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Name | Symbol | Market | Type |
---|---|---|---|
Companhia Sanea | NYSE:SBS | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.08 | 0.51% | 15.71 | 15.83 | 15.43 | 15.78 | 993,740 | 23:38:41 |
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___
Table of Contents
C ompan y I nforma t i o n | |
Capital Breakdown | 1 |
C as h Pr o ce e ds | 2 |
Parent C ompan y ’ s F i n an c i a l St at em e n ts | |
S t a t eme n t o f F i n an c i a l Po s it i on - A sset | 3 |
S t a t eme n t o f F i n an c i a l Po s it i on - L i ab il i ti e s | 4 |
Income Stateme n t | 6 |
S t a t eme n t o f Co mp r eh en s i v e I nc ome | 7 |
S t a t eme n t o f Ca s h F l o ws | 8 |
Stat emen t s o f C ha ng es in Eq u i t y | |
01 / 0 1 / 20 17 t o 03 / 31 / 2 01 7 |
10 |
01 / 0 1 / 2016 to 03/31/2016 |
11 |
Statement of Value Added | 12 |
C ommen t s o n t he Company’s Performance | 13 |
Notes to the Inter i m F i n an c i a l In f o r ma t i o n | 20 |
C ommen t s o n t he Co mp an y ’ s Pr o j e c t i o ns | 76 |
Other Information Deemed as Relevant b y t he Com pa ny | 77 |
R ep or t s a n d S ta t em e nt s | |
Un q u a l if i e d Re p o r t s o n S pe c ia l Re v i e w | 79 |
Company Information / Capital Breakdown
Number of Shares | Current Quarter |
(Units) | 03/31/2017 |
Paid-in Capital | |
Common | 683,509,869 |
Preferred | 0 |
Total | 683,509,869 |
Treasury Shares | |
Common | 0 |
Preferred | 0 |
Total | 0 |
PAGE: 1 of 80
Company Information / Cash Proceeds
Event | Approval | Proceeds | Date of Payment | Type of Payment | Class of Share | Earnings per Share |
(Reais / share) | ||||||
Board of Directors’ | 03/27/2017 | Interest on Capital | Common | 1.20480 | ||
M eet i n g |
PAGE: 2 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Financial Position – Assets
(R$ thousand) | |||
Code | Description | Current Quarter | Previous Year |
03/31/2017 | 12/31/2016 | ||
1 | Total Assets | 37,298,458 | 36,745,034 |
1.01 | Current Assets | 3,988,042 | 3,823,635 |
1.01.01 | Cash and Cash Equivalents | 1,983,822 | 1,886,221 |
1.01.03 | Accounts Receivable | 1,788,876 | 1,760,025 |
1.01.03.01 | Trade Receivables | 1,580,821 | 1,557,472 |
1.01.03.02 | Other Receivables | 208,055 | 202,553 |
1.01.03.02.01 | Related-Party Balances and Transactions | 208,055 | 202,553 |
1.01.04 | Inventories | 64,085 | 58,002 |
1.01.06 | Recoverable Taxes | 14,195 | 42,633 |
1.01.06.01 | Current Recoverable Taxes | 14,195 | 42,633 |
1.01.08 | Other Current Assets | 137,064 | 76,754 |
1.01.08.03 | Other | 137,064 | 76,754 |
1.01.08.03.01 | Restricted Cash | 21,999 | 24,078 |
1.01.08.03.20 | Other Receivables | 115,065 | 52,676 |
1.02 | Noncurrent Assets | 33,310,416 | 32,921,399 |
1.02.01 | Long-Term Assets | 1,254,765 | 1,283,164 |
1.02.01.03 | Accounts Receivable | 161,786 | 153,834 |
1.02.01.03.01 | Trade Receivables | 161,786 | 153,834 |
1.02.01.06 | Deferred Taxes | 175,320 | 186,345 |
1.02.01.06.01 | Deferred Income Tax and Social Contribution | 175,320 | 186,345 |
1.02.01.08 | Receivables from Related Parties | 647,891 | 669,156 |
1.02.01.08.03 | Receivables from Controlling Shareholders | 647,891 | 669,156 |
1.02.01.09 | Other Noncurrent Assets | 269,768 | 273,829 |
1.02.01.09.04 | Escrow Deposits | 65,089 | 77,915 |
1.02.01.09.05 | ANA – Water National Agency | 82,676 | 81,221 |
1.02.01.09.20 | Other Receivables | 122,003 | 114,693 |
1.02.02 | Investments | 90,904 | 89,064 |
1.02.02.01 | Equity Investments | 32,966 | 31,096 |
1.02.02.01.04 | Other Equity Investments | 32,966 | 31,096 |
1.02.02.02 | Investment Properties | 57,938 | 57,968 |
1.02.03 | Property, Plant and Equipment | 284,180 | 302,383 |
1.02.04 | Intangible Assets | 31,680,567 | 31,246,788 |
1.02.04.01 | Intangible Assets | 31,680,567 | 31,246,788 |
1.02.04.01.01 | Concession Contracts | 8,940,391 | 8,864,607 |
1.02.04.01.02 | Program Contracts | 7,438,613 | 7,399,237 |
1.02.04.01.03 | Service Contracts | 14,854,473 | 14,552,707 |
1.02.04.01.04 | Software License | 447,090 | 430,237 |
PAGE: 3 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Financial Position – Liabilities
Code |
Description |
Current Quarter |
Previous Year |
|
|
03/31/2017 |
12/31/2016 |
2 |
Total Liabilities |
37,298,458 |
36,745,034 |
2.01 |
Current Liabilities |
4,369,417 |
4,302,508 |
2.01.01 |
Labor and Pension Plan Liabilities |
454,654 |
458,299 |
2.01.01.01 |
Social Security Liabilities |
24,925 |
43,257 |
2.01.01.02 |
Labor Liabilities |
429,729 |
415,042 |
2.01.02 |
Trade Payable |
201,694 |
311,960 |
2.01.02.01 |
Domestic Suppliers |
201,694 |
311,960 |
2.01.03 |
Tax Liabilities |
168,754 |
168,757 |
2.01.03.01 |
Federal Tax Liabilities |
157,046 |
159,176 |
2.01.03.01.01 |
Income Tax and Social Contribution Paid |
32,547 |
0 |
2.01.03.01.02 |
PIS-PASEP and COFINS (taxes on revenue) Payable |
68,866 |
49,132 |
2.01.03.01.03 |
INSS (social security contribution) Payable |
35,061 |
35,376 |
2.01.03.01.20 |
Other Federal Taxes |
20,572 |
74,668 |
2.01.03.02 |
State Tax Liabilities |
3,346 |
0 |
2.01.03.03 |
Municipal Tax Liabilities |
8,362 |
9,581 |
2.01.04 |
Borrowings and Financing |
1,444,967 |
1,246,567 |
2.01.04.01 |
Borrowings and Financing |
586,499 |
635,701 |
2.01.04.01.01 |
In Local Currency |
219,680 |
269,042 |
2.01.04.01.02 |
In Foreign Currency |
366,819 |
366,659 |
2.01.04.02 |
Debentures |
843,985 |
595,952 |
2.01.04.03 |
Financing through Finance Lease |
14,483 |
14,914 |
2.01.05 |
Other Liabilities |
1,386,385 |
1,386,591 |
2.01.05.01 |
Payables to Related Parties |
1,306 |
1,853 |
2.01.05.01.03 |
Payables to Controlling Shareholders |
1,306 |
1,853 |
2.01.05.02 |
Other |
1,385,079 |
1,384,738 |
2.01.05.02.01 |
Dividends and Interest on Capital Payable |
700,034 |
700,034 |
2.01.05.02.04 |
Services Payable |
437,215 |
460,054 |
2.01.05.02.05 |
Refundable Amounts |
13,331 |
12,240 |
2.01.05.02.06 |
Program Contract Commitments |
110,098 |
109,042 |
2.01.05.02.07 |
Public-Private Partnership - PPP |
32,533 |
31,898 |
2.01.05.02.09 |
Indemnities |
10,262 |
9,379 |
2.01.05.02.20 |
Other Payables |
81,606 |
62,091 |
2.01.06 |
Provisions |
712,963 |
730,334 |
2.01.06.01 |
Tax, Social Security, Labor and Civil Provisions |
177,593 |
180,165 |
2.01.06.01.01 |
Tax Provisions |
32,698 |
27,677 |
2.01.06.01.02 |
Social Security and Labor Provisions |
45,324 |
47,873 |
2.01.06.01.04 |
Civil Provisions |
99,571 |
104,615 |
2.01.06.02 |
Other Provisions |
535,370 |
550,169 |
2.01.06.02.03 |
Provisions for Environmental Liabilities and Decommissioning |
10,815 |
10,691 |
2.01.06.02.04 |
Provisions for Customers |
453,925 |
462,965 |
2.01.06.02.05 |
Provisions for Suppliers |
70,630 |
76,513 |
2.02 |
Noncurrent Liabilities |
16,835,468 |
17,023,315 |
2.02.01 |
Borrowings and Financing |
10,296,502 |
10,717,576 |
2.02.01.01 |
Borrowings and Financing |
7,330,629 |
7,244,771 |
2.02.01.01.01 |
In Local Currency |
2,121,180 |
1,951,067 |
2.02.01.01.02 |
In Foreign Currency |
5,209,449 |
5,293,704 |
PAGE: 4 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Financial Position – Liabilities
Code |
Description |
Current Quarter |
Previous Year |
|
|
31/03/2017 |
31/12/2016 |
2.02.01.02 |
Debentures |
2,426,175 |
2,935,203 |
2.02.01.03 |
Financing through Finance Lease |
539,698 |
537,602 |
2.02.02 |
Other Payables |
6,066,120 |
5,862,998 |
2.02.02.02 |
Other |
6,066,120 |
5,862,998 |
2.02.02.02.04 |
Pension Plan Liabilities |
3,288,029 |
3,265,250 |
2.02.02.02.05 |
Program Contract Commitments |
70,573 |
69,051 |
2.02.02.02.06 |
Public-Private Partnership - PPP |
2,394,656 |
2,217,520 |
2.02.02.02.07 |
Indemnities |
13,163 |
11,247 |
2.02.02.02.08 |
Labor Liabilities |
29,847 |
29,625 |
2.02.02.02.09 |
Deferred COFINS / PASEP |
137,771 |
138,071 |
2.02.02.02.20 |
Other Payables |
132,081 |
132,234 |
2.02.04 |
Provisions |
472,846 |
442,741 |
2.02.04.01 |
Tax, Pension Plan, Labor and Civil Provisions |
293,925 |
287,590 |
2.02.04.01.01 |
Tax Provisions |
39,835 |
39,234 |
2.02.04.01.02 |
Pension Plan and Labor Provisions |
240,216 |
234,338 |
2.02.04.01.04 |
Civil Provisions |
13,874 |
14,018 |
2.02.04.02 |
Other Provisions |
178,921 |
155,151 |
2.02.04.02.03 |
Provisions for Environmental Liabilities and Decommissioning |
149,142 |
138,431 |
2.02.04.02.04 |
Provisions for Customers |
12,363 |
12,074 |
2.02.04.02.05 |
Provisions for Suppliers |
17,416 |
4,646 |
2.03 |
Equity |
16,093,573 |
15,419,211 |
2.03.01 |
Paid-Up Capital |
10,000,000 |
10,000,000 |
2.03.04 |
Profit Reserve |
6,244,859 |
6,244,859 |
2.03.04.01 |
Legal Reserve |
932,310 |
932,310 |
2.03.04.08 |
Additional Dividend Proposed |
62,719 |
62,719 |
2.03.04.10 |
Reserve for Investments |
5,249,830 |
5,249,830 |
2.03.05 |
Retained Earnings/Accumulated Losses |
674,362 |
0 |
2.03.06 |
Other Comprehensive Income |
-825,648 |
-825,648 |
PAGE: 5 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Income Statements
(R$ thousand) | |||
Code | Description | YTD Current Year | YTD Previous Year |
01/01/2017 to 03/31/2017 | 01/01/2016 to 03/31/2016 | ||
3.01 | Revenue from Sales and/or Services | 3,558,825 | 3,027,842 |
3.02 | Cost of Sales and/or Services | -2,061,416 | -1,941,276 |
3.02.01 | Cost of Sales and/or Services | -1,354,187 | -1,328,890 |
3.02.02 | Construction Cost | -707,229 | -612,386 |
3.03 | Gross Profit | 1,497,409 | 1,086,566 |
3.04 | Operating Income/Expenses | -465,380 | -457,903 |
3.04.01 | Selling Expenses | -238,680 | -205,278 |
3.04.02 | General and Administrative Expenses | -239,134 | -260,194 |
3.04.04 | Other Operating Income | 8,697 | 7,629 |
3.04.04.01 | Other Operating Income | 11,568 | 10,144 |
3.04.04.02 | COFINS and PASEP | -2,871 | -2,515 |
3.04.05 | Other Operating Expenses | 1,867 | -2,147 |
3.04.05.01 | Loss on Write-off of Property, Plant and Equipment Items | 2,066 | 931 |
3.04.05.04 | Surplus Cost of Electricity Sold | 0 | -2,955 |
3.04.05.20 | Other | -199 | -123 |
3.04.06 | Equity Results | 1,870 | 2,087 |
3.05 | Income before Financial Result and Taxes | 1,032,029 | 628,663 |
3.06 | Financial Result | 3,798 | 340,160 |
3.06.01 | Financial Income | 80,898 | 140,236 |
3.06.01.01 | Financial Income | 84,551 | 146,752 |
3.06.01.02 | Exchange Gains | 279 | 39 |
3.06.01.03 | COFINS and PASEP | -3,932 | -6,555 |
3.06.02 | Financial Expenses | -77,100 | 199,924 |
3.06.02.01 | Financial Expenses | -166,488 | -283,356 |
3.06.02.02 | Exchange Adjustments On Liabilities | 89,388 | 483,280 |
3.07 | Earnings Before Income Tax | 1,035,827 | 968,823 |
3.08 | Income Tax and Social Contribution | -361,465 | -340,034 |
3.08.01 | Current | -350,440 | -338,989 |
3.08.02 | Deferred | -11,025 | -1,045 |
3.09 | Net Result from Continued Operations | 674,362 | 628,789 |
3.11 | Profit/Loss for the Period | 674,362 | 628,789 |
3.99 | Earnings per Share - (Reais / Share) | ||
3.99.01 | Basic Earnings per Share | ||
3.99.01.01 | Common Share | 0.98662 | 0.91994 |
3.99.02 | Diluted Earnings per Share | ||
3.99.02.01 | Common Share | 0.98662 | 0.91994 |
PAGE: 6 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Comprehensive Income
(R$ thousand) | |||
Code | Description | YTD Current Year | YTD Previous Year |
01/01/2017 to 03/31/2017 | 01/01/2016 to 03/31/2016 | ||
4.01 | Net Income for the Period | 674,362 | 628,789 |
4.3 | Comprehensive Income for the Period | 674,362 | 628,789 |
PAGE: 7 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method
(R$ thousand) | |||
Code | Description | YRD Current Year | YTD Previous Year |
01/01/2017 to 03/31/2017 | 01/01/2016 to 03/31/2016 | ||
6.01 | Net Cash from Operating Activities | 763,612 | 732,647 |
6.01.01 | Cash from Operations | 1,636,617 | 1,212,445 |
6.01.01.01 | Profit (Loss) before Income Tax and Social Contribution | 1,035,827 | 968,823 |
6.01.01.02 | Provision and Inflation Adjustments on Provisions | 62,657 | 122,301 |
6.01.01.04 | Finance Charges from Customers | -60,716 | -67,055 |
6.01.01.05 | Residual Value of Property, Plant and Equipment, | 11,314 | 339 |
Intangible Assets and Investment Properties Written-off | |||
6.01.01.06 | Depreciation and Amortization | 331,948 | 284,656 |
6.01.01.07 | Interest on Borrowings and Financing Payable | 90,640 | 136,821 |
6.01.01.08 | Monetary and Exchange Change on Borrowings and | -67,648 | -430,351 |
Financing | |||
6.01.01.09 | Interest and Monetary Changes on Liabilities | 2,950 | 9,967 |
6.01.01.10 | Interest and Monetary Changes on Assets | -10,569 | -50,977 |
6.01.01.11 | Allowance for Doubtful Accounts | 86,136 | 56,078 |
6.01.01.12 | Provision for Consent Decree (TAC) | 2,314 | 1,073 |
6.01.01.13 | Equity Results | -1,870 | -2,087 |
6.01.01.14 | Provision for Sabesprev Mais | 0 | 2,277 |
6.01.01.15 | Other Adjustments | -12,295 | -6,900 |
6.01.01.16 | Transfer of Funds to São Paulo Municipal Government | 104,360 | 97,402 |
6.01.01.17 | Construction Margin over Intangible Assets Resulting from | -15,699 | -12,894 |
Concession Contracts | |||
6.01.01.18 | Pension Plan Liabilities | 77,268 | 102,972 |
6.01.02 | Changes in Assets and Liabilities | -387,509 | -205,275 |
6.01.02.01 | Trade Receivables | -49,660 | -90,341 |
6.01.02.02 | Related-Party Balances and Transactions | 16,050 | 17,534 |
6.01.02.03 | Inventories | -6,047 | 7,242 |
6.01.02.04 | Recoverable Taxes | 28,438 | 61,897 |
6.01.02.05 | Other Receivables | -71,154 | -32,345 |
6.01.02.06 | Escrow Deposits | 16,047 | 9,422 |
6.01.02.08 | Contractors and Suppliers | -29,084 | -5,380 |
6.01.02.09 | Payroll, Provisions and Social Contribution | -5,959 | 19,538 |
6.01.02.10 | Pension Plan Liabilities | -54,489 | -42,827 |
6.01.02.11 | Taxes and Contributions Payable | -78,771 | -85,300 |
6.01.02.12 | Services Payable | -127,199 | -1,705 |
6.01.02.13 | Other Liabilities | 24,542 | -12,079 |
6.01.02.14 | Provisions | -49,923 | -52,287 |
6.01.02.15 | Deferred COFINS/PASEP | -300 | 1,356 |
6.01.03 | Other | -485,496 | -274,523 |
6.01.03.01 | Interest Paid | -213,824 | -228,369 |
6.01.03.02 | Income Tax and Social Contribution Paid | -271,672 | -46,154 |
6.02 | Net Cash from Investing Activities | -529,408 | -411,287 |
6.02.01 | Acquisition of Intangible Assets | -520,886 | -400,978 |
6.02.02 | Acquisition of Property, Plant and Equipment | -10,601 | -12,906 |
6.02.04 | Restricted Cash | 2,079 | 2,597 |
6.03 | Net Cash from Financing Activities | -136,603 | -528,698 |
PAGE: 8 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method
(R$ thousand) | |||
Code | Description | YRD Current Year | YTD Previous Year |
01/01/2017 to 03/31/2017 | 01/01/2016 to 03/31/2016 | ||
6.03.01 | Funding | 275,208 | 174,708 |
6.03.02 | Amortization | -403,698 | -662,193 |
6.03.04 | Public-Private Partnership - PPP | -7,741 | -8,111 |
6.03.05 | Program Contract Commitments | -372 | -33,102 |
6.05 | Increase (Decrease) in Cash and Cash Equivalents | 97,601 | -207,338 |
