SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For May , 2019
(Commission File No. 1-31317)
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
(Exact name of registrant as specified in its charter)
Basic Sanitation Company of the State of Sao Paulo - SABESP
(Translation of Registrant's name into English)
Rua Costa Carvalho, 300
São Paulo, S.P., 05429-900
Federative Republic of Brazil
(Address of Registrant's principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1)__.
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7)__.
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ______ No ___X___
If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
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Version : 1
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Table of contents
Company
information
|
|
|
|
Capital Breakdown
|
1
|
Cash Proceeds
|
2
|
Parent Company’s Financial Statements
|
|
Statement of Financial Position - Assets
|
3
|
Statement of Financial Position - Liabilities
|
4
|
Income Statement
|
6
|
Statement of Comprehensive Income
|
7
|
Statement of Cash Flows
|
8
|
Statement of Changes in Equity
|
|
1/01/2019 to 3/31/2019
|
10
|
1/01/2018 to 3/31/2018
|
11
|
Statement of Value Added
|
12
|
Comments on the Company’s Performance
|
13
|
Notes to the Interim Financial Information
|
21
|
Comments on the Company’s Projections
|
80
|
Other Information Deemed as Relevant by the Company
|
81
|
Reports and Statements
|
|
Unqualified Reports on Special Review
|
83
|
Executive Officers’ Statement on the Financial Statements
|
84
|
Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm
|
85
|
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
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Version : 1
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Company Information / Capital Breakdown
Number of Shares
|
Current Quarter
|
(Units)
|
3/31/2019
|
Paid-in Capital
|
|
Common
|
683,509,869
|
Preferred
|
0
|
Total
|
683,509,869
|
Treasury Shares
|
|
Common
|
0
|
Preferred
|
0
|
Total
|
0
|
PAGE: 1 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
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Version : 1
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Company Information / Cash Proceeds
Event
|
Approval
|
Proceeds
|
Date of Payment
|
Type of Share
|
Class of Share
|
Proceed per Share
(Reais / Share)
|
Board of Directors’
Meeting
|
3/28/2019
|
Interest on Equity
|
|
Common
|
|
1.15900
|
PAGE: 2 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
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Version : 1
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Parent Company’s Financial Statements / Statement of Financial Position - Assets (R$ thousand)
Code
|
Description
|
Current Quarter
|
Previous Year
|
|
|
3/31/2019
|
12/31/2018
|
1
|
Total Assets
|
43,313,455
|
43,565,118
|
1.01
|
Current Assets
|
4,927,761
|
5,602,242
|
1.01.01
|
Cash and Cash Equivalents
|
2,205,083
|
3,029,191
|
1.01.03
|
Accounts Receivables
|
2,143,760
|
2,017,481
|
1.01.03.01
|
Trade Receivables
|
1,974,708
|
1,843,333
|
1.01.03.02
|
Other Receivables
|
169,052
|
174,148
|
1.01.03.02.01
|
Related-Party Balances
|
169,052
|
174,148
|
1.01.04
|
Inventories
|
70,572
|
65,596
|
1.01.06
|
Recoverable Taxes
|
336,079
|
380,703
|
1.01.06.01
|
Current Recoverable Taxes
|
336,079
|
380,703
|
1.01.08
|
Other Current Assets
|
172,267
|
109,271
|
1.01.08.03
|
Other
|
172,267
|
109,271
|
1.01.08.03.01
|
Restricted Cash
|
25,993
|
31,900
|
1.01.08.03.20
|
Other Receivables
|
146,274
|
77,371
|
1.02
|
Noncurrent Assets
|
38,385,694
|
37,962,876
|
1.02.01
|
Long-Term Assets
|
9,061,435
|
8,590,597
|
1.02.01.04
|
Accounts Receivable
|
197,170
|
209,083
|
1.02.01.04.01
|
Trade Receivables
|
197,170
|
209,083
|
1.02.01.09
|
Receivables from Related Parties
|
670,019
|
669,102
|
1.02.01.09.03
|
Receivables from Controlling Shareholders
|
670,019
|
669,102
|
1.02.01.10
|
Other Noncurrent Assets
|
8,194,246
|
7,712,412
|
1.02.01.10.04
|
Escrow Deposits
|
201,645
|
152,018
|
1.02.01.10.05
|
Water National Agency (ANA)
|
43,965
|
49,136
|
1.02.01.10.06
|
Contract Asset
|
7,837,583
|
7,407,948
|
1.02.01.10.20
|
Other Receivables
|
111,053
|
103,310
|
1.02.02
|
Investments
|
104,661
|
92,207
|
1.02.02.01
|
Equity Investments
|
57,053
|
44,587
|
1.02.02.01.03
|
Equity Investments in Jointly-Owned Subsidiaries
|
57,053
|
44,587
|
1.02.02.02
|
Investment Properties
|
47,608
|
47,620
|
1.02.03
|
Property, Plant and Equipment
|
279,120
|
267,612
|
1.02.04
|
Intangible Assets
|
28,940,478
|
29,012,460
|
1.02.04.01
|
Intangible Assets
|
28,940,478
|
29,012,460
|
1.02.04.01.01
|
Concession Agreements
|
5,317,760
|
5,305,353
|
1.02.04.01.02
|
Program Contracts
|
9,825,474
|
9,857,480
|
1.02.04.01.03
|
Service Contracts
|
13,258,443
|
13,391,452
|
1.02.04.01.04
|
Software License of Use
|
447,257
|
458,175
|
1.02.04.01.05
|
Right of Use
|
91,544
|
0
|
PAGE: 3 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
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Version : 1
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Parent Company’s Financial Statements / Statement of Financial Position - Liabilities (R$ thousand)
Code
|
Description
|
Current Quarter
|
Previous Year
|
|
|
3/31/2019
|
12/31/2018
|
2
|
Total Liabilities
|
43,313,455
|
43,565,118
|
2.01
|
Current Liabilities
|
4,874,771
|
5,398,632
|
2.01.01
|
Labor and Pension Plan Liabilities
|
510,708
|
564,830
|
2.01.01.01
|
Social Security Liabilities
|
26,275
|
48,539
|
2.01.01.02
|
Labor Liabilities
|
484,433
|
516,291
|
2.01.02
|
Trade Payables
|
427,383
|
465,993
|
2.01.02.01
|
Domestic Suppliers
|
427,377
|
465,993
|
2.01.02.02
|
Foreign Suppliers
|
6
|
0
|
2.01.03
|
Tax Liabilities
|
168,037
|
200,563
|
2.01.03.01
|
Federal Tax Liabilities
|
164,659
|
196,014
|
2.01.03.01.02
|
PIS-Pasep and Cofins Payable
|
91,405
|
82,381
|
2.01.03.01.03
|
INSS (social security contribution) Payable
|
37,780
|
38,871
|
2.01.03.01.20
|
Other Federal Taxes
|
35,474
|
74,762
|
2.01.03.03
|
Municipal Tax Liabilities
|
3,378
|
4,549
|
2.01.04
|
Borrowings and Financing
|
1,488,194
|
2,103,612
|
2.01.04.01
|
Borrowings and Financing
|
979,538
|
1,035,025
|
2.01.04.01.01
|
In Local Currency
|
229,258
|
296,525
|
2.01.04.01.02
|
In Foreign Currency
|
750,280
|
738,500
|
2.01.04.02
|
Debentures
|
445,694
|
1,049,510
|
2.01.04.03
|
Financing through Finance Lease
|
62,962
|
19,077
|
2.01.05
|
Other Liabilities
|
1,776,055
|
1,605,247
|
2.01.05.01
|
Payables to Related Parties
|
680
|
8,694
|
2.01.05.01.03
|
Payables to Controlling Shareholders
|
680
|
8,694
|
2.01.05.02
|
Other
|
1,775,375
|
1,596,553
|
2.01.05.02.01
|
Dividends and Interest on Equity Payable
|
673,744
|
673,765
|
2.01.05.02.04
|
Services Payable
|
580,377
|
454,022
|
2.01.05.02.05
|
Refundable Amounts
|
40,174
|
13,419
|
2.01.05.02.06
|
Program Contract Commitments
|
260,017
|
230,695
|
2.01.05.02.07
|
Public-Private Partnership (PPP)
|
122,431
|
137,827
|
2.01.05.02.09
|
Indemnities
|
11,257
|
11,257
|
2.01.05.02.20
|
Other Liabilities
|
87,375
|
75,568
|
2.01.06
|
Provisions
|
504,394
|
458,387
|
2.01.06.01
|
Tax, Social Security, Labor and Civil Provisions
|
246,487
|
169,060
|
2.01.06.01.01
|
Tax Provisions
|
33,775
|
33,434
|
2.01.06.01.02
|
Social Security and Labor Provisions
|
134,875
|
56,243
|
2.01.06.01.04
|
Civil Provisions
|
77,837
|
79,383
|
2.01.06.02
|
Other Provisions
|
257,907
|
289,327
|
2.01.06.02.03
|
Provisions for Environmental Liabilities and Decommissioning
|
14,260
|
14,175
|
2.01.06.02.04
|
Provisions for Customers
|
217,300
|
231,547
|
2.01.06.02.05
|
Provisions for Suppliers
|
26,347
|
43,605
|
2.02
|
Noncurrent Liabilities
|
18,239,705
|
18,614,798
|
2.02.01
|
Borrowings and Financing
|
10,692,566
|
11,049,184
|
2.02.01.01
|
Borrowings and Financing
|
8,062,070
|
8,153,545
|
2.02.01.01.01
|
In Local Currency
|
2,202,979
|
2,222,636
|
2.02.01.01.02
|
In Foreign Currency
|
5,859,091
|
5,930,909
|
2.02.01.02
|
Debentures
|
2,030,328
|
2,346,050
|
PAGE: 4 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Financial Position - Liabilities (R$ thousand)
Code
|
Description
|
Current Quarter
|
Previous Year
|
|
|
3/31/2019
|
12/31/2018
|
2.02.01.03
|
Financing through Finance Lease
|
600,168
|
549,589
|
2.02.02
|
Other Liabilities
|
6,886,552
|
6,869,897
|
2.02.02.02
|
Other
|
6,886,552
|
6,869,897
|
2.02.02.02.04
|
Pension Plan Liabilities
|
2,986,813
|
2,970,009
|
2.02.02.02.05
|
Program Contract Commitments
|
117,471
|
142,314
|
2.02.02.02.06
|
Public-Private Partnership (PPP)
|
3,279,258
|
3,275,297
|
2.02.02.02.07
|
Indemnities
|
31,146
|
31,146
|
2.02.02.02.08
|
Labor Liabilities
|
150,372
|
126,673
|
2.02.02.02.09
|
Deferred Cofins/Pasep
|
140,007
|
140,830
|
2.02.02.02.20
|
Other Liabilities
|
181,485
|
183,628
|
2.02.03
|
Deferred Taxes
|
294,666
|
261,242
|
2.02.03.01
|
Deferred Income Tax and Social Contribution
|
294,666
|
261,242
|
2.02.03.01.01
|
Deferred Income Tax and Social Contribution
|
294,666
|
261,242
|
2.02.04
|
Provisions
|
365,921
|
434,475
|
2.02.04.01
|
Tax, Social Security, Labor and Civil Provisions
|
187,487
|
262,970
|
2.02.04.01.01
|
Tax Provisions
|
20,580
|
21,810
|
2.02.04.01.02
|
Social Security and Labor Provisions
|
160,204
|
235,760
|
2.02.04.01.04
|
Civil Provisions
|
6,703
|
5,400
|
2.02.04.02
|
Other Provisions
|
178,434
|
171,505
|
2.02.04.02.03
|
Provisions for Environmental Liabilities and Decommissioning
|
173,592
|
156,244
|
2.02.04.02.04
|
Provisions for Customers
|
4,842
|
15,261
|
2.03
|
Equity
|
20,198,979
|
19,551,688
|
2.03.01
|
Paid-Up Capital
|
15,000,000
|
15,000,000
|
2.03.04
|
Profit Reserve
|
5,100,783
|
5,100,783
|
2.03.04.01
|
Legal Reserve
|
1,200,030
|
1,200,030
|
2.03.04.08
|
Additional Dividend Proposed
|
60,331
|
60,331
|
2.03.04.10
|
Reserve for Investments
|
3,840,422
|
3,840,422
|
2.03.05
|
Retained Earnings/Accumulated Losses
|
647,291
|
0
|
2.03.06
|
Equity Valuation Adjustments
|
-549,095
|
-549,095
|
PAGE: 5 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Income Statement (R$ thousand)
Code
|
Description
|
YTD Current
Year
|
YTD Previous
Year
|
|
|
1/01/2019 to 3/31/2019
|
1/01/2018 to 3/31/2018
|
3.01
|
Revenue from Sales and/or Services
|
3,878,504
|
3,699,668
|
3.02
|
Cost of Sales and/or Services
|
-2,337,103
|
-2,139,237
|
3.02.01
|
Cost of Sales and/or Services
|
-1,747,145
|
-1,506,585
|
3.02.02
|
Construction Cost
|
-589,958
|
-632,652
|
3.03
|
Gross Profit
|
1,541,401
|
1,560,431
|
3.04
|
Operating Income/Expenses
|
-399,745
|
-477,826
|
3.04.01
|
Selling Expenses
|
-198,955
|
-224,155
|
3.04.01.01
|
Selling Expenses
|
-191,195
|
-175,524
|
3.04.01.02
|
Allowance for Doubtful Accounts
|
-7,760
|
-48,631
|
3.04.02
|
General and Administrative Expenses
|
-210,381
|
-267,980
|
3.04.04
|
Other Operating Income
|
13,385
|
17,425
|
3.04.04.01
|
Other Operating Income
|
14,992
|
19,460
|
3.04.04.02
|
Cofins and Pasep
|
-1,607
|
-2,035
|
3.04.05
|
Other Operating Expenses
|
-5,558
|
-5,933
|
3.04.06
|
Equity Results
|
1,764
|
2,817
|
3.05
|
Income before Financial Result and Taxes
|
1,141,656
|
1,082,605
|
3.06
|
Financial Result
|
-150,456
|
-193,933
|
3.06.01
|
Financial Income
|
102,200
|
77,099
|
3.06.01.01
|
Financial Income
|
107,950
|
80,999
|
3.06.01.02
|
Exchange Gains
|
-731
|
-134
|
3.06.01.03
|
Cofins and Pasep
|
-5,019
|
-3,766
|
3.06.02
|
Financial Expenses
|
-252,656
|
-271,032
|
3.06.02.01
|
Financial Expenses
|
-252,477
|
-159,017
|
3.06.02.02
|
Exchange Losses
|
-179
|
-112,015
|
3.07
|
Earnings before Income Tax
|
991,200
|
888,672
|
3.08
|
Income Tax and Social Contribution
|
-343,909
|
-308,241
|
3.08.01
|
Current
|
-310,485
|
-325,870
|
3.08.02
|
Deferred
|
-33,424
|
17,629
|
3.09
|
Net Result from Continued Operations
|
647,291
|
580,431
|
3.11
|
Profit/Loss for the Period
|
647,291
|
580,431
|
3.99
|
Earnings per Share - (Reais/Share)
|
|
|
3.99.01
|
Basic Earnings per Share
|
|
|
3.99.01.01
|
Common Share
|
0.94701
|
0.84919
|
3.99.02
|
Diluted Earnings per Share
|
|
|
3.99.02.01
|
Common Share
|
0.94701
|
0.84919
|
PAGE: 6 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Comprehensive Income
(R$ thousand)
Code
|
Description
|
YTD Current
Year
1/01/2019 to 3/31/2019
|
YTD Previous
Year
1/01/2018 to 3/31/2018
|
4.01
|
Net Income for the Period
|
647,291
|
580,431
|
4.03
|
Comprehensive Income for the Period
|
647,291
|
580,431
|
PAGE: 7 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method (R$ thousand)
Code
|
Description
|
YTD Current
Year
|
YTD Previous
Year
|
|
|
1/01/2019 to 3/31/2019
|
1/01/2018 to 3/31/2018
|
6.01
|
Net Cash from Operating Activities
|
589,840
|
662,016
|
6.01.01
|
Cash from Operations
|
1,493,474
|
1,557,019
|
6.01.01.01
|
Profit before Income Tax and Social Contribution
|
991,200
|
888,672
|
6.01.01.02
|
Provision and Inflation Adjustments on Provisions
|
46,101
|
36,513
|
6.01.01.04
|
Finance Charges from Customers
|
-197,962
|
-60,324
|
6.01.01.05
|
Residual Value of Property, Plant and Equipment, Intangible Assets and Investment Properties Written-off
|
3,143
|
4,282
|
6.01.01.06
|
Depreciation and Amortization
|
410,863
|
327,899
|
6.01.01.07
|
Interest on Borrowings and Financing Payable
|
138,978
|
119,242
|
6.01.01.08
|
Monetary and Exchange Change on Borrowings and Financing
|
17,207
|
131,664
|
6.01.01.09
|
Interest and Monetary Changes on Liabilities
|
9,524
|
8,099
|
6.01.01.10
|
Interest and Monetary Changes on Assets
|
-75,621
|
-3,929
|
6.01.01.11
|
Allowance for Doubtful Accounts
|
11,070
|
48,631
|
6.01.01.12
|
Provision for Consent Decree (TAC) and Knowledge Retention Program (PRC)
|
-19,313
|
7,387
|
6.01.01.13
|
Equity Results
|
-1,764
|
-2,817
|
6.01.01.15
|
Other Adjustments
|
-13,163
|
6,303
|
6.01.01.16
|
Transfer of Funds to São Paulo Municipal Government
|
119,920
|
0
|
6.01.01.17
|
Construction Margin over Intangible Assets Resulting from Concession Contracts
|
-13,569
|
-14,551
|
6.01.01.18
|
Pension Plan Liabilities
|
66,860
|
59,948
|
6.01.02
|
Changes in Assets and Liabilities
|
-412,002
|
-477,063
|
6.01.02.01
|
Trade Receivables
|
98,414
|
-77,646
|
6.01.02.02
|
Related-Party Balances and Transactions
|
11,513
|
28,282
|
6.01.02.03
|
Inventories
|
-4,976
|
10,179
|
6.01.02.04
|
Recoverable Taxes
|
44,624
|
86,069
|
6.01.02.05
|
Other Receivables
|
-36,159
|
-112,021
|
6.01.02.06
|
Escrow Deposits
|
-12,324
|
-21,891
|
6.01.02.08
|
Accounts Payable to Suppliers and Contractors
|
-328,719
|
-244,286
|
6.01.02.09
|
Salaries, Payroll Charges and Social Contributions
|
-34,809
|
37,686
|
6.01.02.10
|
Pension Plan Liabilities
|
-50,056
|
-52,328
|
6.01.02.11
|
Taxes and Contributions Payable
|
-92,543
|
-160,978
|
6.01.02.12
|
Services Payable
|
6,435
|
107,577
|
6.01.02.13
|
Other Liabilities
|
56,069
|
4,304
|
6.01.02.14
|
Provisions
|
-68,648
|
-80,597
|
6.01.02.15
|
Deferred Cofins/Pasep
|
-823
|
-1,413
|
6.01.03
|
Other
|
-491,632
|
-417,940
|
6.01.03.01
|
Interest Paid
|
-241,164
|
-196,060
|
6.01.03.02
|
Income Tax and Social Contribution Paid
|
-250,468
|
-221,880
|
6.02
|
Net Cash from Investing Activities
|
-233,143
|
-228,659
|
6.02.01
|
Acquisition of Intangible Assets
|
-209,552
|
-229,976
|
6.02.02
|
Acquisition of Property, Plant and Equipment
|
-18,796
|
-2,786
|
6.02.03
|
Increase in Investments
|
-10,702
|
-655
|
6.02.04
|
Restricted Cash
|
5,907
|
4,758
|
6.03
|
Net Cash from Financing Activities
|
-1,180,805
|
247,458
|
PAGE: 8 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method (R$ thousand)
Code
|
Description
|
YTD Current
Year
|
YTD Previous
Year
|
|
|
1/01/2019 to 3/31/2019
|
1/01/2018 to 3/31/2018
|
6.03.01
|
Funding
|
103,815
|
943,048
|
6.03.02
|
Amortization
|
-1,154,042
|
-681,698
|
6.03.03
|
Payment of Interest on Equity
|
-21
|
0
|
6.03.04
|
Public-Private Partnership (PPP)
|
-129,157
|
-13,892
|
6.03.05
|
Program Contract Commitments
|
-1,400
|
0
|
6.05
|
Increase (Decrease) in Cash and Cash Equivalents
|
-824,108
|
680,815
|
6.05.01
|
Opening Cash and Cash Equivalents
|
3,029,191
|
2,283,047
|
6.05.02
|
Closing Cash and Cash Equivalents
|
2,205,083
|
2,963,862
|
PAGE: 9 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Changes in Equity / 1/01/2019 to 3/31/2019 (R$ thousand)
Code
|
Description
|
Paid-up Capital
|
Capital Reserves, Options Granted and Treasury Shares
|
Profit Reserves
|
Retained Earnings/
Accumulated Losses
|
Other Comprehensive Income
|
Equity
|
5.01
|
Opening Balances
|
15,000,000
|
0
|
5,100,783
|
0
|
-549,095
|
19,551,688
|
5.03
|
Restated Opening Balances
|
15,000,000
|
0
|
5,100,783
|
0
|
-549,095
|
19,551,688
|
5.05
|
Total Comprehensive Income
|
0
|
0
|
0
|
647,291
|
0
|
647,291
|
5.05.01
|
Net Income for the Period
|
0
|
0
|
0
|
647,291
|
0
|
647,291
|
5.07
|
Closing Balances
|
15,000,000
|
0
|
5,100,783
|
647,291
|
-549,095
|
20,198,979
|
PAGE: 10 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Changes in Equity / 1/01/2018 to 3/31/2018 (R$ thousand)
Code
|
Description
|
Paid-up Capital
|
Capital Reserves,
Options Granted and Treasury Shares
|
Profit Reserves
|
Retained Earnings/
Accumulated Losses
|
Other Comprehensive Income
|
Equity
|
5.01
|
Opening Balances
|
10,000,000
|
0
|
8,051,110
|
0
|
-538,101
|
17,513,009
|
5.03
|
Restated Opening Balances
|
10,000,000
|
0
|
8,051,110
|
0
|
-538,101
|
17,513,009
|
5.05
|
Total Comprehensive Income
|
0
|
0
|
0
|
580,431
|
0
|
580,431
|
5.05.01
|
Net Income for the Period
|
0
|
0
|
0
|
580,431
|
0
|
580,431
|
5.07
|
Closing Balances
|
10,000,000
|
0
|
8,051,110
|
580,431
|
-538,101
|
18,093,440
|
PAGE: 11 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Parent Company’s Financial Statements / Statement of Value Added (R$ thousand)
Code
|
Description
|
YTD Current
Year
|
YTD Previous
Year
|
|
|
1/01/2019 to 3/31/2019
|
1/01/2018 to 3/31/2018
|
7.01
|
Revenue
|
4,146,906
|
3,898,878
|
7.01.01
|
Goods, Products and Services Sold
|
3,536,147
|
3,280,846
|
7.01.02
|
Other Revenue
|
14,992
|
19,460
|
7.01.03
|
Revenue from Construction of Own Assets
|
603,527
|
647,203
|
7.01.04
|
Allowance for/Reversal of Doubtful Accounts
|
-7,760
|
-48,631
|
7.02
|
Inputs Acquired from Third Parties
|
-1,476,216
|
-1,390,017
|
7.02.01
|
Costs of Sales and Services
|
-1,252,380
|
-1,124,975
|
7.02.02
|
Materials, Electricity, Outside Services and Others
|
-218,278
|
-259,109
|
7.02.04
|
Other
|
-5,558
|
-5,933
|
7.03
|
Gross Value Added
|
2,670,690
|
2,508,861
|
7.04
|
Retentions
|
-410,863
|
-327,899
|
7.04.01
|
Depreciation, Amortization and Depletion
|
-410,863
|
-327,899
|
7.05
|
Net Value Added Produced
|
2,259,827
|
2,180,962
|
7.06
|
Wealth Received in Transfer
|
108,983
|
83,682
|
7.06.01
|
Equity Results
|
1,764
|
2,817
|
7.06.02
|
Financial Income
|
107,219
|
80,865
|
7.07
|
Total Value Added to Distribute
|
2,368,810
|
2,264,644
|
7.08
|
Value Added Distribution
|
2,368,810
|
2,264,644
|
7.08.01
|
Personnel
|
622,298
|
570,360
|
7.08.01.01
|
Salaries and Wages
|
395,114
|
389,100
|
7.08.01.02
|
Benefits
|
206,362
|
139,950
|
7.08.01.03
|
Government Severance Indemnity Fund for Employees (FGTS)
|
20,822
|
41,310
|
7.08.02
|
Taxes and Contributions
|
753,670
|
679,408
|
7.08.02.01
|
Federal
|
705,250
|
636,987
|
7.08.02.02
|
State
|
34,489
|
30,019
|
7.08.02.03
|
Municipal
|
13,931
|
12,402
|
7.08.03
|
Value Distributed to Providers of Capital
|
345,551
|
434,445
|
7.08.03.01
|
Interest
|
332,670
|
414,156
|
7.08.03.02
|
Rental
|
12,881
|
20,289
|
7.08.04
|
Value Distributed to Shareholders
|
647,291
|
580,431
|
7.08.04.03
|
Retained Earnings / Accumulated Loss for the Period
|
647,291
|
580,431
|
PAGE: 12 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Comments on the Company’s Performance
1.
