sbsitr3q18_6k.htm - Generated by SEC Publisher for SEC Filing
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 

 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For December 7, 2018
(Commission File No. 1-31317)
 

 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
(Exact name of registrant as specified in its charter)
 
Basic Sanitation Company of the State of Sao Paulo - SABESP
(Translation of Registrant's name into English)
 


Rua Costa Carvalho, 300
São Paulo, S.P., 05429-900
Federative Republic of Brazil
(Address of Registrant's principal executive offices)



Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1)__.
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7)__.

Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes ______ No ___X___

If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):

 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Table of Contents

 

   

Company Information 

 

Capital Breakdown 

1 

Cash Proceeds 

2 

Parent Companys Financial Statements 

 

Statement of Financial Position - Assets 

3 

Statement of Financial Position - Liabilities 

4 

Income Statement 

6 

Statement of Comprehensive Income 

8 

Statement of Cash Flows 

9 

Statement of Changes in Equity 

 

1/01/2018 to 9/30/2018 

11 

1/01/2017 to 9/30/2017 

12 

Statement of Value Added 

13 

Comments on the Companys Performance 

14 

Notes to the Interim Financial Information 

22 

Comments on the Companys Projections 

81 

Other Information Deemed as Relevant by the Company 

82 

Reports and Statements 

 

Unqualified Reports on Special Review 

84 

Executive Officers’ Statement on the Financial Statements 

85 

Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm 

86 


 

 


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Company Information / Capital Breakdown

 

Number of Shares

Current Quarter

(Units)

9/30/2018

Paid-in Capital

 

Common

683,509,869

Preferred

0

Total

683,509,869

Treasury Shares

 

Common

0

Preferred

0

Total

0

 

 

 

PAGE: 1 of 86


 

 

 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Company Information / Cash Proceeds

 

Event  Approval  Proceeds  Date of Payment  Type of Share  Class of Share  Proceeds per Share
(Reais / Share) 
Board of Directors’ Meeting  3/27/2018  Interest on Equity  6/26/2018  Common    1.02980 

 

 

 

 

 

 

 

 

 

 

 

 

PAGE: 2 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Financial Position - Assets

(R$ thousand)

 

Code

Description

Current Quarter

Previous Year

 

 

9/30/2018

12/31/2017

1

Total Assets

42,246,075

39,546,444

1.01

Current Assets

5,954,364

4,574,085

1.01.01

Cash and Cash Equivalents

3,619,253

2,283,047

1.01.03

Accounts Receivable

1,891,895

1,853,368

1.01.03.01

Trade Receivables

1,739,377

1,672,595

1.01.03.02

Other Receivables

152,518

180,773

1.01.03.02.01

Related-Party Balances

152,518

180,773

1.01.04

Inventories

66,946

85,671

1.01.06

Recoverable Taxes

238,713

276,585

1.01.06.01

Current Recoverable Taxes

238,713

276,585

1.01.08

Other Current Assets

137,557

75,414

1.01.08.03

Other

137,557

75,414

1.01.08.03.01

Restricted Cash

25,017

18,822

1.01.08.03.20

Other Receivables

112,540

56,592

1.02

Noncurrent Assets

36,291,711

34,972,359

1.02.01

Long-Term Assets

1,222,194

1,156,593

1.02.01.04

Accounts Receivable

221,408

215,910

1.02.01.04.01

Trade Receivables

221,408

215,910

1.02.01.09

Receivables from Related Parties

674,876

634,387

1.02.01.09.03

Receivables from Controlling Shareholders

674,876

634,387

1.02.01.10

Other Noncurrent Assets

325,910

306,296

1.02.01.10.04

Escrow Deposits

163,980

122,686

1.02.01.10.05

ANA – Water National Agency

50,454

70,487

1.02.01.10.20

Other Receivables

111,476

113,123

1.02.02

Investments

89,415

94,584

1.02.02.01

Equity Investments

41,783

36,932

1.02.02.01.03

Equity Investments in Jointly-Owned Subsidiaries

41,783

36,932

1.02.02.02

Investment Properties

47,632

57,652

1.02.03

Property, Plant and Equipment

246,648

255,050

1.02.04

Intangible Assets

34,733,454

33,466,132

1.02.04.01

Intangible Assets

34,733,454

33,466,132

1.02.04.01.01

Concession Contracts

6,793,963

8,575,551

1.02.04.01.02

Program Contracts

10,638,394

8,505,442

1.02.04.01.03

Services Contracts

16,844,735

15,917,014

1.02.04.01.04

Software License of Use

456,362

468,125

 

PAGE: 3 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Financial Position - Liabilities

(R$ thousand)

 

Code

Description

Current Quarter

Previous Year

 

 

9/30/2018

12/31/2017

2

Total Liabilities

42,246,075

39,546,444

2.01

Current Liabilities

4,484,101

4,771,880

2.01.01

Labor and Pension Plan Liabilities

609,295

588,073

2.01.01.01

Social Security Liabilities

25,018

40,631

2.01.01.02

Labor Liabilities

584,277

547,442

2.01.02

Trade Payable

384,482

344,947

2.01.02.01

Domestic Suppliers

384,473

344,947

2.01.02.02

Foreign Suppliers

9

0

2.01.03

Tax Liabilities

109,114

183,965

2.01.03.01

Federal Tax Liabilities

108,002

176,202

2.01.03.01.02

PIS-Pasep and Cofins Payable

66,704

74,034

2.01.03.01.03

INSS (social security contribution) Payable

35,976

35,365

2.01.03.01.20

Other Federal Taxes

5,322

66,803

2.01.03.03

Municipal Tax Liabilities

1,112

7,763

2.01.04

Borrowings and Financing

2,104,480

1,746,755

2.01.04.01

Borrowings and Financing

1,040,980

827,702

2.01.04.01.01

In Local Currency

297,677

280,331

2.01.04.01.02

In Foreign Currency

743,303

547,371

2.01.04.02

Debentures

1,046,339

901,480

2.01.04.03

Financing through Finance Lease

17,161

17,573

2.01.05

Other Liabilities

767,043

1,300,181

2.01.05.01

Payables to Related Parties

1,402

1,367

2.01.05.01.03

Payables to Controlling Shareholders

1,402

1,367

2.01.05.02

Other

765,641

1,298,814

2.01.05.02.01

Dividends and Interest on Equity Payable

436

598,612

2.01.05.02.04

Services Payable

399,590

408,275

2.01.05.02.05

Refundable Amounts

12,251

11,598

2.01.05.02.06

Program Contract Commitments

175,405

128,802

2.01.05.02.07

Public-Private Partnership - PPP

78,832

60,007

2.01.05.02.09

Indemnities

11,230

10,368

2.01.05.02.20

Other Liabilities

87,897

81,152

2.01.06

Provisions

509,687

607,959

2.01.06.01

Tax, Social Security, Labor and Civil Provisions

170,866

170,012

2.01.06.01.01

Tax Provisions

33,040

32,712

2.01.06.01.02

Social Security and Labor Provisions

55,894

45,881

2.01.06.01.04

Civil Provisions

81,932

91,419

2.01.06.02

Other Provisions

338,821

437,947

2.01.06.02.03

Provisions for Environmental Liabilities and Decommissioning

19,031

16,472

2.01.06.02.04

Provisions for Customers

279,037

373,747

2.01.06.02.05

Provisions for Suppliers

40,753

47,728

2.02

Noncurrent Liabilities

18,975,023

17,261,555

2.02.01

Borrowings and Financing

11,622,488

10,354,211

2.02.01.01

Borrowings and Financing

8,424,596

7,224,061

2.02.01.01.01

In Local Currency

2,233,458

2,098,611

2.02.01.01.02

In Foreign Currency

6,191,138

5,125,450

2.02.01.02

Debentures

2,647,461

2,586,106

 

PAGE: 4 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Financial Position - Liabilities

(R$ thousand)

 

Code

Description

Current Quarter

Previous Year

 

 

9/30/2018

12/31/2017

2.02.01.03

Financing through Finance Lease

550,431

544,044

2.02.02

Other Liabilities

6,835,084

6,400,345

2.02.02.02

Other

6,835,084

6,400,345

2.02.02.02.04

Pension Plan Liabilities

2,962,815

2,932,338

2.02.02.02.05

Program Contract Commitments

66,552

110,698

2.02.02.02.06

Public-Private Partnership - PPP

3,312,730

3,011,409

2.02.02.02.07

Indemnities

31,146

30,179

2.02.02.02.08

Labor Liabilities

139,042

6,494

2.02.02.02.09

Deferred Cofins/Pasep

136,493

130,182

2.02.02.02.20

Other Liabilities

186,306

179,045

2.02.03

Deferred Taxes

91,944

36,754

2.02.03.01

Deferred Income Tax and Social Contribution

91,944

36,754

2.02.03.01.01

Deferred Income Tax and Social Contribution

91,944

36,754

2.02.04

Provisions

425,507

470,245

2.02.04.01

Tax, Social Security, Labor and Civil Provisions

258,499

292,999

2.02.04.01.01

Tax Provisions

21,320

38,881

2.02.04.01.02

Social Security and Labor Provisions

232,471

247,220

2.02.04.01.04

Civil Provisions

4,708

6,898

2.02.04.02

Other Provisions

167,008

177,246

2.02.04.02.03

Provisions for Environmental Liabilities and Decommissioning

145,901

143,974

2.02.04.02.04

Provisions for Customers

19,567

8,571

2.02.04.02.05

Provisions for Suppliers

1,540

24,701

2.03

Equity

18,786,951

17,513,009

2.03.01

Paid-Up Capital

10,000,000

10,000,000

2.03.04

Profit Reserve

7,997,571

8,051,110

2.03.04.01

Legal Reserve

1,058,275

1,058,275

2.03.04.08

Additional Dividend Proposed

0

53,539

2.03.04.10

Reserve for Investments

6,939,296

6,939,296

2.03.05

Retained Earnings/Accumulated Losses

1,327,481

0

2.03.06

Equity Valuation Adjustments

-538,101

-538,101

 

PAGE: 5 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Income Statement

(R$ thousand)

 

Code

Description

Current Quarter

YTD Current

Same Quarter

YTD Previous

 

 

7/01/2018 to 9/30/2018

Year

Previous Year

Year

 

 

 

1/01/2018 to 9/30/2018

7/01/2017 to 9/30/2017

1/01/2017 to 9/30/2017

3.01

Revenue from Sales and/or Services

3,810,781

11,182,683

3,536,444

10,589,904

3.02

Cost of Sales and/or Services

-2,313,289

-6,604,890

-2,047,318

-6,350,177

3.02.01

Cost of Sales and/or Services

-1,605,412

-4,612,313

-1,352,848

-4,184,251

3.02.02

Construction Cost

-707,877

-1,992,577

-694,470

-2,165,926

3.03

Gross Profit

1,497,492

4,577,793

1,489,126

4,239,727

3.04

Operating Income/Expenses

-371,211

-1,296,981

-342,671

-1,301,297

3.04.01

Selling Expenses

-189,329

-638,890

-124,619

-576,737

3.04.02

General and Administrative Expenses

-216,543

-724,258

-233,926

-766,974

3.04.04

Other Operating Income

44,424

98,845

22,852

46,135

3.04.04.01

Other Operating Income

48,760

108,177

27,601

56,884

3.04.04.02

Cofins and Pasep

-4,336

-9,332

-4,749

-10,749

3.04.05

Other Operating Expenses

-10,265

-36,874

-8,210

-8,420

3.04.06

Equity Results

502

4,196

1,232

4,699

3.05

Income before Financial Result and Taxes

1,126,281

3,280,812

1,146,455

2,938,430

3.06

Financial Result

-262,770

-1,293,937

222,869

-54,549

3.06.01

Financial Income

123,237

344,536

105,842

284,960

3.06.01.01

Financial Income

117,519

348,235

109,762

297,251

3.06.01.02

Exchange Gains

11,183

13,245

0

347

3.06.01.03

Cofins and Pasep

-5,465

-16,944

-3,920

-12,638

3.06.02

Financial  Expenses

-386,007

-1,638,473

117,027

-339,509

3.06.02.01

Financial  Expenses

-195,195

-538,307

-136,131

-469,978

3.06.02.02

Exchange Losses

-190,812

-1,100,166

253,158

130,469

3.07

Earnings before Income Tax

863,511

1,986,875

1,369,324

2,883,881

3.08

Income Tax and Social Contribution

-298,347

-659,394

-468,799

-977,186

3.08.01

Current

-303,572

-604,204

-406,548

-899,391

3.08.02

Deferred

5,225

-55,190

-62,251

-77,795

3.09

Net Result from Continued Operations

565,164

1,327,481

900,525

1,906,695

3.11

Profit/Loss for the Period

565,164

1,327,481

900,525

1,906,695

 

PAGE: 6 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Income Statement

(R$ thousand)

 

Code

Description

Current Quarter

YTD Current

Same Quarter

YTD Previous

 

 

7/01/2018 to 9/30/2018

Year

Previous Year

Year

 

 

 

1/01/2018 to 9/30/2018

7/01/2017 to 9/30/2017

1/01/2017 to 9/30/2017

3.99

Earnings per Share - (Reais/Share)

 

 

 

 

3.99.01

Basic Earnings per Share

 

 

 

 

3.99.01.01

Common Share

0.82686

1.94216

1.31750

2.78957

3.99.02

Diluted Earnings per Share

 

 

 

 

3.99.02.01

Common Share

0.82686

1.94216

1.31750

2.78957

 

PAGE: 7 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Comprehensive Income

 

(R$ thousand)

 

Code  Description  Current Quarter  YTD Current  Same Quarter  YTD Previous 
    7/01/2018 to 9/30/2018  Year  Previous Year  Year 
      1/01/2018 to 9/30/2018  7/01/2017 to 30/09/2017  1/01/2017 to 9/30/2017 
4.01  Net Income for the Period  565,164  1,327,481  900,525  1,906,695 
4.03  Comprehensive Income for the Period  565,164  1,327,481  900,525  1,906,695 

 

PAGE: 8 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Cash Flows - Indirect Method

(R$ thousand)

 

Code

Description

YTD Current Year

YTD Previous Year

 

 

1/01/2018 to 9/30/2018

1/01/2017 to 9/30/2017

6.01

Net Cash from Operating Activities

3,088,023

2,339,196

6.01.01

Cash from Operations

4,553,602

4,659,239

6.01.01.01

Profit before Income Tax and Social Contribution

1,986,875

2,883,881

6.01.01.02

Provision and Inflation Adjustments on Provisions

50,794

138,571

6.01.01.04

Finance Charges from Customers

-219,514

-169,194

6.01.01.05

Residual Value of Property, Plant and Equipment, Intangible Assets and Investment Properties Written-off

16,893

11,528

6.01.01.06

Depreciation and Amortization

997,406

974,487

6.01.01.07

Interest on Borrowings and Financing Payable

391,455

296,665

6.01.01.08

Monetary and Exchange Change on Borrowings and Financing

1,153,748

-86,081

6.01.01.09

Interest and Monetary Changes on Liabilities

20,886

6,948

6.01.01.10

Interest and Monetary Changes on Assets

-55,069

-28,710

6.01.01.11

Allowance for Doubtful Accounts

126,005

87,480

6.01.01.12

Provision for Consent Decree (TAC)

-75,450

60,670

6.01.01.13

Equity Results

-4,196

-4,699

6.01.01.15

Other Adjustments

20,002

-10,332

6.01.01.16

Transfer of Funds to São Paulo Municipal Government

7,601

318,920

6.01.01.17

Construction Margin over Intangible Assets Resulting from Concession Contracts

-45,829

-49,299

6.01.01.18

Pension Plan Liabilities

181,995

228,404

6.01.02

Changes in Assets and Liabilities

-437,746

-1,040,984

6.01.02.01

Trade Receivables

555

49,471

6.01.02.02

Related-Party Balances and Transactions

45,175

68,390

6.01.02.03

Inventories

18,725

-65,200

6.01.02.04

Recoverable Taxes

37,872

31,586

6.01.02.05

Other Receivables

-32,403

-56,751

6.01.02.06

Escrow Deposits

-22,960

-17,678

6.01.02.08

Contractors and Suppliers

-206,041

-217,200

6.01.02.09

Payroll, Provisions and Social Contribution

96,672

79,361

6.01.02.10

Pension Plan Liabilities

-151,518

-160,699

6.01.02.11

Taxes and Contributions Payable

-162,720

-151,611

6.01.02.12

Services Payable

-16,286

-392,765

6.01.02.13

Other Liabilities

142,676

7,805

6.01.02.14

Provisions

-193,804

-209,865

6.01.02.15

Deferred Cofins/Pasep

6,311

-5,828

6.01.03

Other

-1,027,833

-1,279,059

6.01.03.01

Interest Paid

-513,176

-494,094

6.01.03.02

Income Tax and Social Contribution Paid

-514,657

-784,965

6.02

Net Cash from Investing Activities

-1,388,446

-1,237,362

6.02.01

Acquisition of Intangible Assets

-1,366,684

-1,233,769

6.02.02

Acquisition of Property, Plant and Equipment

-23,043

-12,442

6.02.03

Increase in Investments

-655

0

6.02.04

Restricted Cash

-6,195

8,849

6.02.06

Receipt from the Sale of Assets

8,131

0

 

PAGE: 9 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Cash Flows - Indirect Method

(R$ thousand)

 

Code

Description

YTD Current Year

YTD Previous Year

 

 

1/01/2018 to 9/30/2018

1/01/2017 to 9/30/2017

6.03

Net Cash from Financing Activities

-363,371

-887,055

6.03.01

Funding

1,555,670

893,178

6.03.02

Amortization

-1,170,632

-953,482

6.03.03

Payment of Interest on Equity

-653,393

-765,933

6.03.04

Public-Private Partnership - PPP

-63,469

-23,528

6.03.05

Program Contract Commitments

-31,547

-37,290

6.05

Increase (Decrease) in Cash and Cash Equivalents

1,336,206

214,779

6.05.01

Opening Cash and Cash Equivalents

2,283,047

1,886,221

6.05.02

Closing Cash and Cash Equivalents

3,619,253

2,101,000

 

PAGE: 10 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Changes in Equity / 1/01/2018 to 9/30/2018

(R$ thousand)

 

Code

Description

Paid-up Capital

Capital Reserves, Options Granted and Treasury Shares

Profit Reserves

Retained Earnings/Accumulated

Losses

Other Comprehensive

Income

Equity

5.01

Opening Balances

10,000,000

0

8,051,110

0

-538,101

17,513,009

5.03

Restated Opening Balances

10,000,000

0

8,051,110

0

-538,101

17,513,009

5.04

Capital Transactions with Shareholders

0

0

-53,539

0

0

-53,539

5.04.08

Additional Approved Dividends

0

0

-53,539

0

0

-53,539

5.05

Total Comprehensive Income

0

0

0

1,327,481

0

1,327,481

5.05.01

Net Income for the Period

0

0

0

1,327,481

0

1,327,481

5.07

Closing Balances

10,000,000

0

7,997,571

1,327,481

-538,101

18,786,951

 

PAGE: 11 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Changes in Equity / 1/01/2017 to 9/30/2017

(R$ thousand)

 

Code

Description

Paid-up Capital

Capital Reserves, Options Granted and Treasury Shares

Profit Reserves

Retained Earnings/Accumulated

Losses

Other Comprehensive

Income

Equity

5.01

Opening Balances

10,000,000

0

6,244,859

0

-825,648

15,419,211

5.03

Restated Opening Balances

10,000,000

0

6,244,859

0

-825,648

15,419,211

5.04

Capital Transactions with Shareholders

0

0

-62,719

0

0

-62,719

5.04.08

Additional Approved Dividends

0

0

-62,719

0

0

-62,719

5.05

Total Comprehensive Income

0

0

0

1,906,695

0

1,906,695

5.05.01

Net Income for the Period

0

0

0

1,906,695

0

1,906,695

5.07

Closing Balances

10,000,000

0

6,182,140

1,906,695

-825,648

17,263,187

 

PAGE: 12 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Parent Company’s Financial Statements / Statement of Value Added

(R$ thousand)

 

Cod

Description

YTD Current Year

YTD Previous Year

 

 

1/01/2018 to 9/30/2018

1/01/2017 to 9/30/2017

7.01

Revenue

11,882,836

11,115,257

7.01.01

Goods, Products and Services Sold

9,862,258

8,930,628

7.01.02

Other Revenue

108,177

56,884

7.01.03

Revenue from Construction of own Assets

2,038,406

2,215,225

7.01.04

Allowance for/Reversal of Doubtful Accounts

-126,005

-87,480

7.02

Inputs Acquired from Third Parties

-4,162,975

-3,921,047

7.02.01

Costs of Sales and Services

-3,444,258

-3,259,707

7.02.02

Materials, Electricity, Outside Services and Others

-681,826

-652,920

7.02.04

Other

-36,891

-8,420

7.03

Gross Value Added

7,719,861

7,194,210

7.04

Retentions

-997,406

-974,487

7.04.01

Depreciation, Amortization and Depletion

-997,406

-974,487

7.05

Net Value Added Produced

6,722,455

6,219,723

7.06

Wealth Received in Transfer

365,676

302,297

7.06.01

Equity Results

4,196

4,699

7.06.02

Financial Income

361,480

297,598

7.07

Total Value Added to Distribute

7,088,131

6,522,020

7.08

Value Added Distribution

7,088,131

6,522,020

7.08.01

Personnel

1,826,249

1,779,458

7.08.01.01

Salaries and Wages

1,339,636

1,160,465

7.08.01.02

Benefits

476,250

457,107

7.08.01.03

Government Severance Indemnity Fund for Employees (FGTS)

10,363

161,886

7.08.02

Taxes and Contributions

1,835,740

1,964,668

7.08.02.01

Federal

1,691,116

1,859,833

7.08.02.02

State

108,688

73,653

7.08.02.03

Municipal

35,936

31,182

7.08.03

Value Distributed to Providers of Capital

2,098,661

871,199

7.08.03.01

Interest

2,036,509

816,233

7.08.03.02

Rental

62,152

54,966

7.08.04

Value Distributed to Shareholders

1,327,481

1,906,695

7.08.04.03

Retained Earnings/Accumulated Loss for the Period

1,327,481

1,906,695

 

PAGE: 13 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

1.     Financial highlights

 

 

 

R$ million

 

 

 

Chg.

