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Companhia De Saneamento Basico Do Estado De Sao Paulo-Sabesp – ‘6-K’ for 6/30/22

On:  Monday, 8/29/22, at 12:38pm ET   ·   For:  6/30/22   ·   Accession #:  1292814-22-3662   ·   File #:  1-31317

Previous ‘6-K’:  ‘6-K’ on 8/12/22 for 6/30/22   ·   Next:  ‘6-K’ on 10/21/22 for 12/31/21   ·   Latest:  ‘6-K’ on 3/13/24 for 3/31/24

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/29/22  Companhia De Saneam… Paulo-Sabesp 6-K         6/30/22    1:1.7M                                   MZ Technologies/FA

Current, Quarterly or Annual Report by a Foreign Issuer   —   Form 6-K   —   SEA’34

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 6-K         Current, Quarterly or Annual Report by a Foreign    HTML   1.71M 
                Issuer                                                           


This is an HTML Document rendered as filed.  [ Alternative Formats ]




 
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 August, 2022
(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):
 C: 
 
 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

 

Table of Contents

   
Company Information  
Capital Breakdown 1
Parent Company’s Financial Statements  
Statement of Financial Position – Assets 2
Statement of Financial Position – Liabilities 3
Income Statement 5
Statement of Comprehensive Income 7
Statement of Cash Flows (Indirect Method) 8
Statement of Changes in Equity  
01/01/2022 to 06/30/2022 10
01/01/2021 to 06/30/2021 11
Statement of Value Added 12
Comments on the Company’s Performance 13
Notes to the Quarterly Information 23
Comments on the Company’s Projections 72
Other Information Deemed as Relevant by the Company 73
Reports and Statements  
Unqualified Reports on Special Review 75
Executive Officers’ Statement on the Financial Statements 76
Executive Officers’ Statement on the Report of Independent Registered Public Accounting 77

 

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ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Company Information / Capital Breakdown

 

Number of Shares Current Quarter
(Unit) 06/30/2022
Paid-in Capital  
Common 683,509,869
Preferred 0
Total 683,509,869
Treasury Shares  
Common 0
Preferred 0
Total 0

 

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PAGE  C: 1 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

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

(R$ thousand)

Code Description Current Quarter Previous Year
    06/30/2022 12/31/2021
1 Total Assets 53,953,038 53,165,485
1.01 Current Assets 6,209,715 6,502,998
1.01.01 Cash and Cash Equivalents 643,569 717,929
1.01.02 Financial Investments 1,967,901 2,433,385
1.01.02.03 Financial Investments Valued at Amortized Cost 1,967,901 2,433,385
1.01.03 Accounts Receivable 3,068,004 2,868,734
1.01.03.01 Trade Receivables 2,861,512 2,695,077
1.01.03.02 Other Receivables 206,492 173,657
1.01.03.02.01 Related-Party Balances 206,492 173,657
1.01.04 Inventories 122,879 113,506
1.01.06 Recoverable Taxes 287,213 276,104
1.01.06.01 Current Recoverable Taxes 287,213 276,104
1.01.08 Other Current Assets 120,149 93,340
1.01.08.03 Other 120,149 93,340
1.01.08.03.01 Restricted Cash 31,592 28,467
1.01.08.03.20 Other Assets 88,557 64,873
1.02 Noncurrent Assets 47,743,323 46,662,487
1.02.01 Long-Term Assets 10,245,863 9,741,933
1.02.01.04 Accounts Receivable 254,712 223,234
1.02.01.04.01 Trade Receivables 254,712 223,234
1.02.01.09 Receivables from Related Parties 648,143 644,895
1.02.01.09.03 Receivables from Controlling Shareholders 648,143 644,895
1.02.01.10 Other Noncurrent Assets 9,343,008 8,873,804
1.02.01.10.04 Escrow Deposits 155,592 141,667
1.02.01.10.05 Water and Basic Sanitation National Agency – ANA 16,566 20,666
1.02.01.10.06 Contract Asset 9,007,636 8,550,102
1.02.01.10.20 Other Assets 163,214 161,369
1.02.02 Investments 133,093 125,563
1.02.02.01 Equity Interest 86,991 79,437
1.02.02.01.03 Equity Interest in Jointly-Owned Subsidiaries 80,892 73,338
1.02.02.01.04 Other Investments 6,099 6,099
1.02.02.02 Investment Properties 46,102 46,126
1.02.03 Property, Plant and Equipment 297,228 291,157
1.02.04 Intangible Assets 37,067,139 36,503,834
1.02.04.01 Intangible Assets 37,067,139 36,503,834
1.02.04.01.01 Concession Agreements 1,130,199 1,172,498
1.02.04.01.02 Program Contracts 18,945,850 18,469,978
1.02.04.01.03 Service Contracts 16,318,459 16,158,771
1.02.04.01.04 Software License of Use 587,982 598,734
1.02.04.01.05 Right of Use 84,649 103,853

 

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ITR - Quarterly Information Form – 06/30/2022 - 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
    06/30/2022 12/31/2021
2 Total Liabilities 53,953,038 53,165,485
2.01 Current Liabilities 4,775,714 5,092,927
2.01.01 Labor Liabilities and Pension Plan Obligations 459,173 426,616
2.01.01.01 Pension Plan Obligations 36,267 53,506
2.01.01.02 Labor Liabilities 422,906 373,110
2.01.02 Suppliers 311,737 236,763
2.01.02.01 Domestic Suppliers 311,737 236,763
2.01.03 Tax Liabilities 201,555 257,130
2.01.03.01 Federal Tax Liabilities 195,390 248,251
2.01.03.01.02 Pis-Pasep and Cofins Payable 111,612 111,963
2.01.03.01.03 INSS (Social Security Contribution) Payable 43,460 39,902
2.01.03.01.20 Other Federal Taxes 40,318 96,386
2.01.03.03 Municipal Tax Liabilities 6,165 8,879
2.01.04 Borrowings and Financing 1,789,406 1,830,617
2.01.04.01 Borrowings and Financing 1,246,071 1,128,253
2.01.04.01.01 In Local Currency 940,649 769,136
2.01.04.01.02 In Foreign Currency 305,422 359,117
2.01.04.02 Debentures 439,209 596,418
2.01.04.03 Financing through Lease 104,126 105,946
2.01.05 Other Liabilities 1,150,727 1,531,980
2.01.05.01 Payables to Related Parties 2,120 931
2.01.05.01.03 Payables to Controlling Shareholders 2,120 931
2.01.05.02 Other 1,148,607 1,531,049
2.01.05.02.01 Dividends and Interest on Capital Payable 576 548,006
2.01.05.02.04 Services Payable 581,437 469,027
2.01.05.02.05 Refundable Amounts 30,865 31,687
2.01.05.02.06 Program Contract Commitments 99,973 77,652
2.01.05.02.07 Public-Private Partnership - PPP 165,597 142,757
2.01.05.02.09 Indemnities 8,332 6,975
2.01.05.02.20 Other Liabilities 261,827 254,945
2.01.06 Provisions 863,116 809,821
2.01.06.01 Tax, Social Security, Labor, and Civil Provisions 244,415 218,137
2.01.06.01.01 Tax Provisions 32,497 29,525
2.01.06.01.02 Labor Liabilities and Pension Plan Obligations 117,519 105,806
2.01.06.01.04 Civil Provisions 94,399 82,806
2.01.06.02 Other Provisions 618,701 591,684
2.01.06.02.03 Provisions for Environmental Liabilities and Decommissioning 21,315 20,223
2.01.06.02.04 Provisions for Customers 147,293 154,984
2.01.06.02.05 Provisions for Suppliers 450,093 416,477
2.02 Noncurrent Liabilities 22,903,098 23,140,699
2.02.01 Borrowings and Financing 15,937,198 15,893,219
2.02.01.01 Borrowings and Financing 8,007,737 8,739,774
2.02.01.01.01 In Local Currency 5,618,103 5,802,738
2.02.01.01.02 In Foreign Currency 2,389,634 2,937,036
2.02.01.02 Debentures 7,547,177 6,736,111
2.02.01.03 Financing through Lease 382,284 417,334
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ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

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

(R$ thousand)

Code Description Current Quarter Previous Year
    06/30/2022 12/31/2021
2.02.02 Other Liabilities 6,041,133 6,325,069
2.02.02.02 Other 6,041,133 6,325,069
2.02.02.02.04 Pension Plan Obligations 2,305,323 2,321,662
2.02.02.02.05 Program Contract Commitments 12,760 44,995
2.02.02.02.06 Public-Private Partnership - PPP 2,824,281 2,917,428
2.02.02.02.07 Indemnities 12,677 14,642
2.02.02.02.08 Labor Liabilities 1,430 3,047
2.02.02.02.09 Deferred Cofins/Pasep 160,677 159,456
2.02.02.02.20 Other Liabilities 723,985 863,839
2.02.03 Deferred Taxes 280,003 283,739
2.02.03.01 Deferred Income Tax and Social Contribution 280,003 283,739
2.02.03.01.01 Deferred Income Tax and Social Contribution 280,003 283,739
2.02.04 Provisions 644,764 638,672
2.02.04.01 Tax, Social Security, Labor, and Civil Provisions 278,028 263,855
2.02.04.01.01 Tax Provisions 27,191 25,291
2.02.04.01.02 Labor Liabilities and Pension Plan Obligations 242,396 228,292
2.02.04.01.04 Civil Provisions 8,441 10,272
2.02.04.02 Other Provisions 366,736 374,817
2.02.04.02.03 Provisions for Environmental Liabilities and Decommissioning 363,074 311,069
2.02.04.02.04 Provisions for Customers 2,910 2,494
2.02.04.02.05 Provisions for Suppliers 752 61,254
2.03 Equity 26,274,226 24,931,859
2.03.01 Paid-Up Capital 15,000,000 15,000,000
2.03.04 Profit Reserves 9,829,855 9,885,485
2.03.04.01 Legal Reserve 1,532,365 1,532,365
2.03.04.08 Additional Dividend Proposed 0 55,631
2.03.04.10 Reserve for Investments 8,297,490 8,297,489
2.03.05 Retained Earnings/Accumulated Losses 1,397,997 0
2.03.06 Equity Valuation Adjustments 46,374 46,374

 

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PAGE 4 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Parent Company’s Financial Statements / Income Statement

(R$ thousand)

Code Description   YTD Current Same Quarter YTD Previous
    Current Quarter Year Previous Year Year
    04/01/2022 to 06/30/2022 01/01/2022 to 06/30/2022 04/01/2021 to 06/30/2021 01/01/2021 to 06/30/2021
3.01 Revenue from Sales and/or Services 5,265,400 10,135,790 4,595,919 9,273,336
3.02 Cost of Sales and/or Services -3,531,903 -6,648,289 -3,063,427 -6,111,470
3.02.01 Cost of Sales and/or Services -2,402,428 -4,651,293 -2,063,521 -4,111,266
3.02.02 Construction Costs -1,129,475 -1,996,996 -999,906 -2,000,204
3.03 Gross Profit 1,733,497 3,487,501 1,532,492 3,161,866
3.04 Operating Income/Expenses -819,385 -1,439,311 -633,274 -1,157,663
3.04.01 Selling Expenses -486,457 -860,738 -343,762 -659,607
3.04.01.01 Selling Expenses -233,525 -430,112 -199,661 -394,455
3.04.01.02 Allowance for Doubtful Accounts -252,932 -430,626 -144,101 -265,152
3.04.02 General and Administrative Expenses -341,202 -594,994 -292,774 -520,049
3.04.04 Other Operating Income 13,562 23,870 11,954 19,750
3.04.04.01 Other Operating Income 14,937 26,342 15,734 27,935
3.04.04.02 Cofins and Pasep -1,375 -2,472 -3,780 -8,185
3.04.05 Other Operating Expenses -11,211 -18,955 -12,853 -9,972
3.04.06 Equity Pickup 5,923 11,506 4,161 12,215
3.05 Income before Financial Result and Taxes 914,112 2,048,190 899,218 2,004,203
3.06 Financial Result -324,374 15,750 248,813 -105,557
3.06.01 Financial Income 230,160 429,173 93,551 205,009
3.06.01.01 Financial Income 239,441 449,484 99,009 215,434
3.06.01.02 Exchange Variation Gains 1,853 590 -854 -407
3.06.01.03 Cofins and Pasep -11,134 -20,901 -4,604 -10,018
3.06.02 Financial  Expenses -554,534 -413,423 155,262 -310,566
3.06.02.01 Financial  Expenses -489,726 -942,744 -287,054 -615,303
3.06.02.02 Exchange Variation Losses -64,808 529,321 442,316 304,737
3.07 Earnings before Income Tax 589,738 2,063,940 1,148,031 1,898,646
3.08 Income Tax and Social Contribution -167,280 -665,943 -374,979 -628,736
3.08.01 Current -180,174 -669,679 -374,219 -657,702
3.08.02 Deferred 12,894 3,736 -760 28,966
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PAGE 5 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Parent Company’s Financial Statements / Income Statement

(R$ thousand)

 

Code Description   YTD Current Same Quarter YTD Previous
    Current Quarter Year Previous Year Year
    04/01/2022 to 06/30/2022 01/01/2022 to 06/30/2022 04/01/2021 to 06/30/2021 01/01/2021 to 06/30/2021
3.09 Net Result from Continued Operations 422,458 1,397,997 773,052 1,269,910
3.11 Profit/Loss for the Period 422,458 1,397,997 773,052 1,269,910
3.99 Earnings per Share - (Reais/Share)        
3.99.01 Basic Earnings per Share        
3.99.01.01 Common 0.61807 2.04532 1.131 1.85793
3.99.02 Diluted Earnings per Share        
3.99.02.01 Common 0.61807 2.04532 1.131 1.85793

 

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PAGE 6 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Parent Company’s Financial Statements / Statement of Comprehensive Income

(R$ thousand)

 

Code Description   YTD Current Same Quarter YTD Previous
    Current Quarter Year Previous Year Year
    04/01/2022 to 06/30/2022 01/01/2022 to 06/30/2022 04/01/2021 to 06/30/2021 01/01/2021 to 06/30/2021
4.01 Net Income for the Period 422,458 1,397,997 773,052 1,269,910
4.03 Comprehensive Income for the Period 422,458 1,397,997 773,052 1,269,910

 

 

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ITR - Quarterly Information Form – 06/30/2022 - 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

    01/01/2022 to 06/30/2022 01/01/2021 to 06/30/2021
6.01 Net Cash from Operating Activities 1,763,870 1,973,029
6.01.01 Cash from Operations 4,353,847 3,618,620
6.01.01.01 Earnings before Income Tax and Social Contribution 2,063,940 1,898,646
6.01.01.02 Provision and Inflation Adjustments on Provisions 196,108 111,294
6.01.01.04 Finance Charges from Customers -192,460 -175,324
6.01.01.05 Residual Value of Property, Plant and Equipment, Intangible Assets, and Investment Properties Written-off 6,132 4,961
6.01.01.06 Depreciation and Amortization 1,187,911 1,095,106
6.01.01.07 Interest on Borrowings and Financing Payable 467,713 290,429
6.01.01.08 Monetary and Exchange Variations on Borrowings and Financing -367,162 -209,361
6.01.01.09 Interest and Monetary Variation Losses 16,962 18,805
6.01.01.10 Interest and Monetary Variation Gains -23,479 -51,190
6.01.01.11 Allowance for Doubtful Accounts 430,626 265,152
6.01.01.12 Provision for Consent Decree (TAC) and Knowledge Retention Program (PRC) -650 3,214
6.01.01.13 Equity Pickup -11,506 -12,215
6.01.01.14 Interest and Inflation Adjustment - PPP 245,923 225,623
6.01.01.15 Other Adjustments 7,639 -19,510
6.01.01.16 Transfer - São Paulo Municipal Government 277,747 128,265
6.01.01.17 Construction Margin over Intangible Assets Resulting from Concession Agreements -45,930 -46,005
6.01.01.18 Pension Plan Obligations 94,333 90,730
6.01.02 Changes in Assets and Liabilities -1,354,538 -658,909
6.01.02.01 Trade Receivables -430,272 -167,184
6.01.02.02 Related-Party Balances and Transactions -13,148 25,505
6.01.02.03 Inventories -9,373 -4,018
6.01.02.04 Recoverable Taxes -11,109 -678,601
6.01.02.05 Other Assets -17,477 4,763
6.01.02.06 Escrow Deposits 3,418 30,732
6.01.02.08 Trade Payables and Contractors -223,755 -242,244
6.01.02.09 Labor Liabilities and Pension Plan Obligations 33,207 3,974
6.01.02.10 Pension Plan Obligations -110,672 -100,547
6.01.02.11 Taxes and Contributions Payable -64,599 665,664
6.01.02.12 Services Payable -165,337 -85,480
6.01.02.13 Other Liabilities -209,921 -24,973
6.01.02.14 Provisions -136,721 -89,656
6.01.02.15 Deferred Cofins/Pasep 1,221 3,156
6.01.03 Other -1,235,439 -986,682
6.01.03.01 Interest Paid -574,784 -312,268
6.01.03.02 Income Tax and Social Contribution Paid -660,655 -674,414
6.02 Net Cash from Investing Activities -1,077,680 -746,901
6.02.01 Acquisition of Contract Asset and Intangible Assets -1,494,633 -1,472,725
6.02.02 Acquisition of Property, Plant and Equipment -22,800 -12,873
6.02.04 Restricted Cash -3,125 7,792
6.02.07 Financial Investments 442,878 730,905
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ITR - Quarterly Information Form – 06/30/2022 - 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

