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Identity

CORPORATE INFORMATION

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MessageFROM THE EXECUTIVE BOARD

Risk MANAGEMENT

About This REPORT

CorporateGOVERNANCE

Social AND ENVIRONMENTAL PERFORMANCE

MessageFROM THE BOARD OF DIRECTORS

StrategyAND MANAGEMENT MODEL

FinancialPERFORMANCE

GRICONTENT INDEX

OperationalPERFORMANCE

GRIATTACHMENT

IdentityMESSAGE FROM THE EXECUTIVE

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MESSAGE FROM THE BOARD

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STRATEGY AND MANAGEMENT

MODELCORPORATE

GOVERNANCEOPERATIONAL

PERFORMANCEFINANCIAL

PERFORMANCE

SOCIAL AND ENVIRONMENTAL

PERFORMANCEABOUT THIS

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ATTACHMENTGRI CONTENT

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DESEMPENHO SOCIOAMBIENTAL

We are Aegea Participações e Saneamento S.A., the largest sanitation company in the private sector in Brazil in terms of households served. We operate assets through full and partial concessions and public-private partnerships (PPPs), throughout the entire water cycle process. GRI 102-1, 102-2, 102-7

Access of people to water abstraction, treatment and supply, and collection and treatment of sewage is one of the underlying conditions for the sustainable development of cities. For this reason, we are careful to safely take clean water to households, trade and industries, and to make sure that sewage does not contaminate rivers or other sources of water. Operating for eight years, we have extended this purpose to 49 cities in 11 Brazilian states. GRI 102-2, 102-4, 102-6

As a publicly traded Company registered at the Brazilian Securities and Exchange Commission (CVM - Comissão de Valores Mobiliários), we are controlled by Grupo Equipav, which has operated for over 50 years in the Brazilian infrastructure segment. We also have other shareholders with indisputable reputation,

such as the International Finance Corporation (IFC), the Global Infrastructure Fund (GIF), and GIC Private Limited. We also have access to financing via local and international capitals markets, commercial and investment banks, and multilateral agencies. GRI 102-5

Based on this structure and on the understanding that each city has its own specificities—cultural, in the relationship with public authorities and in the business format to be developed—we operate with assertiveness in the various geographies.

We are also prepared to take on new challenges, such as in 2018, when we began operations in the city of Manaus (AM). With a population of more than 2.1 million, this is the third Brazilian capital to enter the business portfolio, representing an important step in the expansion of our operations throughout the country. GRI 102-10

DESEMPENHO OPERACIONAL

Our nature drives life

4 AEGEA Annual Sustainability Report 2018

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1.Household: refers to single family property, or subdivision of the property with independent occupancy, having private connections for water supply and sewage collection services. According to our Market Intelligence Center (NIM - Núcleo de Inteligência de Mercado), we have a 33.4% share of the private sanitation market in Brazil. Calculation is based on number of units.2.According to 2017 data from the Brazilian Institute of Geography and Statistics (IBGE - Instituto Brasileiro de Geografia e Estatística).

IDENTITY

A new brand Our talents Manifesto We have built a new brand based on our purpose. The work involved identifying our vocation based on crossing internal talents and the needs of society. As a result, we instated a manifesto that communicates our business purpose. The same brand, with the same values, also became a part of the identity of all our concessionaires, and has contributed to strengthening our presence throughout Brazil.

MASTERS IN “BRAZICITIES”The capacity to apply our operating model, with flexibility, to the various regions where we operate.

ENGINEERS OF THE ORDER The ability to maintain in operation a system that connects people to treated water and, subsequently, adequately disposes of the sewage.

AMBASSADORS OF HEALTHThe main objective of our operations: to take health to all, including the environment.

MORE THAN PROFESSIONALShe understanding that we must transcend contractual terms, seeking a close relationship with the communities served.

AGENTS OF DIGNITYPerforming our activities with ethics aiming to promote equality.

We love water. After all, our life depends on it.It provides well-being while feeding cities, environmental reserves, and better lives.Through water, we fight for healthier and happier lives.That is our true nature.We respect the environmental order and the rights of people.For more dignified stories, for more sustainable cities, for a bluer future.Because we know the value of clean water,of treated water, of refreshing water,of the water that fuels communities and makes us strong.Attentive to differences,we adapt to the many different Brazils.We understand the beauty of each source,of each city,in every corner of our country.That’s why we go beyond what is expected.We fight to bring quality of life to families,reestablishing the pure alliancebetween mankind and the surrounding environmentand rebuilding life as it should be.Life of the water and of the people.Because our natureis knowing that we work,from dawn to dusk,for lives filled with civism.

GRI 102-16



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and Values MISSION, VISION

GRI 102-16

Mission

To develop sanitation solutions with excellence and corporate security, contributing to the improvement of the quality of life of the audiences served.

Vision

To be recognized as the best company in the development and management of sanitation business in Brazil and as a global benchmark.

Value

Accessibility, Austerity, Collaboration, Continuous Improvement, Social Responsibility, Transparency.



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MAP OF

49 Cities 11 States7,7 million

people served

MASTERS IN “BRAZICITIES”

WE APPLY OUR OPERATING MODEL,

WITH FLEXIBILITY, TO THE VARIOUS

REGIONS WHERE WE OPERATE.Operations



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Indicators MAIN

GRI 102-7

2018 2017 2016 2015

Cities served 49 48 47 43

Population served (million) 7.7 5.5 4.6 3.5

Households with water and sewage (thousand) 2,734.2 2,168.2 1,486.0 1,365.5

Households with water 1,678.0 1,232.3 965.6 788,8

Households with sewage 1,056.2 935.8 620.4 576,7

Volume of water and sewage billed (million m³) 376.1 285.1 223.2 203.9

Volume of water billed 248.8 178.5 144.8 129.7

Volume of sewage billed 127.3 106.6 78.4 74.2

Financial indicators

Ratings Brazilian Scale “AA (bra)” pela Fitch Ratings e “Aaa.br” pela Moody’s

“AA (bra)” “AA (bra)” “AA (bra)”

Ratings Global Scale “BB” pela Fitch Ratings e “Ba1” pela Moody’s

“BB” pela Fitch Ratings e “Ba2” pela Moody’s

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Net operating revenue* (BRL million) 1,731.6 1,343.3 992.4 795.1

EBITDA (BRL million) 810.1 675.1 462.5 402.6

EBITDA margin (%) 46.8 50.3 46.6 50.6



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RecognitionAWARDS AND

GRI 102-7

EXECUTIVOS DE VALOR

For the fourth consecutive year, Hamilton Amadeo, our CEO, was chosen Executive of the year, by the trade journal Valor Econômico.

VALOR 1000

We ranked among the largest companies in Brazil, according to Valor Econômico.

VALOR INOVAÇÃO

We were listed, by Valor Econômico, among the five most innovative companies in the Services sector.

YES TO RACIAL EQUALITY

Granted by Instituto Identidades do Brasil (ID_BR), we were recognized for our commitment within the scope of the program called Respeito Dá o Tom (Respect Sets The Tone) (see page 50).

MUNICIPAL HUMAN RIGHTS AND DIVERSITY SEAL

Also stemming from our initiatives to fight ethnic-racial inequality within the scope of our program Respeito Dá o Tom, we were awarded by the Municipal Department for Human Rights and Civism, granted by the São Paulo City Government.

COMPANIES THAT BEST COMMUNICATE

WITH JOURNALISTS Promoted by the magazine Negócios da Comunicação, we were featured in the Sanitation category.

GUIA EXAME DE SUSTENTABILIDADE

We were recognized as the sustainable company of the year in the infrastructure sector by the traditional guide published by Revista Exame.

EMPRESAS MAIS

We were listed in the ranking, created by the newspaper O Estado de S. Paulo, of the 100 companies that best drive the economy in Brazil.

IDENTITY

The year 2018 was marked by important events that reinforce our growth journey. We started our operations in Manaus (AM), extending our commitment to excellence in services provided to an additional 2.1 million Brazilians. With the acquisition, we now serve 7.7 million people in 49 cities.

The main goal for the capital city of the state of Amazonas is to reach collection and sewage treatment of 80% sewage by 2030. To this end, we invested BRL 70 million in the construction of more than 40 km of collector networks and in the inauguration of the Timbiras Sewage Treatment Station (ETE Timbiras), one of the largest in Brazil’s northern region. Furthermore, immediately after the beginning of activities, we involved more than 350 professionals in the program called Vem com a Gente (Come With Us), which consists in a traveling service to facilitate access of the population to the services.

I also wish to highlight the consolidation of the operation in Teresina (PI), which celebrated one year under our administration in 2018 and whose performance indicators are evolving satisfactorily. The Executive Director of the concessionaire is a former trainee, who participated in the first edition of our program.

Another significant milestone was the revision of our corporate governance practices. In response to the diagnostic completed in 2017, we implemented improvements to place us at the same level required by Novo Mercado of B3, among the companies that comply with the strictest standards. To this end, I stepped down as Chairman of the Board of Directors to dedicate myself exclusively as President of Aegea. It is a natural evolution, in line with our growth.

MessageFROM THE EXECUTIVE BOARD

GRI 102-14

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AEGEA Annual Sustainability Report 2018

We will continue to follow the same principles with which we have conducted our business since the beginning of our history. The internal compliance departments and the integrity policies are already institutionalized. Consequently, in 2018, we celebrated the obtaining of NBR ISO 37001, which certifies the effectiveness of the anti-bribery practices adopted. It is this upright conduct that we expect from our employees and business partners—who have received an intense training agenda throughout the year.

Stemming from the work done in 2018, we recorded net revenue of BRL 1.7 billion, up 28.9% compared with 2017. Cash generation measured through earnings before interest, tax, depreciation and amortization (EBITDA), over the same period, increased 20% and reached BRL 810.1 million. Considering the challenges faced during the period—especially the tariff review at Águas Guariroba and to which rebalancing was addressed—the results were positive and reflect the resiliency of our business model.

The trust of investors became evident by the capital increase through investment of BRL 550 million, an amount intended to strengthen our capital structure, especially in light of the recent acquisition of assets in Manaus (AM). We also completed the third issue of debentures in the amount of BRL 600 million. The investment and funding anticipated the constitution of our liquidity reserves.

We are signatories to the United Nations Global Compact and members of the Brazilian Committee for the Global Compact (CBPG -Comitê Brasileiro do Pacto Global). As such, we have actively collaborated to advance the initiative in Brazil, especially to achieve the goals of the sixth Sustainable Development Goal (SDG).

What drives us is our purpose: “Our nature drives life.” This is our motivation to increasingly promote health, social development and quality services for the thousands of households we serve. Based on this, we built a new brand, which became a part of the identity of all our concessionaires, and has contributed to strengthening our presence throughout Brazil.

We want to replicate to other locations in Brazil the feat we achieved in Piracicaba (SP), where universal sewage collection and treatment services is a reality. In 2018, the city placed first in the Basic Sanitation ranking of the 100 largest cities in Brazil, prepared by Instituto Trata Brasil—a reason for pride and an incentive to continue with our work.

Hamilton Amadeo President of Aegea


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Aegea seeks to consolidate its position as a benchmark in terms of transparency and integrity. To this end, throughout 2018, the Company consolidated the corporate governance practices required by the local and foreign financial markets, in line with irrefutable models.

The most significant fact was the separation of the positions of Chairman of the Executive Board and Chairman of the Board of Directors, in order to allow the latter to work with greater autonomy. Hamilton Amadeo, who held both positions, is now dedicated exclusively to the Executive Board and, in the General Shareholders Meeting, the new composition of the Board of Directors was elected, with nine members—eight of which are independent, pursuant to criteria set out by the Brazilian Institute of Corporate Governance (IBGC - Instituto Brasileiro de Governança Corporativa). Another important aspect of this change in structure was the creation of a corporate governance department, whose function is to act as liaison between the Board of Directors and the Company’s senior management.

In order to support its growth, the scope of the advisory committees to the Board of Directors was also revised and strengthened. As a result, the Project Assessment Committee at the time began to address aspects referring to finance. The reason for this is that we understand that synergy between finance and project assessment is an important catalyst for decision-making. With the elimination of finance matters, the Audit, Risks and Finance Committee, which had integrity within its scope, was renamed as Audit, Risk and Integrity Committee, and gained a more focused and robust agenda, which reinforces the maintenance of strict control standards that go beyond legal compliance and cover, above all, the guarantee of ethical values in all activities, guiding the relationships with stakeholders.

MessageFROM THE BOARD OF DIRECTORS

GRI 102-14

12

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AEGEA Annual Sustainability Report 2018

Obtaining the ISO 37001 certification—Anti-bribery Management System—corroborates our commitment to the topic and highlights the maturity of Integrity Management, established in 2017 as evolution of the work that has been done internally since the creation of Aegea in 2010.

Reflecting the trust that investors have in the integrity of the business model, BRL 550 million were invested—an amount that reinforces the financial structure, especially given the acquisition of assets for the operation in Manaus (AM).

As a matter of fact, with the inclusion of Águas de Manaus into the business portfolio, Aegea has become the largest sanitation company in the private sector in number of households served—a position that shows the result of responsible work, performed with quality, efficiency and integrity.

Growth of the Company will continue to be guided by the expansion of the network in the areas where it operates and new concession or sub concession agreements (full or partial) or even in public-private partnerships (PPPs). The objective is to secure a positive return for investors and reinforce the contribution towards universally available sanitation services in Brazil.

Santiago Crespo Chairman of the Board of Directors


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Strategy and MANAGEMENT MODEL

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More than simply providing services to supply water and collect sewage, we promote health and sustainable development. Throughout the last eight years, we have worked to optimize our portfolio of assets, reduce our exposure to risks, and increase return to investors. As a result, we grew through the expansion of networks in the locations where we operate, through new concession or sub concession agreements, full or partial, or public-private partnerships (PPPs).

The knowledge we’ve acquired throughout our journey is what has helped us make successful investments, such as the one in Águas Guariroba, which is responsible for the water and sewage services in Campo Grande (MS). Since the acquisition of this asset, in 2006, we have reduced losses in distribution of water from 55.9% to 19.6%—one of the lowest loss rates in Brazil. We have also sewage coverage in the city from 27.1% to 80% over the same period.

Good results such as these are replicated to other locations in the country, as a result of our focus on operating efficiency and quality of services. Examples are:• Reduction in loss rate in the distribution of water by Prolagos (from 56.8% in 2007 to 28.5% in 2018), which is instrumental to foster tourism in the cities of Cabo Frio, Armação dos Búzios, Iguaba Grande, Arraial do Cabo and São Pedro da Aldeia, in the State of Rio de Janeiro, especially during the high season, when there is a significant increase in the population served;

• Recovery, also by Prolagos, of the Araruama Lagoon, with the recovery of fishing, tourism, and sports activities. It is the world’s largest hypersaline lagoon, whose ecosystem was considered endangered in 2000;

• Universal access to sewage collection and treatment in the cities of Piracicaba (SP) and Matão (SP), provided by our concessionaires Mirante and Águas de Matão, respectively; and

• Universal access to water treatment services in Timon, the first city in the state of Maranhão to have this.