 

 

Chg.

 

3Q18

3Q17

R$

%

9M18

9M17

R$

%

Gross operating revenue (1)

3,331.6

2,999.7

331.9

11.1

9,862.3

8,930.6

931.7

10.4

Construction revenue

724.1

712.9

11.2

1.6

2,038.4

2,215.2

(176.8)

(8.0)

Cofins and Pasep/TRCF taxes (2)

(244.9)

(176.1)

(68.8)

39.1

(718.0)

(555.9)

(162.1)

29.2

(=) Net operating revenue

3,810.8

3,536.5

274.3

7.8

11,182.7

10,589.9

592.8

5.6

Costs and expenses

(2,011.3)

(1,711.4)

(299.9)

17.5

(5,975.5)

(5,528.0)

(447.5)

8.1

Construction costs

(707.9)

(694.5)

(13.4)

1.9

(1,992.6)

(2,165.9)

173.3

(8.0)

Equity result

0.5

1.2

(0.7)

(58.3)

4.2

4.7

(0.5)

(10.6)

Other operating revenue (expenses), net

34.2

14.6

19.6

134.2

62.0

37.7

24.3

64.5

(=) Earnings before financial result, income tax and social contribution

1,126.3

1,146.4

(20.1)

(1.8)

3,280.8

2,938.4

342.4

11.7

Financial result

(262.8)

222.9

(485.7)

(217.9)

(1,293.9)

(54.5)

(1,239.4)

2,274.1

(=) Earnings before income tax and social contribution

863.5

1,369.3

(505.8)

(36.9)

1,986.9

2,883.9

(897.0)

(31.1)

Income tax and social contribution

(298.3)

(468.8)

170.5

(36.4)

(659.4)

(977.2)

317.8

(32.5)

(=) Net income

565.2

900.5

(335.3)

(37.2)

1,327.5

1,906.7

(579.2)

(30.4)

Earnings per share (R$) *

0.83

1.32

 

 

1.94

2.79

 

 

 

(1)     Includes Revenue from Regulatory, Control and Inspection Fee (TRCF - Taxa de Regulação, Controle e Fiscalização) since November 2017, in the amount of R$ 15.8 million in the quarter and R$ 47.2 in the 9M.

(2)     Includes TRCF transfers in the amount of R$ 13.5 million in the quarter and R$ 40.4 in the 9M.

 (*)    Total shares = 683,509,869

 

 

Adjusted EBITDA Reconciliation (Non-accounting measures)

 

R$ million

 

 

 

Chg.

 

 

Chg.

 

3Q18

3Q17

R$

%

9M18

9M17

R$

%

Net income

565.2

900.5

(335.3)

(37.2)

1,327.5

1,906.7

(579.2)

(30.4)

Income tax and social contribution

298.3

468.8

(170.5)

(36.4)

659.4

977.2

(317.8)

(32.5)

Financial result

262.8

(222.9)

485.7

(217.9)

1,293.9

54.5

1,239.4

2,274.1

Other operating revenues (expenses), net

(34.2)

(14.6)

(19.6)

134.2

(62.0)

(37.7)

(24.3)

64.5

(=) Adjusted EBIT*

1,092.1

1,131.8

(39.7)

(3.5)

3,218.8

2,900.7

318.1

11.0

Depreciation and amortization

342.5

324.5

18.0

5.5

997.4

974.5

22.9

2.3

(=) Adjusted EBITDA**

1,434.6

1,456.3

(21.7)

(1.5)

4,216.2

3,875.2

341.0

8.8

(%) Adjusted EBITDA margin

37.6

41.2

 

 

37.7

36.6

 

 

 

* Adjusted EBIT is net income before: (i) other operating revenues / expenses, net; (ii) financial result; and (iii) income tax and social contribution.

** Adjusted EBITDA is net income before: (i) depreciation and amortization expenses; (ii) income tax and social contribution; (iii) financial result; and (iv) other operating revenues / expenses, net.

 

In 3Q18, the net operating revenue, which considers construction revenue, totaled R$ 3,810.8 million, an increase of 7.8% over the same period of the previous year.

Costs and expenses, which include construction costs, totaled R$ 2,719.2 million, a 13.0% increase when compared to the same period of 2017.

Adjusted EBIT, in the amount of R$ 1,092.1 million, decreased 3.5% compared to the R$ 1,131.8 million presented in 3Q17.

Adjusted EBITDA, in the amount of R$ 1,434.6 million, decreased 1.5% when compared to the R$ 1,456.3 million presented in 3Q17 (R$ 5,610.3 million in the last 12 months).

Adjusted EBITDA margin in 3Q18 was 37.6%, against 41.2% in 3Q17 (36.9% in the last 12 months).

Excluding the effects of revenue and construction costs, the adjusted EBITDA margin was 46.0% in 3Q18 (50.9% in 3Q17 and 45.3% in the last 12 months).

In 3Q18 the Company recorded a net income of R$ 565.2 million, compared to a net income of R$ 900.5 million in 3Q17.

PAGE: 14 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

2.     Gross operating revenue

The gross operating revenue related to sanitation services, in the amount of R$ 3,331.6 million, which does not consider the construction revenue, increased by R$ 331.9 million or 11.1%, when compared to R$ 2,999.7 million in 3Q17.

The main factors that led to the increase were:

 

·         Tariff repositioning index of 7.9% since November 2017; and

·         Tariff repositioning index of 3.5% since June 2018.

 

The increase caused by the above-mentioned factors was partially offset by the higher recognition with allowance for doubtful accounts regarding the wholesale sales in 3Q18, in the amount of R$ 42.7 million, due to the lower revenue in the period, mainly from the municipality of Guarulhos.

There was no relevant variation in the total billed volume in the related period.

 

 

3.    Construction revenue

Construction revenue increased by R$ 11.2 million or 1.6%, when compared to the same period of 2017. The variation is mainly due to the higher investment in the municipalities served by the Company.

PAGE: 15 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

4.    Billed volume

 

The tables below show the billed volumes of water and sewage, in the quarter and year-to-date comparison, per consumer category and region.

 

WATER AND SEWAGE BILLED VOLUME(1) PER CUSTOMER CATEGORY – million m3

 

Water

Sewage

Water + Sewage

Category

3Q18

3Q17

 %

3Q18

3Q17

 %

3Q18

3Q17

%

Residential

394.6

394.2

0.1

338.4

336.3

0.6

733.0

730.5

0.3

Commercial

41.0

41.6

(1.4)

40.0

40.1

(0.2)

81.0

81.7

(0.9)

Industrial

7.7

7.8

(1.3)

9.2

9.4

(2.1)

16.9

17.2

(1.7)

Public

10.1

10.2

(1.0)

9.1

9.2

(1.1)

19.2

19.4

(1.0)

Total retail

453.4

453.8

(0.1)

396.7

395.0

0.4

850.1

848.8

0.2

Wholesale (3)

66.6

65.4

1.8

7.2

8.6

(16.3)

73.8

74.0

(0.3)

Total

520.0

519.2

0.2

403.9

403.6

0.1

923.9

922.8

0.1

 

Water

Sewage

Water + Sewage

Category

9M18

9M17

 %

9M18

9M17

 %

9M18

9M17

 %

Residential

1,199.5

1,177.9

1.8

1,025.7

1,002.7

2.3

2,225.2

2,180.6

2.0

Commercial

124.8

123.9

0.7

120.5

118.9

1.3

245.3

242.8

1.0

Industrial

23.3

23.6

(1.3)

28.2

28.1

0.4

51.5

51.7

(0.4)

Public

30.3

30.6

(1.0)

27.2

27.1

0.4

57.5

57.7

(0.3)

Total retail

1,377.9

1,356.0

1.6

1,201.6

1,176.8

2.1

2,579.5

2,532.8

1.8

Wholesale (3)

196.1

191.6

2.3

23.4

26.5

(11.7)

219.5

218.1

0.6

Total

1,574.0

1,547.6

1.7

1,225.0

1,203.3

1.8

2,799.0

2,750.9

1.7

WATER AND SEWAGE BILLED VOLUME(1) PER REGION – million m3

 

Water

Sewage

Water + Sewage

Region

3Q18

3Q17

 %

3Q18

3Q17

 %

3Q18

3Q17

Var. %

Metropolitan

295,2

295,1

-

258,6

257,6

0,4

553,8

552,7

0,2

Regional (2)

158,2

158,7

(0,3)

138,1

137,4

0,5

296,3

296,1

0,1

Total retail

453,4

453,8

(0,1)

396,7

395,0

0,4

850,1

848,8

0,2

Wholesale (3)

66,6

65,4

1,8

7,2

8,6

(16,3)

73,8

74,0

(0,3)

Total

520,0

519,2

0,2

403,9

403,6

0,1

923,9

922,8

0,1

 

Water

Sewage

Water + Sewage

Region

9M18

9M17

%

9M18

9M17

%

9M18

9M17

%

Metropolitan

893.3

877.5

1.8

780.2

763.9

2.1

1,673.5

1,641.4

2.0

Regional (2)

484.6

478.5

1.3

421.4

412.9

2.1

906.0

891.4

1.6

Total retail

1,377.9

1,356.0

1.6

1,201.6

1,176.8

2.1

2,579.5

2,532.8

1.8

Wholesale (3)

196.1

191.6

2.3

23.4

26.5

(11.7)

219.5

218.1

0.6

Total

1,574.0

1,547.6

1.7

1,225.0

1,203.3

1.8

2,799.0

2,750.9

1.7

(1)  Unaudited

(2)  Including coastal and interior regions

(3)  Reused water volume and non-domestic sewage are included

PAGE: 16 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

5.    Costs, administrative & selling expenses and construction costs

Costs, administrative and selling expenses and construction costs increased by R$ 313.3 million in 3Q18 (13.0%). Excluding construction costs, there was an increase of R$ 299.9 million (17.5%).

As a percentage of net revenue, costs, administrative and selling expenses and construction costs represented 71.4% in 3Q18, against 68.0% in 3Q17.

 

R$ million

 

 

 

Chg.

 

 

Chg.

 

3Q18

3Q17

R$

%

9M18

9M17

R$

%

Salaries, payroll charges and pension plan obligations

692.2

623.4

68.8

11.0

2,002.3

1,927.8

74.5

3.9

General supplies

61.0

39.8

21.2

53.3

169.9

117.4

52.5

44.7

Treatment supplies

58.1

60.1

(2.0)

(3.3)

195.5

198.9

(3.4)

(1.7)

Services

366.5

288.4

78.1

27.1

1,063.2

920.9

142.3

15.5

Electricity

241.5

203.6

37.9

18.6

692.1

591.2

100.9

17.1

General expenses

216.7

184.4

32.3

17.5

685.0

633.9

51.1

8.1

Tax expenses

13.5

21.6

(8.1)

(37.5)

44.1

75.9

(31.8)

(41.9)

Sub-total

1,649.5

1,421.3

228.2

16.1

4,852.1

4,466.0

386.1

8.6

Depreciation and amortization

342.5

324.5

18.0

5.5

997.4

974.5

22.9

2.3

Allowance for doubtful accounts

19.3

(34.4)

53.7

(156.1)

126.0

87.5

38.5

44.0

Sub-total

361.8

290.1

71.7

24.7

1,123.4

1,062.0

61.4

5.8

Costs, administrative and selling expenses

2,011.3

1,711.4

299.9

17.5

5,975.5

5,528.0

447.5

8.1

Construction costs

707.9

694.5

13.4

1.9

1,992.6

2,165.9

(173.3)

(8.0)

Costs, adm & selling expenses and construction costs

2,719.2

2,405.9

313.3

13.0

7,968.1

7,693.9

274.2

3.6

% of net revenue

71.4

68.0

 

 

71.3

72.7

 

 

 

 

 

5.1.  Salaries and payroll charges and Pension plan obligations

 

In 3Q18, there was an increase of R$ 68.8 million or 11.0%, due to the following factors:

 

·         Increase of R$ 61.5 million due to the provision for employees who joined the Knowledge Retention Program (Programa de Retenção de Conhecimento - PRC) launched by the Company in 2Q18, aiming to mitigate the impact of the exit of employees who possess strategic knowledge acquired throughout their career, through the transfer of intellectual capital;

·         Increase of R$ 43.7 million in expenses related to health insurance; and

·         Increase of R$ 16.7 million, mainly due to the 1.7% increase related to the Career and Salary Plan (Plano de Cargos e Salários) in February 2018, salary increases of 1.3% in May 2018 and the hiring of 675 new employees in 3Q18.

 

 

The increases above were partially offset by the reversal of R$ 56.2 million in the provision for the Provision for Consent Decree (Termo de Ajuste de Conduta - TAC), related to the employees who joined the PRC.

 

 

5.2.  General Materials

 

Increase of R$ 21.2 million, or 53.3%, mainly due to the greater use of materials in the maintenance in water and sewage networks and in the maintenance of real estate and facilities, in the amount of R$ 8.0 million and R$ 5.9 million, respectively.

PAGE: 17 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

5.3.  Services

 

Service expenses in the amount of R$ 366.5 million increased by R$ 78.1 million, or 27.1%, compared to the
R$ 288.4 million recorded in 3Q17. The increase in this line was distributed in several items, the main ones were
:

 

 

·         Increased hiring of technical services in 3Q18, in the amount of R$ 27.9 million, mainly related to: (i) customer service, in the amount of R$ 3.7 million; and (ii) IT technical support, in the amount of R$ 3.5 million;

·         Greater services execution in maintenance, in the water and sewage systems, in the amount of R$ 7.8 million;

·         Increased surveillance expenses, in the amount of R$ 6.1 million; and

·         Maintenance of properties and facilities, in the amount of R$ 5.4 million.

 

5.4.  Electricity

 

Electricity expenses totaled R$ 241.5 million in 3Q18, an increase of R$ 37.9 million or 18.6% when compared to the R$ 203.6 million in 3Q17. This variation was mainly due to:

·         Average increase of 10.1% in free market tariffs (Ambiente de Contratação Livre - ACL), with a decrease of 1.3% in consumption;

·         Average increase of 11.4% in the grid market tariffs (Tarifas de Uso do Sistema de Distribuição - TUSD), with a 10.5% increase in consumption; and

·         Average increase of 20.4% in regulated market tariffs (Ambiente de Contratação Regulada - ACR), with a decrease of 0.9% in consumption.

In 3Q18, ACL represented 34.3% of the total amount of electricity consumed by the Company, TUSD 34.1% and ACR represented 31.6% of this amount.

 

 

5.5.  General expenses

 

An increase of R$ 32.3 million or 17.5%, totaling R$ 216.7 million in 3Q18, compared to R$ 184.4 million in 3Q17, mainly due to the following factors:

·         Higher expenses related to charging for use of water, in the amount of R$ 23.0 million, related to an additional payment made to Foundation Agency of Alto Tietê Water Basin (Fundação Agência Bacia Hidrográfica Alto Tietê - FABHAT ) from 2014 to 2016; due to the signature of a Recognition of Obligations Term (Termo de Reconhecimento de Obrigações) between the Company and FABHAT  in 3Q18; and

·         Higher provision for transfer to the São Paulo Municipal Fund for Environmental Sanitation and Infrastructure (Fundo Municipal de Saneamento Ambiental e Infraestrutura de São Paulo), in the amount of R$ 15.2 million.

 

 

The above-mentioned increases were partially offset by the lower provisioning for lawsuits in 3Q18, in the amount of R$ 8.7 million.

 

 

5.6.  Depreciation and Amortization

 

The expenses with depreciation and amortization increased by R$ 18.0 million or 5.5%, mainly due to the start-up of intangible assets, in the amount of R$ 3.7 billion.

PAGE: 18 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

5.7.  Allowance for doubtful accounts

 

Increase of R$ 53.7 million, mainly due to:

 

 

·         Lower recovery of unpaid amounts of R$ 30.1 million in 3Q18; and

·         Increase in delinquency rates, with an impact of R$ 23.6 million.

 

6.    Other Operating Revenues (Expenses), Net

Increase of R$ 19.6 million, mainly related to the higher receipt of resources from the Water Basin Decontamination Program (Programa de Despoluição de Bacias Hidrográficas) in 3Q18, in the amount of R$ 12.8 million.

 

 

7. Financial result

 

 

 

 

 

R$ Million

 

3Q18

3Q17

Chg.

%

Financial expenses, net of income

 (95.1)

(44.5)

(50.6)

113.7

Net monetary and exchange variation

  (167.7)

267.4

(435.1)

(162.7)

Financial result

(262.8)

222.9

(485.7)

(217.9)

 

 

7.1. Financial expenses, net of income

 R$ million

 

3Q18

3Q17

Chg.

%

Financial expenses

 

 

 

Interest and charges on domestic loans and financing

 (84.2)

(72.4)

(11.8)

16.3

Interest and charges on international loans and financing

 (45.7)

(28.7)

(17.0)

59.2

Other financial expenses

(46.3)

(30.6)

(15.7)

51.3

Total financial expenses

 (176.2)

(131.7)

(44.5)

33.8

Financial income

 81.1

87.2

(6.1)

(7.0)

Financial expenses, net of income

(95.1)

(44.5)

(50.6)

113.7

 

 

Increase of R$ 50.6 million, mainly due to the following factors:

 

 

 

 

·         Increase of R$ 11.8 million in interest and charges on domestic loans and financings, mainly due to the lower capitalized amount to intangible assets in 3Q18 when compared to 3Q17;

·         Increase of R$ 17.0 million in interest and charges on foreign loans and financings, mainly due to the higher outstanding amounts in 3Q18 when compared to 3Q17, resulting from the appreciation of the dollar and yen against the real; and

·         Increase of R$ 15.7 million in other financial expenses, mainly due to: (i) recognition of interest on investment related to the Public-Private Partnership - PPP, in 3Q18, in the amount of R$ 36.1 million, due to the full startup of the São Lourenço Production System (Sistema Produtor São Lourenço) in July 2018; and (ii) lower recognition of interest in lawsuits, in the amount of R$ 16.8 million.

PAGE: 19 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

7.2. Monetary and exchange variation, net

 

 

 

 

R$ Million

 

3Q18

3Q17

Chg.

%

Monetary variation on loans and financing

(21.3)

(3.6)

(17.7)

491.7

Currency Exchange variation on loans and financing

(190.8)

253.2

(444.0)

(175.4)

Other monetary variations

2.3

(0.9)

3.2

(355.6)

Monetary/exchange rate variation on liabilities

(209.8)

248.7

(458.5)

(184.4)

Monetary/exchange rate variation on assets

42.1

18.7

23.4

125.1

Monetary/exchange rate variation, net

(167.7)

267.4

(435.1)

(162.7)

 

 

The effect of net monetary and exchange variations in 3Q18 was R$ 435.1 million higher than in 3Q17, highlighting the increase of R$ 444.0 million in exchange variation on loans and financing, due to the appreciation of the dollar and the yen against the real in 3Q18 (3.8% and 1.3%, respectively) when compared to the depreciation occurred in 3Q17 (-4.2% and -4.5%, respectively).

