2nd Quarter 20092nd Quarter 2009
August 2009 August 2009 –– Economic Economic -- Financial Office and Investor Relations OfficeFinancial Office and Investor Relations OfficeAugust 2009 August 2009 –– Economic Economic -- Financial Office and Investor Relations OfficeFinancial Office and Investor Relations Office
This presentation may contain forward-looking statementsreferring to SABESP’s business outlook, operating and financialresults estimates, and growth prospects. These are onlyprojections, and as such, they are exclusively based onSABESP’s management expectation in relation to the future of
Disclaimer
SABESP’s management expectation in relation to the future ofbusiness and its continuous access to capital to finance theCompany’s business plan. These forward-looking statementslargely depend on changes in market conditions, governmentalrules, industry performance and the Brazilian economy. amongstother factors, in addition to risks exhibited in disclosuredocuments filed by SABESP. Therefore, they are subject tochanges without prior notice.
Agenda
Company Overview1
Our Operations2 Our Operations2
Our Financial Performance3
� Sabesp is one of the largest water and sewage service providers in the world based on the number of Customers
� Provides water to 23.2 million people and sewage services to 19.3 million people
� Also sells wholesale treated water to 6 municipalities (3.3 million people)
(1) As of June 30, 2009
One of the largest water and sewage service providersin the world…
Main Operational Indicators(1)Company OverviewWater Sewage
Connections (million) 7.0 5.4
Coverage (%) 100 79
Treatment (%) 100 72(²)
Volume Billed (m³ million) 957.2 681.9
Network (Km thousand) 63.2 42.3
� Natural monopoly, low operating risk
� Serves the City of São Paulo and 364 out of 645 municipalities in the State
� Covers 60% of State's urban population
� Operations in the São Paulo Metropolitan Region* represent 75,5% of our total revenues
(1) As of June 30, 2009(2) Treated sewage as percentage of collected sewage
São PauloRegional Systems
Metropolitan Region**The Metropolitan Region we consider for this estimate, includes 8municipalities outside the legal boundaries of the São PauloMetropolitan Region and represent the total cities served by theCompany’s Metropolitan Division
4
� We are a mixed capital company, majority-owned by the State of São Paulo, with significant private ownership
� Corporate by-laws and State law requires the State of São Paulo to own at least 50% + 1 voting shares at all times
� In 2004, the Government of São Paulo completed a public share offering to sell its excess holdings, which resulted in its current ownership of 50.3% share
� Listed on the “Novo Mercado” and NYSE, to the highest corporate governance standards. We are also part of BM&FBovespa’s Sustainability Index - ISE
� 100% common shares
…with strong corporate governance
50.3%24.6%
25.1%
� 100% common shares
(1) As of June 2009
5
Ownership Structure(1)
Agenda
Our Operations2
Our Company1
6
3
Our Operations2
Our Financial Performance
73%
8%
2%
2%
15%
� The São Paulo Metropolitan Region represents 72% of the total billed water volume
� Operational flexibility to guarantee continued services for the growing demand
� Water production capacity of 67.7 m³/s, increasing by 8.6 m³/s until the end of 2013� 8 water prod. systems,192 reservoirs of treated water and 20 reservoirs non-treated water
Metropolitan Region water resources
Relative importance of each system producer
Water Production (65.2 m³/s) Distribution Systems – Metropolitan Region
SUZANOSÃO PAULO
V.GDE.PAUL.
ITAPEVI
COTIA
R. daGraça
R. P. Beicht
EMBU
JANDIRA
R.Billings
S.B.DOCAMPOS. LOURENÇO
DA SERRA
ITAP. DASERRA
JUQUITIBA
T.DASERRA
S. C.DO SUL
DIADEMA.STO.ANDRÉ
R.PIRESR. GDE.SERRA
FERRAZVASC.
POÁBARUERI
S. DOPARNAÍBA
SUZANO
MOGI DAS CRUZESITAQUA
OSASCO
P. B. JESUSCAJAMAR
MAIRIPORÃ
ARUJÁ
STA. ISABELF. DAROCHA
GUARAREMA
BIRITIBAMIRIM
SALESÓPOLIS
F. MORATO
CAIEIRAS
R. Juqueri
R.Taiaçupeba
R.JundiaíR.Biritiba
Mirim
R.Paraitinga
R.P. Nova
R. R. doCampo
Barr. doFrança
R. ÁguasClaras
R. Juquitiba
GUARULHOS
R.Guarapiranga
R.Guarapiranga
CARAPI-CUÍBA.