Financial highlights
R$ million
|
Var.
|
|
1Q19
|
1Q18
|
R$
|
%
|
Gross operating revenue
(1)
|
3,536.1
|
3,280.8
|
255.3
|
7.8
|
Construction revenue
|
603.5
|
647.2
|
(43.7)
|
(6.8)
|
COFINS and PASEP and TRCF taxes
(2)
|
(261.1)
|
(228.4)
|
(32.7)
|
14.3
|
(=) Net operating revenue
|
3,878.5
|
3,699.6
|
178.9
|
4.8
|
Costs and expenses
|
(2,156.4)
|
(1,998.7)
|
(157.7)
|
7.9
|
Construction costs
|
(590.0)
|
(632.7)
|
42.7
|
(6.7)
|
Equity result
|
1.8
|
2.8
|
(1.0)
|
(35.7)
|
Other operating revenue (expenses), net
|
7.8
|
11.5
|
(3.7)
|
(32.2)
|
(=) Earnings before financial result, income tax and social contribution
|
1,141.7
|
1,082.5
|
59.2
|
5.5
|
Financial result
|
(150.5)
|
(193.9)
|
43.4
|
(22.4)
|
(=) Earnings before income tax and social contribution
|
991.2
|
888.6
|
102.6
|
11.5
|
Income tax and social contribution
|
(343.9)
|
(308.2)
|
(35.7)
|
11.6
|
(=) Net income
|
647.3
|
580.4
|
66.9
|
11.5
|
Earnings per share (R$) *
|
0.95
|
0.85
|
|
|
(1)
Includes Regulation, Control and Inspection Fee (TRCF), totaling R$ 16.7 million in 1Q19 and R$ 15.5 million in 1Q18.
(2)
Includes TRCF transfer, totaling R$ 14.6 million in 1Q19 and R$ 13.5 million in 1Q18.
(*) Total shares
=
683,509,869
Adjusted EBITDA Reconciliation (Non-accounting measures)
R$ million
|
Var.
|
|
1Q19
|
1Q18
|
R$
|
%
|
Net income
|
647.3
|
580.4
|
66.9
|
11.5
|
Income tax and social contribution
|
343.9
|
308.2
|
35.7
|
11.6
|
Financial result
|
150.5
|
193.9
|
(43.4)
|
(22.4)
|
Other operating revenue (expenses), net
|
(7.8)
|
(11.5)
|
3.7
|
(32.2)
|
(=) Adjusted EBIT *
|
1,133.9
|
1,071.0
|
62.9
|
5.9
|
Depreciation and amortization
|
410.8
|
328.0
|
82.8
|
25.2
|
(=) Adjusted EBITDA **
|
1,544.7
|
1,399.0
|
145.7
|
10.4
|
(%) Adjusted EBITDA margin
|
39.8
|
37.8
|
|
|
* Adjusted EBIT is net income before: (i) other operating revenues/expenses, net; (ii) financial result; and (iii) income tax and social contribution.
** Adjusted EBITDA is net income before: (i) depreciation and amortization expenses; (ii) income tax and social contribution; (iii) financial result; and (iv) other operating revenues/expenses, net.
In 1Q19, net operating revenue, which considers construction revenue, totaled R$ 3,878.5 million, up 4.8% year-over-year
.
Costs and expenses, which consider construction costs, totaled R$ 2,746.4 million, up 4.4% year-over-year
.
Adjusted EBIT, totaling R$ 1,133.9 million, up 5.9% over the R$ 1,071.0 million reported in 1Q18
.
Adjusted EBITDA, totaling R$ 1,544.7 million, up 10.4% over the R$ 1,399.0 million reported in 1Q18 (R$ 6,686.3 million in the last 12 months
).
The adjusted EBITDA margin in 1Q19 was of 39.8%, over 37.8% in 1Q18 (41.1% in the last 12 months).
Excluding the effects of revenue and construction costs, adjusted EBITDA margin reached 46.8% in 1Q19, over 45.4% in 1Q18 (49.1% in the last 12 months).
In 1Q19, net income reached R$ 647.3 million, over a net income of R$ 580.4 million in 1Q18
.
PAGE: 13 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Comments on the Company’s Performance
2.
Gross operating revenue
The gross operating revenue related to the sanitation services, totaling R$ 3,536.1 million, which does not consider construction revenue, had an increase of R$ 255.3 million or 7.8%, when compared to the R$ 3,280.8 million in 1Q18
.
The main factors that led to the increase were
:
·
3.5% tariff repositioning index since June 2018;
·
3.1% increase in total billed volume: 0.3% in water and 6.6% in sewage
; and
·
Beginning of operations in the municipality of Guarulhos in January 2019, generating an increase of R$ 70.2 million in operating revenue
.
3.
Construction revenue
Construction revenue decreased by R$ 43.7 million or 6.8% year-over-year.
This variation was mainly due to the increase in asset investments carried out in 1Q18, mostly in São Lourenço Production System
(PPP).
PAGE: 14 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Comments on the Company’s Performance
4.
Billed volume
The tables below show billed volumes of water and sewage, quarter-over-quarter, according to the consumer category and region
.
QUARTER
|
WATER AND SEWAGE BILLED VOLUME
(1)
PER CUSTOMER CATEGORY – million’ m
3
|
|
Water
|
Sewage
|
Water + Sewage
|
Category
|
1Q19
|
1Q18
|
%
|
1Q19
|
1Q18
|
%
|
1Q19
|
1Q18
|
%
|
Residential
|
432.1
|
406.8
|
6.2
|
369.7
|
346.5
|
6.7
|
801.8
|
753.3
|
6.4
|
Commercial
|
43.6
|
42.0
|
3.8
|
42.3
|
40.0
|
5.7
|
85.9
|
82.0
|
4.8
|
Industrial
|
8.2
|
7.8
|
5.1
|
9.9
|
9.7
|
2.1
|
18.1
|
17.5
|
3.4
|
Public
|
10.4
|
9.7
|
7.2
|
9.3
|
8.7
|
6.9
|
19.7
|
18.4
|
7.1
|
Total retail
|
494.3
|
466.3
|
6.0
|
431.2
|
404.9
|
6.5
|
925.5
|
871.2
|
6.2
|
Wholesale
(3)
|
38.3
|
64.7
|
(40.8)
|
8.6
|
7.7
|
11.7
|
46.9
|
72.4
|
(35.2)
|
Total
|
532.6
|
531.0
|
0.3
|
439.8
|
412.6
|
6.6
|
972.4
|
943.6
|
3.1
|
WATER AND SEWAGE BILLED VOLUME
(1)
PER REGION – million m
3
|
|
Water
|
Sewage
|
Water + Sewage
|
Region
|
1Q19
|
1Q18
|
Var. %
|
1Q19
|
1Q18
|
Var. %
|
1Q19
|
1Q18
|
Var. %
|
Metropolitan
|
322.2
|
299.7
|
7.5
|
281.3
|
260.7
|
7.9
|
603.7
|
560.4
|
7.7
|
Regional
(2)
|
172.1
|
166.6
|
3.3
|
149.9
|
144.2
|
4.0
|
322.0
|
310.8
|
3.6
|
Total retail
|
494.3
|
466.3
|
6.0
|
431.2
|
404.9
|
6.5
|
925.5
|
871.2
|
6.2
|
Wholesale
(3)
|
38.3
|
64.7
|
(40.8)
|
8.6
|
7.7
|
11.7
|
46.9
|
72.4
|
(35.2)
|
Total
|
532.6
|
531.0
|
0.3
|
439.8
|
412.6
|
6.6
|
972.4
|
943.6
|
3.1
|
(1)
Unaudited
(2)
Including coastal and interior regions
(3)
Wholesale volumes of reuse water and non-domestic sewage are included
PAGE: 15 of 84
ITR – Quarterly Financial Form – 3/31/2019 - CIA SANEAMENTO BASICO EST SAO PAULO
|
Version : 1
|
Comments on the Company's Performance
5.
Costs, administrative & selling expenses and construction costs
Costs, administrative and commercial expenses and construction costs increased by R$ 115.0 million in 1Q19 (4.4%). Excluding construction costs, there was an increase of R$ 157.7 million (7.9%).
As a participation of net revenue, administrative and selling expenses and construction costs accounted for 70.8% in 1Q19, versus 71.1% in 1Q18.
R$ million
|
Var.
|
|
1Q19
|
1Q18
|
R$
|
%
|
Salaries and payroll charges and Pension plan obligations
|
681.0
|
630.0
|
51.0
|
8.1
|
General supplies
|
57.4
|
55.0
|
2.4
|
4.4
|
Treatment supplies
|
86.7
|
75.9
|
10.8
|
14.2
|
Services
|
422.2
|
377.1
|
45.1
|
12.0
|
Electricity
|
283.0
|
221.9
|
61.1
|
27.5
|
General expenses
|
191.7
|
246.2
|
(54.5)
|
(22.1)
|
Tax expenses
|
15.8
|
16.0
|
(0.2)
|
(1.3)
|
Sub-total
|
1,737.8
|
1,622.1
|
115.7
|
7.1
|
Depreciation and amortization
|
410.8
|
328.0
|
82.8
|
25.2
|
Allowance for doubtful accounts
|
7.8
|
48.6
|
(40.8)
|
(84.0)
|
Sub-total
|
418.6
|
376.6
|
42.0
|
11.2
|
Costs, administrative and selling expenses
|
2,156.4
|
1,998.7
|
157.7
|
7.9
|
Construction costs
|
590.9
|
632.7
|
(42.7)
|
(6.7)
|
Costs, adm. & selling expenses and construction costs
|
2,746.4
|
2,631.4
|
115.0
|
4.4
|
% of net revenue
|
70.8
|
71.1
|
|
|
5.1.
Salaries and payroll charges and Pension plan obligations
In 1Q19, there was an increase of R$ 51.0 million or 8.1%, due to the following
:
·
Increase of R$ 53.3 million in medical expenses;
·
Increase of R$ 13.3 million in salaries, mainly due to the salary increase of 1.3% in May 2018, the hiring of 1,019 employees in 2018 and the application of 1.0% referring to the Carrier and Salaries Plan
(Plano de Cargos e Salários)
in February 2019;
·
Higher overtime expense, reaching R$ 7.5 million; and
·
Increase in expenses with meal voucher and food supplies basket, reaching R$ 5.0 million.
The above increases were partially offset due to:
·
Decrease of R$ 25.5 million in the provision for the Profit-Sharing Program; and
·
Lower provision for retired Consent Decree (
Termo de Ajustamento de Conduta
– TAC) expenses, reaching R$ 5.3 million.
5.2.
Treatment materials
Increase of R$ 10.8 million or 14.2%, mainly due to the greater need to use coagulants and disinfectants in the water treatment, mainly in Water Treatment Station ABV
.
5.3.
Services
Expenses with services, totaling R$ 422.2 million, increased by R$ 45.1 million or 12.0% over the R$ 377.1 million in 1Q18. The increase was mainly due the
:
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Comments on the Company's Performance
·
Increase of hiring of technical and professional services in 1Q19, totaling R$ 20.4 million, mainly related to: (i) the start of operations in the municipality of Guarulhos in January 2019, totaling R$ 7.6 million; (ii) services of management and operation of call centers, totaling R$ 3.1 million; and (iii) maintenance services and IT technical support, totaling R$ 2.9 million; and
·
Greater use of maintenance services in water and sewage networks and systems, totaling R$ 16.2 million.
5.4.
Electricity
Electricity expenses totaled R$ 283.0 million in 1Q19, up R$ 61.1 million or 27.5% over R$ 221.9 million in 1Q18. The key factors that influenced this variation were
:
·
Average decrease of 2.2% in energy prices of the Free market tariffs (
Ambiente de Contratação Livre
- ACL), down 5.3% in consumption
;
·
Average increase of 34.6% in the Grid market tariffs (
Tarifas de Uso do Sistema de Distribuição
- TUSD), down 26.2% in consumption; and
·
Average increase of 16.1% in Regulated market tariffs (
Ambiente de Contratação Regulada
- ACR), up 43.8% in consumption
.
In 1Q19, of total electricity expenses, the free market accounted for 22%, while TUSD corresponded to 11% and the regulated market accounted for 67% of this total
.
5.5.
General expenses
A decrease of R$ 54.5 million or 22.1%, totaling R$ 191.7 million in 1Q19, over R$ 246.2 million in 1Q18, mainly due to reversals of lawsuits, totaling R$ 45.9 million, due to changes in expected loss
.
5.6.
Depreciation and amortization
Depreciation and amortization expenses increased R$ 82.8 million or 25.2%, due to the start-up of intangible assets, totaling R$ 6.1 billion, of which R$ 3.2 billion referring to the São Lourenço Production System
.
5.7.
Allowance for doubtful accounts
Decrease of R$ 40.8 million, mainly due to the lower delinquency rate in 1Q19, of which R$ 29.9 million is related to the provisioning of revenue losses with the municipality of Guarulhos in 1Q18
.
6. Financial result
|
|
|
|
R$ million
|
|
|
|
Var.
|
|
1Q19
|
1Q18
|
R$
|
%
|
Financial expenses, net of income
|
(150.7)
|
(67.2)
|
(83.5)
|
124.3
|
Net monetary and exchange variation
|
0.2
|
(126.7)
|
126.9
|
(100.2)
|
Financial result
|
(150.5)
|
(193.9)
|
43.4
|
(22.4)
|
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Comments on the Company's Performance
6.1. Financial expenses, net of income
R$ million
Financial expenses
Interest and charges on domestic loans and financing
|
(81.2)
|
(78.2)
|
(3.0)
|
3.8
|
Interest and charges on international loans and financing
|
(42.4)
|
(36.6)
|
(5.8)
|
15.8
|
Other financial expenses
|
(104.2)
|
(14.9)
|
(89.3)
|
599.3
|
Total financial expenses
|
(227.8)
|
(129.7)
|
(98.1)
|
75.6
|
Financial income
|
77.1
|
62.5
|
14.6
|
23.4
|
Financial expenses net of income
|
(150.7)
|
(67.2)
|
(83.5)
|
124.3
|
6.1.1. Financial expenses
Increase of R$ 98.1 million, mainly due to
:
|
|
|
|
|
·
Increase of R$ 5.8 million in interest and charges on foreign loans and financing, mainly due to the higher US dollar appreciation in 1Q19 (0.6%), when compared to the appreciation in 1Q18 (0.5%); and
·
Increase of R$ 89.3 million in other financial expenses, mainly due to: (i) higher recognition of interest related to the Public-Private Partnership contracts in 1Q19, reaching R$ 53.4 million, due to the full start-up of operations of the São Lourenço Production System, in July 2018; and (ii) higher recognition of interest on lawsuits, totaling R$ 32.4 million
.
6.1.2. Financial income
Increase of R$ 14.6 million, mainly due to the higher recognition of interest on installment agreements in 1Q19
.