Looking to grow and provide greater transparency to our strategy in capital allocation, in 2018 we implemented a new investment management model. Thus, the necessary investments in our concessionaires for the coming years have been identified, classified and prioritized through an organized process that integrates a multidisciplinary team with representatives from each region where we operate. Subsequently, investments to be made are submitted for approval by the Board of Directors.

As a result, we have improved, with rigor and discipline, the assessment of investments, since projects compete for a limited volume of resources; we have in place transparent criteria for approval based on the nature of each project; we provide managers with a systemic view of the operations.


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The new investment management model reinforces our discipline in handling capital, maintaining financial soundness and fundamentals of credit. In this sense, in order to finance capital investments, we diversified our sources of financing, with credit lines with the National Economic and Social Development Bank (BNDES - Banco Nacional de Desenvolvimento Econômico e Social), and Caixa Econômica Federal specifically for the sanitation sector; financing from multilateral agencies and commercial banks; ample access to capitals markets, through the issue of debentures in the local market and bonds in foreign markets; and capital contribution by shareholders. Furthermore, our financial strategy is backed by financial leverage, with a net debt/EBITDA ratio below 3.5 times and funding in foreign currency 100% hedged, avoiding exposure of our results to exchange variations.

As a result of the soundness of our operating and financial strategies, we continue with our growth journey, with successive increase in our credit ratings:


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Assets

Model

INTANGIBLE

BUSINESS

We invest to manage and strengthen intangible assets that add to our strategy, drive our operations and contribute to the creation of shared value. Among them:

Adhering to the principles set out by the International Integrated Reporting Council (IIRC), we developed our business model. The work involved the Executive Board, in addition to analysis of institutional documents and studies of megatrends.

INVESTOR TRUST

ORGANIZATIONAL CULTURE

LICENSE TO OPERATE

is what allows us to access different sources of long-term financing: public Brazilian banks, national and international multilateral agencies, development banks, commercial banks, and local and foreign capitals markets.

reflects our vocation, identified from the crossing between our talents and the needs of the world (see page 5). The principles that guide our culture are disseminated through training and empowerment programs.

is the permission for us to operate in a given territory and the trust assigned to us by society. The asset is managed by the Social Responsibility Department in synergy with all concessionaires (see page 56).

2012 2013 2014 2015 2016 2017 2018

Fitch Ratings

Brazilian Scale A(bra) A+(bra) A+(bra) A+(bra) AA-(bra) AA(bra) AA(bra)

Global Scale BB BB

Moody’s Brazilian Scale Aaa.br

Global Scale Ba1

CREATING VALUE FOR

STAKEHOLDERS

• Improvement in the Human Development Index (HDI)

• Less absenteeism at schools• Development of local tourism

• Addition of value to homes • Improved solution for

sanitation infrastructure

• Development of local business• Creation of jobs and income• Lower public health expenditures• Remuneration to third-party

capital providers • Sustainable management

of the asset portfolio

• Better quality of public health• Opportunity for career development

and professional training

• Partnerships to develop technologies

• Better quality of rivers• Treated water and sewage

in homes, schools, hospitals and other establishments

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RESOURCES

PROCESSES

Suppliers

Associations Funders and

investorsGovernment

decision-makers

Concession authority

UsersAcademia

General public

Press

•Vision•Mission•Values

•Code of Ethics•Corporate Governance•Initiatives supported•Sustainability Policy

BUSINESS MODEL

Growth and efficiency

management strategy

Concession contracts and operational processes

Indebtedness strategy, revenue

security, financial risk management and Disclosure Policy

Industry participation, supply chain management, investor

communication policy, integrity management and

social responsibility programs

Waste management, water resource management and

electric power management

Competitive advantages and

information and knowledge

systems

Buildings, service units and operational

structure

Investments, net revenues and

loans

Company and third-party employees

StakeholdersWater,

biodiversity and soil

HUMAN CAPITAL

SOCIAL AND RELATIONSHIP CAPITAL

NATURAL CAPITAL

FINANCIAL CAPITAL

INTELLECTUAL CAPITAL

MANUFACTURED CAPITAL

Academia Aegea, Ethics Channel, Job and Salary Policy, Trainee Program, I’m a better leader Program and Environmental,

Health and Safety (EHS) management

EXTERNAL CONTEXT

• New players• National Basic Sanitation Plan• Growth in the Brazilian population• Accelerated urbanization• Acceleration of technological changes• New business opportunities

• Economic scenario impacting the default rate• Climate changes and scarcity of natural resources• More demand forsanitation services• Potential for Brazil to attract foreign investments

PolicySUSTAINABILITY

GRI 103-2, 103-3

We perform our activities in compliance with the law and best market practices in order to achieve efficiency (operational and economic) and respecting people and the environment. That’s because we understand the contribution of our work towards the health of the populations served and for the development (social, environmental, and economic) of the regions where we operate..

Thus, in order to raise and maintain awareness of our team, we have in place a Sustainability Policy, which defines the following strategic guidelines:

To ensure that these guidelines permeate the strategic objectives and operational processes, critical assessments are conducted under supervision of the Executive Board in order to guide the continuous improvement of our Quality, Environmental, Occupational Health & Safety, and Social Responsibility Management System.

• Create value throughout all links of our chain.

• Continuous improvement and sustainable processes.

• Constant search for innovative solutions.

• Transparency and accountability in disclosing information..

ECONOMIC PILLAR ENVIRONMENTAL PILLAR SOCIAL PILLAR

• Prevent pollution and actions to protect the environment.

• Management of aspects and impacts associated with our activities.

• Continuous quest for energy efficiency.

• Sustainable use of natural resources, especially water.

• Minimize losses, reduce generation of waste and reuse of water.

• Continuous improvement of the environmental performance.

• Prevent injuries and diseases among employees through hazard management and risk assessment.• Continuous improvement

of performance in Occupational Health & Safety.

• Ethical and transparent behavior in the relationship with stakeholders.

• Humanized development of the communities where we operate.

• Promote human rights: fight against corruption, child labor, moral and sexual harassment, forced or compulsory labor.

• Respect diversity and prevent all forms of discrimination.


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and InnovationINTELLIGENCE

GRI 103-2, 103-3

According to a study by Instituto Trata Brasil, the country not only finds difficulty in reducing loss of water, but the situation is getting worse. Data from the National Sanitation Information System (SNIS - Sistema Nacional de Informações sobre Saneamento), in its most recent version up to the publication of the study (SNIS 2016), indicate that total loss in revenue and in distribution were, respectively, 38.53% and 38.05%, which are higher than the rates in the five previous years (37.92% and 36.94%).

It is estimated that the total volume of water not billed in Brazil is equivalent to nearly 7,000 Olympic swimming pools of potable water lost every day, with a monetary impact* in excess of BRL 10 billion per year.

Given this scenario, we have continuously invested in technologies to improve indicators of operational efficiency. In the city of Campo Grande (MS), for example, a monitoring system allows technical staff from the Operational Control Center (CCO) at Águas Guariroba to track, in real time, any changes in the water distribution network. The technology is being gradually installed in the CCOs of the other concessionaires.

MEASURED CONSUMPTION BILLED

UNMEASURED CONSUMPTION BILLED

AUTHORIZED CONSUMPTION BILLED

WATER BILLED

WATER NOT BILLED

WAT

ER E

NTE

RIN

G T

HE

SYST

EM

COMMERCIAL LOSSES

PHYSICAL LOSSES

IN 1

,00

0 M

3

VOLUME OF SERVICES 16,5

57,9

27

7,832,545

10,178,8636,379,064

2,346,318

593,127

2,314,375

3,471,562

10,2

MIL

LIO

NS

WA

TE

R B

ALA

NC

E

BR

AZ

IL (

SN

IS 2

016

)

* The financial variables were deflated based on the variation of the IPCA, so the amounts disclosed by Trata Brasil are average totals for 2016.

Perdas de Água - Desafios para Disponibilidade Hídrica e Avanço da Eficiência do Saneamento Básico (2018), (in loose translation, Loss of Water - Challenges in Water Availability and Advances in the Efficiency of Basic Sanitation) available at


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www.tratabrasil.org.br/images/estudos/itb/perdas-2018/estudo-completo.pdf

http://www.tratabrasil.org.br/images/estudos/itb/perdas-2018/estudo-completo.pdf

Among other innovations, we highlight geo-referencing, which displays geographic data of the areas where consumers are located; remote sensing and statistical control, to swiftly detect any anomalies in flow rate; and the water modeling on the network, in order to reduce possible leakage.

In 2018, we put in place a project called Infra Inteligente, which is taking us to a new level of asset management. The initiative was developed based on the Building Information Model (BIM). It is a modeling program that gathers information generated throughout the lifecycle of a project or an operation. BIM Stores data and allows for virtual management, providing a three dimensional view, crossing, analyzing and comparing data, and simulating several possibilities.

Applied at the beginning of the activities for the concession in Manaus (AM), the tool yielded a future vision of the operation of the facilities to obtain greater assertiveness in planning, optimization of operating scenarios, and in energy efficiency. Overall, the project reduces by 85% the chance of errors in the design phase.

We also seek cutting-edge processes and technology to improve the quality of services provided, efficient use of resources, and safety of our employees. In 2018, we acquired 21 trenchers for our concessionaires. The equipment was designed to easily and quickly open narrow and deep trenches, up to 1.8 m—which allows us to increase productivity threefold if compared with the normally used backhoe. Since the opening of the trench is narrow, the volume excavated for refilling and compacting represents 50% of the volume using conventional methods, thereby reducing the impact on the environment through cleaner and more organized worksites, in addition to being more agile and efficient. The use of this technology in the Brazilian sanitation industry is totally new and disruptive.

With the understanding that innovation stems from a cultured internal audience, for the second consecutive year we have held the Aegea Efficiency and Technology Award. The purpose is to recognize and encourage creativity among employees, in addition to identifying projects that have achieved good practical results that can be replicated to the different levels of the administration of the networks that we operate.

We registered 58 projects, assessed by the Executive Board, which considered, among other factors, functionality, clarity of information, possibility of replication to other concessions, potential for cost reduction and value creation, and efficiency of the process.


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2018 Aegea Efficiency and Technology Award (Winners)

First place: Automatic controller, from the Águas Guariroba concessionaire. The system analyzes telemetry data and projects demand by users for the next hours. This way, it is easier to decide on the most cost-effective option to supply water. At the concessionaire, energy reduction reached 9% in kilowatt-hours.

Second place: Count and classification of vehicles through Machine Learning, from the Prolagos concessionaire. The project consists of artificial intelligence techniques to count and classify vehicle traffic in the region. This estimates the population of cities and what is needed to supply water.

Third place: Customization of the light truck body for maintenance and implementation, by the Águas Guariroba concessionaire. This is a customized truck capable of better transporting work material used in field services. Among the advantages are reduced repetitive strain by employees and less fuel consumption.


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CorporateGOVERNANCE GRI 103-2, 103-3

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Based on the diagnostic completed in 2017, we have significantly advanced in our governance practices. The main milestone was decentralizing the Chairman positions of the Executive Board and the Board of Directors. Hamilton Amadeo, who held both positions, became exclusively dedicated to the Executive Board. Santiago Crespo assumed as Chairman of the Board of Directors, leaving his position as Sales Director to assume this new position. The Board of Directors is further comprised of eight board members with diverse technical and practical experience—all of whom are independent, which ensures autonomy in decision-making and aims to mitigate conflicts of interest.

Another relevant advance in the year was the strengthening and reorganization of four Support Committees to the Board of Directors. Financial aspects were transferred to the Project Evaluation Committee, generating greater synergy between the aspects of the governance body. In the Audit, Risk, and

Compliance Committee, a more specialized and exclusive dedication should be highlighted.

By implementing these changes, we voluntarily reached, in terms of composition of the Board and committees, the same level of governance required by B3’s Novo Mercado, a segment dedicated to trading shares of companies that adopt corporate governance practices that go beyond those required by the Brazilian legislation.

The internal regulations of each committee were also revised or reformulated, in addition to the approval of a specific internal regulation for the Board of Directors and the hiring of a specialized company to perform a collegiate evaluation of the Board of Directors, the committees and the governance department.

2017 2018

Audit, Risks, and Finance Committ

Audit, Risks, and Compliance Committee

Project Evaluation Committee

Finance and Project Evaluation Committee

Personnel Management Committee

Personnel Management Committee

Regulations Committee

Regulations Committee

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23AEGEA Annual Sustainability Report 2018

CORPORATE GOVERNANCE

We adopt recognized market practices- Internal Audit, Compliance and Risk Departments

reporting to the Audit Committee;- Board of Directors with a majority of independent members;- All committees coordinated by independent Board members;- Audit Committee: formed by a majority of external Board

members, specializing in the aspects covered by this body;- Corporate governance professional exclusively dedicated

to this aspect, reporting directly to the Chairman of the Board of Directors;

- Corporate Governance Portal for efficient and safe decision-making;

- Annual calendar for convening the Board of Directors, with predefined agenda;

- Aegea Day, an annual event to introduce strategies and present results to investors;

- Quarterly Teleconferences with investors after disclosure of results, in English and Portuguese;

- Simultaneous disclosure, in English and Portuguese, of relevant facts.

The structure of the Executive Board was also revised in the year in order to prepare for our growth. In line with strategic planning, three regional vice presidencies were established, as a means of streamlining the decision-making process, since we now have executives who are more dedicated to the day-to-day activities of the concessions.

The Regional Vice Presidencies cover the following states where we operate:

REGION 1Mato GrossoMato Grosso do SulRondônia

REGION 2Espírito SantoRio de JaneiroSanta CatarinaSão Paulo

REGION 3AmazonasMaranhãoParáPiauí


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Structure StructureSHAREHOLDING GOVERNANCE

GRI 102-18 GRI 102-5, 102-7

In 2018, the Board of Directors approved an increase of our social capital. A total of BRL 550 million was also invested by minority shareholders—with an increase in the equity interest of the International Finance Corporation (IFC) and the Equity Investment Fund (GIF- Fundo de Investimento em Participações)—which is intended to strengthen our financial structure, especially as a result of the recent acquisition of assets in Manaus (AM), in line with the amount approved in the Shareholders’ Agreement, entered into and disclosed to the market in that year.

The capital increase shows that our shareholders believe and have confidence in our business model. The illustration below contains our shareholding structure with the corresponding percentages of the total capital, representing the share interest of each shareholder.

