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SABESPSABESPSABESPSABESP1st Quarter, 2007
11stst Quarter 2008Quarter 2008May 2008 May 2008 –– Economic Economic -- Financial Office and Investor Relations OfficeFinancial Office and Investor Relations OfficeMay 2008 May 2008 –– Economic Economic -- Financial Office and Investor Relations OfficeFinancial Office and Investor Relations Office
DisclaimerDisclaimer
This presentation may contain forward-looking statements referring to
SABESP’s business outlook. operating and financial results estimates. and
growth prospects. These are only projections. and as such. they are exclusively
based on SABESP’s management expectation in relation to the future of
b i d it ti t it l t fi th C ’business and its continuous access to capital to finance the Company’s
business plan. These forward-looking statements largely depend on changes in
market conditions. governmental rules. industry performance and the Brazilianmarket conditions. governmental rules. industry performance and the Brazilian
economy. amongst other factors. in addition to risks exhibited in disclosure
documents filed by SABESP . Therefore. they are subject to changes without
prior notice.
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AgendaAgenda
Company Overview1
Our Operations2 p
Our Financial Performance3
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One of the largest water and sewage i id i th ld
Main Operational Indicators (1)Company Overview
service providers in the world…
Sabesp is one of the largest water and sewage service providers in the world based on the number of customers
Water Sewage
Connections (million) 6 8 5 2based on the number of customers Provides water to 23.0 million people
and sewage services to 18.9 million people
Connections (million) 6.8 5.2
Coverage (%) 100% 79%
Treatment (%) 100% 69%(²)
Also sells wholesale treated water to 6 municipalities (3.3 million people)
Natural monopoly, low operating risk (1) As of March 31, 2008(2) Treated sewage as percentage of collected sewage
Volume Billed (m³ million) 469.0 330.2
Network (km thousand) 62.3 40.6
p y, p g Serves the City of São Paulo and 365
out of 645 municipalities in the State Covers 60% of State's urban population
(2) Treated sewage as percentage of collected sewage
BrazilCovers 60% of State s urban population Operations in the São Paulo
Metropolitan Region represent 75.8% of revenues
Regional Systems
Metropolitan Region
Brazil
São Paulo
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p g
…with strong corporate governance We are a mixed capital company, majority-owned by the State of São Paulo, with
significant private ownership• Corporate by laws and State law requires the State of São Paulo to own at least 50%
g p g
• Corporate by-laws and State law requires the State of São Paulo to own at least 50% + 1 voting shares at all times
• In 2004, the Government of São Paulo completed a public share offering to sell its excess holdings, which resulted in its current ownership of 50.3% share
Listed on the “Novo Mercado” and NYSE, leading to high corporate governance standards
100% common shares
Ownership structure¹
Source: The Company
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Source: The Company(1) As of April 2008
AgendaAgenda
Our Company1
Our Operations2
p y
3
p
Our Financial Performance
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Diversified customer baseWater Volume by Type of Customer Sewage Volume by Type of Customer
Diversified customer base
Water Revenues by Type of Customer Sewage Revenues by Type of Customer
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Metropolitan Region water resources The São Paulo Metropolitan Region represents 72% of the total billed water volume Operational flexibility to guarantee continued services to the growing demand
Metropolitan Region water resources
Operational flexibility to guarantee continued services to the growing demand Water production capacity of 67.7 m³/s, increasing by 7.5 m³/s until the end of 2009 20 reservoirs of non-treated water, 182 reservoirs of treated water and 8 water
production systems
Water Production (65.5 m³/s) Distribution Systems – Metropolitan Region
P. B. JESUSCAJAMARMAIRIPORÃ
ARUJÁ
STA. ISABELF. DAROCHA
F. MORATO
CAIEIRASR. JuqueriR. Águas
Cl
SUZANOSÃO PAULO
V.GDE.PAUL.
ITAPEVI
COTIAR. daGraça
EMBU
JANDIRA
ITAP DA
T.DASERRA
S. C.DO SUL
DIADEMA.STO.ANDRÉ
R.PIRESR. GDE.
FERRAZVASC.