6.05.01 | Opening Cash and Cash Equivalents | 1,886,221 | 1,639,214 |
6.05.02 | Closing Cash and Cash Equivalents | 1,983,822 | 1,431,876 |
PAGE: 9 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Changes in Equity / 01/01/2017 to 03/31/2017 | |||||||
(R$ thousand) | |||||||
Code | Description | Paid-up | Capital Reserves, | Profit Reserves | Retained Earnings / | Other Comprehensive | Total Equity |
Capital | Options Granted and | Accumulated Losses | Income | ||||
Treasury Shares | |||||||
5.01 | Opening Balances | 10,000,000 | 0 | 6,244,859 | 0 | -825,648 | 15,419,211 |
5.03 | Restated Opening Balances | 10,000,000 | 0 | 6,244,859 | 0 | -825,648 | 15,419,211 |
5.05 | Total Comprehensive Income | 0 | 0 | 0 | 674,362 | 0 | 674,362 |
5.05.01 | Net Income for the Period | 0 | 0 | 0 | 674,362 | 0 | 674,362 |
5.07 | Closing Balances | 10,000,000 | 0 | 6,244,859 | 674,362 | -825,648 | 16,093,573 |
PAGE: 10 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Changes in Equity / 01/01/2016 to 03/31/2016 | |||||||
(R$ thousand) | |||||||
Code | Description | Paid-up | Capital Reserves, | Profit Reserves | Retained Earnings / | Other Comprehensive | Total Equity |
Capital | Options Granted and | Accumulated Losses | Income | ||||
Treasury Shares | |||||||
5.01 | Opening Balances | 10,000,000 | 0 | 4,069,988 | 0 | -353,382 | 13,716,606 |
5.03 | Restated Opening Balances | 10,000,000 | 0 | 4,069,988 | 0 | -353,382 | 13,716,606 |
5.05 | Total Comprehensive Income | 0 | 0 | 0 | 628,789 | 0 | 628,789 |
5.05.01 | Net Income for the Period | 0 | 0 | 0 | 628,789 | 0 | 628,789 |
5.07 | Closing Balances | 10,000,000 | 0 | 4,069,988 | 628,789 | -353,382 | 14,345,395 |
PAGE: 11 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Parent Company’s Financial Statements / Statement of Value Added | |||
(R$ thousand) | |||
Code | Description | YTD Current Year | YTD Previous Year |
01/01/2017 to 03/31/2017 | 01/01/2016 to 03/31/2016 | ||
7.01 | Revenue | 3,677,651 | 3,149,974 |
7.01.01 | Operating Revenue | 3,029,291 | 2,570,628 |
7.01.02 | Other Revenue | 11,568 | 10,144 |
7.01.03 | Revenue from Construction | 722,928 | 625,280 |
7.01.04 | Allowance for/Reversal of Doubtful Accounts | -86,136 | -56,078 |
7.02 | Inputs Acquired from Third Parties | -1,257,582 | -1,266,547 |
7.02.01 | Costs of Sales and Services | -1,055,933 | -1,059,023 |
7.02.02 | Materials, Electricity, Outside Services and Others | -203,516 | -205,377 |
7.02.04 | Other | 1,867 | -2,147 |
7.03 | Gross Value Added | 2,420,069 | 1,883,427 |
7.04 | Retentions | -331,948 | -284,656 |
7.04.01 | Depreciation, Amortization and Depletion | -331,948 | -284,656 |
7.05 | Net Value Added Produced | 2,088,121 | 1,598,771 |
7.06 | Wealth Received in Transfer | 86,700 | 148,878 |
7.06.01 | Equity Results | 1,870 | 2,087 |
7.06.02 | Finance Income | 84,830 | 146,791 |
7.07 | Total Value Added to Distribute | 2,174,821 | 1,747,649 |
7.08 | Value Added Distribution | 2,174,821 | 1,747,649 |
7.08.01 | Personnel | 541,307 | 534,056 |
7.08.01.01 | Salaries and Wages | 363,315 | 335,347 |
7.08.01.02 | Benefits | 146,150 | 168,305 |
7.08.01.03 | Government Severance Indemnity Fund for Employees | 31,842 | 30,404 |
(FGTS) | |||
7.08.02 | Taxes and Contributions | 698,920 | 638,401 |
7.08.02.01 | Federal | 666,858 | 610,576 |
7.08.02.02 | Sate | 21,586 | 19,410 |
7.08.02.03 | Municipal | 10,476 | 8,415 |
7.08.03 | Value Distributed to Providers of Capital | 260,232 | -53,597 |
7.08.03.01 | Interest | 243,323 | -76,207 |
7.08.03.02 | Rental | 16,909 | 22,610 |
7.08.04 | Value Distributed to Shareholders | 674,362 | 628,789 |
7.08.04.03 | Retained Earnings / Accumulated Loss for the Period | 674,362 | 628,789 |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Performance
1. | Financial highlights |
R$ million | |||||
1Q17 | 1Q16 | Chg. (R$) | % | ||
Gross operating revenue | 3,029.3 | 2,570.6 | 458.7 | 17.8 | |
Construction revenue | 722.9 | 625.3 | 97.6 | 15.6 | |
COFINS and PASEP taxes | (193.4) | (168.1) | (25.3) | 15.1 | |
(=) | Net operating revenue | 3,558.8 | 3,027.8 | 531.0 | 17.5 |
Costs and expenses | (1,832.0) | (1,794.4) | (37.6) | 2.1 | |
Construction costs | (707.2) | (612.4) | (94.8) | 15.5 | |
Equity result | 1.8 | 2.1 | (0.3) | (14.3) | |
Other operating revenue (expenses), net | 10.6 | 5.5 | 5.1 | 92.7 | |
(=) | Earnings before financial result, income tax and social contribution | 1,032.0 | 628.6 | 403.4 | 64.2 |
Financial result | 3.8 | 340.2 | (336.4) | (98.9) | |
(=) | Earnings before income tax and social contribution | 1,035.8 | 968.8 | 67.0 | 6.9 |
Income tax and social contribution | (361.4) | (340.0) | (21.4) | 6.3 | |
(=) | Net income | 674.4 | 628.8 | 45.6 | 7.3 |
Earnings per share* (R$) | 0.99 | 0.92 | |||
* Total shares = 683,509,869 |
In 1Q17, net operating revenue, including construction revenue, reached R$ 3,558.8 million; a 17.5% increase compared to the same period in 2016.
Costs and expenses, including construction costs, totaled R$ 2,539.2 million, 5.5% higher than in 1Q16.
Adjusted EBIT, in the amount of R$ 1,021.4 million, grew 63.9% from R$ 623.1 million recorded in 1Q16.
Adjusted EBITDA, in the amount of R$ 1,353.4 million, increased 49.1% from R$ 907.8 million recorded in 1Q16.
The adjusted EBITDA margin was 38.0% in 1Q17 against 30.0% in 1Q16. Excluding construction revenues and construction costs, the adjusted EBITDA margin was 47.2% in 1Q17 (37.2% in 1Q16).
In 1Q17 the Company recorded a net income of R$ 674.4 million, in comparison to a net income of R$ 628.8 million in 1T16.
2. Gross operating revenue
Gross operating revenue from sanitation services, not including construction revenue, totaled R$ 3,029.3 million, an increase of R$ 458.7 million or 17.8%, when compared to the R$ 2,570.6 million recorded in 1Q16.
The main factors that led to this variation were:
· Tariff increase of 8.4% since May 2016;
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Performance
· Increase of 6.0% in the Company’s total billed volume (6.1% in water and 5.9% in sewage); and
· Bonus granted in 1Q16 amounting to R$ 153.8 million, within the Water Consumption Reduction Incentive Program ended in April 2016.
The increase resulting from the above mentioned factors was partially offset by the suspension of the Contingency Tariff in April 2016, in the amount of R$ 160.6 million in 1Q16.
3. Construction revenue
Construction revenue increased R$ 97.6 million or 15.6%, when compared to 1Q16. The variation was mainly due to higher investments in the municipalities served by the Company.
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Performance
4. Billed volume
The following tables show the water and sewage billed volume, on quarter-on-quarter basis, per customer category and region.
WATER AND SEWAGE BILLED VOLUME (1) PER CUSTOMER CATEGORY - million m 3 | |||||||||
Water | Sewage | Water + Sewage | |||||||
Category | 1Q17 | 1Q16 | % | 1Q17 | 1Q16 | % | 1Q17 | 1Q16 | % |
Residential | 398.9 | 380.4 | 4.9 | 338.1 | 320.3 | 5.6 | 737.0 | 700.7 | 5.2 |
Commercial | 41.5 | 40.4 | 2.7 | 39.5 | 38.2 | 3.4 | 81.0 | 78.6 | 3.1 |
Industrial | 7.8 | 7.7 | 1.3 | 9.3 | 9.5 | (2.1) | 17.1 | 17.2 | (0.6) |
Public | 9.9 | 9.5 | 4.2 | 8.7 | 8.4 | 3.6 | 18.6 | 17.9 | 3.9 |
Total retail | 458.1 | 438.0 | 4.6 | 395.6 | 376.4 | 5.1 | 853.7 | 814.4 | 4.8 |
Wholesale (3) | 61.9 | 52.0 | 19.0 | 9.0 | 5.7 | 57.9 | 70.9 | 57.7 | 22.9 |
Total | 520.0 | 490.0 | 6.1 | 404.6 | 382.1 | 5.9 | 924.6 | 872.1 | 6.0 |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Performance
5. Costs, administrative, selling and construction expenses
In 1Q17, costs, administrative, selling and construction expenses, grew 5.5% (R$ 132.4 million). Excluding construction costs, total costs and expenses increased by 2.1% (R$ 37.6 million).
As a percentage of net revenue, costs and expenses were 71.3% in 1Q17 compared to 79.5% in 1Q16.
R$ million | ||||
1Q17 | 1Q16 | Chg. (R$) | % | |
Salaries and payroll charges and Pension plan obligations | 588.4 | 574.3 | 14.1 | 2.5 |
General supplies | 36.0 | 36.2 | (0.2) | (0.6) |
Treatment supplies | 71.3 | 75.1 | (3.8) | (5.1) |
Services | 282.8 | 282.4 | 0.4 | 0.1 |
Electricity | 199.7 | 240.4 | (40.7) | (16.9) |
General expenses | 209.9 | 224.6 | (14.7) | (6.5) |
Tax expenses | 25.8 | 20.6 | 5.2 | 25.2 |
Sub-total | 1,413.9 | 1,453.6 | (39.7) | (2.7) |
Depreciation and amortization | 332.0 | 284.7 | 47.3 | 16.6 |
Allowance for doubtful accounts | 86.1 | 56.1 | 30.0 | 53.5 |
Sub-total | 418.1 | 340.8 | 77.3 | 22.7 |
Costs, administrative and selling expenses | 1,832.0 | 1,794.4 | 37.6 | 2.1 |
Construction costs | 707.2 | 612.4 | 94.8 | 15.5 |
Costs, adm., selling and construction expenses | 2,539.2 | 2,406.8 | 132.4 | 5.5 |
% of net revenue | 71.3 | 79.5 |
5.1. Salaries and payroll charges and Pension plan obligations
There was an increase of R$ 14.1 million in 1Q17, mainly due to:
· Increase of R$ 36.1 million, mostly due to the 10.3% pay rise in May 2016 and the 1% impact related to the Career and Salary Plan since December 2016; and
· Increase of R$ 2.2 million in expenses related to the Defined Contribution Plan (Sabesprev Mais), as a result of the migration of 3,572 participants of the Defined Benefit Plan (G1) in August 2016.
The above-mentioned increases were partially offset by the R$ 27.2 million decline in G0 Pension Plan and Defined Benefit Plan (G1) expenses, due to: (i) changes in the actuarial assumptions (interest rate); (ii) the migration of employees from the Defined Benefit Plan to the Defined Contribution Plan (in August 2016); and (iii) the beginning of payment of the actuarial deficit by employees as of December 2016, reducing the Company’s expenses.
5.2. Electricity
Electricity expenses totaled R$ 199.7 million in 1Q17, a decrease of R$ 40.7 million or 16.9% in comparison to the R$ 240.4 million in 1Q16. The main factors that contributed to this increase were:
· Average reduction of 17.4% in the free market tariffs, with an 21.2% increase in consumption;
· Average reduction of 27.3% in the grid market tariff (TUSD), with a 21.7% rise in consumption; and
· Average reduction of 14.0% in the regulated market tariffs, with a 10.2%.decrease in consumption.
In 1Q17, the regulated market accounted for 32.3% of the total electricity consumed by the Company, the free market accounted for 34.4% and the grid market accounted for 33.3% of total consumption.
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Performance
5.3. General expenses
General expenses decreased R$ 14.7 million, or 6.5%, totaling R$ 209.9 million in 1Q17, versus the R$ 224.6 million recorded in 1Q16, mainly due to the reduction of R$ 23.4 million in provisions for court proceedings in 1Q17, partially offset by a higher provision for the Municipal Fund for Environmental Sanitation and Infrastructure, in the amount of R$ 10.9 million, as a result of the increase in revenues with the municipality of São Paulo.
5.4. Depreciation and amortization
Depreciation and amortization increased R$ 47.3 million or 16.6%, reaching R$ 332.0 million in 1Q17 in comparison to the R$ 284.7 million recorded in 1Q16, largely due to the beginning of operations of intangible assets, in the amount of R$ 2.1 billion.
5.5. Allowance for doubtful accounts
Increase of R$ 30.0 million, mainly resulting from:
· Increase in default, causing a R$26.5 million impact; and
· Receipt of non-recurring court-ordered debt payments amounting to R$14.4 million in 1Q16, especially from the city of Guarulhos.
This increase was partially offset by an upturn of R$ 10.8 million in the recovery of funds through agreements in 1Q17.
6. Financial result | ||||
R$ million | ||||
1Q17 | 1Q16 | Chg. | % | |
Financial expenses, net of income | (68.9) | (99.8) | 30.9 | (31.0) |
Net monetary and exchange variation | 72.7 | 440.0 | (367.3) | (83.5) |
Financial result | 3.8 | 340.2 | (336.4) | (98.9) |
6.1. Financial income and expenses | ||||
R$ million | ||||
1Q17 | 1Q16 | Chg. | % | |
Financial expenses | ||||
Interest and charges on domestic loans and financing | (64.8) | (95.2) | 30.4 | (31.9) |
Interest and charges on international loans and financing | (22.2) | (37.6) | 15.4 | (41.0) |
Other financial expenses | (42.1) | (52.5) | 10.4 | (19.8) |
Total financial expenses | (129.1) | (185.3) | 56.2 | (30.3) |
Financial income | 60.2 | 85.5 | (25.3) | (29.6) |
Financial expenses net of income | (68.9) | (99.8) | 30.9 | (31.0) |
6.1.1. Financial expenses
Decrease of R$ 56.2 million, mainly due to the following events:
· Interest and charges on domestic loans and financing: reduction of R$ 30.4 million, mainly due to a decline in the debt balance following the early amortization of the 19th debenture issue in March 2016, the 10th issue in January 2017 and the 15th issue in February 2017;
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Comments on the Company’s Performance
· Interest and charges on international loans and financing: decrease of R$ 15.4 million, mainly due to the 11% depreciation of the dollar against the real at the close of 1Q17 compared with the close of 1Q16; and
· Other financial expenses: reduction of R$ 10.4 million, due to lower provisioning for interest on court proceedings in 1Q17.
6.1.2. Financial income
Decrease of R$ 25.3 million, mainly due to the lower recognition of interest on installment agreements in 1Q17 compared with 1Q16.
6.2. Monetary and exchange rate variation on assets and liabilities
R$ million | ||||
1Q17 | 1Q16 | Chg. | % | |
Monetary variation on loans and financing | (21.8) | (52.9) | 31.1 | (58.8) |
Currency exchange variation on loans and financing | 89.3 | 483.3 | (394.0) | (81.5) |
Other monetary variations | (15.5) | (45.1) | 29.6 | (65.6) |
Monetary/exchange rate variation on liabilities | 52.0 | 385.3 | (333.3) | (86.5) |
Monetary/exchange rate variation on assets | 20.7 | 54.7 | (34.0) | (62.2) |
Monetary/exchange rate variation, net | 72.7 | 440.0 | (367.3) | (83.5) |
6.2.1. Monetary and exchange rate variation on liabilities
The effect of monetary and currency variations in 1Q17 was R$ 333.3 million less than in 1Q16, mainly due to:
· Reduction of R$ 31.1 million in expenses with monetary variation on loans and financing, due to the lower variation in the IPCA in 1Q17 compared with 1Q16 (0.96% and 2.62%, respectively);
· Decrease of R$ 394.0 million in exchange variation on loans and financing, as a result of the lower depreciation of the dollar and the appreciation of the yen against the real in 1Q17 (-2.8% and +1.9%, respectively), versus devaluation of both currencies in 1Q16 (-8.9% and -2.4%, respectively); and
· Decline of R$ 29.6 million in other monetary variation expenses, chiefly due to the reduction in the provision for court proceedings in 1Q17.
