amortization of monetary restatement on adjusted assets - 96/ Deferred income tax and social contribution on adjusted assets - 96/ Closing balances 3,402,385-8,576 2,528, ,136 13,783 6,238, ,238,391 Page 15 of 73

28 Consolidated financial statements/statement of changes in equity - 1/1/2016 to 9/30/2016 (R$ thousand) Capital reserves, options granted and treasury shares Retained earnings Revenue (accumula reserves ted losses) Other comprehensive income Noncontrolling interests 1 - Code 2 - Description Paid-up capital Equity Consolidated equity 5.01 Opening balances 2,773, ,824 2,710, ,161 5,646, ,646, Adjusted opening balances 2,773, ,824 2,710, ,161 5,646, ,646, Equity transactions with stockholders 128, , Total comprehensive income (loss) , , , Profit for the period , , , Other comprehensive loss Actuarial loss on retirement benefits ,347-18, , Fair value of financial assets available for sale ,693 11, , Income tax and social contribution on actuarial loss with pension benefits ,238 6, , Changes in equity 500, ,000-80,838-2,573-83, , Capital increase with revenue reserves 500, , Interest on capital , , , Amortization of monetary restatement on adjusted assets - 96/ ,899-3, Deferred income tax and social contribution on adjusted assets - 96/ ,326 1, Closing balances 3,402,385-8,576 2,210, ,571 39,172 5,865, ,865,432 Page 16 of 73

29 Consolidated financial statements/statement of value added (R$ thousand) Accumulated - current year 1/1/2017 to 9/30/2017 Accumulated - prior year 1/1/2016 to 9/30/ Code 2 - Description 7.01 Revenue 3,501,612 3,292, Sales of products and services 3,262,666 2,989, Other revenue 198, , Other operating income 141,948 50, Recovery of accounts written-off 56,874 55, Revenue from the construction of Company's assets 190, , Provision for impairment of trade receivables -150, , Inputs acquired from third parties -1,170,256-1,196, Cost of sales and services -900, , Materials, energy, outsourced services and other -104,148-95, Other -165, , Gross value added 2,331,356 2,095, Retentions -422, , Depreciation, amortization and depletion -422, , Net value added generated 1,908,837 1,653, Value added received through transfers 115, , Finance income 115, , Total value added to distribute 2,024,435 1,809, Distribution of value added 2,024,435 1,809, Personnel 789, , Direct remuneration 508, , Benefits 213, , Government Severance Indemnity Fund for Employees (FGTS) 42,819 42, Other 25,475 18, Employee profit sharing 25,475 18, Taxes and contributions 547, , Federal 516, , State 29,500 27, Municipal 1,914 1, Remuneration of third-party capital 277, , Interest 252, , Rentals 24,830 17, Remuneration of own capital 409, , Interest on capital 108,171 83, Retained earnings for the period 301, ,998 Page 17 of 73

30 Companhia de Saneamento de Minas Gerais - COPASA MG (A free translation of the original in Portuguese) Earnings Release 3Q17 Rio Manso System Reservoir Belo Horizonte, October 26, 2017 COPASA MG - Companhia de Saneamento de Minas Gerais - (B3: CSMG3), hereby announces its results for the third quarter of 2017 (3Q17). The financial and operational information, except where otherwise indicated, are presented in Brazilian Reais (R$) and the comparisons refer to the third quarters of 2016 (3Q16) and 2015 (3Q15). The financial statements refer to the Parent Company. Tables containing results are available for download at Financial Highlights (R$ million) Conference call with simultaneous translation Date: 27 October :00 AM (Brasília time) 8:00 AM (Nova York time) Phones: Brasil: +55 (11) EUA: (1 646) Code: COPASA Participants: Sinara Inácio Meireles Chenna CEO Luiz Gustavo Braz Lage CFO and IRO IR Contacts: Phone: +55 (31) ir@copasa.com.br COPASA: 30 September 2017 Closure price: R$42.80 Number of shares: million Market value: R$5.4 billion ADTV 3Q17: R$22.8 million Operational Highlights (Consolidated Data) Breakdown 3Q17 3Q16 3Q17 X 3Q16 Water Units (1,000s) 5, , % Distributed volume (1,000 m³) 242, , % Measured volume (1,000 m³) 146, , % Network extension (km) 52, , % Sewage Units (1,000s) 3, , % Measured volume (1,000 m³) 97, , % Treated volume (1,000 m³) (1) 64, , % Network extension (km) 26, , % (1) Data refers to Parent Company only. Page 18 of 73