General Assembly• Elects and removes the members of the Board of

Directors, analyzes Financial Statements and decides on the distribution of dividends, in addition to other duties set out in the Company Bylaws.

• Normally convenes on the first trimester after the end of the fiscal period, and extraordinarily, whenever necessary.

Board of Directors• Sets out the management guidelines and elects and

removes members of the Executive Board.• Composed of nine Board members, eight of which are

independent, pursuant to the criteria of the Brazilian Corporate Governance Institute (IBGC - Instituto Brasileiro de Governança Corporativa).

• Members have one-year terms, with possibility of reelection.

Advisory CommitteesFormed by 3 to 5 members elected by the Board of Directors, in compliance with the rules for appointment and election set out in the shareholders’ agreements. Their technical opinions are merely indicative, in other

words, they are not binding and do not prohibit any type of action or decision by the Board of Directors. Members have one-year terms, with possibility of reelection.• Audit, Risk, and Integrity Committee• Finance and Project Assessment Committee• Regulations Committee• People Management Committee

Executive Board• Responsible for the administration, planning, and

operational and financial performance of the business.• Formed by 3 to 7 members, with a Managing Director,

a Finance and Investor Relations Director, and others without a specific designation.

• Members have one-year terms, with possibility of reelection.

COMPOSITION OF THE BOARD OF DIRECTORS, THE

COMMITTEES, AND THE EXECUTIVE BOARD ARE DETAILED

ON THE INVESTOR RELATIONS WEBSITE, AND MORE

INFORMATION ON THEIR DUTIES CAN BE FOUND IN OUR

COMPANY BYLAWS. GRI 405-1

ON 71.04%PN -

58.74%

ON 18.67%PN 70.00%

27.56% 7.14%

ON 5.49%PN 15.00%

6.56%

ON 4.80%PN 15.00%


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www.tratabrasil.org.br/images/estudos/itb/perdas-2018/estudo-completo.pdf

http://ri.aegea.com.br

http://ri.aegea.com.br/pt-br/governanca-corporativa/estatuto-social-e-politicas/

Compliance GRI 103-2, 103-3

AGENTS OF DIGNITY

We perform our activities with ethics in order to promote equality.

In 2018, we received the NBR ISO 37001—certification for Anti-bribery Management System, which corroborates the consolidation of our Compliance Program, implemented in the previous year. Throughout the year, the corporate areas and concessionaires were subjected to internal audits for the implementation of improvements aiming to obtain the certification.

Notable among the improvements are the automation of the controls of the relationship agenda between our executives and public authorities, and the identification of high-risk suppliers, who began to receive online training applied by Academia Aegea.

Another important advance was the revision of the Code of Conduct, which yielded two versions of the document: one for employees and the other for business partners. The objective is to have a more targeted communication of the guidelines that must steer our activities, and from which practical rules are cascaded, detailed in 18 compliance policies. GRI 102-16, 205-2, 412-1


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18 Integrity Policies- Adherence to the Code of Conduct - Anti-bribery and anti-corruption - Relationship with Public Authorities - Money laundering - Prohibition of facilitation payment - Antitrust and Relationship with competitors - Moral and sexual harassment - Conflict of interests - Contract development and management - Relationship with business partners - Gifts and hospitality - Donations, contributions and sponsorships - Information handling - Use of company assets - Accounting records - Ethics Channel - Disciplinary Consequences and Measures - Compliance with laws and regulations

GRI 102-16, 205-2, 412-1

An intense training agenda was completed in 2018 at the corporate office and in our units—which included online material and face-to-face meetings. This way, we achieved the goal to train all our employees in aspects associated with ethics, compliance, anti-bribery practices, and respect for human rights. GRI 205-2, 412-2

The main objective of the training courses refers to requirements set out in NBR ISO 37001. The idea was to explain to the internal audiences the procedures in compliance with the norm. In order to facilitate this communication, we published a new edition of the Compliance Comic Book, with examples of conduct associated with everyday activities. GRI 205-2

Claims and concerns associated with behaviors that violate the Code of Conduct and Brazilian laws are received through the Ethics Channel, available to all employees, suppliers, users, public authorities, and other stakeholders. Contacts are recorded by an independent company—which ensures anonymity of the whistleblower—and are sent for investigation by the Integrity Department.

GRI 102-17

In 2018, the internal compliance bodies were involved in the investigation of claims relating to Operação Sevandija and Operação Lama Asfáltica. Until publication of this report, no evidence had been found of irregularities in any of the investigations. Information referring to these investigation procedures are regularly updated and disclosed in our Financial Statements and in the Reference Form, both available at the Investor Relations website.


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http://ri.aegea.com.br/

TO LEARN MORE, VISIT WWW.AEGEA.COM.BR/COMPLIANCE

Commitments GRI 102-12

We voluntarily subscribe to external initiatives associated with the promotion of human rights, fair working conditions, ethics, and sustainable development.

In 2016, we adhered to the United Nations Global Compact and, in the following year, we joined the Brazilian Committee of the Global Compact (CBPG), the body that manages the network’s activities in Brazil.

We are also signatories to the Equator Principles, which are the guidelines for social and environmental criteria set out in the International Finance Corporation’s (IFC) Performance Standards on Social and Environmental Sustainability and on the Environmental, Health, and Safety Guidelines of the World Bank Group.

Pillars of the Compliance Program

imminent risks to the business and set out

policies and procedures.

suspicions in order to clarify facts with

confidentiality.

flaws detected and inappropriate behaviors

through disciplinary measures.

PREVENT DETECT CORRECT

AUDIT

COMPLIANCE POLICIESProcedures

COD

E O

F CO

ND

UC

T

Tr

aini

ng

Comm

unication


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www.aegea.com.br/compliance

RiskMANAGEMENT

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In 2018, we proceeded with the revision of our Risk Management Model. The purpose is to develop tools and processes to identify, analyze, and address risks, which allow for decision-making with a greater degree of certainty, contributing to greater transparency of the information, perfecting corporate governance practices, and preserving and creating value for the business.

The work was supported by an external consulting firm and involved the Board of Directors, the Audit, Risk, and Integrity Committee, and the Executive Board, and initially yielded a Panel of Risks with 11 categories and 74 types or forms of risks.

In addition, we adopted a Stress Test Model for the scenarios, through which we assessed the financial impact of the most relevant risks within a five-year horizon. This process to manage proprietary risks will be systematized throughout 2019, following the budget review cycles.

Preventive actions will be investigated by the Internal Audit, which directly reports the results every month to the Audit, Risk, and Integrity Committee, responsible for ensuring the dissemination of the risk management and prevention culture, in addition to recommending strategic and tactical actions to mitigate, minimize or control their occurrence.

GRI 102-11, 103-2, 103-3


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MORE INFORMATION IS AVAILABLE ON OUR REFERENCE FORM.

The work will continue in 2019, when all processes will be automated and procedures documented to form a risk management policy.

of Risks GRI 102-15, 201-2

PANEL

MAIN RISK CATEGORIES

EXAMPLE OF POSSIBLE FORMS OF RISKS

Reputational Dissemination of negative news about our operations and behavior of employees or partners in violation of our Code of Conduct, among others.

Political,regulatory, legal, contractual

Changes in fiscal or tax policies, legal or contractual restrictions that prevent or delay tariff adjustments; unilateral changes in concession agreements or in the Basic Sanitation Law; diffusion on the regulatory competence to which the concessionaires are subject.

Execution Delay in realizing revenue and cash due to loss in productivity and/or quality of the operations; among others.

Human Resources Loss of key employees to the competition or companies from other sectors, and lack of qualified professionals in the market for the private sanitation segment, among others.

Increase in energy cost

Changes in the energy rate resulting from the use of energy sources that are more expensive than hydroelectric; regulatory decisions that impact the energy rate, among others.

Environmental Lack of grants to withdraw water and discharge of effluents, contamination of sources of water withdrawal, environmental accidents in the transportation of sludge, collapse of reservoir dams containing contaminated water, sludge and/or other contaminating products, increased rainfall, resulting in waste taken to sources of withdrawal, and severe droughts, resulting in reduced flow in springs and reservoirs, among others.

Increase in interest rates

Volatility of interest rates; inflation and exchange rates that can lead to increase in payments of interest rates in loans.

Technological Cyber attacks to company systems; inadequate routine to monitor and safeguard files (backup), among others.

Operational Increase in the cost of raw materials, hiring suppliers in disagreement with our policies, reduced quality in the supply of construction services, and fraud in reading water meters, among others.

Financial Increased default or in the number of accounts in arrears, and restriction to access sources of financing, among others.

New Business Actual situation of the assets does not correspond to the description in the bid/concession agreement; additional non-programmed costs associated with the integration process; increased competition in new bidding processes.

MACROMANAGEMENTHOLISTIC

MANAGEMENT OF CORPORATE RISKS

MICROMANAGEMENTINDIVIDUALIZE

- Strategic Focus- Comprehensive view of

the risks- Broad and relevant impact- Affects all processes,

activities, stakeholders, products and services

- Operational focus- Individual view of the risks- Specific and limited impact- Focused on identification,

analysis, treatment and control of a given type o risk


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http://ri.aegea.com.br/wp-content/uploads/sites/33/2018/12/FR-Aegea-v7.pdf

GRI 103-2, 103-3

OperationalPERFORMANCE

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OutlookINDUSTRY

According to the 23rd Diagnosis of Water and Sewage Services (SNIS-AE - Serviços de Água e Esgotos), a document published in 2019 by the National Sanitation Department (SNS - Secretaria Nacional de Saneamento), of the Ministry of Regional Development (MDR), nearly 83.3% of the Brazilian population has access to public water supply services. In other words, approximately 35 million

Brazilians do not have access to this basic service. The study also revealed the loss rate in distribution, which was 38.3%—resulting from leakages, illegal connections, or failure in reading meters. In terms of the Sewage collection networks, only 60.2% of the population has access to the service in the country, indicating that nearly 100 million people do not have access to this service.

Data referring to 2017 took into account information on water supply in 5,126 cities (92% of the total number of cities in Brazil) and Sewage collection in 3,865 cities (69.4% of the total in the country).

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AEGEA Annual Sustainability Report 2018 33

OPERATIONAL PERFORMANCE

We reached a total of 2.7 million households served in 2018. The number of households served with water grew by 36.2% compared with the number recorded in 2017, and totaled 1.7 million. In terms of collection and treatment of sewage, the increase was 12.9%—nearly 1.1 million households served.

As a consequence, the total volume billed, which ended the year at 376,079,000 m3, also increased over the same period—up 31.9%, of which 39.4% in water and 19.4% in sewage.

The volume billed in 2018 was affected by municipal decree number 13,312 in Águas Guariroba, which reduced by 50% the minimum volume charged, from 10 m3 to 5 m3. However, in December, the Seventh Addendum to the concession agreement was signed, reestablishing the economic-financial balance resulting from the extinction of the minimum tariff, in force as of January 2019.

Level of water and Sewage services in Brazil, by region1

ACTIVE HOUSEHOLDS

2018 2017

Water 1,677,965 1,232,347

Sewage 1,056,215 935,814

Total 2,734,180 2,168,161

* Household: single-family property, or subdivision of the property with independent occupancy, having private connections for the use of the water supply and Sewage collection systems.

Volume BilledHOUSEHOLDS* AND

Source: 23rd Diagnosis of Water and Wastewater Services (SNIS-AE)

78.691.3

89.7

90.1

Population served by water supply network

Nor

thN

orth

east

Sout

heas

t So

uth

Mid

wes

t

Sewage treated

Population served by Sewage collection network

Loss in distribution

57.5 55.1

52.0

50.4

53.9

22.6

26.9

10.2

73.3 34.7

36.5

34.3

34.1

46.3

43.944.9


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Operations GRI 102-10, 203-1

Increases in the number of households served with water supply and sewage collection and treatment are associated with the incorporation, in 2018, of Águas de Manaus, responsible for providing services in the city of Manaus (AM). With this addition, our operation now covers 49 cities and 7.7 million Brazilians.

Manaus, which is the capital city of the state of Amazonas, is the largest private concession in Brazil in terms of population served—more than 2.1 million people. Our commitment is to provide sewage collection and treatment of 80% Sewage by 2030—an important mission, given the need to preserve the Amazon Biome, which holds the largest river basin in the world.

This year alone, BRL 70 million were invested to build more than 40 km of new collector networks. The Timbiras SewageSewageTreatment Station (ETE Timbiras) was also inaugurated with the capacity to treat up to 230 liters of Sewage per second, and is already one of the largest treatment stations in Brazil’s north region.

NEW

Looking to strengthen the relationship with customers, the concessionaire invested in the participative service through the program called Vem com a Gente (Come with Us), intended to facilitate access to services. In this program, teams from the concessionaire carry out actions such as traveling service, campaigns for negotiation in partnership with PROCON, inspections, installation of flow meters, change of account-holder name, in addition to guidance on conscientious consumption in order to reduce waste of treated water in the city. More than 350 professionals are directly involved in this initiative.

Águas de Manaus also has in place several channels to communicate with customers and provides services in a brick-and-mortar store, in the city center. In 2018 alone, nearly 36,000 services were provided; a number that will continue to grow given the continuity of the program. The objective is to cover all districts in the city of Manaus in two years.

Another point of attention in the city is associated with the loss of treated water. Our mission, in this sense, is to reduce the high loss rate, currently in excess of 70%. Expected investments include technology, awareness-raising on conscientious consumption, and fraud prevention.

In the concession in Teresina (PI) and in the PPP in Vila Velha (ES)—which last year joined the group of cities served—we work to bring them to the same levels of quality and operational efficiency of the units that we have managed for a longer period of time.

In the capital city of Piauí, Teresina, where we will be operating until 2047, our goal is to reach, by 2031, universal access to water and a minimum of 90% coverage in sewage collection. In the beginning of our operations, we prioritized our goals in order to put into practice an emergency plan focusing on districts that historically lack water supply. Expansion and modernization of services have already benefitted nearly 360,000 residents of the city who constantly suffered shortage of water.

In the city of Vila Velha, we are working to expand, from 56% to 98%, our coverage of sewage collection in up to 12 years, in addition to the implementation of 643 km of sewage collection network and installation of 62,000 connections.


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Highlights GRI 203-1

We have advanced in the Tangram Project, for the implementation of the new Enterprise Resource Planning (ERP) - SAP S/4 HANA—looking to achieve technological security of our internal processes and facilitate the flow of information in all operations.

Activities continued to be focused on configuration and construction of system solutions, according to studies and diagnostics carried out in previous phases. The deployment team also conducted validation checks of the software in order to identify and correct eventual bugs. In all, more than 130 developments and configurations were promoted and validated.

With the new technology, we can expect to have faster and more reliable responses to controllers and regulators, standardization of processes in all areas, reduction of operating costs, among others.

