apresentação 1q19 14 06 2019 - sabesp...30-year-service agreement between sabesp, municipality of...
TRANSCRIPT
1Q19 Results
Economic-Financial Office and Investor Relations Office
DISCLAIMER
This presentation may contain forward-looking statements referring to SABESP’s
business outlook, operating and financial results estimates, and growth prospects. These
are only forecasts, and as such, they are exclusively based on SABESP’s management
expectation in relation to the future of business and its continuous access to capital to
finance the Company’s business plan. These forward-looking statements largely depend
on changes in market conditions, governmental rules, industry performance and the
Brazilian economy, among other factors, in addition to risks exhibited in disclosure
documents filed by SABESP. Therefore, they are subject to changes without prior notice.
AGENDA
1 COMPANY OVERVIEW
2 OUR OPERATIONS
3 OUR FINANCIAL PERFORMANCE
4 SPMR – WATER SITUATION
...ONE OF THE LARGEST WATER AND SEWAGE PROVIDERS IN THE WORLD
COMPANY OVERVIEW MAIN OPERATIONAL INDICATORS(1)
Water Sewage
Connections (million)(2) 9.5 7.9
Coverage(3) (%) 97 89
Service(4) (%) 94 83
Treatment(5)(%) --- 76
Billed Volume (m³ million) 532.6 439.8
(1) As of March 31, 2019
(2) Active and Inacttive water connections. It includes Guarulhos
(3) Services Available. It includes Guarulhos
(4) Connected households. It includes Guarulhos
(5) Consumer units connected to the sewage treatment – It does not include Guarulhos
*Source: Depth Water Yearbook 2014-2015
**Operation in Guarulhos started in Jan/2019
**The Metropolitan Region we consider for this estimate, includes 8 municipalities outside the
legal boundaries of the São Paulo Metropolitan Region and represents the municipalities served
by the Company’s Metropolitan Division
Sabesp is one of the largest water and sewage service
providers in the world based on the number of
Customers*
Provides water to 26.2 million people and sewage
services to 22.8 million people
Also sells wholesale treated water to 4** municipalities
(1.7 million people)
Natural monopoly, low operating risk
Serves the City of São Paulo and 369 out of 645
municipalities in the State
Covers around 65.5% of State's urban population,
including the wholesale
Operations in the São Paulo Metropolitan Region***
represent 69.8% of our total revenues
4
São Paulo
Sistemas Regionais
RMSP
...WITH STRONG CORPORATE GOVERNANCE
OWNERSHIP STRUCTURE % (1)
We are a mixed capital company, majority-owned by the State of São Paulo, with significant private ownership
State law requires the State of São Paulo to own at least 50% + 1 voting shares at all times (State Law 11,454/2003)
Currently the Government of São Paulo has 50.3% share
100% common shares
Market Cap: R$ 28.7 billion (as of March, 2019)
Law nº 13.303/16 – Government-Controlled Companies Law
5(1) March/2019
AGENDA
1 THE COMPANY
2 OUR OPERATIONS
3 OUR FINANCIAL PERFORMANCE
4 SPMR – WATER SITUATION
80% of water volume and revenue come from residential,
commercial and industrial customer
90% of sewage volume and revenue come from residential,
commercial and industrial customer
DIVERSIFIED CONSUMER BASE
WATER BILLED VOLUME BY TYPE OF CUSTOMER SEWAGE BILLED VOLUME BY TYPE OF CUSTOMER
WATER REVENUES BY TYPE OF CUSTOMER* SEWAGE REVENUES BY TYPE OF CUSTOMER*
7*Managerial information
30-year-service agreement between Sabesp, Municipality of São
Paulo and State Government (expires in 2040)
Minimum investment of 13% of the Gross Revenue, net of
