Companhia de Saneamento Básico do Estado de São Paulo - SABESP

Good morning everyone. Welcome to the earnings conference call for SABESP for the third quarter. I'm Luiz Roberto Tiberio and I'm a superintendent of investor relations. Today with us we have André Salcedo, CEO of the company, Katia Deixeira, CFO and Investor Relations Officer, and Marcelo Miyagi, Superintendent of Accounting. Before turning the floor over to André to start the conference, I would like to make some announcements. This video conference has simultaneous interpretation into English and it's being recorded. The presentation and recording will be available for download at the IR portal of SABESP, where the press release is available. We remind you that questions will be taken only in writing at the chat box of this platform. This conference will last approximately one hour and a half, considering time for Q&A with analysts, investors and journalists. We would like to clarify that statements that may be made during this call regarding the business prospects of the company, projections and operating and financial goals are based on assumptions based on the beliefs of the company's management, as well as on information currently available to the company. They do not constitute any recommendation for investments. Forward-looking statements are not guarantee of performance. They involve risks and assumptions and certainties as they refer to future events and therefore they depend on circumstances that may or may not occur. Investors should understand that General economic conditions, industry conditions and other operating factors may affect future results of the company and lead to results that differ materially from those expressed in such forward-looking statements. Now I turn the floor over to Saucedo. Thank you, Tiberio. Thank you everyone for your presence. Another cycle that we're completing. I think the earnings released yesterday, it materializes all the effort we have been making With lots of communication, transparency, the alignment with an active listening to the priorities of the company, to our goals, And basically, the result of this quarter reflects part of this effort that will unfold in the coming months, given the company's structure. We have a long way to capture the gains that will result from current initiatives. And in order to give some accountability, In the cycle of 2023, within what we planned in the beginning of the year and have executed so far, I would like to share with you a bit of our perception in terms of prospects, planning, execution and the deliveries that we are making on this quarter. The next call will be in 2024. So, in the beginning of the year, we have reprioritized the strategic leverages of the company. We have shown you in SABESP Day in August. A good portion of these restructuring of the company is in course and being implemented. This is part of an incentivized dismissal plan that's been negotiated with employees with a good adherence, more than 50% of our initial target. And this is completed. Implementation happened during one whole year. That's when the entire restructuring will be completed by January 24. And the shared services center will be fully operational in the middle of 2024, because that's when the layoff program will be completed. So it's a very complete program that's on schedule. In the business optimization line, we have created the new officers of customers in the meetings held in April. The new officer took office in August. And according to the effort of Sabrina and Katia, we are rethinking our relationship with customers, identifying opportunities, getting to know our customers better, and paying attention to billing, ensuring that once the service is provided, we have A collection rule that is fully implemented to ensure the preservation of our revenue. So this starts to show signs of results in this quarter due to two shocks between this effort of these and the fair that we have and also the collection that's diligent and closed in the billing cycle. Energy is another focus. It's one of the largest expenses we have. We have a project in three fronts for efficient energy. To increase the automation and efficiency, Identify opportunities for energy generation, especially low voltage, solar panels, also within our operations. We have identified some opportunities of a better structured energy source in Araújo. We had an important waterfall from the reservoir to the treatment unit and we are doing a partnership of a 4.1 mega hydropower plant there. So we also aim to optimize the purchase of energy. So what's the best energy sourcing that I can have to serve the company? So we migrate and we are now migrating a set of data that will add to the current situation and until the end of the year will launch a request for proposal to implement a self-production project for energy of solar panels so that as of 2026 we can have a self-production structure for energy that will allow us to reduce carbon footprint and scope too. In sustainability we have an intense agenda and, among other actions, we've been able to obtain the gold seal of the carbon emissions inventory. That's an important step to define the goals and to start pursuing them. Looking at the sewage treatment plants, we know that they are the highest source of greenhouse gas emission in our structure, and we want to have projects that will generate energy within them with biomethane, biogas generation, With projects escalating