    01/01/2022 to 06/30/2022 01/01/2021 to 06/30/2021
6.03 Net Cash from Financing Activities -760,550 -1,372,597
6.03.01 Funding 1,181,233 141,922
6.03.02 Amortization -1,007,862 -915,804
6.03.03 Payment of Interest on Capital -603,541 -254,218
6.03.04 Public-Private Partnership - PPP -316,230 -288,603
6.03.05 Program Contract Commitments -14,150 -55,894
6.05 Increase (Decrease) in Cash and Cash Equivalents -74,360 -146,469
6.05.01 Opening Balance of Cash and Cash Equivalents 717,929 396,401
6.05.02 Closing Balance of Cash and Cash Equivalents 643,569 249,932

 

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PAGE 9 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Parent Company’s Financial Statements / Statement of Changes in Equity / 01/01/2022 to 06/30/2022

(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 9,885,485 0 46,374 24,931,859
5.03 Restated Opening Balances 15,000,000 0 9,885,485 0 46,374 24,931,859
5.04 Capital Transactions with Partners 0 0 -55,630 0 0 -55,630
5.04.08 Additional Dividends Approved 0 0 -55,630 0 0 -55,630
5.05 Total Comprehensive Income 0 0 0 1,397,997 0 1,397,997
5.05.01 Net Income for the Period 0 0 0 1,397,997 0 1,397,997
5.07 Closing Balances 15,000,000 0 9,829,855 1,397,997 46,374 26,274,226

 

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PAGE 10 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Parent Company’s Financial Statements / Statement of Changes in Equity / 01/01/2021 to 06/30/2021

(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 8,194,706 0 -401,002 22,793,704
5.03 Restated Opening Balances 15,000,000 0 8,194,706 0 -401,002 22,793,704
5.04 Capital Transactions with Partners 0 0 -26,376 0 0 -26,376
5.04.08 Additional Dividends Approved 0 0 -26,376 0 0 -26,376
5.05 Total Comprehensive Income 0 0 0 1,269,910 0 1,269,910
5.05.01 Net Income for the Period 0 0 0 1,269,910 0 1,269,910
5.07 Closing Balances 15,000,000 0 8,168,330 1,269,910 -401,002 24,037,238

 

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ITR - Quarterly Information Form – 06/30/2022 - 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

    01/01/2022 to 06/30/2022 01/01/2021 to 06/30/2021
7.01 Revenue 10,388,334 9,627,425
7.01.01 Goods, Products and Services Sold 8,749,692 7,818,433
7.01.02 Other Revenue 26,342 27,935
7.01.03 Revenue from Construction of Own Assets 2,042,926 2,046,209
7.01.04 Allowance for/Reversal of Doubtful Accounts -430,626 -265,152
7.02 Inputs Acquired from Third Parties -4,598,509 -4,335,152
7.02.01 Costs of Goods, Products and Services Sold -3,891,503 -3,742,958
7.02.02 Materials, Electricity, Outsourced Services, and Others -688,051 -582,222
7.02.04 Other -18,955 -9,972
7.03 Gross Value Added 5,789,825 5,292,273
7.04 Retentions -1,187,911 -1,095,106
7.04.01 Depreciation, Amortization, and Depletion -1,187,911 -1,095,106
7.05 Net Value Added Produced 4,601,914 4,197,167
7.06 Wealth Received in Transfer 461,580 227,242
7.06.01 Equity Pickup 11,506 12,215
7.06.02 Financial Income 450,074 215,027
7.07 Total Value Added to Distribute 5,063,494 4,424,409
7.08 Value Added Distribution 5,063,494 4,424,409
7.08.01 Personnel 1,281,549 1,167,600
7.08.01.01 Salaries and Wages 921,256 832,169
7.08.01.02 Benefits 286,789 272,709
7.08.01.03 Government Severance Indemnity Fund for Employees (FGTS) 73,504 62,722
7.08.02 Taxes and Contributions 1,678,239 1,543,193
7.08.02.01 Federal 1,564,208 1,425,880
7.08.02.02 State 81,906 85,725
7.08.02.03 Municipal 32,125 31,588
7.08.03 Value Distributed to Providers of Capital 705,709 443,706
7.08.03.01 Interest 693,345 432,564
7.08.03.02 Rentals 12,364 11,142
7.08.04 Value Distributed to Shareholders 1,397,997 1,269,910
7.08.04.03 Retained Earnings/Accumulated Losses for the Period 1,397,997 1,269,910

 

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PAGE 12 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Comments on the Company’s Performance

 
  

 

Highlights

The Company recorded a net income of R$ 422.4 million in 2Q22, compared to the R$ 773.1 million reported in 2Q21, a decrease of R$ 350.7 million (-45.4%).

Adjusted EBITDA totaled R$ 1,509.9 million, up by R$ 56.7 million over the R$ 1,453.2 million reported in 2Q21 (+3.9%).

 

Revenue from sanitation services

 

Increase of R$ 570.3 million, impacted by (i) tariff adjustments of 7.0% since May 2021 and 12.8% since May 2022; (ii) 1.8% increase in billed volume; and (iii) higher average tariff due to the increase in the billed volume in the commercial and public categories.

 

Costs, administrative & selling expenses (excluding construction costs)

 

Growth of R$ 530.0 million, mainly due to the (i) R$ 119.2 million increase in services; (ii) R$ 108.8 million increase in the allowance for doubtful accounts; (iii) R$ 97.7 million increase with salaries, payroll charges, benefits, and pension plan obligations; and (iv) R$ 60.2 million increase with treatment supplies.

 

Impacts from the exchange variation

 

Exchange variation expenses on borrowings and financing increased by R$ 507.1 million, due to the appreciation of the U.S. dollar and the depreciation of the Japanese Yen against the Brazilian real in 2Q22, compared to the depreciation reported in 2Q21 for both currencies, as shown in the table below:

 

  2Q22 2Q21
Foreign currency debt - R$ million 2,695.1 3,096.2
Foreign currency debt as a percentage of total debt 15.2% 18.8%
U.S. variation in the quarter 10.6% (12.2%)
Yen variation in the quarter (1.1%) (12.6%)

 

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PAGE 13 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

 

1.Result for the period

 

 

                                                                                                    R$ million
      Var.     Var.
  2Q22 2Q21 R$ % 6M22 6M21 R$ %
     Revenue from sanitation services 4,451.5 3,881.2 570.3 14.7 8,749.7 7,818.4 931.3 11.9
     Construction revenue 1,154.7 1,022.9 131.8 12.9 2,042.9 2,046.2 (3.3) (0.2)
     COFINS and PASEP/TRCF taxes (340.8) (308.2) (32.6) 10.6 (656.8) (591.3) (65.5) 11.1
(=) Net operating income 5,265.4 4,595.9 669.5 14.6 10,135.8 9,273.3 862.5 9.3
     Costs and expenses (3,230.1) (2,700.1) (530.0) 19.6 (6,107.0) (5,290.9) (816.1) 15.4
     Construction costs (1,129.5) (999.9) (129.6) 13.0 (1,997.0) (2,000.2) 3.2 (0.2)
     Equity pickup 5.9 4.2 1.7 40.5 11.5 12.2 (0.7) (5.7)
     Other operating income (expenses), net 2.4 (0.9) 3.3 (366.7) 4.9 9.8 (4.9) (50.0)
(=) Earnings before financial result, income tax, and social contribution 914.1 899.2 14.9 1.7 2,048.2 2,004.2 44.0 2.2
     Financial result (324.4) 248.8 (573.2) (230.4) 15.7 (105.6) 121.3 (114.9)
(=) Earnings before income tax and social contribution 589.7 1,148.0 (558.3) (48.6) 2,063.9 1,898.6 165.3 8.7
     Income tax and social contribution (167.3) (374.9) 207.6 (55.4) (665.9) (628.7) (37.2) 5.9
(=) Net income 422.4 773.1 (350.7) (45.4) 1,398.0 1,269.9 128.1 10.1
     Earnings per share (R$)* 0.62 1.13     2.05 1.86    

 

(*) Number of shares = 683,509,869

 

Adjusted EBITDA Reconciliation (Non-accounting measures)

                                                                                                    R$ million
      Var.     Var.
  2Q22 2Q21 R$ % 6M22 6M21 R$ %
     Net income 422.4 773.1 (350.7) (45.4) 1,398.0 1,269.9 128.1 10.1
     Income tax and social contribution 167.3 374.9 (207.6) (55.4) 665.9 628.7 37.2 5.9
     Financial result 324.4 (248.8) 573.2 (230.4) (15.7) 105.6 (121.3) (114.9)
     Other operating income (expenses), net (2.4) 0.9 (3.3) (366.7) (4.9) (9.8) 4.9 (50.0)
(=) Adjusted EBIT* 911.7 900.1 11.6 1.3 2,043.3 1,994.4 48.9 2.5
     Depreciation and amortization 598.2 553.1 45.1 8.2 1,187.9 1,095.0 92.9 8.5
(=) Adjusted EBITDA** 1,509.9 1,453.2 56.7 3.9 3,231.2 3,089.4 141.8 4.6
     (%) Adjusted EBITDA margin 28.7 31.6     31.9 33.3    

 

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

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

 

The net operating revenue, which considers construction revenue, totaled R$ 5,265.4 million in 2Q22, up by 14.6% over 2Q21.

Costs and expenses, which consider construction costs, totaled R$ 4,359.6 million, up by 17.8% over 2Q21.

Adjusted EBIT, of R$ 911.7 million, increased by 1.3% over the R$ 900.1 million recorded in 2Q21.

Adjusted EBITDA, of R$ 1,509.9 million, increased by 3.9% over the R$ 1,453.2 million recorded in 2Q21 (R$ 6,514.4 million in the last 12 months).

Adjusted EBITDA margin was 28.7% in 2Q22, compared to the 31.6% reported in 2Q21 (32.0% in the last 12 months).

Excluding the effects of revenue and construction costs, the adjusted EBITDA margin reached 36.1% in 2Q22, compared to 40.0% in 2Q21 (40.2% in the last 12 months).

The Company recorded a net income of R$ 422.4 million in 2Q21, compared to R$ 773.1 million in 2Q21.

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PAGE 14 of 77 

ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

  

Comments on the Company’s Performance

 
  
2.Revenue from sanitation services

 

The gross operating revenue from sanitation services, which excludes construction revenue, totaled R$ 4,451.5 million in 2Q22, an increase of R$ 570.3 million (+14.7%) over the R$ 3,881.2 million recorded in 2Q21.

The main factors that led to the increase were:

·     Average tariff adjustment of 7.0% since May 2021;

·     Average tariff adjustment of 12.8% since May 2022;

·     Higher average tariff due to the increase in the billed volume in the commercial and public categories; and

·     Increase of 1.8% in the total billed volume.

 

 

3.Construction revenue

 

Construction revenue increased by R$ 131.8 million (+12.9%), due to higher investments made.

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PAGE 15 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

 

4.Billed volume

 

The following tables show the water and sewage billed volume, on a quarter-over-quarter and year-over-year basis, per customer category and region.

 

WATER AND SEWAGE BILLED VOLUME(1) PER CUSTOMER CATEGORY – million m3
  Water Sewage Water + Sewage
Category 2Q22 2Q21 Var. % 2Q22 2Q21 Var. % 2Q22 2Q21 Var. %
Residential 465.9 468.4 (0.5) 406.7 406.5 - 872.6 874.9 (0.3)
Commercial 46.7 40.0 16.8 44.8 38.0 17.9 91.5 78.0 17.3
Industrial 8.7 8.6 1.2 9.5 9.3 2.2 18.2 17.9 1.7
Public 11.7 8.3 41.0 10.1 7.4 36.5 21.8 15.7 38.9
Total retail 533.0 525.3 1.5 471.1 461.2 2.1 1,004.1 986.5 1.8
Wholesale (3) 12.1 12.5 (3.2) 4.1 3.7 10.8 16.2 16.2 -
Overall Total 545.1 537.8 1.4 475.2 464.9 2.2 1,020.3 1,002.7 1.8
  Water Sewage Water + Sewage
Category 1H22 1H21 Var. % 1H22 1H21 Var. % 1H22 1H21 Var. %
Residential 935.2 946.7 (1.2) 813.4 817.5 (0.5) 1,748.6 1,764.2 (0.9)
Commercial 91.1 81.5 11.8 87.7 77.0 13.9 178.8 158.5 12.8
Industrial 17.0 17.1 (0.6) 18.7 17.9 4.5 35.7 35.0 2.0
Public 21.3 17.2 23.8 18.7 15.1 23.8 40.0 32.3 23.8
Total retail 1,064.6 1,062.5 0.2 938.5 927.5 1.2 2,003.1 1,990.0 0.7
Wholesale (3) 24.2 25.7 (5.8) 9.9 7.6 30.3 34.1 33.3 2.4
Overall Total 1,088.8 1,088.2 0.1 948.4 935.1 1.4 2,037.2 2,023.3 0.7
WATER AND SEWAGE BILLED VOLUME(1) PER REGION – million m3
  Water Sewage Water + Sewage
Region 2Q22 2Q21 Var. % 2Q22 2Q21 Var. % 2Q22 2Q21 Var. %
Metropolitan 359.3 362.9 (1.0) 316.8 318.5 (0.5) 676.1 681.4 (0.8)
Regional (2) 173.7 162.4 7.0 154.3 142.7 8.1 328.0 305.1 7.5
Total retail 533.0 525.3 1.5 471.1 461.2 2.1 1,004.1 986.5 1.8
Wholesale (3) 12.1 12.5 (3.2) 4.1 3.7 10.8 16.2 16.2 -
Overall Total 545.1 537.8 1.4 475.2 464.9 2.2 1,020.3 1,002.7 1.8
  Water Sewage Water + Sewage
Region 1H22 1H21 Var. % 1H22 1H21 Var. % 1H22 1H21 Var. %
Metropolitan 713.7 722.4 (1.2) 627.9 629.8 (0.3) 1,341.6 1,352.2 (0.8)
Regional (2) 350.9 340.1 3.2 310.6 297.7 4.3 661.5 637.8 3.7
Total retail 1,064.6 1,062.5 0.2 938.5 927.5 1.2 2,003.1 1,990.0 0.7
Wholesale (3) 24.2 25.7 (5.8) 9.9 7.6 30.3 34.1 33.3 2.4
Overall Total 1,088.8 1,088.2 0.1 948.4 935.1 1.4 2,037.2 2,023.3 0.7

 

(1) Unaudited by external auditors

(2) Including coastal and interior regions

(3) Wholesale includes volumes of reuse water and non-domestic sewage

 

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PAGE 16 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

 

 

5.Costs, administrative & selling expenses, and construction costs

 

Costs, administrative and selling expenses, and construction costs increased by R$ 659.6 million in 2Q22 (+17.8%). Excluding construction costs, the increase was R$ 530.0 million (+19.6%).

 

Costs, administrative and selling expenses, and construction costs as a percentage of net revenue were 82.8% in 2Q22, compared to 80.5% in 2Q21.

                                                                                                    R$ million
      Var.     Var.
  2Q22 2Q21 R$ % 6M22 6M21 R$ %
Salaries, payroll charges and benefits, and Pension plan obligations 776.0 678.3 97.7 14.4 1,444.2 1,299.8 144.4 11.1
General supplies 109.5 78.0 31.5 40.4 181.4 146.3 35.1 24.0
Treatment supplies 142.5 82.3 60.2 73.1 289.8 181.3 108.5 59.8
Services 599.4 480.2 119.2 24.8 1,111.4 984.1 127.3 12.9
Electricity 376.1 340.7 35.4 10.4 788.0 699.6 88.4 12.6
General expenses 356.7 325.7 31.0 9.5 635.8 584.6 51.2 8.8
Tax expenses 18.8 17.7 1.1 6.2 37.9 35.0 2.9 8.3
Subtotal 2,379.0 2,002.9 376.1 18.8 4,488.5 3,930.7 557.8 14.2
Depreciation and amortization 598.2 553.1 45.1 8.2 1,187.9 1,095.0 92.9 8.5
Allowance for doubtful accounts 252.9 144.1 108.8 75.5 430.6 265.3 165.3 62.3
Subtotal 851.1 697.2 153.9 22.1 1,618.5 1,360.3 258.2 19.0
Costs, administrative & selling expenses 3,230.1 2,700.1 530.0 19.6 6,107.0 5,291.0 816.0 15.4
Construction costs 1,129.5 999.9 129.6 13.0 1,997.0 2,000.2 (3.2) (0.2)
Costs, adm & selling expenses, and construction costs 4,359.6 3,700.0 659.6 17.8 8,104.0 7,291.2 812.8 11.1
% of net revenue 82.8 80.5     80.0 78.6    

 

Salaries, payroll charges and benefits, and Pension plan obligations

 

Increase of R$ 97.7 million (+14.4%) in 2Q22, mainly due to the application of 1% referring to the Career and Salary Plan in February 2022, and an average salary adjustment of 12.9% in May 2022, partially offset by the 2.3% decline in the average number of employees.

 

General supplies

 

Increase of R$ 31.5 million (+ 40.4%), mainly the:

 

·     R$ 9.5 million for the maintenance of water and sewage systems, connections, and networks.

·     R$ 8.2 million with fuel and lubricants, due to higher prices and an increased volume of field works in 2Q22 because of the cooling down of the COVID-19 pandemic; and

·     R$ 3.2 million with conservation of buildings and facilities.

 

Treatment supplies

 

Increase of R$ 60.2 million (+73.1%), mainly due to higher product prices and higher use of algaecides, coagulants, and disinfectants in several Water Treatment Stations to maintain the quality of raw water.

 

Services

 

Service expenses totaled R$ 599.4 million, an increase of R$ 119.2 million (+24.8%) over the R$ 480.2 million recorded in 2Q21. The main increases were:

·     R$ 18.8 million for the maintenance of water and sewage systems;

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PAGE 17 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

·     R$ 18.4 million paid to technical services, especially computer technical support;

·     R$ 17.8 million with paving and replacing of sidewalks;

·     R$ 15.1 million with surveillance;

·     R$ 13.3 million with customer service channels; and

·     R$ 5.8 million with conservation of buildings and facilities.