EMBUGUAÇU
MAUÁ
Note: Average of the 12 months ended June 2009
47,3%
20,5%
16,5%
7,0%5,5%
1,5% 1,4% 0,2%
Cantareira GuarapirangaAlto Tietê Rio ClaroRio Grande Alto CotiaBaixo Cotia Ribeirão da Estiva
8
� We currently serve 365 municipalities, mostly through concession contracts� Of the 178 concessions that matured up to 2008, 125 were renewed� In addition, 35 concessions with maturity after 2008 have already been renewed
(includes 12 municipalities that we did not have a formal contract)� Municipalities with concessions not renewed continue to be served by us with a short
term contract� Currently we have 32 municipalities without formal contract, representing 65,9% of our
revenues, including the municipality of São Paulo - we own all the assets in these municipalities
Broad coverage of municipalities
9
Concession Maturity Profile
68
2241
53710.7%
1.5%2.7%
1.1% 5.4%0%
4%
8%
12%
0
25
50
75
Until 2008 2009 2010 2011 Post 2012
% o
f Tota
l R
evenues
Co
nce
ssio
ns
Ma
turi
ng
� Final objective is to sign a Metropolitan Program Contract with the city of São Paulo, but also a benchmark for the metro region
� General guideline - shared responsibility
� June 2009 the São Paulo City Council approved a law which provides the minimum acceptable terms and authorizes the Mayor (Executive Branch) to sign a 30 year Program Contract with Sabesp.
Contract with São Paulo
Progress in the negotiation with São Paulo
Program Contract with Sabesp.
� Minimum acceptable terms are:� Sabesp should provide evidence that it has invested at least 13% of annual gross
revenue (net of Cofins and Pasep taxes) resulting from the services provided to theMunicipality, in sanitation and environmental programs of municipal interest –equivalent to approximately R$500 million per year.
� The City will receive 7.5% of gross revenue (net of Cofins and Pasep taxes) resultingfrom the services provided to the Municipality
� The 7.5% proceeds will be deposited in a Municipal Fund for Environmental Sanitationand Infrastructure
� The agreement shall be automatically terminated if Sabesp is privatized
10
Regulatory Framework
� Obligatory creation of a Regulatory Agency – Municipal or State level� Defines Program Contract as the contractual base to be utilized between Sabesp and a
Municipality� Program Contract is a modality of concession contract based on the Public Consortium Law 11.107/05
� No biding process is required
� Defines deadline for the establishment of formal contractual relationship - year 2010� Clarifies the payment conditions of the agreements executed prior to the law – up to 4 years� A Cooperation Agreement between the State and the Municipality is needed to turn effective
the program Contract and to delegate the regulation to the State Regulatory Agency
Federal Law # 11,445/07 � Effective as of March 2007
11
Discussion on Power of Concession
� Establishes the scope of sanitation services: supply of drinking water, sewage, urban cleaning and solid waste handling, drainage and handling of urban rainwater
� Still remains a discussion in the Federal level over the power of concession for sanitation services in Metropolitan regions � Law 11.445/07 does not address this matter
� Basic discussion: sanitation services are of local interest or common interest� Two legal proceedings under Supreme Court (STF) appraisal
� State of Rio de Janeiro x Niteroi – 4 votes
� State of Bahia x Salvador – 4 votes
Inflation (IPCA) Tariff Increase
� Until 2007, tariffs were adjusted every year by using a formula which adjusts our controllable costs by inflation and contemplates a “pass-through” of non-controllable costs
� As of 2008 the tariffs were established by ARSESP� For 2008 and 2009 the Agency announced tariffs adjustment that maintained the formula
previously used by Sabesp
Tariff adjustments
Annual Tariffs Adjustments vs. Inflation (%) Sabesp Annual Tariffs Adjustment
Part A Part B
7.7%
16.6%
6.8% 6.6%
4.0% 3.7%6,4%
4,5%
8.2%
18.9%
6.8%
9.0%
6.7%4.1% 5,1%
4,4%
2002 2003 2004 2005 2006 2007 2008 2009
12
Inflation (IPCA) X
Controllable Costs
Full “Pass-Through”
of Non-Controllable Costs
Includes:
� Electricity
� Treatment materials
� Taxes
� Use of water resources
Tariffs revision - Sabesp formula
Adjustment established by
ARSESP
� Regulation activities and responsibilities include:� Services� Tariff structure and adjustments
� Oversight of service
� Control
ARSESP - São Paulo State Sanitation and Energy Regulatory Agency
ARSESP s attribution
� Control
� Planning is a concession holder attribution
13
� New methodology to be detailed and implemented in 2011 considers:
� Regulatory return – WACC
� Remuneration of existent asset base
� Productivity components in tariff reviews
Methodology to calculate tariff adjustment published July/09
Water Connection Evolution (million) Water Coverage (Connections in ´000s)