31 Comments on company performance 1. Highlights 1.1. Tariff Revision On 30 June 2017, the Minas Gerais State Water Supply and Sewage Services Regulatory Agency, ARSAE-MG, published Resolution No. 96/2017, with the result of the second stage of the tariff revision for public water supply and sewage services provided by the Company, authorizing it to apply the effective average tariff repositioning index of 8.69% from 30 July Additionally, on 25 September 2017, ARSAE-MG published Resolution No. 100/2017, which adjusted the compensation rule referring to the deductibility of Interest on Equity (IOE) from the calculation based on taxes on profits. The compensation (return to the user) will be related to the net benefit from the use of IOE, deducting the additional expenses incurred by the Company to obtain the tax benefit, which are: higher payment of dividends to shareholders and of employee profit-sharing. This way, financial neutrality will be maintained in relation to the Company's decision to compensate shareholders through dividends or IOE. Regarding COPANOR, ARSAE-MG published Resolution No. 98/2017 on 31 August 2017, which authorized the Tariff Revision for water supply and sewage public services provided by the subsidiary, for which the average tariff repositioning index was 10.82%, applied from 01 October Shareholders Remuneration For the 2017 fiscal year, the Board of Directors resolved, at the meeting held on 9 March 2017, to maintain at 25% (twenty-five percent) the percentage of Net Income, adjusted by the addition or subtraction of the amounts specified in items I, II and III of Article 202 of Law 6,404/76, to be distributed as IOE. This year, IOE was declared in the first three quarters, as shown in the following table: Reference Board of Directors Gross Amount Gross amount per Credit Date Payment Date Meeting (R$ million) share (R$) 1Q17 16 Mar Mar May Q17 14 Jun Jun Jul Q17 20 Sep Sep Oct Accumulated Market Maker As per Material Fact published on 16 October 2017, COPASA MG contracted BTG Pactual to provide market maker services for common shares issued by the Company, negotiated in Brasil, Bolsa, Balcão (B3). The service started on 17 October 2017 and the contract will be valid for 12 months, and may be extended for equal and successive periods, limited to 60 (sixty) months. Page 19 of 73

32 Comments on company performance 1.4. Best Sanitation Company in the Country: Valor Econômico Newspaper COPASA MG received, on 25 August 2017, the award for best company in the Brazilian sanitation sector, granted by the Valor Econômico newspaper. The ranking was made in partnership with Serasa Experian and the Center for Studies and Finance of the Getúlio Vargas Foundation. The criteria used were Net Revenue, Sustainable Growth, Activity Margin, Asset Turnover, EBITDA Margin, Profitability, Current Liquidity and Interest Coverage. The award reflects the Company's recovery and is the result of actions implemented, since 2015, aimed at reducing costs and debt, improving operational efficiency and reviewing business management. 2. Operational Information 2.1. Concessions and Operations During 3Q17, the Company formalized Program Contracts with 3 (three) municipalities in the State of Minas Gerais, as follows: Belo Oriente: water concession (23,000 inhabitants). Visconde do Rio Branco: sanitary sewage concession and renewal of water supply concession (35,000 inhabitants). São João do Oriente: renewal of water supply concession (6,000 inhabitants). On 30 September 2017, the Company owned 636 water concessions, of which 626 were in operation. The number of sewage concessions reached 300, of which 250 were in operation. Concessions and Operations (1) Sep/2017 Sep/2016 Total Parent Co. COPANOR Total Parent Co. COPANOR Water Concessions Operations Sewage Concessions Operations (1) Only one concession/operation is considered per municipality, regardless of whether there is more than one contract, in cases of COPASA and COPANOR service in the same municipality, or if it is a contract that covers only districts and localities. Page 20 of 73