 

Electricity

 

Electricity expenses totaled R$ 376.1 million in 2Q22, an increase of R$ 35.4 million (+10.4%) over the R$ 340.7 million recorded in 2Q21. Of the total, the Free Market Tariffs (ACL) accounted for 49.3% of total expenses in 2Q22 (51.0% in 2Q21) while the Regulated Market Tariffs (ACR) accounted for 50.7% (49.0% in 2Q21).

The main factors that contributed to this variation were:

·     Average increase of 6.6% in ACL prices (includes Grid Market Tariffs - TUSD), with a 3.7% decrease in consumption; and

·     Average increase of 28.8% in ACR tariffs, with a 20.0% decrease in consumption.

 

General expenses

 

Increase of R$ 31.0 million (+9.5%), totaling R$ 356.7 million in 2Q22, compared to the R$ 325.7 million recorded in 2Q21, mainly from the higher provision for transfer to the Municipal Funds for Environmental Sanitation and Infrastructure, of R$ 23.7 million.

Expenses with municipal transfers totaled R$ 172.2 million in 2Q22, compared to the R$ 148.6 million reported in 2Q21 (+15.9%), mainly due to higher operating revenue reported in 2Q22.

 

Depreciation and amortization

 

The R$ 45.1 million increase (+8.2%) was due to the beginning of operations of intangible assets, totaling R$ 3.7 billion.

 

Allowance for doubtful accounts

 

Increase of R$ 108.8 million, from R$ 144.1 million in 2Q21 to R$ 252.9 million in 2Q22, due to higher provisioning arising from the increase in default in 2Q22.

 

6.Financial result

 

        R$ million
      Var.
  2Q22 2Q21 R$ %
Financial expenses, net of revenue (157.2) (134.9) (22.3) 16.5
Monetary and exchange variations, net (167.2) 383.7 (550.9) (143.6)
Financial Result (324.4) 248.8 (573.2) (230.4)

 

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PAGE 18 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

Financial expenses, net of revenue

        R$ million
      Var.
  2Q22 2Q21 R$ %
Financial expenses        
   Interest and charges on domestic borrowings and financing (215.8) (106.6) (109.2) 102.4
   Interest and charges on international borrowings and financing (9.8) (10.4) 0.6 (5.8)
   Other financial expenses (92.7) (74.8) (17.9) 23.9
Total financial expenses (318.3) (191.8) (126.5) 66.0
Financial revenue 161.1 56.9 104.2 183.1
Financial expenses, net of revenue (157.2) (134.9) (22.3) 16.5

 

 

The main impacts resulted from:

 

·     Increase of R$ 109.2 million in interest and charges on domestic borrowings and financing, mainly due to (i) higher interest on debentures, of R$ 63.8 million, mainly from the proceeds of the 28th, 29th, and 30th issues; and (ii) rise in the average DI rate (from 3.24% in 2Q21 to 12.38% in 2Q22), which impacted interest on several domestic borrowings;

·     Increase of R$ 17.9 million in other financial expenses, mostly due to higher recognition of interest on lawsuits in 2Q22; and

·     Increase of R$ 104.2 million in financial revenues, mainly on financial investments in 2Q22, as a result of the higher average DI rate.

 

Monetary and exchange variations, net

        R$ million
      Var.
  2Q22 2Q21 R$ %
Monetary and exchange variations on liabilities        
   Monetary variations on borrowings and financing (91.3) (43.0) (48.3) 112.3
   Exchange variations on borrowings and financing (64.8) 442.3 (507.1) (114.7)
   Other monetary variations (80.1) (52.2) (27.9) 53.4
Total monetary and exchange variations on liabilities (236.2) 347.1 (583.3) (168.0)
Monetary and exchange variations on assets 69.0 36.6 32.4 88.5
Monetary and exchange variations, net (167.2) 383.7 (550.9) (143.6)

 

The effect of net monetary and exchange variations was R$ 550.9 million in 2Q22, higher than in 2Q21, mainly from:

·     R$ 48.3 million increase in monetary variations on borrowings and financing, due to the rise in the IPCA consumer price index (from 1.68% in 2Q21 to 2.22% in 2Q22), and the 29th issue debenture;

·     R$ 507.1 million increase in exchange variations on borrowings and financing, due to the appreciation of the U.S. dollar and the depreciation of the Yen against the Real in 2Q22 (10.6% and -1.1%, respectively), when compared to the depreciation recorded in both currencies in 2Q21 (-12.2% and -12.6%, respectively);

·     R$ 27.9 million increase in other monetary variations, due to (i) higher monetary variation on lawsuits, of R$ 17.7 million; and (ii) higher monetary variation on asset leases (leases), of R$ 8.1 million, due to the rise of IPC in the quarter; and

·     Increase of R$ 32.4 million in monetary and exchange variation on assets, mainly due to higher adjustments on installment payment agreements and overdue invoices in 2Q22.

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PAGE 19 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  
7.Income tax and social contribution

 

The R$ 207.6 million decrease in 2Q22 was mainly due to:

 

·     Higher costs and expenses, of R$ 530.0 million;

·     Negative exchange variation, of R$ 507.1 million, from a revenue of R$ 442.3 million in 2Q21 to an expense of R$ 64.8 million in 2Q22; and

·     Higher net operating revenue, of R$ 669.5 million.

 

8.Indicators

 

a)Operating

 

Information (*) 2Q22 2Q21 %
Water connections (1) 9,916 10,174 (2.5)
Sewage connections (1)   8,500 8,608 (1.3)
Population directly served - water (2) 27.8 27.6 0.7
Population directly served - sewage (2) 24.6 24.5 0.4
Number of employees 12,381 12,667 (2.3)

 

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

(2) In million inhabitants, at the end of the period. Does not include wholesale.

(*) Unaudited by external auditors

 

 

b)Economic

 

Economic variables at the end of the quarter (*) 2Q22 2Q21
Amplified Consumer Price Index (1) 2.22 1.68
National Consumer Price Index (1) 2.12 1.95
Consumer Price Index (1) 2.33 1.67
Interbank Deposit Certificate (2) 12.38 3.24
U.S. dollar (3) 5.2380 5.0022
Yen (3) 0.03860 0.04505

 

(1) Accrued in the quarter (%)

(2) Average quarterly rate (%)

(3) Ptax sale rate on the last day

(*) Unaudited by external auditors

 

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PAGE 20 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

 

 

9.Borrowings and financing

 

On July 15 and 26, 2022​, Sabesp raised R$ 466 million and R$ 760 million referring to the financing contracts executed with IDB Invest and International Finance Corporation - IFC, respectively.

The funds from IDB will be used for expansion works of the sanitation system in the Metropolitan Region of São Paulo to support Sabesp’s counterpart in the IDB financing for Stage IV of the Tietê Project. The total financing term is 14.5 years and it has a grace period of one year.

The funds from IFC will be used for works in the New Pinheiros River, a state program to expand sewage collection and treatment in the basin, aiming at the river’s clean-up by December 2022, as well as to improve water and sewage systems in coastal municipalities of the São Paulo State. The funds will also be used for the construction of a new water main in the São Lourenço System, in Greater São Paulo. Under the financing, Sabesp, in partnership with IFC, is carrying out the first blue loan transaction in Latin America, which consists of an innovative instrument by which the funds raised are certified and monitored to ensure the sustainable use of resources for economic growth, livelihood improvements, and preservation of the health of oceans and rivers. The total financing term is 10.5 years and it has a grace period of up to one year.

                  R$ thousand
DEBT PROFILE
INSTITUTION 2022 2023 2024 2025 2026 2027 2028 onwards TOTAL

% of

total

Local currency                  
Debentures 59,586 739,210 1,073,347 1,203,403 1,092,291 1,709,755 2,108,794 7,986,386 45
Brazilian Federal Savings Bank 51,260 97,083 96,530 102,565 108,980 115,784 936,957 1,509,159 9
BNDES 105,137 203,541 196,851 176,661 166,842 154,365 282,845 1,286,242 7
IDB 2202 90,674 181,349 181,349 181,349 181,349 181,349 1,438,136 2,435,555 14
IDB INVEST 18,670 37,340 39,550 44,300 106,390 108,728 554,424 909,402 5

Lease (Concession Agreements,

Program Contracts, and Contract Asset) (1)

34,693 46,969 13,308 8,360 3,786 619 - 107,735 1
Leases (others) (2) 40,854 43,405 46,111 35,905 31,352 34,406 146,642 378,675 2
Other 2,964 6,228 2,966 2,734 141 - - 15,033 0
Interest and other charges 393,324 10,037 - - - - - 403,361 2
Total in local currency 797,162 1,365,162 1,650,012 1,755,277 1,691,131 2,305,006 5,467,798 15,031,548 85
                   
Foreign currency                  
IDB 26,918 53,837 53,837 60,649 13,624 13,624 207,457 429,946 2
IBRD 15,923 31,845 31,845 31,845 31,845 31,845 204,531 379,679 2
JICA 82,813 165,625 165,625 165,625 165,625 165,625 920,379 1,831,317 10
IDB 1983AB - 39,910 - - - - - 39,910 1
Interest and other charges 14,204   - - - - - 14,204 0
Total in foreign currency 139,858 291,217 251,307 258,119 211,094 211,094 1,332,367 2,695,056 15
                   
TOTAL 937,020 1,656,379 1,901,319 2,013,396 1,902,225 2,516,100 6,800,165 17,726,604 100

 

(1)Refers to work contracts signed as Assets Lease;
(2)Obligations related to leasing agreements, mainly vehicle leases.

 

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PAGE 21 of 77 

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Version: 1

  

Comments on the Company’s Performance

 
  

Covenants

 

The table below shows the most restrictive clauses in 2Q22:

  Covenants
Adjusted EBITDA / Adjusted Financial Expenses Equal to or higher than 2.80
EBITDA / Financial Expenses Paid Equal to or higher than 2.35
Adjusted Net Debt / Adjusted EBITDA Equal to or lower than 3.80
Net Debt / Adjusted EBITDA Equal to or lower than 3.50
Total Adjusted Debt / Adjusted EBITDA Lower than 3.65
Other Onerous Debt (1) / Adjusted EBITDA Equal to or lower than 1.30
Adjusted Current Ratio Higher than 1.00
(1)“Other Onerous Debt” corresponds to the sum of pension plan obligations, healthcare plan, installment payment of tax debts, and installment payment of debts with the electricity supplier.

As of June 30, 2022, the Company had met the requirements of its borrowing and financing agreements.

 

10.Investments

 

Investments totaled R$ 1,240.1 million in 2Q22, presented as additions in the notes to the quarterly information under Contract Asset, Intangible Assets, and Property, Plant and Equipment, of R$ 1,213.1 million, R$ 12.8 million, and R$ 14.2 million, respectively. Cash disbursed in 2Q22 referring to investments, including from previous periods, totaled R$ 857.2 million.

The table below shows investments broken down by water, sewage, and region:

R$ million
Investment – April to June/22 Water Sewage Total
Metropolitan Region 423.8 480.9 904.7
Regional Systems 164.2 171.2 335.4
Total 588.0 652.1 1,240.1

 

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Notes to the Interim Financial Information

 
  

 

 

1Operations

 

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

 

In addition to providing basic sanitation services in the São Paulo State, SABESP may perform 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 June 30, 2022, the Company operated water and sewage services in 375 municipalities of the São Paulo State, 342 of which have already signed contracts, according to Law 11,445/2007. Most of these municipalities’ operations are based on 30-year concession, program, and service contracts, except for the municipalities of Guarulhos, Mauá, Santo André, São Bernardo do Campo, São João da Boa Vista, and Tejupá, which have 40-year term contracts.

 

The table below shows a summary of the contractual situation of the municipalities served:

 

 
       
Total municipalities that have already signed contracts 342 342 342
   Balance – intangible and contract asset 43,250,729 42,260,091 40,935,847
   Percentage of intangible and contract asset 93.87% 93.80% 93.82%
Revenue from sanitation services (excluding construction revenue) 8,316,280 15,490,808 7,439,706
Percentage of revenue from sanitation services (excluding construction revenue) 95.05% 95.01% 95.16%
       
Municipalities with expired contracts: 8 8 8
   Balance – intangible and contract asset 216,347 214,329 216,167
   Percentage of intangible and contract asset 0.47% 0.48% 0.50%
Revenue from sanitation services (excluding construction revenue) 21,975 41,194 19,556
Percentage of revenue from sanitation services (excluding construction revenue) 0.25% 0.25% 0.25%
       
Municipalities with concession agreements due by 2030: 25 25 25
   Balance – intangible and contract asset 1,105,098 1,127,920 1,148,988
   Percentage of intangible and contract asset 2.40% 2.50% 2.63%
Revenue from sanitation services (excluding construction revenue) 346,511 653,408 299,480
Percentage of revenue from sanitation services (excluding construction revenue) 3.96% 4.01% 3.83%

 

 

     
Municipality of São Paulo:      
Percentage of intangible and contract asset 43.22% 43.11% 42.30%
Percentage of revenue from sanitation services (excluding construction revenue) 45.21% 44.45% 43.94%

 

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Notes to the Interim Financial Information

 
  

 

 

The Company's shares have been listed on the Novo Mercado segment of B3 under ticker SBSP3 since April 2002 and on the New York Stock Exchange (NYSE) as Level III American Depositary Receipts (“ADRs”), under ticker SBS, 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 votes on certain issues jointly with associates, indicating the shared control in the management of these investees, except for Saneaqua Mairinque, which, as of August 2020, no longer has a shared control.

 

Economic instability worsened by COVID-19

 

Regarding the effects of COVID-19, we emphasize the migration, in 2020, of the billed volume of the public, commercial, and industrial categories that have average tariffs higher than the tariff charged from the residential category, which slightly recovered in 2021 compared to 2020. Moreover, in the second quarter of 2022 compared to the same period in 2021, there has been a recovery in the volume of the commercial, industrial, and public categories, with the volume of the residential category remaining virtually flat.

 

Expenses with allowance for doubtful accounts are still rising over the same period in 2021, due to the higher delinquency in 2022.

 

New Legal Sanitation Framework

 

On July 15, 2020, Federal Law 14,026/2020, known as New Legal Framework for Basic Sanitation, was sanctioned. The new law expands competition in the sector by extinguishing program contracts, encourages the region-wise provision of services to promote economies of scale, and provides for strengthening the service regulation.

 

Additionally, the New Legal Framework imposes performance goals to reach 99% of the population served with drinking water and 90% with sewage collection and treatment by December 31, 2033, encouraging operators to increase efficiency. The new Law also granted the National Water Agency (ANA) with power to edit reference rules to regulate sanitation services, aiming to standardize the operation of the regulatory agencies and minimize regulatory uncertainties, thus creating a more stable and attractive environment for investments in the sector.

 

On May 31, 2021, Federal Decree 10,710 was published, regulating article 10-B of Law 11,445/2007, establishing the methodology for proving the economic and financial capacity of public providers of drinking water supply and sewage services, to make it possible the compliance with the universalization goals by 2033. Said Decree determines economic and financial evaluation metrics on service providers to prove their ability to make investments within the intended deadlines and several conditions for current contracts to be considered regular. Any adjustments to them should be made by March 31, 2022, in line with paragraph 1 of article 11-B of the New Legal Framework.

 

According to the aforementioned Decree, as of December 30, 2021, the Company presented a requirement to the São Paulo State Utility Services Regulatory Agency (ARESESP) containing documents that prove its capacity to maintain the provision of services in the operated area by meeting the goals of universal water and sewage collection and treatment by 2033, defined by the New Legal Framework, attested and certified by the independent auditors. As of March 28, 2022, ARSESP recognized the Company’s economic-financial capacity, under the applicable legislation.

 

In this new context, the Company understands that it is important to highlight that: i) it has 366 regular contracts that have already been adapted to the provisions of the New Legal Framework, which ensure 99.5% of revenue; ii) it has access to public capital and the private capital market, due to its sound reputation, favoring the maintenance and/or expansion of its operating base and compliance with the universalization of services within the deadline established by the new law; and iii) it has high governance level.

 

Management expects that the financial funds raised with the gradual recovery of the economic activities, improved water security from the works carried out, generation of operational cash, and credit lines available for investments, will be sufficient to meet the Company’s commitments and not compromise the necessary investments.

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Notes to the Interim Financial Information

 
  

Approvals

 

The quarterly information was approved by the Board of Directors on August 11, 2022.

 

 

2Basis of preparation and presentation of the quarterly information

 

Presentation of the Quarterly Information

 

The quarterly information as of June 30, 2022, 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 the Quarterly Information Form – ITR, and is fairly presented consistent with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Accordingly, this Quarterly 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. Therefore, the quarterly information as of June 30, 2022, 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, 2021, prepared under the International Financial Reporting Standards – IFRS, issued by the International Accounting Standards Board – IASB, and the accounting practices adopted in Brazil, which observe the pronouncements issued by the Brazilian Accounting Pronouncements Committee - CPC. Therefore, in this quarterly information, the notes below were either not presented or are not as detailed as and/or have the same references 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 11);
vi.Investments (Note 12);
vii.Intangible assets (Note 15);
viii.Borrowings and financing (Note 17);
ix.Deferred taxes and contributions (Note 19);
x.Provisions (Note 20);
xi.Pension plan obligations (Note 22);
xii.Equity (Note 24);
xiii.Insurance (Note 27);

 

All material information related to the quarterly 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 quarterly information are in thousands of Brazilian reais, unless otherwise stated.

 

 

3Summary of significant accounting policies

 

The accounting policies used in the preparation of the quarterly information as of June 30, 2022, are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2021, disclosed in Note 3 of such financial statements.

 

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Notes to the Interim Financial Information

 
  
4Risk management

 

4.1Financial 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. Financial risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance.

 

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

 

(a)Market risk

 

Exchange risk

 

Currency exposure implies market risks associated with currency fluctuations, since the Company has foreign currency-denominated liabilities, arising from long-term funding, in development institutions, at more attractive interest rates in the U.S. dollar and Yen.