Evolution of operations – water
6.4 6.5 6.6 6.8 6.97.0
2004 2005 2006 2007 2008 1S09
189159 158 149 159 159
787
2008 Real.
2009E 2010E 2011E 2012E 2013E 2014E a 2018E
� Adding 1,570 new connections through 2018 to match organic population growth
14
Real. 2018E
Sewage Connection Evolution (million) Sewage Coverage (Connections in ´000s)
� Collection: From: 79% in 2008 to 90% in 2018
� Treatment : From: 72% in 2008 to 90% in 2018
4.7 4.9
5.0 5.1
5.3 5.4
2004 2005 2006 2007 2008 1S09
� Target new municipalities within the State of São Paulo (16 million people – urban population including wholesale)
� As of December 2007, we are allowed to:� Establish subsidiaries, or to take a stake in other companies with same corporate
purpose, in Brazil and abroad� Increase the scope of services that can be rendered by Sabesp:
� Urban rainwater drainage and management� Urban cleaning and solid waste management� Unrestricted operation of power generation, storage, conservation and energy activities
Expansion opportunities
New Contracts – New Businesses
� Unrestricted operation of power generation, storage, conservation and energy activities
� New business:� In July 2008, SESAM was established in a partnership with OHL, for operation of a
sewage treatment concession in the city of Mogi-Mirim� Sanitary landfill operation: advanced negotiation with 3 cities in the State of São Paulo � Cooperation agreements signed with 5 state sanitation companies, for technical and
service support.� International agreements:
� Instituto Costarricence de Acueductos y Alcantarillados (AyA) – Costa Rica � Cooperation agreement with Agbar - Sociedad General Aguas de Barcelona - for the
exchange of knowledge and mapping of business opportunities for joint operations� International bidding process
� IDAAN – Panama – 3 years, US$ 8.8 million agreement to set up a water lossreduction program and management improvement.
15
Expansion opportunities
� Target municipalities: those currently served on a wholesale basis – population of 3.3 million
� Direct access to customers� Sell water directly to end user� Provide sewage collection and treatment services
� Significantly improve collection rates
Move Wholesale Customers to Retail
� Use of accounts receivable as consideration for acquisitions
� New developments:� Diadema: In December 2008, the protocol of intentions was executed between Sabesp
and the Municipal Government to operate the sanitation services� Guarulhos: Agreement of Execution to treat 20% of the city’s sewage system
16
Water Loss Program
30.0
31.0
32.0
33.0
34.0
35.0
June 2009: 26.9%
� Replacement and repair of water pipes and mains
� Installation of probing and pressure-regulating valves
� Preventive maintenance of existing and newly installed water meters
� Improvement in the quality of the materials
Physical losses
Goal in December 2013: 20.0%
Water Loss Target (%) Strategy to Reduce Water Loss
Goal in December 2018:14.0%
17
24.0
25.0
26.0
27.0
28.0
29.0� Improvement in the quality of the materials
� Non-visible leak research
� Selective change of network and ramifications.
Non physical losses
� Replacement of inaccuracy water meters
� Expand personnel who work on anti-fraud actions
� Fraud prevention
� Control of inactive connections
R$ 912 million investments in the Water Loss Program
forecast for 2009-2013
2018:14.0%
Capex plan
Total Investment Plan of R$ 8.6 billion for 2009 to 2013
214 213 254 228 2311,651 1,751 1,753 1,748 1,726
1500
2000
R$
mill
ion
s
18
577 590 664 653 668
860 948 835 867 827
0
500
1000
2009 2010 2011 2012 2013
R$
mill
ion
s
Water Sewage Others
Capex financing
R$ 3.5 billion
Funds from Company Cash flowR$ 4 billion = 46.5%
Funds from FinancingR$ 4.6 billion = 53.5%
CEF R$ 1.3 biBNDES R$ 105 miJBIC R$ 150 miBID R$ 318 miOthers R$ 15 mi
19
R$ 3.5 billion
41.1%
Total Financed Investments:� Total Amount = R$ 6.1 bi� Financed Amount = R$ 3.6 bi� Matching Funds = R$ 1.5 bi� Leverage = 75%
Others R$ 15 mi
BNDES R$ 533 mi
BID R$ 640 mi
BIRD R$ 115 mi
JBIC R$ 317 mi
CEF / BNDES BID / JBIC
� Solid capital structure, strong credit profile� Total debt / total book capitalization ratio below 50%� Sabesp has reduced its debt leverage from 3.6x in 2004 to 2.1x in June 2009
� Access to international and domestic capital markets and multilateral financing� 60% of total debt obtained along with domestic public and multilateral banks� 70% of foreign currency debt obtained along with multilateral banks
Total Debt Breakdown Total Debt by Currency
Access to long term, low cost financing
70%
30%34%
30%
9%
3%
21%
3%
20
Foreign Currency
Local Currency
Local Capital Markets
CEF and BB
Foreign Gov. Ag.