to other units, productions of water for reuse, that's also implemented in a partnership with Apollo, and we believe there is room to expand to other units. There is a challenge in terms of regulation there, for it to be more favorable. And in terms of energy and biogas, we have a The possibility of heat cogeneration and being able to reduce the cost of transportation of sludge that goes to sanitary fuels. So, this is very important. That starts with the identification of carbon emissions, circular economy, energy efficiency, and now everything is combined in an integrated way in the new business view. From the institutional point of view, there are some important advancements made. We expect to have in the next months the recognition by SESP of this Thank you very much. Thank you very much. public hearings and concentrations both in the National Water Agency as well as at SASB. This slide tries to summarize, there's a lot more to be said, everything that we committed to during the beginning of the year and what we have implemented or completed or still in implementing. Now let's move on to the next slide. I'll be very brief here. Where are we in the project? The privatization, there was a phase zero, that has been widely announced and discussed by us and by the government and the macro topics were defined about privatization. We're now in phase one of the project. It's very intense in terms of decision making, definition of models, due diligence, valuation of the company, the adherence of the city of São Paulo that changed the Regulation of URAE. Governance is proportional to the size of the municipalities and sending notices to the municipalities. This was sent by the state government detailing What is the potential for improvement and gains by everyone? Customers, the company, municipalities and the society as a whole that will come from privatization. And along with this notification, they sent a The presentation of the extension of terms and the anticipation of goals for the universalization of services. Last month, the privatization bill of law was sent to the House of Representatives of São Paulo And the government expects that it will pass until the end of the year. And the government is working a lot for that to happen. Of course, here at the company, we're providing all the support so that it can happen in that timeframe and we can continue with the project. We have started an in-house analysis and we expect to complete this selection of banks that will participate in the syndicate of banks. And then, once that is approved and passed, we'll structure the offering that will happen in the first half of next year. Phase two will include the new governance, a resolution, election, In the URAI, the Regional Unit for Water and Sanitary Sewage, the new bylaws of the company will be defined based on the reduction of the government's share and the transfer of control of the company from the government to a private company. We are working already and talking to creditors and banks that were part of the debenture issue to understand what's the best time to start the consensus for the waiver, to obtain the waiver from creditors that will finish with the offering by the company. Something we haven't not yet is the regulation model that will be enforced as soon as the control is transferred. This is led by the IFC as well as by the government of the state and we try to contribute as much as possible and I know that many of you investors have participated in conversations with IFC and the state suggesting ways to improve regulations. We know that this has a high impact on the value of the company and on the performance of the investments that we need to make, so we're carefully looking into that. We're very happy on our side, working heavily in this turnaround, in this change of profile, transforming the company, making it closer to customers. We are very responsible and committed to complying with the goals and meeting the goals. Everything has a positive impact on the environment, on the concept of climate resilience and to capture all the potential we can for the benefits that this agenda could bring for the company and its value and we are making a long-term plan for Efficient Capital Allocation, Value Generation and Hydro Efficiency. So, I would like to thank you again for your support, for all investors who have helped us in this journey, and this is actually the first quarter in which we start to see all the effort in concrete terms. First, we had the beginning, the stabilization of the bases, And then we started implementing all our vision in terms of efficiency gains that tend to materialize in the medium term, given the size of the company and its type. We have long-term contracts, so everything will materialize in the coming months. Thank you very much and I'll be back to you to talk soon. Thank you, André. Now Katia will talk about the results. Good morning, Tiberio. Good morning, André. Good morning, ladies and gentlemen, everyone. I'll talk about the financial performance. Let's start with the operational performance. We continue to see a growth in volume. We had that in the second quarter. This growth became even stronger in the third quarter. We had a growth of 3.3% in basically all segments, residential, commercial and industrial, and public. And when we look, giving transparency, In this presentation, in our releases, we always show year-to-date. We have the data from nine months of the year with