 

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

 

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

 

Part of the financial debt, totaling R$ 2,724,742 as of June 30, 2022 (R$ 3,321,489 as of December 31, 2021), is indexed to the U.S. dollar and Yen. The exposure to exchange risk is as follows:

 

 

 

June 30, 2022

December 31, 2021

 

Foreign currency

(in thousands)

R$

Foreign currency

(in thousands)

R$

         
Borrowings and financing – US$ 167,330 876,475 163,538 912,624
Borrowings and financing – Yen 47,514,591 1,834,063 49,324,813 2,390,774
Interest and charges from borrowings and financing – US$   3,684   4,121
Interest and charges from borrowings and financing – Yen  

10,520

 

13,970

Total exposure   2,724,742   3,321,489
Borrowing cost – US$   (26,939)   (22,486)
Borrowing cost – Yen  

(2,747)

 

(2,850)

Total foreign currency-denominated borrowings (Note 16)  

2,695,056

 

3,296,153

 

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Notes to the Interim Financial Information

 
  

 

 

The 18% decrease in the balance of the foreign currency-denominated debt from June 30, 2022, compared to December 31, 2021, was mainly impacted by the depreciations of the US dollar and Yen against the Brazilian real. The table below shows the prices and exchange variations in the period:

 

 

Var.

US$ R$ 5.2380 R$ 5.5805 -6.1%
Yen R$ 0.03860 R$ 0.04847 -20.4%

 

The exchange variation in borrowings and financing fell by R$ 528,639 from January to June 2022 (R$ 302,873 from January to June 2021), which accounted for 88% of the reduction in borrowings and financing. See Note 16(ii). As of June 30, 2022, if the Brazilian real had depreciated or appreciated by 10 percentage points, in addition to the impacts already mentioned above, against the US dollar and Yen with all other variables held constant, the effects on results before taxes on the six-month period ended June 30, 2022, would have been R$ 272,474 (R$ 311,656 for the six-month period ended June 30, 2021), lower or higher.

 

The probable scenario below presents the effect in the income statements for the next 12 months, considering the projected rates of the U.S. dollar and Yen.

 

The Company understands that the scenario presented is reasonable, given the instability of the Brazilian real against the U.S. dollar and the Yen.

 

 

Probable scenario

  (*)
Net currency exposure as of June 30, 2022 in US$ - Liabilities 167,330
   
US$ rate as of June 30, 2022 5.2380
Exchange rate estimated according to the scenario

5.1103

Difference between the rates 0.1277
   
Effect on net financial result R$ - (gain) 21,368
   
Net currency exposure as of June 30, 2022, in ¥ - Liabilities 47,514,591
   
Yen rate as of June 30, 2022 0.03860
Exchange rate estimated according to the scenario

0.04138

Difference between the rates (0.00278)
   
Effect on the net financial result R$ - (loss)

(132,091)

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

(110,723)

   
(*) For the probable scenario in U.S. dollars and Yen, the exchange rates estimated for June 30, 2023 were used, according to the projections of LCA Consultores and B3’s Benchmark Rate report, of June 30, 2022, respectively.

 

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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, to evaluate the possible need to replace its debt.

 

The table below provides the borrowings and financing subject to variable interest rates:

 

 

June 30, 2022

December 31, 2021

CDI (i) 8,130,495 7,612,299
TR (ii) 1,645,559 1,638,079
IPCA (iii) 3,087,253 3,019,459
TJLP (iv) 1,356,817 1,478,740
SOFR (v) 876,479 912,626
Interest and charges

407,032

243,696

Total

15,503,635

14,904,899

 

(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) SOFR - Secured Overnight Financing Rate

 

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

 

As of June 30, 2022, 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 six-month period ended June 30, 2022 would have been R$ 155,036 (R$ 137,304 for the six-month period ended June 30, 2020), lower or higher, mainly as a result of lower or higher interest expense on floating rate borrowings and financing.

 

(b)Credit risk

 

Credit risk is related to cash and cash equivalents, financial investments, as well as credit exposures of customers, including 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 exposure to credit risk as of June 30, 2022, is the carrying amount of instruments classified as cash and cash equivalents, financial investments, restricted cash, trade receivables, and accounts receivable from related parties on the reporting date of this quarterly information. See Notes 6, 7, 8, 9, and 10.

 

Regarding the financial assets held with financial institutions, the credit quality was assessed by reference to external credit ratings (if available) or historical information about the bank’s default rates. For the credit quality of the banks, such as deposits and financial investments, the Company assesses the rating published by three main international agencies (Fitch, Moody's, and S&P), as follows:

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Notes to the Interim Financial Information

 
  

 

 

Banks

Fitch

Moody's

Standard Poor's

Banco do Brasil AA(bra) AAA.br -
Banco Santander Brasil - AAA.br brAAA
Brazilian Federal Savings Bank AA(bra) AAA.br brAAA
Banco Bradesco AAA(bra) AAA.br brAAA
Banco Itaú Unibanco AAA(bra) AAA.br brAAA
Banco BV - AA.br brAAA
Banco BTG Pactual AA(bra) AAA.br brAAA

 

The rating assessment disclosed by Fitch for deposit transactions and financial investments in local currency (R$ - domestic rating) is as follows:

 

 

June 30, 2022

December 31, 2021

Cash and cash equivalents and financial investments    
AA(bra) 1,336,349 1,905,810
AAA(bra) 983,128 970,474
Others (*)

291,993

275,030

 

2,611,470

3,151,314

 

(*) As of June 30, 2022, this category includes R$ 274,613 (R$ 262,465 as of December 31, 2021) referring to Banco BV, checking accounts, and financial investments, which are not rated by Fitch.

 

(c)Liquidity risk

 

Liquidity is primarily reliant upon cash provided by operating activities and borrowings and financing obtained in the local and international capital markets, as well as the payment of debts. The management of this risk considers the assessment of its liquidity requirements to ensure it has sufficient cash to meet its operating and capital expenditure requirements.

 

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

 

The table below shows the financial liabilities, by maturity, including the installments of principal and future interest. For agreements with floating interest rates, the interest rates used correspond to the base date of June 30, 2022.

 

 

July to December 2022

2023

2024

2025

2026

2027 onwards

Total

June 30, 2022              
               
Liabilities              
Borrowings and financing 1,366,154 3,275,414 3,405,807 3,424,174 3,170,647 15,505,280 30,147,476
Trade payables and contractors 311,737 - - - - - 311,737
Services payable 581,437 - - - - - 581,437
Public-Private Partnership - PPP 231,299 463,008 432,934 388,483 388,483 4,058,952 5,963,159
Program Contract Commitments 63,685 38,116 1,172 1,172 1,172 13,493 118,810

 

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Notes to the Interim Financial Information

 
  

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 to avoid the execution of these clauses, and the most restrictive are shown in Note 16 (c).

 

(d)Sensitivity analysis on interest rate risk

 

The table below shows the sensitivity analysis of the financial instruments, prepared under CPC 40 (R1) To evidence the balances of main financial assets and liabilities, calculated at a rate projected for the twelve-month period after June 30, 2022, or until the final settlement of each contract, whichever is shorter, considering a probable scenario.

 

The purpose of the sensitivity analysis is to measure the impact of changes in the market on the financial instruments, considering constant all other market indicators. At the time of settlement, the amounts may be different from those presented, due to the estimates used in the measurement.

 

 

June 30, 2022

Indicators

Exposure

Probable scenario

     
Assets    
CDI 1,600,919 13.78%(**)
Financial income   220,607
     
Liabilities    
CDI (8,130,495) 13.78%(**)
Interest to be incurred   (1,120,382)
 
 
 
CDI net exposure (6,529,576) (899,775)
     
Liabilities    
TR (1,645,559) 0.02%(**)
Expenses to be incurred   (329)
     
IPCA (3,087,253) 5.39%(*)
Expenses to be incurred   (166,403)
     
TJLP (1,356,817) 5.84%(*)
Interest to be incurred   (79,238)
     
SOFR (876,479) 3.25%(**)
Interest to be incurred   (28,486)
   
 
Total expenses to be incurred, net  

(1,174,231)

     
(*)       Source: LCA Consultores of June 30, 2022
(**)     Source: B3 of June 30, 2022

 

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Notes to the Interim Financial Information

 
  

 

4.2Capital management

 

The Company’s objectives when managing capital are to ensure its ability to increase investments in infrastructure, provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to reduce such costs.

 

Capital is monitored based on the leverage ratio, which 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 and financial investments. Total capital is calculated as total equity plus net debt, as shown in the statement of financial position.

 

 

June 30, 2022

December 31, 2021

     
Total borrowings and financing (Note 16) 17,726,604 17,723,836
(-) Cash and cash equivalents (Note 6) (643,569) (717,929)
(-) Financial investments (Note 7)

(1,967,901)

(2,433,385)

     
Net debt 15,115,134 14,572,522
Total equity

26,274,226

24,931,859

     
Total (shareholders plus creditor’s equity)

41,389,360

39,504,381

     
Leverage ratio

37%

37%

 

 

4.3Fair value estimates

 

The Company considers that balances from trade receivables (current) and trade payables 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.

 

4.4Financial instruments

 

The Company did not have financial assets classified as fair value through other comprehensive income and fair value through profit or loss. The financial instruments included in the amortized cost category comprise cash and cash equivalents, financial investments, restricted cash, trade receivables balance, balances with related parties, other assets and balances receivable from the Water National Agency (ANA), accounts payable to 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, except for cash equivalents and financial investments.

 

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Notes to the Interim Financial Information

 
  

The estimated fair values of the financial instruments are as follows:

 

Financial Assets

 

 

June 30, 2022

December 31, 2021

 

Carrying amount

Fair value

Carrying amount

Fair value

Cash and cash equivalents 643,569 643,569 717,929 717,929
Financial investments 1,967,901 1,967,901 2,433,385 2,433,385
Restricted cash 31,592 31,592 28,467 28,467
Trade receivables 3,116,224 3,116,224 2,918,311 2,918,311
ANA 16,566 16,566 20,666 20,666
Other assets 251,771 251,771 226,242 226,242

 

Additionally, SABESP has financial assets receivable from related parties, totaling R$ 854,635 as of June 30, 2022 (R$ 818,552 as of December 31, 2021), which were calculated under the conditions negotiated between the related parties. The conditions and additional information related to these financial instruments are disclosed in Note 10. Part of this balance, totaling R$ 758,983 (R$ 741,910 as of December 31, 2021), refers to reimbursement of additional retirement and pension plan - G0, indexed by IPCA plus simple interest of 0.5% p.m. On the transaction date, this interest rate approximated that of National Treasury Notes (NTN-b), with a term similar to the terms of related-party transactions.

 

Financial Liabilities

 

 

June 30, 2022

December 31, 2021

 

Carrying amount

Fair value

Carrying amount

Fair value

Borrowings and financing 17,726,604 17,931,447 17,723,836 17,947,954
Trade payables and contractors 311,737 311,737 236,763 236,763
Services payable 581,437 581,437 469,027 469,027
Program Contract Commitment 112,733 112,733 122,647 122,647
Public-Private Partnership - PPP 2,989,878 2,989,878 3,060,185 3,060,185

 

The criteria adopted to obtain the fair values of borrowings and financing, in preparing the quarterly information as of June 30, 2022, are consistent with those adopted in the Annual Financial Statements for the fiscal year ended December 31, 2021.

 

Financial instruments referring to financial investments and borrowings and financing are classified as Level 2 in the fair value hierarchy.

 

Considering the nature of other financial instruments, assets and liabilities, the balances recognized in the statement of financial position approximate the fair values, except for borrowings and financing, considering the maturities close to the end of the reporting date of this quarterly information, comparison of contractual interest rates with market rates in similar operations at the end of the reporting period, their nature, and maturity terms.

 

 

5Key accounting estimates and judgments

 

The preparation of the quarterly information requires Management to disclose judgments (except for those that involve estimates) that have a significant impact on the amounts recognized based on experience and other factors deemed as relevant, which affect the values of assets and liabilities and present results that may differ from the actual ones.

 

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Notes to the Interim Financial Information

 
  

The Company makes estimates and assumptions concerning the future, which are reviewed on a timely basis. Such accounting estimates, by definition, may differ from the actual results. The effects of the reviews of the accounting estimates are recognized in the period in which the estimates are reviewed.

 

The Company evaluated the main accounting policies that involve judgments, except for those that involve estimates, and concluded that none of them have a significant effect.

 

The areas that require a higher level of judgment and greater complexity, as well as assumptions and estimates that are significant for the quarterly information, are (i) allowance for doubtful accounts; (ii) intangible assets arising from concession agreements and program contracts; (iii) pension plan obligations; (iv) deferred income tax and social contribution; (v) provisions; and (vi) unbilled revenue.

 

 

6Cash and cash equivalents

 

 

June 30, 2022

December 31, 2021

     
Cash and banks 82,349 146,853
Cash equivalents

561,220

571,076

Total

643,569

717,929

 

Cash and cash equivalents include cash, bank deposits, and high-liquidity short-term financial investments, mainly represented by repurchase agreements, fund shares (accruing CDI interest rates), and CDBs, whose original maturities or intention of realization are lower than three months, which are convertible into a cash amount and subject to an insignificant risk of change in value.

 

As of June 30, 2022, the average yield of cash equivalents corresponded to 95.00% of CDI (96.00% as of December 31, 2021).

 

 

7Financial investments

 

The Company has financial investments in CDB, with daily liquidity, which it does not intend to use in the next three months, as shown below:

 

 

June 30, 2022

December 31, 2021

Banco BV 274,613 262,465
Banco Itaú Unibanco 383,058 366,906
Banco Bradesco 548,102 524,791
Banco BTG Pactual 382,868 367,361
Banco do Brasil

379,260

911,862

 

1,967,901

2,433,385

 

As of June 30, 2022, the average yield of the financial investments corresponded to 102.90% of CDI (101.57% as of December 31, 2021).

 

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8Restricted cash

 

 

June 30, 2022

December 31, 2021

     
Agreement with the São Paulo Municipal Government (i) 22,626 21,464
Brazilian Federal Savings Bank – escrow deposits 2,451 740
Other

6,515

6,263

 

31,592

28,467

 

(i)Refers to the amount deducted from the transfer of 7.5% of the revenue earned in the municipality to the Municipal Fund for Environmental Sanitation and Infrastructure, 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.

 

 

9Trade receivables

 

(a)Statement of financial position details

 

 

June 30, 2022

December 31, 2021

Private sector:    
General (i) and special (ii) customers 2,222,276 2,042,023
Agreements (iii)

479,521

514,616

     
 

2,701,797

2,556,639

Government entities:    
Municipal 575,615 586,810
Federal 10,646 7,869
Agreements (iii)

355,026

278,844

     
 

941,287

873,523

Wholesale customers – Municipal Governments: (iv)    
Mogi das Cruzes 3,975 3,580
São Caetano do Sul

28,932

24,464

     
Total wholesale customers – Municipal Governments

32,907

28,044

     
Unbilled supply

714,878

740,193

     
Subtotal (b) 4,390,869 4,198,399
Allowance for doubtful accounts (c)

(1,274,645)

(1,280,088)

     
Total

3,116,224

2,918,311

     
Current 2,861,512 2,695,077
Noncurrent

254,712

223,234

     
Total

3,116,224

2,918,311

 

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(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, among others);
(iii)Agreements - installment payments of past-due receivables, plus inflation adjustment and interest, according to the agreements; and
(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.

 

 

(b)The aging of trade receivables is as follows:

 

 

June 30, 2022

December 31, 2021

     
Current 2,053,566 1,896,535
Past-due:    
Up to 30 days 579,839 502,164
From 31 to 60 days 216,554 267,723
From 61 to 90 days 146,177 182,977
From 91 to 120 days 131,900 155,018
From 121 to 180 days 227,397 258,718
From 181 to 360 days 74,203 95,751
Over 360 days

961,233

839,513

     
Total past-due

2,337,303

2,301,864

     
Total

4,390,869

4,198,399

 

 

(c)Allowance for doubtful accounts

 

Changes in assets

January to June 2022

January to June 2021

     
Balance at the beginning of the period 1,280,088 1,157,619
Losses/(reversals) 23,397 130,074
Recoveries

(28,840)

(22,016)

     
Balance at the end of the period

1,274,645

1,265,677

 

 

Reconciliation of estimated/historical losses at the result

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

         
Write-offs (229,371) (434,440) (94,115) (156,500)
(Losses) with state entities – related parties (223) (1,629) (146) (594)
(Losses)/reversal with the private sector/government entities (33,913) (23,397) (62,048) (130,074)
Recoveries

10,575

28,840

12,208

22,016

         
Amount recorded as expense (Note 27)

(252,932)

(430,626)

(144,101)

(265,152)

 

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

 

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10Related-party balances and transactions

 

(a)São Paulo State

 

(i)Accounts receivable, interest on capital, revenue, and expenses

 

 

June 30, 2022

December 31, 2021

Accounts receivable    
Current:    
Sanitation services 148,253 127,614
Estimated losses (53,962) (52,333)
Reimbursement of additional retirement and pension benefits paid (G0):    
- Monthly flow (payments) 18,157 11,930
- GESP Agreement – 2015

94,044

86,446

     
Total current

206,492

173,657

     
Noncurrent:    
Agreement for the installment payment of sanitation services 1,361 1,361
Reimbursement of additional retirement and pension benefits paid (G0):    
- GESP Agreement – 2015

646,782

643,534

     
Total noncurrent

648,143

644,895

     
Total receivables

854,635

818,552

     
Assets:    
Sanitation services 95,652 76,642
Reimbursement of additional retirement and pension benefits paid (G0)

758,983

741,910

     
Total

854,635

818,552

     
Liabilities:    
Interest on capital payable - 275,240

 

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

         
Revenue from sanitation services 191,641 335,340 118,975 243,381
Payments from related parties (148,103) (279,404) (108,113) (220,336)
         
Payment received from reimbursement referring to Law 4,819/1958 (44,780) (81,412) (33,877) (88,058)

 

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(ii)Disputed amounts

 

As of June 30, 2022 and December 31, 2021, the disputed amounts between SABESP and the São Paulo State, referring to additional retirement and pension benefits paid (Law 4,819/1958), totaled R$ 1,422,031 and R$ 1,375,137, respectively, for which allowances for doubtful accounts were created for the total amount.