33 Comments on company performance The table below shows the main operating figures and the evolution through the comparative periods. Due to the change in the tariff structure carried out in May 2016, in which the billing by minimum consumption was replaced by the fixed tariff and the variable tariff, the Company now discloses the measured volume instead of the billed volume. Breakdown COPASA (Parent Co.) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Water Connections (1,000s) 4, , % 4, % Units (1,000s) 5, , % 4, % Population served (millions) % % Distributed volume (1,000 m³/quarter) 239, , % 223, % Measured volume (1,000 m³/quarter) 144, , % 142, % Network extension (km) 50, , % 47, % Water metering index (%) % % Loss index (%) (1) % % Sewage Connections (1,000s) 2, , % 2, % Units (1,000s) 3, , % 3, % Population served (millions) % % Measured volume (1,000 m³/quarter) 96, , % 92, % Treated volume (1,000 m³/quarter) 64, , % 57, % Network extension (km) 24, , % 22, % (1) Difference between the distributed volume and the measured volume, divided by the distributed volume. Breakdown COPANOR 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Water Connections (1,000s) % % Units (1,000s) % % Population served (millions) % % Distributed volume (1,000 m³/quarter) 3, , % 2, % Measured volume (1,000 m³/quarter) 2, , % 1, % Network extension (km) 2, , % 2, % Sewage Connections (1,000s) % % Units (1,000s) % % Population served (millions) % % Measured volume (1,000 m³/quarter) % % Network extension (km) 1, , % 1, % Page 21 of 73

34 Comments on company performance Breakdown CONSOLIDATED (COPASA + COPANOR) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Water Connections (1,000s) 4, , % 4, % Units (1,000s) 5, , % 4, % Population served (millions of inhabitants) % % Distributed volume (1,000 m³/quarter) 242, , % 225, % Measured volume (1,000 m³/quarter) 146, , % 144, % Network extension (km) 52, , % 49, % Water metering index (%) (1) % % Loss index (%) (2) % % Sewage Connections (1,000s) 2, , % 2, % Units (1,000s) 3, , % 3, % Population served (millions of inhabitants) % % Measured volume (1,000 m³/quarter) 97, , % 93, % Treated volume (1,000 m³/quarter) (1) 64, , % 57, % Network extension (km) 26, , % 23, % (1) Data refers to the Parent Company only. (2) Difference between the distributed volume and the measured volume, divided by the distributed volume Employees and Employees per Connection The number of employees and the Employees per Connection ratio in the comparative periods are presented below: Breakdown 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 COPASA Employees 11,260 11, % 12, % Employees per 1,000 connections (water and sewage) % % COPANOR Employees % % Employees per 1,000 connections (water and sewage) % % COPASA + COPANOR Employees 11,697 11, % 12, % Employees per 1,000 connections (water and sewage) % % Page 22 of 73

35 Comments on company performance 3. Customer Base COPASA s and COPANOR s revenues per consumer category in 3Q17, versus 3Q16 and 3Q15, had the following percentage distribution: In the same period, considering the consolidated number of consumer units, the percentage distribution is shown below: Page 23 of 73

36 Comments on company performance 4. Hydrological Situation The Paraopeba System consists of three reservoirs: Rio Manso, Vargem das Flores and Serra Azul, and supplies approximately 42% of the Belo Horizonte Metropolitan Area (BHMA). The graph below shows the levels of each reservoir through 2015, 2016 and 2017, until October 26: Volume per Reservoir Paraopeba System The level of the Paraopeba System reservoirs is approximately 45% of the total volume stored, after reaching around 60% at the beginning of This reduction is due to no rainfall in the BHMA for a period of 110 days, between June and September. In October, the rain fell again, stabilizing the Paraopeba System reservoirs' level. The graph below shows the evolution of the level of water stored in the Paraopeba System, on a consolidated basis: Paraopeba System Page 24 of 73