ENGINEERS OF THE ORDER

We have in place a system that connects people to treated water and, subsequently, properly disposes of the sewage.

In tandem, the Change Management area, in partnership with Academia Aegea and the Human Resources department, defined course agendas and mapped employees to be trained. The work yielded a total of 28 courses, 19 of which in classroom and 9 distance learning.

Also in the corporate environment, we improved the analysis of indicators through data intelligence software. There are more than 30 indicators in strategic areas of our concessionaires—such as energy, services, commercial, operational, losses, investments, people, communication, planning, and legal—which are now monitored in real time. The technology allows for streamlined managerial decision-making aiming at continuous improvement and operational efficiency.


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Some indicators now monitored by the concessionaires in real timeENERGY- kWh/m³- kWh Total- kWh Peak

SERVICES- Completed on schedule or late- Ongoing, on schedule or late - Expected completion of Outstanding

Service Orders (SO) - Mapping of nonconformities

COMMERCIAL DEPARTMENT - Cash-to-order - Billing by meter reading group - Number of readings per reader

OPERATIONAL TEAMS - Sludge monitoring per

sewage treatment station - Volume of sewage treated and billed- Well levels

LOSSES- Volume measured, produced, and lost

INVESTMENTS PER CATEGORY- Water- Sewage- Other

PERSONNEL DEPARTMENT- Overtime- Total/base salary

COMMUNICATION- Positive, negative, and neutral news

PLANNING- Average bill- Average ticket


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We also approved a master technology plan, developed with the support of an external consultant. The implementations will be put into practice as of next year. The objective is to promote a new form for teams to manage projects, with pre-established goals and lasting and even more modern technologies.

Main projects GRI 203-1

In 2018, a total of BRL 636.3 million were invested mainly in infrastructure work for basic sanitation, which includes the implementation of Sewage Treatment Stations, expansion of the water supply network, expansion of the sewage network and of the system to transport and treat sewage.

In this area, notice should be given to the new water supply system in the city of Bombinhas (SC). With investments of over BRL 55 million—one of the largest ever made in water treatment and distribution in the coastal area of the state of Santa Catarina—the structure includes 27 km of water main, which carries water from the Tijucas River to the new treatment station.

The new structure is intended to provide independence in terms of water supply to the residents served by the concessionaire Águas de Bombinhas, who had never before had a similar system. Itapema and Porto Belo will also benefit directly, since the Perequê River, which in the past supplied Bombinhas, is shared by the two cities that are not served by the concessionaire.

We also invested BRL 80 million to improve water supply to Região dos Lagos (RJ), where we doubled the capacity of the main that transports water from the treatment station, in São Vicente de Paulo, in Araruama, to 5 cities in our concession area: Armação dos Búzios, Arraial do Cabo, Cabo Frio, Iguaba Grande and São Pedro da Aldeia.

The new main is 42 km long and made with fiberglass reinforced plastic piping, which ensures greater strength and durability, in addition to the 2,000-liter per second capacity—an increase of over 30%. The water main has benefited nearly 400,000 residents in the low season and almost 1.5 million during the summer.

In the city of Ariquemes (RO), where, in 2016, we took over the services to supply water and collect sewage, we resumed the work to install a 25 km sewage collection network in two sections of the city, benefiting over 11,500 families. This initiative was part of the program called SaneaMais, which involves investments of nearly BRL 10 million in construction, expansion and improvements in the sewage collection system.

The initiative is similar to the Timon Saneada Program, which, in 2018 began its sewage collection works in the city of Timon (MA). The first phase involves construction of a sewage lift station (EEE) and a sewage treatment station (ETE), with capacity for 120 liters per second. It is expected that, by 2020, coverage of the sewage collection system reaches 45%, benefiting more than 70,000 residents.

The investments in the regions where we operate aim to reduce the prevalence of diseases associated with lack of sanitation, reduce spend healthcare spend by all government levels, increase municipal tax collection, appreciation of properties served by a water supply and sewage collection network, and foster tourism, above all in cities whose economy is based on this activity. In addition, the positive impact of our investments include job generation, since we always prioritize hiring people residing in the areas where we operate and the acquisition of inputs from regional suppliers.


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The cities served are featured in the Ranking of Instituto Trata BrasilTwo of our units were featured in the Ranking of Basic Sanitation of the 100 largest Brazilian cities, produced by Instituto Trata Brasil and disclosed in April 2018. Piracicaba—where we have operated since 2012 through a Public-Private Partnership—ranks first in the indicator for sewage collection and treatment, with a coverage of 100% of the local population. The city of Campo Grande (MS), where we are responsible for the water and sewage collection services, ranked among the five cities with lowest rates of loss of water in distribution, at 19.42%.


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FinancialPERFORMANCE GRI 103-2, 103-3

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ResultsFINANCIAL

Net revenue

Our net operating revenue, less construction revenues without margin, increased 28.9%, from BRL 1.343 billion in 2017 to BRL 1.731 billion in 2018. The growth is mainly due to the incorporation of the revenue from Águas de Manaus and the 12-month consolidation of Águas de Teresina’s revenue, which was incorporated into our portfolio in July 2017.

*In 2018 four months of its results were consolidated.

NET INCOME EVOLUTION BETWEEN 2017 AND 2018 (BRL MILLION)

109.3

+8.1%

Existing

279.0

+20.8%

New2017

1,343.3

+28.9%

2018

1,731.6

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41AEGEA Annual Sustainability Report 2018

FINANCIAL PERFORMANCE

Delinquency

Starting in January 2018, pursuant to CPC 48/IRFS 9, the Provisions from Doubtful Accounts (PDA, or PECLD in the Brazilian acronym) are no longer calculated based on incurred loss and began to be calculated from a future loss approach, based on historical default standards, broken down by private and public users. This way, we now reflect the PECLD incurred in relation to the net revenue from cancellations less the revenue from constructions in the period.

At the end of the fiscal period, delinquency rate was 0.8%, or 1.7 p.p. smaller than at the end of the previous period, considering the same calculation methodology. This reduction reflects the continuous campaigns to encourage renegotiation of accounts in arrears, adoption of an auto pay system, and a program to disconnect customer in default.

Costs and expenses

In 2018, costs and expenses increased by 37.9%, totaling BRL 253.3 million comparing with the previous year, mainly due to the consolidation of the results from Manaus and Teresina—for 12 months of the year, comparing with the consolidation of six months in 2017—in addition to the change in methodology to calculate Provisions from Doubtful Accounts. Disregarding the impact of PDA, costs and expenses increased by 31.5% (BRL 207.9 million) in the same comparison period. This variation is mainly due to the following factors:

(i) Increase of 6.5% (BRL 14.1 million) in labor costs and expenses pas a result of the acquisition of Águas de Manaus, of the increase in the number of employees to absorb the demand from expansion resulting from the most recent concessions and of internalization of outsourced labor in Águas de Teresina.

(ii) Increase totaling BRL 28.5 million (25.1%) in costs and expenses for outsourced service, mainly after consolidation of Águas de Manaus and Águas de Teresina.

(iii) Increase of BRL 71.6 million (66.6%) in expenses for electricity, compared with 2017. Consolidation of Águas de Manaus was responsible for a total increase of BRL 40.4 million (56.4%) in the consolidated results, and the other concessionaires contributed with BRL 31.2 million (43.6%) mainly due to increase in demand and modifications to the base cost of electricity.

(iv) An increase of BRL 24.6 million in expenses for conservation and maintenance compared with the previous year. Águas de Manaus and Águas de Teresina account for 57.3% of cost increase.


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COSTS AND EXPENSES (BRL THOUSAND) 2018 2017 2016

Labor (232,309) (218,226) (189,775)

Outsourced services1 (141,785) (113,325) (79,594)

Outsourced services for the treatment of Sewagesewage (14,013) (14,419) (12,282)

Conservation and maintenance (44,817) (20,227) (13,219)

Materials, equipment and vehicles (22,718) (21,168) (20,667)

Concession costs (18,268) (10,941) (8,200)

Electricity (179,109) (107,498) (89,964)

Chemicals (30,172) (14,016) (7,972)

Travel expenses (21,974) (15,589) (5,462)

Provision for Doubtful Accounts (PDA)2 (54,401) (8,976) (49,153)

Provision for contingencies (23,280) (6,920) (2,867)

Research and Development (R&D) (15,857) (17,313) (12,776)

Lease (21,478) (12,476) (8,588)

Other costs3 (53,822) (44,929) (29,455)

Construction costs4 (47,495) (54,634) -

Subtotal (921,499) (668,181) (529,944)

Amortization and depreciation (194,390) (129,015) (108,042)

Total (1,115,889) (797,196) (637,986)1 Considers lines of technical services, purchase of operational water, consulting, auditing, legal services, advisory services and other. 2 Estimated Losses from Doubtful Accounts, former PCLD, and Recovery of securities written off that are in the Other Operating Income line.3 Includes amounts of other net operating revenues and expenses. 4 Construction costs of the concessionaires Ambiental Serra and Ambiental Vila Velha, referring to the works carried out and calculation basis of the construction revenue of these concessionaires (CPC47).

EBITDA

Earnings before interest, tax, depreciation and amortization (EBITDA) in 2018 totaled BRL 810.1 million, an increase of 20% compared with the previous year. EBITDA margin reached 46.8%, or 3.5 p.p. lower than the margin in 2017 mainly due to (i) consolidation of Águas de Manaus, whose EBITDA margin is lower than the more consolidated concessionaires in our portfolio; and (ii) reduction by 50% in collection of the minimum tariff in Águas Guariroba, which dropped from 10 m3 to 5 m3 in 2018. It should be noted that, in December 2018, the Seventh Amendment to the Concession Agreement for Águas Guariroba was signed, reestablishing the economic-financial balance as of January 2019.

EBITDA (BRL THOUSAND)

2018 2017 2016

Net income 176,147 145,008 103,129

(-) Financial result (307,720) (236,689) (172,002)

(-) Income tax (131,815) (164,426) (79,300)

(-) Amortization and depreciation

(194,390) (129,015) (108,042)

EBITDA 810,072 675,138 462,473

EBITDA margin (%) 46.4 50.3 46.6


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Financial result

The financial result in 2018 was an expense of BRL 307.7 million, up BRL 71 million compared with the previous year. The main impact, totaling BRL 43.3 million, refers to interest and exchange variation on loans, financing and debentures, mainly due to an increase in net indebtedness between the years analyzed. The average cost of debt for the fiscal period was 9.9% p.a., down 0.2 percentage points compared with the previous year, in line with the reduction of the CDI.

Net income

Net income in 2018 totaled BRL 176.1 million, 21.5% higher than the amount recorded in the previous year (BRL 145 million).

Investments

Throughout 2018, we invested BRL 636.3 million, an amount BRL 109.1 million higher than in 2017, mainly reflecting the acquisition of the new concessionaires.

Cash flow

CONSOLIDATED CASH FLOW STATEMENT (BRL THOUSAND)

2018 2017 2016

Cash flow of operating activities 774,656 729,609 498,101

(+) Changes in assets and liabilities (48,206) (260,562) (70,356)

(+) Interest paid 205,104 (236,036) (210,071)

(+) Income Tax and Social Contribution paid 140,933 (100,395) (100,241)

Net cash flow from operating activities 380,413 132,616 117,432

Cash flow from investment activities (1,365,477) (1.241,561) (383,237)

Cash flow from financing activities 990,031 1,120,885 253,336

Net increase (reduction) in cash and cash equivalents

4,967 11,940 (12,469)

Cash and cash equivalents - beginning of the period

20,844 8,624 21,093

Cash and cash equivalents - end of the period

25,823 20,844 8,624


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Indebtedness

Gross debt, including the active and passive position of derivatives, totaled BRL 3.8 billion in 2018. The balance of cash and cash equivalents, and long- and short-term financial investments totaled BRL 1.4 billion.

The increase in gross indebtedness is mainly explained by the issue of debentures totaling BRL 600 million. The growth of net debt by BRL 440.5 million is mainly due from investments made throughout the year.

The first payment for the acquisition of Águas de Manaus, in the amount of BRL 415.4 million, was supported by contributions from minority shareholders of BRL 550 million in 2018, thereby confirming the trust shareholders have in our business plan, with sound credit fundamentals and capital structure. The second payment for the acquisition of

INDEBTEDNESS (BRL THOUSAND) 2018 Variation 2018/2017 (%) 2017 2016

Net debt 2,458,174 24 2,170,720 1,480,146

(+) Gross debt ( including derivatives, without the effects of MtM)*

3,837,685 25.7 3,087,849 1,790,166

(-) Cash and bank deposits (1,379,511) 28.9 (1,070,129) (310,020)

EBITDA 810,072 20.0 675,138 462,473

Net debt/EBITDA 3.03 - 2.99 3.20

* Gross Debt calculation excludes the effects of the mark-to-market of debt in swap operation for Reais, in the amount of BRL 43,926 million, according to Accompanying Note 27 of the Company’s Financial Statements.

nearly BRL 325.1 million, will be made in February 2019, and the last payment totaling BRL 100 million, restated based on CDI, will be due in February 2020.

We have the usual market collaterals, restrictions and covenants for our loans. All restrictive clauses associated with loans, financing and debentures were fully addressed in 2018, when the average term of the debt was 5.5 years and short-term debt represented 8.4% of total indebtedness.


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MORE INFORMATION ON OUR FINANCIAL PERFORMANCE CAN BE FOUND IN OUR FINANCIAL STATEMENTS,

AVAILABLE AT THE INVESTOR RELATIONS WEBSITE.

Market Statement (VAS)In July 2018, we completed our third issue of non-convertible debentures, totaling BRL 600 million. This total was divided into two series, the first of which of BRL 533.5 million, remunerated at CDI + 1.4%, with maturity in five years; the second series of BRL 66.5 million, remunerated at IPCA + 7.0825%, maturing in seven years.

The credit rating agency Moody’s assigned a Ba1/Aaa.br rating, with a stable outlook for the issuance.

The operation is in line with the strategy to diversify sources of financing, in addition to anticipating the constitution of our liquidity reserves.