 

(iii)Actuarial Liability

 

The Company recognized an actuarial liability corresponding to additional retirement and pension benefits paid to employees, retired employees, and pensioners of the G0 Plan. As of June 30, 2022, and December 31, 2021, the amounts corresponding to the actuarial liability totaled R$ 2,189,242 and R$ 2,192,062, respectively. For detailed information on additional retirement and pension benefits, see Note 21.

 

(iv)GESP Agreement – 2015

 

On March 18, 2015, the Company, the São Paulo State, and DAEE, through the Department of Sanitation and Water Resources, entered into an Agreement totaling R$ 1,012,310, R$ 696,283 of which referring to the principal of the Undisputed Amount mentioned in item (iii) and R$ 316,027 to the inflation adjustment of the principal until February 2015.

 

The principal will be paid in 180 installments, as follows:

 

·The first 24 installments were settled upon the transfer of 2,221,000 preferred shares issued by Companhia de Transmissão de Energia Elétrica Paulista (CTEEP), totaling R$ 87,174, based on the share closing price of March 17, 2015, which were sold on April 20, 2016; and

 

·The amount of R$ 609, is being paid in 156 monthly installments, adjusted by the IPCA until the initial payment date, i.e. April 5, 2017. As of this date, the installments are being adjusted by IPCA plus a simple interest of 0.5% per month.

 

On July 22, 2022, the decision regarding the lawsuit that challenged the possibility of transferring the reservoirs was published in the State Official Gazette, preventing the transfer of the reservoirs to SABESP. Accordingly, as provided for in the agreement, the São Paulo State will pay to SABESP, in addition to the principal, the inflation adjustment credit of R$ 316,027 (restated until February 2015) in 60 installments, beginning after the principal installments are finished. The amount will be adjusted by IPCA until the initial date of the payments and, as of that date, IPCA plus simple interest of 0.5% per month will be levied on the amount of each installment.

 

The estimated impact to be recorded in the result for July 2022 is R$ 310,785 in financial revenue and R$ 105,667 in income tax and social contribution expenses.

 

As of June 30, 2022, the balance receivable was R$ 94,044 in current assets (R$ 86,446 as of December 31, 2021) and R$ 646,782 in noncurrent assets (R$ 644,895 as of December 31, 2021).

 

(b)Use of Reservoirs – EMAE

 

Empresa Metropolitana de Águas e Energia S.A. (EMAE) planned to receive the credit and obtain financial compensation for alleged past and future losses in electricity generation arising from 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.

 

As of October 28, 2016, the Company entered into an agreement based on a Private Transaction Agreement and Other Covenants to fully and completely settle the disputes and SABESP will continue using the reservoirs.

 

As of June 30, 2022, the balance of the agreement totaled R$ 8,730 and R$ 100,217 (R$ 7,956 and R$ 88,264 as of December 31, 2021), recorded in Other liabilities, under current and noncurrent liabilities, respectively.

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(c)Agreements with reduced tariffs for government entities that join the Rational Water Use Program (PURA)

 

The Company has agreements with government entities related to the São Paulo State Government that benefit them with a 25% discount on water supply and sewage services tariffs when they are not in default. These agreements provide for the implementation of the rational water use program, which provides for water consumption reduction.

 

(d)Guarantees

 

The São Paulo State provides guarantees for some of the Company’s borrowings and financing and does not charge any related fees. See Note 16.

 

(e)Personnel assignment agreement among entities related to the São Paulo State Government

 

The Company has personnel assignment agreements with entities related to the State Government, whose expenses are fully charged.

 

From April to June and from January to June 2022, expenses with employees assigned to other state entities totaled R$ 176 and R$ 341 (R$ 218 and R$ 375 from April to June and from January to June 2021), respectively.

 

No expenses with employees from other entities assigned to the Company were recorded from April to June 2022 and from January to June 2022 and in the same periods in 2021.

 

(f)Non-operating assets

 

As of June 30, 2022 and December 31, 2021, the Company had an amount of R$ 3,613 related to land and lent structures.

 

(g)SABESPREV

 

The Company sponsors a private defined benefit pension plan (G1 Plan), which is operated and administered by SABESPREV. The net actuarial liability recognized until June 30, 2022, totaled R$ 116,081 (R$ 129,600 as of December 31, 2021). See Note 21.

 

(h)Compensation of the Fiscal Council and Management Key Personnel

 

From April to June and from January to June 2022, expenses related to the compensation of the members of the Management and Fiscal Council totaled R$ 1,610 and R$ 3,207 (R$ 1,596 and R$ 3,190 from April to June and from January to June 2021), respectively.

 

From April to June and from January to June 2022, additional amounts of R$ 380 and R$ 740 (R$ 360 and R$ 720 from April to June and from January to June 2021), respectively, from the management bonus program were recorded.

 

(i)Loan agreement through credit facility

 

The Company holds interest in certain Special Purpose Entities (SPEs), in which it does not hold the majority interest but has cast vote and power of veto in some matters but cannot use such power of veto in a way to affect the returns of its investments. Therefore, these SPEs are considered for accounting purposes as joint arrangements.

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Aquapolo Ambiental

 

The Company entered into a loan agreement through a credit facility with SPE Aquapolo Ambiental S/A to finance the operations of that company, until the borrowings and financing requested with financial institutions are granted.

 

As of June 30, 2022, the balance of principal and interest of this agreement totaled R$ 2,368 and R$ 11,688, recorded in “Other assets” under current and noncurrent assets, respectively (R$ 11,884 and R$ 11,021, respectively, as of December 31, 2021), at CDI + 1.2% p.a.

 

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 mature on December 30, 2021, and the last on December 30, 2023.

 

Águas de Andradina

 

The Company entered into a loan agreement through a credit facility with SPE Águas de Andradina S/A to finance the operations of that company.

 

As of June 30, 2022, the balance of principal and interest of this agreement totaled R$ 106 and R$ 1,009, which was recorded in “Other assets” under current and noncurrent assets (R$ 34 and R$ 1,009, as of December 31, 2021), respectively, at CDI + 3% p.a.

 

This agreement was executed on August 17, 2021. The amount of principal, adjustment, accrued interest, and any other taxes must be paid in full until August 31, 2025.

 

(j)FEHIDRO

 

The Company has financing agreements under the State Fund for Water Resources (FEHIDRO). These funds will be aimed at the execution of works and sewage services. As of June 30, 2022, the balance of these financings totaled R$ 6.9 million (R$ 4.7 million as of December 31, 2021).

 

 

11Investments

 

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 matters, however, it cannot use such power of veto in a way to affect the returns over the investments, implying a mutually shared control (joint venture – CPC 19 (R2)).

 

The Company holds equity interest valued by the equity accounting in the following investees:

 

 

Equity

Dividends

Profit (loss) for the period

 

January to June

2022

January to June

2022

January to June

2021

           
Sesamm 53,931 58,421 (10,354) 5,864 3,203
Águas de Andradina 30,090 29,591 - 499 870
Águas de Castilho 9,973 9,384 - 589 677
Attend Ambiental 27,198 23,493 (500) 4,205 10,274
Aquapolo Ambiental 72,950 58,172 - 14,778 12,338
Paulista Geradora de Energia 5,893 6,153 - (260) (282)

 

 

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Investments

Dividends

Equity accounting

Interest percentage

 

January

to

June

2022

January to

June

2022

January

to

June

2021

               
Sesamm 19,416 21,032 (3,727) 2,111 1,153 36% 36%
Águas de Andradina 9,027 8,877 - 150 261 30% 30%
Águas de Castilho 2,992 2,815 - 177 203 30% 30%
Attend Ambiental 12,239 10,572 (225) 1,892 4,623 45% 45%
Aquapolo Ambiental 35,745 28,504 - 7,241 6,045 49% 49%
Paulista Geradora de Energia

1,473

1,538

-

(65)

(70)

25% 25%
Total 80,892 73,338 (3,952) 11,506 12,215    

 

Other investments

6,099

6,099

         

 

Overall total

86,991

79,437

         

 

 

12Investment Properties

 

 

December 31, 2021

Depreciation

June 30, 2022

       
Investment properties 46,126 (24) 46,102

 

 

 

December 31, 2020

Depreciation

June 30, 2021

       
Investment properties 46,274 (24) 46,250

 

June of June 30, 2022 and December 31, 2021, the market value of these properties was approximately R$ 386,000.

 

 

13Contract asset

 

 

December 31, 2021

Additions (i)

Transfers

Transfers of works to intangible assets (ii)

June 30, 2022 (iii)

           
Total contract asset

8,550,102

2,171,183

406

(1,714,055)

9,007,636

 

 

 

December 31, 2020

Additions

Transfers

Transfers of works to intangible assets

June 30, 2021

           
Total contract asset

7,969,164

2,225,121

1,039

(2,151,459)

8,043,865

 

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(i)The largest additions of the period are located in the municipalities of São Paulo, Praia Grande, and Santo André, totaling R$ 979 million, R$ 71 million, and R$ 62 million, respectively.
(ii)The largest transfers of the period are located in the municipalities of São Paulo, Praia Grande, and Suzano, in the amounts of R$ 667 million, R$ 543 million, and R$ 65 million, respectively.
(iii)The largest works are located in the municipalities of São Paulo, São Bernardo do Campo, and Franca, in the amounts of R$ 3,514 million, R$ 439 million, and R$ 317 million, respectively.

 

As of June 30, 2022, the contract asset included R$ 276,893, recorded as a lease (R$ 276,893 as of December 31, 2021). Leases are part of construction costs and, since June 2020, additional works are being executed by the Company.

 

(a)Capitalization of interest and other finance charges

 

The Company capitalizes interest, and monetary and exchange variation in the contract asset during the construction period. From January to June 2022, the Company capitalized R$ 279,922 (R$ 121,996 from January to June 2021).

 

(b)Construction margin

 

The Company is primarily responsible for the construction and installation of the concession infrastructure, either by using its 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.

 

Constructions related to the concessions are usually performed by third parties. In such a case, the margin is lower to cover administration costs and the assumption of responsibility for primary risks. As of June 30, 2022 and 2021, the margin was 2.3%.

 

From April to June and from January to June 2022, the construction margins were R$ 25,245 and R$ 45,930 (R$ 22,998 and R$ 46,005 from April to June and from January to June 2021), respectively.

 

(c)Expropriations

 

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

 

The costs of such expropriations are recorded in the contract asset during the execution of the works. From April to June and from January to June 2022, expropriations totaled R$ 17,159 and R$ 47,022 (R$ 40,618 and R$ 50,292 from April to June and from January to June 2021), respectively.

 

 

14Intangible assets

 

(a)Statement of financial position details

 

 

June 30, 2022

December 31, 2021

 

Cost

Accumulated amortization

Net

Cost

Accumulated amortization

Net

Intangible assets arising from:            
Concession agreements – equity value 700,176 (214,779) 485,397 696,728 (205,671) 491,057
Concession agreements – economic value 1,515,897 (871,095) 644,802 1,497,968 (816,527) 681,441
Program contracts 25,752,819 (8,098,444) 17,654,375 24,804,170 (7,652,149) 17,152,021
Program contracts – commitments 1,709,757 (418,282) 1,291,475 1,709,757 (391,800) 1,317,957
Service contracts – São Paulo 23,514,575 (7,196,116) 16,318,459 22,834,803 (6,676,032) 16,158,771
Software license of use 1,179,440 (591,458) 587,982 1,133,833 (535,099) 598,734
Right of use – Other assets

187,139

(102,490)

84,649

173,715

(69,862)

103,853

Total

54,559,803

(17,492,664)

37,067,139

52,850,974

(16,347,140)

36,503,834

 

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(b)Changes

 

 

December 31, 2021

Additions

Transfer of contract asset

Transfers

Write-offs and disposals

Amortization

Intangible assets arising from:              
Concession agreements - equity value (*) 491,057 - 4,423 (681) (59) (9,343) 485,397
Concession agreements – economic value   681,441 1 17,289 238 (7) (54,160) 644,802
Program contracts (*) 17,152,021 10,187 960,962 1,766 (1,508) (469,053) 17,654,375
Program contracts – commitments   1,317,957 - - - - (26,482) 1,291,475
Service contracts – São Paulo 16,158,771 208 685,775 1,674 (4,197) (523,772) 16,318,459
Software license of use 598,734 - 45,606 - - (56,358) 587,982
Right of use – Other assets

103,853

16,550

-

-

(54)

(35,700)

84,649

Total

36,503,834

26,946

1,714,055

2,997

(5,825)

(1,174,868)

37,067,139

 

(*) As of June 30, 2022, Concession agreements – equity value, and Program contracts included leases in the amounts of R$ 59,684 and R$ 174,444 (R$ 65,012 and R$ 180,669 as of December 31, 2021), respectively.

 

 

 

December 31, 2020

Additions

Transfer of contract asset

Transfers

Write-offs and disposals

Amortization

Intangible assets arising from:              
Concession agreements - equity value (*) 483,775 - 10,994 62 (136) (8,662) 486,033
Concession agreements – economic value   734,665 - 16,807 74 (239) (51,009) 700,298
Program contracts (*) 16,360,307 8,881 629,440 433 (1,363) (426,359) 16,571,339
Program contracts – commitments   1,370,923 - - - - (26,483) 1,344,440
Service contracts – São Paulo 14,872,604 7,157 1,435,242 - (2,611) (483,115) 15,829,277
Software license of use 540,625 - 58,976 - - (47,513) 552,088
Right of use – Other assets

42,676

103,521

-

-

(462)

(40,044)

105,691

Total

34,405,575

119,559

2,151,459

569

(4,811)

(1,083,185)

35,589,166

 

(*) As of June 30, 2021, Concession agreements – equity value, and Program contracts included leases in the amounts of R$ 71,056 and R$ 186,894 (R$ 76,454 and R$ 193,107 as of December 31, 2020), respectively.

 

(c)Intangible assets arising from concession agreements

 

As of June 30, 2022, the amounts not yet disbursed were recorded in “Program contract commitments” under current and noncurrent liabilities, totaling R$ 99,973 and R$ 12,760 (R$ 77,652 and R$ 44,995 as of December 31, 2021), respectively.

 

(d)Public-Private Partnership - PPP

 

SABESP carries out operations related to the PPPs mentioned below. These operations and their respective guarantees are supported by agreements executed according to Law 11,079/2004.

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The amounts recorded in intangible assets, net of amortization, are as follows:

 

 

June 30, 2022

December 31, 2021

     
Alto Tietê 260,135 269,062
São Lourenço

2,810,849

2,895,798

Total

3,070,984

3,164,860

 

 

The obligations assumed by the Company are as follows:

 

 

June 30, 2022

December 31, 2021

 

Current liabilities

Noncurrent liabilities

Total liabilities

Current liabilities

Noncurrent liabilities

Total liabilities

             
Alto Tietê 67,472 80,200 147,672 69,442 102,873 172,315
São Lourenço

98,125

2,744,081

2,842,206

73,315

2,814,555

2,887,870

Total

165,597

2,824,281

2,989,878

142,757

2,917,428

3,060,185

 

 

(e)Amortization of Intangible Assets

 

The average amortization rate totaled 4.8% and 4.7% as of June 30, 2022 and 2021, respectively.

 

(f)Right of use

 

Nature

     
Leases - Contract asset 276,893 276,893
     
Leases - Concession and Program Contract    
        Cost 405,435 405,446
        Accumulated amortization

(171,307)

(159,765)

  (=) Net 234,128 245,681
     
Other assets    
       Vehicles 153,310 142,003
       Properties 11,148 6,570
       Equipment 7,914 9,841
       Other assets 14,767 15,301
       Accumulated amortization

(102,490)

(69,862)

  (=) Net

84,649

103,853

 
 
 
Right of use

595,670

626,427

 

The 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.

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Version: 1

  

Notes to the Interim Financial Information

 
  

 

 

The table below shows the impact on the Company’s results:

 

Impact on the result

 
     
Right of use amortization (47,242) (51,675)
Financial result – interest expense and inflation adjustment (35,664) (34,070)
Expenses of short-term leases with low value

(12,200)

(10,871)

Reduction of profit for the period

(95,106)

(96,616)

 

(g)Performance Agreements

 

As of June 30, 2022, the accounting balances of these agreements recorded in contract asset and intangible assets were R$ 171,062 and R$ 1,661,763 (R$ 737,657 and R$ 871,488 as of December 31, 2021), respectively.