 

 

8.    Income tax and social contribution

The Company recorded a decrease of R$ 170.5 million, due to the lower taxable result presented in 3Q18, mainly due to the appreciation of the dollar and yen against the real in 3Q18, when compared to the depreciation in 3Q17.

 

 

9.    Indicators

 

9.1.  Operating

 

 

Operating indicators (*)

3Q18

3Q17

%

Water connections (1)

9,010

8,807

2.3

Sewage connections (1)

7,449

7,247

2.8

Population directly served - water (2)

25.0

24.9

0.4

Population directly served - sewage (2)

21.7

21.5

0.9

Number of employees

14,170

13,901

1.9

Water volume produced in the quarter (3)

693

695

(0.3)

Water volume produced in the year (3)

2,087

2,082

0.2

IPM – Measured water loss (%)

30.0

31.1

(3.5)

IPDt (liters/connections x day)

292

306

(4.6)

 

 

(1)     Total connections, active and inactive, in thousand units at the end of the period

(2)     In million inhabitants, at the end of the period. Not including wholesale

(3)     In millions of cubic meters

(*)  Unaudited

PAGE: 20 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

9.2.  Financial

 

Economic Variables at the close of the quarter (*)

3Q18

3Q17

Amplified Consumer Price Index (1)

0.72

0.59

National Consumer Price Index (1)

0.55

0.12

Consumer Price Index (1)

1.03

0.11

Referential Rate (1)

0.0000

0.1132

Interbank Deposit Certificate (2)

6.39

8.14

US DOLLAR (3)

4.0039

3.1680

YEN (3)

0.03528

0.02813

 

 

(1) Accrued in the quarter (%)

(2) Quarterly average

(3) Ptax sales on the last day

(*) Unaudited

 

10.     Loans and financing

 

 

DEBT PROFILE (R$ thousand)

INSTITUTION

2018

2019

2020

2021

2022

2023

2024 onwards

TOTAL

Local currency

 

 

 

 

 

 

 

 

Brazilian Federal Savings Bank

18,270

74,079

76,853

80,875

85,215

77,578

909,839

1,322,709

Debentures

309,883

1,044,297

587,169

479,076

558,337

361,791

353,247

3,693,800

BNDES

30,307

121,229

103,019

102,569

102,569

96,837

540,620

1,097,150

Leasing

4,527

33,924

35,577

37,374

39,328

42,091

374,771

567,592

Others

344

1,376

1,376

1,376

1,376

1,376

2,640

9,864

Interest and other charges

43,231

58,181

-

-

-

-

-

101,412

Total Local Currency

406,562

1,333,086

803,994

701,270

786,825

579,673

2,181,117

6,792,527

Foreign currency

 

 

 

 

 

 

 

 

IADB

-

169,385

169,385

169,385

169,385

169,385

1,604,859

2,451,784

IBRD

-

12,171

24,342

24,342

24,342

24,342

255,666

365,205

Deutsche Bank 350

150,146

297,253

-

-

-

-

-

447,399

Eurobonds

-

-

1,399,512

-

-

-

-

1,399,512

JICA

1,489

139,060

139,060

139,060

139,060

139,060

1,290,668

1,987,457

BID 1983AB

-

70,838

69,935

30,799

30,799

29,158

-

231,529

Interest and other charges

41,972

9,583

-

-

-

-

-

51,555

Total Foreign Currency

193,607

698,290

1,802,234

363,586

363,586

361,945

3,151,193

6,934,441

Total

600,169

2,031,376

2,606,228

1,064,856

1,150,411

941,618

5,332,310

13,726,968

 

11.     Capex

 

3Q18 investments totaled R$ 795.6 million, including R$ 61.6 million related to the São Lourenço PPP.

PAGE: 21 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

1                    Operations

 

Companhia de Saneamento Básico do Estado de São Paulo ("SABESP" or the "Company") is a mixed-capital company headquartered in São Paulo, at Rua Costa Carvalho, 300, CEP 05429-900, controlled by the São Paulo State Government. The Company is engaged in the provision of basic and environmental sanitation services in the State of São Paulo, as well as it supplies treated water and sewage services on a wholesale basis.

 

In addition to providing basic sanitation services in the State of São Paulo, SABESP may perform these activities in other states and countries, and can operate in drainage, urban cleaning, solid waste handling and energy markets. SABESP aims to be a world reference in the provision of sanitation services, in a sustainable, competitive and innovative manner, with a focus on customers.

 

As of September 30, 2018, the Company operated water and sewage services in 369 municipalities of the State of São Paulo. Most of these municipalities operations are based on 30-year concession, program and services contracts. The Company has two partial contracts with the municipality of Mogi das Cruzes, however, since most of the municipality is serviced by wholesale, it was not included in the 369 municipalities. As of September 30, 2018, the Company had 371 contracts.

 

SABESP is not temporarily operating in the municipalities of Macatuba and Cajobi due to judicial orders. The lawsuits are in progress and the carrying amount of these municipalities’ intangible assets was R$ 4,345 as of September 30, 2018 (R$ 4,345 as of December 31, 2017).

 

As of September 30, 2018, 42 concession agreements (51 as of December 31, 2017) had expired and are being negotiated. From October 1, 2018 to 2030, 31 concession agreements will expire. Management believes that concession agreements expired and not yet renewed will result in new contracts, disregarding the risk of discontinuity in the provision of municipal water supply and sewage services. By September 30, 2018, 298 program and services contracts were signed (287 contracts as of December 31, 2017).

 

As of September 30, 2018, the carrying amount of the underlying assets used in the 42 concessions of the municipalities under negotiation totaled R$ 4,827,224, accounting for 13.90% of the total intangible assets, and the related gross revenue for the nine-month period ended September 30, 2018 totaled R$ 918,677, accounting for 7.72% of total revenue.

 

The Company’s operations are concentrated in the municipality of São Paulo, which represents 54.86% of the gross revenues on September 30, 2018 (53.64% on September 30, 2017) and 48.24% of intangible assets (46.92% on December 31, 2017).

 

As of June 23, 2010, the State of São Paulo, the Municipality of São Paulo, the Company and the regulatory agency “Sanitation and Energy Regulatory Agency – ARSESP” signed an agreement to share the responsibility for water supply and sewage services to the Municipality of São Paulo based on a 30-year concession agreement. This agreement is extendable for another 30 years, pursuant to the law. This agreement sets forth SABESP as the exclusive service provider and designates ARSESP as regulator, establishing prices, controlling and monitoring services. On the same date, the State of São Paulo, the Municipality of São Paulo and SABESP signed the “Public service provision agreement of water supply and sewage services”,  a 30-year concession agreement which is extendable for another 30 years. This agreement involves the following activities:

 

i.  protection of the sources of water in collaboration with other agencies of the State and the City;

ii.  capture, transport and treatment of water;

iii. collect, transport, treatment and final dispose of  sanitary sewage; and

iv. adoption of other actions of basic and environmental sanitation.

PAGE: 22 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

The Company operates under an authorization by public deed in some municipalities in the Santos coast region and in the Ribeira Valley, where the Company started to operate after the merger of the companies that formed it. In September 2015, the Company entered into a water supply and sewage public utility services agreement with the municipality of Santos; the gross revenue calculated in the nine-month period ended September 30, 2018 totaled
R$ 240,571 (R$ 251,212 in the nine-month period ended September 30, 2017) and the intangible asset was
R$ 500,965 on September 30, 2018 (R$ 310,577 on December 31, 2017).

 

Article 58 of Law 11,445/07 determines that precarious and overdue concessions, as well as those effective for an undetermined period, including those that do not have an instrument formalizing them, will be valid until December 31, 2010. However, Article 2 of Law 12,693 of July 24, 2012, which amended Article 7-A of Law 11,578, of November 26, 2007, allowed the provision of public basic sanitation services to be executed until December 31, 2016. The Company’s Management understands that in the municipalities where the concession agreements were not yet renewed, the operation is governed by Laws 8,987/95 and 11,445/07, including those municipalities served without an agreement.

 

Public deeds are valid and governed by the Brazilian Civil Code.

 

 

The Company's shares have been listed in the Novo Mercado segment of B3 under the ticker symbol SBSP3 since April 2002 and on the New York Stock Exchange (NYSE) as American Depositary Receipts (“ADRs”) Level III, under the SBS code, since May 2002.

 

Since 2008, the Company has been setting up partnerships with other companies, which resulted in the following companies: Sesamm, Águas de Andradina, Saneaqua Mairinque, Aquapolo Ambiental, Águas de Castilho, Attend Ambiental and Paulista Geradora de Energia. Although SABESP has no majority interest in the capital stock of these companies, the shareholders’ agreements provide for the power of veto and casting vote in certain issues jointly with associates, indicating the shared control in the management of investees.

 

In March 2018, the Jaguari-Atibainha interconnection was inaugurated; this interconnection allows the transfer of an average annual outflow of 5.13 cubic meters per second (m³/s) and a maximum outflow of 8.5 m³/s from the Paraíba do Sul Basin to the Cantareira System. In April 2018, the São Lourenço Production System was inaugurated and expands water production and capacity by 6.4 m³/s. With the completion of the construction, the Company has nine large production systems available to supply the São Paulo Metropolitan Region. These two important works aim at expanding water security in the São Paulo Metropolitan Region.

 

Management expects that with improved water security, due to the works carried out, the generation of operating cash and the credit lines available for investment, the Company will have sufficient funds to meet its commitments and not compromise its necessary investments.

 

 

Corporate reorganization

 

On May 12, 2017, the Board of the State Privatization Program approved:

 

(i)  the conducting of studies for SABESP’s Capitalization (as defined below);

 

(ii) the hiring, by SABESP, of the International Finance Corporation, which is associated with the World Bank;

PAGE: 23 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

(iii)   the execution of an agreement between SABESP and the State Government through the Water Resources and Sanitation Department and the Treasury Department, in order to define the scope of the contract and control the relationship between the parties, including a proportional expense reimbursement.

 

The proposed Capitalization provides for the creation of a corporation to directly control SABESP through the transfer of the shares held by the São Paulo State to the capital stock of the new corporation. The São Paulo State will continue holding a sufficient number of shares to ensure SABESP’s control, as provided for in law. The objective of the Capitalization is to overcome a situation that restricts investments designed to preserve the expansion of activities to ensure the universalization of basic sanitation services offered by the Company.

 

The Capitalization may provide for the admission of institutional investors to contribute financial resources to the capital stock of the new company, strengthening SABESP’s corporate governance and business efficiency in order to promote and accelerate the universalization of sanitation services in the State of São Paulo.

 

On September 15, 2017, Law 16,525 was sanctioned, enacted and published; it provides for the corporate reorganization of Companhia de Saneamento Básico de São Paulo - SABESP and sets forth other provisions.

 

The interim financial information was approved by the Board of Directors on November 8, 2018.

 

 

2                   Basis of preparation and presentation of the interim information

 

Presentation of the interim information

 

The interim information as of September 30, 2018, was prepared based on the provisions of CPC 21 (R1) – Interim Financial Information and the international standard IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), applicable to the preparation of Quarterly Information Form– ITR and they are fairly presented consistent with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Therefore, this interim information takes into consideration the official letter CVM/SNC/SEP 003 of April 28, 2011, which allows the entities to present selected notes to the financial statements, in cases of redundant information already disclosed in the Annual Financial Statements. The interim information for September 30, 2018, therefore, does not include all the notes and reporting required by the annual financial statements, and accordingly, shall be read jointly with the Annual Financial Statements as of December 31, 2017, prepared pursuant to the International Financial Reporting Standards – IFRS, issued by the International Accounting Standards Board – IASB and pursuant to the accounting practices adopted in Brazil which observe the pronouncements issued by the Brazilian Accounting Pronouncements Committee - CPC. Therefore, the interim information as of September 30, 2018 was not fully completed due to redundancies with the information presented in the annual financial statements of December 31, 2017 and, as provided for in Official Letter/CVM/SNC/SEP 003/2011. In this interim information, the notes below were either not presented or are not as detailed as those in the annual financial statements:

 

i.            Summary of significant accounting policies (Note 3);

ii.            Changes in accounting practices and disclosures (Note 4);

iii.           Risk Management – Financial Instruments (Note 5.4);

iv.           Key Accounting Estimates and Judgments (Note 6);

v.            Related-Party Balances and Transactions (Note 10);

vi.           Investments (Note 12);

PAGE: 24 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

vii.           Intangible Assets (Note 14);

viii.           Borrowings and Financing (Note 16);

ix.           Deferred Taxes and Contributions (Note 18);

x.            Provisions (Note 19);

xi.           Employees Benefits 20);

xii.           Equity (Note 22);

xiii.           Insurance (Note 25);

xiv.           Financial Income (Expenses) (Note 28).

 

All material information related to the interim information, and this information alone, is being disclosed and corresponds to the information used by the Company’s Management in its administration.

 

The amounts disclosed in the Notes to the interim financial information are in thousands of reais, unless otherwise stated.

 

 

3                   Summary of significant accounting policies

 

Except for the amendments introduced by CPC 47/IFRS 15 (Revenue from Contracts with Customers) and
CPC 48/IFRS 9 (Financial Instruments) pursuant to the accounting policies described below, the other policies used in the preparation of the interim financial information for the period ended September 30, 2018 are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2017:

 

3.1 Operating income

 

(a)  Revenue from sanitation services

 

Revenue from water supply and sanitation services are recognized as the water is consumed and services are provided. Revenues, including revenues unbilled, are recognized at the fair value of the consideration received or receivable for the sale of those services. Revenue is shown net of value-added tax, rebates and discounts. Unbilled revenues represent incurred revenues in which the services were provided, but not yet billed until the end of the each period and are recorded as trade receivables based on monthly estimates of the completed services. Concerning revenues of wholesale municipal governments, which do not pay the full invoice, the Company records allowance for doubtful accounts upon invoicing in revenue reduction account.

 

The Company recognizes revenue when: i) it identifies the contracts with customers; ii) it identifies the different obligations in the contract; iii) it determines the transaction price; iv) it allocates the transaction price to the performance obligations in the contracts; and (v) it satisfies all performance obligations. Amounts in dispute are recognized as revenue when collected.

PAGE: 25 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

(b)  Construction revenue

 

Revenue from concession construction contracts is recognized in accordance with ICPC 01 (R1)/IFRIC 12 (Concession Contracts) and CPC 47 (R1)/IFRS 15 (Revenue from Contracts with Customers), as all performance obligations are satisfied over time. During the construction of the contract, an asset is classified as intangible, as the Company estimates that the fair value of its consideration is equivalent to expected construction costs plus margin. The fee represents the additional margin related to the work performed by the Company in relation to such construction contracts and it is added to construction costs, resulting in the construction revenue.

 

3.2  Financial assets and liabilities

 

 

Financial Asset - Classification
 

 

The Company classifies its financial assets according to the following categories: measured at amortized cost, measured at fair value through other comprehensive income and measured at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of the financial assets at inception. As of September 30, 2018, the Company did not have financial assets classified as fair value through other comprehensive income and fair value through profit or loss.

 

·         Amortized cost

 

This comprises financial assets that meet the following conditions: (i) it is held within the business model whose objective is to hold financial assets to collect contractual cash flows; and (ii) the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

Presented as current assets, except for those with maturity of more than 12 months after the reporting date (these are classified as noncurrent assets). The Company's financial assets measured at amortized cost include cash and cash equivalents, restricted cash, balances of trade receivables, accounts receivable from related parties, other receivables, receivables from the Water National Agency – ANA. Financial assets measured at amortized cost are recorded at fair value and subsequently at amortized cost, under the effective interest rate method.

 

Financial Liabilities - Classification

 

The Company classifies its financial liabilities measured at amortized cost. Classification depends on the purpose to which the financial liabilities were assumed. This category comprises balances payable to contractors and suppliers, borrowings and financing, services payable, balances payable from public-private partnership (PPP), and program contract commitments.

 

The effective interest rate method is adopted to calculate the amortized cost of a financial liability and allocate its interest expense under the respective period. The effective interest rate exactly deducts the estimated future cash flows (including fees, transaction costs and other issue costs) throughout the financial liability’s estimated life or, when appropriate, during a shorter period, for initial recognition of the net carrying amount.

PAGE: 26 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

3.3  Trade receivables and allowance for doubtful accounts

 

Trade receivables are amounts due from customers for services performed in the ordinary course of business. These are classified as current assets, except when maturity exceeds 12 months after the end of the reporting period. In these cases, they are presented as noncurrent assets.

 

The Company records allowance for doubtful accounts for receivable balances at an amount that Management considers to be sufficient to cover eventual losses. The analysis is carried out based on objective “accounts receivable” data, past receipts, existing guarantees and expected future losses.

 

 

4                   Risk management

 

4.1   Financial Risk Management Financial risk factors

The Company's activities are affected by Brazilian economic scenario, making it exposed to market risk (exchange rate and interest rate), credit risk and liquidity risk. The Company’s financial risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

 

The Company has not utilized derivative instruments in any of the reported periods.

 

(a)          Market risk Foreign currency risk

SABESP’s foreign exchange exposure implies market risks associated with currency fluctuations, since the Company has foreign currency-denominated liabilities, mainly US dollar and yen-denominated short and long-term borrowings.

 

The management of SABESP’s foreign currency exposure considers several current and projected economic factors, besides market conditions.

 

This risk arises from the possibility that the Company may incur in losses due to exchange rate fluctuations that would impact liability balances of foreign currency-denominated borrowings and financing raised in the market and related financial expenses. The Company does not maintain hedge or swap contracts or any derivative financial instrument to hedge against this risk.

PAGE: 27 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

A significant amount of the Company’s financial debt is indexed to the US dollar and Yen, in the total amount of  R$ 6,961,495 as of September 30, 2018 (R$ 5,702,375 as of December 31, 2017). Below, the Company’s exposure to exchange risk:

 

 

September 30, 2018

December 31, 2017

 

Foreign currency

R$

Foreign currency

R$

 

 

 

 

 

Borrowings and financing – US$

1,228,652

4,919,400

1,200,786

3,972,200

Borrowings and financing – Yen

56,421,190

1,990,540

57,575,271

1,692,713

Interest and charges from borrowings and financing – US$

 

47,542

 

26,628

Interest and charges from borrowings and financing – Yen

 

4,013

 

10,834

Total exposure

 

6,961,495

 

5,702,375

Borrowing cost – US$

 

(23,970)

 

(26,454)

Borrowing cost – Yen

 

(3,084)

 

(3,100)

Total foreign currency-denominated borrowings (Note 15)

 

6,934,441

 

5,672,821

   

 

1)         The 22.2% increase in foreign-currency denominated debt from December 31, 2017 to September 30, 2018 was mainly due to exchange rate changes, as a result of the 21.0% increase of the US dollar against the Real, from R$ 3.3080 on December 31, 2017, to R$ 4.0039 on September 30, 2018, and the 20.0% increase of the Yen versus the Real, from R$ 0.02940 on December 31, 2017, to R$ 0.03528 on September 30, 2018.

 

As of September 30, 2018, if the Brazilian real had depreciated or appreciated by 10 percentage points, in addition to the impacts mentioned above, against the US dollar and Yen with all other variables held constant, the effects on results before taxes on the nine-month period ended September 30, 2018 would have been R$ 696,150 (R$ 570,238 for the year ended December 31, 2017), lower or higher, mainly as a result of exchange losses or gains on the translation of foreign currency-denominated loans.

 

Scenario I below presents the effect in income statements for the next 12 months, considering the projected rates of the US dollar and the Yen. Considering the other variables as remaining constant, the impacts for the next 12 months are shown in scenarios II and III with possible depreciations of 25% and 50%, respectively, in the Brazilian real.