Others
Foreign Capital Markets
Local Gov. Ag.
� The US dollar-denominated debt is long-term and low cost (multilateral agencies). Currently, SABESP’s credit rating by S&P is brA+ (domestic) and BB- (international).
Debt amortization profile
300
450
600
750
900
1,050
1,200
1,350
1,500
1,650
1,203
928 1,052
650 689
339 219
449
171 126 115
525
Local Currency
Foreign Currency
21
Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020+
Local Debt 1,149 857 922 509 548 198 78 35 35 36 38 93
Foreign Debt 53 71 129 141 141 141 141 414 136 90 78 432
Total 1,203 928 1,052 650 689 339 219 449 171 126 115 525
-
150
300
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020+
171 126 115
R$ million
Our Company1
Our Operations2
Agenda
22
Our Financial Performance3
Net Revenues (R$ million) Gross Profit (R$ million)
Consistent performance
4,397 4,953 5,5275,971 6,352
3,277
2004 2005 2006 2007 2008 1S09
2,1442,577
2,9103,275 3,520
1,612
2004 2005 2006 2007 2008 1S09
23
EBITDA (R$ million) Net Income (R$ million)
1,927 2,286 2,446
2,699 2,840
1,290
2004 2005 2006 2007 2008 1S09
513
866779
1,055 1,008
721
2004 2005 2006 2007 2008 1S09
Financial Highlights
2004 2005 2006 2007 2008 1S09
Net Revenues (R$) 4,397.1 4,953.4 5,527.3 5,970.8 6,351.7 3,277.0
EBITDA (R$) 1,927.0 2,285.6 2,446.0 2,698.9 2,840.3 1,290.4
EBITDA Margin (%) 43.8 46.1 44.3 45.2 44.7 39.4
Net Income (R$) 513.1 865.6 778.9 1,048.7 1,008.1 720.9
Net Margin (%) 11.7 17.5 14.1 17.6 15.9 22.0
Total Assets (R$) 16,783.8 17,431.1 17,999.9 18,663.4 20,523.0 20,762.0
Total Debt (R$) 7,050.7 6,664.2 6,326.7 5,685.2 6,865.1 6,465.2
Short-term Debt (R$) 1,496.8 759.0 852.5 742.1 1,448.9 1,614.3
(In R$ million)
24
Short-term Debt (R$) 1,496.8 759.0 852.5 742.1 1,448.9 1,614.3
Long-Term Debt (R$) 5,553.8 5,905.2 5,474.2 4,943.1 5,416.2 4,850.9
Foreign Currency Debt (R$) 2,680.9 1,575.9 1,472.2 1,242.3 2,281.0 1,967.2
Shareholders' Equity (R$) 7,951.6 8,482.5 9,018.5 9,784.0 10,492.4 11,074.3
Total Debt/Total Cap. (%) 47.0 44.0 41.2 36.8 39.6 36.9
Investments (R$) 601.0 678.2 904.9 921.1 1,708.0 671.7
Dividend Declared (R$/000 shares) 5.4 12.2 9.5 1,32* 1,30* 0.61*
Pay Out (%) 29.8 40.2 34.7 28.7 29.4 19.3
Dividend Yield (%) 3.4 7.8 3.2 3.2 4.7 2.1
Outstanding shares - 227,836,623
Shares: ADR rate = 2:1
Note: Financials are in Brazilian Corporate Law. *earnings per share
Capital structure has remained
consistent with operating cash
generation and capitalization
Historical leverage metrics
New Debt vs. Amortization (R$ million)
9111,153
706
222
1,050 8461,0181,290
1,022735 630
803
2004 2005 2006 2007 2008 1S09
Inflow of funds Amortization
25
* EBITDA - LTM
Net Debt vs. EBITDA* (R$ million)
6,945 6,384 5,9995,220
6,242 5,780
1,9272,286 2,446 2,699 2,840
2,7253.60x2.79x
2.45x1.93x 2.10x 2.10x
2004 2005 2006 2007 2008 1Q09
Net Debt EBITDA Net Debt/Ebitida
6,945 6,384 5,999 5,220 6,242 5,7807,952 8,483
9,018 9,78410,492 11,074
0.9x 0.8x 0.7x0.5x
0.6x
0.5x
2004 2005 2006 2007 2008 1S09
Net Debt Shareholders' Equity Net Debt/SE
Net Debt vs. Shareholders’ Equity (R$ million)
www.sabesp.com.br
IR Contacts
Mario Azevedo de Arruda Sampaio Angela Beatriz [email protected] [email protected](55 11) 3388 8664 (55 11) 3388 8793
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