 

 

15Property, plant and equipment

 

(a)Statement of financial position details

 

 

June 30, 2022

December 31, 2021

 

Cost

Accumulated depreciation

Net

Annual average depreciation rate

Cost

Accumulated depreciation

Net

Annual average depreciation rate

Land 94,213 - 94,213 - 94,213 - 94,213 -
Buildings 87,366 (41,756) 45,610 2.1% 86,703 (41,205) 45,498 2.1%
Equipment 402,818 (287,811) 115,007 14.9% 397,782 (282,628) 115,154 15.1%
Transportation equipment 10,350 (8,248) 2,102 9.9% 10,434 (7,962) 2,472 9.9%
Furniture and fixtures 36,462 (14,757) 21,705 6.7% 36,561 (14,482) 22,079 6.7%
Other

18,862

(271)

18,591

5.0%

11,982

(241)

11,741

5.0%

Total

650,071

(352,843)

297,228

10.9%

637,675

(346,518)

291,157

11.1%

 

 

(b)Changes

 

 

December 31, 2021

Additions

Transfers

Write-offs and disposals

Depreciation

Land 94,213 - - - - 94,213
Buildings 45,498 829 (92) (45) (580) 45,610
Equipment 115,154 14,054 (2,601) (208) (11,392) 115,007
Transportation equipment 2,472 - (81) - (289) 2,102
Furniture and fixtures 22,079 1,118 (724) (54) (714) 21,705
Other

11,741

6,799

95

-

(44)

18,591

Total

291,157

22,800

(3,403)

(307)

(13,019)

297,228

 

 C: 
 
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Notes to the Interim Financial Information

 
  

 

 

 

December 31, 2020

Additions

Transfers

Write-offs and disposals

Depreciation

Land 94,213 - - - - 94,213
Buildings 45,347 707 (20) - (514) 45,520
Equipment 101,016 11,172 (1,761) (110) (10,381) 99,936
Transportation equipment 2,969 (80) - - (335) 2,554
Furniture and fixtures 17,419 635 54 (40) (637) 17,431
Other

7,287

439

119

-

(30)

7,815

Total

268,251

12,873

(1,608)

(150)

(11,897)

267,469

 

 

 

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Notes to the Interim Financial Information

 
  

 

16Borrowings and financing

 

 Borrowings and financing outstanding balance

June 30, 2022

December 31, 2021

Financial institution

 

Current

Noncurrent

 

Total

 

Current

Noncurrent

 

Total

Local currency            
 12th issue debentures 45,450 90,355 135,805 45,450 113,049 158,499
 14th issue debentures - - - 25,388 - 25,388
 17th issue debentures 144,035 - 144,035 102,252 101,982 204,234
 18th issue debentures 49,724 82,318 132,042 48,479 92,677 141,156
 21st issue debentures - - - 174,849 - 174,849
 22nd issue debentures 200,000 325,009 525,009 200,000 508,530 708,530
 23rd issue debentures - 864,851 864,851 - 864,776 864,776
 24th issue debentures - 486,417 486,417 - 461,350 461,350
 26th issue debentures - 1,233,402 1,233,402 - 1,168,317 1,168,317
 27th issue debentures - 997,677 997,677 - 997,433 997,433
 28th issue debentures - 1,197,577 1,197,577 - 1,197,395 1,197,395
 29th issue debentures - 1,271,524 1,271,524 - 1,230,602 1,230,602
 30th issue debentures - 998,047 998,047 - - -
 Brazilian Federal Savings Bank 102,230 1,406,929 1,509,159 98,784 1,380,170 1,478,954
 Brazilian Development Bank - BNDES PAC 13,401 - 13,401 13,394 6,665 20,059
 Brazilian Development Bank - BNDES PAC II 9751 7,176 26,796 33,972 7,161 30,308 37,469
 Brazilian Development Bank - BNDES PAC II 9752 4,862 18,231 23,093 4,851 20,619 25,470
 Brazilian Development Bank - BNDES ONDA LIMPA 26,807 46,828 73,635 26,751 60,089 86,840
 Brazilian Development Bank – BNDES TIETÊ III 117,840 559,638 677,478 117,593 617,251 734,844
 Brazilian Development Bank - BNDES 2015 33,629 404,818 438,447 33,558 420,685 454,243
 Brazilian Development Bank - BNDES 2014 6,537 19,679 26,216 6,524 22,874 29,398
 Inter-American Development Bank – IDB 2202 181,349 2,254,206 2,435,555 181,349 2,344,403 2,525,752
 Inter-American Development Bank – IDB INVEST 37,340 872,062 909,402 34,800 890,400 925,200
 Leases (Concession Agreements, Program Contracts, and Contract Asset) 40,854 337,821 378,675 36,640 360,671 397,311
 Leases (others) 63,272 44,463 107,735 69,306 56,663 125,969
 Other 6,117 8,916 15,033 4,790 9,274 14,064
 Interest and other charges

403,361

-

403,361

239,581

-

239,581

Total in local currency

1,483,984

13,547,564

15,031,548

1,471,500

12,956,183

14,427,683

 

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Notes to the Interim Financial Information

 
  

 

 

 Borrowings and financing outstanding balance

June 30, 2022

December 31, 2021

Financial institution

 

Current

Noncurrent

 

Total

 

Current

Noncurrent

 

Total

Foreign currency            
 Inter-American Development Bank - IDB 1212 – US$ 35,973 thousand (US$ 41,112 thousand in December 2021) 53,837 134,592 188,429 57,357 172,071 229,428
 Inter-American Development Bank - IDB 4623 – US$ 49,420 thousand (US$ 30,329 thousand in December 2021) - 241,517 241,517 - 155,192 155,192
 International Bank for Reconstruction and Development (IBRD) – IBRDs 7662 and 8916 - US$ 74,245 thousand (US$ 76,712 thousand in December 2021) 31,845 347,834 379,679 33,927 386,328 420,255
 JICA 15 – ¥ 8,643,225 thousand (¥ 9,219,440 thousand in December 2021) 44,484 289,145 333,629 55,858 391,008 446,866
 JICA 18 – ¥ 7,771,200 thousand (¥ 8,289,280 thousand in December 2021) 39,996 259,822 299,818 50,223 351,398 401,621
 JICA 17 – ¥ 3,897,396 thousand (¥ 3,706,564 thousand in December 2021) 11,144 138,405 149,549 12,833 165,900 178,733
 JICA 19 – ¥ 27,202,770 thousand (¥ 28,109,529 thousand in December 2021) 70,002 978,319 1,048,321 87,901 1,272,803 1,360,704
 IDB 1983AB – US$ 7,692 thousand (US$ 15,385 thousand in December 2021) 39,910 - 39,910 42,927 42,336 85,263
 Interest and other charges

14,204

-

14,204

18,091

-

18,091

Total in foreign currency

305,422

2,389,634

2,695,056

359,117

2,937,036

3,296,153

             
Total borrowings and financing

1,789,406

15,937,198

17,726,604

1,830,617

15,893,219

17,723,836

 

Exchange rates as of June 30, 2022: US$ 5.2380; ¥ 0.03860 (as of December 31, 2021: US$ 5.5805; ¥ 0.04847).

As of June 30, 2022, the Company did not have balances of borrowings and financing raised during the year, maturing within 12 months.

 

 

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Notes to the Interim Financial Information

 
  

Local currency

Guarantees

Maturity

Annual interest rate

Inflation adjustment

         
12th issue debentures Own funds 2025 TR + 9.5%  
14th issue debentures Own funds 2022 TJLP + 1.92 % (series 1 and 3) and 9.19% (series 2) IPCA (series 2)
17th issue debentures Own funds 2023 CDI + 0.75% (series 1), 4.5% (series 2), and 4.75% (series 3) IPCA (series 2 and 3)
18th issue debentures Own funds 2024 TJLP + 1.92 % (series 1 and 3) and 8.25% (series 2) IPCA (series 2)
21st issue debentures Own funds 2022 CDI + 0.60% (series 1) and CDI+ 0.90% (series 2)  
22nd issue debentures Own funds 2025 CDI + 0.58% (series 1), CDI+ 0.90% (series 2), and 6.0% (series 3) IPCA (series 3)
23rd issue debentures Own funds 2027 CDI + 0.49% (series 1) and CDI+ 0.63% (series 2)  
24th issue debentures Own funds 2029 3.20% (series 1) and 3.37% (series 2) IPCA (series 1 and 2)
26th issue debentures Own funds 2030 4.65% (series 1) and 4.95% (series 2) IPCA (series 1 and 2)
27th issue debentures Own funds 2027 CDI + 1.60% (series 1), CDI+ 1.80% (series 2), and 2.25% (series 3)  
28th issue debentures Own funds 2028

CDI + 1.20% (series 1) and CDI + 1.44% (series 2)

and CDI + 1.60% (series 3)

 
29th issue debentures Own funds 2036

CDI + 1.29% (series 1), 5.3058% (series 2), and

5.4478% (series 3)

IPCA (series 2 and 3)
30th issue debentures Own funds 2029 CDI + 1.30% (series 1) and CDI+ 1.58% (series 2)  
Brazilian Federal Savings Bank Own funds 2022/2042 5% to 9.5% TR
Brazilian Development Bank - BNDES PAC Own funds 2023 TJLP + 1.82%  
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 + 2.18%  
Brazilian Development Bank - BNDES 2014 Own funds 2026 TJLP + 1.76%  
Inter-American Development Bank – IDB 2202 Government 2035 CDI + 0.86%  
Inter-American Development Bank – IDB INVEST Own funds 2034 CDI+ 1.90% and CDI 2.70%  
Leases (Concession Agreements, Program Contracts, and Contract Asset)   2035 7.73% to 10.12% IPC
Leases (others)   2027 5.20% to 15.39%  
Other Own funds 2025 3% (FEHIDRO) TJLP + 1.5% (FINEP)  

 

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Notes to the Interim Financial Information

 
  

Foreign currency

Guarantees

Maturity

Annual interest rate

Exchange variation

         
Inter-American Development Bank - IDB 1212 – US$ 35,973 thousand Government 2025 3.31% (*) US$
Inter-American Development Bank - IDB 4623 – US$ 49,420 thousand Government 2044 1.12% (*) US$
International Bank for Reconstruction and Development (IBRD) – IBRDs 7662 and 8916 - US$ 74,245 thousand Government 2034 2.85% (*) US$
JICA 15 – ¥ 8,643,225 thousand Government 2029 1.8% and 2.5% Yen
JICA 18 – ¥ 7,771,200 thousand Government 2029 1.8% and 2.5% Yen
JICA 17 – ¥ 3,897,396 thousand Government 2035 1.2% and 0.01% Yen
JICA 19 – ¥ 27,202,770 thousand Government 2037 1.7% and 0.01% Yen
IDB 1983AB – US$ 7,692 thousand - 2023 2.08% to 2.38% (*) US$

 

 

(*) Rates comprising SOFR + contractually defined spread.

 

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Notes to the Interim Financial Information

 
  

(i)       Payment schedule – accounting balances as of June 30, 2022

 

 

2022

2023

2024

2025

2026

2027

2028 to 2044

TOTAL

LOCAL CURRENCY                
Debentures 59,586 739,210 1,073,347 1,203,403 1,092,291 1,709,755 2,108,794 7,986,386
Brazilian Federal Savings Bank 51,260 97,083 96,530 102,565 108,980 115,784 936,957 1,509,159
BNDES 105,137 203,541 196,851 176,661 166,842 154,365 282,845 1,286,242
IDB 2202 90,674 181,349 181,349 181,349 181,349 181,349 1,438,136 2,435,555
IDB INVEST 18,670 37,340 39,550 44,300 106,390 108,728 554,424 909,402
Leases (Concession Agreements, Program Contracts, and Contract Asset) 40,854 43,405 46,111 35,905 31,352 34,406 146,642 378,675
Leases (others) 34,693 46,969 13,308 8,360 3,786 619 - 107,735
Other 2,964 6,228 2,966 2,734 141 - - 15,033
Interest and other charges

393,324

10,037

-

-

-

-

-

403,361

TOTAL IN LOCAL CURRENCY

797,162

1,365,162

1,650,012

1,755,277

1,691,131

2,305,006

5,467,798

15,031,548

FOREIGN CURRENCY                
IDB 26,918 53,837 53,837 60,649 13,624 13,624 207,457 429,946
IBRD 15,923 31,845 31,845 31,845 31,845 31,845 204,531 379,679
JICA 82,813 165,625 165,625 165,625 165,625 165,625 920,379 1,831,317
IDB 1983AB - 39,910 - - - - - 39,910
Interest and other charges

14,204

-

-

-

-

-

-

14,204

TOTAL IN FOREIGN CURRENCY

139,858

291,217

251,307

258,119

211,094

211,094

1,332,367

2,695,056

Total

937,020

1,656,379

1,901,319

2,013,396

1,902,225

2,516,100

6,800,165

17,726,604

 

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Notes to the Interim Financial Information

 
  

(ii)       Changes

 

 

Addition (lease)

Funding

Borrowing costs

Monetary and exchange variation

Inflation adjustment / exchange variation and incorporated interest- Capitalized

Interest paid

Amortization

Accrued interest

Provision for interest and fees - Capitalized

Expenses with borrowing costs

                         
LOCAL CURRENCY                        
Debentures 7,467,968 - 1,000,000 (3,260) 155,490 - (251,420) (503,957) 239,385 124,882 5,578 8,234,666
Brazilian Federal Savings Bank 1,483,113 - 71,596 - 5,011 2,770 (58,108) (49,170) 36,194 21,999 - 1,513,405
BNDES 1,392,844 - - - 1,535 1,238 (51,301) (104,982) 26,414 24,431 129 1,290,308
IDB 2202 2,589,442 - - - - - (108,419) (90,674) 43,471 101,549 478 2,535,847
IDB INVEST 956,942 - - - - - (44,803) (16,130) 59,502 - 333 955,844
Leases (Concession Agreements, Program Contracts, and Contract Asset) 397,311 - - - - - (27,292) (18,636) 27,292 - - 378,675
Leases (others) 125,969 16,550 - - - - (8,372) (43,157) 16,745 - - 107,735
Other

14,094

-

3,654

-

18

-

(403)

(2,702)

376

31

-

15,068

TOTAL IN LOCAL CURRENCY

14,427,683

16,550

1,075,250

(3,260)

162,054

4,008

(550,118)

(829,408)

449,379

272,892

6,518

15,031,548

                         
FOREIGN CURRENCY                        
IDB 387,837 - 95,847 (3,444) (18,922) - (4,398) (28,316) 4,165 - 161 432,930
IBRD 420,881 - 2,841 (1,547) (26,884) 61 (944) (15,215) 886 2 167 380,248
JICA 2,401,887 - 15,546 - (477,964) 516 (18,272) (94,808) 12,673 2,149 103 1,841,830
IDB 1983AB

85,548

-

-

-

(5,446)

-

(1052)

(40,115)

610

294

209

40,048

TOTAL IN FOREIGN CURRENCY

3,296,153

-

114,234

(4,991)

(529,216)

577

(24,666)

(178,454)

18,334

2,445

640

2,695,056

Total

17,723,836

16,550

1,189,484

(8,251)

(367,162)

4,585

(574,784)

(1,007,862)

467,713

275,337

7,158

17,726,604

 

 

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Notes to the Interim Financial Information

 
  

 

 

 

Addition (lease)

Funding

Borrowing costs

Monetary and exchange variation

Inflation adjustment / exchange variation and incorporated interest- Capitalized

Interest paid

Amortization

Accrued interest

Provision for interest and fees - Capitalized

Expenses with borrowing costs

                         
LOCAL CURRENCY                        
Debentures 6,756,504 - - (867) 95,382 - (89,796) (437,780) 123,693 33,361 8,136 6,488,633
Brazilian Federal Savings Bank 1,418,832 - 84,254 - - - (55,955) (45,904) 36,008 20,074 - 1,457,309
BNDES 1,370,902 - 7,136 - - - (41,793) (88,956) 7,902 33,473 128 1,288,792
IDB 2202 2,730,195 - - - - - (40,708) (90,674) 19,368 29,920 478 2,648,579
IDB INVEST 944,513 - - - - - (7,758) - 24,044 - 332 961,131
Leases (Concession Agreements, Program Contracts, and Contract Asset) 428,743 - - - - - (40,201) (14,290) 40,201 - - 414,453
Leases (others) 45,876 103,521 - - - - (2,790) (40,044) 13,529 - - 120,092
Other

15,197

-

-

-

-

-

(352)

(1,760)

324

12

-

13,421

TOTAL IN LOCAL CURRENCY

13,710,762

103,521

91,390

(867)

95,382

-

(279,353)

(719,408)

265,069

116,840

9,074

13,392,410

                         
FOREIGN CURRENCY                        
IDB 317,302 - 47,593 (3,796) (13,984) - (4,473) (27,111) 3,765 - 85 319,381
IBRD 426,860 - - (1,733) (14,239) - (1,375) (17,070) 675 - 105 393,223
JICA 2,684,321 - 9,335 - (274,159) 1,870 (25,450) (111,609) 19,797 3,001 97 2,307,203
IDB 1983AB

119,379

-

-

-

(2,361)

-

(1,617)

(40,606)

1,123

285

208

76,411

TOTAL IN FOREIGN CURRENCY

3,547,862

-

56,928

(5,529)

(304,743)

1,870

(32,915)

(196,396)

25,360

3,286

495

3,096,218

Total

17,258,624

103,521

148,318

(6,396)

(209,361)

1,870

(312,268)

(915,804)

290,429

120,126

9,569

16,488,628

 

 

 

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Notes to the Interim Financial Information

 
  

 

(a)Main events in the six-month period ended June 30, 2022

 

Debentures

 

As of March 18, 2022, the Company raised R$ 1.0 billion from the 30th issue of simple, unsecured debentures, not convertible into shares, in two series, under CVM Instruction 476. The proceeds from the Issue were used to refinance financial commitments maturing in 2022 and to recompose and reinforce the Company’s cash position.

 

The 30th issue debentures was as follows:

 

 

Value

Maturity

Remuneration

Series 1 R$ 500,000 03/2027 CDI + 1.30% p.a.
Series 2 R$ 500,000 03/2029 CDI + 1.58% p.a.

 

·The covenants agreed for the 30th issue are:

Calculated every quarter, when disclosing the quarterly information or annual financial statements:

- Net debt/adjusted EBITDA lower than or equal to 3.50;

- Adjusted EBITDA/paid financial expenses equal to or higher than 1.5;

- Disposal of operating assets, termination of licenses, loss of concession, or loss of the Issuer’s ability to execute and operate public sanitation services in areas of the São Paulo State which, individually or jointly during the term of the agreement, lead to a reduction of the Issuer’s net sales and/or service revenue of more than twenty- five percent (25%). The above limit will be calculated every quarter, taking into consideration the Issuer’s net operating income during the twelve (12) months before the end of each quarter and using the financial information disclosed by the Issuer.