PAGE: 28 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

 

 

 

Scenario I (Probable)

Scenario II (+25%)

Scenario III (+50%)

 

(*)

 

 

Net currency exposure as of September 30, 2018 (Liabilities) in US$

1,228,652

1,228,652

1,228,652

 

 

 

 

US$ rate as of September 30, 2018

4.0039

4.0039

4.0039

Exchange rate estimated according to the scenario

3.8300

4.7875

5.7450

Differences between the rates

0.1739

(0.7836)

(1.7411)

 

 

 

 

Effect on net financial result R$ - gain/(loss)

213,663

(962,772)

(2,139,206)

 

 

 

 

Net currency exposure as of September 30, 2018 (Liabilities) in Yen

56,421,190

56,421,190

56,421,190

 

 

 

 

Yen rate as of September 30, 2018

0.03528

0.03528

0.03528

Exchange rate estimated according to the scenario

0.03657

0.04572

0.05486

Difference between the rates

(0.00129)

(0.01044)

(0.01958)

 

 

 

 

Effect on net financial result R$ - (loss)

(72,783)

(589,037)

(1,104,727)

 

 

 

 

Total effect on net financial result in R$ - gain/(loss)

140,880

(1,551,809)

(3,243,933)

 

 

 

 

(*) For the probable scenario in US dollar, the exchange rate estimated for September 30, 2019 was used, pursuant to the Focus Report-BACEN of September 30, 2018, while for the Yen, the average exchange rate was considered for the 12-month period after September 30, 2018, according to B3’s Reference Rates report of September 30, 2018.

 

 

Interest rate risk

 

This risk arises from the possibility that the Company could incur losses due to fluctuations in interest rates, increasing the financial expenses related to borrowings and financing.

 

The Company has not entered into any derivative contract to hedge against this risk; however, it continually monitors market interest rates, in order to evaluate the possible need to replace its debt.

PAGE: 29 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

The table below provides the Company's borrowings and financing subject to variable interest rate:

 

 

September 30, 2018

December 31, 2017

CDI(i)

1,500,000

1,144,391

TR(ii)

1,629,546

1,574,564

IPCA(iii)

1,635,360

1,699,747

TJLP(iv)

1,367,770

1,354,987

LIBOR(v)

3,518,034

2,814,399

Interest and charges

119,187

125,172

Total

9,769,897

8,713,260

 

(i)  CDI - (Certificado de Depósito Interbancário), an interbank deposit certificate

(ii)  TR – Interest Benchmark Rate

(iii) IPCA - (Índice Nacional de Preços ao Consumidor Amplo), a consumer price index

(iv) TJLP - (Taxa de Juros a Longo Prazo), a long-term interest rate index

(v)  LIBOR - London Interbank Offered Rate

 

Another risk to which the Company is exposed, is the mismatch of the monetary restatement indices of its debts with those of its service revenues. Tariff adjustments of services provided by the Company do not necessarily follow the increases in the inflation indexes to adjust loans, financing and interest rates affecting indebtedness.

 

As of September 30, 2018, if interest rates on borrowings and financing had been 1 percentage point higher or lower with all other variables held constant, the effects on profit before taxes for the nine-month period ended September 30, 2018 would have been R$ 97,699 (R$ 87,133 as of December 31, 2017), lower or higher, mainly as a result of lower or higher interest expense on floating rate borrowings and financing.

 

(b)         Credit risk

 

Credit risk arises from cash and cash equivalents, deposits in banks and financial institutions, as well as credit exposures to wholesale basis and retail customers, including outstanding accounts receivable, restricted cash and accounts receivable from related parties. Credit risk exposure to customers is mitigated by sales to a dispersed base.

 

The maximum exposures to credit risk as of September 30, 2018 are the carrying amounts of instruments classified as cash equivalents, deposits in banks and financial institutions, restricted cash, trade receivables and accounts receivable from related parties at the reporting period. See additional information in Notes 6, 7, 8 and 9.

 

Regarding the financial assets held with financial institutions, the credit quality that is not past due or subject to impairment can be assessed by reference to external credit ratings (if available) or to historical information about the bank’s default rates. The credit quality of the banks, such as deposits and financial investments, the Company considers the lower rating published by three main international rating agencies (Fitch, Moody's and S&P), according to internal policy of market risk management:

PAGE: 30 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

September 30, 2018

December 31, 2017

Cash at banks and short-term bank deposits

 

 

AA(bra)

3,561,932

2,222,001

AAA(bra)

38,494

43,978

Other (*)

18,827

17,068

 

3,619,253

2,283,047

 

(*) This category includes current accounts and investment funds in banks whose balances were not significant.

 

The available credit rating information of the banks, as of September 30, 2018, in which the Company made deposit transactions and financial investments in local currency (R$ - local rating) during the period is as follows:

 

Banks

Fitch

Moody's

Standard Poor's

Banco do Brasil S/A

AA(bra)

Aa1.br

-

Banco Santander Brasil S/A

-

Aaa.br

brAAA

Brazilian Federal Savings Bank

AA(bra)

Aa1.br

brAAA

Banco Bradesco S/A

AAA(bra)

Aa1.br

brAAA

Itaú Unibanco Holding S/A

AAA(bra)

Aa1.br

brAAA

 

(c)    Liquidity risk

 

The Company's liquidity is primarily reliant upon cash provided by operating activities, loans from Brazilian Federal and State governmental financial institutions, and financing in the local and international capital markets. The liquidity risk management considers the assessment of its liquidity requirements to ensure it has sufficient cash to meet its operating and capital expenditures needs, as well as the payment of debts.

 

The funds held by the Company are invested in interest-bearing current accounts, time deposits and securities, selecting instruments with appropriate maturity or liquidity sufficient to provide margin as determined by projections mentioned above.

 

The table below shows the Company’s financial liabilities, into relevant maturities, including the installments of principal and future interest to be paid according to the agreement.

PAGE: 31 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

 

October to December 2018

2019

2020

2021

2022

2023 onwards

Total

As of September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Borrowings and financing

687,459

2,655,179

3,104,589

1,424,749

1,467,962

7,536,127

16,876,065

Accounts payables to suppliers and contractors

384,482

-

-

-

-

-

384,482

Services payable

399,590

-

-

-

-

-

399,590

Public-Private Partnership – PPP (*)

138,302

375,258

375,258

375,258

375,258

5,264,349

6,903,683

Program contract commitments

94,185

120,719

15,604

15,737

987

15,375

262,607

 

(*) The Company also considered future commitments (construction not yet performed) still not recognized in the financial statements related to São Lourenço PPP, due to the relevance of future cash flows, the impacts on its operations and the fact the Company already has formalized this commitment through an agreement signed by the parties.

 

Future interest

 

Future interest was calculated based on the contractual clauses for all agreements. For agreements with floating interest rate, the interest rates used correspond to the base dates above.

 

Cross default

 

The Company has borrowings and financing agreements including cross default clauses, i.e., the early maturity of any debt, may imply the early maturity of these agreements. The indicators are continuously monitored in order to avoid the execution of these clauses.

 

(d)        Sensitivity analysis on interest rate risk

 

The table below shows the sensitivity analysis of the financial instruments, prepared in accordance with CVM Rule 475/2008 in order to evidence the balances of main financial assets and liabilities, calculated at a rate projected for the twelve-month period after September 30, 2018, or until the final settlement of each contract, whichever is shorter, considering a probable scenario (scenario I), appreciation of 25% (scenario II) and 50% (scenario III).

 

The purpose of the sensitivity analysis is to measure the impact of changes in the market over the financial instruments of the Company, considering constant all other variables. In the time of settlement the amounts can be different from those presented, due to the estimates used in the measurement.

PAGE: 32 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

September 30, 2018

Indicators

Exposure

Scenario I

(Probable) (i)

Scenario II

25%

Scenario III

50%

 

 

 

 

 

Assets

 

 

 

 

CDI

3,520,269

8.0000% (*)

6.0000%

4.0000%

Financial income

 

281,622

211,216

140,811

 

 

 

 

 

Liabilities

 

 

 

 

CDI

(1,500,000)

8.0000% (*)

6.0000%

4.0000%

Interest to be incurred

 

(120,000)

(90,000)

(60,000)

 

 

 

 

 

CDI net exposure

2,020,269

161,622

121,216

80,811

 

 

 

 

 

Liabilities

 

 

 

 

TR

(1,629,546)

0.0001% (***)

0.0001%

0.0002%

Expenses to be incurred

 

(2)

(2)

(3)

 

 

 

 

 

IPCA

(1,635,360)

4.2000% (*)

5.2500%

6.3000%

Expenses to be incurred

 

(68,685)

(85,856)

(103,028)

 

 

 

 

 

TJLP

(1,367,770)

6.5600% (*)

8.2000%

9.8400%

Interest to be incurred

 

(89,726)

(112,157)

(134,589)

 

 

 

 

 

LIBOR

(3,518,034)

2.7823% (**)

3.4779%

4.1735%

Interest to be incurred

 

(97,883)

(122,353)

(146,824)

 

 

 

 

 

Total net expenses to be incurred

 

(94,674)

(199,152)

(303,633)

 

 

 

 

 

(*)     Source: CDI and IPCA rates (Focus Report – BACEN, September 30, 2018) and long-term interest rate at September 30, 2018 (BACEN).

(**)   Source: Bloomberg

(***) Source: B3 (previously BM&FBovespa)

 

(i) Refers to the scenario of interest to be incurred for the 12 months as of September 30, 2018 or until the maturity of the agreements, whichever is shorter.

 

4.2  Capital management

 

The Company’s objectives when managing capital are ensure its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

 

The Company monitors capital based on the leverage ratio. This ratio corresponds to net debt divided by total capital. Net debt corresponds to total borrowings and financing less cash and cash equivalents. Total capital is calculated as total equity as shown in the balance sheet plus net debt.

PAGE: 33 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

September 30, 2018

December 31, 2017

 

 

 

Total borrowings and financing (Note 15)

13,726,968

12,100,966

(-) Cash and cash equivalents (Note 6)

(3,619,253)

(2,283,047)

 

 

 

Net debt

10,107,715

9,817,919

Total equity

18,786,951

17,513,009

 

 

 

Total capital

28,894,666

27,330,928

 

 

 

Leverage ratio

35%

36%

 

 

As of September 30, 2018, the leverage ratio fell to 35% on the 36% reported on December 31, 2017, chiefly due to the increase of equity arising from the profit calculated in the nine-month period ended September 30, 2018 and the increase of cash and cash equivalents, mitigated by higher borrowings and financing due to the appreciation of the US dollar and the Yen against the Real.

 

4.3  Fair value estimates

 

It is assumed that balances from trade receivables (current) and accounts payable to suppliers by carrying amount, less impairment approximate their fair values, considering the short maturity. Long-term trade receivables also approximate their fair values, as they will be adjusted by inflation and/or will bear contractual interest rates over time.

 

4.4  Financial instruments

 

With the changes introduced by CPC 48/IFRS 9 (Financial Instruments), as of September 30, 2018, the Company did not have financial assets classified as fair value through other comprehensive income and fair value through profit or loss. The Company’s financial instruments included in the amortized cost category comprise cash and cash equivalents, restricted cash, trade receivables, balances with related parties, other receivables, and balances receivable from the Water National Agency – ANA, accounts payable to contractors and suppliers, borrowings and financing, services payable, balances payable deriving from the Public Private Partnership-PPP and program contract commitments, which are non-derivative financial assets and liabilities with fixed or determinable payments, not quoted in an active market.

 

The estimated fair values of financial instruments are as follows:

PAGE: 34 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Financial Assets

 

 

September 30, 2018

December 31, 2017

 

Carrying amount

Fair value

Carrying amount

Fair value

   Cash and cash equivalents

3,619,253

3,619,253

2,283,047

2,283,047

   Restricted cash

25,017

25,017

18,822

18,822

   Trade receivables

1,960,785

1,960,785

1,888,505

1,888,505

   Water National Agency– ANA

50,454

50,454

70,487

70,487

   Other receivables

224,016

224,016

169,715

169,715

 

Additionally, SABESP has financial instrument assets receivable from related parties, in the amount of R$ 827,394 as of September 30, 2018 (R$ 815,160 as of December 31, 2017), which were calculated in accordance with the conditions negotiated between related parties. Part of this balance, totaling R$ 732,626 (R$ 709,208 as of December 31, 2017), refers to reimbursement of additional retirement and pension plan – G0 and is indexed by the IPCA plus simple interest of 0.5% p.m. This interest rate approximates that one practiced by federal government bonds (NTN-b) with terms similar to those of related-party transactions.

 

Financial Liabilities

 

 

September 30, 2018

December 31, 2017

 

Carrying amount

Fair value

Carrying amount

Fair value

   Borrowings and financing

13,726,968

13,643,799

12,100,966

11,967,909

   Accounts payable to suppliers and contractors

384,482

384,482

344,947

344,947

   Services payable

399,590

399,590

408,275

408,275

   Program contract commitments

241,957

241,957

239,500

239,500

   Public-Private Partnership - PPP

3,391,562

3,391,562

3,071,416

3,071,416

 

The criteria adopted to obtain the fair values of borrowings and financing, in preparing the interim financial information as of September 30, 2018, are consistent with those adopted in the Annual Financial Statements for the fiscal year ended December 31, 2017.

 

Considering the nature of other financial instruments, assets and liabilities of the Company, the balances recognized in the balance sheet approximate the fair values, taking into account the maturities close to the end of the reporting period, comparison of contractual interest rates with market rates in similar operations at the end of the reporting period, their nature and maturity terms.

PAGE: 35 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

5                   Key accounting estimates and judgments

 

Estimates and judgments are continually evaluated and are based on historical experience and on other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The key accounting estimates and judgments are: (i) allowance for doubtful accounts, (ii) intangible assets resulting from concession agreements and program contracts, (iii) pension benefits, (iv) deferred income tax and social contribution, and (v) provisions.

 

6           Cash and cash equivalents

 

 

September 30, 2018

December 31, 2017

 

 

 

Cash and banks

98,984

171,951

Cash equivalents

3,520,269

2,111,096

 

3,619,253

2,283,047

 

 

Cash and cash equivalents include cash, bank deposits and high-liquidity short-term financial investments, mainly represented by repurchase agreements (remunerated based on the variation of the Interbank Deposit Certificates (CDI) rates), entered into with Banco do Brasil, whose original maturities are lower than three months, which are convertible into a cash amount and subject to an insignificant risk of change in value.

 

As of September 30, 2018, the average yield of financial investments corresponds to 98.55% of CDI (98.88% as of December 31, 2017).

 

 

7             Restricted cash

 

 

 

September 30, 2018

December 31, 2017

Current

 

 

Agreement with the São Paulo municipal government (i)

14,181

12,055

Brazilian Federal Savings Bank – escrow deposits (ii)

4,857

1,209

Other

5,979

5,558

 

25,017

18,822

 

 

 

 

(i)      Refers to the amount deducted from the 7.5% of Municipal revenue transferred to the Municipal Fund, corresponding to eventual amounts unpaid by direct management bodies, foundations and government agencies, as established in the agreement entered into with the municipal government of São Paulo; and

 

(ii)    Refers to savings account for receiving escrow deposits regarding lawsuits with final and unappealable decisions in favor of the Company, which are blocked as per contractual clause.

PAGE: 36 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

8           Trade receivables

 

(a)     Statement of financial position details

 

 

September 30, 2018

December 31, 2017

Private sector:

 

 

General and special customers (i) (ii)

1,261,308

1,248,979

Agreements (iii)

327,213

320,032

 

 

 

 

1,588,521

1,569,011

Government entities:

 

 

Municipal

568,514

532,320

Federal

4,022

3,547

Agreements (iii)

292,327

285,614

 

 

 

 

864,863

821,481

Wholesale customers – Municipal governments: (iv)

 

 

Guarulhos

870,305

760,598

Mauá

583,783

530,830

Mogi das Cruzes

3,114

2,670

Santo André

1,135,177

1,048,832

São Caetano do Sul

5,831

2,604

Diadema

222,671

222,671

 

 

 

Total wholesale customers – Municipal governments

2,820,881

2,568,205

 

 

 

Unbilled supply

612,359

580,006

 

 

 

Subtotal

5,886,624

5,538,703

Allowance for doubtful accounts

(3,925,839)

(3,650,198)

 

 

 

Total

1,960,785

1,888,505

 

 

 

Current

1,739,377

1,672,595

Noncurrent

221,408

215,910

 

 

 

 

1,960,785

1,888,505

 

(i)     General customers - residential and small and mid-sized companies;

 

(ii)   Special customers – large consumers, commercial industries, condominiums and special billing consumers (fixed demand agreements, industrial waste, wells, etc.);

(iii) Agreements - installment payments of past-due receivables, plus monetary restatement and interest, as provided for in the agreements; and

PAGE: 37 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(iv) Wholesale basis customers - municipal governments - This balance refers to the sale of treated water to municipalities, which are responsible for distributing to, billing and charging final customers. Some of these municipalities are questioning in court the tariffs charged by SABESP, which have full allowance for doubtful accounts. Additionally, the overdue amounts are included in the allowance for doubtful accounts.

 

(b)         The aging of trade receivables is as follows

 

 

September 30, 2018

December 31, 2017

 

 

 

Current

1,481,881

1,471,668

Past-due:

 

 

Up to 30 days

320,766

287,173

From 31 to 60 days

136,027

118,179

From 61 to 90 days

106,490

73,989

From 91 to 120 days

90,038

52,477

From 121 to 180 days

171,604

105,952

From 181 to 360 days

174,132

147,699

Over 360 days

3,405,686

3,281,566

 

 

 

Total past-due

4,404,743

4,067,035

 

 

 

Total

5,886,624

5,538,703

 

 

The increase in the overdue balance was mainly due to wholesale receivables, where the municipalities challenge the tariffs charged by SABESP in court, and the increase in default of amounts overdue, related to private customers.

 

(c)         Allowance for doubtful accounts

 

 

January to September 2018

January to September 2017

 

 

 

Balance at the beginning of the period

3,650,198

3,514,240

Private sector/government entities

35,804

57,170

Recoveries

(76,872)

(99,197)

Wholesale customers

316,709

182,149

 

 

 

Net additions for the period

275,641

140,122

 

 

 

Write-offs in the period referring to accounts receivable

-

(6,583)

 

 

 

Balance at the end of the period

3,925,839

3,647,779

PAGE: 38 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Reconciliation of estimated losses in profit or loss

July to September
2018

January to September
2018

July to September
2017

January to September 2017

 

 

 

 

 

Write-offs

(57,070)

(138,575)

(31,065)

(133,035)

(Losses)/reversal with state entities – related parties

(155)

960

23,082

23,211

(Losses) with private sector/government entities

(16,211)

(35,804)

(8,889)

(57,170)

(Losses) with wholesale customers

-

(29,458)

(18,456)

(19,683)

Recoveries

54,129

76,872

69,708

99,197

 

 

 

 

 

Amount recorded as selling expenses

(19,307)

(126,005)

34,380

(87,480)

 

 

Wholesale sales losses, amounting to R$ 109,627 from July to September 2018 and R$ 287,251 from January to September 2018 (R$ 66,776 from July to September 2017 and R$ 162,466 from January to September 2017) were also recorded as revenue reduction.

 

The Company does not have customers representing 10% or more of its total revenues.

PAGE: 39 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

9                   Related-Party Balances and Transactions

 

The Company is a party to transactions with its controlling shareholder, the State Government, and companies/entities related to it.

 

(a)         Accounts receivable, interest on capital payable, revenue and expenses with the São Paulo State Government

 

 

September 30, 2018

December 31, 2017

Accounts receivable

 

 

Current:

 

 

   Sanitation services

110,384

118,441

   Allowance for losses

(34,154)

(35,114)

   Reimbursement for retirement and pension benefits paid (G0):

 

 

      - monthly flow (payments)

15,417

22,968

      - GESP Agreement – 2008

-

20,099

      - GESP Agreement – 2015

60,871

54,379

 

 

 

Total current

152,518

180,773

 

 

 

Noncurrent:

 

 

   Agreement for the installment payment of sanitation services

18,538

22,625

   Reimbursement for retirement and pension benefits paid (G0):

 

 

      - GESP Agreement – 2015

656,338

611,762

 

 

 

Total noncurrent

674,876

634,387

 

 

 

Total receivables from shareholders

827,394

815,160

 

 

 

Assets:

 

 

Sanitation services

94,768

105,952

Reimbursement of additional retirement and pension benefits (G0)

732,626

709,208

 

 

 

Total

827,394

815,160

 

 

 

Liabilities:

 

 

Interest on capital payable to related parties

-

300,717

Other (f)

1,402

1,367

                                                                                                              

 

 

PAGE: 40 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

July to

September

 2018

January to September

2018

July to September

2017

January to September

2017

 

 

 

 

 

Revenue from sanitation services

119,386

366,608

110,927

341,789

Payments received from related parties

(127,638)

(384,902)

(116,267)

(351,764)

 

 

 

 

 

Receipt of GESP reimbursement referring to Law 4,819/58

(36,948)

(136,714)

(42,038)

(127,942)

 

 

(b)         Disputed amounts - GESP

 

As of September 30, 2018 and December 31, 2017, the disputed amounts between SABESP and GESP, corresponding to the private retirement and pension plan paid (Law 4,819/58), totaled R$ 1,080,960 and
R$ 1,021,657, respectively. The Company created allowances for doubtful accounts for such amounts.