the comparison to help to better understand our figures. Year-to-date, we have 2.1 in build, total water volume build, new connections, In this third quarter, we see a concentration. Most of the growth comes from volumes above 10 cubic meters because we start looking not only at growth, but growth looking for an average tariff that's better for the company. Next slide, please. When we talk about sewage, the growth also took place above the water, given our commitment to advance in sewage implementation. So we are closing this quarter with 3.7% growth in sewage, and when we look at year-to-date, it's 2.7%. Again, the same analysis we make for water, we make for sewage. So, growth accompanies that of water, and when we look at the bar graph, we can see volumes above 10 cubic meters that contributes in a consolidated way to the growth of the company in terms of billing. In sewage, we grew quarter on quarter. by 100,000 new connections. We are advancing on the universal utility services provision agenda and increasing allocation for sewage because of that goal. Now, financial data. When we look at revenue, In the quarter-on-quarter, we have grown 10.4%. Part of this growth comes from volume, so the average volume growth was 3.5%, and we also have a growth that comes from tariff adjustments. The tariff review happened in May, So there's an effect that comes from volume, tariff adjustments, and also mix, because the consumption is growing in the areas where tariffs are better. This is reflected on consolidated figures. Year on year, in the first nine months, we can also see that a growth of 14.1% in our revenue. When we look at EBITDA and EBITDA margin, We go from 2.1 in 2022, third quarter, and to 414. We grew 13% quarter on quarter in EBITDA, and year on year, 24.3%. It's a significant growth, showing all the initiatives that company has taken. Of course, it's a journey, and in some areas, results are obtained faster. Others take longer to appear. When we look at net income and net income margin, there was a drop when compared to the same quarter in 2022 of 21.7%. and in the year 5.7%. When we compare periods that are events, for example, one important event in the third quarter of 22 that is non-recurring of 325 million, so that alone, if we exclude that, we would be pretty much at the same level of last year. That was a For the adjustment for inflation of a debt we had with the government, state government, we had to adjust that in 2022. It was recognized in 2022 and contributed to a financial result in 2020. Looking at the year, this also materializes and this effect of 22 is carried forward when compared to 2023. The next slide shows what we did. We come from a net income of 1,081, net income in third quarter of 22, we grow and It's a neutral result of construction. When we look at costs and expenses, there is a decrease of 303 million, and other revenues and expenses, 7 million, and financial results That's what I explained previously. 325 came from a non-recurring event in 2022, which explains part of this difference. In addition, 101 million in net financial expenses, of which 26 million refer to new debt made, loans made in July Last year, in May of 2023, BidInvest, we also had 8 million coming from increase in interest rates. When we look at interest loans in foreign currency, especially in U.S. dollars, our rate is super. So there was an inflation pressure. We went from 2.12 to 5.27 quarter on quarter. There was an impact also of foreign exchange variance, quarter on quarter, with an effect from last year in which the Brazilian real was appreciated when compared to the yen, so the revenue that was captured in 2022 now has stabilized in this year. In this account, there are also updates regarding lawsuits, Every quarter we update these lawsuits with our legal department and there are also performance agreements expenses. So, in general, this explains our financial performance. Income tax is 126, which is expected. It's higher because we had a better income. or rather expenses were higher with a net income of 846 million. This is a general view, quarter on quarter, of our financial performance. Next. Now, because investors asked, This is to explain the journey more clearly, so it's the same period, year on year, first nine months of 2022 and 2023. So we come from 2,479 in net income, there's an increase of 1,800 in revenue, then costs and expenses, there would be also a non-recurring expense, that is the layoff program, Other operating expenses, 73 favorable. In financial expenses, 837, the 547 that I mentioned before. And the difference is exchange variance and interest expenses on our loans. Income tax and social contribution, 93 positive. Reaching an income of 2,337. This is the overview looking at the first nine months of 2022 and 2023. Now, going into details about operating expenses, when we look at personnel, there has been a growth quarter on quarter of 4.7%. We're basically growing 15 million due to health plan expenses, both based on use and cost. There was an increase in cost in the beginning of the year. and also an increase in the use of, considering that we have a dismissal plan that employees will leave until the end of next year, they may tend to use their health insurance as much as they can while in the company. In terms of expenses, there was a growth of 15 million that if you consider The expenses of personnel that was neutralized by many people that left the company. The 3.7% reduction in our