The failure to comply with the covenants for at least two consecutive quarters, or two non-consecutive quarters within twelve months, will cause the early termination of the agreement (in which case the 30-day cure period does not apply).

The contract has a cross acceleration clause, i.e. the early maturity of any of the Company’s debts, in an individual or aggregate amount equal to or higher than R$ 182 million, adjusted by the IPCA inflation index as of the issue date, constitutes a default event and may result in the early maturity of the obligations arising from the Debentures.

In the first quarter of 2022, the Company made the final amortization payment of the 14th issue debentures, totaling R$ 27.6 million, of which R$ 25.7 million in principal and R$ 1.9 million in interest.

 

On June 15, 2022, the Company made the final amortization payment of the 21st issue debentures, totaling R$ 185.1 million, of which R$ 175.0 million in principal and R$ 10.1 million in interest.

 

(b)Lease

 

The Company has lease agreements signed as Assets Lease. During the construction period, work costs are capitalized to contract assets and the lease amount is recorded at the same proportion.

 

After startup, the lease payment period starts (240 monthly installments), and the amount is periodically restated by the contracted price index.

 

The amounts payable for the right of use of assets are also recorded in this line. See Note 14 (f).

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Notes to the Interim Financial Information

 
  
(c)Covenants

 

The table below shows the most restrictive covenants as of June 30, 2022.

 

 

Covenants

Adjusted EBITDA / Adjusted Financial Expenses Equal to or higher than 2.80
EBITDA / Financial Expenses Paid Equal to or higher than 2.35
Adjusted Net Debt / Adjusted EBITDA Equal to or lower than 3.80
Net Debt / Adjusted EBITDA Equal to or lower than 3.50
Total Adjusted Debt / Adjusted EBITDA Lower than 3.65
Other Onerous Debt (1) / Adjusted EBITDA Equal to or lower than 1.30
Adjusted Current Ratio Higher than 1.00
(1) The contractual definition of “Other Onerous Debts” corresponds to the sum of pension plan obligations and healthcare plan, installment payments of tax debts, and installments payments of debts with the electricity supplier.

 

As of June 30, 2022, and December 31, 2021, the Company met the requirements set forth by its borrowings and financing agreements.

 

(d)Borrowings and financing – Credit limited

 

Agent

 

June 30, 2022

    (in millions of reais (*))
Brazilian Federal Savings Bank   1,281
Brazilian Development Bank (BNDES)   455
Inter-American Development Bank (IDB)   1,313
Inter-American Development Bank – IDB Invest   470
International Bank for Reconstruction and Development (IBRD)   1,300
International Finance Corporation - IBRD   760
Other  

18

TOTAL  

5,597

 

(*) Brazilian Central Bank’s exchange rate as of June 30, 2022 (US$ 1.00 = R$ 5.2380; ¥ 1.00 = R$ 0.03860).

 

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

 

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Notes to the Interim Financial Information

 
  
17Taxes and contributions

 

(a) Current assets

 

 

June 30, 2022

December 31, 2021

Recoverable taxes    
Income tax and social contribution 273,410 259,902
Withheld income tax (IRRF) on financial investments 10,400 13,041
Other federal taxes

3,403

3,161

Total

287,213

276,104

 

 

(b) Current liabilities

 

 

June 30, 2022

December 31, 2021

Taxes and contributions payable    
Cofins and Pasep 111,612 111,963
INSS (social security contribution) 43,460 39,902
IRRF (withholding income tax) 5,753 49,468
Other

40,730

55,797

Total

201,555

257,130

 

 

18Deferred taxes and contributions

 

(a) Statement of financial position details

 

 

June 30, 2022

December 31, 2021

Deferred income tax assets    
Provisions 526,313 503,374
Pension plan obligations - G1 146,193 150,577
Donations of underlying assets on concession agreements 47,065 47,589
Allowance for doubtful accounts 183,562 183,963
Other

122,980

127,092

Total deferred tax asset

1,026,113

1,012,595

     
Deferred income tax liabilities    
Temporary difference on concession of intangible asset (360,718) (368,235)
Capitalization of borrowing costs (429,363) (404,931)
Profit on supply to government entities (349,513) (353,262)
Actuarial gain – G1 Plan (109,271) (109,271)
Construction margin (44,698) (46,079)
Borrowing costs

(12,553)

(14,556)

Total deferred tax liabilities

(1,306,116)

(1,296,334)

     
Deferred tax liability, net

(280,003)

(283,739)

 

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Notes to the Interim Financial Information

 
  
(b) Changes

 

Deferred income tax assets

Net

change

Provisions 503,374 22,939 526,313
Pension plan obligations - G1 150,577 (4,384) 146,193
Donations of underlying assets on concession agreements 47,589 (524) 47,065
Allowance for doubtful accounts 183,963 (401) 183,562
Other

127,092

(4,112)

122,980

Total

1,012,595

13,518

1,026,113

       
Deferred income tax liabilities      
Temporary difference on concession of intangible asset (368,235) 7,517 (360,718)
Capitalization of borrowing costs (404,931) (24,432) (429,363)
Profit on supply to government entities (353,262) 3,749 (349,513)
Actuarial gain – G1 (109,271) - (109,271)
Construction margin (46,079) 1,381 (44,698)
Borrowing costs

(14,556)

2,003

(12,553)

Total

(1,296,334)

(9,782)

(1,306,116)

       
Deferred tax liability, net

(283,739)

3,736

(280,003)

 

 

 

Deferred income tax assets

Net

change

Provisions 436,445 11,610 448,055
Pension plan obligations - G1 154,498 (1,930) 152,568
Donations of underlying assets on concession agreements 50,142 (1,342) 48,800
Allowance for doubtful accounts 155,719 17,605 173,324
Other

134,932

(14,467)

120,465

Total

931,736

11,476

943,212

       
Deferred income tax liabilities      
Temporary difference on concession of intangible asset (388,675) 7,882 (380,793)
Capitalization of borrowing costs (390,211) 4,368 (385,843)
Profit on supply to government entities (356,513) 895 (355,618)
Actuarial gain – G1 (48,979) - (48,979)
Construction margin (48,843) 1,382 (47,461)
Borrowing costs

(19,231)

2,963

(16,268)

Total

(1,252,452)

17,490

(1,234,962)

       
Deferred tax liability, net

(320,716)

28,966

(291,750)

 

 C: 
 
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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:

 

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

         
Profit before income taxes 589,738 2,063,940 1,148,031 1,898,646
Statutory rate

34%

34%

34%

34%

         
Estimated expense at statutory rate (200,511) (701,740) (390,331) (645,540)
Benefit of interest on capital 32,878 32,878 13,874 13,874
Permanent differences:        
Provision Law 4,819/1958 – G0 (i) (7,013) (14,985) (5,651) (11,927)
Donations (2,505) (4,881) (2,308) (3,675)
Other differences

9,871

22,785

9,437

18,532

         
Income tax and social contribution

(167,280)

(665,943)

(374,979)

(628,736)

         
Current income tax and social contribution (180,174) (669,679) (374,219) (657,702)
Deferred income tax and social contribution 12,894 3,736 (760) 28,966
Effective rate 28% 32% 33% 33%

 

(i) Permanent difference related to the provision for the actuarial liability. See Note 21 (ii) and (v).

 

 

19Provisions

 

(a)Lawsuits and proceedings that resulted in provisions

 

(I)Statement of financial position details

 

The Company is a party to several legal claims and administrative proceedings arising from the normal course of business, including civil, tax, labor, and environmental matters. Management recognizes provisions consistently with the recognition and measurement criteria established in Note 3.15 to the Annual Financial Statements as of December 31, 2021. The terms and payment amounts are defined based on the outcome of these lawsuits.

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Notes to the Interim Financial Information

 
  

 

 

 

June 30, 2022

 

December 31, 2021

 

 

Provisions

Escrow deposits

Provisions net of deposits

 

Provisions

Escrow deposits

Provisions net of deposits

Customer claims (i) 157,092 (6,889) 150,203   168,258 (10,780) 157,478
Supplier claims (ii) 450,975 (130) 450,845   477,854 (123) 477,731
Other civil claims (iii) 104,553 (1,713) 102,840   95,601 (2,523) 93,078
Tax claims (iv) 75,465 (15,777) 59,688   57,509 (2,693) 54,816
Labor claims (v) 375,469 (15,554) 359,915   349,962 (15,864) 334,098
Environmental claims (vi)

384,425

(36)

384,389

 

331,326

(34)

331,292

Total

1,547,979

(40,099)

1,507,880

 

1,480,510

(32,017)

1,448,493

               
Current 863,116 - 863,116   809,821 - 809,821
Noncurrent 684,863 (40,099) 644,764   670,689 (32,017) 638,672

 

 

(II)Changes

 

 

Additional provisions

Interest and inflation adjustment

Use of the accrual

Amounts not used

(reversal)

Customer claims (i) 168,258 9,664 15,952 (26,261) (10,521) 157,092
Supplier claims (ii) 477,854 18,969 29,131 (74,768) (211) 450,975
Other civil claims (iii) 95,601 7,996 9,427 (5,461) (3,010) 104,553
Tax claims (iv) 57,509 13,209 5,965 (925) (293) 75,465
Labor claims (v) 349,962 53,825 17,561 (22,322) (23,557) 375,469
Environmental claims (vi)

331,326

19,901

33,599

(300)

(101)

384,425

Subtotal 1,480,510 123,564 111,635 (130,037) (37,693) 1,547,979
Escrow deposits

(32,017)

(15,007)

(4,382)

8,323

2,984

(40,099)

Total

1,448,493

108,557

107,253

(121,714)

(34,709)

1,507,880

 

 

Additional provisions

Interest and inflation adjustment

Use of the accrual

Amounts not used

(reversal)

Customer claims (i) 160,705 22,820 13,885 (16,717) (19,174) 161,519
Supplier claims (ii) 410,734 8,964 21,817 (39,309) (39,382) 362,824
Other civil claims (iii) 86,083 2,208 5,750 (2,187) (2,878) 88,976
Tax claims (iv) 59,678 6,071 4,406 - (1,064) 69,091
Labor claims (v) 316,880 54,665 19,205 (20,470) (16,210) 354,070
Environmental claims (vi)

249,582

19,417

21,590

-

(9,262)

281,327

Subtotal 1,283,662 114,145 86,653 (78,683) (87,970) 1,317,807
Escrow deposits

(31,360)

(13,991)

(2,370)

3,018

836

(43,867)

Total

1,252,302

100,154

84,283

(75,665)

(87,134)

1,273,940

 

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Notes to the Interim Financial Information

 
  
(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 obligations cannot be reliably measured. Contingent liabilities, net of deposits, are represented as follows:

 

 

June 30, 2022

December 31, 2021

Customer claims (i) 193,555 173,875
Supplier claims (ii) 1,582,481 1,521,935
Other civil claims (iii) 934,750 852,735
Tax claims (iv) 1,730,374 1,548,781
Labor claims (v) 1,147,116 1,095,841
Environmental claims (vi)

3,491,703

3,201,716

Total

9,079,979

8,394,883

 

 

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

 

(i)Customer claims

 

Refer mainly to lawsuits from customers claiming that their tariffs should be equal to those of other consumer categories, lawsuits for reduction of sewage tariff due to system losses, consequently requiring the refund of amounts charged by the Company, and lawsuits for reduction of tariff for being eligible to the Social Welfare Entity category.

 

(ii)Supplier claims

 

Include lawsuits filed by some suppliers alleging underpayment of monetary adjustments and economic and financial imbalance of the agreements, and are in progress at different courts.

 

(iii)Other civil claims

 

Refer mainly to indemnities for property damage, pain and suffering, and loss of profits allegedly caused to third parties, such as vehicle accidents, claims, and challenges on the methodology to collect tariffs, among others, filed at different court levels.

 

(iv)Tax claims

 

Tax claims refer mainly 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 several 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 others, which are at various court levels.

 

(vi)Environmental claims

 

These refer to several administrative proceedings and lawsuits filed by government entities, including Companhia Ambiental do Estado de São Paulo (CETESB) and the Public Prosecution Office of the São Paulo State, which aim at certain obligations to do and not to do, with the provision of fines for non-compliance and imposition of compensation for environmental damages allegedly caused by the Company.

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Notes to the Interim Financial Information

 
  
(d)Guarantee insurance

 

As of May 25, 2021, the Company executed an agreement effective for one year for the issue of policies under several types of guarantee insurance. The limit that can be used is R$ 600 million. The guarantee insurance for escrow deposit is used in legal claims, where instead of immediately disbursing cash, the Company uses the guarantee provided by the insurance until the end of these proceedings, limited to up to five years. As of June 30, 2022, R$ 580 million was available for use.

 

 

20Labor liabilities and pension plan obligations

 

 

June 30, 2022

December 31, 2021

Salaries and payroll charges 40,905 58,591
Provision for vacation 255,788 226,127
Provision for Christmas bonus 56,405 -
Healthcare plan (i) 49,630 45,915
Provision for profit sharing (ii) 48,522 88,376
Consent Decree (TAC) 6,354 5,723
Knowledge Retention Program (PRC)

1,569

1,884

Total

459,173

426,616

 

(i)       Healthcare plan

 

Benefits are paid after the event, free of choice, and are sponsored by the contributions of SABESP and the employees. In the second quarter of 2022, the Company contributed 8.2%, on average, of gross payroll, totaling R$ 65,345 (7.8% in the second quarter of 2021, totaling R$ 54,881).

 

(ii)       Provision for profit sharing

 

The profit-sharing program was implemented according to an agreement with the labor union. Payment corresponds to up to one month’s salary for each employee, depending on the performance of goals reached from January to December, and should be paid in the subsequent year.

 

 

21Pension plan obligations

 

The Company has Post-Employment Benefit Plans in the following modalities: Defined Benefit (BD) – G1 (i) and G0 (ii); and Defined Contribution (CD) – Sabesprev Mais (iii) and VIVEST (iv), whereby only the latter is open for new adhesions. See the reconciliation of expenses with such plans in item (v).

 

Defined benefit plans

 

Summary of pension plan - Liabilities

 

 

G1 Plan

G0 Plan

Total

Pension plan liabilities as of December 31, 2021 (129,600) (2,192,062) (2,321,662)
Expenses recognized in 2022 (5,857) (88,476) (94,333)
Payments made in 2022

19,376

91,296

110,672

Pension plan liabilities as of June 30, 2022

(116,081)

(2,189,242)

(2,305,323)

 

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Notes to the Interim Financial Information

 
  
 

G1 Plan

G0 Plan

Total

Pension plan liabilities as of December 31, 2020 (319,053) (2,549,541) (2,868,594)
Expenses recognized in 2021 (11,623) (79,107) (90,730)
Payments made in 2021

17,572

82,975

100,547

Pension plan liabilities as of June 30, 2021

(313,104)

(2,545,673)

(2,858,777)

 

(i)G1 Plan

 

Managed by SABESPREV, the financed defined benefit plan (“G1 Plan”) 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.

 

(ii)G0 Plan

 

According to State Law 4,819/1958, employees who started providing services before May 1974 acquired a legal right to receive supplemental pension payments, which rights are referred to as "G0 Plan". The Company pays supplemental retirement and pension amounts on behalf of the São Paulo State and seeks reimbursements of such amounts, which are recorded in the “Balances with related parties” line, limited to the amounts considered virtually certain to be reimbursed by the São Paulo State.

 

(iii)Sabesprev Mais Plan

 

Administered by SABESPREV, the sponsor's contributions correspond to the result obtained by applying a percentage of 100% to the basic contribution made by the participant.

 

(iv)VIVEST

 

Administered by VIVEST, the sponsor's contributions correspond to the result obtained by applying a percentage of 100% to the basic contribution made by the participant.

 

(v)Reconciliation of expenditures with pension plan obligations

 

 

April to

June

2022

January to June

2022

April to

June

2021

January to June

2021

         
G1 Plan (i) 2,922 5,857 5,812 11,623
G0 Plan (ii) 44,238 88,476 39,553 79,107
Sabesprev Mais Plan (iii) 6,429 12,307 5,604 10,890
VIVEST Plan (iv)

73

131

32

58

Subtotal 53,662 106,771 51,001 101,678
Capitalized (823) (1,594) (1,064) (2,058)
Reimbursement of additional retirement and pension benefits paid (G0) (23,611) (44,402) (22,934) (44,027)
Other

1,338

2,583

1,257

2,472

Pension plan obligations (Note 27)

30,566

63,358

28,260

58,065

 

 

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Notes to the Interim Financial Information

 
  
22Services payable

 

This line records the balances payable, mainly from services received from third parties, such as the 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 line also includes the amounts payable related to the transfer of 7.5% of revenue from the São Paulo municipal government to the Municipal Fund for Environmental Sanitation and Infrastructure. The balances as of June 30, 2022, and December 31, 2021, were R$ 581,437 and R$ 469,027, respectively.

 

 

23Equity

 

(a)Share capital

 

As of June 30, 2022, and December 31, 2021, the authorized, subscribed, and paid-in capital, totaling R$ 15,000,000, was composed of 683,509,869 registered, book-entry common shares with no par value, as follows:

 

 

June 30, 2022

December 31, 2021

 

Number of shares

%

Number of shares

%

 São Paulo State 343,506,664 50.3 343,506,664 50.3
 Other shareholders    
   In Brazil (1) 245,397,335 35.9 234,965,971 34.4
   Abroad(2)

94,605,870

13.8

105,037,234

15.3

         
 Total

683,509,869

100.0

683,509,869

100.0

 

(1)As of June 30, 2022, the common shares traded in Brazil were held by 35,599 shareholders. It includes six shares held by Cia Paulista de Parcerias – CPP, a company controlled by the São Paulo State.
(2)Shares traded as American Depositary Receipts (ADR) on the New York Stock Exchange, through The Bank New York Mellon, the depositary bank of the Company’s ADRs. Each ADR corresponds to 1 share.