6.2.2. Monetary and exchange rate variation on assets
Decrease of R$ 34.0 million, mainly due to the lower monetary restatement of judicial deposits in 1Q17.
7. Income tax and social contribution
Increase of R$ 21.4 million, mainly due to the upturn in operating revenue. This increase was partially offset by the worse financial result reported in the period, which was impacted by exchange rate oscillations.
PAGE: 18 of 80
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Performance
8. | Indicators |
8.1. Operating | ||||
Operating indicators * | 1Q17 | 1Q16 | % | |
Water connections (1) | 8,703 | 8,477 | 2.7 | |
Sewage connections (1) | 7,140 | 6,917 | 3.2 | |
Population directly served - water (2) | 24.8 | 24.5 | 1.2 | |
Population directly served - sewage (2) | 21.3 | 21.0 | 1.4 | |
Number of Employees | 14,086 | 13,816 | 2.0 | |
Water volume produced (3) | 700 | 667 | 4.9 | |
IPM - Measured water loss (%) | 31.5 | 29.9 | 5.4 | |
IPDt (liters/connection x day) | 308 | 275 | 12.0 | |
(1) | Total connections, active and inactive, in thousand units at the end of the period | |||
(2) | In million inhabitants, at the end of the period. Not including wholesale | |||
(3) | In millions of cubic meters | |||
(*) | Unaudited |
8.2. | Economic |
Economic Variables at the close of the quarter* | 1Q17 | 1Q16 |
Amplified Consumer Price Index Variation (%) | 0.96 | 2.62 |
Referential Rate Variation (%) | 0.35 | 0.45 |
Interbank Deposit Certificate (%) | 12.13 | 14.13 |
US DOLAR (R$) | 3.1684 | 3.5589 |
YEN (R$) | 0.02844 | 0.03166 |
10. Investments
In 2017, investments are expected to reach R$ 2.3 billion, R$ 745.4 million of which were invested in the first quarter of the year, including R$ 189.8 million related to the São Lourenço PPP.
PAGE: 19 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
1 Operations
Companhia de Saneamento Básico do Estado de São Paulo ("SABESP" or the "Company") is a mixed-capital company headquartered in São Paulo, at Rua Costa Carvalho, 300, CEP 05429-900, controlled by the São Paulo State Government. The Company is engaged in the provision of basic and environmental sanitation services in the State of São Paulo, as well as it supplies treated water and sewage services on a wholesale basis.
In addition to providing basic sanitation services in the State of São Paulo, SABESP may performs these activities in other states and countries, and can operate in drainage, urban cleaning, solid waste handling and energy markets. SABESP aims to be a world reference in the provision of sanitation services, in a sustainable, competitive and innovative manner, with a focus on customers.
As of March 31, 2017, the Company operated water and sewage services in 367 municipalities of the State of São Paulo. Most of these municipalities operations are based on 30-year concession, program and services contracts. The Company has two partial contracts with the municipality of Mogi das Cruzes, however, since most of municipality is serviced by wholesale, it was not included in the 367 municipalities. As of March 31, 2017, the Company had 369 contracts.
SABESP is not temporarily operating in some municipalities due to judicial orders. The lawsuits in progress refer to Macatuba and Cajobi, and the carrying amount of these municipalities’ intangible assets was R$4,345 as of March 31, 2017 (R$4,345 as of December 31, 2016).
As of March 31, 2017, 54 concession agreements (54 as of December 31, 2016) had expired and are being negotiated. From March 31, 2017 to 2030, 34 concession agreements will expire. Management believes that concession agreements expired and not yet renewed will result in new contracts, disregarding the risk of discontinuity in the provision of municipal water supply and sewage services. By March 31, 2017, 281 program and services contracts were signed (281 contracts as of December 31, 2016).
As of March 31, 2017, the carrying amount of the underlying assets used in the 54 concessions of the municipalities under negotiation totaled R$6,605,835, accounting for 20.85% of the total, and the related gross revenue for the three-month period ended March 31, 2017 totaled R$458,053, accounting for 12.21% of the total.
The Company’s operations are concentrated in the municipality of São Paulo, which represents 52.86% of the gross revenues as of March 31, 2017 (52.83% as of March 31, 2016) and 46.90% of intangible assets (46.57% as of December 31, 2016).
On June 23, 2010, the State of São Paulo, the Municipality of São Paulo, the Company and the regulatory agency “Sanitation and Energy Regulatory Agency – ARSESP” signed an agreement to share the responsibility for water supply and sewage services to the Municipality of São Paulo based on a 30-year concession agreement. This agreement is extendable for another 30 years, pursuant to the law. This agreement sets forth SABESP as the exclusive service provider and designates ARSESP as regulator, establishing prices, controlling and monitoring services. On the same date, the State of São Paulo, the Municipality of São Paulo and SABESP signed the “Public service provision agreement of water supply and sewage services”, a 30-year concession agreement which is extendable for another 30 years. This agreement involves the following activities:
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
i. protection of the sources of water in collaboration with other agencies of the State and the City;
ii. capture, transport and treatment of water;
iii. collect, transport, treatment and final dispose of sanitary sewage; and
iv. adoption of other actions of basic and environmental sanitation.
The Company operates under an authorization by public deed in some municipalities in the Santos coast region and in the Vale do Ribeira, where the Company started to operate after the merger of the companies that formed it. In September 2015, the Company entered into a water supply and sewage public utility services agreement with the municipality of Santos; the gross revenue calculated in the three-month period ended March 31, 2017 totaled R$76,086 (R$69,304 in the period ended March 31, 2016) and the intangible asset was R$301,243 as of March 31, 2017 (R$303,540 as of December 31, 2016).
Article 58 of Law 11,445/07 determines that precarious and overdue concessions, as well as those effective for an undetermined period of time, including those that do not have an instrument formalizing them, will be valid until December 31, 2010. However, Article 2 of Law 12,693 of July 24, 2012, which amended Article 7°-A of Law 11,578, of November 26, 2007, allowed the provision of public basic sanitation services to be executed until December 31, 2016.
The Company’s Management understands that in the municipalities where the concession agreements were not yet renewed, the operation is governed by Laws 8,987/95 and 11,445/07, including those municipalities served without an agreement.
Public deeds are valid and governed by the Brazilian Civil Code.
The Company's shares have been listed in the Novo Mercado segment of BM&FBovespa under the ticker symbol SBSP3 since April 2002 and on the New York Stock Exchange (NYSE) as American Depositary Receipts (“ADRs”) Level III, under the SBS code, since May 2002.
Since 2008, the Company has been setting up partnerships with other companies, which resulted in the following companies: Sesamm, Águas de Andradina, Saneaqua Mairinque, Aquapolo Ambiental, Águas de Castilho, Attend Ambiental and Paulista Geradora de Energia. Although SABESP has no majority interest in the capital stock of these companies, the shareholders’ agreements provide for the power of veto and casting vote in certain issues jointly with associates, indicating the shared control in the management of investees.
The 2014-2015 period presented the lowest rainfall and inflow ever seen in 85 years, especially in the reservoirs composing the Cantareira System. During the rainy season, from October 2015 to March 2016, and October 2016 to March 2017, rainfall in the region returned to the normal levels expected for the period.
In March 2017, the reservoirs of the São Paulo Metropolitan Region stored 1.5 trillion litters of treatment water, versus 1.2 trillion litters in March 2016 and 589 billion litters in March 2015, including the technical reserve. From December 2016 to May 2017, the Company was authorized to capture 31 m³/s from the Cantareira System, while in most part of 2015, the Company was authorized to capture 13.5 m³/s.
As a result of the normalization of the level of water available in the reservoirs to serve the population of the São Paulo Metropolitan Region, the measures adopted during the water crisis were gradually eliminated and, since May 1, 2016, the Water Consumption Reduction Incentive Program effective since February 2014, and the Contingency Tariff, effective as of January 2015, were cancelled.
However, although the measures adopted in 2014 and 2015 to ensure water supply in the São Paulo Metropolitan Region were discontinued in 2016, billed water volume has not reached pre-crisis levels yet, which is a sign that consumer habits may have changed. Another factor that probably played a role in the decline of consumption was the slowdown in the Brazilian economy.
In March 2017, the water monthly production for the São Paulo Metropolitan Region averaged 62.1 m³/s, compared to 59.4 m³/s in March 2016, 51.3 m³/s in March 2015, 67.4 m³/s in March 2014 and 70.1 m³/s in March 2013, the year before the beginning of the water crisis.
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
At the end of 2017 and beginning of 2018 two important projects aimed to increase water security in the São Paulo Metropolitan Region are expected to be concluded, as follows: (i) the Jaguarí-Atibainha interconnection, which will transfer up to 5.13 cubic meters per second (m³/s) from the Paraíba do Sul Basin to the Cantareira System; and (ii) the construction of the São Lourenço Production System, which will expand water production and capacity by 6.4 m³/s.
The Company’s Management expects that with the improvement of water conditions and operating cash, in addition to the lines of credit available for investments, the Company will have sufficient funds to meet its liabilities and not compromise its necessary investments.
The interim financial information was approved by the Board of Directors on May 12, 2017.
2 Basis of preparation and presentation of the financial statements
Presentation of the quarterly financial information
The quarterly financial information as of March 31, 2017, was prepared based on the provisions of CPC 21 (R1) –Interim Financial Information and the international standard IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), applicable to the preparation of Quarterly Information Form– ITR and they are fairly presented consistent with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Therefore, this quarterly financial information takes into consideration the official letter CVM/SNC/SEP 003 of April 28, 2011, which allows the entities to present selected notes to the financial statements, in cases of redundant information already disclosed in the Annual Financial Statements. The interim financial information for March 31, 2017, therefore, does not include all the notes and reporting required by the annual financial statements, and accordingly, shall be read jointly with the Annual Financial Statements as of December 31, 2016, prepared pursuant to the International Financial Reporting Standards –IFRS, issued by the International Accounting Standards Board – IASB and pursuant to the accounting practices adopted in Brazil which observe the pronouncements issued by the Brazilian Accounting Pronouncements Committee- CPC. Therefore, the interim financial information as of March 31, 2017 was not fully completed due to redundancies with the information presented in the annual financial statements of December 31, 2016 and, as provided for in Official Letter/CVM/SNC/SEP no. 003/2011. In this quarterly financial information, the notes below were either not presented or are not as detailed as those in the annual financial statements:
i. Summary of Significant Accounting Policies (Note3);
ii. Changes in Accounting Practices and Disclosures (Note 4);
iii. Risk Management – Financial Instruments (Note 5.4);
iv. Key Accounting Estimates and Judgments(Note6);
v. Related-Party Balances and Transactions (Note 10);
vi. Investments (Note 12); vii. Intangible Assets(Note14);
viii. Borrowings and Financing (Note16);
ix. Deferred Taxes and Contributions(Note18);
x. Provisions(Note19); xi. Employees Benefits (Note20);
xii. Equity (Note22); xiii. Insurance (Note 25);
xiv. Financial Income (Expenses) (Note 28).
The main accounting policies applied in the preparation of these financial statements are defined below. These policies have been applied consistently in all years presented.
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Notes to the Quarterly Financial Information
3 Summary of Significant Accounting Policies
The accounting policies used in the preparation of the quarterly financial information for the quarter ended March 31, 2017 are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2016. These policies are disclosed in Note 3 to the Annual Financial Statements.
4 Risk Management
4.1 Financial Risk Management
Financial risk factors
The Company's activities are affected by Brazilian economic scenario, making it exposed to market risk (exchange rate and interest rate), credit risk and liquidity risk. The Company’s financial risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.
The Company has not utilized derivative instruments in any of the reported periods.
(a) Market risk
Foreign currency risk
SABESP’s foreign exchange exposure implies market risks associated with currency fluctuations, since the Company has foreign currency-denominated liabilities, mainly US dollar and yen-denominated short and long-term borrowings.
The management of SABESP’s foreign currency exposure considers several current and projected economic factors, besides market conditions.
This risk arises from the possibility that the Company may incur in losses due to exchange rate fluctuations that would impact liability balances of foreign currency-denominated borrowings and financing raised in the market and related financial expenses. The Company does not maintain hedge or swap contracts or any derivative financial instrument to hedge against this risk.
A significant amount of the Company’s financial debt is indexed to the U.S. dollar and Yen, in the total amount of R$5,609,025 as of March 31, 2017 (R$5,692,984 as of December 31, 2016). Below, the Company’s exposure to exchange risk:
March 31, 2017 | December 31, 2016 | ||||||
Foreign | Foreign | ||||||
currency | R$ | currency | R$ | ||||
Borrowings and financing – US$ | 1,234,096 | 3,910,110 | 1,241,963 | 4,047,682 | |||
Borrowings and financing – Yen | 58,291,741 | 1,657,817 | 57,643,930 | 1,609,419 | |||
Interest and charges from borrowings and financing – | |||||||
US$ | 37,076 | 25,114 | |||||
Interest and charges from borrowings and financing – | |||||||
Yen | 4,022 | 10,769 | |||||
Total exposure | 5,609,025 | 5,692,984 | |||||
Borrowing cost – US$ | (29,822) | (29,650) | |||||
Borrowing cost – Yen | (2,935) | (2,971) | |||||
Total foreign currency-denominated borrowings | |||||||
(Note 15) | 5,576,268 | 5,660,363 |
PAGE: 23 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
The 1% variation in foreign currency-denominated debt from March 31, 2017 to December 31, 2016 was mainly due to the following:
1) Exchange rate changes, due to the 2.8% decrease in the US dollar, from R$3.2591 as of December 31, 2016 to R$3.1684 as of March 31, 2017. The US dollar-denominated debt accounts for 70.3% of foreign currency-denominated debts; and
2) Offset by the 1% increase in the Yen-denominated debt due to the 1.9% increase in the Yen, from R$0.02792 as of December 31, 2016 to R$0.028440 as of March 31, 2017.
As of March 31, 2017, if the Brazilian real had depreciated or appreciated by 10%, in addition to the impacts mentioned above, against the US dollar and Yen with all other variables held constant, effects on results before taxes on the three-month period ended March 31, 2017 would have been R$560,902 (R$569,298 for the year ended December 31, 2016), lower or higher, mainly as a result of exchange losses or gains on the translation of foreign currency-denominated loans.
Scenario I below presents the effect in income statements for the next 12 months, considering the projected rates of the U.S. dollar and the Yen. Considering the other variables as remaining constant, the impacts for the next 12 months are shown in scenarios II and III with possible depreciations of 25% and 50%, respectively, in the Brazilian real.
PAGE: 24 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly 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 continually monitors market interest rates, in order to evaluate the possible need to replace its debt.
The table below provides the Company's borrowings and financing subject to variable interest rate:
Another risk to which the Company is exposed, is the mismatch of the monetary restatement indices of its debts with those of its service revenues. Tariff adjustments of services provided by the Company do not necessarily follow the increases in the inflation indexes to adjust borrowings, financing and interest rates affecting indebtedness
As of March 31, 2017, if interest rates on borrowings and financing had been 1% higher or lower with all other variables held constant, the effects on profit for the three-month period ended March 31, 2017 before taxes would have been R$84,363 (R$86,910 as of December 31, 2016) lower or higher, mainly as a result of a lower or higher interest expense on floating rate borrowings and financing.
(b) Credit risk
Credit risk arises from cash and cash equivalents, deposits in banks and financial institutions, as well as credit exposures to wholesale basis and retail customers, including outstanding accounts receivable, restricted cash and accounts receivable from related parties. Credit risk exposure to customers is mitigated by sales to a dispersed base.
The maximum exposures to credit risk as of March 31, 2017 are the carrying amounts of instruments classified as cash equivalents, deposits in banks and financial institutions, restricted cash, trade receivables and accounts receivable from related parties at the end of the reporting period. See additional information in Notes 6, 7, 8 and 9.
PAGE: 25 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
Regarding the financial assets held with financial institutions, the credit quality that is not past due or subject to impairment can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. The credit quality of counterparties which are banks, such as deposits and financial investments, the Company considers the lower rating of the counterparty published by three main international rating agencies (Fitch, Moody's and S&P), according to internal policy of market risk management:
March 31, 2017 | December 31, 2016 | ||
Cash at bank and short-term bank deposits | |||
AA+(bra) | 1,954,078 | 1,850,220 | |
AAA(bra) | 29,522 | 35,452 | |
Other (*) | 222 | 549 | |
1,983,822 | 1,886,221 |
(*)This category includes current accounts and investment funds in banks which have no credit rating information available.
The available credit rating information of the banks, as of March 31, 2017, in which the Company made deposit transactions and financial investments in domestic currency (R$ - domestic rating) during the period is as follows:
Banks | Fitch | Moody's | Standard Poor's | ||
Banco do Brasil S/A | AA+(bra) | Aa1.br | - | ||
Banco Santander Brasil S/A | AAA(bra) | Aaa.br | brAA- | ||
Brazilian Federal Savings Bank | AA+(bra) | Aa1.br | brAA- | ||
Banco Bradesco S/A | AAA(bra) | Aa1.br | brAA- | ||
Itaú Unibanco Holding S/A | AAA(bra) | Aa1.br | brAA- |
(c) Liquidity risk
The Company's liquidity is primarily reliant upon cash provided by operating activities, borrowings from Brazilian Federal and State governmental financial institutions, and financing in the domestic and international capital markets. The liquidity risk management considers the assessment of its liquidity requirements to ensure it has sufficient cash to meet its operating and capital expenditures needs, as well as the payment of debts.
The funds held by the Company are invested in interest-bearing current accounts, time deposits and securities, selecting instruments with appropriate maturity or liquidity sufficient to provide margin as determined by projections mentioned above.
The table below shows the financial liabilities of the Company, into relevant maturities, including the installment of principal and future interest to be paid according to the agreement.