37 Comments on company performance The flow of the das Velhas River, responsible for the supply of approximately 50% of the BHMA, at the point of capture of the production system, is heavily influenced by rainfall, given its location in the upper water basin. The characteristics of this basin provide sudden flow peaks when there is rainfall in the headwaters and rapid return to normal flow. The evolution of the average flow rate, which reached 10.3 m³/s in the 7 (seven) days prior to 25 October 2017, is shown below. The water collection grant at this unit is 8.7 m³/s. Das Velhas River Flow (m³/s) The municipality of Montes Claros is undergoing a drastic hydrological situation: no significant periods of rainfall have been recorded since 2015, leading to the deterioration of the reservoirs that supply the city. As a result, construction works began in 2017 for the implementation of a water collection system in the Pacuí River, aimed at the normalization of the supply in the region. The project consists of the construction of a 345 liter per second water intake and inflow structure that will take water collected from the river to the Coração de Jesus Water Treatment Station, 2 km away from the collection point. Then, the water will be transported to Montes Claros via 54 km of pipeline and distributed throughout the network. In the other regions of the Minas Gerais State, several localities have presented hydrological restrictions during 2017, reflecting the low rainfall levels throughout the State, resulting in supply interruptions, rotating shift systems and the use of water trucks. COPASA MG reiterates that it is taking all appropriate measures to normalize supply in these localities, according to the alternatives available in each region and the degree of water shortage in each case. Page 25 of 73

38 Comments on company performance 5. Operational Cash Flow The EBITDA, which represents the Company s operational result, is a non-accounting measure adopted by COPASA MG, calculated in accordance with CVM Instruction 527/2012, consisting of net income (loss) plus taxes on income, financial result, depreciation and amortization and the non-operating result of the subsidiary COPANOR in 3Q16 and 3Q15, this result also included the defunct subsidiaries COPASA Serviços de Irrigação and COPASA Águas Minerais de Minas. EBITDA reached R$381.9 million in 3Q17, 8.0% up from the R$353.5 million recorded in 3Q16. The EBITDA Margin, calculated by dividing the EBITDA by the sum of net revenues from water and sewage, other operating revenues and revenues from the subsidiaries, reached 34.8% in 3Q17, the same level recorded in 3Q16. Breakdown (R$ thousands) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Net income (loss) for the period 149, , % 8,938 - (+) Taxes on income 55,721 38, % (939) - (+) Financial result 35,536 58, , % (+) Depreciation and amortization 141, , % 138, % (+) Subsidiaries 1 (332) (997) - (429) - (=) EBITDA 381, , % 288, % EBITDA Margin 34.8% 34.8% % - (1) Sum of taxes on income, financial result and depreciation/amortization of the subsidiary COPANOR in 3Q16 and 3Q15, this result also included the defunct subsidiaries COPASA Serviços de Irrigação and COPASA Águas Minerais de Minas. 6. Revenues Water and sewage net revenues totaled R$1.03 billion, versus R$972.2 million in 3Q16, an increase of 6.0% due to: average tariff repositioning index of 8.69%, resulting from the delayed conclusion of the Company's tariff revision, applied pro rata to consumptions between 30 July and 29 August, and in full for consumptions registered as of 30 August 2017, which meant that the full impact of the tariff revision was perceived only in September. This situation limited the growth of revenues in 3Q17. In 2016, on the other hand, the tariff repositioning occurred in May, and with that, the impacts of the readjustment of that year were fully recognized in 3Q16; and the increase in water (+1.7%) and sewage (+3.0%) units. The water and sewage measured volumes per unit dropped by 1.1, confirming the trend of decreasing consumption per unit, caused by the population's awareness of the need to preserve natural resources, by hydraulic installations and equipment that employ rational water use techniques, by the shift in the typology of residential property - a greater preference for vertical buildings, among other factors. Page 26 of 73