 

(c)         Use of reservoirs EMAE

 

Empresa Metropolitana de Águas e Energia S.A. - EMAE planned to receive for the credit and obtain financial compensation for alleged past and future losses in electricity generation, due to water collection, and compensation for costs already incurred and to be incurred with the operation, maintenance and inspection of the Guarapiranga and Billings reservoirs used by SABESP in its operations.

 

Several lawsuits were filed by EMAE, an arbitration proceeding was in progress related to the Guarapiranga reservoir and a lawsuit related to the Billings reservoir, both pleading for financial compensation due to SABESP’s water collect for public supply, alleging that this conduct has been causing financial losses due to the permanent and growing loss in the capacity of generating electricity of Henry Borden hydroelectric power plant with financial losses.

 

As of October 28, 2016, the Company entered into an agreement based on a Private Transaction Agreement and Other Adjustments aimed to fully and completely settle the disputes involving the two companies, and involves the payment by SABESP to EMAE of the following amounts:

 

-  R$ 6,610 annually, adjusted for inflation, as of the execution date of this instrument, by the IPCA or any other index that may replace it, by the last business day of October of each fiscal year,  with (i) the first of  such annual payments due up to the last business day of October 2017 and (ii) the last payment due up to the last business day of October 2042; and

 

- R$ 46,270, in five annual and successive installments, adjusted for inflation by the IPCA or any other index that may replace it, with the first installment of R$ 9,254 due on April 30, 2017 and the subsequent ones in 04 (four) installments of same amount, due on every April 30 of the subsequent years, or on the first subsequent business day.

 

On October 19, 2017, the contractual conditions precedent were complied with and the agreement came into effect.

 

As of September 30, 2018, the balance of the agreement totaled R$ 16,068 and R$ 92,244 (R$ 15,668 and R$ 92,894 on December 31, 2017), recorded under other liabilities, in current and noncurrent liabilities, respectively.

PAGE: 41 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(d)        Agreements with reduced tariffs with State and Municipal Government Entities that joined the Rational Water Use Program (PURA)

 

The Company has signed agreements with government entities related to the State Government and municipalities where it operates that benefit from a reduction of 25% in the tariff of water supply and sewage services when they are not in default. These agreements provide for the implementation of the rational water use program, which takes into consideration the reduction in water consumption.

 

(e)         Guarantees

 

The State Government provides guarantees for some borrowings and financing of the Company and does not charge any fee with respect to such guarantees.

 

(f)          Personnel assignment agreement among entities related to the State Government

 

The Company has personnel assignment agreements with entities related to the State Government, whose expenses are fully passed on and monetarily reimbursed. From July to September 2018 and in the same period in 2017, the expenses related to employees assigned by SABESP to other state government entities amounted to R$ 1,868 and R$ 2,102, respectively, and from January to September 2018 and 2017 amounted to R$ 6,396 and R$ 7,237, respectively.

 

From July to September 2018, expenses with employees from other entities at the disposal of the Company totaled R$ 53. From January to June 2018 and from January to September 2017, there were no expenses related to personnel assigned by other entities to the Company.

 

(g)                        Services obtained from state government entities

 

As of September 30, 2018 and December 31, 2017, SABESP had an outstanding amount payable of R$ 1,402 and
R$ 1,367, respectively, for services rendered by São Paulo State Government entities.

 

(h)        Non-operating assets

 

As of September 30, 2018 and December 31, 2017, the Company had an amount of R$ 969 related to a free land lent to DAEE (Department of Water and Electricity).

 

(i)          Sabesprev

 

The Company sponsors a private defined benefit pension plan, which is operated and administered by Sabesprev. The net actuarial liability recognized as of September 30, 2018 amounted to R$ 369,906 (R$ 388,461 as of December 31, 2017), according to Note 19 (b).

 

(j)          Compensation of Management Key Personnel

 

Expenses related to the compensation to the members of its Board of Directors, Fiscal Council and Board of Executive Officers amounted to R$ 1,080 from July to September 2018 (R$ 989 from July to September 2017). From January to September 2018, these expenses amounted to R$ 3,014 (R$ 2,884 from January to September 2017). An additional amount of R$ 192, related to the Officers’ bonus program, was recorded from July to September 2018 (R$ 124 from July to September 2017). From January to September 2018, these bonuses amounted to R$ 536 (R$ 432 from January to September 2017).

PAGE: 42 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(k)         Loan agreement through credit facility

 

The Company holds interest in certain Special Purpose Entities (SPEs), not holding the majority interest but with cast vote and power of veto in some issues, with no ability to use such power of veto in a way to affect returns over investments. Therefore, these SPEs are considered for accounting purposes as jointly owned subsidiaries.

 

The Company entered into a loan agreement through credit facility with the SPEs Aquapolo Ambiental S.A. on March 30, 2012, and with Attend Ambiental S.A. on May 9, 2014, to finance the operations of these companies, until the borrowings and financing requested with financial institutions is cleared.

 

Two agreements were entered into with Aquapolo, according to the table below:

 

SPE

Value of the agreement

Interest rate

Maturity

Aquapolo Ambiental

5,629

CDI + 1.2% p.a.

(i)

Aquapolo Ambiental

19,000

CDI + 1.2% p.a.

(ii)

Total

24,629

 

 

 

 

(i)      The R$ 5,629 loan agreement originally expired on April 30, 2016; however, on February 10, 2016, an amendment to the agreement changed the payment schedule for four annual installments, the first of which maturing on December 30, 2018 and the last on December 30, 2021; and

(ii)    The loan agreement totaling R$ 19,000 originally expired on April 30, 2015, but was extended to October 30, 2015. On November 25, 2015, a new amendment changed the payment schedule for three annual installments, the first of which maturing on December 30, 2021 and the last on December 30, 2023.

 

The amount disbursed referring to the agreements entered into with Aquapolo Ambiental S/A is recognized under “Other Receivables”, of which R$ 1,397 was classified in Current Assets and R$ 35,075 in Noncurrent Assets. As of September 30, 2018, the balance of principal and interest rates of these agreements was R$ 36,472 (R$ 50,617 as of December 31, 2017). From January to September 2018, the financial income recognized was R$ 2,227 (R$ 3,881 from January to September 2017).

 

The Company entered into an agreement with Attend, in the amount of R$ 5,400, which was overdue since June 2015. As of March 31, 2018, the Company created allowance for doubtful accounts in the amount of R$ 9,596 related to this loan agreement, as a renegotiation agreement was not reached.

 

(l)          “Se Liga na Rede” (Connect to the Network Program)

 

The State Government enacted the State Law 14,687/12, creating the pro-connection program, destined to financially subsidize the execution of household branches necessary to connect to the sewage collecting networks, in low-income households, which agreed to adhere to the program. The program expenditures, except for indirect costs, construction margin and borrowing costs are financed with 80% of funds deriving from the State Government and the remaining 20% invested by SABESP, which is also liable for the execution of works. Until September 30, 2018, the program total amount was R$ 97,184 (R$ 82,697 as of December 31, 2017); as of September 30, 2018 and December 31, 2017, there was no balance receivable from related parties. As of September 30, 2018, R$ 49,312 (R$ 35,068 as of December 31, 2017) was recorded under intangible assets.
R$ 47,872 was reimbursed by GESP (R$ 47,629 as of December 31, 2017) from the beginning of the program until
September 30, 2018.

 

 

PAGE: 43 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

10                Water National Agency - ANA

 

The Company has agreements executed within the scope of the Hydrographic Basin Depollution Program (PRODES), also known as "Treated Sewage Purchase Program".

 

This program does not finance works or equipment, remunerates by results achieved, i.e., by effectively treated sewage. In this program, the Water National Agency (ANA) makes available funds, which are restricted to a specific current account and applied in investment funds at the Brazilian Federal Savings Banks (CEF), until the fulfillment of treated sewage volume is evidenced, as well as the reduction of polluting cargoes of each agreement.

 

When resources are made available, liabilities are recorded until funds are released by ANA. After the evidence of targets stipulated in each contract, the revenue deriving from these funds is recognized, but if these targets are not met, funds will return to the National Treasury with the appropriate funds earnings. As of September 30, 2018, the balances of assets and liabilities were R$ 50,454 (R$ 70,487 as of December 31, 2017), and the liability is recorded under "other liabilities" of noncurrent liabilities.

 

 

11                 Investments

 

The Company holds interest in certain Special Purpose Entities (SPE). Although SABESP has no majority shares of its investees, the shareholders’ agreement provides for the power of veto in certain management issues, however, with no ability to use such power of veto in a way to affect returns over investments, indicating participating shared control (joint venture – CPC 19(R2)).

 

The Company holds interest valued by the equity accounting.

 

Below is a summary of the investees’ financial statements and SABESP’s equity interest:

 

 

Equity

Capital increase

Profit (loss) for the period

 

September 30, 2018

December 31, 2017

January to September 2018

January to September 2018

January to September 2017

     

 

   

Sesamm

43,862

39,262

-

4,600

5,234

Águas de Andradina

21,403

19,392

-

2,011

(4)

Águas de Castilho

5,796

4,880

-

916

671

Saneaqua Mairinque

6,037

4,327

2,183

(473)

551

Attend Ambiental

1,325

5,169

-

(3,844)

3,133

Aquapolo Ambiental

26,008

18,757

-

7,251

2,132

Paulista Geradora de Energia

8,371

8,447

-

(76)

(19)

 

 

PAGE: 44 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

Investments

Capital increase

Equity in the earnings (losses) of subsidiaries

Interest percentage

 

September 30, 2018

December 31, 2017

January to September 2018

January to September 2018

January to September 2017

September 30, 2018

December 31, 2017

     

 

       

Sesamm

15,791

14,135

-

1,656

1,884

36%

36%

Águas de Andradina

6,421

5,818

-

603

(1)

30%

30%

Águas de Castilho

1,740

1,465

-

275

201

30%

30%

Saneaqua Mairinque

1,811

1,298

655

(142)

165

30%

30%

Attend Ambiental

596

2,326

-

(1,730)

1,410

45%

45%

Aquapolo Ambiental

12,744

9,191

-

3,553

1,045

49%

49%

Paulista Geradora de Energia

2,092

2,111

-

(19)

(5)

25%

25%

Total

41,195

36,344

655

4,196

4,699

 

 

 

Other investments

588

588

 

 

 

 

 

 

Overall total

41,783

36,932

 

 

 

 

 

12                Investment properties

As of September 30, 2018, the balance of “Investment properties” was R$ 47,632 (R$ 57,652 as of December 31, 2017). As of September 30, 2018 and December 31, 2017, the market value of these properties was approximately R$ 388,000 and R$ 402,000, respectively.

 

 

December 31, 2017

Expropriation

Depreciation

September 30, 2018

 

 

 

 

 

Investment properties

57,652

(9,983)

(37)

47,632

Total

57,652

(9,983)

(37)

47,632

 

 

 

 

December 31, 2016

Write-offs and disposals

Depreciation

September 30, 2017

 

 

 

 

 

Investment properties

57,968

(8)

(60)

57,900

Total

57,968

(8)

(60)

57,900

 

 

 

PAGE: 45 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

13                Intangible assets

 

(a)         Statement of financial position details

 

 

September 30, 2018

December 31, 2017

 

Cost

Accumulated amortization

Net

Cost

Accumulated amortization

Net

Intangible right arising from:

 

 

 

 

 

 

Agreements – equity value

6,841,013

(1,444,666)

5,396,347

8,893,296

(1,751,682)

7,141,614

Agreements – economic value

2,105,917

(708,301)

1,397,616

2,068,402

(634,465)

1,433,937

Program contracts

13,456,342

(3,728,716)

9,727,626

10,653,292

(3,058,226)

7,595,066

Program contracts – commitments

1,141,805

(231,037)

910,768

1,113,160

(202,785)

910,375

Services contracts – São Paulo

20,738,417

(3,893,682)

16,844,735

19,388,751

(3,471,736)

15,917,015

Software license

730,095

(273,733)

456,362

688,712

(220,587)

468,125

Total

45,013,589

(10,280,135)

34,733,454

42,805,613

(9,339,481)

33,466,132

 

 

 

(b)   Changes

 

 

 

 

December 31, 2017

Additions

Contract renewals

Transfers

Write-offs and disposals

Amortization

September 30, 2018

Intangible right arising from:

 

 

 

 

 

 

 

Agreements – equity value

7,141,614

202,279

(1,855,596)

18,751

(1,954)

(108,747)

5,396,347

Agreements – economic value 

1,433,937

82,926

-

(45,149)

(8)

(74,090)

1,397,616

Program contracts

7,595,066

544,429

1,855,596

6,667

(3,758)

(270,374)

9,727,626

Program contracts – commitments

910,375

28,645

-

-

-

(28,252)

910,768

Services contracts – São Paulo

15,917,015

1,351,175

-

20,018

(11,089)

(432,384)

16,844,735

Software license

468,125

40,698

-

686

-

(53,147)

456,362

Total

33,466,132

2,250,152

-

973

(16,809)

(966,994)

34,733,454

PAGE: 46 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

December 31, 2016

Additions

Contract renewal

Allowance for estimated losses

Transfers

Write-off and disposals

Amortization

September 30, 2017

Intangible right arising from:

 

 

 

 

 

 

 

 

Agreements – equity value

7,482,955

299,967

(250,679)

2,078

25,734

(1,892)

(121,991)

7,436,172

Agreements – economic value 

1,381,652

139,710

-

8

2,612

(1,008)

(72,049)

1,450,925

Program contracts

6,576,021

398,614

250,679

4,834

(1,784)

(3,690)

(228,138)

6,996,536

Program contracts – commitments

823,216

65,647

-

-

-

-

(25,028)

863,835

Services contracts – São Paulo

14,552,707

1,386,417

-

6,460

(18,929)

(4,816)

(432,667)

15,489,172

Software license

430,237

64,755

-

-

6,489

-

(53,702)

447,779

Total

31,246,788

2,355,110

-

13,380

14,122

(11,406)

(933,575)

32,684,419

 

 

In the first quarter of 2018, the Company renewed a program contract with the municipalities of Itirapuã and Monte Mor. In the second quarter of 2018, the Company renewed a program contract with the municipalities of Poá, Cachoeira Paulista, Monções and Salesópolis. In the third quarter of 2018, the Company renewed program contracts with the municipalities of Guararema, São Vicente, Praia Grande and Gália for 30 years, and began operating in the municipality of Saltinho.

 

(c)         Intangible arising from concession agreements

 

During the period ended September 30, 2018, there were no changes in the criteria to account for intangible assets and types of contracts.

 

The Company has obligations recorded in “Program Contract – Commitments” in current liabilities in the amount of R$ 175,405 and R$ 128,802 as of September 30, 2018 and December 31, 2017, respectively, and noncurrent liabilities in the amount of R$ 66,552 and R$ 110,698 as of September 30, 2018 and December 31, 2017, respectively.

 

(d)        Capitalization of interest and other finance charges

 

From January to September 2018, the Company capitalized interest, inflation adjustment and foreign currency exchange in concession intangible assets, totaling R$ 397,420, including the São Lourenço Production System and Leases (R$ 476,719 from January to September 2017), during the construction period.

 

(e)         Construction margin

 

The Company acts as a primary responsible to construct and install the infrastructure related to the concession, using own efforts or hiring outsourcing services, receiving the risks and benefits.

PAGE: 47 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

As a consequence, the Company recognizes revenue from construction service corresponding to the cost of construction increased by a gross margin. Generally, the constructions related to the concessions are performed by third parties, in such case, the margin of the Company is lower, normally, to cover eventual administration costs, and the responsibility of the primary risk. As of September 30, 2018 and 2017, the margin was 2.3%.

 

Construction margin from July to September 2018 and 2017 was R$ 16,281 and R$ 18,405, respectively, and from January to September 2018 and 2017 it was R$ 45,829 and R$ 49,299, respectively.

 

(f)          Expropriations

 

As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate third-parties' properties, and the owners of these properties will be compensated either amicably or through courts.

 

The costs of these expropriations are recorded as concession intangible assets after the transaction is concluded. From July to September 2018, the total amount related to expropriations was R$ 9,512 and from January to September 2018 it was R$ 89,562 (R$ 8,111 from July to September 2017 and R$ 12,894 from January to September 2017).

 

(g)         Public-Private Partnership - PPP

 

SABESP carries out operations related to the PPPs mentioned below. These operations and their respective obligations and guarantees are supported by agreements executed according to Law 11,079/04.

 

Alto Tietê Production System

 

As of September 30, 2018 and December 31, 2017, the amounts recognized as intangible asset related to this PPP were R$ 362,552 and R$ 371,862, respectively.

 

From January to September 2018, a discount rate of 8.20% p.a. was used to calculate the adjustment to present value of the agreement. The obligations assumed by the Company as of September 30, 2018 and December 31, 2017 are shown in the next table.

 

On a monthly basis, SABESP assigns funds from tariffs to the SPE CAB Sistema Produtor Alto Tietê S/A, in the amount of R$ 10,012, corresponding to the monthly remuneration. This amount is annually adjusted by the IPC – FIPE and is recorded in a restricted account, pursuant to the contractual operating proceeding. Should SABESP comply with its monthly obligations with the SPE, the funds from the restricted account will be released.

 

The guarantee is effective since the beginning of the operation and will be valid until the conclusion, termination, intervention, annulment or caducity of the Administrative Concession, or other extinction events provided for in the Concession Agreement or in the law applicable to administrative concessions, including in the event of bankruptcy or extinction of the SPE.

 

 

São Lourenço Production System

 

In May 2018, the control of the special purpose entity Sistema Produtor São Lourenço S/A was transferred to CGGC Construtora do Brasil Ltda, previously composed of Construções e Comércio Camargo Corrêa S/A and Construtora Andrade Gutierrez S/A.

 

The São Lourenço Production System (SPSL) PPP began the service provision phase on July 10, 2018, as per the contractual clause that allows the beginning of operations provided that system has full operating capacity, without, however implying in the Acceptance of the Works with the beginning of the corresponding payment of the due considerations, together with the end of the Works. The Company is currently negotiating a new Contract Amendment Term that will change the schedule for the acceptance of SPSL works, which are expected to be concluded in the first quarter of 2019.

 

 

PAGE: 48 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

As of September 30, 2018 and December 31, 2017, the carrying amount recorded in the Company’s intangible assets, related to this PPP, totaled R$ 3,182,963 and R$ 2,818,805, respectively. Intangible assets are accounted for based on the physical evolution of the works, which, as of September 30, 2018, was approximately 96.5%, with a counter-entry in the Private Public Partnership (PPP) liabilities account. As of September 30, 2018, a discount rate of 7.80% p.a. was used to calculate the adjustment to present value of the agreement.

 

The obligations assumed by the Company as of September 30, 2018 and December 31, 2017 are shown in the table below, and the increase in intangible assets and liabilities was due to the progress of works in 2018.

 

 

September 30, 2018

December 31, 2017

 

Current liabilities

Noncurrent liabilities

Total liabilities

Current liabilities

Noncurrent liabilities

Total liabilities

 

 

 

 

 

 

 

Alto Tietê

37,219

254,314

291,533

35,083

282,501

317,584

São Lourenço

41,613

3,058,416

3,100,029

24,924

2,728,908

2,753,832

Total

78,832

3,312,730

3,391,562

60,007

3,011,409

3,071,416

 

(h)        Works in progress

 

The amount of R$ 7,913 million is recorded under intangible assets as works in progress as of September 30, 2018
(R$ 10,387 million as of December 31, 2017), and, in the period ended September 30, 2018, the major projects are located in the municipalities of São Paulo, Franca and São Bernardo do Campo, totaling R$ 4,529 million, R$ 274 million and R$ 118 million, respectively.

 

(i)          Amortization of intangible assets

 

The average amortization rate totaled 3.9% and 4.0% as of September 30, 2018 and 2017, respectively.