staff. And we still cannot see such a strong effect. In the next quarter, because there's a lot of concentration of people who left in August and September, and the expense was not accounted for, and they will be shown in next quarters. Although we have almost a linear distribution of exits, there are people who have higher salaries that are scheduled to leave in the first half of 2024, because we need to ensure the transfer of knowledge and transition of processes as well. But when comparing September to August, we see a reduction of 3 million in the salaries account, so now is for this to go down. We can still see some effect in the health insurance account. Materials, we had a reduction of 12 million, 10%. It's a small difference, but we believe it comes from movements that happened to the services account. There are two possibilities. We can buy services and materials. This is based on a contract analysis. We have contracts to buy materials less than we had compared to 2022. So much of the materials we used to buy, now we're buying services and materials. So it's important to look at these accounts on a consolidated way. The same thing happens with services and personnel. That's a positive effect of 10.4. Material for treatment, there is a drop, which is a positive effect. What explains that? We have a reservation level of 74% so we can manage the use of water which allows us to choose better quality water such as coming from Cantareira to supply That leads us to a lower demand of chemical products, but we also see a trend in the decrease in the prices of treatment materials, especially the most significant ones, In terms of consumptions with the drop in prices and also the management team and operations team is working to look for other products to replace the ones we usually use so that we can benefit from this change in the prices in the market. That's not only a full reservoir, but there's also an effect of good management of the company. In terms of services, there was an increase in 89 million. There is an increase that comes partially from pavement. and refurbishing of roads, 30 million. And a specific point here, this growth came in the third quarter because We were not doing as demanded in the beginning of the year. An important supplier is no longer working with us. The agreement was broken as we mentioned in our last call and we had little time to We had a liability to be served and this liability of these commitments caused a 17 million impact on this curve. This was specific and one-off event in terms of expenses we should have had in the first and second quarter and we didn't. There was no contract and if we don't have a contract we cannot make the provisions. So part of these expenses of services in terms of IT and consulting services We are in a restructuring phase of the company. Some consulting companies are working with us, looking at IT roadmap, future vision for the next three years. We have consulting company working with us in restructure personnel, And we also have consulting companies working with contract modeling. So all of this is taking place now, all these expenses, so that we will have the benefits in the future. So this is a lot of work that happens before the journey of obtaining the result. Eleven million that we pay for collection companies, So, 11 million in collection companies that help with us to recover defaulting customers. And there is also an amount for new connections and maintenance. When we move to electricity, we're moving sideways here and we're able to see an effect of reduction in consumption of almost 10% in our demand. Because we have a reservoir level that is high, so that allows us to use less energy. However, on the other hand, there was an increase in tariff, both in the regulated market and the free market. 5.9% and 11%. So, this mix of increase in tariffs and reduction of consumption, the impact was only 2.4% in the electricity bill. Moving on to general expenses. Since the last quarter, we have explained what is the transfer of a municipal fund for greater transparency. There is a growth in this municipal fund, especially given the growth in revenue, that's the main driver of growth, as well as the new municipalities that entered. The main impact we have in general expenses refer to lawsuits. Each quarter, the legal department of the company does an evaluation of expected losses, and the reassessment made this quarter increased the provision 78 million. These are not new lawsuits, but They were classified as possible losses in the second quarter, and now it's a probable loss according to the legal department. In terms of depreciation amortization, we see a significant growth of almost 100 million. That basically reflects all the investment effort made by the company. Behind this, we have 6.4 billion in Property, Plant and Equipment. This we are investing and increasing our depreciation amortization account. When moving to allowance for doubtful accounts, although there is a growth of 15%, Percentually speaking, we are very close to where we were in the second quarter of 2022, but we see a reduction of 50 million, which comes from an effort to curb default, as we call structural effort, to strengthen our collection efforts, know our customers and act on it, not letting a delay in payment become a default This is something we're doing very well, focusing on the first 90 days to ensure that this does not become an allowance for doubtful accounts. We added