PAGE: 26 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
April to | |||||||||||||
December | 2022 | ||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | onwards | Total | |||||||
March 31, 2017 | |||||||||||||
Liabilities | |||||||||||||
Borrowings and financing | 1,175,957 | 2,191,200 | 2,265,800 | 2,412,508 | 910,435 | 6,054,807 | 15,010,707 | ||||||
Trade payables and contractors | 201,694 | - | - | - | - | - | 201,694 | ||||||
Services payable | 437,215 | - | - | - | - | - | 437,215 | ||||||
Public-Private Partnership – PPP (*) | 40,687 | 361,052 | 361,052 | 361,052 | 361,052 | 5,414,392 | 6,899,287 | ||||||
Program contract commitments | 106,413 | 41,225 | 29,819 | 878 | 1,016 | 16,799 | 196,150 |
(*) The Company also considered future commitments (construction not yet performed) still not recognized in the financial statements related to São Lourenço PPP, due to the relevance of future cash flows, the impacts on its operations and the fact the Company already has formalized this commitment through an agreement signed by the parties.
Future interest
Future interest was calculated based on the contractual clauses for all agreements. For agreements with floating interest rate, the interest rates used correspond to the base dates above.
Cross default
The Company has borrowings and financing agreements including cross default clauses, i.e., the early maturity of any debt, may imply the early maturity of these agreements. The indicators are continuously monitored in order to avoid the execution of these clauses.
(d) Sensitivity analysis on interest rate risk
The table below shows the sensitivity analysis of the financial instruments, prepared in accordance with CVM Rule 475/2008 in order to evidence the balances of main financial assets and liabilities, calculated at a rate projected for the twelve-month period after March 31, 2017, or until the final settlement of each contract, whichever is shorter, considering a probable scenario (scenario I), appreciation of 25% (scenario II) and 50% (scenario III).
The purpose of the sensitivity analysis is to measure the impact of changes in the market over the financial instruments of the Company, considering constant all other variables. In the time of settlement the amounts can be different from those presented, due to the estimates used in the measurement.
PAGE: 27 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
March 31, 2017 | |||||||
Scenario I | Scenario II | Scenario III | |||||
Indicators | Exposure | (Problable) (i) | 25% | 50% | |||
Assets | |||||||
CDI | 1,901,971 | 8.7500%(*) | 6.5625% | 4.3750% | |||
Financial income | 166,422 | 124,817 | 83,211 | ||||
Liabilities | |||||||
CDI | (844,391) | 8.7500%(*) | 6.5625% | 4.3750% | |||
Interest to be incurred | (73,884) | (55,413) | (36,942) | ||||
CDI net exposure | 1,057,580 | 92,538 | 69,404 | 46,269 | |||
Liabilities | |||||||
TR | (1,543,576) | - 0.0023%(***) | -0.0017% | -0.0012% | |||
Expenses to be incurred | 36 | 26 | 19 | ||||
IPCA | (1,700,613) | 4.5000%(*) | 5.6250% | 6.7500% | |||
Expenses to be incurred | (76,528) | (95,659) | (114,791) | ||||
TJLP | (1,463,516) | 7.5000% (*) | 9.3750% | 11.2500% | |||
Interest to be incurred | (109,764) | (137,205) | (164,646) | ||||
LIBOR | (2,801,168) | 1.3790% (**) | 1.7238% | 2.0686% | |||
Interest to be incurred | (38,628) | (48,287) | (57,945) | ||||
Total net expenses to be incurred | (132,346) | (211,721) | (291,094) | ||||
(*) Source: CDI and IPCA rates (Focus Report – BACEN, March 31, 2017) and long-term interest rate at | |||||||
March 31, 2017 (BACEN). | |||||||
(**) Source: Bloomberg | |||||||
(***)Source: BM&FBovespa |
(i) Refers to the scenario of interest to be incurred for the 12 months as of December 31, 2016 or until the maturity of the agreements, whichever is shorter.
4.2 Capital management
The Company’s objectives when managing capital are ensure its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
PAGE: 28 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
The Company monitors capital based on the leverage ratio. This ratio corresponds to net debt divided by total capital. Net debt corresponds to total borrowings and financing less cash and cash equivalents. Total capital is calculated as total equity as shown in the balance sheet plus net debt.
March 31, 2017 | December 31, 2016 | ||
Total borrowings and financing (Note 15) | 11,741,469 | 11,964,143 | |
(-) Cash and cash equivalents (Note 6) | (1,983,822) | (1,886,221) | |
Net debt | 9,757,647 | 10,077,922 | |
Total equity | 16,093,573 | 15,419,211 | |
Total capital | 25,851,220 | 25,497,133 | |
Leverage ratio | 38% | 40% |
As of March 31, 2017, the leverage ratio decreased to 38% from the 40% as of December 31, 2016, due to the decreased balance of foreign currency-denominated borrowings and financing as a result of the payment of debt-related installments in the period, the 2.8% depreciation of the US dollar and the profit from the three-month period ended March 31, 2017.
4.3 Fair value estimates
It is assumed that balances from trade receivables (current) and accounts payable to suppliers by carrying amount, less impairment approximate their fair values, considering the short maturity. Long-term trade receivables also approximate their fair values, as they will be adjusted by inflation and/or will bear contractual interest rates over time.
4.4 Financial instruments
As of March 31, 2017 and December 31, 2016, the Company did not have financial assets classified as fair value through profit or loss, held to maturity and available for sale neither financial liabilities classified as fair value through profit or loss. The Company’s financial instruments included in the borrowings and receivables category comprise cash and cash equivalents, restricted cash, trade receivables, related parties balances, other receivables, and balances receivable from the Water National Agency – ANA. The financial instruments under the “other liabilities” category comprise accounts payable to contractors and suppliers, borrowings and financing, services payable, balances payable deriving from the Public Private Partnership-PPP and program contract commitments, which are non-derivative financial assets and liabilities with fixed or determinable payments, not quoted in an active market.
PAGE: 29 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
The estimated fair values of financial instruments are as follows:
Financial Assets
March 31, 2017 | December 31, 2016 | ||||||
Carrying | Carrying | ||||||
amount | Fair value | amount | Fair value | ||||
Cash and cash equivalents | 1,983,822 | 1,983,822 | 1,886,221 | 1,886,221 | |||
Restricted cash | 21,999 | 21,999 | 24,078 | 24,078 | |||
Trade receivables | 1,742,607 | 1,742,607 | 1,711,306 | 1,711,306 | |||
Water National Agency – ANA | 82,676 | 82,676 | 81,221 | 81,221 | |||
Other receivables | 237,068 | 237,068 | 167,369 | 167,369 |
Additionally, SABESP has financial instrument assets receivables from related parties, in the amount of R$855,946 as of March 31, 2017 (R$871,709 as of December 31, 2016), which were calculated in accordance with the conditions negotiated’ between related parties. The conditions and additional information referring to these financial instruments are disclosed in Note 9 to this interim financial information and Note 10 to the Annual Financial Statements of December 31, 2016. Part of this balance, totaling R$780,035 (R$788,180 as of December 31, 2016), refers to reimbursement of additional retirement and pension plan - G0 and is indexed by IPCA plus simple interest of 0.5% p.m. This interest rate approximates that one practiced by federal government bonds (NTN-b) with terms similar to those of related-party transactions.
Financial Liabilities
March 31, 2017 | December 31, 2016 | ||||||
Carrying | Carrying | ||||||
amount | Fair value | amount | Fair value | ||||
Borrowings and financing | 11,741,469 | 12,444,709 | 11,964,143 | 11,776,178 | |||
Trade payables and contractors | 201,694 | 201,694 | 311,960 | 311,960 | |||
Services payable | 437,215 | 437,215 | 460,054 | 460,054 | |||
Program contract commitments | 180,671 | 180,671 | 178,093 | 178,093 | |||
Public-Private Partnership – PPP | 2,427,189 | 2,427,189 | 2,249,418 | 2,249,418 |
The criteria adopted to obtain the fair values of borrowings and financing, in preparing the interim financial information as of March 31, 2017, are consistent with those adopted in the Annual Financial Statements for the fiscal year ended December 31, 2016. In the Annual Financial Statements, these criteria are disclosed in Note 5.4.
Considering the nature of other financial instruments, assets and liabilities of the Company, the balances recognized in the balance sheet approximate the fair values, taking into account the maturities close to the end of the reporting period, comparison of contractual interest rates with market rates in similar operations at the end of the reporting period, their nature and maturity terms.
PAGE: 30 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
5 Key accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and on other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The key accounting estimates and judgments are: (i) allowance for doubtful accounts, (ii) intangible assets resulting from concession and program contracts, (iii) provisions, (iv) pension plan liabilities, and (v) deferred income tax and social contribution, and are disclosed in Note 6 to the Annual Financial Statements as of December 31, 2016.
6 Cash and cash equivalents
March 31, 2017 | December 31, 2016 | ||
Cash and banks | 81,851 | 137,395 | |
Cash equivalents | 1,901,971 | 1,748,826 | |
1,983,822 | 1,886,221 |
Cash and cash equivalents include cash, bank deposits and high-liquidity short-term financial investments, mainly represented by repurchase agreements (accruing CDI interest rates), deposited at Banco do Brasil, whose original maturities are lower than three months, which are convertible into a cash amount and subject to an insignificant risk of change in value.
As of March 31, 2017, the average yield of financial investments corresponds to 99.21% of CDI (99.24% as of December 31, 2016).
7 Restricted cash
March 31, 2017 | December 31, 2016 | |||
Current | ||||
Agreement with the São Paulo municipal | ||||
government (i) | 16,264 | 15,858 | ||
Brazilian Federal Savings Bank – escrow deposit | ||||
(ii) | 400 | 2,989 | ||
Other | 5,335 | 5,231 | ||
21,999 | 24,078 |
(i) | Agreement with the municipal government of São Paulo where the Company transfers 7.5% of the Municipal revenue to the Municipal Fund; |
(ii) | Refers to savings account for receiving escrow deposits regarding lawsuits with final and unappealable decisions in favor of the Company, which are blocked as per contractual clause. |
PAGE: 31 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
8 | Trade receivables |
(a) Financial position balances | |||
March 31, 2017 | December 31, 2016 | ||
Private sector: | |||
General and special customers (i) (ii) | 1,198,489 | 1,205,498 | |
Agreements (iii) | 309,359 | 315,351 | |
1,507,848 | 1,520,849 | ||
Government entities: | |||
Municipal | 522,135 | 520,950 | |
Federal | 4,644 | 3,414 | |
Agreements (iii) | 276,938 | 279,449 | |
803,717 | 803,813 | ||
Wholesale customers – Municipal governments: (iv) | |||
Guarulhos | 789,869 | 778,106 | |
Mauá | 483,484 | 467,775 | |
Mogi das Cruzes | 2,447 | 2,527 | |
Santo André | 970,035 | 946,045 | |
São Caetano do Sul | 2,326 | 2,371 | |
Diadema | 222,671 | 222,671 | |
Total wholesale customers – Municipal governments | 2,470,832 | 2,419,495 | |
Unbilled supply | 530,266 | 481,389 | |
Subtotal | 5,312,663 | 5,225,546 | |
Allowance for doubtful accounts | (3,570,056) | (3,514,240) | |
Total | 1,742,607 | 1,711,306 | |
Current | 1,580,821 | 1,557,472 | |
Noncurrent | 161,786 | 153,834 | |
1,742,607 | 1,711,306 |
(i) | General customers – residential and small and mid-sized companies |
(ii) | Special customers – large consumers, commercial industries, condominiums and special billing consumers (fixed demand agreements, industrial waste, wells, etc.). |
(iii) | Agreements - installment payments of past-due receivables, plus monetary restatement and interest, when provided for in the agreements. |
(iv) | Wholesale basis customers - municipal governments - This balance refers to the sale of treated water to municipalities, which are responsible for distributing to, billing and charging final customers. Some of these municipalities are questioning in court the tariffs charged by SABESP, which have full allowance doubtful accounts. Additionally, the overdue amounts are included in the allowance for doubtful accounts. |
PAGE: 32 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(b) | The aging of trade receivables is as follows |
March 31, 2017 | December 31, 2016 | ||
Current | 1,303,556 | 1,337,503 | |
Past-due: | |||
Up to 30 days | 270,372 | 263,157 | |
From 31 to 60 days | 153,693 | 148,927 | |
From 61 to 90 days | 70,612 | 53,268 | |
From 91 to 120 days | 87,974 | 109,138 | |
From 121 to 180 days | 123,367 | 124,001 | |
From 181 to 360 days | 220,328 | 203,837 | |
Over 360 days | 3,082,761 | 2,985,715 | |
Total past-due | 4,009,107 | 3,888,043 | |
Total | 5,312,663 | 5,225,546 |
The increase in the overdue balance was mainly due to the default of the municipalities that purchased water on a wholesale basis, given that they are challenging the tariffs charged by SABESP in court, and the increase in default of amounts overdue, related to private customers.
PAGE: 33 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(c) | Allowance for doubtful accounts |
January to March 2017 | January to March 2016 | ||
Balance at beginning of the period | 3,514,240 | 3,307,793 | |
Private sector /government entities | 30,546 | 39,693 | |
Recoveries | (3,485) | (22,856) | |
Wholesale customers | 38,278 | 68,747 | |
Net additions for the period | 65,339 | 85,584 | |
Write-offs in the period referring to accounts receivable | (9,523) | (3,626) | |
Balance at end of the period | 3,570,056 | 3,389,751 | |
Reconciliation of estimated losses | |||
of income | January to March 2017 | January to March 2016 | |
Write-offs | 58,136 | 41,537 | |
Losses with state entities (related parties) | (288) | 246 | |
Losses with private sector / government entities | 30,546 | 39,693 | |
Losses with wholesale customers | 1,227 | (2,542) | |
Recoveries | (3,485) | (22,856) | |
Amount recorded as selling expenses | 86,136 | 56,078 |
Wholesale sales losses, amounting to R$37,051 from January to March 2017 and R$71,289 from January to March 2016, were also recorded as revenue reduction.
The Company does not have customers representing 10% or more of its total revenues.
PAGE: 34 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
9 Related-Party Balances and Transactions
The Company is a party to transactions with its controlling shareholder, the State Government, and companies related to it.
(a) Accounts receivable, interest on capital payable, revenue and expenses with the São Paulo State Government
March 31, 2017 | December 31, 2016 | ||
Accounts receivable | |||
Current: | |||
Sanitation services | 126,693 | 134,005 | |
Allowance for losses | (56,336) | (56,624) | |
Reimbursement for retirement and pension benefits paid G0): | |||
- monthly flow (payments) | 22,034 | 22,696 | |
- GESP Agreement – 2008 | 56,512 | 56,512 | |
- GESP Agreement– 2015 | 53,598 | 39,816 | |
“Se Liga na Rede” program (l) |
5,554 | 6,148 | |
Total current | 208,055 | 202,553 | |
Noncurrent: | |||
Reimbursement for retirement and pension benefits paid (G0): | |||
- GESP Agreement – 2008 | 4,709 | 18,838 | |
- GESP Agreement – 2015 | 643,182 | 650,318 | |
Total noncurrent | 647,891 | 669,156 | |
Total receivables from shareholders | 855,946 | 871,709 | |
Assets: | |||
Sanitation services | 70,357 | 77,381 | |
Reimbursement of additional retirement and pension benefits (G0) | 780,035 | 788,180 | |
“Se Liga na Rede” program (l) | 5,554 | 6,148 | |
Total | 855,946 | 871,709 | |
Liabilities: | |||
Interest on capital payable to related parties | 351,788 | 351,788 | |
Other (g) | 1,306 | 1,853 |
PAGE: 35 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
January to March 2017 | January to March 2016 | ||
Revenue from sanitation services | 109,926 | 97,526 | |
Payments received from related parties | (119,586) | (87,651) | |
Receipt of GESP reimbursement referring to Law 4819/58 | (36,552) | (46,666) |
(b) Contingent assets -GESP(not recorded)
As mentioned above, as of March 31, 2017 and December 31, 2016, SABESP had contingent assets with GESP, not recorded in assets referring to the additional retirement and pension paid (Law 4,819/58), named “Disputed amounts receivable”, totaling R$955,334 and R$937,035, respectively.
(c) Use of reservoirs– EMAE
Empresa Metropolitana de Águas e Energia S.A. (“EMAE”) planned to receive for the credit and obtain financial compensation for alleged past and future losses in electricity generation, due to water collection, and compensation for costs already incurred and to be incurred with the operation, maintenance and inspection of the Guarapiranga and Billings reservoirs used by SABESP in its operations.
Several lawsuits were filed by EMAE, among which an arbitration proceeding related to the Guarapiranga reservoir and a lawsuit related to the Billings reservoir, both pleading for financial compensation due to SABESP’s water collect for public supply, alleging that this conduct has been causing permanent and growing loss in the capacity of generating electricity of Henry Borden hydroelectric power plant with financial losses.
As of April 10, 2014, the Company issued a Notice to the Market including the information about an eventual future agreement.
As of October 28, 2016, the Company entered into an agreement based on a Private Transaction Agreement and Other Adjustments with EMAE aimed to fully and completely settle the disputes involving the two companies.
Pursuant to the terms of Clause Two of the agreement, the transaction is subject to the condition precedent of approval by the competent bodies of EMAE.
Upon ratification of the agreement, all litigation between SABESP and EMAE will cease permanently.
The agreement involves the payment by SABESP to EMAE of the following amounts:
- R$6,610 annually payments, adjusted for inflation, as of the execution date of this instrument, by the IPCA or on any other index that may replace it, by the last business day of October of each fiscal year, with (i) the first of such annual payments due up to the last business day of October 2017 and (ii) the last payment due up to the last business day of October 2042; and
PAGE: 36 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
- R$46,270, in five annual and successive installments, adjusted for inflation by the IPCA or any other index that may replace it, with the first installment of R$9,254 due on April 30, 2017 and the subsequent ones in 4 (four) installments of the same amount, due on every April 30 of the subsequent years, or on the first subsequent business day.
On April 11, 2016, the Company was served with lawsuits filed by EMAE’s minority shareholders against the São Paulo State. The plaintiffs of these lawsuits are seeking a decision that requires the State to prohibit SABESP from extracting water from these reservoirs without paying a financial compensation to EMAE and that allows EMAE to pump water from the reservoirs to its hydroelectric power plant. The plaintiffs of this lawsuit claim that the State, as EMA’s controlling shareholder, acted against EMAE and in favor of SABESP.
If SABESP can no longer extract water from these reservoirs, it will have to transport water from more distant places, increasing water transportation costs, which may jeopardize the Company’s ability to provide an appropriate service in the region.