6.2. Monetary and exchange variation, net
|
|
|
|
R$ million
|
|
|
|
Var.
|
|
1Q19
|
1Q18
|
R$
|
%
|
Monetary variation on loans and financing
|
(16.7)
|
(19.6)
|
2.9
|
(14.8)
|
Currency exchange variation on loans and financing
|
(0.2)
|
(112.0)
|
111.8
|
(99.8)
|
Other monetary variations
|
(8.0)
|
(9.7)
|
1.7
|
(17.5)
|
Monetary/exchange rate variation on liabilities
|
(24.9)
|
(141.3)
|
116.4
|
(82.4)
|
Monetary/exchange rate variation on assets
|
25.1
|
14.6
|
10.5
|
71.9
|
Monetary/exchange rate variation, net
|
0.2
|
(126.7)
|
126.9
|
(100.2)
|
The effect of the net monetary and exchange rate variations in 1Q19 decreased R$ 126.9 over 1Q18, mainly due to the decrease of R$ 111.8 million in exchange rate changes on loans and financing due to the depreciation of the yen versus the real in 1Q19 (-0.2%), when compared to the appreciation in 1Q18 (6.3%), and the fact that the US dollar had no significant variation in the comparison period.
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Comments on the Company's Performance
7.
Income tax and social contribution
The increase of R$ 35.7 million was due to the higher taxable income in 1Q19, mainly affected by the increase in operating revenue, mostly due to the beginning of the operation in the city of Guarulhos; and mitigated by the increase in costs with electricity and salaries
.
8.
Indicators
8.1.
Operating
Operating indicators
(*)
|
1Q19
|
1Q18
|
%
|
Water connections
(1)
|
9,484
|
8,908
|
6.5
|
Sewage connections
(1)
|
7,893
|
7,345
|
7.5
|
Population directly served - water
(2)
|
26.2
|
24.9
|
5.2
|
Population directly served - sewage
(2)
|
22.8
|
21.6
|
5.6
|
Number of employees
|
14,213
|
13,610
|
4.4
|
Water volume produced
(3)
|
719
|
702
|
2.5
|
IPM – Measured water loss (%)
|
29.9
|
30.4
|
(0.5)
|
IPDt (liters/connection x day)
|
291
|
298
|
(2.3)
|
(1)
Total connections, active and inactive, in thousand units at the end of the period
(2)
In million inhabitants, at the end of the period. Does not include wholesale
(3)
In millions of cubic meters
(*)
Unaudited
8.2.
Economic
Economic Variables at the close of the period (*)
|
1Q19
|
1Q18
|
Amplified Consumer Price Index
(1)
|
1.51
|
0.70
|
National Consumer Price Index
(1)
|
1.68
|
0.48
|
Consumer Price Index
(1)
|
1.64
|
0.04
|
Referential Rate
(1)
|
0.0000
|
0.0000
|
Interbank Deposit Certificate
(2)
|
6.40
|
6.39
|
US DOLLAR
(3)
|
3.8967
|
3.3238
|
YEN
(3)
|
0.03521
|
0.03126
|
(1)
Annual accrual, in %
(2)
Annual average
(3)
Ptax sale rate on the last day
(*)
Unaudited
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Comments on the Company's Performance
9.
Loans and financing
R$ thousand
DEBT PROFILE
|
INSTITUTION
|
2019
|
2020
|
2021
|
2022
|
2023
|
2024
|
2025 onwards
|
TOTAL
|
Local currency
|
|
|
|
|
|
|
|
|
Banco do Brasil
|
‐
|
‐
|
|
|
|
|
|
‐
|
Brazilian Federal Savings Bank
|
57,078
|
78,813
|
82,956
|
87,424
|
79,923
|
78,310
|
883,200
|
1,347,704
|
Debentures
|
117,925
|
593,632
|
481,515
|
560,631
|
363,834
|
206,601
|
151,884
|
2,476,022
|
BNDES
|
91,289
|
103,423
|
102,970
|
102,970
|
97,298
|
91,803
|
451,497
|
1,041,250
|
Leases
|
13,823
|
36,481
|
38,348
|
40,378
|
43,175
|
45,055
|
352,503
|
569,763
|
Leases (IFRS 16)
|
32,703
|
41,414
|
18,885
|
302
|
63
|
‐
|
‐
|
93,367
|
Other
|
1,037
|
1,383
|
1,383
|
1,383
|
1,383
|
1,383
|
1,268
|
9,220
|
Interest and other charges
|
27,237
|
6,826
|
|
|
|
|
|
34,063
|
Total in local currency
|
341,092
|
861,972
|
726,057
|
793,088
|
585,676
|
423,152
|
1,840,352
|
5,571,389
|
Foreign currency
|
|
|
|
|
|
|
|
|
IABD
|
82,199
|
164,397
|
164,397
|
164,397
|
164,397
|
164,397
|
1,392,108
|
2,296,292
|
IBRD
|
11,845
|
23,691
|
23,691
|
23,691
|
23,691
|
23,691
|
225,130
|
355,430
|
Deutsche Bank 350
|
291,032
|
‐
|
‐
|
‐
|
‐
|
|
‐
|
291,032
|
Eurobonds
|
‐
|
1,362,403
|
‐
|
‐
|
‐
|
|
‐
|
1,362,403
|
JICA
|
82,305
|
144,795
|
144,795
|
144,795
|
144,795
|
144,795
|
1,222,629
|
2,028,909
|
BID 1983AB
|
68,942
|
68,309
|
29,975
|
29,975
|
28,507
|
‐
|
‐
|
225,708
|
Interest and other charges
|
49,597
|
‐
|
|
|
|
|
|
49,597
|
Total in foreign currency
|
585,920
|
1,763,595
|
362,858
|
362,858
|
361,390
|
332,883
|
2,839,867
|
6,609,371
|
Total
|
927,012
|
2,625,567
|
1,088,915
|
1,155,946
|
947,066
|
756,035
|
4,680,219
|
12,180,760
|
10.
capex
A total of R$ 787.5 million was invested in the first quarter of 2019
.
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Notes to the Interim Financial Information
1
Operations
Companhia de Saneamento Básico do Estado de São Paulo ("SABESP" or the "Company") is a mixed-capital company headquartered in São Paulo, at Rua Costa Carvalho, 300, CEP 05429-900, controlled by the São Paulo State Government.
The Company is engaged in the provision of basic and environmental sanitation services in the State of São Paulo, as well as it supplies treated water and sewage services on a wholesale basis.
In addition to providing basic sanitation services in the State of São Paulo, SABESP may perform these activities in other states and countries, and can operate in drainage, urban cleaning, solid waste handling and energy markets. SABESP aims to be a world reference in the provision of sanitation services, in a sustainable, competitive and innovative manner, with a focus on customers.
As of March 31, 2019, the Company operated water and sewage services in 370 municipalities of the State of São Paulo. Most of these municipalities’ operations are based on 30-year concession, program and services contracts. The Company has two partial contracts with the municipality of Mogi das Cruzes, however, since most of the municipality is serviced by wholesale, it was not included in the 370 municipalities. The municipality of Aguaí signed a contract in December 2018, however its operations will begin only in June 2019. As of March 31, 2019, the Company had 373 contracts.
SABESP is not temporarily operating in the municipalities of Macatuba and Cajobi due to judicial orders. The lawsuits are in progress and the carrying amount of these municipalities’ unamortized assets was R$ 4,345 as of March 31, 2019 (R$ 4,345 as of December 31, 2018).
As of March 31, 2019, 35 concession agreements (35 as of December 31, 2018) had expired and are being negotiated. From April 1, 2019 to 2030, 31 concession agreements will expire. Management believes that concession agreements expired and not yet renewed will result in new contracts, disregarding the risk of discontinuity in the provision of municipal water supply and sewage services. By March 31, 2019, 307 program and services contracts were signed (307 contracts as of December 31, 2018).
As of March 31, 2019, the carrying amount of the underlying assets used in the 35 concessions of the municipalities under negotiation totaled R$ 4,488,997, accounting for 12.21% of the total intangible assets (as of December 31, 2018, the carrying amount of the underlying assets used in the 35 concessions of the
municipalities under negotiation totaled R$
4,485,203,
accounting for 12.32%
of the
total
intangible assets), and the related gross revenue for the period ended March 31, 2019 totaled R$ 318,900, accounting for 7.70% of total revenue (as of March 31, 2018, the related gross revenue totaled R$ 397,788, accounting for 10.13% of
total revenue).
The Company’s operations are concentrated in the municipality of São Paulo, which represents 46.34% of the gross revenues as of March 31, 2019 (55.00% as of March 31, 2018) and 46.76% of intangible assets (46.97% as of December 31, 2018).
PAGE: 21 of 84
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Notes to the Interim Financial Information
As of June 23, 2010, the State of São Paulo, the municipality of São Paulo, the Company and the regulatory agency Sanitation and Energy Regulatory Agency (ARSESP) signed an agreement to share the responsibility for water supply and sewage services to the Municipality of São Paulo based on a 30-year concession agreement. This agreement is extendable for another 30 years, pursuant to the law. This agreement sets forth SABESP as the exclusive service provider and designates ARSESP as regulator, establishing prices, controlling and monitoring services. On the same date, the State of São Paulo, the Municipality of São Paulo and SABESP signed the “Public service provision agreement of water supply and sewage services”, a 30-year concession agreement which is extendable for another 30 years. This agreement involves the following activities:
i.
protection of the sources of water in collaboration with other agencies of the State and the City;
ii.
capture, transport and treatment of water;
iii.
collect, transport, treatment and final dispose of sanitary sewage; and
iv.
adoption of other actions of basic and environmental sanitation.
The Company operates under an authorization by public deed in some municipalities in the Santos coast region and in the Ribeira Valley, where the Company started to operate after the merger of the companies that formed it. In September 2015, the Company entered into a water supply and sewage public utility services agreement with the municipality of Santos; the gross revenue calculated in the three-month period ended March 31, 2019 totaled R$ 87,856 (R$ 98,042 in the three-month period ended March 31, 2018) and the intangible asset was R$ 307,248 as of March 31, 2019 (R$ 307,566 as of December 31, 2018).
Public deeds are valid and governed by the Brazilian Civil Code.
The Company's shares have been listed in the Novo Mercado segment of B3 under the ticker symbol SBSP3 since April 2002 and on the New York Stock Exchange (NYSE) as American Depositary Receipts (“ADRs”) Level III, under the SBS code, since May 2002.
Since 2008, the Company has been setting up partnerships with other companies, which resulted in the following companies: Sesamm, Águas de Andradina, Saneaqua Mairinque, Aquapolo Ambiental, Águas de Castilho, Attend Ambiental and Paulista Geradora de Energia. Although SABESP has no majority interest in the capital stock of these companies, the shareholders’ agreements provide for the power of veto and casting vote in certain issues jointly with associates, indicating the shared control in the management of investees.
Management expects that with improved water security, due to the works carried out, the generation of operating cash and the credit lines available for investment, the Company will have sufficient funds to meet its commitments and not compromise its necessary investments.
The financial statements were approved by the Board of Directors on May 9, 2019.
PAGE: 22 of 84
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Notes to the Interim Financial Information
2
Basis of preparation and presentation of the interim financial information
Presentation of the interim financial information
The interim financial information as of March 31, 2019, was prepared based on the provisions of CPC 21 (R1) – Interim Financial Information and the international standard IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), applicable to the preparation of Quarterly Information Form– ITR, and are fairly presented consistent with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Therefore, this interim information takes into consideration the Official Letter CVM/SNC/SEP 003 of April 28, 2011, which allows the entities to present selected notes to the financial statements, in cases of redundant information already disclosed in the Annual Financial Statements. The interim financial information for March 31, 2019, therefore, does not include all the notes and reporting required by the annual financial statements, and accordingly, shall be read jointly with the Annual Financial Statements as of December 31, 2018, prepared pursuant to the International Financial Reporting Standards – IFRS, issued by the International Accounting Standards Board – IASB and pursuant to the accounting practices adopted in Brazil, which observe the pronouncements issued by the Brazilian Accounting Pronouncements Committee - CPC. Therefore, the interim financial information as of March 31, 2019 was not fully completed due to redundancies with the information presented in the annual financial statements of December 31, 2018 and, as provided for in Official Letter/CVM/SNC/SEP 003/2011. In this interim financial information, the notes below were either not presented or are not as detailed as those in the annual financial statements (according to numerical references):
i.
Summary of significant accounting policies (Note 3);
ii.
Changes in accounting practices and disclosures (Note 4);
iii.
Risk Management – Financial Instruments (Note 5.4);
iv.
Key Accounting Estimates and Judgments (Note 6);
v.
Related-Party Balances and Transactions (Note 10);
vi.
Investments (Note 12);
vii.
Contract Asset (Note 14)
viii.
Intangible Assets (Note 15);
ix.
Borrowings and Financing (Note 17);
x.
Deferred Taxes and Contributions (Note 19);
xi.
Provisions (Note 20);
xii.
Employees Benefits (Note 21);
xiii.
Equity (Note 24);
xiv.
Insurance (Note 27);
xv.
Financial Income (Expenses) (Note 30).
All material information related to the interim information, and this information alone, is being disclosed and corresponds to the information used by the Company’s Management in its administration.
The amounts disclosed in the Notes to the interim financial information are in thousands of reais, unless otherwise stated.
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Notes to the Interim Financial Information
3
Summary of significant accounting policies
Except for the amendments introduced by CPC 06 (R2) / IFRS 16 (Leases) in accordance with the accounting policy described below, the other policies used in the preparation of the interim financial information for the quarter ended March 31, 2019 are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2018:
3.1
Leases
CPC
06
(R2)
/
IFRS
16
–
Leases,
replaced
CPC
06
(R1)
/
IAS
17
–
Leases
.
The standard established the principles for the recognition, measurement, presentation and disclosure of lease operations, and requires lessees to account for leases based on a single model, similar to the accounting for finance leases, as per CPC 06 (R1), i.e. recognition of a Right-of-Use Asset
(“Lease Asset”) that is
equal to a Lease Liability, other than short-term
leases (leases of 12 months or less) and assets of low value (amounts below US$
5).
Transition to CPC 06 (R2) - Leases
The new standard replaces CPC 06 (R1) / IAS 17 – “Leases” and corresponding interpretations, introducing significant changes to lessees, as it requires lessees to recognize the liability of future payments and the right of use of leased assets to virtually all lease agreements, including operating leases; specific short-term contracts or contracts with small amounts may be excluded from the scope of this new standard.
The Company’s financial statements were impacted as follows:
a)
recognition of right-of-use assets and lease liabilities in the statement of financial position, initially measured at present value of future lease payments;
b)
recognition of amortization expenses of right-of-use assets and interest expenses on lease liabilities in the income statement; and
c)
separation of the total cash paid in these transactions between principal (recorded in financing activities) and interest (recorded in operating activities) in the statement of cash flows.
SABESP applied the requirements of CPC 06 (R2)/IFRS 16 as of the fiscal year beginning on January 1, 2019. To this end, the transition method selected by the Company was the modified retrospective approach, whereby the amount referring to the Right-of-Use Asset equals the Lease Liability, without the cumulative effect of the initial application of this new standard recorded as adjustment to the opening balance of equity and without the restatement of comparative periods.
The new lease definitions were applied to all contracts in effect on the transition date. The change in the definition of a lease refers mainly to the concept of control. CPC 06 (R2)/IFRS 16 establishes whether a contract contains a lease based on the fact that customer has the right to control an identified asset for a defined period of time in exchange of consideration.
PAGE: 24 of 84
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Notes to the Interim Financial Information
The Company’s Management analyzed contracts (out of a total of approximately 20,000 contracts), evaluating whether they contained leases in accordance with CPC 06 (R2) / IFRS 16. This analysis identified impacts mainly related to vehicles and properties leased from third parties, corresponding to approximately 95% of the total amount, and less representative amounts arising from other transactions in which we identified assets leased individually or in combination in service contracts.
The recognition of lease expenses of short-term leases (12 months or less) and leases of low-value assets (below RS$ 19) will remain on a linear basis, as permitted by CPC 06 (R2) / IFRS 16.
As of January 1, 2019, the measurement of lease liabilities corresponds to the total future fixed lease payments, adjusted to present value, considering an incremental rate on borrowings, which corresponds to the average rate applicable to borrowings or debt issues in the local capital market, which represent the financing of these assets classified as right of use, allocating the assets based on useful life at the average rate per maturity term of each borrowing contract.
The Company decided to use the practical expedient of using an average real discount rate based on the respective terms for contracts with similar characteristics.
Regarding renewals, the Company considered the assumptions, policies and internal regulations, whose term cannot be automatically renewed, and for which extensions will only occur based on an agreement between the parties in cases proven to be advantageous and necessary to attain SABESP’s interests, i.e. when it is reasonable sure that the option will be exercised.
The Company applied the practical expedient relating to the definition of leases during the transition period. This means that it applied CPC 06 (R2) / IFRS 16 to all agreements signed before January 1, 2019, identified as leases in accordance with IAS 17 and IFRIC 4.
After carrying out analysis, the Company concluded that on January 1, 2019, 70 contracts fell under the scope of CPC 06 (R2)/IFRS 16 (98 contracts as of March 31, 2019). The adoption of this standard increased assets, due to the recognition of the right of use of leased assets, and liabilities, as shown below:
Impact from first-time adoption of the standard
Group
|
|
Future payments of fixed leases
|
|
Impact of the discount rate
|
|
Right of use of leased assets
|
|
Lease liabilities
|
Vehicles
|
|
63,795
|
|
(9,313)
|
|
54,482
|
|
54,482
|
Properties
|
|
7,525
|
|
(1,333)
|
|
6,192
|
|
6,192
|
Equipment
|
|
741
|
|
(100)
|
|
641
|
|
641
|
Other
|
|
4,243
|
|
(603)
|
|
3,640
|
|
3,640
|
Total
|
|
76,304
|
|
(11,349)
|
|
64,955
|
|
64,955
|
PAGE: 25 of 84
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Notes to the Interim Financial Information
4
Risk Management
4.1
Financial risk management
Financial risk factors
The Company's activities are affected by the Brazilian economic scenario, making it exposed to market risk (exchange rate and interest rate), credit risk and liquidity risk. The Company’s financial risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.
The Company has not utilized derivative instruments in any of the reported periods.
(a)
Market risk Foreign currency risk
SABESP’s foreign exchange exposure implies market risks associated with currency fluctuations, since the Company has foreign currency-denominated liabilities, mainly US dollar and yen-denominated short and long-term borrowings.
The management of SABESP’s foreign currency exposure considers several current and projected economic factors, besides market conditions.
This risk arises from the possibility that the Company may incur in losses due to exchange rate fluctuations that would impact liability balances of foreign currency-denominated borrowings and financing raised in the market and related financial expenses. The Company does not maintain hedge or swap contracts or any derivative financial instrument to hedge against this risk.
A significant amount of the Company’s financial debt is indexed to the US dollar and Yen, in the total amount of
R$ 6,633,283 as of March 31, 2019 (R$ 6,694,912 as of December 31, 2018). Below, the Company’s exposure to exchange risk:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings and financing – US$
|
1,168,083
|
4,551,669
|
1,191,152
|
4,615,476
|
Borrowings and financing – Yen
|
57,711,358
|
2,032,017
|
57,463,173
|
2,026,726
|
Interest and charges from borrowings and financing – US$
|
|
45,831
|
|
40,193
|
Interest and charges from borrowings and financing – Yen
|
|
|
|
|
Total exposure
|
|
6,633,283
|
|
6,694,912
|
Borrowing cost – US$
|
|
(20,804)
|
|
(22,390)
|
Borrowing cost – Yen
|
|
|
|
|
Total foreign currency-denominated borrowings (Note 16)
|
|
|
|
|
PAGE: 26 of 84
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Notes to the Interim Financial Information
The Brazilian real increased 0.2% against the Yen, from R$ 0.03527 on December 31, 2018 to R$ 0.03521 on March 31, 2019, decreasing the Yen-pegged debt by R$ 3,462.
In the same period, the Brazilian real decreased 0.6% against the US dollar, from R$ 3.8748 on December 31, 2018 to R$ 3.8967 on March 31, 2019, increasing the US dollar-pegged debt by R$ 25,581.
As of March 31, 2019, if the Brazilian real had depreciated or appreciated by 10 percentage points, in addition to the impacts mentioned above, against the US dollar and Yen with all other variables held constant, the effects on results before taxes on the three-month period ended March 31, 2019 would have been R$ 663,328 (R$ 580,270 for the three-month period ended March 31, 2018), lower or higher, mainly as a result of exchange losses or gains on the translation of foreign currency-denominated loans.