 

(j)          Software license of use

 

The software license of use is capitalized based on the costs incurred to acquire software and prepared them for use. On April 10, 2017, the Company implemented the Integrated Business Management System (Enterprise Resource Planning – SAP ERP), which includes the administrative/financial module. The implementation of the commercial module is in progress.

PAGE: 49 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

 

 

14                Property, plant and equipment

 

(a)     Statement of financial position details

 

 

September 30, 2018

December 31, 2017

 

Cost

Accumulated depreciation

Net

Cost

Accumulated depreciation

Net

Land

92,979

-

92,979

92,507

-

92,507

Buildings

78,499

(38,154)

40,345

79,013

(36,653)

42,360

Equipment

347,876

(249,497)

98,379

330,753

(226,950)

103,803

Transportation equipment

10,770

(7,680)

3,090

10,862

(7,182)

3,680

Furniture and fixtures

24,442

(13,433)

11,009

24,430

(12,614)

11,816

Other

1,122

(276)

846

1,122

(238)

884

Total

555,688

(309,040)

246,648

538,687

(283,637)

255,050

 

 

 

 

(b)     Changes

 

 

 

December 31, 2017

Additions

Transfers

Write-offs and disposals

Depreciation

September 30, 2018

Land

92,507

472

-

-

-

92,979

Buildings

42,360

50

(334)

-

(1,731)

40,345

Equipment

103,803

22,371

(593)

(75)

(27,127)

98,379

Transportation equipment

3,680

8

8

(8)

(598)

3,090

Furniture and fixtures

11,816

142

(54)

(13)

(882)

11,009

Other

884

-

-

-

(38)

846

Total

255,050

23,043

(973)

(96)

(30,376)

246,648

 

 

 

 

December 31, 2016

Additions

Transfers

Write-offs and disposals

Depreciation

September 30, 2017

Land

92.494

-

13

-

-

92.507

Buildings

43.262

86

1.355

-

(1.767)

42.936

Equipment

149.140

12.080

(15.445)

(69)

(37.441)

108.265

Transportation equipment

4.531

-

33

(10)

(657)

3.897

Furniture and fixtures

11.986

276

(63)

(35)

(948)

11.216

Other

970

-

(15)

-

(39)

916

Total

302.383

12.442

(14.122)

(114)

(40.852)

259.737

 

 

 

 

(c)         Depreciation

 

The Company annually revises the depreciation rates of buildings - 3.0%; equipment- 16.7%; transportation equipment - 10% and furniture, fixture and equipment - 6.8%. Lands are not depreciated.

 

The depreciation average rate was 12.6% and 12.7%, as of September 30, 2018 and 2017, respectively.

 

PAGE: 50 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

15           Borrowings and Financing

 

Borrowings and financing outstanding balance

September 30, 2018

December 31, 2017

Financial institution

 

Current

Noncurrent

 

Total

 

Current

Noncurrent

 

Total

Local currency

 

 

 

 

 

 

 10th issue debentures

42,123

63,851

105,974

41,702

80,953

122,655

 12th issue debentures

45,450

260,610

306,060

45,450

294,702

340,152

 14th issue debentures

41,105

108,784

149,889

40,503

141,351

181,854

 15th issue debentures

356,870

-

356,870

346,414

345,788

692,202

 17th issue debentures

277,262

529,133

806,395

144,391

781,922

926,313

 18th issue debentures

33,529

183,238

216,767

33,020

194,872

227,892

 20th issue debentures

250,000

247,958

497,958

250,000

246,890

496,890

 21st issue debentures

-

499,606

499,606

-

499,628

499,628

 22nd issue debentures

-

754,281

754,281

-

-

-

 Brazilian Federal Savings Bank

73,661

1,249,048

1,322,709

78,487

1,154,599

1,233,086

 Brazilian Development Bank - BNDES BAIXADA SANTISTA

16,859

4,215

21,074

16,782

16,782

33,564

 Brazilian Development Bank - BNDES PAC

11,201

41,871

53,072

11,143

50,028

61,171

 Brazilian Development Bank - BNDES PAC II 9751

4,354

19,849

24,203

4,334

22,991

27,325

 Brazilian Development Bank - BNDES PAC II 9752

3,179

23,841

27,020

2,367

19,526

21,893

 Brazilian Development Bank - BNDES ONDA LIMPA

23,577

129,473

153,050

23,469

146,461

169,930

 Brazilian Development Bank - BNDES TIETÊ III

30,516

259,235

289,751

30,378

280,825

311,203

 Brazilian Development Bank - BNDES 2015

31,542

497,438

528,980

10,050

397,922

407,972

 Leases

17,161

550,431

567,592

17,573

544,044

561,617

 Other

1,376

8,488

9,864

1,466

9,477

10,943

 Interest and charges

101,412

-

101,412

101,855

-

101,855

Total in local currency

1,361,177

5,431,350

6,792,527

1,199,384

5,228,761

6,428,145

 

PAGE: 51 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Borrowings and financing outstanding balance

September 30, 2018

December 31, 2017

Financial institution

 

Current

Noncurrent

 

Total

 

Current

Noncurrent

 

Total

Foreign currency

 

 

 

 

 

 

 Inter-American Development Bank - BID 1212 – US$ 71,947 thousand (US$ 82,225 thousand in December 2017)

41,152

246,915

288,067

34,000

238,000

272,000

 Inter-American Development Bank - BID 2202 – US$ 544,457 thousand (US$ 444,871 thousand in December 2017)

128,233

2,035,484

2,163,717

81,757

1,375,358

1,457,115

 International Bank of Reconstruction and Development - BIRD – US$ 91,286 thousand
(US$ 91,286 thousand in December 2017)

12,171

353,034

365,205

-

301,665

301,665

 Deutsche Bank – US$ 112,500 thousand (US$ 150,000 thousand in December 2017)

300,293

147,106

447,399

248,100

242,343

490,443

 Eurobonds – US$ 350,000 thousand (US$ 350,000 thousand in December 2017)

-

1,399,512

1,399,512

-

1,155,331

1,155,331

 JICA 15 – ¥ 12,676,730 thousand (¥ 13,829.160 thousand in December 2017)

40,658

406,577

447,235

33,881

372,696

406,577

 JICA 18 – ¥ 11,397,760 thousand (¥ 12,433,920 thousand in December 2017)

36,556

365,328

401,884

30,463

334,849

365,312

 JICA 17 – ¥ 1,476,838 thousand (¥ 1,534,959 thousand in December 2017)

2,977

48,372

51,349

2,507

41,835

44,342

 JICA 19 – ¥ 30,869,862 thousand (¥ 29,777,232 thousand in December 2017)

58,870

1,028,119

1,086,989

-

873,383

873,383

 BID 1983AB – US$ 58,462 (US$ 82,404 thousand in December 2017)

70,838

160,691

231,529

79,201

189,990

269,191

 Interest and charges

51,555

-

51,555

37,462

-

37,462

Total in foreign currency

743,303

6,191,138

6,934,441

547,371

5,125,450

5,672,821

 

 

 

 

 

 

 

Total borrowings and financing

2,104,480

11,622,488

13,726,968

1,746,755

10,354,211

12,100,966

 

Exchange rate as of September 30, 2018: US$ 4.0039; ¥ 0.03528 (as of December 31, 2017: US$ 3.3080; ¥ 0.02940).

As of September 30, 2018, the Company did not record balances of borrowings and financing raised during the year to mature within 12 months.

 

PAGE: 52 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Local currency

Guarantees

Maturity

Annual interest rate

Inflation adjustment

 

 

 

 

 

10th issue debentures

Own funds

2020

TJLP +1.92% (series 1 and 3) and 9.53%

(series 2)

IPCA (series 2)

12th issue debentures

Own funds

2025

 TR + 9.5%

 

14th issue debentures

Own funds

2022

TJLP +1.92% (series 1 and 3) and 9.19%

(series 2)

IPCA (series 2)

15th issue debentures

Own funds

2019

CDI + 0.99% (series 1) and 6.2% (series 2)

IPCA (series 2)

17th issue debentures

Own funds

2023

CDI +0.75 (series 1) and 4.5% (series 2) and 4.75% (series 3)

IPCA (series 2 and 3)

18th issue debentures

Own funds

2024

TJLP + 1.92 % (series 1 and 3) and 8.25%

(series 2)

IPCA (series 2)

20th issue debentures

Own funds

2019

CDI + 3.80%

 

21st issue debentures

Own funds

2022

CDI + 0.60% and CDI+ 0.90%

 

22nd issue debentures

Own funds

2025

CDI + 0.58%, CDI+ 0.90%

IPCA + 6% (series 3)

Brazilian Federal Savings Bank

Own funds

2018/2038

5% to 9.5%

TR

Brazilian Development Bank - BNDES BAIXADA SANTISTA

Own funds

2019

2.5% + TJLP

 

Brazilian Development Bank - BNDES PAC

Own funds

2023

2.15% + TJLP

 

Brazilian Development Bank - BNDES PAC II 9751

Own funds

2027

1.72%+TJLP

 

Brazilian Development Bank - BNDES PAC II 9752

Own funds

2027

1.72%+TJLP

 

Brazilian Development Bank - BNDES ONDA LIMPA

Own funds

2025

1.92% + TJLP

 

Brazilian Development Bank - BNDES TIETÊ III

Own funds

2028

1.66% + TJLP

 

Brazilian Development Bank - BNDES 2015

Own funds

2035

2.5% + TJLP

 

Leases

 

2035

7.73% to 10.12%

IPC

Other

Own funds

2018/2025

12% (Presidente Prudente) and TJLP + 1.5% (FINEP)

TR

 

 

PAGE: 53 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 


 

Foreign currency

Guarantees

Maturity

Annual interest rate

Inflation adjustment

 

 

 

 

 

Inter-American Development Bank - BID 1212 – US$ 71,947 thousand

Government

2025

3.31% (*)

US$

Inter-American Development Bank - BID 2202 – US$ 544,457 thousand

Government

2035

3.28% (*) 

US$

International Bank for Reconstruction and Development - BIRD – US$ 91,286 thousand

Government

2034

2.85% (*)

US$

Deutsche Bank – US$112,500 thousand

2019

4.50% (*)

US$

Eurobonds – US$ 350,000 thousand

2020

6.25%

US$

JICA 15 – ¥ 12,676,730 thousand

Government

2029

1.8% and 2.5%

Yen

JICA 18 – ¥ 11,397,760 thousand

Government

2029

1.8% and 2.5%

Yen

JICA 17 – ¥ 1,476,838 thousand

Government

2035

1.2% and 0.01%

Yen

JICA 19 – ¥ 30,869,862 thousand

Government

2037

1.7% and 0.01%

Yen

BID 1983AB – US$ 58,462 thousand

2023

2.08% and 2.38% (*)

US$

 

 
 

(*) Rates comprising LIBOR + contractually defined spread.

PAGE: 54 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 


 

(i)       Payment schedule – accounting balances as of September 30, 2018

 

 


2018

2019

2020

2021

2022

2023

2024 to 2038

TOTAL

LOCAL CURRENCY

 

 

 

 

 

 

 

 

Debentures

309,883

1,044,297

587,169

479,076

558,337

361,791

353,247

3,693,800

Brazilian Federal Savings Bank

18,270

74,079

76,853

80,875

85,215

77,578

909,839

1,322,709

BNDES

30,307

121,229

103,019

102,569

102,569

96,837

540,620

1,097,150

Leases

4,527

33,924

35,577

37,374

39,328

42,091

374,771

567,592

Other

344

1,376

1,376

1,376

1,376

1,376

2,640

9,864

Interest and charges

43,231

58,181

-

-

-

-

-

101,412

TOTAL LOCAL CURRENCY

406,562

1,333,086

803,994

701,270

786,825

579,673

2,181,117

6,792,527

FOREIGN CURRENCY

 

 

 

 

 

 

 

 

BID

-

169,385

169,385

169,385

169,385

169,385

1,604,859

2,451,784

BIRD

-

12,171

24,342

24,342

24,342

24,342

255,666

365,205

Deutsche Bank

150,146

297,253

-

-

-

-

-

447,399

Eurobonds

-

-

1,399,512

-

-

-

-

1,399,512

JICA

1,489

139,060

139,060

139,060

139,060

139,060

1,290,668

1,987,457

BID 1983AB

-

70,838

69,935

30,799

30,799

29,158

-

231,529

Interest and charges

41,972

9,583

-

-

-

-

-

51,555

TOTAL FOREIGN CURRENCY

193,607

698,290

1,802,234

363,586

363,586

361,945

3,151,193

6,934,441

Overall Total

600,169

2,031,376

2,606,228

1,064,856

1,150,411

941,618

5,332,310

13,726,968

PAGE: 55 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(ii)     Changes

 

          

 

 

December 31, 2017

Funding

Borrowing costs

Lease

Monetary variation and exchange rate changes

Inflation adjustment / update - Capitalized

Interest paid

Amortization

Accrued interest

Provision for interest and fees - Capitalized

Borrowing costs expenses

September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

LOCAL CURRENCY

 

 

 

 

 

 

 

 

 

 

 

 

Debentures

3,576,842

750,000

(2,779)

-

51,200

-

(190,937)

(594,693)

169,504

26,681

2,481

3,788,299

Brazilian Federal Savings Bank

1,236,674

156,695

-

-

-

-

(76,146)

(67,072)

57,094

19,285

-

1,326,530

BNDES

1,042,036

131,000

-

-

2,343

2,565

(69,137)

(71,972)

19,606

43,616

157

1,100,214

Leases

561,616

-

-

18,877

-

-

-

(12,901)

-

-

-

567,592

Other

10,977

-

-

-

47

-

(593)

(1,126)

583

4

-

9,892

TOTAL IN LOCAL CURRENCY

6,428,145

1,037,695

(2,779)

18,877

53,590

2,565

(336,813)

(747,764)

246,787

89,586

2,638

6,792,527

 

 

 

 

 

 

 

 

 

 

 

 

 

FOREIGN CURRENCY

 

 

 

 

 

 

 

 

 

 

 

 

BID

1,743,257

484,690

(2,365)

-

330,794

39,423

(55,391)

(130,520)

20,363

28,097

646

2,458,994

BIRD

303,278

-

-

-

60,563

2,963

(7,610)

-

4,862

1,565

17

365,638

Deutsche Bank

496,726

-

-

-

84,184

-

(26,665)

(129,945)

23,325

3,698

2,717

454,040

Eurobonds

1,158,642

-

-

-

243,565

-

(47,662)

-

63,590

10,529

616

1,429,280

JICA

1,700,448

38,546

(117)

-

334,263

2,114

(33,361)

(77,097)

25,741

799

131

1,991,467

BID 1983AB

270,470

-

-

-

46,789

-

(5,674)

(85,306)

6,787

1,100

856

235,022

TOTAL IN FOREIGN CURRENCY

5,672,821

523,236

(2,482)

-

1,100,158

44,500

(176,363)

(422,868)

144,668

45,788

4,983

6,934,441

Overall Total

12,100,966

1,560,931

(5,261)

18,877

1,153,748

47,065

(513,176)

(1,170,632)

391,455

135,374

7,621

13,726,968

 

PAGE: 56 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 


 

           

 

 

December 31, 2016

Funding

Borrowing costs

Lease

Monetary variation and exchange rate changes

Inflation adjustment / update - Capitalized

Interest paid

Amortization

Accrued interest

Provision for interest and fees - Capitalized

Borrowing costs expenses

September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

LOCAL CURRENCY

 

 

 

 

 

 

 

 

 

 

 

 

Debentures

3,641,912

500,000

(955)

-

35,559

-

(222,304)

(538,820)

119,403

94,851

2794

3,632,440

Brazilian Federal Savings Bank

1,150,691

106,331

-

-

5,494

1,415

(71,031)

(44,307)

56,707

14,535

-

1,219,835

BNDES

946,984

171,153

-

-

3,294

5,273

(58,016)

(66,862)

26,520

32,887

157

1,061,390

Leases

552,516

-

-

25,465

-

-

-

(18,948)

-

-

-

559,033

Other

11,677

-

-

-

92

-

(665)

(553)

569

29

-

11,149

TOTAL IN LOCAL CURRENCY

6,303,780

777,484

(955)

25,465

44,439

6,688

(352,016)

(669,490)

203,199

142,302

2,951

6,483,847

 

 

 

 

 

 

 

 

 

 

 

 

 

FOREIGN CURRENCY

 

 

 

 

 

 

 

 

 

 

 

 

BID

1,811,664

33,346

(2,498)

-

(75,599)

26,729

(37,689)

(147,430)

17,688

10,754

546

1,637,511

BIRD

261,337

35,710

-

-

(9,469)

2,400

(4,049)

-

2,468

750

14

289,161

Deutsche Bank

485,090

-

(720)

-

(13,665)

-

(23,283)

-

13,393

11,002

2,681

474,498

Eurobonds

1,141,469

-

-

-

(31,885)

-

(42,746)

-

35,558

26,667

616

1,129,679

JICA

1,617,215

51,021

(128)

-

10,026

2,373

(28,466)

(60,952)

20,008

1,051

118

1,612,266

BID 1983AB

343,588

-

(82)

-

(9,928)

-

(5,845)

(75,610)

4,351

3,347

988

260,809

TOTAL IN FOREIGN CURRENCY

5,660,363

120,077

(3,428)

-

(130,520)

31,502

(142,078)

(283,992)

93,466

53,571

4,963

5,403,924

Overall Total

11,964,143

897,561

(4,383)

25,465

(86,081)

38,190

(494,094)

(953,482)

296,665

195,873

7,914

11,887,771

 

PAGE: 57 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

(i)   Main events in the nine-month period ended September 30, 2018

 

(a)         Debentures

 

As of January 15, 2018, the Company amortized series 1 of the 17th issue, totaling R$ 144,391.

 

As of February 15, 2018, the Company amortized the first installment of series 2 of the 15th issue, totaling
R$ 348,434.

 

As of February 19, 2018, the Company held the 22nd issue of unsecured debentures, not convertible into shares, in up to three series, for public distribution, with restricted placement efforts, pursuant to CVM Instruction 476/2009, distributed as follows:

 

 

 

Value

 

Maturity

 

Remuneration

Series 1

Series 2

Series 3

R$ 100,000

R$ 400,000

R$ 250,000

 

3 years

5 years

7 years

 

CDI + 0.58% p.a.

CDI + 0.90% p.a.

IPCA + 6.00% p.a.

 

The proceeds from the debenture issue will be allocated to refinance financial commitments and recompose the Company’s cash.

 

The covenants agreed for the 22nd debenture issue are disclosed in the quarterly financial information for the period ended March 31, 2018.

 

(b)         BNDES

 

As of March 15 and June 11, 2018, the Company raised R$ 79,000 and R$ 44,300, respectively, corresponding to agreement BNDES 2015.

 

(c)         JICA

 

In 2018, funding totaled R$ 38,546, referring to agreement JICA 19.

 

(d)        BID

 

In 2018, funding and amortization referring to agreement BID 2202 totaled R$ 484,690 and R$ 130,520, respectively.

 

(e)         DEUTSCHE BANK

 

As of April 25, 2018, the first installment was amortized in the amount of R$ 129,945.

 

(f)          AB LOAN 1983

 

The amount of R$ 85,306 was partially amortized as of May 15, 2018.

 

 

 

PAGE: 58 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(g)         Foreign exchange variation

 

The US dollar increased 21.0%, from R$ 3.3080 as of December 31, 2017 to R$ 4.0039 as of September 30, 2018, increasing the Company’s debt denominated in US dollars by R$ 855,019. In the same period, the Yen increased 20.0%, from R$ 0.02940 as of December 31, 2017 to R$ 0.035280 as of September 30, 2018, increasing the Company’s debt denominated in Yen by R$ 331,757.

 

(ii)       Covenants

 

As of September 30, 2018, the Company had met the requirements set forth by its borrowings and financing agreements.

 

(iii)     Borrowings and financing – Credit Limited

 

 

Agent

 

September 30, 2018

 

 

(in millions of reais (*))

Brazilian Federal Savings Bank

 

1,330

Brazilian Development Bank – BNDES

 

1,452

Japan International Cooperation Agency – JICA

 

251

Other

 

38

TOTAL

 

3,071

 

(*) Brazilian Central Bank’s exchange rate as of September 30, 2018 (US$ 1.00 = R$ 4.0039; ¥ 1.00 = R$ 0.035280).

 

SABESP in order to comply with its Capex plan relies on a fund-raising plan.

 

Financing resources contracted have specific purposes, which have been released for the execution of their respective investments, according to the progress of the works.