(d) Agreements with reduced tariffs with State and Municipal Government Entities that joined the Rational Water Use Program (PURA)
The Company has signed agreements with government entities related to the State Government and municipalities where it operates that benefit from a reduction of 25% in the tariff of water supply and sewage services when they are not in default. These agreements provide for the implementation of the rational water use program, which takes into consideration the reduction in water consumption.
(e) Guarantees
The State Government provides guarantees for some borrowings and financing of the Company and does not charge any fee with respect to such guarantees.
(f) Personnel assignment agreement among entities related to the State Government
The Company has personnel assignment agreements with entities related to the State Government, whose expenses are fully passed on and monetarily reimbursed. From January to March 2017 and in the same period in 2016, the expenses related to personnel assigned by SABESP to other state government entities amounted to R$2,523 and R$2,247, respectively.
From January to March 2017, there were no expenses related to personnel assigned by other entities to SABESP, but totaled R$4 in the same period in 2016.
(g) Services obtained from state government entities
As of March 31, 2017 and December 31, 2016, SABESP had an outstanding amounts payable of R$1,306 and R$1,853, respectively, for services rendered by São Paulo State Government entities.
PAGE: 37 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(h) Non-operating assets
As of March 31, 2017 and December 31, 2016, the Company had an amount of R$969 related to a free land lent to DAEE (Department of Water and Electricity).
(i) Sabesprev
The Company sponsors a private defined benefit pension plan, which is operated and administered by Sabesprev. The net actuarial liability recognized as of March 31, 2017 amounted to R$750,291 (R$753,170 as of December 31, 2016), according to Note 19 (b).
(j) Compensation of Management Key Personnel
Expenses related to the compensation to the members of its Board of Directors, Fiscal Council and Board of Executive Officers amounted to R$926 and R$983 from January to March 2017 and the same period in 2016, respectively. An additional amount of R$124, related to the bonus program paid to Executive Officers, was recorded from January to March 2017 and in the same period in 2016.
(k) Loan agreement through credit facility
The Company holds interest in certain Special Purpose Entities (SPEs), not holding the majority interest but with cast vote and power of veto in some issues, with no ability to use such power of veto in a way to affect returns over investments. Therefore, these SPEs are considered for accounting purposes as jointly-owned subsidiaries.
The Company entered into a loan agreement through credit facility with the SPEs Aquapolo Ambiental S.A. and Attend Ambiental S.A. on May 9, 2014, to finance the operations of these companies, until the borrowings and financing requested with financial institutions is cleared. These agreements remain with the same characteristics, according to the table below:
Principal | ||||||||||
disbursed | Interest | |||||||||
SPE | amount | balance | Total | Interest rate | Maturity | |||||
Attend Ambiental | 5,400 | 3,338 | 8,738 | SELIC + 3.5 % p.a. | (i) | |||||
Aquapolo Ambiental | 5,629 | 5,103 | 10,732 | CDI + 1.2% p.a. | 04/30/2016 (ii) | |||||
Aquapolo Ambiental | 19,000 | 9,377 | 28,377 | CDI + 1.2% p.a. | 10/30/2015 (ii) | |||||
Total | 30,029 | 17,818 | 47,847 |
(i) | The loan agreement with SPE Attend Ambiental S/A matures within 180 days, from the date when the respective amount is available in the borrower’s account, renewable for the same period. The credit has been overdue since May 11, 2015 and is subject to contractual default charges (inflation adjustment considering the IGP-M variation, 2% fine and default interest of 1% p.m.). The agreement has been renegotiated between the parties. |
(ii) | The R$19,000 loan agreement originally expired on April 30, 2015, but was extended to October 30, 2015. The Company and Aquapolo Ambiental S/A are renegotiating the payment terms and the maturity of both agreements. |
PAGE: 38 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
As a result of the renegotiations, the principal, in the amount of R$30,029, and interest, in the amount of R$17,818, that used to be recognized in current assets, under “other receivables”, were reclassified to the same group of noncurrent assets until new payment conditions are agreed upon. As of March 31, 2017, the balance of principal and interest rates of these agreements was R$47,847 (R$52,407 as of December 31, 2016). From January to March 2017, a financial income recognized was R$4,560 (R$2,006 from January to March 2016).
(l) “Se Liga na Rede” (Connect to the Network Program)
The State Government enacted the State Law nº 14,687/12, creating the pro-connection program, destined to financially subsidize the execution of household branches necessary to connect to the sewage collecting networks, in low income households which agreed to adhere to the program. The program expenditures, except for indirect costs, construction margin and borrowing costs are financed with 80% of funds deriving from the State Government and the remaining 20% invested by SABESP, which is also liable for the execution of works. As of March 31, 2017, the program total amount was R$79,255 (R$79,274 as of December 31, 2016), R$5,554 (R$6,148 as of December 31, 2016) recorded in balances receivable from related parties, the amount of R$34,896 (R$34,915 as of December 31, 2016) recorded in the group of intangible assets and R$38,805 (R$38,211 as of December 31, 2016) reimbursed by GESP.
10 Water National Agency - ANA
The Company has agreements executed within the scope of the Hydrographic Basin Depollution Program (PRODES), also known as "Treated Sewage Purchase Program".
This program does not finance works or equipment, remunerates by results achieved, i.e., by effectively treated sewage. In this program, the Water National Agency (ANA) makes available funds, which are restricted to a specific current account and applied in investment funds at the Brazilian Federal Savings Bank (CEF), until the fulfillment of treated sewage volume is evidenced, as well as, the reduction of polluting cargoes of each agreement.
When resources are made available, liabilities are recorded until funds are released by ANA. After the evidence of targets stipulated in each contract, the revenue deriving from these funds is recognized, but if these targets are not met, funds will return to the National Treasury with the appropriate funds earnings. As of March 31, 2017, the balances of assets and liabilities were R$82,676 (R$81,221 as of December 31, 2016), and the liabilities are recorded under "other liabilities" of noncurrent liabilities.
11 Investments
The Company holds interest in certain Special Purpose Entities (SPE). Although SABESP has no majority shares of its investees, the shareholders’ agreement provides for the power of veto in certain management issues, with no ability, however, to use such power of veto in a way to affect returns over investments, indicating participating shared control (joint venture – CPC 19 (R2)).
The Company holds interest valued by the equity method.
PAGE: 39 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
See additional information on the operations of each investee in Note 12 to the Annual Financial Statements as of December 31, 2016.
(a) Summary of the investees’ financial statements and SABESP’s equity interest:
Profit (loss) for the | |||||||
Company | Equity | period | |||||
January to | January to | ||||||
March 31, | December 31, | March | March | ||||
2017 | 2016 | 2017 | 2016 | ||||
Sesamm | 38,887 | 37,198 | 1,689 | 1,318 | |||
Águas de Andradina (i) | 17,063 | 16,161 | 902 | 3,191 | |||
Águas de Castilho | 3,965 | 3,706 | 259 | 968 | |||
Saneaqua Mairinque | 4,198 | 4,090 | 108 | (214) | |||
Attend Ambiental | 4,954 | 3,925 | 1,029 | 1,143 | |||
Aquapolo Ambiental | 13,194 | 12,340 | 854 | (169) | |||
Paulista Geradora de Energia | 8,468 | 8,469 | (1) | (3) |
Equity in the earnings of | |||||||||||
Company | Investments | subsidiaries | Interest percentage | ||||||||
March | December | January to | January to | March | December | ||||||
31, | 31, | March | March | 31, | 31, | ||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||
Sesamm | 13,999 | 13,391 | 608 | 474 | 36% | 36% | |||||
Águas de Andradina | 5,120 | 4,849 | 271 | 957 | 30% | 30% | |||||
Águas de Castilho | 1,190 | 1,112 | 78 | 290 | 30% | 30% | |||||
Saneaqua Mairinque | 1,259 | 1,227 | 32 | (64) | 30% | 30% | |||||
Attend Ambiental | 2,229 | 1,766 | 463 | 514 | 45% | 45% | |||||
Aquapolo Ambiental | 6,465 | 6,047 | 418 | (83) | 49% | 49% | |||||
Paulista Geradora de Energia | 2,117 | 2,117 | - | (1) | 25% | 25% | |||||
Total | 32,379 | 30,509 | 1,870 | 2,087 | |||||||
Other investments | 587 | 587 | |||||||||
Overall total | 32,966 | 31,096 |
PAGE: 40 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
12 Investment properties
As of March 31, 2017, the balance of “Investment properties” is R$57,938 (December 31, 2016 –R$57,968). As of March 31, 2017 and December 31, 2016, the market value of these properties was approximately R$404,000.
December 31, | Write-offs and | March 31, | |||||
2016 | disposals | Depreciation | 2017 | ||||
Investment properties | 57,968 | (7) | (23) | 57,938 | |||
Total | 57,968 | (7) | (23) | 57,938 | |||
December 31, | Write-offs and | March 31, | |||||
2015 | disposals | Depreciation | 2016 | ||||
Investment properties | 56,957 | 9 | (26) | 56,940 | |||
Total | 56,957 | 9 | (26) | 56,940 |
13 Intangible assets
(a) Statement of financial position details
March 31, 2017 | December 31, 2016 | ||||||||||
Accumulated | Accumulated | ||||||||||
Cost | amortization | Net | Cost | amortization | Net | ||||||
Intangible assets arising from: | |||||||||||
Agreements – equity value | 9,300,692 | (1,781,987) | 7,518,705 | 9,222,543 | (1,739,588) | 7,482,955 | |||||
Agreements – economic value | 1,991,226 | (569,540) | 1,421,686 | 1,925,361 | (543,709) | 1,381,652 | |||||
Program contracts | 9,323,017 | (2,698,551) | 6,624,466 | 9,209,367 | (2,633,346) | 6,576,021 | |||||
Program contracts – commitments | 991,848 | (177,701) | 814,147 | 991,848 | (168,632) | 823,216 | |||||
Services contracts – São Paulo | 17,898,926 | (3,044,453) | 14,854,473 | 17,457,658 | (2,904,951) | 14,552,707 | |||||
Software license | 607,301 | (160,211) | 447,090 | 575,494 | (145,257) | 430,237 | |||||
Total | 40,113,010 | (8,432,443) | 31,680,567 | 39,382,271 | (8,135,483) | 31,246,788 |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(b) Changes
December 31, | Estimated | Write-offs | March 31, | ||||||||||
2016 | Additions | losses | Transfers | and disposals | Amortization | 2017 | |||||||
Intangible assets arising from: | |||||||||||||
Agreements – equity value | 7,482,955 | 81,886 | 2,078 | 312 | (1,805) | (46,721) | 7,518,705 | ||||||
Agreements – economic value | 1,381,652 | 67,641 | 8 | (23) | (1,007) | (26,585) | 1,421,686 | ||||||
Program contracts | 6,576,021 | 121,742 | 4,833 | 513 | (3,688) | (74,955) | 6,624,466 | ||||||
Program contracts – commitments | 823,216 | - | - | - | - | (9,069) | 814,147 | ||||||
Services contracts – São Paulo | 14,552,707 | 441,546 | 6,460 | 2,148 | (4,738) | (143,650) | 14,854,473 | ||||||
Software license | 430,237 | 22,013 | - | 6,489 | - | (11,649) | 447,090 | ||||||
Total | 31,246,788 | 734,828 | 13,379 | 9,439 | (11,238) | (312,629) | 31,680,567 |
Reversal of | |||||||||||||
December 31, | estimated | Write-offs | March 31, | ||||||||||
2015 | Additions | losses | Transfers | and disposals | Amortization | 2016 | |||||||
Intangible assets arising from: | |||||||||||||
Agreements – equity value | 7,287,630 | 79,042 | 1,061 | 20 | (3) | (35,989) | 7,331,761 | ||||||
Agreements –economic value | 1,353,020 | 10,778 | - | 3 | - | (17,509) | 1,346,292 | ||||||
Program contracts | 6,288,575 | 89,263 | (1,471) | 944 | (79) | (70,270) | 6,306,962 | ||||||
Contract programs – commitments | 850,530 | - | - | - | - | (8,207) | 842,323 | ||||||
Services contract – São Paulo | 12,367,017 | 446,503 | 1,680 | (31) | (238) | (132,749) | 12,682,182 | ||||||
Software license | |||||||||||||
366,854 | 26,894 | - | - | - | (9,469) | 384,279 | |||||||
Total | 28,513,626 | 652,480 | 1,270 | 936 | (320) | (274,193) | 28,893,799 |
In February 2017, the Company started operations in the municipality of Santa Branca.
PAGE: 42 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(c) Construction services
January to March 2017 | |||||
Water supply | Sewage services | Total | |||
Construction revenue | 476,696 | 246,232 | 722,928 | ||
Construction cost incurred | 466,257 | 240,972 | 707,229 | ||
Margin | 10,439 | 5,260 | 15,699 | ||
January to March 2016 | |||||
Water supply | Sewage services | Total | |||
Construction revenue | 429,067 | 196,213 | 625,280 | ||
Construction cost incurred | 419,594 | 192,792 | 612,386 | ||
Margin | 9,473 | 3,421 | 12,894 |
(d) General information
During the period ended March 31, 2017, there were no relevant changes in the criteria to account for intangible assets and types of contracts. Further information is included in Note 14 (d) to the Annual Financial Statements as of December 31, 2016.
The Company has obligations recorded in “Program Contract– Commitments” in current liabilities in the amount of R$110,098 and R$109,042 as of March 31, 2017 and December 31, 2016, respectively, and noncurrent liabilities in the amount of R$70,573 and R$69,051 as of March 31, 2017 and December 31, 2016, respectively.
(e) Capitalization of interest and other finance charges
From January to March 2017, the Company capitalized interest and inflation adjustment in concession intangible assets totaling R$166,223, including the São Lourenço Production System and Leases (R$123,717 from January to March 2016), during the construction period.
(f) Construction margin
The Company acts as a primary responsible to construct and install the infrastructure related to the concession, using own efforts or hiring outsourcing services, receiving the risks and benefits.
As a consequence, the Company recognizes revenue from construction service corresponding to the cost of construction increased by margin. Generally, the constructions related to the concessions are performed by third parties, in such case, the margin of the Company is lower, normally, to cover eventual administration costs, and the responsibility of the primary risk. As of March 31, 2017 and 2016, the margin was 2.3%.
Construction margin from January to March 2017 and the same period in 2016 was R$15,699 and R$12,894, respectively.
(g) Expropriations
As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate third-parties' properties, and the owners of these properties will be compensated either amicably or through courts.
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
The costs of these expropriations are recorded as concession intangible assets after the transaction is concluded. From January to March 2017, the total amount related to expropriations was R$2,901 (R$2,216 from January to March 2016).
(h) Public-Private Partnership - PPP
SABESP carries out operations related to the PPPs mentioned below. These operations and their respective obligations and guarantees are supported by agreements executed according to Law 11,079/04.
Alto Tietê Production System
As of March 31, 2017 and December 31, 2016, the amounts recognized as intangible asset related to PPP were R$379,310 and R$382,103, respectively.
From January to March 2017, a discount rate of 8.20% p.a. was used to calculate the adjustment to present value of the agreement. The obligations assumed by the Company as of March 31, 2017 and December 31, 2016 are shown in the next table.
On a monthly basis, SABESP assigns funds from tariffs to the SPE CAB Sistema Produtor Alto Tietê S/A, in the amount of R$9,773, corresponding to the monthly remuneration. This amount is annually adjusted by the IPC – FIPE and is recorded in a restricted account, pursuant to the contractual operating proceeding. Should SABESP comply with its monthly obligations with the SPE, the funds from the restricted account will be released.
The guarantee has been effective since the beginning of the operation and will be valid until the conclusion, termination, intervention, annulment or caducity of the Administrative Concession, or other extinction events provided for in the Concession Agreement or in the law applicable to administrative concessions, including in the event of bankruptcy or extinction of the SPE.
São Lourenço Production System
As of March 31, 2017 and December 31, 2016, the carrying amount recorded in the Company’s intangible assets, related to this PPP, amounted to R$2,141,317 and R$1,951,538, respectively. Intangible assets are accounted for based on the physical evolution of the works which, as of March 31, 2017 was approximately 69%, with a counter-entry in the Public-Private Partnership (PPP) liabilities account. As of March 31, 2017, a discount rate of 7.80% p.a. was used to calculate the adjustment to present value of the agreement.
PAGE: 44 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
The obligations assumed by the Company as of March 31, 2017 and December 31, 2016 are shown in the table below, and the increase in intangible assets and liabilities was due to the progress of works in 2017.
March 31, 2017 | December 31, 2016 | ||||||||||
Current | Noncurrent | Total | Current | Noncurrent | Total | ||||||
liabilities | liabilities | liabilities | liabilities | liabilities | liabilities | ||||||
Alto Tietê | 32,533 | 301,482 | 334,015 | 31,898 | 309,858 | 341,756 | |||||
São Lourenço | - | 2,093,174 | 2,093,174 | - | 1,907,662 | 1,907,662 | |||||
Total | 32,533 | 2,394,656 | 2,427,189 | 31,898 | 2,217,520 | 2,249,418 |
(i) Works in progress
As of March 31, 2017, the amount of R$8,854 million is recorded under intangible assets as work in progress (R$9,156 million - December 31, 2016), and in the period ended March 31, 2017, the major projects are located in the municipalities of São Paulo, Franca and Praia Grande, totaling R$5,747 million (including R$2,141 million from PPP São Lourenço), R$230 million and R$199 million, respectively.
(j) Amortization of intangible assets
The amortization average rate totaled 3.9% as of March 31, 2017 and 2016.
(k) Software license of use
The software license of use is capitalized based on the costs incurred to acquire software and make them ready for use. The project to implement an integrated business management solution (ERP system), which includes the administrative/financial module and the commercial module, is in progress. The administrative/financial module began operations in April 2017.