CAPITALS VALUE-ADDED

GRI 201-1

VALUE-ADDED STATEMENT (BRL THOUSAND) 2018 2017 2016

Revenue 2,425,626 1,817,281 1,516,841

Inputs acquired from third parties (1,314,418) (836,513) (780,933)

Gross value added 1,111,208 980,769 753,908

Amortization and depreciation (194,390) (129,015) (108,042)

Net value added produced 916,818 851,753 627,866

Value added received in transfer 667,955 136,532 135,783

Total value added for distribution 1,584,773 988,285 763,649

Value added distribution 1,584,773 988,286 763,649

Personnel 198,149 186,788 164,280

Taxes, fees, and contributions 348,710 349,462 223,880

Remuneration of third-party capital 861,767 307,027 272,360

- Interest 840,151 294,472 262,484

- Lease 21,616 12,555 8,876

Remuneration of own capital 176,147 145,008 103,129

- Dividends 141,433 25,068 25,068

- Profit retained/loss in the period 36,689 101,089 80,483

- Noncontrolling interest in retained profits (1,975) 18,851 (2,422)


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Social and ENVIRONMENTAL

PERFORMANCE GRI 103-2, 103-3

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We ended 2018 with 4,239 employees on our team, of which 3,122 are men and 1,117 are women. Except for interns, Directors and Board Members, all other direct employees are covered by collective bargaining agreement or a collective bargaining convention. GRI 102-8, 102-41

MORE INFORMATION ON THE STAFF CAN BE FOUND HERE. GRI 102-8, 405-1, 405-2

Talent attraction GRI 103-2, 103-3

One of the main forms of joining our team is through the Trainee Program, which has a two-year duration where we invest in training of participants aiming to develop their leadership and management skills.

In 2018, we hired participants of the ongoing edition and selected—after the test, group dynamics, and one-on-one interview phases—an additional 20 newly graduated students from the areas of Engineering, Information Technology, Economy, Mathematics and Statistics. Starting in 2019, they will be allocated to some of the 49 cities where we have operations.

AudienceINTERNAL

*Considers all employees (active and on leave), regardless the type of labor agreement.


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To young adults between the ages of 14 and 24, we offer job positions through the Young Apprentice program, which is an initiative of the Federal Government to promote first jobs. In the year, we had 93 workers in this category.

Looking to promote opportunities to those already integrating our team, we have mechanisms in place to initially disclose the job positions available to the internal audience. When there is a need to hire in the market, the selection criteria are set out by our Recruitment and Selection Policy, which, among other objectives, aims to ensure the promotion of diversity and equal opportunities.

Development and training GRI 103-2, 103-3

Keeping employees constantly trained on aspects associated with efficiency, occupational safety, ethics and innovation, among others, is one of the foundations that support our growth in an increasingly competitive scenario.

In this sense, we base all initiatives to train our team on the strategic plan, on the succession program, on the individual development plans and on the needs of each unit. Since 2014, we have invested in Academia Aegea, the development arm of our technical and behavioral training.

In 2018, this structure was expanded with dedicated professionals in new strategies for corporate education. As a result, the number of people trained climbed from 12,000 in 2017 to nearly 64,000 in 2018—an increase of 433.3%.

These numbers reflect the work of internal multipliers and partnerships such as those we established with Hydrus, an institution specializing in preparation of courses geared to the sanitation sector; and with Fundação Dom Cabral, one of the most renowned institutions in leadership development.

The essence of Academia is to seek several forms of connecting learning strategies with the needs to improve our operations, in line with best practices. To this end, it has the support of the Executive Board for the adoption of new technologies and education platforms, advances in teaching methods and trends in corporate education.


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MORE INFORMATION ABOUT TRAINING CAN BE FOUND

HERE. GRI 404-1

Highlights of the new Academia Aegea• New education environment installed at the Aegea Administration

Center (CAA), in Santa Bárbara d’Oeste (SP).• New content platform, previously accessible only in computer,

also converted for mobile phones (Android and iOS systems).• A more attractive and intuitive layout.• Live transmission of lectures to the 49 cities where we operate.• New partnerships with learning institutions.• Training of multipliers (train the trainers), which consists in turning

professionals with specific knowledge into instructors for the others.• Access to training programs also for family members of

employees, an initiative called Academia Connected to the Family (Academia Conectada à Família).

Management of diversity GRI 103-2, 103-3

In 2018, we celebrated the first year of the program called Respeito Dá o Tom (Respect Sets the Tone), intended to focus on driving racial equality and diversity. We do this because we believe it is the right thing to do and because we want our team—from operations to senior management—to reflect the various cultures of the population we serve.

In these 12 months, 12 regional Racial Diversity and Equality Committees were created under the program aiming to promote the ethnic-racial debate, strengthen the relationship with representatives of black rights movements and support actions for diversity in all units. The purpose is to develop talents with eye on diversity and inclusion. To this end, members of these regional committees underwent training to gain more understanding and acquire a larger repertoire about the racial issue.

In addition, more than 150 employees, between trainees, supervisors, coordinators and managers, took part in the workshop on Inclusive Leadership, with classes covering sociological aspects, anthropology, and competitive advantage, taught by specialists Liliane Rocha, from Gestão Kairós, and Fernanda Macedo, from the Educafro organization.

Initiatives such as this have become routine within our facilities. In the first year alone, the initiative promoted debates, lectures, training and more than 50 rounds of debates. The meetings, intended to raise awareness and value ethnic-racial diversity, were attended by representatives of regional black rights movements and other guests invited to talk about racism, discrimination, and affirmative actions.

In the employability pillar, a notable action by the concessionaire Águas Guariroba should be noted, which recruited an employee from a Quilombola community, in Campo Grande (MS). Initiatives such as this one shall gain traction as of 2019, after compilation of data from the Census, which had the participation of 78.4% of the employees and will indicate the actual number of self-declared black and pardo professionals within our staff.

Given the results obtained by the program Respeito Dá o Tom, we were awarded the Municipal Human Rights and Diversity Seal, granted by the São Paulo government’s Municipal Human Rights and Civism Department. This award recognizes best practices adopted by public and private organizations that fight against ethnic-racial inequalities through the promotion of respect for diversity and inclusion in the labor market.


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Pillars of the Program Respeito dá o Tom and Initiatives Toward DiversityDEVELOPMENT• Training at Academia Aegea.• Partnership with institutions and other agencies to communicate

aspects associated with racial equality.

EMPLOYABILITY• Communication and access of black applicants to job positions.• Mandatory participation of black professionals in all

selection processes.• Creation of trainee and young apprentice programs geared to the

black population.

RELATIONSHIP• Constant contact with associations that work toward racial

equality in each city, promoting a reflection on this topic among employees and other stakeholders.

• Creation of Regional Racial Diversity and Equality Committees, with regular meetings in all units.

• Agenda of visits from black communities to the concessionaires.


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Health & Safety GRI 103-2, 103-3, 403-3, 403-4

Our Occupational Health Safety and Environment Department sets out the corporate guidelines for these topics and, in 2018, became involved in the implementation and adjustment of the program called Interage in all concessionaires.

Among other control needs associated with Occupational Safety Regulatory Standards, the initiative aims to standardize procedures for disclosure, investigation and adoption of corrective and preventive action plans for accidents and near accidents and to set up a management system, with reactive and proactive Key Performance Indicators (KPIs) on safety.

Safety Performance IndicatorsREACTIVE | ALLOW FOR COURSE ADJUSTMENTS AND IMPLEMENTATION OF NEW POLICIES:- Total Case Incident Rate (TCIR)- Severity Index (SI)- Days lost from accidents- Number of lost time accidents- Number of recordable accidents- Number of severe accidents- Number of first aid cases- Number of lost time accidents

in commuting- Number of recordable accidents

in commuting- Days lost from commuting accidents- Number of employees in

restricted activities- Accidents without injury

PROACTIVE | INTENDED TO MONITOR THE EVOLUTION OF INITIATIVES CARRIED OUT:- Near accident/Risk Notification- Man-Hours Worked (HHT)- Daily Safety Dialogue (DDS)

performed monthly- Number of DDS Participants per month- Number of Man-Hours Worked (HHT) in

occupational health and safety training- Number of participants in occupational

health and safety training


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In total, there are 59 guidelines that cover the environmental, occupational medicine, safety, and social responsibility activities. With all processes in place, we will have greater control over the risks inherent to the operations in order to anticipate best environmental practices and prepare healthier and safer workplaces.

Throughout the year, all units were involved and instructed through meetings and training courses to expand awareness among our internal audience on aspects of legislation, standards, and procedures that could increasingly ensure greater health and safety to employees involved in the operation, and respect for the environment.

In June, a workshop was conducted in Campinas (SP), focusing on preparation of managerial reports, assessment of performance indicators, civil and criminal responsibilities of managers in relation to health and safety of workers and the preservation of the environment. The entire technical team of the concessionaires who are responsible for conducting policies and best practices associated with this aspect took part in the event.

The year was also marked by remote assessments through the application of questionnaires to check the performance of each unit to gauge adherence to the program. As a result of the assessments of managerial reports, we replaced all motorcycles with 350 cars in order to mitigate the main cause of accidents, acquired 21 trenchers to reduce the risk of trench collapse accidents and fatal accidents at worksites, and trained, in partnership with the Special Ops Battalion, the team of readers of certain units to prevent attacks from dogs—the third largest cause of accidents reported. GRI 403-3

The next step, starting in 2019, will be to carry out internal audits to check the level of adherence to processes in each unit, and to guide leaders to help them identify eventual opportunities for improvements.

Pursuant to the legislation in force, all our units have in place Internal Accident Prevention Commissions (CIPAs)—which, although being sized according to the number of employees in each concession, cater to all employees and contractors.

GRI 403-1


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Suppliers GRI 103-2, 103-3

Our supply chain is formed by manufacturers of inputs for the operations, vendors of office supplies, services providers, and technical consulting firms. GRI 102-9

The procurement process basically involves a minimum of three quote requests, analyses by the contract and measurement department and by the administrative management, and approval from manager, director, and president of the concessionaire. Depending on the value of the contract, the decision process also required approval from the Executive Board and/or the Board of Directors.

In 2018, the pre-evaluation phase for hiring was enhanced through an integrity due diligence, which began to identify high-risk partners for the operation and automatically direct them for training at Academia Aegea. GRI 412-1, 414-1

Communication of our ethical principles was also based on the review of the Code of Conduct, which resulted in the development of a specific document for our partners—to which all suppliers must state their formal adherence.

Furthermore, all contracts contain clauses associated with human rights and contain measures to fight corruption, bribery, child or bonded labor, among other behaviors that violate our compliance policies. GRI 408-1, 409-1, 412-3

All companies hired undergo regular assessments and, should any irregularity be identified, such partner is notified and its payments may be suspended until the situation is rectified—with a risk of contractual termination in the event of recurrence.


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Associations GRI 102-13, 102-44

We maintain dialogues with municipal, state and federal governments in order to contribute to advances in regulations and consequent development of the industry in Brazil. This coordination is conducted by the vice presidency of Institutional Relations through our integration with trade associations such as Instituto Trata Brasil; Associação Brasileira de Infraestrutura e Indústrias de Base (ABDIB); Associação Brasileira das Concessionárias Privadas dos Serviços Públicos de Água e Esgoto (ABCON); and Associação Brasileira de Engenharia Sanitária e Ambiental (ABES).

In 2018, the sector was involved in debates concerning the review of the regulatory sanitation framework, conducted by the federal government, which created an interministerial group to discuss the topic with associations.

One of the points debated referred to reformulating the regulation of program agreements, which is instated through federal law No. 11,107, of 2005, through which a state-owned company and a municipality can establish long-term agreements without the need for a bidding process. Such review could establish that program agreements could include goals for investments and for universal access to services, similar to the existing one, for example in concession agreements or Public-Private Partnerships. In other words, the review could drive fair competition and generate market opportunities for the private sector.

In addition, changes to Law No. 9,984, of July 17, 2000, which created the Agência Nacional de Águas (ANA), were also under discussion The idea was for the agency to assume other responsibilities that would enable the creation of national regulatory guidelines to be followed by municipal, regional and state agencies—which currently regulate the service directly—which would guarantee greater legal certainty for public and private operators.

TRADE

These and other issues formed Provisional Measure 844/18, with which we declared our support during the year, but which was longer in force in November due to lack of agreement to vote. In December 2018, however, another Provisional Measure (868/18) was approved, changing the competencies of ANA, which assumes regulation of the public sanitation services.

We will always be attentive to the discussions that involve the sector, as we understand that advances towards universal access can be facilitated by the new interpretation of industry legislation—which depends on the cooperation between public and private operators.


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Communities GRI 103-2, 103-3, 413-1

Throughout 2018, we defined a new social strategy, prepared internal policies, adopted social risk management tools, and implemented a platform to manage social projects.

Strategy and Internal Policies

Based on the studies conducted in 2017, Social Responsibility management developed technical knowledge and established a new strategy for social performance, approved by the Executive Board and applied to all operations.

In summary, the strategy determines a social performance focused on the pillars that form the human development index (HDI) of the cities in which we operate and on promoting a model focused on the population in a situation of social vulnerability.

MORE THAN PROFESSIONALS

We understand that we must transcend contractual terms, seeking a close relationship with the communities served.

Based on this, a Private Social Investment Policy was developed, available on our website (www.aegea.com.br/politica-de-investimento-social-privado). The document contains our social performance cause, as well as the criteria for the investment of resources—incentivized or own—in projects that contribute with the improvement of Municipal Human Development Index (M-HDI) in the cities where we operate.

Social Projects

All social programs and projects were created for a customized implementation in each city, taking into account the local characteristics and needs. In addition, a new virtual platform called Cidades+, which presents each social project along with the supporting materials for their execution, in addition to the figures of the main milestones reached.

*Through the following laws: Culture Incentive Law (Rouanet Law), Audiovisual Law, Sports Incentive Law, Municipal Funds for Children and Adolescents, Municipal Funds for the Elderly, Pronon and Pronas/PCD.


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Among the projects implemented, note should be given to the initiatives called Programa Afluentes (Tributaries Program) and Projeto Saúde Nota 10 (Top-Notch Health Project). The first is intended to promote a relationship with local community leaders. It is an important communication channel, through which we can approach communities members, in addition to listening to suggestions and opinions about the services provided. This way, we can offer this audience a personalized service that is in line with the demands of neighborhoods and communities. In 2018, more than 4,000 community leaders were involved.

Projeto Saúde Nota 10 consists in a series of educational lectures and theater plays that address issues related to basic sanitation and environmental preservation, geared to children and youths of the public school system. In some locations, essay and drawing contests are conducted with students. In 2018, the project involved over 37,000 elementary, middle and high school students.

Incentive Projects

In order to provide transparency to the selection of incentive projects, a committee was created to assess projects and municipal funds to benefit from the tax incentive resources of our concessionaires, always having in mind the Private Social Investment Policy and equal opportunities.

In 2018, five incentive projects in the cities where we operate were featured, four of which supported by the Rouanet Law, and one supported by the Sports Incentive Law.


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INCENTIVE LAW PROPONENT PROJECT DESCRIPTION LOCATIONS SERVED BENEFICIARIES

Rouanet Law 3 Apitos Cultural and Sports Marketing

Aventuras no Mundo Encanado (6th edition)

Theater plays with puppets addressing several social and environmental topics promoting the participation of children in the preservation of the environment.

20 cities in seven states (Rio de Janeiro, Mato Grosso, Mato Grosso do Sul, Rondônia, Pará, Piauí and Maranhão).