Scenario I below presents the effect in income statements for the next 12 months, considering the projected rates of the US dollar and the Yen. Considering the other variables as remaining constant, the impacts for the next 12 months are shown in scenarios II and III with possible depreciations of 25% and 50%, respectively, in the Brazilian real.
|
|
|
|
|
(*)
|
|
|
Net currency exposure as of March 31, 2019 (Liabilities) in US$
|
1,168,083
|
1,168,083
|
1,168,083
|
|
|
|
|
US$ rate as of March 31, 2019
|
3.8967
|
3.8967
|
3.8967
|
Exchange rate estimated according to the scenario
|
|
|
|
Differences between the rates
|
0.1467
|
(0.7908)
|
(1.7283)
|
|
|
|
|
Effect on net financial result in R$ - gain/(loss)
|
171,358
|
(923,720)
|
(2,018,798)
|
|
|
|
|
Net currency exposure as of March 31, 2019 (Liabilities) in Yen
|
57,711,358
|
57,711,358
|
57,711,358
|
|
|
|
|
Yen rate as of March 31, 2019
|
0.03521
|
0.03521
|
0.03521
|
Exchange rate estimated according to the scenario
|
|
|
|
Differences between the rates
|
(0.00095)
|
(0.00999)
|
(0.01903)
|
|
|
|
|
Effect on net financial result in R$ - (loss)
|
|
|
|
|
|
|
|
Total effect on net financial result in R$ - gain/(loss)
|
116,532
|
(1,500,256)
|
(3,117,045)
|
|
(*) For the probable scenario in US dollar, the exchange rate estimated for March 31, 2019 was used, pursuant to the Focus Report-BACEN of March 31, 2019, while for the Yen, the average exchange rate was considered for the 12-month period after March 31, 2019, according to B3’s Reference Rates report of March 31, 2019.
PAGE: 27 of 84
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Notes to the Interim Financial Information
Interest rate risk
This risk arises from the possibility that the Company could incur losses due to fluctuations in interest rates, increasing the financial expenses related to borrowings and financing.
The Company has not entered into any derivative contract to hedge against this risk; however, it continually monitors market interest rates, in order to evaluate the possible need to replace its debt.
The table below provides the Company's borrowings and financing subject to variable interest rate:
|
March 31, 2019
|
|
December 31, 2018
|
CDI (i)
|
1,000,000
|
|
1,250,000
|
TR (ii)
|
1,631,820
|
|
1,637,290
|
IPCA (iii)
|
971,264
|
|
1,614,595
|
TJLP (iv)
|
1,277,490
|
|
1,322,854
|
LIBOR (v)
|
3,187,824
|
|
3,259,295
|
Interest and other charges
|
50,922
|
|
134,725
|
Total
|
8,119,320
|
|
9,218,759
|
(i)
CDI - (
Certificado de Depósito Interbancário
), an interbank deposit certificate
(ii)
TR – Interest Benchmark Rate
(iii)
IPCA - (
Índice Nacional de Preços ao Consumidor Amplo
), a consumer price index
(iv)
TJLP - (
Taxa de Juros a Longo Prazo
), a long-term interest rate index
(v)
LIBOR - London Interbank Offered
Rate
Another risk to which the Company is exposed is the mismatch of monetary restatement indices of its debts with those of its service revenues. Tariff adjustments of services provided by the Company do not necessarily follow the increases in the inflation indexes to adjust loans, financing and interest rates affecting indebtedness.
As of March 31, 2019, if interest rates on borrowings and financing had been 1 percentage point higher or lower with all other variables held constant, the effects on profit before taxes for the three-month period ended March 31, 2019 would have been R$ 81,193 (R$ 89,713 for the three-month period ended March 31, 2018), lower or higher, mainly as a result of lower or higher interest expense on floating rate borrowings and financing.
(b)
Credit risk
Credit risk arises from cash and cash equivalents, deposits in banks and financial institutions, as well as credit exposures to wholesale basis and retail customers, including outstanding accounts receivable, restricted cash and accounts receivable from related parties. Credit risk exposure to customers is mitigated by sales to a dispersed base.
The maximum exposures to credit risk as of March 31, 2019 are the carrying amounts of instruments classified as cash equivalents, deposits in banks and financial institutions, restricted cash, trade receivables and accounts receivable from related parties in the balance sheet date. See additional information in Notes 6, 7, 8 and 9.
PAGE: 28 of 84
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Notes to the Interim Financial Information
Regarding the financial assets held with financial institutions, the credit quality that is not past due or subject to impairment can be assessed by reference to external credit ratings (if available) or to historical information about the bank’s default rates. The credit quality of the banks, such as deposits and financial investments, the Company considers the lower rating published by three main international rating agencies (Fitch, Moody's and S&P), according to internal policy of market risk management:
|
March 31, 2019
|
|
December 31, 2018
|
Cash at bank and short-term bank deposits
|
|
|
|
AA(bra)
|
2,136,280
|
|
2,966,080
|
AAA(bra)
|
48,635
|
|
45,430
|
Other (*)
|
20,168
|
|
17,681
|
|
2,205,083
|
|
3,029,191
|
(*) This category includes current accounts and investment funds in banks whose balances were not significant.
The available credit rating information of the banks, as of March 31, 2019, in which the Company made deposit transactions and financial investments in local currency (R$ - local rating) during the period is as follows:
Banks
|
|
Fitch
|
|
Moody's
|
|
Standard Poor's
|
Banco
do
Brasil
S/A
Banco
Santander
Brasil
S/A Brazilian Federal Savings Bank Bradesco
S/A
Itaú Unibanco Holding S/A
|
|
AA(bra)
-
AA(bra)
AAA(bra)
AAA(bra)
|
|
Aa1.br
Aaa.br
Aa1.br
Aa1.br
Aa1.br
|
|
-
brAAA
brAAA
brAAA
brAAA
|
(c) Liquidity risk
The Company's liquidity is primarily reliant upon cash provided by operating activities, loans from Brazilian Federal and State governmental financial institutions, and financing in the local and international capital markets. The liquidity risk management considers the assessment of its liquidity requirements to ensure it has sufficient cash to meet its operating and capital expenditures needs, as well as the payment of debts.
The funds held by the Company are invested in interest-bearing current accounts, time deposits and securities, selecting instruments with appropriate maturity or liquidity sufficient to provide margin as determined by projections mentioned above.
The table below shows the Company’s financial liabilities, into relevant maturities, including the installments of principal and future interest to be paid according to the agreement. Future interest was calculated based on the contractual clauses for all agreements. For agreements with floating interest rate, the interest rates used correspond to the base dates.
PAGE: 29 of 84
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Notes to the Interim Financial Information
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Borrowings and financing
|
1,288,113
|
3,154,573
|
1,459,935
|
1,482,356
|
1,205,174
|
6,521,499
|
15,111,650
|
Accounts payable to suppliers and contractors
|
427,383
|
-
|
-
|
-
|
-
|
-
|
427,383
|
Services payable
|
580,377
|
-
|
-
|
-
|
-
|
-
|
580,377
|
Public-Private Partnership (PPP)
|
282,897
|
377,196
|
377,196
|
377,196
|
377,196
|
4,889,573
|
6,681,254
|
Program contract commitments
|
244,775
|
45,613
|
45,748
|
30,998
|
30,998
|
14,552
|
412,684
|
|
|
|
|
|
|
|
|
Cross default
The Company has borrowings and financing agreements including cross default clauses, i.e. the early maturity of any debt may imply the early maturity of these agreements. The indicators are continuously monitored in order to avoid the execution of these clauses.
(d) Sensitivity analysis on interest rate risk
The table below shows the sensitivity analysis of the financial instruments, prepared in accordance with CVM Rule 475/08 in order to evidence the balances of main financial assets and liabilities, calculated at a rate projected for the twelve-month period after March 31, 2019, or until the final settlement of each contract, whichever is shorter, considering a probable scenario (Scenario I), appreciation of 25% (Scenario II) and 50% (Scenario III).
The purpose of the sensitivity analysis is to measure the impact of changes in the market over the financial instruments of the Company, considering constant all other variables. In the time of settlement, the amounts can be different from those presented, due to the estimates used in the measurement.
PAGE: 30 of 84
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Notes to the Interim Financial Information
|
|
|
Scenario I
(Probable) (i)
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
CDI
|
2,093,263
|
7.5000%(*)
|
5.6250%
|
3.7500%
|
Financial income
|
|
156,995
|
117,746
|
78,497
|
|
|
|
|
|
Liabilities
|
|
|
|
|
CDI
|
(1,000,000)
|
7.5000%(*)
|
5.6250%
|
3.7500%
|
Interest to be incurred
|
|
(75,000)
|
(56,250)
|
(37,500)
|
|
|
|
|
|
CDI net exposure
|
1,093,263
|
81,995
|
61,496
|
40,997
|
|
|
|
|
|
Liabilities
|
|
|
|
|
TR
|
(1,631,820)
|
0.0001%(***)
|
0.0001%
|
0.0002%
|
Expenses to be incurred
|
|
(2)
|
(2)
|
(3)
|
|
|
|
|
|
IPCA
|
(971,264)
|
4.0000%(*)
|
5.0000%
|
6.0000%
|
Expenses to be incurred
|
|
(38,851)
|
(48,563)
|
(58,276)
|
|
|
|
|
|
TJLP
|
(1,277,490)
|
7.0300%(*)
|
8.7875%
|
10.5450%
|
Interest to be incurred
|
|
(89,808)
|
(112,259)
|
(134,711)
|
|
|
|
|
|
LIBOR
|
(3,187,824)
|
2.5490%(**)
|
3.1862%
|
3.8234%
|
Interest to be incurred
|
|
(81,258)
|
(101,570)
|
(121,883)
|
|
|
|
|
|
Total net expenses to be incurred
|
|
|
|
|
|
|
|
|
|
(*) Source: CDI and IPCA rates (Focus Report – BACEN, March 31, 2019) and long-term interest rate as at March 31, 2019 (BACEN).
|
(**) Source: Bloomberg.
|
(***) Source: B3 (previously BM&FBovespa).
|
(i)
Refers to the scenario of interest to be incurred for the 12 months as of March 31, 2019 or until the maturity of the agreements, whichever is shorter.
4.2
Capital management
The Company’s objectives when managing capital are ensure its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
PAGE: 31 of 84
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Notes to the Interim Financial Information
The Company monitors capital based on the leverage ratio. This ratio corresponds to net debt divided by total capital (shareholders and creditor’s equity). Net debt corresponds to total borrowings and financing less cash and cash equivalents. Total capital is calculated as total equity as shown in the statement of financial position plus net debt.
|
March 31, 2019
|
December 31, 2018
|
Total borrowings and financing (Note 16)
|
12,180,760
|
13,152,796
|
(-) Cash and cash equivalents (Note 6)
|
(2,205,083)
|
(3,029,191)
|
Net debt
|
9,975,677
|
10,123,605
|
Total equity
|
20,198,979
|
19,551,688
|
Total capital (shareholders plus
creditor’s equity
)
|
30,174,656
|
29,675,293
|
Leverage ratio
|
33%
|
34%
|
As of March 31, 2019, the leverage ratio decreased to 33% from the 34% as of December 31, 2018, mainly due to the increase in equity generated by the profit calculated in the period ended March 31, 2019.
4.3
Fair value estimate
The Company considers that balances from trade receivables (current) and accounts payable to suppliers by carrying amount, less impairment approximate their fair values, considering the short maturity. Long-term trade receivables also approximate their fair values, as they will be adjusted by inflation and/or will bear contractual interest rates over time.
4.4
Financial instruments
As of March 31, 2019 and December 31, 2018, the Company did not have financial assets classified as fair value through other comprehensive income and fair value through profit or loss. The Company’s financial instruments included in the amortized cost category comprise cash and cash equivalents, restricted cash, trade receivables, balances with related parties, other receivables, and balances receivable from the Water National Agency (ANA), accounts payable to contractors and suppliers, borrowings and financing, services payable, balances payable deriving from the Public Private Partnership (PPP) and program contract commitments, which are non-derivative financial assets and liabilities with fixed or determinable payments, not quoted in an active market.
PAGE: 32 of 84
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Notes to the Interim Financial Information
The estimated fair values of financial instruments are as follows:
Financial assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
2,205,083
|
2,205,083
|
3,029,191
|
3,029,191
|
Restricted cash
|
25,993
|
25,993
|
31,900
|
31,900
|
Trade receivables
|
2,171,878
|
2,171,878
|
2,052,416
|
2,052,416
|
Water National Agency (ANA)
|
43,965
|
43,965
|
49,136
|
49,136
|
Other receivables
|
257,327
|
257,327
|
180,681
|
180,681
|
Additionally, SABESP has financial instrument assets receivable from related parties, in the amount of R$ 839,071 as of March 31, 2019 (R$ 843,250 as of December 31, 2018), which were calculated in accordance with the conditions negotiated between related parties. The conditions and additional information related to these financial instruments are disclosed in Note 9 to these financial statements. Part of this balance, totaling R$ 734,971 (R$ 737,503 as of December 31, 2018), refers to reimbursement of additional retirement and pension plan - G0 and is indexed by the IPCA plus simple interest of 0.5% p.m. This interest rate approximates that one practiced by federal government bonds (NTN-b) with terms similar to those of related-party transactions.
Financial liabilities
|
|
|
|
|
|
|
|
Borrowings and financing
|
12,180,760
|
12,158,980
|
13,152,796
|
13,116,684
|
Accounts payable to suppliers and contractors
|
427,383
|
427,383
|
465,993
|
465,993
|
Services payable
|
580,377
|
580,377
|
454,022
|
454,022
|
Program contract commitments
|
377,488
|
377,488
|
373,009
|
373,009
|
Public-Private Partnership (PPP)
|
3,401,689
|
3,401,689
|
3,413,124
|
3,413,124
|
The criteria adopted to obtain the fair values of borrowings and financing in preparing the interim financial information as of March 31, 2019 are consistent with those adopted in preparing the Annual Financial Statements for the fiscal year ended December 31, 2018.
Considering the nature of other financial instruments, assets and liabilities of the Company, the balances recognized in the statement of financial position approximate the fair values, taking into account the maturities close to the end of the reporting period, comparison of contractual interest rates with market rates in similar operations at the end of the reporting period, their nature and maturity terms.
PAGE: 33 of 84
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Notes to the Interim Financial Information
5
Key accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and on other factors, including expectations of future events that are believed to be reasonable under the circumstances.
(ii)
The key accounting estimates and judgments are: (i) allowance for doubtful accounts, (ii) intangible assets resulting from concession agreements and program contracts, (iii) pension plan obligations, (iv) deferred income tax and social contribution and (v) provisions.
6
Cash and cash equivalents
|
|
March 31, 2019
|
December 31, 2018
|
|
Cash and banks
|
111,820
|
151,558
|
|
Cash equivalents
|
2,093,263
|
2,877,633
|
|
|
2,205,083
|
3,029,191
|
Cash and cash equivalents include cash, bank deposits and high-liquidity short-term financial investments, mainly represented by repurchase agreements (accruing CDI interest rates), deposited at Banco do Brasil, whose original maturities are lower than three months, which are convertible into a cash amount and subject to an insignificant risk of change in value.
As of March 31, 2019, the average yield of financial investments corresponds to 98.31% of CDI (98.28% as of December 31, 2018).
7
Restricted cash
|
|
|
Current
|
|
|
Agreement with the São Paulo municipal government (i)
|
17,357
|
19,977
|
Brazilian Federal Savings bank – escrow deposits (ii)
|
2,142
|
5,880
|
Other
|
|
|
|
|
|
(i)
Refers to the amount deducted from the 7.5% of municipal revenue transferred to the Municipal Fund, corresponding to eventual amounts unpaid by direct management bodies, foundations and government agencies, as established in the agreement entered into with São Paulo municipal government; and
(ii)
Refers to savings account for receiving escrow deposits regarding lawsuits with final and unappealable decisions in favor of the Company, which are blocked as per contractual clause.
PAGE: 34 of 84
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Notes to the Interim Financial Information
8
|
Trade receivables
(a) Statement of financial position details
|
March 31, 2019
|
|
December 31, 2018
|
|
Private sector:
|
|
|
|
|
General and special customers (i) (ii)
|
1,474,511
|
|
1,372,667
|
|
Agreements (iii)
|
373,514
|
|
347,679
|
|
|
1,848,025
|
|
1,720,346
|
|
Government entities:
|
|
|
|
|
Municipal
|
554,391
|
|
575,733
|
|
Federal
|
5,440
|
|
3,876
|
|
Agreements (iii)
|
266,099
|
|
274,906
|
|
|
825,930
|
|
854,515
|
|
Wholesale customers – Municipal governments: (iv)
|
|
|
|
|
Mogi das Cruzes
|
3,121
|
|
3,056
|
|
São Caetano do Sul
|
5,841
|
|
2,869
|
|
Total wholesale customers – Municipal governments
|
8,962
|
|
5,925
|
|
Unbilled supply
|
570,041
|
|
571,072
|
|
Subtotal
|
3,252,958
|
|
3,151,858
|
|
Allowance for doubtful accounts
|
(1,081,080)
|
|
(1,099,442)
|
|
Total
|
2,171,878
|
|
2,052,416
|
|
Current
|
1,974,708
|
|
1,843,333
|
|
Noncurrent
|
197,170
|
|
209,083
|
|
|
2,171,878
|
|
2,052,416
|
(i)
General customers - residential and small- and mid-sized companies;
(ii)
Special customers - large consumers, commercial industries, condominiums and special billing customers (fixed demand agreements, industrial waste, wells, etc.);
(iii)
Agreements - installment payments of past-due receivables, plus monetary adjustment and interest, according to the agreements; and
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Notes to the Interim Financial Information
|
March 31,
|
|
December 31,
|
2019
|
|
2018
|
Wholesale customers – Municipal governments: (iv)
|
|
|
|
Mauá
|
619,651
|
|
601,910
|
Mogi das Cruzes
|
3,121
|
|
3,056
|
Santo André
|
1,193,246
|
|
1,164,399
|
São Caetano do Sul
|
5,841
|
|
2,869
|
Diadema
|
222,671
|
|
222,671
|
Total wholesale customers – Municipal governments
|
2,044,530
|
|
1,994,905
|
(iv)
Wholesale basis customers - municipal governments. This balance refers to the sale of treated water to municipalities, which are responsible for distributing to, billing and charging final customers. Some of these municipalities are questioning in court the tariffs charged by SABESP. The Company did not record revenues and receivables from these municipalities in accordance with IFRS 15 and IFRS 9, as it does not believe that it is likely that it will receive the consideration it is entitled to in exchange for the services transferred to the municipalities.
The Company did not record revenues in the amounts of R$ 46,433 and R$ 73,178 from January to March 2019 and 2018, respectively, due to low expectation of receipt.
(b)
The aging of trade receivables is as follows
|
|
|
|
|
|
Current
|
1,520,067
|
1,449,927
|
Past-due:
|
|
|
Up to 30 days
|
334,858
|
330,310
|
From 31 and 60 days
|
161,534
|
145,153
|
From 61 and 90 days
|
82,487
|
83,679
|
From 91 and 120 days
|
58,511
|
54,486
|
From 121 and 180 days
|
106,322
|
89,740
|
From 181 and 360 days
|
89,691
|
44,856
|
Over 360 days
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
The increase in the overdue balance was mainly due to the increase in default of private sector
.
PAGE: 36 of 84
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Notes to the Interim Financial Information
(c)
Allowance for doubtful accounts
|
|
|
|
|
|
Balance at the beginning of the period
|
1,099,442
|
1,067,973
|
Private sector/government entities
|
(9,857)
|
6,639
|
Recoveries
|
|
|
|
|
|
Net additions/(recoveries) in the period
|
|
|
|
|
|
Balance at the end of the period
|
|
|
Reconciliation of estimated losses on income
|
|
|
|
|
|
Write-offs
|
(22,812)
|
(27,567)
|
(Losses)/reversal with state entities – related parties
|
(3,310)
|
(1,360)
|
(Losses)/reversal with private sector/government entities
|
9,857
|
(6,639)
|
(Losses)/reversal with wholesale customers
|
-
|
(25,153)
|
Recoveries
|
|
|
|
|
|
Amount recorded as selling expense
|
(7,760)
|
(48,631)
|
The Company does not have customers representing 10% or more of its total revenues
.
PAGE: 37 of 84
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Notes to the Interim Financial Information
9
Related-Party Balances and Transactions
The Company is a party to transactions with its controlling shareholder, the State Government, and companies/entities related to it.