Cofins and Pasep
Transfer of 7.5% of the Gross Revenue, net of Cofins and Pasep,
to the Municipal Environmental Sanitation and Infrastructure
Fund
Since May/18 – Pass-through of 4%
BROAD COVERAGE OF MUNICIPALITIES
CONTRACTS
CONTRACT WITH THE MUNICIPALITY OF SÃO PAULO TOP 10 CONTRACTS
8
Municipalities% of Total Revenue
(1Q19)
Remaining Period(Years)
São Paulo 46.3 21
São Bernardo do Campo 3.8 15
Santos 2.1 26
Osasco 2.1 11
Praia Grande 2.0 29
São José dos Campos 1.8 20
Barueri 1.7 26
Diadema 1.3 25
Itaquaquecetuba 1.2 28
Suzano 1.1 23
Total 10+ / Avg. 63.4 22
* Program and Service Contract from 2007 to Mar/2019
Nº CONTRACTS % OF REVENUE
Renewed/Secured* 307 83.6%
Expired Contracts / Under negotiation 35 7.7%
To be expired (2019 - 2030) 31 7.8%
Total Retail 373 99.1%
Wholesale 4 0.9%
Total Sabesp 377 100.0%
Guarulhos: Operation started in January 2019. Participation of total revenue accounted for 2.4%
CONTRACT WITH GUARULHOS
CONTRACT
9
TERM OF DEBT ADJUSTMENT
40-year service contract Water Supply Service
Sewage collection, removal and treatment services*
Contract signing parties: State, Municipality and Sabesp
Planning shared among State and Municipality (SPMR)
Regulator: ARSESP Tariff, control and monitoring
Tariff: the same as SPMR (adjustment – catch-up period of approximately 2 years)
Expected investment of R$ 2 billion over 40 years
Transfers to the Municipal Fund for Environmental Sanitation and Infrastructure R$ 150 million in 5 years (R$ 30 million per year) 4% of net revenue
The municipality withdraws pending appeals of Sabesp’s collections legal procedings
Sabesp: Court orders debt payments (“Precatórios”) Sabesp suspends the judicial collection of debt
The payments remains suspended during the contract term
The amounts are used as guarantees in the service contract
If the service contract is interrupted, the court orders will be reactivated
Transfer R$ 50 million to the municipality in order to end SAAE’s activities
SAAEs employees ceded to Sabesp: During 6 months - All SAAE’s employees will be ceded to Sabesp
From month 7 up to a maximum of 4 years up to 400 employees will continue to be ceded
* Part of the removal and treatment services will be remaine under the municipality’s direct and indirect responsibility
REGULATORY FRAMEWORK
Legal proceeding related to this matter under Supreme Court (STF) appraisal was ruled in March 2013
The decision was released in September 2013
Sanitation services in metro regions are subject to shared responsibility between State and Municipality
State Legislative has to create an entity and mechanisms to implement the ruling to adjust to the legislation
FEDERAL LAW 11.445/07 / FEDERAL DECREES: 7.217/10, 8.211/14, 8.629/15, 9.254/17
CONCESSION POWER IN METROPOLITAN REGIONS
PROPOSED AMENDMENT TO THE REGULATORY FRAMEWORK FOR SANITATION
Obligatory creation of a Regulatory Agency → Municipal or State level
Clarifies the payment conditions of non-amorSzed investments → up to 4 years
Disbursement of federal funds conditioned to the existence of a sanitation plan
10
The Provisional Measure Nº 868 of December 28, 2018 expired on June 3, 2019;
The Provisional Measure was replaced by a Bill of Law, which was approved on na emercency basis
on June 6 in the Senate;
The Bill of Law is being appraised by the House of Representatives and, if approved without
changes, will continue on to the President of Brazil to be sanctioned, otherwise it will return to the
Senate for approval of the amendments and then to the presidencial sanction.