 

 

16                Taxes and contributions

 

(a)     Current assets

 

 

September 30, 2018

December 31, 2017

Recoverable taxes

 

 

Income tax and social contribution

214,774

270,614

Withheld income tax (IRRF) on financial investments

11,060

2,606

Other federal taxes

12,879

3,365

Total

238,713

276,585

 

 

The decrease in recoverable taxes was mainly due to the offset of income tax and social contribution payable calculated in September 2018, deducted from the income tax and social contribution.

PAGE: 59 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(b)   Current liabilities

 

 

September 30, 2018

December 31, 2017

Tax obligations

 

 

Cofins and Pasep

66,704

74,034

INSS (Social Security contribution)

35,976

35,365

IRRF (withholding income tax)

5,496

58,204

Other

938

16,362

Total

109,114

183,965

 

The decrease in tax liabilities was mainly due to the payment of withholding income tax based on the amount of interest on equity declared in 2017.

 

 

17                 Deferred taxes and contributions

 

(a)             Statement of financial position details

 

 

September 30, 2018

December 31, 2017

Deferred tax assets

 

 

Provisions

349,601

482,863

Pension obligations – G1

159,195

165,503

Donations of underlying asset on concession agreements

53,115

55,112

Allowance for doubtful accounts

255,782

199,063

Other

181,483

151,562

Total deferred tax asset

999,176

1,054,103

 

 

 

Deferred tax liabilities

 

 

Temporary difference on concession of intangible asset

(439,268)

(460,177)

Capitalization of borrowing costs

(420,068)

(415,379)

Profit on supply to governmental entities

(96,907)

(76,705)

Actuarial gain/loss –G1 Plan

(36,538)

(36,538)

Construction margin

(86,856)

(88,947)

Borrowing costs

(11,483)

(13,111)

Total deferred tax liabilities

(1,091,120)

(1,090,857)

 

 

 

Deferred tax liability, net

(91,944)

(36,754)

PAGE: 60 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(b)     Changes

 

Deferred tax assets

December 31, 2017

Net change

September 30, 2018

Provisions

482,863

(133,262)

349,601

Pension obligations – G1

165,503

(6,308)

159,195

Donations of underlying asset on concession agreements

55,112

(1,997)

53,115

Allowance for doubtful accounts

199,063

56,719

255,782

Other

151,562

29,921

181,483

Total

1,054,103

(54,927)

999,176

 

 

 

 

Deferred tax liabilities

 

 

 

Temporary difference on concession of intangible asset

(460,177)

20,909

(439,268)

Capitalization of borrowing costs

(415,379)

(4,689)

(420,068)

Profit on supply to governmental entities

(76,705)

(20,202)

(96,907)

Actuarial gain/loss – G1

(36,538)

-

(36,538)

Construction margin

(88,947)

2,091

(86,856)

Borrowing costs

(13,111)

1,628

(11,483)

Total

(1,090,857)

(263)

(1,091,120)

 

 

 

 

Deferred tax liability, net

(36,754)

(55,190)

(91,944)

PAGE: 61 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Deferred tax assets

December 31, 2016

Net change

September 30, 2017

Provisions

524,129

(34,017)

490,112

Actuarial loss – G1

85,044

-

85,044

Pension obligations – G1

167,922

(2,074)

165,848

Donations of underlying asset on concession agreements

57,317

(1,537)

55,780

Allowance for doubtful accounts

266,757

(41,858)

224,899

Other

151,247

6,536

157,783

Total

1,252,416

(72,950)

1,179,466

 

 

 

 

Deferred tax liabilities

 

 

 

Temporary difference on concession of intangible asset

(492,341)

24,455

(467,886)

Capitalization of borrowing costs

(374,512)

(39,376)

(413,888)

Profit on supply to governmental entities

(92,365)

6,755

(85,610)

Construction margin

(91,790)

2,152

(89,638)

Borrowing costs

(15,063)

1,169

(13,894)

Total

(1,066,071)

(4,845)

(1,070,916)

 

 

 

 

Deferred tax asset, net

186,345

(77,795)

108,550

PAGE: 62 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

(c)         Reconciliation of the effective tax rate

 

The amounts recorded as income tax and social contribution expenses in the interim information are reconciled to the statutory rates, as shown below:

 

 

September 30, 2018

September 30, 2017

 

 

 

Profit before income taxes

1,986,875

2,883,881

Statutory rate

34%

34%

 

 

 

Estimated expense at statutory rate

(675,536)

(980,520)

Tax benefit of interest on equity

35,884

42,009

Permanent differences

 

 

     Provision Law 4,819/58 – G0 (i)

(36,834)

(44,776)

     Donations

(5,170)

(4,389)

     Other differences

22,262

10,490

 

 

 

Income tax and social contribution

(659,394)

(977,186)

 

 

 

Current income tax and social contribution

(604,204)

(899,391)

Deferred income tax and social contribution

(55,190)

(77,795)

Effective rate

33%

34%

 

(i)        Permanent difference related to the provision for actuarial liability (Note 19 (b) (iii)).

 

 

18                Provisions

 

(a)    Lawsuits and proceedings that resulted in provisions

 

(I)  Statement of financial position details

 

The Company is party to a number of claims and legal and administrative proceedings arising in the normal course of business, including civil, tax, labor and environmental matters. Management recognizes provisions consistently with the recognition and measurement criteria established in Note 3.15 to the Annual Financial Statements as of December 31, 2017. The ultimate timing and amounts of the payments depend on the outcome of the court cases. The provisions, net of escrow deposits are as follows:

PAGE: 63 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

 

Provisions

Escrow deposits

September 30, 2018

 

Provisions

Escrow deposits

December 31, 2017

Customer claims (i)

338,283

(39,679)

298,604

 

438,619

(56,301)

382,318

Supplier claims (ii)

66,595

(24,302)

42,293

 

332,037

(259,608)

72,429

Other civil claims (iii)

99,787

(13,147)

86,640

 

114,544

(16,227)

98,317

Tax claims (iv)

62,395

(8,035)

54,360

 

77,100

(5,507)

71,593

Labor claims (v)

298,649

(10,284)

288,365

 

299,842

(6,741)

293,101

Environmental claims (vi)

164,932

-

164,932

 

160,446

-

160,446

Total

1,030,641

(95,447)

935,194

 

1,422,588

(344,384)

1,078,204

 

 

 

 

 

 

 

 

Current

509,687

-

509,687

 

607,959

-

607,959

Noncurrent

520,954

(95,447)

425,507

 

814,629

(344,384)

470,245

 

 

(II) Changes

 

 

 

December 31, 2017

Additional provisions

Interest and inflation adjustment

Use of the accrual

Amounts not used

(reversal)

September 30, 2018

Customer claims (i)

438,619

14,923

29,319

(85,739)

(58,839)

338,283

Supplier claims (ii)

332,037

24,925

5,935

(283,513)

(12,789)

66,595

Other civil claims (iii)

114,544

18,327

9,995

(10,421)

(32,658)

99,787

Tax claims (iv)

77,100

4,931

3,443

(2,458)

(20,621)

62,395

Labor claims (v)

299,842

63,950

23,962

(33,305)

(55,800)

298,649

Environmental claims (vi)

160,446

26,290

14,658

(114)

(36,348)

164,932

Subtotal

1,422,588

153,346

87,312

(415,550)

(217,055)

1,030,641

Escrow deposits

(344,384)

(42,457)

(4,994)

264,203

32,185

(95,447)

Total

1,078,204

110,889

82,318

(151,347)

(184,870)

935,194

PAGE: 64 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

December 31, 2016

Additional provisions

Interest and inflation adjustment

Use of the accrual

Amounts not used

(reversal)

September 30, 2017

Customer claims (i)

572,210

22,992

35,925

(124,817)

(58,670)

447,640

Supplier claims (ii)

332,667

16,392

17,893

(12,368)

(17,815)

336,769

Other civil claims (iii)

131,286

7,879

8,822

(7,338)

(17,781)

122,868

Tax claims (iv)

69,898

4,418

6,152

(251)

(943)

79,274

Labor claims (v)

285,413

42,803

27,876

(37,775)

(26,088)

292,229

Environmental claims (vi)

150,084

23,786

12,125

(20,685)

(2,585)

162,725

Subtotal

1,541,558

118,270

108,793

(203,234)

(123,882)

1,441,505

Escrow deposits

(368,483)

(20,550)

(5,823)

13,919

41,213

(339,724)

Total

1,173,075

97,720

102,970

(189,315)

(82,669)

1,101,781

 

 

 

(b)        Lawsuits deemed as contingent liabilities

 

The Company is party to lawsuits and administrative proceedings relating to environmental, tax, civil and labor claims, which are assessed as contingent liabilities in the financial statements, since it either does not expect outflows to be required or the amount of the obligation cannot be reliably measured. Contingent liabilities are represented as follows:

 

 

September 30, 2018

December 31, 2017

Customer claims (i)

205,000

219,900

Supplier claims (ii)

1,570,400

1,430,600

Other civil claims (iii)

716,000

733,100

Tax claims (iv)

1,416,400

1,291,000

Labor claims (v)

604,300

677,400

Environmental claims (vi)

4,087,200

3,879,000

Total

8,599,300

8,231,000

 

(c)         Explanation on the nature of main classes of lawsuits

 

(i)                       Customer claims

 

Approximately 1,020 lawsuits (1,070 as of December 31, 2017) were filed by commercial customers, which claim that their tariffs should correspond to other consumer categories, and 650 lawsuits (680 as of December 31, 2017) in which customers claim a reduction in the sewage tariff due to losses in the system, consequently requesting the refund of amounts charged by the Company and 40 lawsuits (50 as of December 31, 2017) in which customers plead the reduction in tariff under the category “Social Welfare Entity”. The Company was granted both favorable and unfavorable final decisions at several court levels.

PAGE: 65 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

(ii)             Supplier claims

 

These include lawsuits filed by some suppliers alleging underpayment of monetary restatements, withholding of amounts related to the understated inflation rates deriving from Real economic plan, and the economic and financial imbalance of the agreements, and are in progress at different courts.

 

(iii)          Other civil claims

 

These mainly refer to indemnities for property damage, pain and suffering, and loss of profits allegedly caused to third parties, filed at different court levels.

 

(iv)            Tax claims

 

Tax claims refer mainly to issues related to tax collections and fines in general challenged due to disagreements regarding notification or differences in the interpretation of legislation by the Company's management.

 

(v)              Labor claims

 

The Company is a party to labor lawsuits, involving issues such as overtime, shift schedule, health hazard premium and hazardous duty premium, prior notice, change of function, salary equalization, service outsourcing and other. Part of the amount involved is in provisional or final execution at various court levels.

 

(vi)            Environmental claims

 

These refer to several administrative proceedings and lawsuits filed by government entities, including Companhia de Tecnologia de Saneamento Ambiental – Cetesb and the Public Prosecution Office of the State of São Paulo, that aim affirmative and negative covenants and penalty is estimated due to failure to comply in addition to the imposition of indemnity due to environmental damages allegedly caused by the Company. The amounts accrued represent the best estimate of the Company at this moment, however, may differ from the amount to be disbursed as indemnity to alleged damages, in view of the current stage of referred proceedings.

 

(d)                 Guarantee insurance for escrow deposit

 

The Company contracts guarantee insurance for the issue of policy, which was renewed on May 25, 2018, in the amount of R$ 500 million. Such insurance will be used in legal claims where instead of making immediate cash disbursement by the Company, such insurance is used until the conclusion of these proceedings limited to up to five years.

 

From July to September 2018, the Company used R$ 25,729 as guarantee insurance (R$ 1,749 from July to September 2017); a total of R$ 472,276 referring to the current agreement is outstanding.

PAGE: 66 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

19                Employees benefits

 

(a)        Health benefit plan

 

The health benefit plan is managed by Sabesprev and consists of optional, free choice, health plans sponsored by contributions of SABESP and the active participants, as follows:

 

.     Company: 8.6% on average, of gross payroll;

 

.     Participating employees: 3.21% of base salary and premiums, equivalent to 3.0% of payroll, on average.

 

The health plans offered to SABESP employees are self-managed by Fundação Sabesp de Seguridade Social (Sabesprev). However, the Company is undergoing a bidding process to hire a health operator that will implement an internally managed plan to redesign the medical services rendered to SABESP.

 

Pursuant to the rules of the National Regulatory Agency for Private Health Insurance and Plans (ANS), Sabesprev is required to maintain sufficient equity and solvency margin in order to ensure its operation. For this reason, SABESP was required to contribute an additional R$ 41 million in 2018, in view of the imbalance caused by the increase in healthcare costs, in order to comply with the parameters required by ANS.

 

We also emphasize that monthly administrative expenses decreased significantly in the first phase of the bidding process, from R$ 2.4 million to R$ 584 thousand.

 

 

(b)   Pension plan benefits

 

Funded plan – G1

 

 

Pension plan liabilities as of December 31, 2017

 

388,461

Expenses recognized in 2018

 

7,808

Payments made in 2018

 

(26,363)

Pension plan liabilities as of September 30, 2018 (i)

 

369,906

 

 

 

Unfunded plan – G0

 

 

Pension plan liabilities as of December 31, 2017

 

2,543,877

Expenses recognized in 2018

 

174,187

Payments  made in 2018

 

(125,155)

Pension plan liabilities as of September 30, 2018 (iii)

 

2,592,909

 

 

 

Total

 

2,962,815

 

(i) G1 Plan

 

The Company sponsors a defined benefit pension plan for its employees (“G1 Plan”), which is managed by Sabesprev, receives similar contributions established in a plan of subsidy of actuarial study of SABESPREV, as follows:

 

·         0.99% of the portion of the salary of participation up to 20 salaries; and

·         8.39% of the surplus, if any, of the portion of the salary of participation over 20 salaries.

PAGE: 67 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

As of September 30, 2018, SABESP had a net actuarial liability of R$ 369,906 (R$ 388,461 as of December 31, 2017) representing the difference between the present value of the Company's defined benefit obligations to the participating employees, retired employees, and pensioners; the fair value of the plan’s assets.

 

(ii)            Private pension plan benefits – Defined contribution

 

As of September 30, 2018, Sabesprev Mais plan, based on defined contribution, had 9,607 active and assisted participants (9,328 as of December 31, 2017).

 

With respect to the Sabesprev Mais plan, the contributions from the sponsor represent 100% over the total basic contribution from the participants. In 2018, expenses related to the obligation of defined contribution, totaling
R$ 9,767, R$ 1,359 and R$ 2,667, were allocated to operating costs, selling expenses and administrative expenses. The amount of R$ 1,374 was capitalized in assets.

 

From January to September 2018, the Company has made contributions in the amount of R$ 15,167 (R$ 12,671 from January to September 2017).

 

 

(iii)     Plan G0

 

Pursuant to State Law 4,819/58, employees who started providing services prior to May 1974 and retired as an employee of the Company acquired a legal right to receive supplemental pension payments, which rights are referred as "Plan G0". The Company pays these supplemental benefits on behalf of the State Government and makes claims for reimbursements from the State Government, which are recorded as accounts receivable from related parties, limited to the amounts considered virtually certain that will be reimbursed by the State Government. As of September 30, 2018, the Company recorded a defined benefit obligation for Plan G0 of R$ 2,592,909 (R$ 2,543,877 as of December 31, 2017).

 

(c) Profit sharing

 

The Company has a profit sharing program in accordance with an agreement with labor union and SABESP. The period covered represents the Company fiscal year, from January to December 2018. The limit of the profit sharing is one month salary for each employee, depending on performance goals reached.

 

In the third quarter of 2018, the Company accrued R$ 27,553 (R$ 25,175 in the third quarter of 2017). From January to September 2018 and 2017, R$ 81,695 and R$ 69,573, respectively, were accrued.

 

 

20               Services payable

 

The services account records the balances payable, mainly from services received from third parties, such as supply of electric power, reading of hydrometers and delivery of water and sewage bills, cleaning, surveillance and security services, collection, legal counsel services, audit, marketing and advertising and consulting services, among others. This account also includes the amounts payable related to the transfer of 7.5% of revenue from the São Paulo local government to the Municipal Fund (Note 14 (c) (v) of the Annual Financial Statements of December 31, 2017). The balances as of September 30, 2018 and December 31, 2017 were R$ 399,590 and R$ 408,275, respectively.

PAGE: 68 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

21                Knowledge Retention Program

 

In June 2018, SABESP implemented the Knowledge Retention Program (PRC), aiming to provide personnel planning conditions and mitigate the impact of the exit of employees who possess strategic knowledge acquired throughout their career.

 

The period to enroll in the Program was from July 2, 2018 to October 31, 2018; however, the final term was postponed to November 30, 2018. Employment terminations will be carried out based on a previously set schedule, during the validity of the Program, i.e. from January 2, 2019 to December 30, 2020.

 

For those enrolled in the Program, the compliance with the agreements of the Collective Bargaining Agreement effective on the date of termination is thereby guaranteed. They will also receive a severance incentive proportional to the length of service at SABESP, corresponding to a percentage of the balance of the Guarantee Fund for Length of Service (FGTS), for termination purposes, on the date of termination, as per the table below:

 

Length of service at SABESP (years)

% of the Guarantee Fund for Length of Service (FGTS)

more than 15

40%

11 - 15

30%

06 - 10

15%

0 - 5

5%

 

 

In the third quarter of 2018, the Company recorded R$ 61,514, corresponding to the provision of compensatory payments of employees enrolled in the Program. On September 30, 2018, the total balance was R$ 152,400,
R$ 16,997 of which recorded under current liabilities and R$ 135,403 under noncurrent liabilities.

 

For employees eligible to the Consent Decree (TAC) entered into with the São Paulo State Prosecution Office in 2009 who joined the Program, the Company reversed R$ 70,446 in the third quarter of 2018, corresponding to provision (R$ 143,735 from January to September 2018).

 

As of September 30, 2018 the total provisioned corresponding to TAC was R$ 162,472, R$ 158,832 of which was recorded under current liabilities and R$ 3,640 under noncurrent liabilities.

 

22               Equity

 

(a)        Authorized capital

 

The Company is authorized to increase capital by up to R$ 15,000,000, based on a Board of Directors' resolution, after submission to the Fiscal Council.

 

In the event of capital increase, issue of convertible debentures and/or warrants by means of private subscription, shareholders will have preemptive right in the proportion of the number of shares held, pursuant to Article 171 of Law 6,404/76.

 

(b)        Subscribed and paid-in capital

 

As of September 30, 2018 and December 31, 2017, subscribed and paid-in capital is represented by 683,509,869 registered, book-entry common shares with no par value, held as follows:

PAGE: 69 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

September 30, 2018

December 31, 2017

 

Number of shares

%

Number of shares

%

State Department of Finance

343,524,285

50.26%

343,524,285

50.26%

Companhia Brasileira de Liquidação e Custódia

210,420,840

30.78%

201,026,895

29.41%

The Bank Of New York ADR Department   (equivalent in shares) (*) (**)

127,406,567

18.64%

136,790,413

20.01%

Other

2,158,177

0.32%

2,168,276

0.32%

 

 

 

 

 

 

683,509,869

100.00%

683,509,869

100.00%

 

(*)  each ADR corresponds to 1 share.

(**)    custodians.

 

The Annual Shareholders’ Meeting of April 27, 2018 approved the distribution of dividends as interest on equity, in the amount of R$ 703,878, the transfer of R$ 1.689,466 from retained earnings to Investment Reserves and the allocation of R$ 125,965 to the Legal Reserve.

 

In June 2017, the Company began paying interest on equity in the amount of R$ 703,878 before withholding income tax of R$ 50,324, which gives a net amount of R$ 653,554. A total of R$ 653,393 has already been paid.

 

 

23               Earnings per share Basic and diluted

Basic earnings per share is calculated by dividing the equity attributable to the Company’s owners by the weighted average number of outstanding common shares during the year. The Company does not have potentially dilutive common shares outstanding or debts convertible into common shares. Accordingly, basic and diluted earnings per share are equal.                                                               

 

                                                                                                                                                      

 

January to September 2018

January to September 2017

 

 

 

Profit attributable to the Company’s owners

1,327,481

1,906,695

Weighted average number of common shares issued

683,509,869

683,509,869

 

 

 

Basic and diluted earnings per share (reais per share)

1.94216

2.78957

 

PAGE: 70 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

24               Operating segment information

 

Management, comprised of the Board of Directors and Board of Executive Officers, has determined the operating segment used to make strategic decisions, as sanitation services.