130 performance for a total attendance of nearly 25,000 children - an average of 200 per show.

Flamingo Comunicação Eireli

Trilha da Cultura (Water and Sanitation Module)

Educational initiative that focuses on discussing, primarily, issues associated with water, sanitation, and well-being of communities, with 6th to 9th grade students from middle school. This initiative is supported by an educational kit containing activities to be conducted during classes. The project also involves workshops to train teachers and, after the work in the classroom, there are wrap-up meetings where teachers can present the results and share experiences.

45 cities in 10 states (Espírito Santo, Rio de Janeiro, Mato Grosso, Mato Grosso do Sul, Rondônia, Pará, Piauí, Maranhão, Santa Catarina and São Paulo).

49,221 students and 493 teachers in 653 public municipal and state schools, and distribution of 2,782 kits.

Marco Aurélio Ribeiro da Costa

Cine Autorama Traveling cinema project with outdoor screening where people can watch films from within their cars.

Eight cities in six states (Espírito Santo, Maranhão, Mato Grosso, Mato Grosso do Sul, Piauí and Pará).

5,774 spectators in 1,749 cars.

Brazucah Produções Artísticas e Culturais

Cinesolarzinho Traveling cinema project that uses solar energy to screen the films. Under this initiative, children and adolescents also take part in a workshop associated with the practices of cinema and sustainability.

24 cities in five states (Santa Catarina, São Paulo, Mato Grosso, Rondônia and Pará).

52 sessions with 6,750 spectators, in addition to 329 youngsters participating in 13 workshops.

Sports Incentive Law

Instituto Tênis Massificação Instituto Tênis 2018

Instituto Tênis is a nonprofit institution that supports tennis in Brazil, offering sports scholarships to talented and high-potential athletes. In 2018, the project initiated an activity in the city of Cabo Frio (RJ) to promote the sport among students between the ages of 6 and 10 from two selected NGOs. Afterwards, the activities were extended to the city of Vila Velha (ES).

Cabo Frio (RJ) and Vila Velha (ES).

200 children in Cabo Frio (RJ) and 1,300 in Vila Velha (ES).


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Social Risk Management

The main social risks stemming from the operations arise from the nature of our services, as well as from the relationship with stakeholders. In 2018, new management tools were adopted aiming to identify and mitigate such risks.

In order to manage the social risks associated with the operation, under the Interage Program, four normative instructions were developed based on the requirements of the Performance Standards on Social and Environmental Sustainability set out by IFC. In tandem, we implemented an online platform that allows the concessionaires to monitor legislation related to Social Responsibility and the industry.

This way, we can adopt proactive and resilient actions, in line with legal requirements, towards best global standards in corporate social responsibility.

Instituto Aegea

Starting in 2018, in compliance with governance standards and with our new Social Responsibility agenda, the then called Instituto Equipav was renamed Instituto Aegea, switching its focus and starting to act as a center of social intelligence, to: :

• Establish an interchange with other third sector institutions, especially NGOs, foundations, and corporate institutes;

• Identify opportunities for integrated initiatives geared to local development;

• Produce technical information; and• Track trends within the third sector.


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AMBASSADORS OF HEALTH

The main objective of our operations: to take health to all, including the environment.

Environment GRI 103-2, 103-3

Our environmental guidelines are set out by the Occupational Health Safety and Environment Department, under the Interage Program. The initiative—implemented across all concessionaires throughout the year—documents nine procedures, among normative instructions and standards. The purpose is to identify and mitigate environmental impacts arising from the Process to abstract and treat water and treatment of sanitary sewage; ensure compliance with legal, regulatory and corporate requirements; and identify, mitigate corporate and civil responsibility risks associated with the activities performed by our units.

More than conducting engineering works, we plan the infrastructure necessary to preserve water resources; ensure the availability and quality of water; safely conduct sewage to treatment facilities; and ensure the satisfaction of users—all with high levels of monitoring and control, and always having in mind the local characteristics of each of the 49 municipalities served.

The work conducted by the engineering department relies on an independent environmental team that oversees compliance with environmental requirements and conditions imposed, destination

*A study called “Análise dos Indicadores de Saúde Pública Associadas ao Saneamento Inadequado no Município de Campo Grande (MS) no Período 2003-2015” (in loose translation, “Assessment of Public Health Indicators Associated with Inappropriate Sanitation in the City of Campo Grande (MS) from 2003-2015”), available at www.aguasguariroba.com.br/relatorio-reducao-doencas.

of waste and provides technical support to issues pertaining to the environment. Furthermore, there are environmental managers in each unit, who are responsible for monitoring these activities and for reporting on the associated indicators.

Piracicaba (SP) is an example of the excellence of this operation. In only two years, the city achieved universal access to collection and treatment of sewage. This is an instrumental milestone for the recovery of Rio Piracicaba, a symbol of the city and an important element for the development of local economy.

Collecting and treating sewage are directly associated with improvement of public health. So much so that, in Campo Grande (MS), the expansion of these services has already resulted in a decrease by more than 90% in the number of hospital admissions for diarrheal diseases*.

The capital city of the state of Mato Grosso do Sul is also an example in management of water loss. Investments in the unit reduced loss of water from 56% to 19% in the last 10 years—a number that exceeds the goal set out in contract (28%) and highlights the city in the comparison with the national average (38.3%).


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Water GRI 103-2, 103-3, 303-1, 303-4

In the year, we treated and distributed 508,077,450.62 m3 of water through our concessionaires. This total, 77.72% higher than in the previous year, considers the partial consumption in Águas de Manaus, which was included in our business portfolio in the year, and reflects increases in the population served and coverage of supply.

In order to guarantee the quality of the service, we adopt rigid controls: water samples from dams and wells are collected and analyzed monthly, based on 32 environmental parameters.Another important focus of this work is management of losses, one of the pillars of our Sustainability Policy and an important contractual milestone to be achieved by our units.

To this end, we have in place a Loss Management and Control System (GCP - Gestão e Controle de Perdas), based on international models and on the knowledge acquired by our more consolidated units. The system considers:

• Adequacy of pressure levels in the network in order to reduce the volume leaked and the risk of new leaks.

• Methodologies to detect hidden underground leaks, in order to expedite repair.

• Speed and quality in repairs.• Infrastructure management through heat maps, which

indicate regions with high incidence of leaks.• Micro-metering management* looking to reduce under-

registration rates** .

As a result, the consolidated loss rate in distribution was 51%, an increase of 13 p.p. over the previous year, mainly due to the start of the new concessions, which usually have higher rates—which are reduced as they conform to our standards.

* Measurement performed in the inlet extension of the buildings.** Volume of water consumed, but not billed, by concessionaires.

TOTAL VOLUME OF WATER WITHDRAWN, BY SOURCE (M3)

2018 2017 2016

Surface water 376,678,343.30 169,814,237.00 112,968,736.00

Groundwater 122,559,600.46 106,875,047.00 101,463,321,00

Municipal supply 8,839,506.86 9,203,379.00 0

Total 508,077,450.62 285,892,663.00 214,432,057.00


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Effluents GRI 103-2, 103-3, 306-5

The environmental guidelines for effluent management are defined by the Department of Occupational Health, Safety and Environment under the Interage Program.

Whenever possible, we avoid discharging water from our water treated in the Wastewater Treatment Stations (ETAs). Sewage is returned to the entrance of the ETAs and corresponds to less than 10% of the abstraction flow rate. Treatments include the use of flocculator, decanter and sand filter or disinfection in underground abstraction wells. The methods to treat sewage include lagoon system, activated sludge, Upflow Anaerobic Sludge Blanket Reactors (UASB), physical-chemical treatments, septic tanks, among others. GRI 306-1

To verify that the water sources were not affected, periodic analyses are conducted upstream and downstream of the effluent discharge point. Monitoring reports of the treated effluent are also sent annually.


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SIZES OF WATER BODIES AFFECTED BY WATER DISCHARGE GRI 306-5

Unit Name of the body of water affected by discharge Size of the body of water (Km2)

Águas de Barra do Garças Rio Araguaia 5.67

Rio Garças (Córrego Fundo) 11.73

Águas de Campo Verde Rio São Lourenço 11.38

Rio das Motes 8.47

Águas de Cláudia Ribeirão Leda 28.67

Águas de Diamantino Rio Diamantino 5.56

Córrego do Ouro 10.81

Águas de Confresa Córrego Gameleira 10.42

Águas de Guarantã Afluente do Rio Braço Sul 10.68

Águas de Pedra Petra Rio Jurigue 3.13

Águas de Peixoto de Azevedo Rio Peixoto 6.2

Águas de Porto Esperidião Rio Aguapeí 1.48

Águas de Primavera Córrego Traíras 12.94

Águas de Sorriso Córrego Golçalves 63.56

Afluente do Rio Lira 6.55

Rio Lira 6.55

Rio Teles Pires 4.36

Águas Guariroba Córrego Bandeira 6.1

Córrego Imbirussú 58

Águas de Holambra Ribeirão Cachoeira 1.9

Águas de Matão Rio São Lourenço 59.8

Mirante Rio Piracicaba 12.5

Ribeirão Tijuco Preto N/D

Ribeirão Anhumas N/D

Ribeirão Piracicamirim N/D

Prolagos Laguna Araruama 61

Rio Una 12

Canal da Marina 21

Ambiental Serra Canal dos Escravos 1

Ilha do Lameirão 8.91

Lagoa Jacuném 1.3

Lagoa Maringá 2.06

Córrego Barro Branco 6.2

Córrego Irema 1.1

Ribeirão Brejo Grande 11

Rio Jacaraípe 36.71

Córrego Laranjeiras 13

Córrego Manguinhos 1.6

Rio Reis Magos N/D

Afluente Dr. Robson 0.59

Córrego Garanhões 1.4

Águas de Teresina Rio Poti 52.57

Rio Paraíba 20.07

Ambiental Vila Velha Rio Jucu 1.56

Afluente do Rio da Draga N/D

Córrego Xuri 1.6

Canal da Draga N/D


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Energy GRI 103-2, 103-3, 302-1, 302-4

In 2018, a total of 1,605,156.00 GJ of energy was consumed. This total is higher when compared to the previous year (1,084,358.37 GJ) because it considers the consumption in the units Águas de Bombinhas, Ambiental Vila Velha, Ambiental Serra and Águas de Teresina; as well as the partial consumption in Águas de Manaus, which was added to our business portfolio in the year.

However, the consumption of 15,196.00 GJ of energy was avoided as a result of the implementation of improvement projects. The result reflects the work of the Energy Efficiency Management (GEE - Gestão de Eficiência Energética) center, which focuses on standardization of processes and on the energy efficiency of operations. The actions aimed at reducing consumption take place on three fronts:

• Design of projects for the units: When the most efficient equipment is considered and when the power to be installed, the voltage level and the load losses are sized, among other criteria.

TOTAL ENERGY CONSUMED (GJ)

2018 2017

Total energy consumed from fuels from non-renewable sources

121,878.13 125,046.04

Gasoline 40,002.24 44,099.19

Diesel 80,264.29 80,946.85

Natural gas 1,611.60 0

Total energy consumed from fuels from renewable sources

19,414.82 20,162.14

Ethanol 12,296.34 11,071.82

Biodiesel 7,865.80 8,343.00

Total electricity consumed 1,463,863.05 939,150.19

Total energy consumed 1,605,156.00 1,084,358.37*A base de cálculo leva em consideração o índice de eficiência (kWh/m³) da unidade logo após a implantação do projeto.

• Action in existing units: Where we correct and/or modify the power factor, startup, supply voltage and alternative generations, among other measures for energy efficiency.

• Operation of pumping systems: Where we evaluate operational alternatives through frequency control, sectorization, loss control and hydraulic simulation, among others.


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About This REPORT

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REPORT

Our eighth Annual Sustainability Report contains the operational, financial and social and environmental performance of all our units in the period from January 1 to December 31, 2018, and contextualizes the results obtained.

GRI 102-45, 102-50, 102-52

To ensure the quality of information, this publication has been prepared according to the standards of the Global Reporting Initiative (GRI): Core Option; to the criteria of the Brazilian Association of Publicly-Held Companies (ABRASCA - Associação Brasileira das Companhias Abertas); to the guidelines of the International Integrated Reporting Council (IIRC); and to the principles of the United Nations Global Compact, to which we have been signatories since 2016. GRI 102-54

The financial information was externally audited by KPMG Auditores Independentes, and the other information was assessed internally, with approval from Company Administration. GRI 102-56

If you have any questions or suggestions regarding this document, please contact the Investor Relations team by email ([email protected]) or telephone (+55 11 3818-8150). GRI 102-53

The content of this material reflects the relevant topics identified in 2014 based on online consultation to stakeholders and reviewed annually since then, based on sector studies, analysis of competition and news articles disseminated by the national press.

As a result of this work, in 2018, we included the topic “Innovation and technology” since we verified its recurrence in the journalistic coverage of the sector and to highlight the possible correlations with the other topics, especially “Management of Operational efficiency” and “Universal access to basic sanitation.”

Materiality GRI 102-46, 102-48, 102-49, 103-1

“Compliance, ethics and anti-corruption measures,” the aspects “Human rights assessment”, “Supplier social assessment,” “Child labor” and “Forced or compulsory labor”—formerly segregated, were also incorporated to the topic. The topics “Talent attraction and retention” and “Health and safety” were grouped under “People management.” The goal was to concentrate the similar subjects and aspects to improve management and dissemination.

Another significant advance was the correlation between the material topics and the Sustainable Development Goals (ODS), the international agenda of the United Nations (UN), supported by various institutions around the world, to promote prosperity and well-being for all. We are working to align these goals to our strategic planning in the future, reinforcing our commitment to the environment and to people.