Productivity Factor
(0.6920%)
Productivity Factor
(0.6920%)New Average
Tariff
New Average
Tariff= 1
Inflation
(IPCA)
Inflation
(IPCA)
100x Previous
Average TariffPrevious
Average Tariff
QualityFactor*QualityFactor*
-
+
TARIFF REVIEW
*Not defined yet
METHODOLOGY OF TARIFF REVIEW (PRICE CAP)
ANNUAL TARIFF ADJUSTMENT FORMULA
11
-
TaxesRequired Revenue
Average
Tariff (P0)
PRICECAP
Output ofthe Model
= + +
Reduced by X Factor X defined by Arsesp
(after year1)
Income Taxes
RevenueTaxes
OPEX +
PersonnelEnergy
MaterialsOthers
WaterSewageOthers
RABt – RAB0
AmortizationRate
AssetUseful Life
WACC
Cost of EquityCost of Debt
ArsespTechnical
Note
Sabesp 4 year Business Plan+
Arsesp Review
CAPEX
Billed
Volume
Initial Phase - Oct/2017 Final Phase- May/2018
RAB(1) (R$ Billion) 40.3 39.0
WACC (%) 8.11 8.11
Current Average Tariff (R$/m³) 3.37255 3.6425
X Factor(%) - 0.6920
P0 (R$/m³) 3.63861 3.7702
TRI(2) (%) 7.8888 3.507
TARIFF READJUSTMENTS AND REVISIONS
ORDINARY TARIFF REVISION (OTR) - 2º CYCLE FROM 2017 TO 2020
READJUSTMENTS AND REVISIONS INDEXES
12
(1) Regulatory Asset Base (2) Tariff Repositioning Index
ARSESP’s responds to the requests filed by Sabesp: Reconsideration request Not accepted Clarification and revision request Partially accepted (Adjustment of 0.8408% in May 2019)
ARSESP’s Resolutions nº 865 and nº 866 → Tariff Structure Revision (to be defined by June 2020)
OTR- Ordinary Tariff Revision
ETR- Extraordinary Tariff Revision
2015 - Readjustment + Residual + ETR = 15.24%
IPCA Index – Between the readjustement/revision periods
Add 954 thousand new connections by 2023
Add 1.2 million new connections by 2023
Coverage: 93% in 2023
Treatment: 84% in 2023
WATER AND SEWAGE OPERATIONS
WATER CONNECTION EVOLUTION (million) WATER COVERAGE (Connection in 000’s)
SEWAGE CONNECTION EVOLUTION (million) SEWAGE COVERAGE (´000s)
13
Metropolitan Water Program
Tietê Project
Corporate Program for Water Loss Reduction
Clean Stream Program
Clean Wave Program
CAPEX AND FINANCING
CAPEX PLAN OF R$ 18.7 BILLION FROM 2019 TO 2023
FINANCING MAIN PROGRAMS
(*) Book Value – Includes non-cash items
(**) Book Value – Items that affected cash
Additional information is presented in
Note 31 of the 1Q19 Financial Information
14
Financial Values (in R$ million)
788*
228**
AGENDA
1 COMPANY OVERVIEW
2 OUR OPERATIONS
3 OUR FINANCIAL PERFORMANCE
4 SPMR – WATER SITUATION
LONG TERM AND LOW COST FUNDING
TOTAL DEBT BREAKDOWN TOTAL DEBT BY CURRENCY
DEBT AMORTIZATION PROFILE (R$ million)
16
Total debt: R$ 12.2 Billion
2013 2014 2015 2016 2017 2018
Dividends declared (R$) 0.8 0.4 0.2 1.2 1.0 1.2
Pay Out % 27.9 27.9 27.9 27.9 27.9 27.9
Outstanding Shares
(million)
683.5 683.5 683.5 683.5 683.5 683.5
CONSISTENT PERFORMANCES
NET REVENUE (R$ million) NET INCOME (R$ million)
ADJUSTED EBITDA (R$ million) DIVIDENDS / PAY OUT
Adjusted EBITDA – Last 12 months Adjusted EBTIDA Margin – Last 12 months Adjusted EBITDA Margin Without Construction – Last 12 months 17