39 Comments on company performance The detailed components of water and sewage net revenues are shown below: Breakdown (R$ thousands) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q16 Direct Water Revenues 646, , % 510, % Direct Sewage Revenues 359, , % 272, % Direct Revenues 1,006, , % 782, % Indirect Water Revenues 20,701 18, % 14, % Indirect Sewage Revenues 3,075 3, % 2, % Indirect Revenues 23,776 21, % 17, % Net Revenues 1,030, , % 799, % 7. Costs and Expenses Costs and expenses, which correspond to the sum of costs of services rendered, sales and administrative expenses resulting from the operation of water and sewage services, totaled R$ million, versus R$ million in 3Q16, an increase of 7.1%. Disregarding the adjustment in the accounting methodology of the Rio Manso Public-Private Partnership (PPP), due to which R$ 5.2 million were moved from financial expenses to OPEX (see Section 7.4 of this Release), the increase in costs would be 6.3% in 3Q17. The following table shows the costs and expenses in comparative periods: Breakdown (R$ thousands) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Personnel 306, , % 289, % Electricity 96,624 94, % 103, % Outsourced services 102,579 99, % 78, % Rio Manso PPP 21,259 12, % - - Materials 33,549 33, % 29, % Sundry operating costs 12,102 9, % 8, % Tariff transfers to municipalities 21,537 19, % 16, % Provision for doubtful accounts 52,509 41, % 30, % Tax credits (30,296) (31,538) -3.9% (29,497) 6.9% Cost of services rendered + selling expenses + administrative expenses (excl. dep./amort.) 616, , % 527, % Depreciation and amortization 141, , % 138, % Cost of services rendered + selling expenses + administrative expenses 757, , % 665, % Page 27 of 73

40 Comments on company performance 7.1. Personnel Personnel expenses increased by 9.0% in 3Q17 over 3Q16, reflecting: salary adjustment of 3.99%, in accordance with the Collective Agreement signed on 23 August 2017 and retroactive to 01 May (base date), based on the variation observed in the National Consumer Price Index (INPC) from May 2016 to April 2017; incorporation, under the Collective Agreement, of part of the variable remuneration to the nominal salary and adjustment of the level for application of this bonus, with impacts of approximately 1.5% on salaries; additional adjustments of R$2.6 million in provisions for vacations and 13 th salary bonuses, reflecting the signing of the Collective Agreement in August; and increase of 16% in expenses related to the healthcare plan, due to the average adjustment of 17% in the prices of medical procedures and fees Electricity Electricity expenses increased by 1.8% in 3Q17 versus 3Q16, due to: the application of the yellow tariff flag in July 2017, in the amount of R$20.00/kWh, increasing to the red flag in August, in the amount of R$30.00/kWh, and returning to the yellow flag in September, while, in 3Q16, only the green tariff flag was applied, with zero additional cost; and the increase in electricity consumption by 5.7% in comparative periods, from GWh in 3Q16 to GWh in 3Q17. These variations were offset by the reduction of 10.7% in CEMIG's tariffs, authorized in the 2017 adjustment (Resolution No. 2,248 of 23 May 2017) in relation to the 2016 electricity tariffs Outsourced Services The 3.6% increase in 3Q17 over 3Q16 was mainly due to: the increase in expenses with services of maintenance and preservation of assets and systems, resulting from price adjustments in service contracts, and from higher demand for corrective and preventive maintenance services in the systems; the increase in expenses with contracted transportation services, due to a greater need for hiring water trucks, reflecting cases of water scarcity in certain localities of the State; Page 28 of 73

41 Comments on company performance the upturn in expenses with cleaning, surveillance and messengers, influenced by salary and benefit adjustments of 7.4% in January 2017, as well as an increase in the acquisition of inputs and new hirings, reflecting demands in systems in operation and the start of operation of new systems; the increase in outsourcing of vehicle fleet, which replaced the Company s fleet; and higher expenses with IT services, reflecting the contracting of services for development and maintenance of information systems, and of support, acquisition and updating of software licenses. These variations were offset by a reduction in invoice delivery services, with the implementation of the offline billing project, a mechanism that eliminated the need for real-time data transmission through a telephony signal. The previous system (online), in situations of scarcity or absence of signal, entailed the need for a subsequent delivery of invoices. The decrease in marketing and advertising expenses also offset the increases described above, due to the lower number of institutional campaigns carried out in the period Rio Manso PPP In 3Q17, the registered increase of R$8.9 million in expenses under the Public-Private Partnership (PPP) of the Rio Manso System, compared to 3Q16, was mainly due to the revision of the accounting methodology adopted for contractual adjustment of system maintenance expenses, which is now recorded as an operating expense (OPEX), and therefore is no longer recorded as a financial expense. Of the total amount recorded in 3Q17 (R$21.2 million), R$5.2 million refer to the aforementioned adjustment. This way, only the portion corresponding to the difference between the interest projected in the reference model and the monetary restatement of the financial liability is accounted as financial expenses Materials The expenses with materials were in line in the comparative periods Sundry Operating Costs The increase observed in the comparative periods is mainly due to increased expenses with events and expos, and to expenses related to tax incentives, with sponsorship of cultural projects incentivized by the Rouanet Law and Sports Law Tariff Transfers to Municipalities The increase in tariff transfers in 3Q17 versus 3Q16 is mainly due to the tariff adjustment of 8.69%, authorized by ARSAE-MG as of 30 July 2017 and the beginning of transfers to new municipalities Provision for Doubtful Accounts Provision for doubtful accounts grew by 26.9% in 3Q17 versus 3Q16, a R$11 million increase, due to the growth in revenues reported in the period as a result of the tariff repositioning applied from May 2016, impacting the provision in 3Q17, combined with the increase in the default rate, mainly from public sector clients, especially hospitals and municipal governments. Page 29 of 73