POÁBARUERI
S. DOPARNAÍBA
SUZANO
MOGI DAS CRUZESITAQUA
OSASCO
GUARAREMA
BIRITIBAMIRIM
SALESÓPOLIS
R.TaiaçupebaR.Jundiaí
R.BiritibaMirim
R.Paraitinga
R.P. NovaR. R. do
Campo
Claras GUARULHOS
R.Guarapiranga
R.Guarapiranga
CARAPI-CUÍBA.
MAUÁ
R. P. Beicht
R.Billings
S.B.DOCAMPOS. LOURENÇO
DA SERRA
ITAP. DASERRA
JUQUITIBA
SERRA
Barr. doFrançaR. Juquitiba
piranga
EMBUGUAÇU
8Note: Average of the 12 months ended March 2008
Broad coverage of municipalities
We currently serve 366 municipalities, mostly through concession contracts Out of the 174 concessions that matured up to 2007, 84 were renewed In addition, 21 concessions with maturity after 2008 have already been renewed (includes 8
municipalities that did not have a formal contract) Although we maintain no formal contract with the municipality of São Paulo, we own all the
assets
Concession maturity profile
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Regulatory FrameworkRegulatory Framework
Obli t ti f R l t A M i i l St t l l
Federal Law # 11,445/07 Effective as of March 2007
Obligatory creation of a Regulatory Agency – Municipal or State level
Defines deadline for the establishment of formal contractual relationship - year 2010
Clarifies the payment conditions of the agreements executed prior to the law – up to 4 years
Scope of sanitation services: supply of drinking water, sewage, urban cleaning and solid waste handling, drainage and handling of urban rainwater
Defines Program Contract as the contractual base to be utilized between Sabesp and a Municipality. • Program Contract is a modality of concession contract based on the Public Consortium Law 11,107/05.
• No biding process is required.
A Cooperation Agreement between the State and the Municipality is needed to turn effective the program Contract and to delegate the regulation to the State Regulatory Agencyprogram Contract and to delegate the regulation to the State Regulatory Agency.
Still remains a discussion in the Federal level over the power of concession for sanitation services in
Discussion of Power of Concession
Still remains a discussion in the Federal level over the power of concession for sanitation services in Metropolitan regions Law 11,445/07 does not address this matter.
Basic discussion: sanitation services are of local interest or common interest.
Two legal proceedings under Supreme Court (STF) appraisal – no final decision / no clear direction:
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Two legal proceedings under Supreme Court (STF) appraisal – no final decision / no clear direction:• State of Rio de Janeiro x Niteroi – 3 votes
• State of Bahia x Salvador – 4 votes
Regulatory FrameworkRegulatory Framework
C t d D b 7 2007 f ll i L 11 445/07 di ti d i t
State Regulatory Agency - ARSESP
Created on December 7, 2007, following Law 11,445/07 directions and requirements
The agency will cover energy, gas and sanitation
Expected that municipalities will delegate sanitation regulation to State Regulatory Agency
A Cooperation Agreement is needed between the Municipality and the State
The agency is expected to be effective by mid 2008
Commitment Partnership between the Municipality of São Paulo and Sabesp
Preparation of drafts for the Cooperation Agreement, Metropolitan Program Contract and M i i l L P j tMunicipal Law Project;
Adjust the Contract to the requirements of Law 11,445/07;
Settle any financial outstanding debt;
Targeted programs and additional sanitation and environmental initiatives driven to several areas of the municipality, with pre established funding;
To ensure long term rendering of sanitation services by Sabesp to the Municipality of São Paulo.
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Consistent annual tariff adjustments Tariffs are adjusted every year by using a formula which adjusts our controllable costs by
inflation and contemplates a “pass-through” of non-controllable costs
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A special tariff policy is being implemented geared towards Large Customers, in line with Sabesp Environmental Solution activities.