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Topics GRI 102-47

LIST OF MATERIAL

Topics Capitals (IIRC) Aspects (GRI) Indicators (GRI)

Principles (Global

Compact)

Sustainable Development

Goals (SDG)

People management

Human Training and education 404-1 6 4, 5 e 8

Diversity and equal opportunities

405-1 6 5 e 8

405-2 6 5, 8 e 10

Human rights assessment

412-2 1 Sem relação

Occupational health and safety

403-1 Sem relação 8

403-2 3 e 8

403-3 3 e 8

403-4 8

Compliance, ethics and anti-corruption measures

Financial Anti-corruption 205-2 10 16

Public policies 415-1 10 16

Unfair competition 206-1 Sem relação 16

Environmental compliance

307-1 8 16

Socioeconomic Compliance


Child labor 408-1 5 8 e 16

Forced or compulsory labor

409-1 4 8



Supplier social assessment

414-1 2 5, 8 e 16

Privacidade do cliente 418-1 Sem relação 16

Management of operational efficiency

Manufactured, Natural and Intellectual

Energy 302-1 7 e 8 7, 8, 12 e 13

302-4 8 e 9 7,8, 12 e 13

Water 303-3 8 6, 8 e 12

Economic and financial performance

Financial Economic performance 201-1 Sem relação 2, 5, 7, 8 e 9

Risk management

Financial and Intellectual

Economic performance 201-2 Sem relação 13

Environmental protection

Natural Biodiversity 304-2 8 6, 14 e 15

Effluents and waste 306-5 8 6 e 15

Respect for local communities, environmental education and awareness programs

Social and relationship

Direitos dos povos indígenas e tradicionais

411-1 1 6



Local communities 413-1 1 Sem relação

Health and safety of clients

Social and relationship

Effluents and waste 306-1 8 3, 6, 12 e 14

306-3 8 3, 6, 12, 14 e 15

Health and safety of clients


Universal access to basic sanitation

Manufactured, Social and Relationship

Indirect economic impacts

203-1 Sem relação 2, 5, 7, 9 e 11

Waters 303-1 7 e 8 6 e 7

Innovation and technology

Intellectual None Não há Sem relação Sem relação


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Engagement GRI 102-40, 102-42, 102-43, 102-44

STAKEHOLDER

We have relationships with lending institutions and investors, public decision makers, granting authorities, users, trade entities, suppliers, universities and the press. These audiences are classified based on the approach and frequency of engagement.

STAKEHOLDERS APPROACH FREQUENCY SUBJECTS ADDRESSEDInvestors, lending institutions and shareholders

Communication through the Investor Relations website and through periodic publications of relevant events and of quarterly and annual results, in addition to events, teleconferences and face-to-face meetings in Brazil and abroad.

- Call for results (quarterly).- Face-to-face meetings (according to demand).- Aegea Day, event for dissemination of results and other relevant

topics (annual).- Calls to answer specific questions (according to demand).- Participation in events organized by banks

(according to demand).- Investor Relations Website (updated periodically). - Filing of documents with the Securities and Exchange

Commission (CVM) (periodically, according to the Policy for Disclosure of Relevant Act or Fact and CVM Instruction No. 358).

We disclose information about the sector and our business, and identify the public’s concerns to answer their questions and improve communication with the market.

Public Decision-Makers

In 2017, we instituted the Vice Presidency of Institutional Relations and reinforced the Communication area in order to act more actively with public decision-makers. In some cases, our support is provided through the trade entities of which we are part, in addition to face-to-face (in Brasilia) and digital (social networks of Market Associations) advocacy work, to take information from the sector and interact with this audience. In addition, in view of the risks that may involve the contact with Public Administrators, we reinforce our compliance policies and processes. As a result, we obtained, during the year, the NBR ISO 37001 Certification.

- Face-to-face meetings (average of two per month).- Participation in market events (average of one per month).

Clarification of information related to the sector and to the contribution of private companies to the development of this market. In 2018, public administrators were involved in discussions about regulatory improvements.

Granting authorities Face-to-face meetings According to opportunity or demand. Presentation of the performance of each concessionaire, revealed by compliance with the contractual milestones established; and issues related to the regulatory changes under discussion in the year. We seek to respect the concerns expressed by this audience in our strategy.


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Users Each concessionaire has a multi-channel platform, which includes website, digital social networks and telephone service, as well as printed materials and interpersonal relationship in physical stores. Face-to-face meetings are also held with community leaders.

Ongoing communication. Public satisfaction is measured regularly through surveys (annually or every two years according to each concessionaire).

The contacts registered allow us to identify opportunities for improvement in our operations—we constantly improve the training provided to our employees to serve this audience.

Market associations We hold important positions in associations and we are concerned with increasing the relevance of these entities. We also hold occasional meetings to understand and evaluate how we can contribute to the development of the sector.

- Evaluation and planning meeting (annual)- Participation in Councils, Committees and Working Groups

(according to the agenda of the associations)- Sponsorship of events organized by the entities of which

we are members (monthly average)

In 2018, key industry players were engaged in discussions about regulatory improvements.

Press Ongoing press office work. In 2018, we were recognized in the award ‘Companies that best communicate with journalists,’ in the sanitation category, promoted by magazine Negócios da Comunicação.

- In-person relationship meetings (approximately five per year).- Interviews by phone (average of two per month).- Calls to encourage generation of an agenda about our

business and sector.

Clarifications on the sector and on our investments.

Suppliers Relationship supported by contractual clauses and guided by our Code of Conduct.

Upon establishing commercial agreements (contractual clauses) and, annually, in conduct alignment meeting.

Compliance, ethics and anti-corruption practices to which our suppliers must commit.

Universities Meetings, mainly through market associations, for joint analyses of the work and participation in courses and events involving the sector.

– According to internal demand, demand from an association or a university.

Dissemination and clarification of information on the sector, with total transparency and exemption.

Employees In 2018, we had a differentiated view concerning internal communication. In this sense, we worked with the support of an external consultancy to identify new communication channels and engage the audience in the new brand positioning. We understand the importance of each of our employees and seek to value and enhance the work of this audience. We also encourage actions to promote inclusion and racial equality within the framework of the program called “Respeito dá o tom” (“Respect sets the Tone”).

- Continuous relationship through events and face-to-face meetings, as well as targeted communication tools.

We reinforce the communication of topics that are relevant for the development of our business: compliance, health and safety, environmental responsibility, among others.


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GRI AttachmentCommunication and training on anti-corruption policies and procedures

GRI 205-2

Significant impacts of activities, products, and services on biodiversity GRI 304-2

2018 2017

Communicated Trained Communicated Trained

Senior Management and Board of Directors

Total number of executives 52 32

Total number of executives communicated / trained

52 42 30 23

Percentage of executives communicated / trained

100 80,77 93,75 71,88

Administration Total number of employees 2.019 1.538

Total number of employees communicated / trained

2.019 1.297 1.589 1006

Percentage of employees communicated / trained

100 64,24 103,32 65,41

Operational Total number of employees 2.219 1.545

Total number of employees communicated / trained

2.219 1.062 1.573 917

Percentage of employees communicated / trained

100 47,86 101,81 59,35

Partners Total number of partners 2.855 333

Total number of partners communicated / trained

2.855 2.855 333 333

Percentage of partners communicated / trained

100 100 100 100

Sewage treated by the concessionaires mitigates water pollution and, consequently, preserves the environment. The extent of areas impacted is limited to the perimeter of the facilities of the units that are part of the water and Sewage system, and the activities carried out require minimum intervention.

These are short-term impacts, since treated Sewage easily decomposes in nature. Impacts may have medium duration only in the event of accidents involving chemicals. However, they are reversible in all respects.


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Occupational health and safety GRI 403-2

EMPLOYEES Accidents are recorded through a computerized system to form a database and generate indicators and to allow for traceability of actions. The composition of this indicator did not consider the accidents classified as commutingand first aid, i.e., only typical accidents were considered.

* Data in the table refer to the absolute number of injuries and their corresponding percentage compared to the total number of records.** Injury frequency in relation to the total number of hours worked divided by the total number of workers in the period covered by the report.

EMPLOYEE INJURIES, BY GENDER*

2018 2017 2016

Women Men Women Men Women Men

Number 8 132 6 96 1 78

Rate (%)** 6.06 93.94 6 96 1 99

14. Professionals with whom we have a working relationship in accordance with the Consolidation of Labor Laws (CLT).15. Accidents suffered in the commute to and from work, including those occurred at meal times, provided they occurred outside the company.16. Accidents that cause minor injuries and, therefore, did not result in lost time, allowing for immediate return of employees to their activities.

EMPLOYEE LOST DAYS, BY GENDER*

2018 2017 2016


Number 58 7,072*** 34 1,445 1 1,165

Rate (%)** 0.82 99.18 2,30 97.70 0.09 99.1* Data in the table refer to the absolute number of lost days and their corresponding percentage compared to the total number of records.** Total number of lost days compared to total number of hours scheduled to be worked by the professionals in the period covered by the report.*** 6,000 lost days were recorded due to the recorded fatality.


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NATURE OF SIGNIFICANT DIRECT AND INDIRECT IMPACTS ON BIODIVERSITY

Aspect Impacts

Construction

Pollution Discharge of treated sanitary Sewage into bodies of water, with risk of leaking untreated Sewage due to mechanical and/or electrical failure.

Introduction of invasive species, harmful organisms and pathogens

None.

Reduction in number of species

None.

Conversion of habitats Habits at risk of conversion when reservoirs/water dams are installed.

Changes in ecological processes outside the natural range of variation

None.

GRI ATTACHMENT

EMPLOYEE LOST DAYS, BY REGION*

2018 2017 2016

Number Rate (%)** Number Rate (%)** Number Rate (%)**

North 102 1.43 396 27 0 0

Northeast 148 2.08 18 1 90 8

Midwest 6,624*** 92.90 487 33 386 33

Southeast 254 3.56 558 36 683 59

South 2 0.03 40 3 7 1* Data in the table refer to the absolute number of lost days and their corresponding percentage compared to the total number of records.** Total number of lost days compared to total number of hours scheduled to be worked by the professionals in the period covered by the report.*** 6,000 lost days were recorded due to the recorded fatality.

WORKERS17

EMPLOYEE INJURIES, BY GENDER*

2018 2017 2016

Women Homens Women Homens Women Homens

Number 0 26 31 4 - -

Rate (%)** 0 100 89 11 - -* Data in the table refer to the absolute number of injuries and their corresponding percentage compared to?? the total number of records.** Frequency of injuries in relation to the total time worked by the total number of workers in the period covered by the report.

EMPLOYEE INJURIES, BY REGION*

2018 2017 2016


North 1 3.85 2 6 - -

Northeast 4 15.38 9 26 - -

Midwest 5 19.23 13 37 - -

Southeast 10 38.46 7 20 - -

South 6 23.08 4 11 - -* Data in the table refer to the absolute number of injuries and their corresponding percentage compared to the total number of records.** Injury frequency in relation to the total number of hours worked divided by the total number of workers in the period covered by the report.

17. In 2016, the indicators referring to outsourced workers were managed in a decentralized manner. As of 2017, our Health, Safety and Environment Department began managing these indicators. However, we still depend on effective communication to update and keep the indicators up to date. Therefore, the indicator reflects the accidents actually reported.

EMPLOYEE INJURIES, BY REGION*

2018 2017 2016


North 14 10 12 12 0 0

Northeast 29 20.7 4 4 1 1

Midwest 60 42.9 54 53 36 46

Southeast 30 21.4 26 25 40 51

South 7 5 6 6 2 3* Data in the table refer to the absolute number of injuries and their corresponding percentage compared to the total number of records.** Injury frequency in relation to the total number of hours worked divided by the total number of workers in the period covered by the report.

One fatality was recorded in the year.


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EMPLOYEE LOST DAYS, BY GENDER*

2018 2017 2016


Number 7,295 58 7,763 43 31 1,660

Rate (%)** 99.21 0.79 99.45 0.55 1.80 98.17* Data in the table refer to the absolute number of lost days and their corresponding percentage compared to the total number of records.** Total number of lost days compared to total number of hours scheduled to be worked by the professionals in the period covered by the report.

EMPLOYEE LOST DAYS, BY REGION*

2018 2017 2016


North 104 1.42 396 5.07 - -

Northeast 168 2.29 21 0.27 90 5.32

Midwest 6.698 91.24 6,774 86.78 502 29.69

Southeast 283 3.86 575 7.37 1,092 64.58

South 88 1.20 40 0.51 7 0.41* Data in the table refer to the absolute number of lost days and their corresponding percentage compared to the total number of records.** Total number of lost days compared to total number of hours scheduled to be worked by the professionals in the period covered by the report.

TRAINING AND EDUCATION GRI 404-1

AVERAGE NUMBER OF TRAINING HOURS PROVIDED TO EMPLOYEES IN THE REPORTING PERIOD, BY GENDER

2018 2017 2016

Total number of employees

Training hours Average number of training hours





Men 3,122 298,196 95.51 2,206 51,933 23.54 1,890 57,754 30.56

Women 1,117 50,711 45.40 875 17,790 20.33 676 17,251 25.52

Total 4,239 348,907 82.31 3,081 69,735 22.63 2,566 75,005 29.23


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AVERAGE NUMBER OF TRAINING HOURS PROVIDED TO EMPLOYEES DURING THE REPORTING PERIOD, BY EMPLOYMENT CATEGORY GRI 405-1, 405-2

2018 2017 2016







Tactical 859 62,460 72.71 916 32,488 35.47 623 16,685 26.78

Operational 2,851 270,919 95.03 386 4,897 12.69 351 47,631 135.70

Strategic 529 15,528 29.35 1,779 32,339 18.18 1,592 10,689 6.71

Total 4,239 348,907 82.31 3,081 69,724 22.63 2,566 75,005 29.23

DIVERSITY OF GOVERNANCE BODIES AND EMPLOYEES GRI 405-1

MEMBERS OF THE ORGANIZATION’S GOVERNANCE BODIES, BY GENDER

2018 2017 2016

Number Percentage (%) Number Percentage (%) Number Percentage (%)

Men 11 73.33 7 70.00 7 70.00

Women 4 26.67 3 30.00 3 30.00

Total 15 100.00 10 100.00 10 100.00

MEMBERS OF THE ORGANIZATION’S GOVERNANCE BODIES, BY AGE GROUP

2018 2017 2016

Number Percentage (%) Number Percentage (%) Number Percentage (%)

Below 30 0 0.00 0 0.00 0 0.00

Between 30 and 50 6 40.00 3 30.00 3 30.00

Over 50 9 60.00 7 70.00 7 70.00

Total 15 100.00 10 100.00 10 100.00


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EMPLOYEES, BY EMPLOYMENT CATEGORY AND GENDER2018 2017 2016

Men Women Men Women Men WomenNumber Percentage (%) Number Percentage (%) Number Percentage (%) Number Percentage (%) Number Percentage (%) Number Percentage (%)

Executive Board 61 85.92 10 14.08 53 89.83 6 10.17 41 89.13 5 10.87Board 11 73.33 4 26.67 7 70.00 3 30.00 7 70.00 3 30.00Management 51 69.86 22 30.14 35 66.04 18 33.96 25 13.53 9 26.47Coordinators 112 62.92 66 37.08 94 69.63 41 30.37 61 68.54 28 31.46Operational 2,691 75.44 876 24.56 1,858 72.69 698 27.31 1,578 74.43 542 25.57Young Apprentices 29 32.58 60 67.42 20 37.74 33 62.26 21 41.18 30 58.82Managers 2 100.00 0 0.00 11 68.75 5 31.25 34 80.95 8 19.05Supervisors 139 73.16 51 26.84 124 75.15 41 24.85 114 76.00 36 24.00Trainees 3 42.86 4 57.14 12 54.55 10 45.45 12 60.00 8 40.00Interns 23 50.00 23 50.00 23 46.94 26 53.06 21 61.76 13 38.24Total 3,122 73.67 1,116 26.33 2,237 71.74 881 28.26 1,914 73.73 682 26.27