 

Result

 

 

July to September 2018

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per interim information

Gross operating revenue

3,331,564

724,158

4,055,722

Gross sales deductions

(244,941)

-

(244,941)

Net operating revenue

3,086,623

724,158

3,810,781

Costs, selling, general and administrative expenses

(2,011,284)

(707,877)

(2,719,161)

Income from operations before other operating expenses, net and equity accounting

1,075,339

16,281

1,091,620

Other operating income/(expenses), net

 

 

34,159

Equity accounting

 

 

502

Financial result, net

 

 

(262,770)

Income before taxes

 

 

863,511

Depreciation and amortization

(342,520)

-

(342,520)

 

 

 

 


PAGE: 71 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

January to September 2018

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per interim information

Gross operating revenue

9,862,258

2,038,406

11,900,664

Gross sales deductions

(717,981)

-

(717,981)

Net operating revenue

9,144,277

2,038,406

11,182,683

Costs, selling, general and administrative expenses

(5,975,461)

(1,992,577)

(7,968,038)

Income from operations before other operating expenses, net and equity accounting

3,168,816

45,829

3,214,645

Other operating income/(expenses), net

 

 

61,971

Equity accounting

 

 

4,196

Financial result, net

 

 

(1,293,937)

Income before taxes

 

 

1,986,875

Depreciation and amortization

(997,406)

-

(997,406)

 

(i)        See note 30 for further information about non-monetary items, other than depreciation and amortization that impact segment results, and additionals to long-lived asset information.

 

(ii)      Construction revenue and related costs not reported to the CODM (“Chief Operating Decision Maker”).

PAGE: 72 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

July to September 2017

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per interim information

Gross operating revenue

2,999,747

712,875

3,712,622

Gross sales deductions

(176,178)

-

(176,178)

Net operating revenue

2,823,569

712,875

3,536,444

Costs, selling, general and administrative expenses

(1,711,393)

(694,470)

(2,405,863)

Income from operations before other operating expenses, net and equity accounting

1,112,176

18,405

1,130,581

Other operating income/(expenses), net

 

 

14,642

Equity accounting

 

 

1,232

Financial result, net

 

 

222,869

Income from operations before taxes

 

 

1,369,324

Depreciation and amortization

324,516

-

324,516

 

 

PAGE: 73 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

January to September 2017

 

Sanitation (i)

Reconciliation to the statement of income (ii)

Balance as per interim information

Gross operating revenue

8,930,628

2,215,225

11,145,853

Gross sales deductions

(555,949)

-

(555,949)

Net operating revenue

8,374,679

2,215,225

10,589,904

Costs, selling, general and administrative expenses

(5,527,962)

(2,165,926)

(7,693,888)

Income from operations before other operating expenses, net and equity accounting

2,846,717

49,299

2,896,016

Other operating income/(expenses), net

 

 

37,715

Equity accounting

 

 

4,699

Financial result, net

 

 

(54,549)

Income from operations before taxes

 

 

2,883,881

Depreciation and amortization

974,487

-

974,487

 

(i)        See note 30 for further information about non-monetary items, other than depreciation and amortization that impact segment results, and additionals to long-lived asset information.

 

(ii)      Construction revenue and related costs not reported to the CODM (“Chief Operating Decision Maker”).

 

 

Explanation on the reconciliation items for the income statement.

The impacts on gross operating income and costs are as follows:

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

 

 

 

 

 

Gross revenue from construction recognized under ICPC 1 (R1)  (a)

724,158

2,038,406

712,875

2,215,225

Construction costs recognized under ICPC 1 (R1) (a)

(707,877)

(1,992,577)

(694,470)

(2,165,926)

 

 

 

 

 

Construction margin (Note 13 (e))

16,281

45,829

18,405

49,299

 

(a)   Revenue from construction is recognized as shown in Note 3.1 (b).

PAGE: 74 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

25   Operating income

 

(a) Income from sanitation services:

 

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

 

 

 

 

 

São Paulo Metropolitan Region

2,355,358

6,935,754

2,125,599

6,296,886

Regional Systems

976,206

2,926,504

874,148

2,633,742

Total

3,331,564

9,862,258

2,999,747

8,930,628

 

(b)       Reconciliation between gross operating income and net operating income:

 

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

 

 

 

 

 

Revenue from sanitation services (i)

3,331,564

9,862,258

2,999,747

8,930,628

Construction revenue

724,158

2,038,406

712,875

2,215,225

Sales tax

(231,470)

(677,569)

(176,178)

(555,949)

Regulation, Control and Oversight Fee (TRCF) (ii)

(13,471)

(40,412)

-

-

Net revenue

3,810,781

11,182,683

3,536,444

10,589,904

 

(i)    Includes the amount of R$ 15,832 from July to September 2018 and R$ 47,176 from January to September 2018, corresponding to the TRCF charged from customers from the municipalities regulated by ARSESP.

(ii)  Amount payable to ARSESP referring to the performance of the regulation, control and oversight activity, pursuant to State Complementary Law 1,025/07.

PAGE: 75 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

26         Operating costs and expenses

 

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

Operating costs

 

 

 

 

     Salaries, payroll charges and benefits

(504,663)

(1,458,988)

(438,701)

(1,368,180)

     Pension obligations

(6,449)

(18,626)

(12,268)

(35,738)

     Construction costs (Note 24)

(707,877)

(1,992,577)

(694,470)

(2,165,926)

     General supplies

(58,101)

(161,792)

(34,867)

(109,465)

     Treatment supplies

(58,132)

(195,490)

(60,060)

(198,871)

     Outside services

(250,452)

(714,289)

(180,220)

(612,655)

     Electricity

(240,952)

(690,308)

(203,205)

(589,921)

     General expenses

(173,426)

(463,996)

(130,634)

(392,706)

     Depreciation and amortization

(313,237)

(908,824)

(292,893)

(876,715)

 

(2,313,289)

(6,604,890)

(2,047,318)

(6,350,177)

 

 

 

 

 

Selling expenses

 

 

 

 

     Salaries, payroll charges and benefits

(72,711)

(219,267)

(69,083)

(215,917)

     Pension obligations

(892)

(2,615)

(1,876)

(5,343)

     General supplies

(1,753)

(4,294)

(925)

(2,742)

     Outside services

(66,367)

(198,976)

(57,979)

(184,377)

     Electricity

(254)

(853)

(200)

(575)

     General expenses

(23,680)

(73,852)

(24,523)

(69,001)

     Depreciation and amortization

(4,365)

(13,028)

(4,413)

(11,302)

           Allowance for doubtful accounts (Note 8 (c))

(19,307)

(126,005)

34,380

(87,480)

 

(189,329)

(638,890)

(124,619)

(576,737)

 

 

 

 

 

Administrative expenses

 

 

 

 

     Salaries, payroll charges and benefits

(70,362)

(190,905)

(55,436)

(168,084)

     Pension obligations

(37,102)

(111,913)

(46,059)

(134,635)

     General supplies

(1,182)

(3,828)

(3,971)

(5,154)

     Outside services

(49,681)

(149,972)

(50,166)

(123,846)

     Electricity

(252)

(945)

(227)

(711)

     General expenses

(19,599)

(147,152)

(29,257)

(172,207)

     Depreciation and amortization

(24,918)

(75,554)

(27,210)

(86,470)

     Tax expenses

(13,447)

(43,989)

(21,600)

(75,867)

 

(216,543)

(724,258)

(233,926)

(766,974)

 

 

 

 

 

PAGE: 76 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

Operating costs and expenses

 

 

 

 

     Salaries, payroll charges and benefits

(647,736)

(1,869,160)

(563,220)

(1,752,181)

     Pension obligations

(44,443)

(133,154)

(60,203)

(175,716)

     Construction costs (Note 24)

(707,877)

(1,992,577)

(694,470)

(2,165,926)

     General supplies

(61,036)

(169,914)

(39,763)

(117,361)

     Treatment supplies

(58,132)

(195,490)

(60,060)

(198,871)

     Outside services

(366,500)

(1,063,237)

(288,365)

(920,878)

     Electricity

(241,458)

(692,106)

(203,632)

(591,207)

     General expenses

(216,705)

(685,000)

(184,414)

(633,914)

     Depreciation and amortization

(342,520)

(997,406)

(324,516)

(974,487)

     Tax expenses

(13,447)

(43,989)

(21,600)

(75,867)

           Allowance for doubtful accounts (Note 8 (c))

(19,307)

(126,005)

34,380

(87,480)

 

(2,719,161)

(7,968,038)

(2,405,863)

(7,693,888)

PAGE: 77 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

27       Financial income (expenses)

 

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

Financial expenses

 

 

 

 

Interest and charges on borrowings and financing – local currency

(84,191)

(246,785)

(72,389)

(203,199)

Interest and charges on borrowings and financing – foreign currency

(45,725)

(129,495)

(28,622)

(80,240)

Other financial expenses

(58,533)

(105,030)

(27,047)

(78,280)

Income tax over international remittance

(5,235)

(15,175)

(4,226)

(13,226)

Inflation adjustment on loans and financing

(21,251)

(53,589)

(3,597)

(44,442)

Other inflation adjustments

(6,176)

(26,162)

(6,994)

(23,938)

Interest and inflation adjustments on provisions

25,916

37,929

6,744

(26,653)

Total financial expenses

(195,195)

(538,307)

(136,131)

(469,978)

 

 

 

 

 

Financial income

 

 

 

 

Inflation adjustment gains

30,915

89,177

18,670

68,528

Income on short-term investments

49,420

133,751

45,104

156,671

Interest income

37,181

125,301

45,988

71,610

Cofins and Pasep

(5,465)

(16,944)

(3,920)

(12,638)

Other

3

6

-

442

Total financial income

112,054

331,291

105,842

284,613

 

 

 

 

 

Financial income (expenses), net before exchange rate changes

(83,141)

(207,016)

(30,289)

(185,365)

 

 

 

 

 

Net exchange gains (losses)

 

 

 

 

Exchange rate changes on borrowings and financing (i)

(190,812)

(1,100,166)

253,158

130,523

Exchange gains on assets

11,183

13,245

-

347

Other exchange rate changes

-

-

-

(54)

Exchange rate changes, net

(179,629)

(1,086,921)

253,158

130,816

 

 

 

 

 

Financial income (expenses), net

(262,770)

(1,293,937)

222,869

(54,549)

 

(i)        The change in quarterly expenses mainly reflects the 3.8% appreciation of the US dollar and the 1.3% appreciation of the Yen in 2018, compared to 4.2% and 4.5% depreciations, respectively in the same period in 2017.

PAGE: 78 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

28               Other operating income (expenses), net

 

 

July to September 2018

January to September 2018

July to September 2017

January to September 2017

 

 

 

 

 

Other operating income, net

44,424

98,845

22,852

46,135

Other operating expenses

(10,265)

(36,874)

(8,210)

(8,420)

 

 

 

 

 

Other operating income (expenses), net

34,159

61,971

14,642

37,715

 

Other operating income is comprised by sale of property, plant and equipment, sale of contracts awarded in public bids, right to sell electricity, indemnities and reimbursement of expenses, fines and collaterals, property leases, reuse water, PURA projects and services, net of Cofins and Pasep.

 

Other operating expenses consist mainly of derecognition of concessions due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, losses on property, plant and equipment and exceeding cost of electricity sold.

 

 

29               Commitments

 

The Company has agreements to manage and maintain its activities, as well as agreements to build new projects aiming at achieving the objectives proposed in its target plan. Below, the main committed amounts as of September 30, 2018:

 

 

October to December 2018

2019 to 2020

2021 to 2022

2023 onwards

Total

Contractual obligations – Expenses

994,810

1,531,642

400,601

1,250,732

4,177,785

Contractual obligations - Investments

1,426,876

3,080,652

1,221,014

6,158,056

11,886,598

Total

2,421,686

4,612,294

1,621,615

7,408,788

16,064,383

 

The main commitment refers to the São Lourenço PPP. See Note 13 (g).

PAGE: 79 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

30        Supplemental cash flow information

 

 

January to September 2018

January to September 2017

 

 

 

Total additions to intangible assets (Note 13 (b))

2,250,152

2,355,110

 

 

 

Items not affecting cash (see breakdown below)

(883,468)

(1,121,341)

 

 

 

Total additions to intangible assets as per statement of cash flows

1,366,684

1,233,769

 

 

 

Investments and financing operations affecting intangible assets but not cash:

 

 

Interest capitalized in the period (Note 13 (d))

397,420

476,719

Contractors payable

245,576

190,073

Public-Private Partnership - São Lourenço PPP (Note 13 (g))

169,785

332,446

Leases

2,095

9,258

Program contract commitments

22,763

63,546

Construction margin (Note 24)

45,829

49,299

Total

883,468

1,121,341

 

 

31           Events after the reporting period

 

·            Agreements for the Provision of Water Supply and Sewage Services

 

In October 2018, the Company renewed the Agreement for the Provision of Water Supply and Sewage Services with the municipalities of Angatuba, Arandu and Piraju for 30 years.

PAGE: 80 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

Comments on the Company’s Projections

 

 

 

 

Comments on the Company’s projections

 

 

The projections presented in the Reference Form are annual and not on a quarterly basis. Therefore, the quarterly comparison between information disclosed in the Reference Form with quarterly results shall not apply.

 

The projections monitoring occurs on annual basis and are disclosed in the Reference Form.

 

PAGE: 81 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

 

1.        CHANGES IN INTEREST HELD BY CONTROLLING SHAREHOLDER, BOARD MEMBERS AND EXECUTIVE OFFICERS

 

 

CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, MANAGEMENT AND OUTSTANDING SHARES

Position as of 9/30/2018

 

Shareholder

Number of Common Shares (units)

 

%

Total Number of Shares

(units)

 

%

Controlling Group

 

 

 

 

Treasury Department

343,524,285

50.3%

343,524,285

50.3%

Cesp - Companhia Energética De São Paulo

 

4,272

 

0.00%

 

4,272

 

0.00%

Companhia Paulista de

Parcerias - CPP

 

6

 

0.00%

 

6

 

0.00%

Management

 

 

 

 

Board of Directors

10,600

0.00%

10,600

0.00%

Board of Executive Officers

-

-

-

-

 

 

 

 

 

Fiscal Council

64

0.00%

64

0.00%

 

 

 

 

 

Treasury Shares

-

-

-

-

 

 

 

 

 

Other Shareholders

 

 

 

 

 

 

 

 

 

Total

343,539,227

50.3%

343,539,227

50.3%

 

 

 

 

 

 

 

 

 

 

Outstanding Shares

339,970,642

49.7%

339,970,642

49.7%

PAGE: 82 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, MANAGEMENT AND OUTSTANDING SHARES

Position as of 30/09/2017

 

Shareholder

Number of Common Shares (units)

 

%

Total Number of Shares

(units)

 

%

Controlling Group

 

 

 

 

Treasury Department

343,524,285

50.3%

343,524,285

50.3%

Cesp - Companhia Energética De São Paulo

 

4,272

 

0.00%

 

4,272

 

0.00%

Companhia Paulista de

Parcerias - CPP

 

6

 

0.00%

 

6

 

0.00%

Management

 

 

 

 

Board of Directors

-

-

-

-

Board of Executive Officers

-

-

-

-

 

 

 

 

 

Fiscal Council

4

0.0%

4

0.0%

 

 

 

 

 

Treasury Shares

-

-

-

-

 

 

 

 

 

Other Shareholders

 

 

 

 

 

 

 

 

 

Total

343,528,567

50.3%

343,528,567

50.3%

 

 

 

 

 

 

 

 

 

 

Outstanding Shares

339,981,302

49.7%

339,981,302

49.7%

 

 

 

2.        SHAREHOLDING POSITION

 

 

SHAREHOLDING POSITION OF HOLDERS OF MORE THAN 5% OF EACH TYPE AND CLASS OF COMPANY SHARES, UP TO THE INDIVIDUAL LEVEL

Company:

CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO

Position as of 9/30/2018

(Number of shares)

 

Common shares

Total

Shareholder

Number of shares

%

Number of shares

%

 

Treasury Department

 

343,524,285

 

50.3

 

343,524,285

 

50.3

Lazard Asset Management LCC

 

34,596,179

 

5.06

 

34,596,179

 

5.06

PAGE: 83 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Reports and Statements / Unqualified Reports on Special Review

 

Review report on the interim financial statements – ITR

 

To the Board of Directors and Shareholders  

Companhia de Saneamento Básico do Estado de São Paulo - SABESP

São Paulo - SP

 

Introduction

We have reviewed the interim financial information of Companhia de Saneamento Básico do Estado de São Paulo – SABESP (“The Company”), included in the Quarterly Financial Information – ITR referring to the quarter ended September 30, 2018, comprising the Financial position as of September 30, 2018 and the statement of income and comprehensive income for the three and nine-month periods the ended, and the changes in equity and cash flows for the nine-months period then ended, including the explanatory notes. 

 

Management is responsible for the preparation of the interim financial information in accordance with accounting standard CPC 21(R1) - Interim Financial Reporting and IAS 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board - IASB, as well as for the presentation of this information in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM, applicable to the preparation of Quarterly Financial Information - ITR. Our responsibility is to express a conclusion on this interim financial information based on our review.

 

Scope of Review

We conducted our review in accordance with the Brazilian and International standards on review engagements NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively. A review of interim financial information consists of making inquiries, primarily of persons responsible for the 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 the auditing standards and, consequently, does 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 financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the Quarterly Information Form - ITR referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by the IASB applicable to the preparation of Quarterly Financial Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM.

 

Other matters - Statement of value added

We have also reviewed the statements of value added (DVA) for the nine-month period ended September 30, 2018, prepared under the responsibility of the Company’s management, whose presentation on the interim financial information is required in accordance with the standards issued by the Brazilian Securities and Exchange Commission – CVM applicable to the preparation of Quarterly Financial Information - ITR, and considered as supplementary information by IFRS, which does not require this disclosure. These statements were subject to the same review procedures described above, and based on our review, nothing has come to our attention that causes us to believe that it is not prepared, in all material respects, in accordance with the interim financial information taken as a whole.

 

 

 

São Paulo, November 08, 2018.

 

 

KPMG Auditores Independentes

CRC 2SP014428/O-6

 

 

 

(Original report in Portuguese signed by)                                  

Márcio Serpejante Peppe

Contador CRC 1SP233011/O-8

PAGE: 84 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Reports and Statements / Executive Officers’ Statement on the Financial Statements

 

Executive Officers’ Statement on the Interim Financial Information

STATEMENT

The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayer’s ID (CNPJ/MF) no. 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, pursuant to paragraph 1, article 29, item II, of CVM Instruction 480, of December 7, 2009, amended by CVM Instruction 586, of June 8, 2017, that:

They revised, discussed and agreed with the interim financial information for the period ended September 30, 2018.

São Paulo, November 8, 2018.

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

Karla Bertocco Trindade

Chief Executive Officer

Rui de Britto Álvares Affonso
Chief Financial and Investor Relations Officer

Augusto Bezana
Corporate Management Officer

Edison Airoldi
Technology, Project and Environment Officer

Paulo Massato Yoshimoto

Metropolitan Officer

João Cesar Queiroz Prado
Regional Systems Officer

PAGE: 85 of 86


 
 
ITR - Quarterly Financial Form - 9/30/2018 - CIA SANEAMENTO BASICO EST SAO PAULO  Version : 1 

 

 

Reports and Statements / Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm

Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm

STATEMENT

The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayer’s ID (CNPJ/MF) no. 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, pursuant to paragraph 1, article 29, item II, of CVM Instruction 480, of December 7, 2009, amended by CVM Instruction 586, of June 8, 2017, that:

They revised, discussed and agreed with the Report of Independent Registered Public Accounting Firm on the interim financial information for the period ended September 30, 2018.

São Paulo, November 8, 2018.

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

Karla Bertocco Trindade
Chief Executive Officer

Rui de Britto Álvares Affonso 
Chief Financial and Investor Relations Officer

Augusto Bezana
Corporate Management Officer

Edison Airoldi

Technology, Project and Environment Officer

 

Paulo Massato Yoshimoto

Metropolitan Officer

João Cesar Queiroz Prado
Regional Systems Officer

PAGE: 86 of 86

 

SIGNATURE  
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city São Paulo, Brazil.
Date: December 7, 2018
 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
By: /s/  Rui de Britto Álvares Affonso    
 
Name: Rui de Britto Álvares Affonso
Title: Chief Financial Officer and Investor Relations Officer
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.