only when it's 370 days, so if these collection efforts are completed within 90 days, the fewer defaulting customers go to the allowance for doubtful accounts. There is also an effort to recover and to collect those defaulting accounts and we are benefiting from that. There is a lot to be done still in terms of change of behavior with customers and this large fair that we did for collection is an effort and other companies in the market do that in order to compete for funds of customers and make sure that we get paid. We must have that event to ensure that the families in Brazil are still highly indebted, so it's important to compete for those additional funds that may come to capture and reduce our default rate to a controlled level. We had a positive effect there. Tax expenses have dropped by 2.1%, but in terms of financial value, it's the same. This is the year view. In personnel, there is a large growth when we consider the dismissal program, excluding that it's 7%, looking at the first nine months of 2022 and 23. For 23, there is 12% of the collective bargaining agreement that's been carried to 23. and the 4.9% in May. So, this will be diluted or reduced in time because of the dismissal program. In general supplies and treatment supplies, expenses are dropping due to our efforts, services This is basically due to consulting, fees, asphalt and pavement expenses, connections. And electricity is neutral and general expenses growth in the nine months is explained by the fund and lawsuits. What happened in this quarter explains most of this difference. Depreciation and amortization follows the same trend. Allowance for doubtful accounts, we see a significant drop year on year. We go from 4.1 to 3.4 in the 9 months of 2022 to 2023. In terms of investment, in this quarter we had 1.4 billion in investments. We are accelerating this CAPEX movement. There was a disbursement of cash of 752 million in the first nine months of this year. We invested almost 4 billion in nine months and we are accelerating the most we can to ensure that our goals are met. That's the bottom, the slide shows how investments are made, mostly into sewage collection and treatment, and that's the trend for the next five years. The main highlight here is Tietê, Cantareira e PSJ, and the North Coast, and the focus The universalization target so that we can close the tariff review cycle in 2024 with the most of our commitments met. Looking at disconnections and loans and financing in terms of net debt versus adjusted EBITDA, 2.2 to 2, basically this drop is due to an increase in EBITDA and the same is reflected in the adjusted EBITDA. There was an increase in coverage and an increase in EBITDA. We have 13% of debt in foreign currency and half and half yen and half dollar basically because the yen is in the amortization repayment stage and expenses and dollars are still in the Okay, this is it. This is what I had to say. Now I turn the floor over to Tiberio for the Q&A session. Thank you, Katia. Let's now start the Q&A session. Before, I would like to say that the first part is for analysts and investors, and then we'll open for journalists. Questions should be asked in writing on the chat box. Carolina Carneiro has two questions. First is about allowance for doubtful accounts. Could we consider improvement on this improvement as recurring What would be the level of debt that we should consider? And the second question is, the company was working with the regulator discussing several topics as well as some costs not included in the tariff. Did we have any development in such conversations? So one question about doubtful accounts and the regulatory environment. I can start here. When we talk about allowance for doubtful accounts, the FAIR does The collection event brings a benefit. We will continue to do that, to make the wheel turn until we have treated all the structural aspects. We are making actions. A structural work is not something that has a quick return. The results will happen, but gradually. So this collection fair is something that helps bring customers to the table to have a negotiation. So we're looking at this The amount of debt for accounts is based on debt from the past, so when we compare to a higher revenue, the percentage is lower. So, we are focusing on the collection rule, to ensure that the 90 days default will be collected as soon as possible in order not to become doubtful accounts. But we want to keep the collection efforts consistent. So when I compare that revenue is growing to a higher In the collection fair, we opened for deaths starting at 70 days. Many of these negotiations for settlement were of debts that were still not in the provision of our balance sheet. It was good for results, it was good for cash, but we ended up Getting paid on debts that are short-term debts. We still have the challenge of going back to this event and see what we have to do differently to have older debts paid, debts that have an impact on our balance sheet this year. When we talk about For expenses in the cost of electricity, or costs here, we're talking to the regulator. There was a major debt the company had with the commercial issue. The company has worked on the last three months looking at our sales program, Seeing how we could build on that with a technical structure and for the firm demand program so that we could present it to our regulatory agency. This was done at the end of September and now we're waiting for their answer. We