(a)
Accounts receivable, interest on capital payable, revenue and expenses with the São Paulo State Government
|
|
|
Accounts receivable
|
|
|
Current:
|
|
|
Sanitation services
|
125,716
|
122,522
|
Allowance for losses
|
(37,130)
|
(33,820)
|
Reimbursement of additional retirement and pension benefits paid (G0):
|
|
|
- Monthly flow (payments)
|
15,016
|
22,926
|
- GESP Agreement – 2015
|
|
|
|
|
|
Total current
|
|
|
|
|
|
Noncurrent:
|
|
|
Agreement for the installment payment of sanitation services
|
15,514
|
17,045
|
Reimbursement of additional retirement and pension benefits paid (G0):
|
|
|
- GESP Agreement – 2015
|
|
|
|
|
|
Total noncurrent
|
|
|
|
|
|
Total receivables from shareholders
|
|
|
|
|
|
Assets:
|
|
|
Sanitation services
|
104,100
|
105,747
|
Reimbursement of additional retirement and pension benefits paid (G0)
|
|
|
|
|
|
Total
|
839,071
|
843,250
|
|
|
|
Liabilities:
|
|
|
Interest on capital payable to related parties
|
338,407
|
338,407
|
Other (g)
|
680
|
8,694
|
PAGE: 38 of 84
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Notes to the Interim Financial Information
|
|
|
|
|
|
Revenue from sanitation services
|
123,000
|
117,353
|
Payments from related parties
|
(125,098)
|
(118,721)
|
|
|
|
Receipt of GESP reimbursement referring to Law 4,819/58
|
(44,786)
|
(50,709)
|
(b) Disputed amounts -
GESP
As of March 31, 2019 and December 31, 2018, the disputed amounts between SABESP and GESP, corresponding to additional retirement and pension benefits paid (Law 4,819/58), totaled R$ 1,126,243 and R$ 1,107,104, respectively. The Company created allowances for doubtful accounts for such amounts.
(c)
Use of reservoirs –
EMAE
Empresa Metropolitana de Águas e Energia S.A. (EMAE) planned to receive for the credit and obtain financial compensation for alleged past and future losses in electricity generation, due to water collection, and compensation for costs already incurred and to be incurred with the operation, maintenance and inspection of the Guarapiranga and Billings reservoirs used by SABESP in its operations.
Several lawsuits were filed by EMAE, An arbitration proceeding was in progress related to the Guarapiranga reservoir and a lawsuit related to the Billings reservoir, both pleading for financial compensation due to SABESP’s water collection for public supply, alleging that this conduct has been causing permanent and growing loss in the capacity of generating electricity of Henry Borden hydroelectric power plant with financial losses.
On October 28, 2016, the Company entered into an agreement based on a Private Transaction Agreement and Other Adjustments aimed to fully and completely settle the disputes involving the two companies. As of October 19, 2017, the conditions precedent were complied with and the agreement came into effect.
According to the Private Transaction Agreement and Other Adjustments, the payments were established as follows:
-
R$
6,610 annually, adjusted for inflation, as of the execution date of this instrument, by the IPCA or any other index that may replace it, by the last business day of October of each fiscal year, with (i) the first of such annual payments due up to the last business day of October 2017 and (ii) the last payment due up to the last business day of October 2042; and
-
R$ 46,270, in five annual and successive installments, adjusted for inflation by the IPCA or any other index that may replace it, with the first installment of R$ 9,254 due on April 30, 2017 and the subsequent ones in four (4) installments of same amount, adjusted for inflation, due on every April 30 of the subsequent years, or on the first subsequent business day.
PAGE: 39 of 84
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Notes to the Interim Financial Information
By entering into the Agreement, all litigation between the parties will cease permanently and the Company will continue using the reservoirs.
In addition to the lawsuits that were part of the Agreement, on April 11, 2016, SABESP was named in the indemnification proceeding commenced by EMAE’s minority shareholders, who claimed compensation for damages suffered by EMAE, based on the amounts that the latter did not earn due to the decrease in the outflow of these reservoirs and in the generation of electricity as a result of the use of water of the Billings and Guarapiranga reservoirs by SABESP, and also requested that SABESP be sentenced to reimburse the loss of profits related to EMAE’s unearned amounts resulting from the fact that water was not pumped from the Pinheiros and Tietê Rivers to the Henry Borden hydroelectric power plant. In summary, the company claims that the São Paulo State, in its capacity as controlling shareholder of EMAE, has acted unduly to EMAE’s detriment and in favor of SABESP’s interests by allowing and consenting water intake from the Billings and Guarapiranga reservoirs, in detriment to the output of these reservoirs and generation of electricity by EMAE, without the necessary financial compensation, making impracticable the satisfactory use of the Henry Borden hydroelectric power plant. The lawsuit is in evidentiary stage.
On August 7, 2017, another minority shareholder of EMAE filed a lawsuit against SABESP, EMAE and the Brazilian Electricity Regulatory Agency (ANEEL), claiming the annulment of ANEEL’s decision that approved the agreement mentioned and requesting that SABESP be sentenced to pay damages to EMAE. The plaintiff claims that the decision is illegal and harmful and that it threatens the operational feasibility of the Henry Borden hydroelectric power plant and the energy security of State of São Paulo, the Southeast region and Brazil as a whole. The judge dismissed the case without prejudice. The plaintiff filed an appeal and is awaiting a decision from the Court of Justice.
The agreement entered into with EMAE will not necessarily settle these lawsuits.
As of March 31, 2019, the balance of the agreement totaled R$ 16,054 and R$ 93,714 (R$ 16,055 and R$ 90,518 on December 31, 2018), recorded under Other Liabilities, in current and noncurrent liabilities, respectively.
(d)
Agreements with reduced tariffs with State and Municipal Government Entities that joined the Rational Water Use Program (PURA)
The Company has signed agreements with government entities related to the State Government and municipalities where it operates that benefit from a reduction of 25% in the tariff of water supply and sewage services when they are not in default. These agreements provide for the implementation of the rational water use program, which takes into consideration the reduction in water consumption.
(e)
Guarantees
The State Government provides guarantees for some of the Company’s borrowings and financing and does not charge any fee for such guarantees.
(f)
Personnel assignment agreement among entities related to the State Government
The Company has personnel assignment agreements with entities related to the State Government, whose expenses are fully charged. From January to March 2019 and 2018, the expenses related to employees assigned by SABESP to other state government entities amounted to R$ 1,454 and R$ 2,131, respectively.
PAGE: 40 of 84
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Notes to the Interim Financial Information
From January to March 2019, expenses related to personnel assigned by other entities to the Company totaled R$ 80 and refer to a member of the Board of Executive Officers. No expenses were recorded in the same period in 2018.
(g)
Services obtained from state government entities
As of March 31, 2019 and December 31, 2018, SABESP had outstanding amounts payable of R$ 680 and R$ 8,694, respectively, for services rendered by São Paulo State Government entities.
(h)
Non-operating assets
As of March 31, 2019 and December 31, 2018, the Company had an amount of R$ 969 related to a free land lent to the Department of Water and Electricity (DAEE).
(i)
Sabesprev
The Company sponsors a private defined benefit pension plan, which is operated and administered by Sabesprev. The net actuarial liability recognized as of March 31, 2019 amounted to R$ 364,770 (R$ 363,902 as of December 31, 2018), according to Note 20 (b) (i).
(j)
Compensation of Management Key Personnel
Expenses related to the compensation to the members of its Board of Directors, Fiscal Council and Board of Executive Officers totaled R$ 1,013 and R$ 923 from January to March 2019 and 2018, respectively. Additional amounts of R$ 170 and R$ 185, related to the bonus program, were recorded from January to March 2019 and 2018, respectively.
(k)
Loan agreement through credit facility
The Company holds interest in certain Special Purpose Entities (SPEs), not holding the majority interest but with cast vote and power of veto in some issues, with no ability to use such power of veto in a way to affect returns over investments. Therefore, these SPEs are considered for accounting purposes as jointly arrangements.
The Company entered into a loan agreement through credit facility with the SPEs Aquapolo Ambiental S.A. and Attend Ambiental S.A. to finance the operations of these companies, until the borrowings and financing requested with financial institutions is granted.
SPE
|
|
Principal
|
|
Interest
|
|
Total
|
|
Interest rate
|
|
Maturity
|
Aquapolo Ambiental
|
|
19,000
|
|
14,462
|
|
33,462
|
|
CDI + 1.2% p.a.
|
|
(i)
|
Total
|
|
19,000
|
|
14,462
|
|
33,462
|
|
|
|
|
(i)
The loan originally matured on April 30, 2015 but was extended to October 30, 2015. On November 25, 2015, a new amendment changed the payment schedule for three annual installments, the first of which maturing on December 30, 2021 and the last on December 30, 2023
.
PAGE: 41 of 84
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Notes to the Interim Financial Information
As of March 31, 2019, the balance of principal and interest of this agreement was R$ 33,462, recorded in noncurrent assets, under “Other Accounts Receivables” (R$ 32,857 as of December 31, 2018). From January to March 2019, the financial income recognized was R$ 605 (R$ 740 from January to March 2018).
As of March 1, 2019, R$ 10,925 was paid-in in Attend, corresponding to 10,924,760 shares. The interest held in that company remained at 45%. The Company used the outstanding balance of the loan agreement to make said payment, reversing R$ 10,925 in profit (loss), which was accrued for losses, and recorded interest of R$ 152 and monetary restatement of R$ 68 under financial revenue.
(l)
“Se Liga na Rede” (Connect to the Network Program)
The State Government enacted the State Law 14,687/12, creating the pro-connection program, destined to financially subsidize the execution of household branches necessary to connect to the sewage collecting networks, in low-income households, which agreed to adhere to the program. The program expenditures, except for indirect costs, construction margin and borrowing costs are financed with 80% of funds deriving from the State Government and the remaining 20% invested by SABESP, which is also liable for the execution of works. Until March 31, 2019, the program total amount was R$ 101,151 (R$ 100,928 as of December 31, 2018); as of March 31, 2019 and December 31, 2018, there was no balance receivable from related parties. As of March 31, 2019, R$ 50,142 (R$ 49,919 as of December 31, 2018) was recorded under intangible assets. R$ 51,009 was reimbursed by GESP (R$ 51,009 as of December 31, 2018) from the beginning of the program until March 31, 2019.
10
Water National Agency (ANA)
The Company has agreements executed within the scope of the Hydrographic Basin Depollution Program (PRODES), also known as "Treated Sewage Purchase Program".
This program does not finance works or equipment, but remunerates based on results achieved, i.e. by effectively treated sewage. In this program, the Water National Agency (ANA) makes available funds, which are restricted to a specific current account and applied in investment funds at the Brazilian Federal Savings Banks (CEF), until the fulfillment of treated sewage volume is evidenced, as well as the reduction of polluting cargoes of each agreement.
When resources are made available, liabilities are recorded until funds are released by ANA. After the evidence of targets stipulated in each contract, the revenue deriving from these funds is recognized, but if these targets are not met, funds will return to the National Treasury with the appropriate funds’ earnings. As of March 31, 2019, the balances of assets and liabilities totaled R$ 43,965 (R$ 49,136 as of December 31, 2018), and the liability is recorded in "other liabilities" under noncurrent liabilities
.
PAGE: 42 of 84
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Notes to the Interim Financial Information
11
Investments
The Company holds interest in certain Special Purpose Entities (SPE). Although SABESP has no majority shares of its investees, the shareholders’ agreement provides for the power of veto in certain management issues, however, with no ability to use such power of veto in a way to affect returns over investments, indicating participating shared control (joint venture – CPC 19
(R2)).
The Company holds interest valued by the equity accounting.
Below is a summary of the investees’ financial statements and SABESP’s equity interest
:
|
|
|
|
Profit (loss) for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sesamm
|
42,899
|
43,547
|
-
|
-
|
1,419
|
(2,067)
|
1,492
|
Águas de Andradina
|
25,266
|
24,832
|
-
|
(623)
|
856
|
201
|
659
|
Águas de Castilho
|
6,268
|
6,084
|
-
|
(280)
|
345
|
119
|
292
|
Saneaqua Mairinque
|
5,407
|
5,720
|
-
|
(11)
|
(298)
|
(4)
|
(93)
|
Attend Ambiental
|
25,158
|
1,426
|
24,277
|
-
|
(128)
|
(417)
|
779
|
Aquapolo Ambiental
|
34,618
|
30,170
|
-
|
-
|
4,448
|
-
|
3,417
|
Paulista Geradora de Energia
|
7,512
|
7,625
|
-
|
-
|
(113)
|
-
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sesamm
|
15,444
|
15,677
|
-
|
-
|
511
|
(744)
|
537
|
36%
|
36%
|
Águas de Andradina
|
7,580
|
7,450
|
-
|
(187)
|
257
|
60
|
198
|
30%
|
30%
|
Águas de Castilho
|
1,880
|
1,826
|
-
|
(84)
|
102
|
36
|
88
|
30%
|
30%
|
Saneaqua Mairinque
|
1,622
|
1,716
|
-
|
(3)
|
(89)
|
(2)
|
(28)
|
30%
|
30%
|
Attend Ambiental
|
11,321
|
642
|
10,925
|
-
|
(57)
|
(189)
|
350
|
45%
|
45%
|
Aquapolo Ambiental
|
16,963
|
14,783
|
-
|
-
|
2,180
|
-
|
1,674
|
49%
|
49%
|
Paulista Geradora de Energia
|
|
|
|
|
|
|
|
25%
|
25%
|
Total
|
56,688
|
43,999
|
10,925
|
(274)
|
2,877
|
(839)
|
2,817
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(*) Refer to changes in the equity of investees, as their financial statements for the year ended December 31, 2018 were issued, including some adjustments, after the Company’s financial statements.
PAGE: 43 of 84
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Notes to the Interim Financial Information
12
Investment properties
|
|
|
|
|
|
|
|
Investment properties
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Investment properties
|
|
|
|
Total
|
|
|
|
As of March 31, 2019 and December 31, 2018, the market value of these properties was approximately R$ 386,000
.
PAGE: 44 of 84
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Notes to the Interim Financial Information
13
Contract asset
Contract Asset (works in progress) is the right to consideration in exchange for goods or services transferred to customers. As established by CPC 47 – Revenue from Contracts with Customers, assets conditioned to the concession under construction, recorded under the scope of ICPC 01 (R1) – Concession Agreements, must be recorded as Contract Asset during the construction period and transferred to Intangible Assets only after the conclusion of the works.
A contract asset is initially designated at fair value and includes borrowing costs capitalized during the period when the asset is under construction, based on the weighted average rate of borrowings in effect on the capitalization date. For further information on the capitalization of interest and construction margin, recorded during the construction period, see Note 14
.
|
|
|
|
|
Contract asset arising from:
|
|
|
|
|
Concession agreements – equity value
|
910,414
|
52,786
|
(107,446)
|
855,754
|
Concession agreements – economic value
|
248,388
|
30,883
|
(6,883)
|
272,388
|
Program contracts
|
2,232,931
|
235,622
|
(50,796)
|
2,417,757
|
Service contracts – São Paulo
|
4,016,199
|
341,064
|
(68,015)
|
4,289,248
|
Software license
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Contract asset arising from:
|
|
|
|
|
|
Concession agreements – equity value
|
1,399,823
|
41,120
|
(8,745)
|
(13,728)
|
1,418,470
|
Concession agreements – economic value
|
233,362
|
45,883
|
-
|
(72,760)
|
206,485
|
Program contracts
|
2,020,464
|
95,572
|
8,745
|
(52,402)
|
2,072,379
|
Service contracts – São Paulo
|
6,733,533
|
491,993
|
-
|
(94,799)
|
7,130,727
|
Software license
|
|
|
|
|
|
Total
|
|
|
|
|
|
PAGE: 45 of 84
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Notes to the Interim Financial Information
14
Intangible assets
(a)
Statement of financial position details
|
|
|
|
|
|
|
|
|
|
Intangible right arising from:
|
|
|
|
|
|
|
Concession agreements – equity value
|
5,479,378
|
(1,411,882)
|
4,067,496
|
5,465,206
|
(1,391,862)
|
4,073,344
|
Concession agreements – economic value
|
1,993,025
|
(742,761)
|
1,250,264
|
1,948,255
|
(716,246)
|
1,232,009
|
Program contracts
|
12,825,037
|
(4,068,482)
|
8,756,555
|
12,710,937
|
(3,933,008)
|
8,777,929
|
Program contracts – commitments
|
1,320,106
|
(251,187)
|
1,068,919
|
1,320,106
|
(240,555)
|
1,079,551
|
Services contracts – São Paulo
|
17,522,851
|
(4,264,408)
|
13,258,443
|
17,474,797
|
(4,083,345)
|
13,391,452
|
Software license of use
|
753,881
|
(306,624)
|
447,257
|
748,962
|
(290,787)
|
458,175
|
Right of use
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(b)
Changes
|
|
First-time adoption of IFRS 16
|
|
Transfer to indemnities receivable
|
|
|
|
|
|
Intangible right arising from:
|
|
|
|
|
|
|
|
|
|
Concession agreements – equity value
|
4,073,344
|
-
|
5
|
(4,345)
|
19,487
|
(875)
|
(23)
|
(20,097)
|
4,067,496
|
Concession agreements –economic value
|
1,232,009
|
-
|
-
|
-
|
31,050
|
14,284
|
(438)
|
(26,641)
|
1,250,264
|
Program contracts
|
8,777,929
|
-
|
209
|
-
|
117,040
|
(737)
|
(663)
|
(137,223)
|
8,756,555
|
Program contracts – commitments
|
1,079,551
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,632)
|
1,068,919
|
Service contracts – São Paulo
|
13,391,452
|
-
|
1,045
|
-
|
65,260
|
(14,721)
|
(1,986)
|
(182,607)
|
13,258,443
|
Software license of use
|
458,175
|
-
|
-
|
-
|
4,919
|
-
|
-
|
(15,837)
|
447,257
|
Right of use
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
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Notes to the Interim Financial Information
|
|
|
|
|
|
|
|
|
Intangible right arising from:
|
|
|
|
|
|
|
|
|
Concession agreements – equity value
|
5,741,791
|
4
|
(95,976)
|
(942)
|
13,728
|
(853)
|
(45,125)
|
5,612,627
|
Concession agreements – economic value
|
1,200,575
|
-
|
-
|
(26,028)
|
72,760
|
(5)
|
(23,387)
|
1,223,915
|
Program contracts
|
5,574,602
|
137
|
95,976
|
11,742
|
52,402
|
(759)
|
(75,488)
|
5,658,612
|
Program contracts – commitments
|
910,375
|
-
|
-
|
-
|
-
|
-
|
(9,280)
|
901,095
|
Service contracts – São Paulo
|
9,183,482
|
466
|
-
|
16,006
|
94,799
|
(2,644)
|
(147,218)
|
9,144,891
|
Software license
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
(c)
Intangible rights arising from concession agreements
During the period ended March 31, 2019, there were no significant changes in the criteria to account for intangible assets and types of contracts.
The Company has obligations recorded under “Program Contract – Commitments” in current liabilities in the amount of R$ 260,017 and R$ 230,695 as of March 31, 2019 and December 31, 2018, respectively, and noncurrent liabilities in the amount of R$ 117,471 and R$ 142,314 as of March 31, 2019 and December 31, 2018, respectively.
(d)
Capitalization of interest and other finance charges
From January to March 2019, the Company capitalized interest and inflation adjustment, including exchange rate changes, in concession intangible assets, totaling R$ 80,014, including the São Lourenço Production System and Leases (R$ 143,041 from January to March 2018) during the construction period
.
(e)
Construction margin
The Company is primarily responsible for the construction and installation of the concession infrastructure, either by using its own employees or contracting third parties, and is significantly exposed to its risks and benefits.
Accordingly, the Company recognizes revenue from construction services corresponding to construction costs increased by gross margin. Generally, constructions related to the concessions are performed by third parties. In such case, the Company’s margin is lower, normally to cover administration costs and assume the responsibility for primary risks. As of March 31, 2019 and 2018, the margin was 2.3%.
The construction margin from January to March 2019 and 2018 was R$ 13,569 and R$ 14,551, respectively.
(f)
Expropriations
As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate third-parties' properties, whose owners will be compensated either amicably or through courts.
Expropriation costs are recorded as concession intangible assets after the transaction is concluded. From January to March 2019, expropriations totaled R$ 7,819 (R$ 9,695 from January to March 2018).
PAGE: 47 of 84
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Notes to the Interim Financial Information
(g)
Public-Private Partnership (PPP)
SABESP carries out operations related to the PPPs mentioned below. These operations and their respective obligations and guarantees are supported by agreements executed according to Law 11,079/04.
Alto Tietê Production System
The Company and the special purpose entity CAB-Sistema Produtor Alto Tietê S/A, formed by Galvão Engenharia S.A. and Companhia Águas do Brasil – Cab Ambiental, signed in June 2008 the contract of public-private- partnership of Alto Tietê production system
.