PAGE: 45 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
14 Property, plant and equipment
(a) Statement of financial position details
March 31, 2017 | December 31, 2016 | ||||||||||
Accumulated | Accumulated | ||||||||||
Cost | depreciation | Net | Cost | depreciation | Net | ||||||
Land | 92,494 | - | 92,494 | 92,494 | - | 92,494 | |||||
Buildings | 77,581 | (34,734) | 42,847 | 77,548 | (34,286) | 43,262 | |||||
Equipment | 326,926 | (195,080) | 131,846 | 338,696 | (189,556) | 149,140 | |||||
Transportation equipment | 10,922 | (6,626) | 4,296 | 11,141 | (6,610) | 4,531 | |||||
Furniture and fixtures | 23,573 | (11,833) | 11,740 | 23,633 | (11,647) | 11,986 | |||||
Other | 1,179 | (222) | 957 | 1,181 | (211) | 970 | |||||
Total | 532,675 | (248,495) | 284,180 | 544,693 | (242,310) | 302,383 |
(b) Changes
Write-offs | |||||||||||
December | and | March 31, | |||||||||
31, 2016 | Additions | Transfers | disposals | Depreciation | 2017 | ||||||
Land | 92,494 | - | - | - | - | 92,494 | |||||
Buildings | 43,262 | - | 11 | - | (426) | 42,847 | |||||
Equipment | 149,140 | 10,426 | (9,340) | (30) | (18,350) | 131,846 | |||||
Transportation equipment | 4,531 | - | (25) | (10) | (200) | 4,296 | |||||
Furniture and fixtures | 11,986 | 175 | (85) | (29) | (307) | 11,740 | |||||
Other | 970 | - | - | - | (13) | 957 | |||||
Total | 302,383 | 10,601 | (9,439) | (69) | (19,296) | 284,180 | |||||
Write-offs | |||||||||||
December 31, | and | March 31, | |||||||||
2015 | Additions | Transfers | disposals | Depreciation | 2016 | ||||||
Land | 102,708 | - | - | - | - | 102,708 | |||||
Buildings | 45,891 | - | 171 | - | (944) | 45,118 | |||||
Equipment | 162,218 | 12,555 | (5,891) | (23) | (8,520) | 160,339 | |||||
Transportation equipment | 5,692 | 97 | - | - | (237) | 5,552 | |||||
Furniture and fixtures | 8,418 | 254 | 4,784 | (5) | (734) | 12,717 | |||||
Other | 149 | - | - | - | (2) | 147 | |||||
Total | 325,076 | 12,906 | (936) | (28) | (10,437) | 326,581 |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(c) Depreciation
The Company annually revises the depreciation rates of: buildings – 2.3%; equipment- 16.2%; transportation equipment - 10% and furniture, fixture and equipment – 7.0%. Lands are not depreciated.
The depreciation average rate was 12.0% and 10.8%, as of March 31, 2017 and 2016, respectively.
PAGE: 47 of 80
15 | Borrowings and Financing |
Borrowings and financing outstanding balance | March 31, 2017 | December 31, 2016 | |||||||||
Financial institution | Current | Noncurrent | Total | Current | Noncurrent | Total | |||||
Local currency | |||||||||||
10th issue debentures | 41,234 | 115,016 | 156,250 | 40,967 | 120,343 | 161,310 | |||||
12th issue debentures | 45,450 | 328,793 | 374,243 | 45,450 | 340,165 | 385,615 | |||||
14th issue debentures | 40,056 | 158,174 | 198,230 | 39,802 | 178,571 | 218,373 | |||||
15th issue debentures | 340,492 | 339,697 | 680,189 | 97,692 | 672,657 | 770,349 | |||||
17th issue debentures | 144,391 | 768,150 | 912,541 | 140,144 | 904,094 | 1,044,238 | |||||
18th issue debentures | 32,648 | 220,479 | 253,127 | 32,436 | 223,840 | 256,276 | |||||
19th issue debentures | 199,714 | - | 199,714 | 199,461 | - | 199,461 | |||||
20th issue debentures | - | 495,866 | 495,866 | - | 495,533 | 495,533 | |||||
Brazilian Federal Savings Bank | 61,230 | 1,106,212 | 1,167,442 | 59,199 | 1,088,160 | 1,147,359 | |||||
Brazilian Development Bank - BNDES BAIXADA SANTISTA | 16,662 | 29,158 | 45,820 | 16,603 | 33,207 | 49,810 | |||||
Brazilian Development Bank - BNDES PAC | 11,216 | 58,755 | 69,971 | 10,987 | 60,293 | 71,280 | |||||
Brazilian Development Bank - BNDES PAC II 9751 | 4,303 | 26,033 | 30,336 | 4,288 | 27,007 | 31,295 | |||||
Brazilian Development Bank - BNDES PAC II 9752 | 2,350 | 21,148 | 23,498 | 2,341 | 21,659 | 24,000 | |||||
Brazilian Development Bank - BNDES ONDA LIMPA | 23,301 | 162,859 | 186,160 | 23,219 | 168,083 | 191,302 | |||||
Brazilian Development Bank - BNDES TIETÊ III | 30,160 | 301,413 | 331,573 | 30,054 | 307,862 | 337,916 | |||||
Brazilian Development Bank - BNDES 2015 | - | 404,936 | 404,936 | - | 233,967 | 233,967 | |||||
Leases | 14,483 | 539,698 | 554181 | 14,914 | 537,602 | 552,516 | |||||
Other | 772 | 10,666 | 11,438 | 746 | 10,829 | 11,575 | |||||
Interest and charges | 69,686 | - | 69,686 | 121,605 | - | 121,605 | |||||
Total in local currency | 1,078,148 | 5,087,053 | 6,165,201 | 879,908 | 5,423,872 | 6,303,780 |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO
Notes to the Quarterly Financial Information
Borrowings and financing outstanding balance | March 31, 2017 | December 31, 2016 | |||||||||
Financial institution | Current | Noncurrent | Total | Current | Noncurrent | Total | |||||
Foreign currency | |||||||||||
Inter-American Development Bank - BID 713 – US$25,097 thousand (US$25,097 thousand | |||||||||||
in December 2016) | 79,519 | - | 79,519 | 81,794 | - | 81,794 | |||||
Inter-American Development Bank - BID 1212 – US$87,364 thousand (US$92,503 thousand | |||||||||||
in December 2016) | 32,565 | 244,238 | 276,803 | 33,499 | 267,979 | 301,478 | |||||
Inter-American Development Bank - BID 2202 – US$433,740 thousand (US$438,071 | |||||||||||
thousand in December 2016) | 74,284 | 1,286,083 | 1,360,367 | 75,143 | 1,339,803 | 1,414,946 | |||||
International Bank of Reconstruction and Development -BIRD – US$81,548 thousand | |||||||||||
(US$79,946 thousand in December 2016) | - | 258,052 | 258,052 | - | 260,224 | 260,224 | |||||
Deutsche Bank – US$150,000 thousand (US$150,000 thousand in December 2016) | - | 467,059 | 467,059 | - | 480,244 | 480,244 | |||||
Eurobonds– US$350,000 thousand (US$350,000 thousand in December 2016) | - | 1,105,855 | 1,105,855 | - | 1,137,395 | 1,137,395 | |||||
JICA 15 – ¥14,405,735 thousand (¥14,981,590 thousand in December 2016) | 32,775 | 376,914 | 409,689 | 32,175 | 386,111 | 418,286 | |||||
JICA 18 – ¥12,952,000 thousand (¥13,470,080 thousand in December 2016) | 29,468 | 338,626 | 368,094 | 28,930 | 346,889 | 375,819 | |||||
JICA 17 – ¥1,627,078 thousand (¥1,596,251 thousand in December 2016) | 1,251 | 44,343 | 45,594 | 1,205 | 42,675 | 43,880 | |||||
JICA 19 – ¥29,307,288 thousand (¥27,596,009 thousand in December 2016) | - | 831,506 | 831,506 | - | 768,463 | 768,463 | |||||
BID 1983AB – US$106,346 thousand (US$106,346 thousand in December 2016) | 75,859 | 256,773 | 332,632 | 78,030 | 263,921 | 341,951 | |||||
Interest and other charges | 41,098 | - | 41,098 | 35,883 | - | 35,883 | |||||
Total in foreign currency | 366,819 | 5,209,449 | 5,576,268 | 366,659 | 5,293,704 | 5,660,363 | |||||
Total borrowings and financing | 1,444,967 | 10,296,502 | 11,741,469 | 1,246,567 | 10,717,576 | 11,964,143 |
Exchange rate as of March 31, 2017: US$3.1684; ¥0.02844 (as of December 31, 2016: US$3.2591; ¥0.02792).
As of March 31, 2017, the Company did not record balances of borrowings and financing raised during the year to mature within 12 months.
PAGE: 49 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO
Notes to the Quarterly Financial Information
Inflation | ||||||||
Local currency | Guarantees | Maturity | Annual interest rates | adjustment | ||||
10th issue debentures | Own funds | 2020 | TJLP +1.92% (Series 1 and 3) and 9.53% (Series 2) | IPCA (series 2) | ||||
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) | ||||
15th issue debentures | Own funds | 2019 | CDI + 0.99% (Series 1) and 6.2% (Series 2) | IPCA (series 2) | ||||
17th issue debentures | Own funds | 2023 | CDI +0.75 (Series 1) and 4.5% (Series 2) | IPCA (series 2 | ||||
and4.75% (Series 3) | and 3) | |||||||
18th issue debentures | Own funds | 2024 | TJLP 1.92 % (Series 1 and 3) and 8.25% (Series 2) | IPCA (series 2) | ||||
19th issue debentures | Own funds | 2017 | CDI + 0.80% to 1.08% | |||||
20th issue debentures | Own funds | 2019 | CDI + 3.80% | |||||
Brazilian Federal Savings Bank | Own funds | 2017/2038 | 5% to 9.5% | TR | ||||
Brazilian Development Bank - BNDES BAIXADA SANTISTA | Own funds | 2019 | 2.5%+TJLP | |||||
Brazilian Development Bank - BNDES PAC | Own funds | 2023 | 2.15%+TJLP | |||||
Brazilian Development Bank - BNDES PAC II 9751 | Own funds | 2027 | 1.72%+TJLP | |||||
Brazilian Development Bank - BNDES PAC II 9752 | Own funds | 2027 | 1.72%+TJLP | |||||
Brazilian Development Bank - BNDES ONDA LIMPA | Own funds | 2025 | 1.92%+TJLP | |||||
Brazilian Development Bank - BNDES TIETÊ III | Own funds | 2028 | 1.66%+TJLP | |||||
Brazilian Development Bank - BNDES 2015 | Own funds | 2035 | 2.5%+TJLP | |||||
Leases | 2035 | 7.73% to 10.12% | IPC | |||||
12% (Presidente Prudente) and TJLP + 1.66% | ||||||||
Other | Own funds | 2018/2025 | TR | |||||
(FINEP) |
PAGE: 50 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO
PAGE: 51 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO
(i) | Payment schedule – accounting balances as of March 31, 2017 |
2023 to | |||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2038 | TOTAL | ||||||||||
LOCAL CURRENCY | |||||||||||||||||
Debentures | 315,156 | 894,272 | 1,009,264 | 420,208 | 198,445 | 177,932 | 254,883 | 3,270,160 | |||||||||
Brazilian Federal Savings Bank | 45,431 | 64,598 | 66,586 | 68,885 | 72,422 | 76246 | 773,274 | 1,167,442 | |||||||||
BNDES | 65,994 | 97,969 | 111,938 | 93,941 | 93,497 | 93,497 | 535,458 | 1,092,294 | |||||||||
Leases | 11,218 | 28,214 | 29,699 | 31,313 | 33,067 | 34,975 | 385,695 | 554,181 | |||||||||
Other | 570 | 1,458 | 1,360 | 1,360 | 1,360 | 1,360 | 3,970 | 11,438 | |||||||||
Interest and charges | 57,327 | 12,359 | - | - | - | - | - | 69,686 | |||||||||
TOTAL IN LOCAL CURRENCY | 495,696 | 1,098,870 | 1,218,847 | 615,707 | 398,791 | 384,010 | 1,953,280 | 6,165,201 | |||||||||
FOREIGN CURRENCY | |||||||||||||||||
BID | 132,944 | 106,850 | 106,850 | 106,850 | 106,850 | 106,850 | 1,049,495 | 1,716,689 | |||||||||
BIRD | - | - | 8,604 | 17,208 | 17208 | 17,208 | 197,824 | 258,052 | |||||||||
Deutsche Bank | - | 237,630 | 229,429 | - | - | - | - | 467,059 | |||||||||
Eurobonds | - | - | - | 1,105,855 | - | - | - | 1,105,855 | |||||||||
JICA | 32,372 | 64,745 | 109,799 | 109,799 | 109,799 | 109,799 | 1,118,570 | 1,654,883 | |||||||||
BID 1983AB | 75,859 | 75,353 | 56,056 | 54,379 | 24,372 | 24,372 | 22,241 | 332,632 | |||||||||
Interest and charges | 41,098 | - | - | - | - | - | - | 41,098 | |||||||||
TOTAL | IN | FOREIGN | |||||||||||||||
CURRENCY | 282,273 | 484,578 | 510,738 | 1,394,091 | 258,229 | 258,229 | 2,388,130 | 5,576,268 | |||||||||
Overall Total | 777,969 | 1,583,448 | 1,729,585 | 2,009,798 | 657,020 | 642,239 | 4,341,410 | 11,741,469 |
PAGE: 52 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(i) Main events in the three-month period ended March 31, 2017
(a) Debentures
As of January 16, 2017, the Company amortized the second installment of the 17th issue of series 1, totaling R$140,144.
As of February 15, 2017, the Company fully paid the 15th issue of series 1, totaling R$104,809, referring to principal and interest.
(b) BNDES
As of March 15, 2017, the Company raised R$170,000, corresponding to agreement 15.2.0313.1 -BNDES 2015.
(c) JICA
In 2017, funding totaled R$20,243, referring to agreement BZ-P19 (JICA 19).
(d) BID
In 2017, funding and amortization totaled R$22,463 and R$35,870, respectively, referring to agreement BID 2202.
(e) Exchange rate changes
The US dollar rate exchange decreased 2.8%, from R$3.2591 as of December 31, 2016 to R$3.1684 in March 31, 2017, decreasing debt by R$111,933. In the same period, the Yen increased 1.9%, from R$0.02792 in December 31, 2016 to R$0.02844 in March 31, 2017, increasing debt by R$30,312.
(ii) Covenants
As of March 31, 2017, the Company had met the requirements set forth by its borrowings and financing agreements.
The goals of the Performance Improvement Agreement (AMD), dated May 28, 2007 and amended on August 22, 2012, entered into between SABESP and the Federal Government, with the Brazilian Federal Savings Bank and the BNDES as intervening parties, expired on December 31, 2016 and were not renewed, pursuant to article 2 of Normative Instruction 6, of March 14, 2013.
PAGE: 53 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(iii) Borrowings and financing – Credit Limited
Agent | March 31, 2017 | |
(in millions of reais (*)) | ||
Brazilian Federal Savings Bank | 1,678 | |
Brazilian Development Bank | 1,545 | |
Inter-American Development Bank – BID | 490 | |
Japan International Cooperation Agency – JICA | 223 | |
International Bank for Reconstruction and Development – BIRD | 58 | |
Other | 38 | |
Total | 4,032 | |
(*)Exchange rate as of March 31, 2017 (US$1.00 = R$3.1684; ¥1.00 = R$0.028440). | ||
SABESP, in order to comply with its Capex plan relies on a fund-raising plan. | ||
Financing resources contracted have specific purposes, which have been released for the | ||
execution of their respective investments, according to the progress of the works. | ||
Additional information on borrowings and financing is presented in Note 16 to the Annual | ||
Financial Statements as of December 31, 2016. |
16 | Taxes payable (a) Current assets |
March 31, 2017 | December 31, 2016 | ||
Recoverable taxes | |||
Income tax and social contribution | - | 32,365 | |
Withholding income tax (IRRF) on financial investments | 10,984 | 7,057 | |
Other federal taxes | 2,961 | 2,961 | |
Other municipal taxes | 250 | 250 | |
Total | 14,195 | 42,633 |
The reduction in recoverable taxes is mainly due to a decrease in “income tax and social contribution” item, which was offset by these taxes in the period.