HISTORICAL LEVERAGE (R$ million)
GROSS DEBT VS. ADJUSTED EBITDA* ADJUSTED EBITDA* VS. FINANCIAL EXPENSES**
NET DEBT VS. ADJUSTED EBITDA* NET DEBT VS. EQUITY
* Adjusted EBITDA – LTM ** Financial Explosures paid - LTM Calculated in accordance with CPCs/IFRS 18
19
COVENANT – ADJUSTED NET DEBT vs. EBITDA
COVENANT – ADJUSTED TOTAL DEBT vs. EBITDA
20
2002 2003 2004 2005 2006 2007 2008* 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 1Q19
Gross Revenues w/ construction 3.962 4.308 4.642 5.356 5.984 6.448 6.839 9.085 9.787 10.530 11.391 11.985 11.823 12.284 14.855 15.375 17.056 4.140
Net Revenues 3.767 4.131 4.397 4.953 5.527 5.971 7.809 8.580 9.231 9.927 10.738 11.316 11.213 11.712 14.098 14.608 16.085 3.879
Adjusted EBITDA 1.860 2.076 1.927 2.286 2.446 2.699 2.865 2.727 3.222 3.371 3.605 4.007 2.919 3.974 4.572 5.269 6.541 1.545
Adjusted EBITDA Margin 49,4 50,3 43,8 46,1 44,3 45,2 36,7 31,8 34,9 34,0 33,6 35,4 26,0 33,9 32,4 36,1 40,7 39,8
Adj. EBITDA without Construction Margin 46,3 41,2 44,7 43,2 43,0 44,6 34,4 46,6 43,3 45,4 48,8 46,8
Net Income (651) 833 513 866 789 1.055 863 1.508 1.630 1.381 1.912 1.924 903 536 2.947 2.519 2.835 647
Net Margin (%) 20,2 11,7 17,5 14,3 17,7 11,0 17,6 17,7 13,9 17,8 17,0 8,1 4,6 20,9 17,2 17,6 16,7
2002 2003 2004 2005 2006 2007 2008* 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 1Q19
Total Assets 16.332 16.590 16.784 17.431 18.000 18.660 17.206 20.243 23.293 25.019 26.476 28.274 30.355 33.707 36.745 39.546 43.565 43.313
Total Debt 7.878 7.264 7.051 6.664 6.327 5.685 6.865 6.560 8.209 8.423 8.875 9.450 10.786 13.122 11.964 12.101 13.153 12.181
Short-term Debt 1.132 997 1.497 759 853 742 1.449 1.010 1.240 1.629 1.343 641 1.207 1.526 1.247 1.747 2.104 1.488
Long-Term Debt 6.593 6.267 5.554 5.905 5.474 4.943 5.416 5.548 6.970 6.794 7.533 8.809 9.579 11.595 10.718 10.354 11.049 10.693
Foreign Currency Debt 3.708 3.013 2.681 1.576 1.472 1.242 2.281 1.746 2.249 3.053 3.216 3.699 4.346 6.618 5.660 5.673 6.669 6.609
Shareholders' Equity 4.217 7.577 7.952 8.483 9.019 9.781 6.758 8.439 9.682 10.546 11.257 12.931 13.304 13.717 15.419 17.513 19.552 20.199
Total Debt/Total Cap. (%) 65,1 48,9 47,0 44,0 41,2 36,8 50,4 43,7 45,9 44,4 44 42 45 48,9 43,7 40,9 40,2 37,6
Investments 619 594 601 678 905 921 1.734 2.059 2.194 2.440 2.536 2.716 3.211 3.482 3.878 3.388 4.177 788
2002 2003 2004 2005 2006 2007 2008* 2009* 2010* 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 1Q19
Dividend Declared (R$/ share) - 17.7** 5.4** 12.2** 9.5** 1,3 1,3 1,7 2,0 2,5 2,3 0,8 0,4 0,2 1,2 1,0 1,2 -
Pay Out (%) - 60,5 29,8 40,2 34,7 28,5 34,3 26,1 28,0 47,3 27,9 27,9 27,9 27,9 27,9 27,9 27,9 -
Dividend Yield (%) - 10,8 3,4 7,8 3,2 3,2 4,7 5,0 4,7 4,9 2,7 3,0 2,2 1,2 4,2 3,0 3,8 -
Outstanding shares (million) 28,5 28,5 28,5 28,5 28,5 227,8 227,8 227,8 227,8 227,8 227,8 683,5 683,5 683,5 683,5 683,5 683,5 683,5