As of March 31, 2019 and December 31, 2018, the amounts related to this PPP recognized in intangible assets were R$ 356,966 and R$ 359,759, respectively.
From January to March 2019, a discount rate of 8.20% p.a. was used to calculate the adjustment to present value of the agreement. The obligations assumed by the Company as of March 31, 2019 and December 31, 2018 are shown in the table below.
On a monthly basis, SABESP assigns funds from tariffs arising from the services provided to the SPE CAB Sistema Produtor Alto Tietê S/A, in the amount of R$ 10,361, corresponding to the monthly remuneration. This amount is annually adjusted by the IPC – FIPE and is recorded in a restricted account, pursuant to the contractual operating proceeding. Should SABESP comply with its monthly obligations with the SPE, the funds from the restricted account will be released
.
The guarantee is effective since the beginning of the operation and will be valid until the conclusion, termination, intervention, annulment or caducity of the Administrative Concession, or other extinction events provided for in the Concession Agreement or in the law applicable to administrative concessions, including in the event of bankruptcy or
extinction
of the SPE
.
São Lourenço
Production System
In May 2018, the control of SPE Sistema Produtor São Lourenço S/A was transferred to CGGC Construtora do Brasil Ltda, previously composed of Construções e Comércio Camargo Corrêa S/A and Construtora Andrade Gutierrez S/A.
The São Lourenço Production System (SPSL) PPP started operating on July 10, 2018, as per the contractual clause that allows the beginning of operations provided that system has full operating capacity, without, however implying in the acceptance of the works. Accordingly, the service provision phase began with the corresponding payment of the due considerations, together with the end of the works.
As of March 31, 2019 and December 31, 2018, the carrying amount recorded in the Company’s intangible assets, related to this PPP, totaled R$ 3,240.543 and R$ 3,208,464, respectively. São Lourenço Production System’s main works were concluded on the first quarter of 2019 and this phase is expected to end on the second quarter of 2019, after contractual clauses are met and there are no documents pending
.
The obligations assumed by the Company as of March 31, 2019 and December 31, 2018 are shown in the table below, and the increase in intangible assets and liabilities was due to the progress of works in
2019
.
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Notes to the Interim Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alto Tietê
|
40,042
|
241,802
|
281,844
|
39,283
|
252,093
|
291,376
|
São Lourenço
|
|
|
|
|
|
|
Total
|
122,431
|
3,279,258
|
3,401,689
|
137,827
|
3,275,297
|
3,413,124
|
(h)
Works in progress
With the adoption of CPC 47/IFRS 15 – Revenue from contract with customers, as of January 1, 2018, assets related to the concession under construction, recorded under the scope of ICPC 01 (R1) – Concession Agreements, previously recognized as part of intangible assets, such as works in progress, were reclassified to contract asset, pursuant to Note 13, in the amount of R$ 10,387 million
.
As of March 31, 2019, the amount recorded as contract asset was R$ 7,838 million.
(i)
Amortization of intangible assets
The amortization average rate was 4.4% and 4.1% as of March 31, 2019 and 2018, respectively
.
(j)
Software license of use
The software license of use is capitalized based on the costs incurred to acquire software and
prepared them for use
. As of April 10, 2017, the Company implemented the Integrated Business Management System (Enterprise Resource Planning – SAP ERP), which includes the administrative/financial module. The implementation of the commercial module is in progress
.
(k)
Right of use
The statement of financial position account Right of Use, created by the Company as of January 1, 2019, reflects the amendment introduced by IFRS 16 / CPC 06 (R2), which requires lessees to record the right-of-use asset and the lease liability, which may not be applied to short-term leases and assets of low-value. For these cases, SABESP maintained the amount of R$ 12,723 in its income statement
.
Statement of financial position details
:
Nature
|
|
March 31,
2019
|
Vehicles
|
|
87,502
|
Properties
|
|
8,120
|
Equipment
|
|
684
|
Other
|
|
3,748
|
Accumulated amortization
|
|
(8,510)
|
Total
|
|
91,544
|
Lease liability corresponds to total future fixed lease payments, adjusted to present value, considering an incremental rate on borrowings. For further information, see Note 16.
PAGE: 49 of 84
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Notes to the Interim Financial Information
15
Property, plant and equipment
(a)
Statement of financial position details
|
|
|
|
|
|
|
|
|
|
Land
|
92,962
|
-
|
92,962
|
92,979
|
-
|
92,979
|
Buildings
|
78,548
|
(39,307)
|
39,241
|
79,086
|
(38,961)
|
40,125
|
Equipment
|
362,095
|
(235,905)
|
126,190
|
372,872
|
(256,786)
|
116,086
|
Transportation equipment
|
11,324
|
(7,928)
|
3,396
|
11,333
|
(7,860)
|
3,473
|
Furniture and fixtures
|
28,374
|
(13,024)
|
15,350
|
27,250
|
(13,672)
|
13,578
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(b)
Changes
|
|
|
|
|
|
|
Land
|
92,979
|
-
|
(17)
|
-
|
-
|
92,962
|
Buildings
|
40,125
|
16
|
(323)
|
-
|
(577)
|
39,241
|
Equipment
|
116,086
|
17,473
|
882
|
(27)
|
(8,224)
|
126,190
|
Transportation equipment
|
3,473
|
296
|
(188)
|
-
|
(185)
|
3,396
|
Furniture and fixtures
|
13,578
|
657
|
1,424
|
(6)
|
(303)
|
15,350
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
92,507
|
-
|
-
|
-
|
-
|
92,507
|
Buildings
|
42,360
|
-
|
-
|
-
|
(579)
|
41,781
|
Equipment
|
103,803
|
2,767
|
(733)
|
(14)
|
(8,500)
|
97,323
|
Transportation equipment
|
3,680
|
-
|
-
|
-
|
(199)
|
3,481
|
Furniture and fixtures
|
11,816
|
19
|
(45)
|
(7)
|
(274)
|
11,509
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(c)
Depreciation
The Company annually reviews the depreciation rates of buildings (3.0%); equipment (16.6%); transportation equipment (9.9%) and furniture and fixtures (6.8%). Land is not depreciated
.
The depreciation average rates were 12.3% and 12.7%, as of March 31, 2019 and 2018, respectively
.
PAGE: 50 of 84
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16
Borrowings and Financing
Borrowings and financing outstanding balance
|
|
|
Financial institution
|
|
|
|
|
|
|
Local currency
|
|
|
|
|
|
|
10
th
issue debentures
|
42,554
|
34,458
|
77,012
|
42,493
|
40,194
|
82,687
|
12
th
issue debentures
|
45,450
|
237,904
|
283,354
|
45,450
|
249,249
|
294,699
|
14
th
issue debentures
|
41,528
|
80,970
|
122,498
|
41,270
|
103,005
|
144,275
|
15
th
issue debentures
|
-
|
-
|
-
|
359,394
|
-
|
359,394
|
17
th
issue debentures
|
282,475
|
256,731
|
539,206
|
279,100
|
532,691
|
811,791
|
18
th
issue debentures
|
33,687
|
161,431
|
195,118
|
33,469
|
165,267
|
198,736
|
20
th
issue debentures
|
-
|
-
|
-
|
248,334
|
-
|
248,334
|
21
st
issue debentures
|
-
|
499,610
|
499,610
|
-
|
499,604
|
499,604
|
22
nd
issue debentures
|
-
|
759,224
|
759,224
|
-
|
756,040
|
756,040
|
Brazilian Federal Savings Bank
|
76,327
|
1,271,377
|
1,347,704
|
75,223
|
1,266,592
|
1,341,815
|
Brazilian Development Bank - BNDES BAIXADA SANTISTA
|
12,705
|
-
|
12,705
|
16,899
|
-
|
16,899
|
Brazilian Development Bank - BNDES PAC
|
11,167
|
36,206
|
47,373
|
11,227
|
39,169
|
50,396
|
Brazilian Development Bank - BNDES PAC II 9751
|
4,375
|
17,769
|
22,144
|
4,364
|
18,811
|
23,175
|
Brazilian Development Bank - BNDES PAC II 9752
|
3,194
|
22,357
|
25,551
|
3,186
|
23,100
|
26,286
|
Brazilian Development Bank - BNDES ONDA LIMPA
|
23,689
|
118,260
|
141,949
|
23,632
|
123,875
|
147,507
|
Brazilian Development Bank - BNDES TIETÊ III
|
30,663
|
245,146
|
275,809
|
30,589
|
252,197
|
282,786
|
Brazilian Development Bank - BNDES 2015
|
31,692
|
484,027
|
515,719
|
31,615
|
490,729
|
522,344
|
Leases
|
19,450
|
550,313
|
569,763
|
19,077
|
549,589
|
568,666
|
Leases (IFRS 16)
|
43,512
|
49,855
|
93,367
|
-
|
-
|
-
|
Studies and Projects Funding (FINEP)
|
1,383
|
7,837
|
9,220
|
1,380
|
8,163
|
9,543
|
Interest and charges
|
|
|
|
|
|
|
Total in local currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Borrowings and financing outstanding balance
|
|
|
Financial institution
|
|
|
|
|
|
|
Foreign currency
|
|
|
|
|
|
|
Inter-American Development Bank - BID 1212 – US$ 66,808 thousand (US$ 71,947 thousand in December 2018)
|
40,051
|
220,279
|
260,330
|
39,826
|
238,954
|
278,780
|
Inter-American Development Bank - BID 2202 – US$ 526,527 thousand (US$544.457 thousand in December 2018)
|
124,347
|
1,911,615
|
2,035,962
|
124,098
|
1,969,565
|
2,093,663
|
International Bank of Reconstruction and Development - BIRD – US$ 91,286 thousand
(US$ 91.286 thousand in December 2018)
|
23,691
|
331,739
|
355,430
|
11,779
|
341,646
|
353,425
|
Deutsche Bank – US$ 75,000 thousand (US$ 75.000 thousand in December 2018)
|
291,032
|
-
|
291,032
|
288,479
|
-
|
288,479
|
Eurobonds – US$ 350,000 thousand (US$ 350.000 thousand in December 2018)
|
-
|
1,362,403
|
1,362,403
|
-
|
1,354,532
|
1,354,532
|
JICA 15 – ¥ 12, 100.515 thousand (¥ 12,676,730 thousand in December 2018)
|
40,577
|
385,482
|
426,059
|
40,646
|
406,462
|
447,108
|
JICA 18 – ¥ 10,879.680 thousand (¥ 11,397,760 thousand in December 2018)
|
36,483
|
346,372
|
382,855
|
36,545
|
365,230
|
401,775
|
JICA 17 – ¥ 2,226,960 thousand (¥ 1,826,957 thousand in December 2018)
|
11,815
|
65,792
|
77,607
|
11,835
|
51,786
|
63,621
|
JICA 19 – ¥ 32,504,203 thousand (¥ 31,561,726 thousand in December 2018)
|
63,745
|
1,078,643
|
1,142,388
|
64,028
|
1,047,081
|
1,111,109
|
BID 1983AB – US$ 58,462 thousand (US$ 58,462 thousand in December 2018)
|
68,942
|
156,766
|
225,708
|
68,554
|
155,653
|
224,207
|
Interest and charges
|
|
|
|
|
|
|
Total in foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings and financing
|
|
|
|
|
|
|
Exchange rate as of March 31, 2019: US$ 3.8967; ¥ 0.03521 (as of December 31, 2018: US$ 3.8748; ¥ 0.03527).
On March 31, 2019, the Company did not have balances of borrowings and financing raised during the year to mature within 12 months.
|
|
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|
|
|
|
|
|
|
|
|
|
10
th
issue debentures
|
Own funds
|
2020
|
TJLP + 1.92% (series 1 and 3) and 9.53%
(series 2)
|
IPCA (series 2)
|
12
th
issue debentures
|
Own funds
|
2025
|
TR + 9.5%
|
|
14
th
issue debentures
|
Own funds
|
2022
|
TJLP + 1.92% (series 1 and 3) and 9.19%
(series 2)
|
IPCA (series 2)
|
15
th
issue debentures
|
Own funds
|
2019
|
CDI + 0.99% (series 1) and 6.2% (series 2)
|
IPCA (series 2)
|
17
th
issue debentures
|
Own funds
|
2023
|
CDI + 0.75% (series 1), 4.5% (series 2) and 4.75% (series 3)
|
IPCA (series 2 and 3)
|
18
th
issue debentures
|
Own funds
|
2024
|
TJLP + 1.92 % (series 1 and 3) and 8.25% (series 2)
|
IPCA (series 2)
|
20
th
issue debentures
|
Own funds
|
2019
|
CDI + 3.80%
|
|
21
st
issue debentures
|
Own funds
|
2022
|
CDI + 0.60% (series 1) and CDI+ 0.90%
(series 2)
|
|
22
nd
issue debentures
|
Own funds
|
2025
|
CDI + 0.58% (series 1), CDI+ 0.90% (series 2) and 6.0% (series 3)
|
IPCA (series 3)
|
Brazilian Federal Savings Bank
|
Own funds
|
2019/2039
|
5% to 9.5%
|
TR
|
Brazilian Development Bank - BNDES BAIXADA SANTISTA
|
Own funds
|
2019
|
TJLP + 2.5%
|
|
Brazilian Development Bank - BNDES PAC
|
Own funds
|
2023
|
TJLP + 2.15%
|
|
Brazilian Development Bank - BNDES PAC II 9751
|
Own funds
|
2027
|
TJLP + 1.72%
|
|
Brazilian Development Bank - BNDES PAC II 9752
|
Own funds
|
2027
|
TJLP + 1.72%
|
|
Brazilian Development Bank - BNDES ONDA LIMPA
|
Own funds
|
2025
|
TJLP + 1.92%
|
|
Brazilian Development Bank - BNDES TIETÊ III
|
Own funds
|
2028
|
TJLP + 1.66%
|
|
Brazilian Development Bank - BNDES 2015
|
Own funds
|
2035
|
TJLP + 2.5%
|
|
Leases
|
|
2035
|
7.73% to 10.12%
|
IPC
|
Leases (IFRS 16)
|
Own funds
|
2023
|
7.02% to 10.47%
|
|
Studies and Projects Funding (FINEP)
|
Own funds
|
2025
|
TJLP + 1.5% (FINEP)
|
|
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|
|
|
|
|
|
|
|
|
|
Inter-American Development Bank - BID 1212 – US$ 66,808 thousand
|
Government
|
2025
|
3.31% (*)
|
US$
|
Inter-American Development Bank - BID 2202 – US$ 526,527 thousand
|
Government
|
2035
|
3.42% (*)
|
US$
|
International Bank for Reconstruction and Development - BIRD – US$ 91,286 thousand
|
Government
|
2034
|
2.85% (*)
|
US$
|
Deutsche Bank – US$ 75,000 thousand
|
-
|
2019
|
4.50%(*)
|
US$
|
Eurobonds – US$ 350,000 thousand
|
-
|
2020
|
6.25%
|
US$
|
JICA 15 – ¥ 12,100,515 thousand
|
Government
|
2029
|
1.8% and 2.5%
|
Yen
|
JICA 18 – ¥ 10,879,680 thousand
|
Government
|
2029
|
1.8% and 2.5%
|
Yen
|
JICA 17 – ¥ 2,226,960 thousand
|
Government
|
2035
|
1.2% and 0.01%
|
Yen
|
JICA 19 – ¥ 32,504,203 thousand
|
Government
|
2037
|
1.7% and 0.01%
|
Yen
|
BID 1983AB – US$ 58,462 thousand
|
-
|
2023
|
2.08% to 2.38% (*)
|
US$
|
(*) Rates comprising LIBOR + contractually defined spread.
PAGE: 54 of 84
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|
(i)
Payment schedule – accounting balances as of March 31, 2019
|
|
|
|
|
|
|
|
|
LOCAL CURRENCY
|
|
|
|
|
|
|
|
|
Debentures
|
117,925
|
593,632
|
481,515
|
560,631
|
363,834
|
206,601
|
151,884
|
2,476,022
|
Brazilian Federal Savings Bank
|
57,078
|
78,813
|
82,956
|
87,424
|
79,923
|
78,310
|
883,200
|
1,347,704
|
BNDES
|
91,289
|
103,423
|
102,970
|
102,970
|
97,298
|
91,803
|
451,497
|
1,041,250
|
Leases
|
13,823
|
36,481
|
38,348
|
40,378
|
43,175
|
45,055
|
352,503
|
569,763
|
Leases (IFRS 16)
|
32,703
|
41,414
|
18,885
|
302
|
63
|
-
|
-
|
93,367
|
FINEP
|
1,037
|
1,383
|
1,383
|
1,383
|
1,383
|
1,383
|
1,268
|
9,220
|
Interest and other charges
|
|
|
|
|
|
|
|
|
TOTAL IN LOCAL CURRENCY
|
|
|
|
|
|
|
|
|
FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
BID
|
82,199
|
164,397
|
164,397
|
164,397
|
164,397
|
164,397
|
1,392,108
|
2,296,292
|
BIRD
|
11,845
|
23,691
|
23,691
|
23,691
|
23,691
|
23,691
|
225,130
|
355,430
|
Deutsche Bank
|
291,032
|
-
|
-
|
-
|
-
|
-
|
-
|
291,032
|
Eurobonds
|
-
|
1,362,403
|
-
|
-
|
-
|
-
|
-
|
1,362,403
|
JICA
|
82,305
|
144,795
|
144,795
|
144,795
|
144,795
|
144,795
|
1,222,629
|
2,028,909
|
BID 1983AB
|
68,942
|
68,309
|
29,975
|
29,975
|
28,507
|
-
|
-
|
225,708
|
Interest and other charges
|
|
|
|
|
|
|
|
|
TOTAL IN FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
Overall Total
|
|
|
|
|
|
|
|
|
PAGE: 55 of 84
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(ii)
Changes
|
|
|
|
|
Monetary variation and exchange rate changes
|
Inflation adjustment / update incorporated interest - Capitalized
|
|
|
|
Provision for interest and fees - Capitalized
|
Borrowing costs - expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOCAL CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Debentures
|
3,486,861
|
-
|
-
|
(188)
|
15,090
|
-
|
(116,081)
|
(936,628)
|
46,805
|
4,556
|
2,186
|
2,502,601
|
Brazilian Federal Savings Bank
|
1,345,684
|
-
|
25,900
|
-
|
-
|
-
|
(26,833)
|
(20,007)
|
18,625
|
8,223
|
-
|
1,351,592
|
BNDES
|
1,072,605
|
-
|
-
|
-
|
1,918
|
638
|
(20,038)
|
(30,752)
|
15,506
|
4,889
|
52
|
1,044,818
|
Leases
|
568,666
|
-
|
-
|
-
|
-
|
1,729
|
(9,528)
|
(4,545)
|
9,497
|
3,944
|
-
|
569,763
|
Leases (IFRS 16)*
|
-
|
100,054
|
-
|
-
|
-
|
-
|
(175)
|
(7,759)
|
1,247
|
-
|
-
|
93,367
|
FINEP
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IN LOCAL CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
BID
|
2,399,985
|
-
|
-
|
-
|
(7,608)
|
17,464
|
(40,579)
|
(86,249)
|
6,772
|
14,151
|
239
|
2,304,175
|
BIRD
|
356,420
|
-
|
-
|
-
|
1,389
|
611
|
(5,014)
|
-
|
2,102
|
387
|
5
|
355,900
|
Deutsche Bank
|
292,872
|
-
|
-
|
-
|
1,643
|
-
|
(6,119)
|
-
|
5,563
|
548
|
911
|
295,418
|
Eurobonds
|
1,358,412
|
-
|
-
|
-
|
7,665
|
-
|
-
|
-
|
22,829
|
2,264
|
206
|
1,391,376
|
JICA
|
2,036,128
|
-
|
78,143
|
(40)
|
(4,193)
|
(903)
|
(16,626)
|
(67,757)
|
7,373
|
503
|
46
|
2,032,674
|
BID 1983AB
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IN FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall Total
|
|
|
|
|
|
|
|
|
|
|
|
|
PAGE: 56 of 84
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|
|
|
|
|
|
Monetary variation and exchange rate changes
|
Inflation adjustment / update incorporated interest - Capitalized
|
|
|
|
Provision for interest and fees - Capitalized
|
Borrowing costs - expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOCAL CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Debentures
|
3,576,842
|
750,000
|
(2,294)
|
-
|
18,204
|
-
|
(104,183)
|
(537,322)
|
51,440
|
11,043
|
792
|
3,764,522
|
Brazilian Federal Savings Bank
|
1,236,674
|
57,531
|
-
|
-
|
-
|
-
|
(24,588)
|
(27,565)
|
19,709
|
4,924
|
-
|
1,266,685
|
BNDES
|
1,042,036
|
79,000
|
-
|
-
|
1,426
|
761
|
(19,936)
|
(22,138)
|
6,823
|
12,662
|
52
|
1,100,686
|
Leases
|
561,616
|
-
|
-
|
8,695
|
-
|
-
|
-
|
(4,157)
|
-
|
-
|
-
|
566,154
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IN LOCAL CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
BID
|
1,743,257
|
32,772
|
(1,139)
|
-
|
(3,490)
|
11,336
|
(20,457)
|
(56,971)
|
5,723
|
5,006
|
204
|
1,716,241
|
BIRD
|
303,278
|
-
|
-
|
-
|
598
|
845
|
(2,634)
|
-
|
1,010
|
240
|
5
|
303,342
|
Deutsche Bank
|
496,726
|
-
|
-
|
-
|
2,370
|
-
|
(8,449)
|
-
|
7,156
|
1,531
|
902
|
500,236
|
Eurobonds
|
1,158,642
|
-
|
-
|
-
|
5,530
|
-
|
-
|
-
|
17,025
|
4,375
|
205
|
1,185,777
|
JICA
|
1,700,448
|
27,241
|
(63)
|
-
|
105,706
|
750
|
(15,609)
|
(33,343)
|
8,102
|
142
|
43
|
1,793,417
|
BID 1983AB
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IN FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall Total
|
|
|
|
|
|
|
|
|
|
|
|
|
PAGE: 57 of 84
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|
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|
Notes to the Interim Financial Information
(i)
Main events in the three-month period ended March 31, 2019
(a)
Debentures
As of January 15, 2019, the Company amortized the first installment of series 2 of the 17
th
debenture issue, in the amount of R$ 279,797
.