42 Comments on company performance 7.9. Tax Credits Tax credits fell by 3.94% in 3Q17 over 3Q16, mainly due to the 32% reduction in incentivized depreciation (REIDI) on assets incorporated in property, plant and equipment, acquired or built for the provision of services, which is the basis of calculation for said credits Depreciation and Amortization In 3Q17, depreciation and amortization decreased by 4.6% compared to 3Q16, mainly due to the end of the depreciation period of machines and equipment used in the automation of water supply systems in the Belo Horizonte Metropolitan Area. The following graph shows the evolution of the representativeness of each item of the Company s costs and expenses in 3Q16 and 3Q17. Page 30 of 73

43 Comments on company performance 8. Other Operating Revenues (Expenses) The other operating revenues (expenses) item showed a negative net result of R$19.5 million in 3Q17, versus a negative R$50.6 million in 3Q16, as detailed below: Breakdown (R$ thousands) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Other operating revenues 60,714 36, % 65, % Revenue from technical services Reversal of non-deductible provisions 35,677 16,376 43,654 Recovery of written-off accounts 18,256 16,023 19,090 Other revenues 6,751 3,451 2,424 Other operating expenses (80,200) (86,639) -7.4% (49,488) 75.1% Payments and non-deductible provision (64,031) (71,284) (13,160) Non-recurring losses (1,616) (5,896) (25,676) Other expenses (14,553) (9,459) (10,652) Total (19,486) (50,617) -61.5% 15,743 - The following factors contributed to this result: 8.1 Other Operating Revenues: higher reversals of non-deductible provisions previously recorded, especially for civil lawsuits, combined with a higher recovery of written-off accounts. 8.2 Other Operating Expenses: in 3Q16, additional provisions for lawsuits were made, reflecting risk reassessments carried out under the Judicial Contingency Forum established in the Company to review and validate the risks indicated by the legal department in lawsuits against the Company, increasing the amount of provisions in that quarter. 9. Equity Income Equity Income was a negative R$2.2 million in 3Q17, versus a negative R$0.5 million in 3Q16. The periods of 3Q16 and 3Q15 are affected by the defunct subsidiaries COPASA Serviços de Irrigação and COPASA Águas Minerais de Minas, dissolved on 30 September 2016 and 26 December 2016, respectively. The only remaining subsidiary is COPANOR. Result of the Subsidiaries (R$ thousands) 3Q17 3Q16 3Q15 Net revenue from sales and/or services 6,028 5,465 5,945 Other operating revenues ,486 Operating costs and expenses (8,930) (7,174) (7,758) Other operating expenses (233) (569) (846) Net financial revenues (expenses) 331 1, Income tax and social contribution - - (30) Net income (loss) (2,204) (487) 270 Page 31 of 73