Sabesp will continue to utilize it´s tariff structure, until a regulatory agency is effective
Annual Tariffs Adjustments vs. Inflation (%) Annual Tariffs Adjustment Index
Full “Pass-Through”
Part A Part B
Inflation (IPCA) X
Controllable Costs
of Non-Controllable Costs Includes:
Electricity
Treatment materials Treatment materials
Taxes
Use of water resources
12Tariffs revision under new formula
Evolution of operations and visible growth
Water Connection Evolution (million) Water Coverage (thousand connections)*
gpotential – water
* Adding 652,100 new connections through 2010 to match organic population growth
Today’s production capacity (m³/s)
T t l 103 5
Expected growth (m³/s)
Total 103.5SPMR 67.7
Total 11.0SPMR 8.0
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Evolution of operations and visible growth
Sewage Connection Evolution (million) Sewage Coverage (thousand connections)
gpotential – sewage
Increase coverage by adding 791,700 connections
Current System(m³/s)
Collectionl
Expected growth (m³/s)
CollectionT t l 4 6Total 30.3
SPMR 21.2
Treatment Total 39 5
Total 4.6From: 78% to: 84%
Treatment Total 9 3
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Total 39.5SPMR 18.0
Total 9.3From: 63% to: 82%
Water Loss Program
Water Losses Target (%)
g
Strategy to reduce water loss
In March 2008: 29.1% Replacement and repair of water pipes and mains;
Physical losses
32.033.034.035.0
% mains; Installation of probing and pressure-regulating
valves; Preventive maintenance of existing and newly
installed water meters;
28 029.030.031.03 0 installed water meters;
Improvement in the quality of the materials. Non-visible leak research; Selective change of network and ramifications.
24 025.026.027.028.0 g
Non physical losses
Replacement of inaccuracy water meters;
Goal in December 2010: 24.0%
24.0 p y ; Expand personnel who work on anti-fraud
actions; Preventing frauds; Control of inactive connections
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Control of inactive connections.
Expansion opportunities and operational ffi i i tefficiency improvement
New Contracts – New Businesses
Target new municipalities (15.3 million people – urban population including wholesale); In March 2006, Law nº 12,292 was approved, allowing us to operate outside of the São Paulo State and
abroad; Sabesp Environmental Solutions Focus on large customers – catered solutionsSabesp Environmental Solutions Focus on large customers – catered solutions As of December 2007:
• Sabesp is allowed to establish subsidiaries, as well as to take a stake in other companies withsimilar corporate purpose, in Brazil and abroad.
• The scope of services that can be rendered by Sabesp may be increased to:• The scope of services that can be rendered by Sabesp may be increased to:o Urban rainwater drainage and management;o Urban cleaning and solid waste management;o Unrestricted operation of power generation, storage, conservation and energy activities
Move Wholesale Customers to Retail
Target municipalities currently served on a wholesale basis - Currently 3.3 million population Direct access to customers
• Sell water directly to end user• Provide sewage collection and treatment services
Si ifi tl i ll ti t
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Significantly improve collection rates, Use of accounts receivable as consideration for acquisitions
Capex plan - Investments - Expected Benefits Total investment plan of R$ 5.9 billion for 2007 to 2010, comprising of:
1,5911,745
1,574
960
02
960
Maintain: • Natural resources – water • Operating base – mainly Metropolitan Regions (Major markets)
Meet service and revenue goals Further enhance compliance with Environmental Laws:
Mi i i t l it
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• Minimizes our exposure to lawsuits• Approaches Company and society
Capex financing
Financing by caseFunds from Company Cash flow
R$2.8 billion = 48%Funds from FinancingR$3.1 billion = 52%
CEF R$ 776 miR$ 2.4 billion
78%
CEF R$ 776 miBID R$ 168 miJBIC R$ 384 miOthers R$ 12 mi
CEF R$ 338 iCEF R$ 338 mi
BNDES R$ 129 mi
Others R$ 55 mi
CEFCEF
BNDES
BID
Total Financed Investments- Total Amount = R$ 4.4 bi- Financed Amount = R$ 3 1 bi
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- Financed Amount = R$ 3.1 bi- Matching Funds = R$ 1.3 bi- Leverage = 70%
Access to long term low cost financing Solid capital structure, strong credit profile
Total debt / total book capitalization ratio below 50%
Access to long term, low cost financing
• Total debt / total book capitalization ratio below 50%• Sabesp has reduced its debt leverage from 3.6x in 2004 to 1.9x in March 2008
Average life of 5.9 years with an annual average cost of debt of 12.2% in R$ and 7.9% in foreign currencyg y
Access to international and domestic capital markets and multilateral financing• 66% of foreign currency debt is from multilateral financings
Total Debt BreakdownTotal Debt by Currency
F i G A F iOthers3%Foreign
Currency
CEF and BB
Gov. Ag. Foreign
Foreign Capital
Gov. Ag. Local
42%7%
4%
15%3%
Local Currency
Local Capital Markets
Foreign Capital Markets
42%
29%
7%
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Currency Markets
Debt amortization profile The US dollar-denominated debt is long-term and low cost (multilateral agencies). Currently,
SABESP’s credit rating by S&P is brA+ (domestic) and BB- (international).