As of February 15, 2019, the Company amortized the second and last installment of series 2 of the 15
th
debenture issue, in the amount of R$ 361,593
.
As of March 26, 2019, the Company prepaid the 20
th
debenture issue, in the amount of R$ 250,000
.
(b)
Brazilian Federal Savings Bank (CEF)
In 2019, funding and amortizations totaled R$ 25,900 and R$ 20,007, respectively
.
(c)
Brazilian Development Bank (BNDES)
In 2019, amortizations totaled
R$ 30,752.
(d)
Japan International Cooperation Agency (JICA)
In 2019, the Company raised R$ 78,143 from JICA 17 and JICA 19 agreements, while amortizations referring to JICA 15, JICA 18 and JICA 19 agreements totaled R$ 67,757
.
(e)
Inter-American Development Bank (BID)
In 2019, amortizations referring to BID 1212 and BID 2202 agreements totaled R$ 19,369 and R$ 66,880, respectively
.
(f)
Exchange rate changes
There were no significant changes in the US dollar and Yen exchange rates in the quarter ended March 31, 2019.
(ii)
Covenants
As of March 31, 2019, the Company met the requirements set forth by its borrowing and financing agreements
.
PAGE: 58 of 84
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Notes to the Interim Financial Information
(iii)
Borrowings and financing – Credit Limited
Agent
|
|
March 31, 2019
|
|
|
(in millions of R$ (*))
|
Brazilian Federal Savings Bank
|
|
1,882
|
Brazilian Development Bank (BNDES)
|
|
1,459
|
Japan International Cooperation Agency (JICA)
|
|
128
|
Other
|
|
38
|
TOTAL
|
|
3,507
|
(*) Brazilian Central Bank’s exchange rate as of March 31, 2019 (¥ 1.00 = R$ 0.03521).
In order to comply with its capex plan, SABESP relies on a fund-raising plan.
Financing resources contracted have specific purposes, which have been released for the execution of their respective investments, according to the progress of the works.
17
Taxes and contributions
(a)
Current assets
|
|
|
Recoverable taxes
|
|
|
Income tax and social contribution
|
314,505
|
361,758
|
Withholding income tax (IRRF) on financial investments
|
9,052
|
6,423
|
Other federal taxes
|
|
|
Total
|
|
|
(b)
Current liabilities
|
|
|
Taxes obligations
|
|
|
Cofins and Pasep
|
91,405
|
82,381
|
INSS (Social Security contribution)
|
37,780
|
38,871
|
IRRF (withholding income tax)
|
25,552
|
66,825
|
Other
|
|
|
Total
|
|
|
PAGE: 59 of 84
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|
Notes to the Interim Financial Information
18
Deferred tax and contributions
(a)
Statement of financial position details
|
|
|
Deferred tax assets
|
|
|
Provisions
|
305,576
|
337,833
|
Pension plan obligations – G1
|
157,255
|
157,044
|
Donations of underlying assets on concession agreements
|
53,473
|
54,131
|
Credit losses
|
193,105
|
197,920
|
Other
|
|
|
Total deferred tax assets
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
Temporary difference on concession of intangible asset
|
(427,496)
|
(433,842)
|
Capitalization of borrowing costs
|
(420,001)
|
(420,978)
|
Profit on supply to governmental entities
|
(207,951)
|
(206,978)
|
Actuarial (gain)/loss – G1 Plan
|
(36,430)
|
(36,430)
|
Construction margin
|
(85,473)
|
(86,164)
|
Borrowing costs
|
|
|
Total deferred tax liabilities
|
|
|
|
|
|
Deferred tax assets/(liabilities), net
|
|
|
PAGE: 60 of 84
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|
Notes to the Interim Financial Information
(b) Changes
Deferred tax assets
|
|
|
|
Provisions
|
337,833
|
(32,257)
|
305,576
|
Pension obligations– G1
|
157,044
|
211
|
157,255
|
Donations of underlying asset on concession agreement
|
54,131
|
(658)
|
53,473
|
Credit losses
|
197,920
|
(4,815)
|
193,105
|
Other
|
|
|
|
Total
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
Temporary difference on concession of intangible asset
|
(433,842)
|
6,346
|
(427,496)
|
Capitalization of borrowing costs
|
(420,978)
|
977
|
(420,001)
|
Profit on supply to government entities
|
(206,978)
|
(973)
|
(207,951)
|
Actuarial (gain)/loss – G1
|
(36,430)
|
-
|
(36,430)
|
Construction margin
|
(86,164)
|
691
|
(85,473)
|
Borrowing costs
|
|
|
|
Total
|
|
|
|
|
|
|
|
Deferred tax asset/(liability), net
|
|
|
|
PAGE: 61 of 84
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|
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|
Notes to the Interim Financial Information
Deferred tax assets
|
|
|
|
Provisions
|
482,863
|
(7,015)
|
475,848
|
Pension obligations – G1
|
165,503
|
(3,090)
|
162,413
|
Donations of underlying asset on concession agreements
|
55,112
|
(668)
|
54,444
|
Credit losses
|
199,063
|
7,930
|
206,993
|
Other
|
|
|
|
Total
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
Temporary difference on concession of intangible asset
|
(460,177)
|
7,499
|
(452,678)
|
Capitalization of borrowing costs
|
(415,379)
|
(2,242)
|
(417,621)
|
Profit on supply to governmental entities
|
(76,705)
|
(9,216)
|
(85,921)
|
Actuarial gain/loss – G1
|
(36,538)
|
-
|
(36,538)
|
Construction margin
|
(88,947)
|
692
|
(88,255)
|
Borrowing costs
|
|
|
|
Total
|
|
|
|
|
|
|
|
Deferred tax liability, net
|
|
|
|
PAGE: 62 of 84
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|
Version : 1
|
Notes to the Interim Financial Information
(c)
Reconciliation of the effective tax rate
The amounts recorded as income tax and social contribution expenses in the financial statements are reconciled to the statutory rates, as shown below
:
|
March 31, 2019
|
|
March 31, 2018
|
Profit before income taxes
|
991,200
|
|
888,672
|
Statutory rate
|
34%
|
|
34%
|
Estimated expense at statutory rate
|
(337,008)
|
|
(302,148)
|
Permanent differences
|
|
|
|
Provision Law 4,819/58 – G0 (i)
|
(11,926)
|
|
(12,323)
|
Donations
|
(986)
|
|
(657)
|
Other differences
|
6,011
|
|
6,887
|
Income tax and social contribution
|
(343,909)
|
|
(308,241)
|
Current income tax and social contribution
|
(310,485)
|
|
(325,870)
|
Deferred income tax and social contribution
|
(33,424)
|
|
17,629
|
Effective rate
|
35%
|
|
35%
|
(i)
Permanent difference related to the provision for actuarial liability (Note 20
(b)
(iii)).
PAGE: 63 of 84
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|
Notes to the Interim Financial Information
19
Provisions
(a)
Lawsuits and proceedings that resulted in provisions
(I)
Statement of financial position details
The Company is party to a number of claims and legal and administrative proceedings arising in the normal course of business, including civil, tax, labor and environmental matters. Management recognizes provisions
consistently with
the recognition and measurement criteria established in Note 3.15 to the Annual Financial Statements of December 31, 2018.
The ultimate timing and amounts of the payments depend on the outcome of the court cases. The provisions, net of escrow deposits are as follows:
|
|
|
|
|
|
|
|
Customer claims (i)
|
235,219
|
(13,077)
|
222,142
|
|
290,649
|
(43,841)
|
246,808
|
Supplier claims (ii)
|
26,755
|
(408)
|
26,347
|
|
67,985
|
(24,380)
|
43,605
|
Other civil claims (iii)
|
87,180
|
(2,640)
|
84,540
|
|
98,302
|
(13,519)
|
84,783
|
Tax claims (iv)
|
57,999
|
(3,645)
|
54,354
|
|
63,335
|
(8,091)
|
55,244
|
Labor claims (v)
|
303,748
|
(8,668)
|
295,080
|
|
302,935
|
(10,932)
|
292,003
|
Environmental claims (vi)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
504,394
|
-
|
504,394
|
|
458,387
|
-
|
458,387
|
Noncurrent
|
394,359
|
(28,438)
|
365,921
|
|
535,238
|
(100,763)
|
434,475
|
(II) Changes
|
|
|
Interest and inflation adjustment
|
|
Amounts not used
(reversal)
|
|
Customer claims (i)
|
290,649
|
4,061
|
6,356
|
(39,259)
|
(26,588)
|
235,219
|
Supplier claims (ii)
|
67,985
|
4,710
|
7,159
|
(25,970)
|
(27,129)
|
26,755
|
Other civil claims (iii)
|
98,302
|
1,372
|
1,738
|
(936)
|
(13,296)
|
87,180
|
Tax claims (iv)
|
63,335
|
110
|
622
|
(4,490)
|
(1,578)
|
57,999
|
Labor claims (v)
|
302,935
|
17,173
|
8,720
|
(12,582)
|
(12,498)
|
303,748
|
Environmental claims (vi)
|
|
|
|
|
|
|
Subtotal
|
993,625
|
39,719
|
29,943
|
(83,237)
|
(81,297)
|
898,753
|
Escrow deposits
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
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Notes to the Interim Financial Information
|
|
|
Interest and inflation adjustment
|
|
Amounts not used (reversal)
|
|
Customer claims (i)
|
438,619
|
1,281
|
8,159
|
(19,285)
|
(13,802)
|
414,972
|
Supplier claims (ii)
|
332,037
|
20,049
|
2,345
|
(26,287)
|
(1,506)
|
326,638
|
Other civil claims (iii)
|
114,544
|
2,584
|
2,826
|
(3,725)
|
(7,843)
|
108,386
|
Tax claims (iv)
|
77,100
|
4,583
|
1,223
|
(2,431)
|
(5,240)
|
75,235
|
Labor claims (v)
|
299,842
|
17,583
|
7,740
|
(5,131)
|
(13,447)
|
306,587
|
Environmental claims (vi)
|
|
|
|
|
|
|
Subtotal
|
1,422,588
|
56,285
|
27,320
|
(56,859)
|
(47,377)
|
1,401,957
|
Escrow deposits
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
(b)
Lawsuits deemed as contingent liabilities
The Company is a party to lawsuits and administrative proceedings relating to environmental, tax, civil and labor claims, which are assessed as contingent liabilities in the financial statements, since it either does not expect outflows to be required or the amount of the obligation cannot be reliably measured. Contingent liabilities are represented as follows
:
|
|
|
Customer claims (i)
|
211,800
|
207,600
|
Supplier claims (ii)
|
1,491,100
|
1,459,100
|
Other civil claims (iii)
|
732,700
|
719,300
|
Tax claims (iv)
|
1,640,100
|
1,439,100
|
Labor claims (v)
|
620,700
|
624,200
|
Environmental claims (vi)
|
|
|
Total
|
|
|
(c)
Explanation on the nature of main classes of lawsuits
(i)
Customer claims
Approximately 830 lawsuits (890 as of December 31, 2018) were filed by commercial customers, who claim that their tariffs should correspond to other consumer categories, and 460 lawsuits (490 as of December 31, 2018) in which customers claim a reduction in the sewage tariff due to losses in the system, consequently requesting the refund of amounts charged by the Company, and 40 lawsuits (40 as of December 31, 2018) in which customers plead the reduction in tariff under the category “Social Welfare Entity”.
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Notes to the Interim Financial Information
(ii)
Supplier claims
These lawsuits include lawsuits filed by some suppliers alleging underpayment of monetary restatements, withholding of amounts related to the understated inflation rates deriving from Real economic plan, and the economic and financial imbalance of the agreements, and are in progress at different courts.
(iii)
Other civil claims
These mainly refer to indemnities for property damage, pain and suffering, and loss of profits allegedly caused to third parties, such as vehicle accidents, claims, challenges on the methodology to collect tariffs, among others, filed at different court levels.
(iv)
Tax claims
Tax claims refer mainly to issues related to tax collections and fines in general challenged due to disagreements regarding notification or differences in the interpretation of legislation by the Company's Management.
(v)
Labor claims
The Company is a party to labor lawsuits, involving issues such as overtime, shift schedule, health hazard premium and hazardous duty premium, prior notice, change of function, salary equalization, service outsourcing and other. Part of the amount involved is in provisional or final execution at various court levels.
(vi)
Environmental claims
These refer to several administrative proceedings and lawsuits filed by government entities, including Companhia de Tecnologia de Saneamento Ambiental (Cetesb) and the Public Prosecution Office of the São Paulo State, that aim affirmative and negative covenants and penalty is estimated due to failure to comply in addition to the imposition of indemnity due to environmental damages allegedly caused by the Company. The amounts accrued represent the best estimate of the Company at this moment, however, may differ from the amount to be disbursed as indemnity to alleged damages, in view of the current stage of referred proceedings.
(d)
Guarantee insurance for escrow deposit
The Company contracts guarantee insurance for escrow deposit, which was renewed as of May 25, 2018, in the amount of R$ 500 million. Such insurance will be used to settle legal claims instead of having immediate cash disbursement by the Company, such insurance is used until the conclusion of these proceedings limited to up to five years.
From January to March 2019, the Company used R$ 21,811 of the guarantee insurance (no amount was used from January to March 2018). A total of R$ 449,745 is currently outstanding from the current contract
.
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Notes to the Interim Financial Information
20
Employees benefits
(a)
Health benefit plan
The health benefit plan is managed by Sabesprev and consists of optional, free choice, health plans sponsored by contributions of SABESP and the active participants, as follows:
. Company: 7.9% on average, of gross payroll;
. Participating employees: 3.21% of base salary and premiums, equivalent to 2.7% of payroll, on average.
The health plans offered to SABESP employees are self-managed by Fundação Sabesp de Seguridade Social (Sabesprev). However, since February 2019, the Company has been evaluating/studying an Adhesion Agreement with Fundação CESP (Funcesp), another self-management entity. This solution maintains the strategy to redesign the medical services rendered to SABESP.
Pursuant to the rules of the National Regulatory Agency for Private Health Insurance and Plans (ANS), Sabesprev is required to maintain equity higher than the solvency margin in order to ensure its operation. For this reason, SABESP was required to contribute an additional R$ 53.0 million in the first quarter of 2019, in view of the imbalance caused by the increase in healthcare costs, in order to comply with the parameters required by ANS.
(b)
Pension plan benefits
Funded plan – G1
|
|
|
|
|
Pension plan liabilities as of December 31, 2018
|
|
|
|
363,902
|
Expenses recognized in 2019
|
|
|
|
10,019
|
Payments made in 2019
|
|
|
|
(9,151)
|
Pension plan liabilities as of March 31, 2019 (i)
|
|
|
|
364,770
|
Unfunded plan– G0
|
|
|
|
|
Pension plan liabilities as of December 31, 2018
|
|
|
|
2,606,107
|
Expenses recognized in 2019
|
|
|
|
56,841
|
Payments made in 2019
|
|
|
|
(40,905)
|
Pension plan liabilities as of March 31, 2019 (iii)
|
|
|
|
2,622,043
|
Total
|
|
|
|
2,986,813
|
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Notes to the Interim Financial Information
(i)
G1 Plan
The Company sponsors a defined benefit pension plan for its employees (“G1 Plan”), which is managed by Sabesprev, receives similar contributions established in a plan of subsidy of actuarial study of SABESPREV, as follows:
·
0.99% of the portion of the salary of participation up to 20 salaries; and
·
8.39% of the surplus, if any, of the portion of the salary of participation over 20 salaries.
As of March 31, 2019, SABESP had a net actuarial liability of R$ 364,770 (R$ 363,902 as of December 31, 2018) representing the difference between the present value of the Company's defined benefit obligations to the participating employees, retired employees, and pensioners, and the fair value of the plan’s assets.
(ii)
Private pension plan benefits – Defined contribution
As of March 31, 2019, Sabesprev Mais plan, based on defined contribution, had 9,888 active and assisted participants (9,586 as of December 31, 2018).
With respect to the Sabesprev Mais plan, the contributions from the sponsor represent 100% over the total basic contribution from the participants. In 2019, expenses related to the obligation of defined contribution, totaling
R$ 3,560, R$ 471 and R$ 939, were allocated to operating costs, selling expenses and administrative expenses. The amount of R$ 492 was capitalized in assets.
The Company has made contributions in the amount of R$ 5,462 from January to March 2019 (R$ 4,989 from January to March 2018).
(iii)
G0 Plan
Pursuant to State Law 4,819/58, employees who started providing services prior to May 1974 and retired as an employee of the Company acquired a legal right to receive supplemental pension payments, which rights are referred as "G0 Plan". The Company pays these supplemental benefits on behalf of the State Government and makes claims for reimbursements from the State Government, which are recorded as accounts receivable from related parties, limited to the amounts considered virtually certain that will be reimbursed by the State Government. As of March 31, 2019, the Company recorded a defined benefit obligation for the G0 Plan of R$ 2,622.043 (R$ 2,606,107 as of December 31, 2018).
(c) Profit sharing
The Company has a profit-sharing program in accordance with an agreement with labor union and SABESP. The period covered represents the Company fiscal year, from January to December 2019. The limit of the profit sharing is up to one-month salary for each employee, depending on performance goals reached
.
From January to March 2019 and 2018, R$ 22,802 and R$ 24,619, respectively, were accrued under “Salaries and related charges”.
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21
Services payable
The services account records the balances payable, mainly from services received from third parties, such as supply of electric power, reading of hydrometers and delivery of water and sewage bills, cleaning, surveillance and security services, collection, legal counsel services, audit, marketing and advertising and consulting services, among others. This account also includes the amounts payable related to the transfer of 7.5% of revenue from the São Paulo municipal government to the Municipal Fund (Note 15 (c) (v) (6) of the Annual Financial Statements of December 31, 2018). The balances as of March 31, 2019 and December 31, 2018 were R$ 580,377 and R$ 454,022, respectively.
22
Knowledge Retention Program
In June 2018, SABESP implemented the Knowledge Retention Program (PRC), aiming to provide personnel planning conditions and mitigate the impact of the exit of employees who possess strategic knowledge acquired throughout their career.
The period to enroll in the Program was from July 2, 2018 to October 31, 2018; however, the final term was postponed to November 30, 2018. Employment terminations will be carried out based on a previously set schedule, during the validity of the Program, i.e. from January 2, 2019 to December 30, 2020
.