44 Comments on company performance 10. Financial Result The net financial result was a negative R$35.5 million in 3Q17, versus a negative R$58.5 million in 3Q16. Financial revenues were in line between 3Q17 and 3Q16. On the other hand, financial expenses fell, due to the decreased debt and average debt coupon. The decrease in monetary variation expenses also contributed to this result, as a reflex of the decrease in the rates of the indices that restate the outstanding balances of the debt. The following table shows the financial revenues (expenses) in the comparative periods: Breakdown (R$ thousands) 3Q17 3Q16 3Q17 X 3Q16 Financial revenues 28,558 29, % 42,533 - Monetary variation 2,157 7,303 4,260 Foreign exchange variation 1,253 (7,830) 17,921 Interest 5,848 11,134 1,024 Real gains from financial investments 14,023 14,457 14,965 Capitalization of financial assets/other 5,277 3,969 4,363 Financial expenses (64,094) (87,509) -26.8% (184,989) -52.7% Monetary variation (10,126) (15,726) (15,218) Foreign exchange variation 1, (95,927) Interest on loans (54,999) (71,850) (73,611) Other (85) (234) (233) Financial result (35,536) (58,476) -39.2% (142,456) -59.0% 3Q15 3Q16 X 3Q Net Income The Company recorded net income of R$149.7 million in 3Q17, over R$109.7 million in 3Q16, mainly due to a better performance in the operational result, which increased by 16.8%, as seen in the table below: Net income (loss) (R$ thousands) 3Q17 3Q16 3Q17 X 3Q16 3Q15 3Q16 X 3Q15 Operating result (a) 241, , % 150,455 - Financial result + taxes on income (b) (91,257) (96,727) -5.7% (141,517) -31.6% Financial result (35,536) (58,476) 39.2% (142,456) -59.0% Taxes on income (55,721) (38,251) -45.7% Net income (loss) (a) + (b) 149, , % 8,938 - Earnings per share (R$) % Page 32 of 73

45 Comments on company performance 12. Investments Investments made in the first nine months of 2017 (9M17) by COPASA totaled R$340 million, from a total of R$650 million projected for Of the amounts invested, R$160 million were allocated to water supply systems, R$165 million to sewage systems and R$15 million to corporate and operational development programs. The amounts invested in COPANOR were R$17.6 million, of which R$10.8 million were invested in sewage systems and R$6.8 million in water supply systems. The amount of the investment planned for the year in the subsidiary is R$40 million. In the last two years, the Company has focused on its economic-financial rebalancing and deleveraging, prioritizing investments that enable the conclusion of works in progress, in order to maximize profitability. The main investments were: Water Supply Systems Breakdown (R$ million) 9M Water Sewage Paraopeba Collection System Rio Manso PPP Others (1) COPASA Total Rio Manso PPP COPANOR Main Total (1) Corporate and operational development programs. implementation of a dam in the Viamão River, in Mato Verde, aiming to expand water production capacity in that locality; implementation of an additional system to capture and pump 345 liters per second of water from the Pacuí River, in Montes Claros, in order to normalize water supply in the region; expansion of the water supply systems of Teófilo Otoni and Nova Serrana; and vegetative growth of distribution networks and water connections throughout the State Sewage Systems expansions of the sewage systems of Coronel Fabriciano and Timóteo, in the Aço Valley, of Montes Claros, and of Três Corações, in the Verde River Basin; Page 33 of 73

46 Comments on company performance complementation of the Patos de Minas Sewage Treatment Station, aiming at expanding the treatment capacity of that unit; implementation of the Sewage Treatment Station in Conselheiro Lafaiete; expansion of sewage networks in Contagem; and vegetative growth of collection networks and sewage connections throughout the State. 13. Debt Gross debt moved from R$3.57 billion in September 2016 to R$3.26 billion in September 2017, a reduction of R$309 million. Net debt fell from R$2.95 billion in the end of 3Q16 to R$2.64 billion in 3Q17. This amount of net debt is the lowest recorded since 2Q13, reflecting the improvements in cash management and the pursuit for the Company s economic and financial balance. The leverage ratio, measured by Net Debt/EBITDA of the last 12 months, decreased from 2.5x in September 2016 to 1.7x in the same month of 2017, led by the reduction in net debt and the increase in EBITDA. The graph below shows gross debt, net debt, the Company s Net Debt/ EBITDA ratio, and the proportion between short and long-term debts in the comparative periods. Short-term debt, which represented 14% of total debt in September 2016, accounted for 19% of total debt in September 2017, reflecting the amortizations due in the next 12 months, from the 9 th and 10 th debenture issues, which are operations contracted in 2015 and Page 34 of 73