PAGE: 54 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(b) Current liabilities
March 31, 2017 | December 31, 2016 | ||
Taxes and contributions payable | |||
Cofins and Pasep | 68,866 | 49,132 | |
Income tax and social contribution | 32,547 | - | |
INSS (Social Security contribution) | 35,061 | 35,376 | |
IRRF (withholding income tax) | 1,354 | 62,771 | |
Other | 30,926 | 21,478 | |
Total | 168,754 | 168,757 |
17 Deferred taxes and contributions
(a) Statement of financial position details
March 31, 2017 | December 31, 2016 | ||
Deferred income tax assets | |||
Provisions | 528,019 | 524,129 | |
Actuarial loss –G1 Plan | 85,044 | 85,044 | |
Pension obligations – G1 | 166,943 | 167,922 | |
Donations of underlying asset on concession agreements | 57,130 | 57,317 | |
Allowance for doubtful accounts | 257,899 | 266,757 | |
Other | 152,184 | 151,247 | |
Total deferred tax assets | 1,247,219 | 1,252,416 | |
Deferred income tax liabilities | |||
Temporary difference on concession of intangible asset | (483,509) | (492,341) | |
Capitalization of borrowing costs | (392,583) | (374,512) | |
Profit on supply to governmental entities | (89,959) | (92,365) | |
Construction margin | (91,052) | (91,790) | |
Borrowing costs | (14,796) | (15,063) | |
Total deferred tax liabilities | (1,071,899) | (1,066,071) | |
Deferred tax asset, net | 175,320 | 186,345 |
PAGE: 55 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
December 31, | Net | March 31, | ||||
Deferred income tax assets | 2016 | change | 2017 | |||
Provisions | 524,129 | 3,890 | 528,019 | |||
Actuarial loss – G1 | 85,044 | - | 85,044 | |||
Pension obligations - G1 | 167,922 | (979) | 166,943 | |||
Donations of underlying assets on concession agreements | 57,317 | (187) | 57,130 | |||
Allowance for doubtful accounts | 266,757 | (8,858) | 257,899 | |||
Other | 151,247 | 937 | 152,184 | |||
Total | 1,252,416 | (5,197) | 1,247,219 | |||
Deferred income tax liabilities | ||||||
Temporary difference on concession of intangible asset | (492,341) | 8,832 | (483,509) | |||
Capitalization of borrowing costs | (374,512) | (18,071) | (392,583) | |||
Profit on supply to governmental entities | (92,365) | 2,406 | (89,959) | |||
Construction margin | (91,790) | 738 | (91,052) | |||
Borrowing costs | (15,063) | 267 | (14,796) | |||
Total | (1,066,071) | (5,828) | (1,071,899) | |||
Deferred tax asset, net | 186,345 | (11,025) | 175,320 |
PAGE: 56 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
December 31, | Net | March 31, | |||
Deferred income tax assets | 2015 | change | 2016 | ||
Provisions | 480,378 | 34,886 | 515,264 | ||
Pension obligations - G1 | 256,808 | 8,709 | 265,517 | ||
Donations of underlying asset on concession | |||||
agreements | 53,206 | 146 | 53,352 | ||
Credit losses | 213,171 | 11,416 | 224,587 | ||
Tax losses | 58,829 | (58,829) | - | ||
Other | 121,550 | 7,730 | 129,280 | ||
Total | 1,183,942 | 4,058 | 1,188,000 | ||
Deferred income tax liabilities | |||||
Temporary difference on concession of | |||||
intangible asset | (524,495) | 7,719 | (516,776) | ||
Capitalization of borrowing costs | (309,648) | (10,681) | (320,329) | ||
Profit on supply to governmental entities | (81,055) | (2,523) | (83,578) | ||
Actuarial gain – G1 | (33,726) | - | (33,726) | ||
Construction margin | (94,921) | 824 | (94,097) | ||
Borrowing costs | (11,855) | (442) | (12,297) | ||
Total | (1,055,700) | (5,103) | (1,060,803) | ||
Deferred tax asset, net | 128,242 | (1,045) | 127,197 | ||
March 31, | December 31, | ||||
2017 | 2016 | ||||
Opening balance | 186,345 | 128,242 | |||
Net change in the period: | |||||
- corresponding entry in the statement of income | (11,025) | (60,667) | |||
- corresponding entry in equity valuation adjustments | - | 118,770 | |||
Total change, net | (11,025) | 58,103 | |||
Closing balance | 175,320 | 186,345 |
PAGE: 57 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(c) Reconciliation of the effective tax rate
The amounts recorded as income tax and social contribution expenses in the financial statements are reconciled to the statutory rates, as shown below:
March 31, 2017 | March 31, 2016 | ||
Profit before income taxes | 1,035,827 | 968,823 | |
Statutory rate | 34% | 34% | |
Computed expense at statutory rate | (352,181) | (329,400) | |
Permanent differences | |||
Provision – Law 4,819/58 (i) | (14,945) | (17,108) | |
Donations | (222) | (92) | |
Other differences | 5,883 | 6,566 | |
Actual income tax and social contribution | (361,465) | (340,034) | |
Current income tax and social contribution | (350,440) | (338,989) | |
Deferred income tax and social contribution | (11,025) | (1,045) | |
Effective rate | 35% | 35% | |
(i) Permanent difference related to the provision for actuarial liability (Note 19 b (iii)). |
PAGE: 58 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
18 Provisions
(a) Lawsuits and proceedings that resulted in provisions
(I) Statement of financial position details
The Company is party to a number of claims and legal proceedings arising in the normal course of business, including civil, tax, labor and environmental matters. Management recognizes provisions consistently with the recognition and measurement criteria established in Note 3.15 to the Annual Financial Statements as of December 31, 2016. Management believes that the provisions are sufficient to cover eventual losses, net of escrow deposits, as follows:
December | |||||||||||
Escrow | March 31, | Escrow | 31, | ||||||||
Provisions | deposits | 2017 | Provisions | deposits | 2016 | ||||||
Customer claims (i) | 557,879 | (91,591) | 466,288 | 572,210 | (97,171) | 475,039 | |||||
Supplier claims (ii) | 341,572 | (253,525) | 88,047 | 332,667 | (251,510) | 81,157 | |||||
Other civil claims (iii) | 126,907 | (13,463) | 113,444 | 131,286 | (12,652) | 118,634 | |||||
Tax claims (iv) | 75,543 | (3,010) | 72,533 | 69,898 | (2,986) | 66,912 | |||||
Labor claims (v) | 290,169 | (4,629) | 285,540 | 285,413 | (3,202) | 282,211 | |||||
Environmental claims (vi) | 160,927 | (970) | 159,957 | 150,084 | (962) | 149,122 | |||||
Total | 1,552,997 | (367,188) | 1,185,809 | 1,541,558 | (368,483) | 1,173,075 | |||||
Current | 712,963 | - | 712,963 | 730,334 | - | 730,334 | |||||
Noncurrent | 840,034 | (367,188) | 472,846 | 811,224 | (368,483) | 442,741 |
PAGE: 59 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(II) Changes
Interest | |||||||||||
and | Use of | Amounts | |||||||||
December | Additional | inflation | the | not used | March 31, | ||||||
31, 2016 | provision | adjustment | accrual | (reversal) | 2017 | ||||||
Customer claims (i) | 572,210 | 7,188 | 10,842 | (28,459) | (3,902) | 557,879 | |||||
Supplier claims (ii) | 332,667 | 5,891 | 13,035 | (9,878) | (143) | 341,572 | |||||
Other civil claims (iii) | 131,286 | 3,167 | 3,721 | (3,428) | (7,839) | 126,907 | |||||
Tax claims (iv) | 69,898 | 2,392 | 3,473 | (192) | (28) | 75,543 | |||||
Labor claims (v) | 285,413 | 11,950 | 10,176 | (8,628) | (8,742) | 290,169 | |||||
Environmental claims (vi) | 150,084 | 7,518 | 4,592 | (970) | (297) | 160,927 | |||||
Subtotal | 1,541,558 | 38,106 | 45,839 | (51,555) | (20,951) | 1,552,997 | |||||
Escrow deposits | (368,483) | (6,627) | (3,050) | 8,274 | 2,698 | (367,188) | |||||
Total | 1,173,075 | 31,479 | 42,789 | (43,281) | (18,253) | 1,185,809 |
Interest | |||||||||||
and | Use of | Amounts | |||||||||
December | Additional | inflation | the | not used | March 31, | ||||||
31, 2015 | provisions | adjustment | accrual | (reversal) | 2016 | ||||||
Customer claims (i) | 561,061 | 18,788 | 34,563 | (8,579) | (8,278) | 597,555 | |||||
Supplier claims (ii) | 296,660 | 3,545 | 22,519 | (11,141) | (25) | 311,558 | |||||
Other civil claims (iii) | 124,833 | 4,018 | 6,594 | (598) | (2,062) | 132,785 | |||||
Tax claims (iv) | 62,812 | 367 | 2,753 | (263) | (1,701) | 63,968 | |||||
Labor claims (v) | 283,991 | 7,988 | 7,749 | (9,664) | (9,050) | 281,014 | |||||
Environmental claims (vi) | 83,520 | 36,385 | 12,690 | - | (3,991) | 128,604 | |||||
Subtotal | 1,412,877 | 71,091 | 86,868 | (30,245) | (25,107) | 1,515,484 | |||||
Escrow deposits | (330,663) | (22,089) | (11,673) | 47 | 1,122 | (363,256) | |||||
Total | 1,082,214 | 49,002 | 75,195 | (30,198) | (23,985) | 1,152,228 |
(b) Lawsuits deemed as contingent liabilities
The Company is party to lawsuits and administrative proceedings relating to environmental, tax, civil and labor claims, which are assessed as contingent liabilities in the financial statements, since it either does not expect outflows to be required or the amount of the obligation cannot be reliably measured. Contingent liabilities are represented as follows:
March 31, 2017 | December 31, 2016 | ||
Customer claims (i) | 276,200 | 306,500 | |
Supplier claims (ii) | 1,493,900 | 1,422,000 | |
Other civil claims (iii) | 722,000 | 709,400 | |
Tax claims (iv) | 1,170,500 | 1,143,000 | |
Labor claims (v) | 547,900 | 533,600 | |
Environmental claims (vi) | 3,450,000 | 3,317,600 | |
Total | 7,660,500 | 7,432,100 |
PAGE: 60 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(c) Explanation on the nature of main classes of lawsuits
(i) Customer claims
Approximately 1,110 lawsuits were filed by commercial customers, which claim that their tariffs should correspond to other consumer categories, and 700 lawsuits in which customers claim a reduction in the sewage tariff due to losses in the system, consequently requesting the refund of amounts charged by the Company and 50 lawsuits in which customers plead the reduction in tariff under the category as “Social Welfare Entity”. The Company was granted both favorable and unfavorable final decisions at several court levels.
(ii) Supplier claims
These claims include lawsuits filed by some suppliers alleging underpayment of monetary restatements, withholding of amounts related to the understated inflation rates deriving from Real economic plan, and the economic and financial imbalance of the agreements. These lawsuits are in progress at different courts.
(iii) Other civil claims
These mainly refer to indemnities for property damage, pain and suffering, and loss of profits allegedly caused to third parties, filed at different court levels.
(iv) Tax claims
Tax claims refer mainly to issues related to tax collections challenged due to differences in the interpretation of legislation by the Company's management.
(v) Labor claims
The Company is a party to labor lawsuits, involving issues such as overtime, shift schedule, health hazard premium and hazardous duty premium, prior notice, change of function, salary equalization, service outsourcing and other. Part of the amount involved is in provisional or final execution at various court levels.
(vi) Environmental claims
Environmental claims refer to several administrative proceedings and lawsuits filed by government entities, including Companhia de Tecnologia de Saneamento Ambiental – Cetesb and the Public Prosecution Office of the State of São Paulo, that aim affirmative and negative covenants and penalty is estimated due to failure to comply in addition to the imposition of indemnity due to environmental damages allegedly caused by the Company. The amounts accrued represent the best estimate of the Company at this moment, however, may differ from the amount to be disbursed as indemnity to alleged damages, in view of the current stage of referred proceedings.
PAGE: 61 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(d) Guarantee insurance for escrow deposit
The Company contracts guarantee insurance for the issue of policy, which was renewed on May 24, 2016, in the amount of R$500 million. Such insurance will be used in legal claims where instead of making immediate cash disbursement by the Company, such insurance is used until the conclusion of these proceedings limited to up to five years.
From May 24, 2016 to March 31, 2017, the Company used R$50,586 of the total contracted amount.
Additional information on provisions and contingent liabilities is presented in Note 19 to the Annual Financial Statements as of December 31, 2016.
19 Employees benefits (a) Health benefit plan
The health benefit plan is managed by Sabesprev and consists of optional, free choice, health plans sponsored by contributions of SABESP and the active participants, as follows:
. Company: 12.2% on average, of gross payroll;
. Participating employees: 3.21% of base salary and premiums, equivalent to 2.9% of payroll, on average.
(b) Pension plan benefits
PAGE: 62 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
(i) G1 Plan
The Company sponsors a defined benefit pension plan for its employees ("G1 Plan"), which is managed by Sabesprev, receives similar contributions established in a plan of subsidy of actuarial study of Sabesprev, as follows:
. 1.21% of the portion of the salary of participation up to 20 salaries; and
. 10.24% of the surplus, if any, of the portion of the salary of participation over 20 salaries.
As of March 31, 2017, SABESP had a net actuarial liability of R$750,291 (R$753,170 as of December 31, 2016) representing the difference between the present value of the Company's defined benefit obligations to the participating employees, retired employees, and pensioners; the fair value of the plan’s assets.
(ii) Private pension plan benefits – Defined contribution
As of March 31, 2017, Sabesprev Mais plan, based on defined contribution, had 9,424 active and assisted participants (9,453 as of December 31, 2016).
With respect to the Sabesprev Mais plan, the contributions from the sponsor represent 100% over the total basic contribution from the participants.
(iii) PlanG0
Pursuant to Law 4,819/58, employees who started providing services prior to May 1974 and were retired as an employee of the Company acquired a legal right to receive supplemental pension payments, which rights are referred as "Plan G0". The Company pays these supplemental benefits on behalf of the State Government and makes claims for reimbursements from the State Government, which are recorded as accounts receivable from related parties, limited to the amounts considered virtually certain that will be reimbursed by the State Government. As of March 31, 2017, the Company recorded a defined benefit obligation for Plan G0 of R$2,537,738 (R$2,512,080 as of December 31, 2016).
(c) Profit sharing
The Company has a profit sharing program in accordance with an agreement with labor union and SABESP. The period covered represents the Company fiscal year, commence in January to December 2017. The limit of the profit sharing is one month salary for each employee, depending on performance goals reached.
From January to March 2017 and 2016, R$21,077 and R$18,729, respectively, were accrued.
PAGE: 63 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
20 Servicespayable
The services account records the balances payable, mainly from services received from third parties, such as supply of electric power, reading of hydrometers and delivery of water and sewage bills, cleaning, surveillance and security services, collection, legal counsel services, audit, marketing and advertising and consulting services, among others. This account also records the amounts payable from the percentage in the revenues of São Paulo local government. The balances as of March 31, 2017 and December 31, 2016 were R$437,215 and R$460,054, respectively.
21 Equity
(a) Authorized capital
The Company is authorized to increase capital by up to R$15,000,000, based on a Board of Directors' resolution, after submission to the Fiscal Council.
In the event of capital increase, issue of convertible debentures and/or warrants by means of private subscription, shareholders will have preemptive right in the proportion of number of shares held, pursuant to Article 171 of Law 6,404/76.
(b) Subscribed and paid-in capital
Subscribed and paid-in capital is represented by 683,509,869 registered, book-entry common shares without par value as of March 31, 2017 and December 31, 2016, held as follows:
March 31, 2017 | December 31, 2016 | ||||||
Number of | Number of | ||||||
shares | % | shares | % | ||||
State Department of Finance | 343,524,285 | 50.26% | 343,524,285 | 50.26% | |||
Companhia Brasileira de Liquidação e Custódia | 205,558,732 | 30.07% | 206,955,305 | 30.28% | |||
The Bank of New York ADR Department | |||||||
(equivalent in shares) (*) |
132,354,213 | 19.37% | 132,401,813 | 19.37% | |||
Other | 2,072,639 | 0.30% | 628,466 | 0.09% | |||
683,509,869 | 100.00% | 683,509,869 | 100.00% |
(*) each ADR corresponds to 1 share.
Further information about equity, such as shareholder’ compensation, dividends and purpose of reserves, can be found in Note 22 to the Annual Financial Statements as of December 31, 2016.
PAGE: 64 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
22 Earnings per share Basic anddiluted
Basic earnings per share is calculated by dividing the equity attributable to Company’s owners by the weighted average number of outstanding common shares during the year. The Company does not have potentially dilutive common shares outstanding or debts convertible into common shares. Accordingly, basic and diluted earnings per share are equal.
January to | January to | ||
March 2017 | March 2016 | ||
Equity attributable to Company’s owners | 674,362 | 628,789 | |
Weighted average number of common shares issued | 683,509,869 | 683,509,869 | |
Basic and diluted earnings per share (reais per share) | 0.98662 | 0.91994 |
PAGE: 65 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
23 Operating segment information
Management, comprised by the Board of Directors and Board of Executive Officers, has determined the operating segment used to make strategic decisions, as sanitation services.