provided all the technical support in terms of the tariff structure and the beneficial effect it would have on the company so for the population to have a firm demand contracts in the company. In the expense account we Look at how we can get closer to the regulator by our regulation team. André, now it's you. I think, Katia, I believe you have addressed both topics. On our side, we're doing everything we can to accelerate the gap reduction process, either by having conversation with our SESPs, showing them what's feasible, our investment capacity, And this effect of no longer considering some expenses line is something that affects us because we cannot afford not to have those expense lines. And so we're working to find an alignment between what we find more reasonable to be able to deliver on what we are required to do. We sent this proposal to Arcespi and we are now detailing the program to make sure that for each segment there is a rationale and then Arcespi will analyze it. If they agree with it, they will ratify it and then we'll recognize these programs as part of our cost structure. Reprocessing of invoices is something Carol didn't talk about. This was a topic that Carol asked and we didn't answer. There was a difference in reprocessing and we are, since the first quarter, we are collecting this, considering the revenue, sending to Arcespi the net revenue data without reprocessing costs. So this 97.5 will imply a tariff of setting if we perform below the level established by Arcespi. Thank you, André. The next question comes from Guilherme Lima. I believe you have answered his question. If Guilherme understands that his question was answered or not answered, he can tell us again. So let's move on to the next one. Next question from Guilherme. Could you give us an update on the option to define the regulatory model for private company? We've seen the government's position discussing the change of the current model from forward-looking to backward-looking. How is the discussion of the bill for the regulatory bill? So, Guilherme, again, let us know if your question was answered. As for regulation, The company is working according to the current rule. What's happening in parallel in the context of privatization is a structured conversation led by IFC, along with the state government, Natalia, from the Secretariat of Logistic Infrastructure and Environment, and Rafael, in SPI, to look for the leverage to improve regulations. They have announced what we seek and part of that is reflected in the contribution of SPI and the public hearing at RCSP. What we believe is that there is room for improvement for the population. The adjustment of CAPEX recognition is something That compares to what currently exists in the electricity industry, but no decision was made so far. What we expect is that these conversations become more intense in November, and that we'll have a definition until the end of the year of that model, and then this new structure that aims to align shared efficiency gains Thank you, André. Next question from Marcelo Sá. Do you have any idea of the impact on the tariff discount for customers? Then the other question is About the contracts, you mentioned as if it was going to happen in the next phase, only after January, but in the event, Natalia is saying that she was working to sign it this year. Could you imagine that it's possible to sign contracts with the most important municipalities still this year? Will the regulatory issue be reflected in the agreements with the municipalities? We don't disclose details of commercial discounts, Marcelo, because this is a commercial issue of the company. As for the signing agreements with the municipalities, what I understood from the structure that was built is that For the agreement to be signed, we need to have a meeting of the Collegiate of Municipalities, the meeting of the Board, the Executive, and if this agreement is approved, then it will be signed by the representative of URI that will be appointed in the process. It's possible that municipalities state their opinion until the end of the year to agree with the privatization? Yes, of course, that's highly desirable. We're working on that agenda. The teams of the company Regulatory Investments, Natalia, and the team of the Infrastructure Secretariat are having weekly meetings Many meetings to explain to all City Halls of 375 City Halls the investment plan, the benefits that the process can bring to each one of them. So we would like the most of the municipalities to express their opinion by the end of the year. And the details, the step-by-step was extracted from a presentation of the state government, so I believe that it's in agreement with what we planned. He completed his question, asking us to confirm If we're going to sign a single contract for URAI and not a contract by municipality. This is what we understood based on the statements and everything that's been discussed in the project. A single contract signed by URAI. But this... A voting process from the municipalities in electing the committee of Juraj as well as the executive at the executive level. Okay, thank you, he says. So there are no further questions so far and I remind you that if you want to ask a question, please use the Q&A box.

I'll wait a few more seconds. We give priority to investors. If there are no further questions from investors, we'll start answering the questions from journalists. Recebemos aqui uma pergunta do Aaron Green.