FINANCIAL HIGHLIGHTS (R$ million)
21
* In accordance with CPCs / IFRS, which includes Construction Costs.** R$ / 000 shares
AGENDA
1 COMPANY OVERVIEW
2 OUR OPERATIONS
3 OUR FINANCIAL PERFORMANCE
4 SPMR – WATER SITUATION
Guarapiranga Alto Tietê
SPMR – WATER SITUATION
Cantareira
Long Term Average – Sep/17 to Oct/18
RAINFALL IN THE MAIN WATER PRODUCTION SYSTEMS (mm)
23
AVERAGE PRODUCTION (m³/s)VOLUME STORAGE (%)
Until June 13, 2019Until June 13, 2019
SPMR – WATER SITUATION
WATER SUPPLY SYSTEM STRONGER THAN BEFORE THE WATER CRISIS OF 2014/2015
RESERVOIRS 2013 2019 Var. %
Reservoirs (water right) (m³/s) 70.4 80.3 14%
Maximum storage capacity (hm³)
(without the technical reserve)1,816 2,106 16%
Transfers between reservoirs (m³/s) 13.2 35.4 168%
PRODUCTION AND DISTRIBUTION 2013 2019 Var. %
Urban population in the area served (source: SEADE)
(million inhabitants)20.1 20.9
3.6%
730,000 inhab.
Total water treatment capacity (m³/s) 73.4 82.3 12%
Water production systems 8 9 -
Average monthly production (m³/s) 69.1 63.3 (9%)
Average residential consumption (m³/month) 13.0 10.8 (17%)
Treated water transfers between the systems (m³/s) Up to 3 Up to 12 300%
IPDT (water loss per connection per day) in the SPMR 434 322 (26%)
24
WATER PLAN FOR SPMR – FROM 2015 TO 2019 (MAIN ACTIONS)
25
DESCRIPTION FLOW (m³/s)
PURPOSEAVAILABILITY/ SECURITY
INITIATIVES ACCOMPLISHED IN 2015Reversal increase from Guaratuba River to the Ponte Nova reservoir by 0.5
m³/s0.5
Recover the storage volume and ensure Alto Tietê's water source
Reversal from the Guaió River to the Taiaçupeba reservoir: 1 m³/s 1
Increase of the ABV Water Treatment Station production from 15 to 16 m³/s Transfer water from Guarapiranga to the Cantareira area via the
aqueduct system
Interconnection between: Pequeno River → Grande River (Billings) →
Taiaçupeba (Alto Tietê) 4 m³/s 4
Recover the storage volume and ensure the Alto Tietê reservoir
Transfer water to Cantareira’s area
1 m³/s transfer increase from Taquacetuba to Guarapiranga (from 4 to 5
m³/s)1
Ensure Guarapiranga's water source
Transfer water to Cantareira’s area
TOTAL 2015 6.5
INITIATIVES ACCOMPLISHED IN 2018Jaguari → Atibainha Interconnection: 5.13 m³/s to the Cantareira system
(security increase)5.13
Recover storage volume and ensure the Cantareira System's water
source
São Lourenço Production System: 6.4 m³/s 6.4 Produce 6.4 m³/s for the Greater São Paulo's western region
TOTAL 2018 11.53
INITIATIVE PLANNED FOR 2019
Reversal from Itapanhaú River (Ribeirão Sertãozinho) to the Biritiba reservoir 2 Recover the storage volume and assure Alto Tietê's water source
TOTAL 2019 2
TOTAL 2015 – 2019 20.03
SPMR – WATER SITUATION
www.sabesp.com.br
IR Contacts
Mario Azevedo de Arruda Sampaio Angela Beatriz AiroldiHead of Capital Markets and IR Investor Relations [email protected] [email protected]+55 (11) 3388-8664 +55 (11) 3388-8793