January to March 2017 | |||||
Reconciliation to | Balance as per | ||||
the statement of | financial | ||||
Sanitation (i) | income (ii) | statements | |||
Gross operating revenue | 3,029,291 | 722,928 | 3,752,219 | ||
Gross sales deductions | (193,394) | - | (193,394) | ||
Net operating revenue | 2,835,897 | 722,928 | 3,558,825 | ||
Costs, selling and administrative expenses | (1,832,001) | (707,229) | (2,539,230) | ||
Income from operations before other | |||||
operating expenses, net and equity | |||||
accounting | 1,003,896 | 15,699 | 1,019,595 | ||
Other operating income / (expenses), net | 10,564 | ||||
Equity accounting | 1,870 | ||||
Financial result, net | 3,798 | ||||
Income from operations before taxes | 1,035,827 | ||||
Depreciation and amortization | 331,948 | - | 331,948 |
(i) | See note 29 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional information to long-lived assets; |
(ii) | Construction revenue and related costs not reported to the Company’s chief operating decision maker (“CODM”). |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
January to March 2016 | |||||
(Restated) | |||||
Reconciliation to | Balance as per | ||||
the financial | financial | ||||
Sanitation (i) | statements (ii) | statements | |||
Gross operating revenue | 2,570,628 | 625,280 | 3,195,908 | ||
Gross sales deductions | (168,066) | - | (168,066) | ||
Net operating revenue | 2,402,562 | 625,280 | 3,027,842 | ||
Costs, selling, general and administrative | |||||
expenses | (1,794,362) | (612,386) | (2,406,748) | ||
Income from operations before other | |||||
operating expenses, net and equity | |||||
accounting | 608,200 | 12,894 | 621,094 | ||
Other operating income / (expenses), net | 5,482 | ||||
Equity accounting | 2,087 | ||||
Financial result, net | 340,160 | ||||
Income from operations before taxes | 968,823 | ||||
Depreciation and amortization | 284,656 | - | 284,656 |
(i) | See note 29 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional information to long-lived assets; |
(ii) | Construction revenue and related costs not reported to the Company’s chief operating decision maker (“CODM”). |
Explanation on the reconciliation items for the Financial Statements. The impacts on gross operating income and costs are as follows:
January to March | January to March | ||
2017 | 2016 | ||
Gross revenue from construction recognized under ICPC 1 | |||
(R1) (a) | 722,928 | 625,280 | |
Construction costs recognized under ICPC 1 (R1) (a) | (707,229) | (612,386) | |
Construction margin | 15,699 | 12,894 |
(a) | Revenue from concession construction contracts is recognized in accordance with CPC 17 (R1), Construction Contracts (IAS 11), using the percentage-of-completion method. See Notes 13 (c) and (f). |
PAGE: 67 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
24 Operating revenue
(a) Revenue from sanitation services:
January to March de | January to March | ||
2017 | 2016 | ||
São Paulo Metropolitan Region | 2,108,248 | 1,750,611 | |
Regional Systems (i) | 921,043 | 820,017 | |
Total (ii) | 3,029,291 | 2,570,628 | |
(i) Including the municipalities operated in countryside and at the coast of the State of São Paulo. | |||
(ii) The gross operating revenue from sanitation services, totaling R$3,029,291, not including
construction revenue, increased by R$458,663, or 17.8%, when compared to the R$2,570,628
recorded from January 1, 2016 to March 31, 2016. |
|||
The main factors responsible for the increase were the 8.4% tariff adjustment since May 2016, the 6.0% increase in the total billed volume in the first quarter of 2016 versus the first q uarter of 2017. | |||
Revenue was also impacted by the Water Consumption Reduction Incentive Program (Bonus), a R$153,766 decrease in the first quarter of 2016, and by the application of the Contingency Tariff, totaling R$160,570 in the first quarter of 2016. | |||
(b) | Reconciliation between gross operating income and net operating income: |
January to March | January to March | ||
2017 | 2016 | ||
Revenue from sanitation services | 3,029,291 | 2,570,628 | |
Construction revenue (Note 13 (c)) | 722,928 | 625,280 | |
Sales tax | (193,394) | (168,066) | |
Net revenue | 3,558,825 | 3,027,842 |
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ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
25 Operating costs and expenses
January to March | January to March | ||
2017 | 2016 | ||
Cost of services | |||
Salaries, payroll charges and benefits | 417,423 | 386,137 | |
Pension obligations | 10,970 | 22,438 | |
Construction costs (Note 13 (c)) | 707,229 | 612,386 | |
General supplies | 34,520 | 34,996 | |
Treatment supplies | 71,268 | 75,097 | |
Outside services | 194,236 | 191,329 | |
Electricity | 199,326 | 239,591 | |
General expenses | 125,345 | 114,196 | |
Depreciation and amortization | 301,099 | 265,106 | |
2,061,416 | 1,941,276 | ||
Selling expenses | |||
Salaries, payroll charges and benefits | 65,266 | 60,702 | |
Pension obligations | 1,603 | 2,928 | |
General supplies | 972 | 876 | |
Outside services | 60,249 | 62,195 | |
Electricity | 177 | 231 | |
General expenses | 21,786 | 19,944 | |
Depreciation and amortization | 2,491 | 2,324 | |
Bad debt expenses, net of recoveries (Note 8 (c)) | 86,136 | 56,078 | |
238,680 | 205,278 | ||
Administrative (income) expenses | |||
Salaries, payroll charges and benefits | 47,506 | 43,987 | |
Pension obligations | 45,659 | 58,110 | |
General supplies | 499 | 342 | |
Outside services | 28,269 | 28,886 | |
Electricity | 205 | 579 | |
General expenses | 62,801 | 90,508 | |
Depreciation and amortization | 28,358 | 17,226 | |
Tax expenses | 25,837 | 20,556 | |
239,134 | 260,194 |
PAGE: 69 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
January to March | January to March | ||
2017 | 2016 | ||
Total costs and expenses | |||
Salaries, payroll charges and benefits | 530,195 | 490,826 | |
Pension obligations | 58,232 | 83,476 | |
Construction costs (Note 13 (c)) | 707,229 | 612,386 | |
General supplies | 35,991 | 36,214 | |
Treatment supplies | 71,268 | 75,097 | |
Outside services | 282,754 | 282,410 | |
Electricity | 199,708 | 240,401 | |
General expenses | 209,932 | 224,648 | |
Depreciation and amortization | 331,948 | 284,656 | |
Tax expenses | 25,837 | 20,556 | |
Bad debt expenses, net of recoveries (Note 8 (c)) | 86,136 | 56,078 | |
2,539,230 | 2,406,748 |
PAGE: 70 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
26 Financial Income (Expenses)
January to | January to | ||
March 2017 | March 2016 | ||
Financial expenses | |||
Interest and charges on borrowings and financing – local currency | (64,850) | (95,220) | |
Interest and charges on borrowings and financing – foreign currency | (22,182) | (37,585) | |
Other financial expenses | (23,251) | (22,939) | |
Income tax over international remittance | (3,608) | (4,016) | |
Inflation adjustment on borrowings and financing | (21,794) | (52,945) | |
Inflation adjustment on Sabesprev Mais deficit | - | (368) | |
Other inflation adjustments | (6,933) | (8,244) | |
Interest and inflation adjustments on provisions | (23,870) | (62,039) | |
Total financial expenses | (166,488) | (283,356) | |
Financial income | |||
Inflation adjustment gains | 20,449 | 54,704 | |
Income on short-term investments | 55,414 | 53,274 | |
Interest income | 8,246 | 32,686 | |
COFINS and PASEP | (3,932) | (6,555) | |
Other | 442 | 6,088 | |
Total financial income | 80,619 | 140,197 | |
Financial income (expenses), net before exchange rate changes | (85,869) | (143,159) | |
Net exchange gains (losses) | |||
Exchange rate changes on borrowings and financing (i) | 89,442 | 483,296 | |
Other exchange rate changes | (54) | (16) | |
Exchange gains | 279 | 39 | |
Exchange rate changes, net | 89,667 | 483,319 | |
Financial income (expenses), net | 3,798 | 340,160 |
(i) | The change in expenses mainly reflects the 2.8% depreciation of the U.S. dollar against the real in 2017 and the 1.9% appreciation of the Yen in 2017, compared to the depreciation presented in the same period in 2016 (8.9% and 2.4%, respectively). |
PAGE: 71 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
27 Other operating income (expenses), net
January to | January to | ||
March 2017 | March 2016 | ||
Other operating income, net | 8,697 | 7,629 | |
Other operating expenses | 1,867 | (2,147) | |
Other operating income (expenses), net | 10,564 | 5,482 |
Other operating income is comprised by sale of property, plant and equipment, sale of contracts awarded in public bids, right to sell electricity, indemnities and reimbursement of expenses, fines and collaterals, property leases, reuse water, PURA projects and services.
Other operating expenses consist mainly of derecognition of concessions due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, losses on property, plant and equipment and exceeding cost of electricity sold.
28 Commitments
The Company has agreements to manage and maintain its activities, as well as agreements to build new projects aiming at achieving the objectives proposed in its target plan. Below, the main committed amounts as of March 31, 2017:
April to | |||||||||
December | More than | ||||||||
2017 | 1-3 years | 3-5 years | 5 years | Total | |||||
Contractual obligations – | |||||||||
Expenses | 1,088,603 | 1,852,682 | 427,378 | 1,325,858 | 4,694,521 | ||||
Contractual obligations – | |||||||||
Investments | 1,055,190 | 2,494,156 | 1,097,974 | 6,356,411 | 11,003,731 | ||||
Total | 2,143,793 | 4,346,838 | 1,525,352 | 7,682,269 | 15,698,252 |
The main commitment refers to São Lourenço PPP. See Note 13 (h).
PAGE: 72 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
29 Supplemental cash flow information
January to | January to | ||
March 2017 | March 2016 | ||
Total additions to intangible assets (Note 13 (b)) | 734,828 | 652,480 | |
Items not affecting cash (see breakdown below) | (213,942) | (251,502) | |
Total additions to intangible assets as per statement of cash flows | 520,886 | 400,978 | |
Investments and financing operations affecting intangible assets but not | |||
cash: | |||
Interest capitalized in the period (Note 13 (e)) | 166,223 | 123,717 | |
Contractors payable | (81,182) | (44,689) | |
Public Private Partnership - São Lourenço PPP (Note 13 (h)) | 113,202 | 156,765 | |
Leases | - | 2,815 | |
Construction margin (Notes 13 (f) and 23) | 15,699 | 12,894 | |
Total | 213,942 | 251,502 |
30 Events after the reporting period
· Implementation of the SAP ERP - Enterprise Resource Planning System
On April 10, 2017, SABESP implemented the Enterprise Resource Planning – SAP ERP, that comprises a series of programs, integrating all information of the Company’s processes in a single database.
· Protocol of Intentions with the municipality of Guarulhos
On April 10, 2017, SABESP executed a Protocol of Intentions with the municipality of Guarulhos for the preparation of studies and evaluations aiming to resolve commercial relations and existing debts between the municipality and the Company.
· News published by the press concerning alleged irregularities in two contracts with Odebrecht
On April 25, 2017, the Company issued a Notice to the Market about news published by the press concerning alleged irregularities in two contracts with Odebrecht, as per statements made by one of its former executives in a plea bargain deposition.
Internal procedures were carried out to determine if there were indications of alleged irregularities in the contracts mentioned and it was concluded that there is no evidence of irregularities in these contracts.
Any new factor or indication will lead to new diligence on the part of the Company.
· SABESP’S Second Ordinary Tariff Revision - New Schedule
On April 26, 2017, the Regulatory Agency of Sanitation and Energy of the State of São Paulo (ARSESP – Agência Reguladora de Saneamento e Energia do Estado de São Paulo) published a Notice changing the timeline for the initial stage of SABESP’s Tariff Revision.
PAGE: 73 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
The Preliminary Maximum Average Tariff ("Preliminary P0") will be disclosed up until June 30, 2017.
The Final Maximum Average Tariff ("Final P0") will be maintained up until April 10, 2018.
· General Shareholders’ Meeting
On April 28, 2017 it was held the Annual Shareholders’ Meeting, which made the following decisions:
· Approval of the Company’s financial statements for the fiscal year ended December 31, 2016;
· Allocation of the profit for the year 2016;
· Election of Mr. Francisco Luiz Sibut Gomide to compose the Board of Directors; and
· Election of effective and alternate members to the Fiscal Council.
· SABESP’S Second Ordinary Tariff Revision
On May 10, 2017, the Company’s Board of Executive Officers resolved to file, on May 11, 2017, a formal request to the Regulatory Agency for Sanitation and Energy of the State of São Paulo (ARSESP – Agência Reguladora de Saneamento e Energia do Estado de São Paulo) to postpone, for 30 days, the schedule of the currently ongoing tariff revision, with the following objectives:
·consider, in this stage, the technical report prepared by SABESP regarding the exclusion of pipelines carried out during the first cycle, requesting its incorporation in the calculation of the preliminary P0; and
· provide additional clarifications and information on the Business Plan, as requested by ARSESP.
· SABESP’S Second Ordinary Tariff Revision
On May 11, 2017, the Regulatory Agency for Sanitation and Energy of the State of São Paulo (ARSESP - Agência Reguladora de Saneamento e Energia do Estado de São Paulo), regarding Sabesp's request, published Resolution No. 722, in which ARSESP:
(i) grants to the Company the additional time requested to supplement and submit the information for the initial stage of the preliminary tariff revision process; and
(ii) announces that it will disclose, up to May 19, the new schedule for the initial stage of the 2nd Ordinary Tariff Revision of Sabesp, as a result of the additional time granted to submit the information.
· Memorandum of understanding with the municipality of Santo André
On May 11, 2016, the Company entered into a Memorandum of Understanding with the municipality of Santo André, in order to prepare studies and evaluations to govern commercial relations and debts between the municipality and the Company.
PAGE: 74 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Notes to the Quarterly Financial Information
· 21 st debenture issue
On May 12, 2017, Sabesp's Board of Directors approved the issuance of the 21 st issue of simple, non-convertible unsecured debentures in up to two (2) series, for public distribution, with restricted placement efforts, Pursuant to CVM Instruction 476 of January 16, 2009, in the total amount of R $ 500,000. The proceeds from the issuance of the Debentures will be allocated to the refinancing of outstanding financial commitments in 2017 and to the Company's cash recovery.
· Studies for the Company’s Capitalization
On May 12, 2017, Sabesp announces to its shareholders and to the market in general that, the State Privatization Program's Board, established by the State Law 9.361, dated as of July 5th, 1996, unanimously resolved, on this date ("Resolution"):
(i) To proceed with studies on alternatives for the Capitalization of Sabesp ("Capitalization");
(ii) The hiring, by Sabesp, of the International Finance Corporation ("IFC"), an institution bound to the World Bank; and
(iii) The conclusion of an agreement between Sabesp and the São Paulo State Government, through the Secretariat of Sanitary and Water Resources and the Secretariat of Finance, to delineate the scope of the IFC's hiring and to govern the relationship between the contracting parties, including proportional reimbursement of expenses.
The proposed Capitalization provides the establishment of a new company to exercise Sabesp's direct corporate control after the conference of the totality of share interest owned by the São Paulo State Government into the stock capital of the new company. São Paulo State Government will continue, under any circumstances, to hold sufficient shareholding interest to assure the exercise of Sabesp's majority corporate control, as provided by law. The purpose of the Capitalization is to overcome financial restrictiveness and preserve the expansion of the activities of universalization of basic sanitation services promoted by the Company.
If further studies are implemented, new information will be disclosed regarding the possible Capitalization, which, if continued, may provide for the admission of institutional investors in order to fund the new company's share capital, allowing to strengthen Sabesp's corporate governance and business efficiency in order to preserve the development of its activities of universal sanitation services in the São Paulo State.
During this process the Company will disclose any relevant developments over this subject.
PAGE: 75 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Comments on the Company’s Projections
Comments on the Company’s projections
The projections presented in the Reference Form are annual and not on a quarterly basis. Therefore, the quarterly comparison between information disclosed in the Reference Form with quarterly results shall not apply.
The projections monitoring occurs on annual basis and are disclosed in the Reference Form.
PAGE: 76 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Other Information Deemed as Relevant by the Company
1. CHANGES IN INTEREST HELD BY CONTROLLING SHAREHOLDER, BOARD MEMBERS AND EXECUTIVE OFFICERS
CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, | ||||
MANAGEMENT AND OUTSTANDING SHARES | ||||
Position as of March 31, 2017 | ||||
Number of | Total Number of | |||
Shareholder | Common Shares | % | Shares | % |
(units) | (units) | |||
Controlling shareholder | ||||
Treasury Department | 343,524,285 | 50.3% | 343,524,285 | 50.3% |
Management | ||||
Board of Directors | - | - | - | - |
Executive Officers | - | - | - | - |
Fiscal Council | - | - | - | - |
Treasury shares | - | - | - | - |
Other shareholders | ||||
Total | 343,524,285 | 50.3% | 343,524,285 | 50.3% |
Outstanding shares | 339,985,584 | 49.7% | 339,985,584 | 49.7% |
PAGE: 77 of 80
ITR – Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version : 1
Other Information Deemed as Relevant by the Company
CONSOLIDATED SHAREHOLDING OF CONTROLLING SHAREHOLDERS, | ||||
MANAGEMENT AND OUTSTANDING SHARES | ||||
Position as of March 31, 2016 | ||||
Number of | Total | |||
Shareholder | Common Shares | % | Number of Shares | % |
(units) | (units) | |||
Controlling shareholder | ||||
Treasury Department | 343,524,285 | 50.3% | 343,524,285 | 50.3% |
Management | ||||
Board of Directors | - | - | ||
Executive Officers | - | - | - | - |
Fiscal Council | 15 | - | 15 | - |
Treasury shares | - | - | - | - |
Other shareholders | ||||
Total | 343,524,300 | 50.3% | 343,524,300 | 50.3% |
Outstanding shares | 339,985,569 | 49.7% | 339,985,569 | 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: | Position as of March 31, 2017 | |||
CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO | (shares) | |||
Common shares | Total | |||
Shareholder | Number of shares | % | Number of shares | % |
Treasury Department | 343,524,285 | 50.3 | 343,524,285 | 50.3 |
PAGE: 78 of 80
ITR - Quarterly Information Form – 03/31/2017 - CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO Version: 1
Reports and Statements / Unqualified Report on Special Review
(Convenience Translation into English from the Original Previously Issued in Portuguese)
Review report on the interim financial statements – ITR
To the Board of Directors and Shareholders
Companhia de Saneamento Básico do Estado de São Paulo – SABESP São Paulo – SP
Introduction
We have reviewed the interim financial information of Companhia de Saneamento Básico do Estado de São Paulo – SABESP (“The Company”), included in the Quarterly Financial Information – ITR referring to the quarter ended March 31, 2017, comprising the balance sheet as of March 31, 2017 and the related statement of income, comprehensive income, changes in equity and cash flows for the three-month period then ended, including the explanatory notes.
Management is responsible for the preparation of the interim financial information in accordance with accounting standard CPC 21(R1) - Interim Financial Reporting and IAS 34 - Interim Financial Reporting, as issued by the International Accounting Standards Board - IASB, as well as for the presentation of this information in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM, applicable to the preparation of Quarterly Information - ITR. Our responsibility is to express a conclusion on this interim financial information based on our review.
Review scope
We conducted our review in accordance with the Brazilian and International standards on review engagements NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively. A review of interim financial information consists of making inquiries, primarily of persons responsible for the financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the auditing standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the interim financial information
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the Quarterly Information Form - ITR referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by the IASB applicable to the preparation of Quarterly Information - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission - CVM.
Other matters
Statement of value added
We have also reviewed the statements of value added (DVA) for the three-month period ended March 31, 2017, prepared under the responsibility of the Company’s management, whose presentation on the interim financial information is required in accordance with the standards issued by the Brazilian Securities and Exchange Commission – CVM applicable to the preparation of Quarterly Information - ITR, and considered as supplementary information by IFRS, which does not require this disclosure. These statements were subject to the same review procedures described above, and based on our review, nothing has come to our attention that causes us to believe that it is not prepared, in all material respects, in accordance with the interim financial information taken as a whole.
PAGE: 79 of 80
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Corresponding figures
The corresponding information and figures related to the statement of income, comprehensive income, changes in equity and cash flows for the three-month period ended March 31, 2016 were audited by another independent auditor who issued a report dated May 12, 2016 without qualification. The corresponding information and figures of Statement of value added (DVA) for the three-month period ended March 31, 2016, were subject to the same review procedures by previous independent auditor, and, based on their review, nothing has come to their attention that causes them to believe that it was not prepared, in all material respects, in accordance with the interim financial information taken as a whole.
São Paulo, May 12, 2017.
KPMG Auditores Independentes
CRC 2SP014428/O-6
(Original report in Portuguese signed by)
Marcelo Gavioli
CRC 1SP201409/O-1
PAGE: 80 of 80
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
|
||
By: |
/s/
Rui de Britto Álvares Affonso
|
|
Name: Rui de Britto Álvares Affonso
Title: Chief Financial Officer and Investor Relations Officer
|
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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