For those enrolled in the Program, the compliance with the agreements of the Collective Bargaining Agreement effective on the date of termination is thereby guaranteed. They will also receive a severance incentive proportional to the length of service at SABESP, corresponding to a percentage of the balance of the Guarantee Fund for Length of Service (FGTS), for termination purposes, on the date of termination, as per the table below
:
Length of service at SABESP
(years)
|
|
% of the Guarantee Fund for Length of Service (FGTS)
|
more than 15
|
|
40%
|
11 - 15
|
|
30%
|
6 - 10
|
|
15%
|
0 - 5
|
|
5%
|
In the first quarter of 2019, the Company wrote-off R$ 22,766, corresponding to the
provision of compensatory payments of employees enrolled in the Program
. As of March 31, 2019, the balance totaled R$ 273,705, R$ 28,438 of which recorded under current liabilities and R$ 245,267 under noncurrent liabilities.
As of March 31, 2019 and 2018, the total provisioned corresponding to TAC were R$ 144,270 and R$ 267,500, respectively, R$ 139,166 of which recorded under current liabilities (R$ 260,785 in 2018) and R$ 5,104 under noncurrent liabilities (R$ 6,715 in 2018)
.
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23
Equity
(a)
Subscribed and paid-in capital
As of March 31, 2019 and December 31, 2018, subscribed and paid-in capital was represented by 683,509,869 registered, book-entry common shares with no par value, as follows
:
|
March 31, 2019
|
|
December 31, 2018
|
|
Number of shares
|
|
%
|
|
Number of shares
|
|
%
|
State Department of Finance
|
343,524,285
|
|
50.26%
|
|
343,524,285
|
|
50.26%
|
Companhia Brasileira de Liquidação e Custódia
|
222,124,772
|
|
32.50%
|
|
212,612,143
|
|
31.10%
|
The Bank Of New York ADR Department (equivalent in shares) (*)
|
115,771,267
|
|
16.93%
|
|
125,278,967
|
|
18.33%
|
Other
|
2,089,545
|
|
0.31%
|
|
2,094,474
|
|
0.31%
|
|
683,509,869
|
|
100.00%
|
|
683,509,869
|
|
100.00%
|
(*) each ADR corresponds to 1 share.
|
|
|
|
|
|
|
|
24
Earnings per share
Basic and diluted
Basic earnings per share is calculated by dividing the equity attributable to the Company’s owners by the weighted average number of outstanding common shares during the year. The Company does not have potentially dilutive common shares outstanding or debts convertible into common shares. Accordingly, basic and diluted earnings per share are equal
.
|
|
|
|
|
|
Profit attributable to Company’s owners
|
647,291
|
580,431
|
Weighted average number of common shares issued
|
|
|
|
|
|
Basic and diluted earnings per share (reais per share)
|
|
|
25
Operating segment information
Management, comprised of the Board of Directors and Board of Executive Officers, has determined the operating segment used to make strategic decisions, as sanitation services.
Result
|
|
|
|
Reconciliation to the financial statements (ii)
|
Balance as per financial
statements
|
Gross operating revenue
|
|
|
|
Gross sales deductions
|
|
|
|
Net operating revenue
|
|
|
|
Costs, selling, general and administrative expenses
|
|
|
|
Income from operations before other operating expenses, net and equity accounting
|
|
|
|
Other operating income/(expenses), net
|
|
|
7,827
|
Equity accounting
|
|
|
1,764
|
Financial result, net
|
|
|
|
Income before taxes
|
|
|
|
Depreciation and amortization
|
(410,863)
|
-
|
(410,863)
|
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Notes to the Interim Financial Information
(i)
See Note 31 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional information to long-lived assets
.
(ii)
Construction revenue and related costs not reported to the CODM
.
|
|
|
|
Reconciliation to the financial statements (ii)
|
Balance as per financial
statements
|
Gross operating revenue
|
|
|
|
Gross sales deductions
|
|
|
|
Net operating revenue
|
|
|
|
Costs, selling, general and administrative expenses
|
|
|
|
Income from operations before other operating expenses, net and equity accounting
|
|
|
|
Other operating income/(expenses), net
|
|
|
11,492
|
Equity accounting
|
|
|
2,817
|
Financial result, net
|
|
|
|
Income before taxes
|
|
|
|
Depreciation and amortization
|
(327,899)
|
-
|
(327,899)
|
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Notes to the Interim Financial Information
(i)
See Note 31 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional information to long-lived assets
.
(ii)
Construction revenue and related costs not reported to the CODM
.
Explanation on the reconciliation items for the financial statements. The impacts on gross operating income and costs are as follows
:
|
|
|
|
|
|
Gross revenue from construction recognized under
ICPC 1 (R1) (a)
|
603,527
|
647,203
|
Construction costs recognized under ICPC 1 (R1) (a)
|
|
|
|
|
|
Construction margin
|
|
|
(a)
Revenue from construction is recognized in accordance with ICPC 01 (R1) / IFRIC 12 (Concession Agreements) and CPC 47 / IFRS 15 (Revenue from Contracts with Customers), as all performance obligations are satisfied over time. See Note
14
(e).
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26
Operating revenue
(a)
Revenue from sanitation services
:
|
|
|
|
|
|
Metropolitan Region of São Paulo
|
2,468,134
|
2,280,557
|
Regional systems
|
|
|
Total
|
|
|
(b)
Reconciliation between gross operating income and net operating income
:
|
|
|
|
|
|
Revenue from sanitation services (i)
|
3,536,147
|
3,280,846
|
Construction revenue
|
603,527
|
647,203
|
Sales tax
|
(246,521)
|
(214,910)
|
Regulation, Control and Oversight Fee (TRCF) (ii)
|
|
|
Net revenue
|
|
|
(i)
Includes the amounts of R$ 16,718 and R$ 15,509 from January to March 2019 and 2018, respectively, from the TRCF charged from customers from the municipalities regulated by ARSESP
.
(ii)
Amount payable to ARSESP referring to regulation, control and oversight activities, pursuant to State Complementary Law 1,025/07
.
PAGE: 73 of 84
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27
Operating costs and expenses
|
|
|
Operating costs
|
|
|
Salaries, payroll charges and benefits
|
(499,548)
|
(457,587)
|
Pension obligations
|
(12,231)
|
(5,408)
|
Construction costs (Note 25)
|
(589,958)
|
(632,652)
|
General supplies
|
(55,100)
|
(52,148)
|
Treatment supplies
|
(86,693)
|
(75,931)
|
Outside services
|
(273,954)
|
(245,995)
|
Electricity
|
(282,434)
|
(221,237)
|
General expenses
|
(152,504)
|
(150,113)
|
Depreciation and amortization
|
|
|
|
(2,337,103)
|
(2,139,237)
|
|
|
|
Selling expenses
|
|
|
Salaries, payroll charges and benefits
|
(70,022)
|
(70,754)
|
Pension obligations
|
(1,678)
|
(795)
|
General supplies
|
(1,720)
|
(1,431)
|
Outside services
|
(85,977)
|
(73,893)
|
Electricity
|
(367)
|
(314)
|
General expenses
|
(27,236)
|
(23,992)
|
Depreciation and amortization
|
|
|
|
(191,195)
|
(175,524)
|
|
|
|
Bad debt expenses (Note 8 (c))
|
(7,760)
|
(48,631)
|
|
|
|
Administrative expenses
|
|
|
Salaries, payroll charges and benefits
|
(60,476)
|
(58,095)
|
Pension obligations
|
(37,059)
|
(37,313)
|
General supplies
|
(588)
|
(1,377)
|
Outside services
|
(62,244)
|
(57,302)
|
Electricity
|
(193)
|
(321)
|
General expenses
|
(12,010)
|
(72,144)
|
Depreciation and amortization
|
(21,987)
|
(25,388)
|
Tax expenses
|
|
|
|
(210,381)
|
(267,980)
|
PAGE: 74 of 84
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Notes to the Interim Financial Information
|
January to March 2019
|
January to March 2018
|
Operating costs and expenses
|
|
|
Salaries, payroll charges and benefits
|
(630,046)
|
(586,436)
|
Pension obligations
|
(50,968)
|
(43,516)
|
Construction costs (Note 25)
|
(589,958)
|
(632,652)
|
General supplies
|
(57,408)
|
(54,956)
|
Treatment supplies
|
(86,693)
|
(75,931)
|
Outside services
|
(422,175)
|
(377,190)
|
Electricity
|
(282,994)
|
(221,872)
|
General expenses
|
(191,750)
|
(246,249)
|
Depreciation and amortization
|
(410,863)
|
(327,899)
|
Tax expenses
|
(15,824)
|
(16,040)
|
Bad debt expenses (Note 8 (c))
|
|
|
|
|
|
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Notes to the Interim Financial Information
28
Financial income (expenses)
|
|
|
Financial expenses
|
|
|
Interest and charges on borrowings and financing – local currency
|
(81,168)
|
(78,169)
|
Interest and charges on borrowings and financing – foreign currency
|
(42,461)
|
(36,559)
|
Other financial expenses
|
(79,635)
|
(22,903)
|
Income tax over international remittance
|
(4,668)
|
(4,514)
|
Inflation adjustment on borrowings and financing
|
(16,692)
|
(19,649)
|
Other inflation adjustments
|
(11,180)
|
(9,764)
|
Interest and inflation adjustments on provisions
|
|
|
Total financial expenses
|
|
|
|
|
|
Financial income
|
|
|
Inflation adjustment gains
|
25,810
|
14,753
|
Income on short-term investments
|
38,975
|
37,578
|
Interest income
|
43,162
|
28,667
|
Cofins and Pasep
|
(5,019)
|
(3,766)
|
Other
|
|
|
Total financial income
|
|
|
|
|
|
Financial income (expenses), net before exchange rate changes
|
|
|
|
|
|
Net exchange gains (losses)
|
|
|
Exchange rate changes on borrowings and financing
|
(175)
|
(112,015)
|
Exchange rate changes on assets
|
(731)
|
(134)
|
Other exchange rate changes
|
|
|
Exchange rate changes, net
|
|
|
|
|
|
Financial income (expenses), net
|
|
|
(i) Decrease of R$ 111.8 million in exchange rate changes from borrowings and financing, due to the 0.2% depreciation of the Yen against the Real in the first quarter of 2019, versus the 6.3% appreciation in the first quarter of 2018.
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Notes to the Interim Financial Information
29
Other operating income (expenses), net
|
|
|
|
|
|
Other operating income, net
|
13,385
|
17,425
|
Other operating expenses
|
|
|
|
|
|
Other operating income (expenses), net
|
|
|
Other operating income is comprised by sale of property, plant and equipment, sale of contracts awarded in public bids, right to sell electricity, indemnities and reimbursement of expenses, fines and collaterals, property leases, reuse water, PURA projects and services, net of Cofins and Pasep.
Other operating expenses consist mainly of derecognition of concessions assets due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, losses on property, plant and equipment and exceeding cost of electricity sold.
30
Commitments
The Company has agreements to manage and maintain its activities, as well as agreements to build new projects aiming at achieving the objectives proposed in its target plan. Below, the main committed amounts as of March 31, 2019:
|
|
|
|
|
|
Contractual obligations - Expenses
|
766,484
|
1,608,072
|
286,069
|
1,107,432
|
3,768,057
|
Contractual obligations - Investments
|
|
|
|
|
|
Total
|
|
|
|
|
|
The main commitment refers to the São Lourenço PPP. See Note 14 (g).
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Notes to the Interim Financial Information
31
Supplemental cash flow information
|
|
|
|
|
|
Total additions of contract assets (Note 13)
|
667,391
|
685,779
|
Total additions to intangible assets (Note 14 (b))
|
101,313
|
607
|
|
|
|
Items not affecting cash (see breakdown below)
|
|
|
|
|
|
Total additions to intangible assets and contract assets as per statement of cash flows
|
209,552
|
229,976
|
|
|
|
Investments and financing operations affecting intangible assets but not cash:
|
|
|
Interest capitalized in the period (Note 14 (d))
|
80,014
|
143,041
|
Contractors payable
|
290,109
|
210,024
|
Public-Private Partnership – São Lourenço PPP (Note 14 (g))
|
75,406
|
85,576
|
Leases
|
100,054
|
3,218
|
Construction margin (Note 25)
|
|
|
Total
|
|
|
32
Events after the reporting period
·
23
rd
Debenture Issue
On April 8, 2019, the 23
rd
issue of simple, unsecured and not convertible debentures, in up to two series, for public distribution, with restricted placement efforts was approved pursuant to CVM Instruction 476, of January 16, 2009, in the total amount of up to one billion and five hundred million reais (R$ 1,500,000,000.00). The Offer is contingent to the issue of, at least, seven hundred and fifty thousand (750,000) Debentures, in the total amount of seven hundred and fifty million reais (R$ 750,000,000.00). The issue and the number of Debentures to be placed in each series, the remuneration of the Debentures and the total amount of the Offer will be defined according to the book building process, in the communicating vessels system.
·
Tariff adjustment
On April 10, 2019, the São Paulo State Energy and Sanitation Regulatory Agency (ARSESP) published Resolution 859, which authorizes the Company to apply a tariff adjustment index of 4.7242% to its current tariffs, comprised of:
·
IPCA variation in the period, of 4.5754%;
·
Efficiency factor (X Factor), of 0.6920%; and
·
Compensatory adjustment of 0.8408%, as described in Technical Note NT.F-0010-2018.
PAGE: 78 of 84
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Notes to the Interim Financial Information
·
Program Contract
On April 12,
2019,
the Company renewed the Program Contract with the municipality of Espírito
Santo
do Turvo for 30 years.
·
Corporate reorganization
The State Privatization Program’s Board, established by State Law 9,361, of July 5, 1996, resolved, on a meeting held on April 24, 2019 and ratified on April 26, 2019, to create a work group with the purpose of evaluating alternatives on SABESP’s corporate reorganization
.
PAGE: 79 of 84
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Comments on the Company’s Projections
Comments on the Company’s projections
The projections presented in the Reference Form are annual and not on a quarterly basis. Therefore, the quarterly comparison between information disclosed in the Reference Form with quarterly results shall not apply.
The projections monitoring occurs on annual basis and are disclosed in the Reference Form
.
PAGE: 80 of 84
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Other Information Deemed as Relevant by the Company
1.
CHANGES IN INTEREST HELD BY THE CONTROLLING SHAREHOLDER, BOARD MEMBERS AND EXECUTIVE OFFICERS
CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, MANAGEMENT AND OUTSTANDING SHARES
Position as of 3/31/2019
|
Shareholder
|
Number of Common Shares
(units)
|
%
|
Total Number of Shares
(units)
|
%
|
Controlling Shareholder
|
|
|
|
|
Treasury Department
|
343,524,285
|
50.3%
|
343,524,285
|
50.3%
|
Management
|
|
|
|
|
Board of Directors
|
3,000
|
0.0%
|
3,000
|
0.0%
|
Board of Executive Officers
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Fiscal Council
|
114
|
0.0%
|
114
|
0.0%
|
|
|
|
|
|
Treasury Shares
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Other Shareholders
|
|
|
|
|
|
|
|
|
|
Total
|
343,527,399
|
50.3%
|
343,527,399
|
50.3%
|
|
|
|
|
|
|
|
|
|
|
Outstanding Shares
|
339,985,584
|
49.7%
|
339,985,584
|
49.7%
|
PAGE: 81 of 84
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Other Information Deemed as Relevant by the Company
CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, MANAGEMENT AND OUTSTANDING SHARES
Position as of 3/31/2018
|
Shareholder
|
Number of Common Shares (units)
|
%
|
Total Number of Shares
(units)
|
%
|
Controlling Shareholder
|
|
|
|
|
Treasury Department
|
343,524,285
|
50.3%
|
343,524,285
|
50.3%
|
Management
|
|
|
|
|
Board of Directors
|
-
|
-
|
-
|
-
|
Board of Executive Officers
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Fiscal Council
|
4
|
0%
|
4
|
0%
|
|
|
|
|
|
Treasury Shares
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Other Shareholders
|
|
|
|
|
|
|
|
|
|
Total
|
343,524,289
|
50.3%
|
343,524,289
|
50.3%
|
|
|
|
|
|
|
|
|
|
|
Outstanding Shares
|
339,985,580
|
49.7%
|
339,985,580
|
49.7%
|
2.
SHAREHOLDING POSITION
SHAREHOLDING POSITION OF HOLDERS OF MORE THAN 5% OF EACH TYPE AND
CLASS OF COMPANY SHARES, UP TO THE INDIVIDUAL LEVEL
|
Company:
CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO
|
Position as of 3/31/2019
(Number of shares)
|
|
Common shares
|
Total
|
Shareholder
|
Number of shares
|
%
|
Number of shares
|
%
|
Treasury Department
|
343,524,285
|
50.3
|
343,524,285
|
50.3
|
PAGE: 82 of 84
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Reports and Statements / Unqualified Reports on Special Review
Review report on the interim financial statements – ITR
To the Board of Directors and Shareholders
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
São Paulo - SP
Introduction
We have reviewed the interim financial information of Companhia de Saneamento Básico do Estado de São Paulo – SABESP (“The Company”), included in the Quarterly Financial Information – ITR referring to the quarter ended March 31, 2019, comprising the Financial position as of March 31, 2019 and the statement of income, comprehensive income, changes in equity and cash flows for the three-months period then ended, including the explanatory notes.
Management is responsible for the preparation of the interim financial information in accordance with accounting standard CPC 21(R1) - Interim Financial Reporting and IAS 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board - IASB, as well as for the presentation of this information in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM, applicable to the preparation of Quarterly Financial Information - ITR. Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of Review
We conducted our review in accordance with the Brazilian and International standards on review engagements NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively. A review of interim financial information consists of making inquiries, primarily of persons responsible for the financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the auditing standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the Quarterly Information Form - ITR referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by the IASB applicable to the preparation of Quarterly Financial Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM.
Other matters - Statement of value added
We have also reviewed the statements of value added (DVA) for the three-month period ended March 31, 2019, prepared under the responsibility of the Company’s management, whose presentation on the interim financial information is required in accordance with the standards issued by the Brazilian Securities and Exchange Commission – CVM applicable to the preparation of Quarterly Financial Information - ITR, and considered as supplementary information by IFRS, which does not require this disclosure. These statements were subject to the same review procedures described above, and based on our review, nothing has come to our attention that causes us to believe that it is not prepared, in all material respects, in accordance with the interim financial information taken as a whole.
São Paulo, May 09, 2019.
KPMG Auditores Independentes
CRC 2SP014428/O-6
(Original report in Portuguese signed by)
Marcio Serpejante Peppe
Accountant CRC 1SP233011/O-8
PAGE: 83 of 84
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Reports and Statements / Executive Officers’ Statement on the Financial Statements
Executive Officers’ Statement on the Interim Financial Information
STATEMENT
The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayers’ ID (CNPJ/MF) no. 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, pursuant to paragraph 1, article 25, items V and VI of CVM Instruction 480, of December 7, 2009, that:
They revised, discussed and agreed with the interim financial information for the period ended March 31, 2019.
São Paulo, May 9, 2019.
Companhia de Saneamento Básico do Estado de São Paulo – SABESP
Benedito Pinto Ferreira Braga Junior
Chief Executive Officer
Rui de Britto Álvares Affonso
Chief Financial and Investor Relations Officer
Adriano Candido Stringhini
Corporate Management Officer
Edison Airoldi
Technology, Project and Environment Officer
Paulo Massato Yoshimoto
Metropolitan Officer
Ricardo Daruiz Borsari
Regional System Officer
PAGE: 84 of 84
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Reports and Statements / Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm
Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm
STATEMENT
The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayer’s ID (CNPJ/MF) no. 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, pursuant to paragraph 1, article 25, items V and VI, of CVM Instruction 480, of December 7, 2009, that:
They revised, discussed and agreed with the Report of Independent Registered Public Accounting Firm on the interim financial information for the period ended March 31, 2019.
São Paulo, May 9, 2019.
Companhia de Saneamento Básico do Estado de São Paulo – SABESP
Benedito Pinto Ferreira Braga Junior
Chief Executive Officer
Rui de Britto Álvares Affonso
Chief Financial and Investor Relations Officer
Adriano Candido Stringhini
Corporate Management
Officer Edison Airoldi
Technology, Project and Environment
Officer Paulo Massato Yoshimoto
Metropolitan Officer
Ricardo Daruiz Borsari
Regional Systems Officer
PAGE: 85 of 84
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city São Paulo, Brazil.
Date: May 24, 2019
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
|
|
|
|
By:
|
/s/
Rui de Britto Álvares Affonso
|
|
|
Name: Rui de Britto Álvares Affonso
Title: Chief Financial Officer and Investor Relations Officer
|
|
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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