EMPLOYEES, BY EMPLOYMENT CATEGORY AND AGE GROUP2018 2017 2016

Number Percentage (%) Number Percentage (%) Number Percentage (%)Below 30 Between

30 and 50Over 50 Below 30 Between





30 and 50Over 50

Executive Board 4 37 30 5.63 52.11 42.25 5 32 22 8.47 54.24 37.29 5 28 13 10.87 60.87 28.26Board 0 4 11 0.00 26.67 73.33 0 3 7 0.00 30.00 70.00 0 3 7 0.00 30.00 70.00Management 1 65 7 1.37 89.04 9.59 2 48 3 3.77 90.57 5.66 1 31 2 2.94 91.18 5.88Coordinators 25 143 10 14.04 80.34 5.62 34 95 6 25.19 70.37 4.44 27 58 4 30.34 65.17 4.49Operational 1,274 2,037 256 35.72 57.11 7.18 1,065 1,315 176 41.67 51.45 6.89 962 1,003 155 45.38 47.31 7.31Young Apprentices 89 0 0 100.00 0.00 0.00 53 0 0 100.00 0.00 0.00 51 0 0 100.00 0.00 0.00Managers 0 1 1 0.00 50.00 50.00 0 14 2 0.00 87.50 12.50 6 33 3 14.29 78.57 7.14Supervisors 48 129 13 25.23 67.89 6.84 36 118 11 21.82 71.52 6.67 34 101 15 22.67 67.33 10.00Trainees 7 0 0 100.00 0.00 0.00 21 1 0 95.45 4.55 0.00 19 1 0 95.00 5.00 0.00Interns 44 2 0 95.65 4.35 0.00 46 3 0 93.88 6.12 0.00 32 2 0 94.12 5.88 0.00Total 1,492 2,418 328 35.21 57.06 7.74 1,262 1,629 227 40.47 52.25 7.28 1,137 1,260 199 43.80 48.54 7.67


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BLACK EMPLOYEES, BY EMPLOYMENT CATEGORY AND GENDER2018 2017 2016


Executive Board 2 3.00 0 0.00 4 8.00 0 0.00 4 10.00 0 0.00Board 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Management 0 0.00 0 0.00 1 3.00 0 0.00 1 4.00 0 0.00Coordinators 4 4.00 4 6.00 4 4.00 0 0.00 3 5.00 2 7.00Operational 344 13.00 83 9.00 162 9.00 57 8.00 179 11.00 37 7.00Young Apprentices 3 10.00 9 15.00 2 10.00 6 18.00 0 0.00 3 10.00Managers 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Supervisors 12 9.00 5 10.00 5 4.00 1 2.00 7 6.00 1 3.00Trainees 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Interns 0 0.00 4 17.00 1 4.00 3 12.00 3 14.00 1 8.00Total 353 11.00 100 9.00 174 8.00 66 7.00 197 10.00 43 6.00

EMPLOYEES WITH DISABILITIES, BY EMPLOYMENT CATEGORY AND GENDER2018 2017 2016


Executive Board 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Board 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Management 1 1.96 0 0.00 1 2.86 0 0.00 1 4.00 0 0.00Coordinators 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Operational 44 1.64 28 3.20 21 1.13 12 1.72 23 1.46 12 2.21Young Apprentices 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Managers 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Supervisors 1 0.72 0 0.00 1 0.81 0 0.00 0 0.00 0 0.00Trainees 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Interns 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0 0.00Total 46 1.47 28 2.51 23 1.03 12 1.36 24 1.25 12 1.76


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Employment category

Gender 2018 2017 2016

Base salary (BRL) Remuneration (BRL)

Ratio Base salary (BRL) Remuneration (BRL)

Ratio Base salary (BRL) Remuneration (BRL)

Ratio

Executive Board

Women 23,176.57 43,474.06 1.88 15,616.20 29,135.31 1.87 21,297.13 39,922.35 1.87

Men 29,860.12 61,585.98 2.06 28,471.47 57,692.29 2.03 28,495.73 55,005.48 1.93

Board Women 11,755.23 16,626.20 1.41 6,619.56 13,184.26 1.99 8,444.64 10,172.08 1.20

Men 13,755.57 26,420.02 1.92 7,210.57 195,931.55 27.17 6,855.25 13,858.03 2.02

Management Women 18,697.73 37,889.67 2.03 16,523.74 32,906.37 1.99 14,894.15 35,769.52 2.40

Men 18,786.02 37,186.45 1.98 17,783.61 37,374.78 2,10 14,553.32 30,763.62 2.11

Coordinators Women 7.381,71 15,127.86 2.05 6,619.56 13,184.26 1,99 7,140.53 13,816.77 1.93

Men 7,828.92 14,973.00 1.91 7,828.92 14,973.00 1,91 7,210.57 13,757.36 1.91

Operational Women 2,201.72 3,931.64 1.79 1,963.14 3,931.64 2,00 1,767.80 3,931.64 2.22

Men 1,782.31 4,702.89 2.64 1,698.42 4,396.28 2.59 1,619.51 4,178.06 2.58

Young Apprentices

Women 2,201.72 4,960.94 2.25 518.88 1,256.47 2.42 518.88 1,256.47 2.42

Men 1,782.31 4,960.94 2.78 490.42 1,059.16 2.16 490.42 1,059.16 2.16

Managers Women 0.00 0.00 0.00 21,703.54 43,132.62 1.99 14,894.15 37,491.01 2.52

Men 21,582.22 44,563.41 2.06 16,944.61 32,957.17 1.94 11,391.18 23,679.95 2.08

Supervisors Women 2,778.60 5,672.58 2.04 2,511.66 5,758.19 2.29 2,670.53 6,633.47 2.48

Men 3,244.91 7,371.73 2.27 3,009.07 6,724.92 2.23 2,873.05 6,762.91 2.35

Trainees Women 4,872.30 8,860.09 1.82 4,797.94 9,927.44 2.07 4,583.00 8,622.73 1.88

Men 4,872.30 8,832.67 1.81 4,797.94 10,528.24 2.19 4,583.00 8,602.05 1.88

Interns Women 897.17 1,537.73 1.71 855.81 1,497.62 1.75 756.96 1,451.71 1.92

Men 957.06 1,564.40 1.63 859.41 1,486.04 1.73 822.29 1,264.59 1.54

RATIO OF THE BASIC SALARY AND REMUNERATION OF WOMEN TO MEN GRI 405-2


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HUMAN RIGHTS ASSESSMENT GRI 412-2

TRAINING IN HUMAN RIGHTS POLICIES AND PROCEDURES

2018 2017 2016

Total number of training hours in human rights

348,907 69,724 75,005

Total number of employees 4,239 3,081 2,566

Total number of employees trained in human rights

6,836 5,626 1,021

Percentage of employees trained in human rights

161.26 182.60 39.79

LOCAL COMMUNITIES GRI 413-2

OPERATIONS WITH ENGAGEMENT IN LOCAL COMMUNITY

Type of initiative 2018 2017 2016

Number % Number % Number %

Assessments of social impacts 44 97.78 44 100 43 100

Public dissemination of results of environmental and social impact assessments

44 97.78 44 100 43 100

Local development programs based on the needs of local communities

45 100 44 100 43 100

Stakeholder engagement plans based on mappings of stakeholders

45 100 44 100 43 100

Committees and comprehensive consultation processes with the local community, including vulnerable groups

45 100 44 100 43 100

Formal processes for grievances and complaints by local communities

45 100 44 100 43 100


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SUMÁRIO GRI (102-55)Topics (GRI) Disclosures (GRI) Description Page UN Global

CompactUN Sustainable

Development Goals

GRI 100: General disclosures

Organizational profile 102-1 Name of the organization 4, 80102-2 Activities, brands, products, and services 4102-3 Location of headquarters 80102-4 Location of operations 4102-5 Ownership and legal form 4, 25102-6 Markets served 4102-7 Scale of the organization 4, 8, 9, 25102-8 Information on employees and other workers 48 8102-9 Supply chain 54102-10 Significant changes to the organization and its supply chain 4, 35102-11 Precautionary principle or approach 30102-12 External initiatives 28102-13 Membership of associations 55

Strategy 102-14 Statement from senior decision-maker 10, 12102-15 Key impacts, risks, and opportunities 31

Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 5, 6, 26, 27102-17 Mechanisms for advice and concerns about ethics 27

Governance 102-18 Governance structure 25

IndexGRI CONTENT

GRI 102-55


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Stakeholder engagement 102-40 List of stakeholder groups 68102-41 Collective bargaining agreements 48 8102-42 Identifying and selecting stakeholders 68102-43 Approach to stakeholder engagement 68102-44 Key topics and concerns raised 55, 68

Reporting practice 102-45 Entities included in the consolidated financial statements 66102-48 Restatements of information 66/ None102-49 Changes in reporting 66/ None102-50 Reporting period 66102-51 Date of most recent report april 2018102-52 Reporting cycle 66102-53 Contact point for questions regarding the report 66, 80102-54 Claims of reporting in accordance with the GRI Standards 66

GRI 200: Economic Standards

Economic performance 103 | 201 Management approach 40, 66201-1 Direct economic value generated and distributed 46 2, 5, 7, 8 e 9201-2 Financial implications and other risks and opportunities due

to climate changeWe are aware that climate change and other

effects from environmental factors can influence water availability and, consequently,

reduce revenue, increase operating costs, reduce credibility and even result in lawsuits.

However, we do not yet have a system in place to measure financial implications

and other risks and opportunities related to climate change. Our risk management

structure is described on page 31.

13

Indirect economic impact 103 | 203 Management approach 32, 66203-1 Infrastructure investments and services supported 35, 36, 38 2, 5, 7, 9 e 11


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Anti-Corruption 103 | 205 Management approach 22, 66205-2 Communication and training about anti-corruption

policies and procedures26, 27, 70 10 16

Anti-competitive behavior 103 | 206 Management approach 22, 66206-1 Legal actions for anti-competitive behavior,

anti-trust, and monopoly practicesNone. 16

GRI 300: Environmental Standards

Energy 103 | 302 Management approach 47, 66302-1 Energy consumption within the organization 64 7 e 8 7, 8, 12 e 13302-4 Reduction of energy consumption 64 8 e 9 7,8, 12 e 13

Water 103 | 303 Management approach 47, 66303-1 Water withdrawal by source 61 7 e 8 6 e 7303-3 Water recycled and reused Since it is a public utility service, for the

purpose of supplying drinking water for human consumption, our services do

not use recycled water. However, some concessionaires reuse water for cleaning

common areas and backwashing treatment units.

8 6, 8 e 12

Biodiversity 103 | 304 Management approach 47, 66304-2 Significant impacts of activities, products, and

services on biodiversity70 8 6, 14 e 15

Effluents and waste 103 | 306 Management approach 47, 66306-1 Water discharge by quality and destination 62 8 3, 6, 12 e 14306-3 Significant spills None. 8 3, 6, 12, 14 e 15306-5 Water bodies affected by water discharges and/or runoff 62, 63 8 6 e 15

Environmental compliance 103 | 307 Management approach 47, 66307-1 Non-compliance with environmental laws and regulations None. 8 16


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GRI 400: Social Standards

Occupational health and safety

103 | 403 Management approach 47, 66403-1 Workers representation in formal joint

management–worker health and safety committees53 8

403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

71 3 e 8

403-3 Workers with high incidence or high risk of diseases related to their occupation

52, 53 3 e 8

403-4 Health and safety topics covered in formal agreements with trade unions

52/ Information regarding occupational health and safety follows the regulatory standards established by the Ministry of

Labor and Employment (MTE) and there is no criterion that is more restrictive

than the legislation.

8

Training and education 103 | 404 Management approach 47, 66404-1 Average hours of training per year per employee 50, 73 6 4, 5 e 8

Diversity and equal opportunity

103 | 405 Management approach 22, 47, 65405-1 Diversity of governance bodies and employees 25, 48, 74 6 5 e 8405-2 Ratio of basic salary and remuneration of women to men 48, 74 6 5, 8 e 10

Child labor 103 | 408 Management approach 47

408-1 Operations and suppliers at significant risk for incidents of child labor

None / 54 5 8 e 16

Forced or compulsory labor 103 | 409 Management approach 47409-1 Operations and suppliers at significant risk for incidents

of forced or compulsory laborNone / 54 4 8

Rights of indigenous peoples 103 | 411 Management approach 18, 22, 47, 66411-1 Incidents of violations involving rights of indigenous peoples None. 2


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Human rights assessment 103 | 412 Management approach 22, 47, 66412-1 Operations that have been subject to human rights

reviews or impact assessments27, 54/ 100% 1

412-2 Employee training on human rights policies or procedures 27, 78 1412-3 Significant investment agreements and contracts that include

human rights clauses or that underwent human rights screening

54 2

Local communities 103 | 413 Management approach 47, 66413-1 Operations with local community engagement, impact

assessments, and development programs56 1

Supplier Social Assessment 103 | 414 Management approach 47, 66414-1 New suppliers that were screened using social criteria 54/ 100% 2 5, 8 e 16

Public policy 103 | 415 Abordagem de gestão políticas públicas None. We do not make donations to political parties or individual politicians

(Law No. 9,504/97).415-1 Contribuições políticas 10 16

Customer health and safety 103 | 416 Management approach 18, 66416-2 Incidents of non-compliance concerning the health

and safety impacts of products and servicesWe do not yet corporately control this kind of

impact on customers.Customer privacy 103 | 418 Management approach 22, 66

418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data

None. 16

Socioeconomic compliance 103 | 419 Management approach 22, 66419-1 Non-compliance with laws and regulations in the

social and economic areaNone. 16


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Information

CreditsAEGEA SANEAMENTO E PARTICIPAÇÕES S.A.

Avenida Brigadeiro Faria Lima, 1.663 – 1º andar São Paulo (SP)CEP: 01452-001Phone.: +55 (11) 3818-8150E-mail: [email protected]

GENERAL COORDINATION

Aegea (Investor Relations)

TEXT, EDITING AND REVIEW

KMZ Conteúdo

INDICATOR CONSULTANTS (GRI)

Avesso Sustentabilidade

CORPORATE

GRI 102-1, 102-3, 102-53

ENGLISH TRANSLATION

Gotcha! Idiomas

ART DIRECTION

Marcia Godoy

PHOTOGRAPHS

Aegea (Image bank)


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AEGEA SANEAMENTO E PARTICIPAÇÕES S.A.

Avenida Brigadeiro Faria Lima, 1.663 – 1º andar | São Paulo (SP)CEP: 01452-001 | +55 (11) 3818-8150 | [email protected]

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