 

(b)Interest on capital

 

The Annual Shareholders’ Meeting of April 28, 2022, approved the distribution of dividends as interest on capital totaling R$ 547,645, corresponding to a minimum mandatory dividend of R$ 96,700 as additional dividends, totaling R$ 644,345, paid on June 27, 2022.

 

 

24Earnings per share

 

Basic and diluted

 

Basic earnings per share are calculated by dividing the profit attributable to 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.

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Notes to the Interim Financial Information

 
  
 

April to

June

2022

January to

June

2022

April to

June

2021

January to

June

2021

         
Profit attributable to the Company’s owners 422,458 1,397,997 773,052 1,269,910
Weighted average number of common shares issued

683,509,869

683,509,869

683,509,869

683,509,869

         
Basic and diluted earnings per share (reais per share)

0.61807

2.04532

1.13100

1.85793

 

 

25Operating segment information

 

The Company’s Management, composed of the Board of Directors and the Executive Board, has determined the operating segment used to make strategic decisions, such as sanitation services.

 

Result

 

 

April to June 2022

 

Sanitation (i)

Reconciliation to the income statement (ii)

Balance according to the financial statements

Gross operating revenue 4,451,472 1,154,720 5,606,192
Gross sales deductions

(340,792)

-

(340,792)

Net operating revenue

4,110,680

1,154,720

5,265,400

Costs, selling, general, and administrative expenses

(3,230,087)

(1,129,475)

(4,359,562)

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

880,593

25,245

905,838

Other operating income (expenses), net     2,351
Equity accounting     5,923
Financial result, net    

(324,374)

Income before income tax and social contribution    

589,738

Depreciation and amortization (598,165) - (598,165)

 

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Notes to the Interim Financial Information

 
  
 

January to June 2022

 

Sanitation (i)

Reconciliation to the income statement (ii)

Balance according to the financial statements

Gross operating revenue 8,749,692 2,042,926 10,792,618
Gross sales deductions

(656,828)

-

(656,828)

Net operating revenue

8,092,864

2,042,926

10,135,790

Costs, selling, general, and administrative expenses

(6,107,025)

(1,996,996)

(8,104,021)

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

1,985,839

45,930

2,031,769

Other operating income (expenses), net     4,915
Equity accounting     11,506
Financial result, net    

15,750

Income before income tax and social contribution    

2,063,940

Depreciation and amortization (1,187,911) - (1,187,911)

 

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Notes to the Interim Financial Information

 
  
 

April to June 2021

 

Sanitation (i)

Reconciliation to the income statement (ii)

Balance according to the financial statements

Gross operating revenue 3,881,211 1,022,904 4,904,115
Gross sales deductions

(308,196)

-

(308,196)

Net operating revenue

3,573,015

1,022,904

4,595,919

Costs, selling, general, and administrative expenses

(2,700,057)

(999,906)

(3,699,963)

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

872,958

22,998

895,956

Other operating income (expenses), net     (899)
Equity accounting     4,161
Financial result, net    

248,813

Income before income tax and social contribution    

1,148,031

Depreciation and amortization (553,055)   (553,055)

 

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Notes to the Interim Financial Information

 
  
 

January to June 2021

 

Sanitation (i)

Reconciliation to the income statement (ii)

Balance according to the financial statements

Gross operating revenue 7,818,433 2,046,209 9,864,642
Gross sales deductions

(591,306)

-

(591,306)

Net operating revenue

7,227,127

2,046,209

9,273,336

Costs, selling, general, and administrative expenses

(5,290,922)

(2,000,204)

(7,291,126)

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

1,936,205

46,005

1,982,210

Other operating income (expenses), net     9,778
Equity accounting     12,215
Financial result, net    

(105,557)

Income before income tax and social contribution    

1,898,646

Depreciation and amortization (1,095,106) - (1,095,106)

 

(i)See Note 31 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional information on long-lived assets.
(ii)Construction revenue and related costs are not reported to the CODM. Revenue from construction is recognized under ICPC 01 (R1) / IFRIC 12 (Concession Agreements) and CPC 47/IFRS 15 (Revenue from Contracts with Customers), as all performance obligations are met over time. See Note 14 (e) for further information.

 

 

26Operating revenue

 

(a)Revenue from sanitation services:

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

         
Metropolitan Region of São Paulo 3,225,891 6,274,744 2,787,854 5,569,632
Regional Systems

1,225,581

2,474,948

1,093,357

2,248,801

Total

4,451,472

8,749,692

3,881,211

7,818,433

 

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Notes to the Interim Financial Information

 
  
(b)Reconciliation from gross operating revenue to net operating revenue:

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

         
Revenue from sanitation services (i) 4,451,472 8,749,692 3,881,211 7,818,433
Construction revenue 1,154,720 2,042,926 1,022,904 2,046,209
Sales tax (322,341) (619,926) (289,903) (554,788)
Regulation, Control and Oversight Fee (TRCF)

(18,451)

(36,902)

(18,293)

(36,518)

Net revenue

5,265,400

10,135,790

4,595,919

9,273,336

 

(i) Includes R$ 22,573 and R$ 43,534 referring to the TRCF charged from customers from April to June and from January to June 2022 (R$ 19,568 and R$ 38,857 from April to June and from January to January to June 2021), respectively, referring to the municipalities regulated by ARSESP.

 

 

27Operating costs and expenses

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

Operating costs        
Salaries, payroll charges, and benefits (591,821) (1,100,694) (518,265) (991,360)
Pension plan obligations (7,489) (14,546) (9,082) (17,932)
Construction costs (Note 25) (1,129,475) (1,996,996) (999,906) (2,000,204)
General supplies (95,925) (162,415) (70,782) (131,712)
Treatment supplies (142,491) (289,799) (82,332) (181,257)
Outsourced services (431,808) (797,700) (341,052) (708,647)
Electricity (375,361) (786,445) (340,012) (697,987)
General expenses (206,033) (404,659) (191,077) (371,554)
Depreciation and amortization

(551,500)

(1,095,035)

(510,919)

(1,010,817)

  (3,531,903) (6,648,289) (3,063,427) (6,111,470)
         
Selling expenses        
Salaries, payroll charges, and benefits (80,464) (148,373) (67,812) (129,074)
Pension plan obligations (1,010) (1,969) (1,184) (2,361)
General supplies (2,149) (3,279) (1,888) (3,418)
Outsourced services (106,353) (190,716) (80,588) (167,523)
Electricity (271) (685) (329) (676)
General expenses (26,561) (51,688) (31,279) (58,325)
Depreciation and amortization

(16,717)

(33,402)

(16,581)

(33,078)

  (233,525) (430,112) (199,661) (394,455)
         
Bad debt expense, net of recoveries (Note 9 (c)) (252,932) (430,626) (144,101) (265,152)
         
Administrative expenses        
Salaries, payroll charges, and benefits (73,217) (131,738) (63,941) (121,312)
Pension plan obligations (22,067) (46,843) (17,994) (37,772)
General supplies (11,402) (15,701) (5,356) (11,165)
Outsourced services (61,196) (123,029) (58,541) (107,923)
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April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

Electricity (460) (905) (311) (901)
General expenses (124,066) (179,453) (103,414) (154,750)
Depreciation and amortization (29,948) (59,474) (25,555) (51,211)
Tax expenses

(18,846)

(37,851)

(17,662)

(35,015)

  (341,202) (594,994) (292,774) (520,049)
         
Operating costs and expenses        
Salaries, payroll charges, and benefits (745,502) (1,380,805) (650,018) (1,241,746)
Pension plan obligations (Note 21 (v)) (30,566) (63,358) (28,260) (58,065)
Construction costs (Note 25) (1,129,475) (1,996,996) (999,906) (2,000,204)
General supplies (109,476) (181,395) (78,026) (146,295)
Treatment supplies (142,491) (289,799) (82,332) (181,257)
Outsourced services (599,357) (1,111,445) (480,181) (984,093)
Electricity (376,092) (788,035) (340,652) (699,564)
General expenses (356,660) (635,800) (325,770) (584,629)
Depreciation and amortization (598,165) (1,187,911) (553,055) (1,095,106)
Tax expenses (18,846) (37,851) (17,662) (35,015)
Bad debt expense, net of recoveries (Note 9 (c))

(252,932)

(430,626)

(144,101)

(265,152)

 

(4,359,562)

(8,104,021)

(3,699,963)

(7,291,126)

 

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28Financial income (expenses)

 

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

Financial expenses        
Interest and charges on borrowings and financing – local currency (215,789) (405,342) (106,659) (211,339)
Interest and charges on borrowings and financing – foreign currency (9,778) (18,334) (10,354) (22,816)
Other financial expenses (72,705) (163,949) (78,902) (153,544)
Monetary variation on borrowings and financing (91,336) (162,054) (42,985) (95,382)
Other monetary variations (50,790) (99,155) (40,672) (82,786)
Interest and monetary variations on provisions

(49,328)

(93,910)

(7,482)

(49,436)

Total financial expenses

(489,726)

(942,744)

(287,054)

(615,303)

         
Financial income        
Inflation adjustment gains 67,181 126,865 37,470 88,653
Income on financial investments 101,339 181,001 29,636 47,858
Interest income 70,920 141,604 31,903 78,882
Cofins and Pasep (11,134) (20,901) (4,604) (10,018)
Other

1

14

-

41

Total financial income

228,307

428,583

94,405

205,416

         
Financial income (expenses), net of exchange variation

(261,419)

(514,161)

(192,649)

(409,887)

         
Exchange variation        
Exchange variation on borrowings and financing (64,814) 529,216 442,316 304,743
Exchange variation on assets 1,853 590 (854) (407)
Other exchange variations

6

105

-

(6)

Exchange variations, net

(62,955)

529,911

441,462

304,330

         
Financial income (expenses), net

(324,374)

15,750

248,813

(105,557)

 

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29Other operating income (expenses), net

 

 

April to

June 2022

January to

June 2022

April to

June 2021

January to

June 2021

         
Other operating income, net 13,562 23,870 11,954 19,750
Other operating expenses

(11,211)

(18,955)

(12,853)

(9,972)

         
Other operating income (expenses), net

2,351

4,915

(899)

9,778

 

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

 

Other operating expenses usually record derecognition of concessions assets due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, losses on property, plant and equipment, estimated losses and operational assets indemnification.

 

 

30Commitments

 

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. The main unrecognized committed amounts as of June 30, 2022 are as follows:

 

 

1 year

1-3 years

3-5 years

More than

5 years

Total

Contractual obligations – Expenses 1,141,864 1,640,500 302,814 781,114 3,866,292
Contractual obligations - Investments

2,807,897

2,805,361

1,214,095

323,928

7,151,281

Total

3,949,761

4,445,861

1,516,909

1,105,042

11,017,573

 

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Notes to the Interim Financial Information

 
  
31Supplemental cash flow information

 

 

January to June 2022

January to June 2021

     
Total additions to contract assets (Note 13) 2,171,183 2,225,121
Total additions to intangible assets (Note 14 (b)) 26,946 119,559
     
Items not affecting cash (see breakdown below)

(703,496)

(871,955)

     
Total additions to intangible and contract assets according to the statement of cash flows 1,494,633 1,472,725
     
Investments and financing operations affecting intangible assets but not cash:    
Interest capitalized in the period (Note 13 (a)) 279,922 121,996
Contractors payable 298,729 204,404
Performance agreements 62,365 396,029
Right of use 16,550 103,521
Construction margin (Note 13 (b))

45,930

46,005

Total

703,496

871,955

 

 

32Events after the reporting period

 

·Financing - IDB Invest and International Finance Corporation - IFC

 

On July 15 and 26, 2022, Sabesp raised R$ 466 million and R$ 760 million referring to the financing contracts executed with IDB Invest and International Finance Corporation - IFC, respectively. The funds from IDB will be used for expansion works of the sanitation system in the Metropolitan Region of São Paulo to support SABESP’s counterpart in the IDB financing for Stage IV of the Tietê River Clean-Up Project. The funds from IFC will be used for works in the New Pinheiros River, a state program to expand sewage collection and treatment in the basin, aiming at the river’s clean-up by December 2022, as well as to improve water and sewage systems in coastal municipalities of the São Paulo State. The funds will also be used for the construction of a new water main in the São Lourenço System, in Greater São Paulo.

 

·GESP Agreement – 2015

 

On July 22, 2022, the decision preventing the transfer of reservoirs of the Alto Tietê Production System was published in the State Official Gazette. For additional information, see Note 10 (a) (iv).

 

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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.

 

Projections are monitored every year and disclosed in the Reference Form.

 

 

 

 

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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 POSITION OF CONTROLLING SHAREHOLDERS
AND MANAGEMENT, AND OUTSTANDING SHARES
Position as of 06/30/2022
Shareholder Number of Common Shares
(units)
% Total Number
 of Shares
(units)
%
Controlling Shareholder        
Treasury Department        343,506,664 50.3%        343,506,664 50.3%
Companhia Paulista de Parcerias - CPP 6 0% 6 0%
Management        
Board of Directors 100 0% 100 0%
Executive Board -    -   -
         
Fiscal Council - - - -
         
Treasury Shares                              -              -                                   -                   -   
         
Other Shareholders - - - -
         
Total 343,506,770 50.3% 343,506,770 50.3%
         
         
Outstanding Shares 340,003,099 49.7% 340,003,099 49.7%

 

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Other Information Deemed as Relevant by the Company

 

CONSOLIDATED SHAREHOLDING POSITION OF CONTROLLING SHAREHOLDERS
AND MANAGEMENT, AND OUTSTANDING SHARES
Position as of 06/30/2021
Shareholder Number of Common Shares
(units)
% Total Number
 of Shares
(units)
%
Controlling Shareholder        
Treasury Department       343,507,729 50.3% 343,507,729 50.3%
Companhia Paulista de Parcerias - CPP 6 0% 6 0%
Management        
Board of Directors - - - -
Executive Board 200 0.0% 200 0.0%
         
Fiscal Council - -    - -   
         
Treasury Shares                              -              -                                   -                   -   
         
Other Shareholders
         
Total 343,507,935 50.3% 343,507,935 50.3%
         
         
Outstanding Shares 340,001,934 49.7% 340,001,934 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 06/30/2022
(Number of shares)
  Common Shares Total
Shareholder Number of Shares % Number of Shares %
Treasury Department

 

343,506,664

50.3 343,506,664 50.3

 

 

 

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Reports and Statements / Unqualified Reports on Special Review

 

(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail.)

 

Report on Review of Interim Financial Information

 

To the Shareholders, Directors and Management of

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

São Paulo – SP

Introduction

We have reviewed the accompanying interim financial information of Companhia de Saneamento Básico do Estado de São Paulo (“Company”), included in the Interim Financial Information Form (ITR) for the quarter ended June 30, 2022, which comprises the Statement of financial position as of June 30, 2022 and the related income statement and statement of comprehensive income for the three and six months then ended and the statements of changes in equity and cash flows for the six months then ended, including a summary of significant accounting policies and other explanatory notes.

Management is responsible for the preparation of the interim financial information in accordance with Technical Pronouncement NBC TG - 21- Interim Financial Reporting and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Interim 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 Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity). A review of interim financial information consists of making inquiries, primarily of persons responsible for 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 standards on auditing 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 Interim Financial Information Form (ITR) referred to above is not prepared, in all material respects, in accordance with NBC TG – 21 and IAS 34 applicable to the preparation of interim financial information and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM).

 

Other matters

Statement of value added

The quarterly information referred to above includes statements of value added for the period of six months ended June 30, 2022, prepared under the responsibility of the Company's management and presented as supplementary information for the purposes of IAS 34. These statements were submitted to the same review procedures in conjunction with the review of the Company's interim financial information in the order to conclude they are reconciliated to the interim financial information and to the accounting records, as applicable, and whether the structure and content are in accordance with the criteria established in the NBC TG 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added were not prepared, in all material respects, in accordance with the interim financial information taken as a whole.

 

São Paulo, August 11, 2022

 

Nelson Fernandes Barreto Filho

CT CRC 1SP-151.079/O-0

 

Grant Thornton Auditores Independentes

CRC 2SP-025.583/O-1

 

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

 

Executive Officers’ Statement on the Quarterly Information STATEMENT

The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayers’ ID (CNPJ/MF) number 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, according to paragraph 1 of article 25, item VI of CVM Instruction 480, of December 7, 2009, that:

 

They reviewed, discussed, and agreed with the quarterly information for the period ended June 30, 2022. São Paulo, August 11, 2022.

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

 

Benedito Pinto Ferreira Braga Junior

CEO

 

Osvaldo Garcia

Chief Economic, Finance, and Investor Relations Officer, cumulatively responding for the Corporate Management Board

 

Alceu Segamarchi Junior

Technology, Project, and Environment Officer

 

Ricardo Daruiz Borsari

Metropolitan Officer

 

Antonio Carlos Teixeira

Regional Systems Officer

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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 Taxpayers’ ID (CNPJ/MF) number 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, according to paragraph 1 of article 25, item V of CVM Instruction 480, of December 7, 2009:

 

They reviewed, discussed, and agreed with the Report of Independent Registered Public Accounting Firm on the quarterly information for the period ended June 30, 2022.

 

São Paulo, August 11, 2022.

 

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

Benedito Pinto Ferreira Braga Junior

CEO

 

Osvaldo Garcia

Chief Economic, Finance, and Investor Relations Officer, cumulatively responding for the Corporate Management Board

 

Alceu Segamarchi Junior

Technology, Project, and Environment Officer

 

Ricardo Daruiz Borsari

Metropolitan Officer

 

Antonio Carlos Teixeira Regional

Systems Officer

 

 C: 
 
PAGE 77 of 77 
  
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: August 26, 2022
 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
By: /s/  Osvaldo Garcia    
 
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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