1,284
671866
911
520 518
329206
87 5735
207
Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019+Local Debt 408 1,218 799 843 449 447 136 17 13 13 13 46 Foreign Debt 263 67 67 69 71 71 71 71 316 44 22 161
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Foreign Debt 263 67 67 69 71 71 71 71 316 44 22 161 Total 671 1,284 866 911 520 518 206 87 329 57 35 207
AgendaAgenda
Our Company1
Our Operations2
Our Financial Performance3
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Consistent performance
Net Revenues (R$ million) Gross Profit (R$ million)
p
EBITDA (R$ million) Net Income (R$ million)
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Financial Highlights(In R$ million)
Financial Highlights 2003 2004 2005 2006 2007 1Q08
N t R (R$) 4 130 8 4 397 1 4 953 4 5 527 3 5 970 8 1 540 1Net Revenues (R$) 4,130.8 4,397.1 4,953.4 5,527.3 5,970.8 1,540.1 EBITDA (R$) 2,076.5 1,927.0 2,285.6 2,446.0 2,698.9 774.4 EBITDA Margin (%) 50.3 43.8 46.1 44.3 45.2 50.3 Net Income (R$) 833.3 513.1 865.6 778.9 1,048.7 303.7 Net Margin (%) 20.2 11.7 17.5 14.1 17.6 19.7
Total Assets (R$) 16,590.1 16,783.8 17,431.1 17,999.9 18,663.4 18,590.2 Total Debt (R$) 7,264.3 7,050.7 6,664.2 6,326.7 5,685.2 5,691.6 Short-term Debt (R$) 997.0 1,496.8 759.0 852.5 742.1 980.1 Long-Term Debt (R$) 6,267.3 5,553.8 5,905.2 5,474.2 4,943.1 4,711.5 Foreign Currency Debt (R$) 3,012.7 2,680.9 1,575.9 1,472.2 1,242.3 1,289.9 Shareholders' Equity (R$) 7,576.9 7,951.6 8,482.5 9,018.5 9,784.0 10,087.7Shareholders Equity (R$) 7,576.9 7,951.6 8,482.5 9,018.5 9,784.0 10,087.7Total Debt/Total Cap. (%) 48.9 47.0 44.0 41.2 36.8 36.1 Investments (R$) 594.0 601.0 678.2 904.9 921.1 270.0
Dividend Declared (R$/000 shares) 17.7 5.4 12.2 9.5 1,32* - ( )Pay Out (%) 60.5 29.8 40.2 34.7 28.7 - Dividend Yield (%) 10.8 3.4 7.8 3.2 3.2 -
23Note: Financials are in Brazilian Corporate Law.
*earnings per share
Historical leverage metrics
New Debt vs. Amortization (R$ million)
g
Capital structure has remained consistent with operating cash generation and capitalization
Net Debt vs. EBITDA* (R$ million) Net Debt vs. Shareholders’ Equity (R$ million)
24* EBITDA - LTM
www.sabesp.com.br
IR ContactsIR Contacts
Mario Azevedo de Arruda Sampaio Angela Beatriz Airoldimaasampaio@sabesp.com.br abairoldi@sabesp.com.br
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(55 11) 3388 8664 (55 11) 3388 8793