He asks if the IDP is expected to deliver a 15% reduction of the salaries, payroll charges and benefits by June 2023. If not, when is the full reduction expected to be realized? No, we expect the full appropriation of the benefit reduction from the exit of people to happen as of July 2024. The IDP program Aaron has a schedule for people to leave that started in July 2023 that will happen until June 2024. So throughout this period there's a growing impact of reduction of expenses with benefits from personnel line, but This full benefit will really be seen as of July 2024. We have the Q&A page open for investors. Since there are no further questions from investors, let's answer the journalist questions. First question from Thais Irada. Hello. About discussions of changes in the regulation of privatization. One, what have the government or IFC actually proposed? Two, what are the necessary steps to formalize it? Will the law need to be amended? Well, the best vehicle to answer the question is the government or IFC. What we know is that there is a desire to improve the regulation mentioned by the rapporteur and the secretary that's being discussed with IFC. I don't have the details of each of the steps, but I know that each event goes through Arcespi to analyze the merit of the proposal, but I don't foresee any changes in the law, because there is a regulation that says that the regulation is made by Arcespi. What may happen is that part of the regulation being reflected in the agreement. So, a part of the agreement may reflect some items that are purely regulational today to increase the safety during this journey. This contract may include some of these points if the government finds it convenient. Thank you, André. The next question is from Bruno Andrade. The privatization of SABESP has been questioned by the opposition after the blackout in São Paulo after a strong windstorm. The privatization of SABESP foresees a better regulation in case of longer delays in the supply of water for consumers after some accident? Will there be established deadlines? I think it's natural for people to question that this event impacted every one of us and SABESP had a blackout in some of its facilities as well. We believe that privatization will be beneficial. There are several sectors, including the power sector, has evolved a lot after the privatization. What, in terms of the debate by the population, is what are the best models in terms of regulation applicable to our case? Regulation is robust. It provides the flexibility of investments in more severe moments. The best example that's a good regulation is in the water crisis. There was a very extreme environment or climate event and the company was able, based on a lot of cooperation with the state, the government, the granting authority, to organize itself and face the problem. The regulation includes that type of effort. Our investment plan is very robust, focused on the medium and long term, on water resilience and We are anticipating an increase of water availability throughout this journey. One example are the desanilization plants at the coast that will help build resilience Because the water supply is based on rivers and there are events that happen and that harm the water availability. So we're increasing that water availability, enlarging the connection between Santos and São Vicente and Guarujá. There are many efforts made to reduce the dependence on events and also increasing resilience and the communication among the Metropolitan Area of São Paulo. The Cantareira system was responsible for supplying water to half the metropolitan area. After many interventions inside the metropolitan area, now cities can be supplied by other systems, Alto Tietê, Cotia, São Lourenço, Guarapiranga Billings. So the dependence was to be 50% in the past, and now it's only one third. That allows us to manage the availability of water In this reservoirs and there's also a connection among them we are able to pump water from one reservoir to the other rebalancing the level of water so we can have a uniform supply in the metropolitan area so there is room for improvement but it's a robust regulation This is being analyzed by the IFC and the state government to reduce the time of service in case of crisis. Okay, this was the last question. I believe there is one last question by Thais. Oh, okay, I'm sorry. How can the crisis with Enel São Paulo, the electricity company, impact the advancement of privatization with SABESP? Well, Thais, I think the debate shed light on the regulation model. How can a private concessionaire have a supervision and alignment There are several differences between the electricity sector and the sanitation. First, the granting authority is municipal. For the metropolitan area, it's a shared granting authority between the state and the municipality.

But there is a difference

Thank you very much. It is our role as a company and the state government role to explain the difference and say that it's a good project and the regulation could be improved to ensure perpetuity and any problems in the reduction of provision of services, and in the event of any atypical circumstance, the population will be served as quickly as possible. This debate is taking place. If they ask us, we will provide the necessary clarification. And my feeling is that the process will continue after these clarifications are made. Okay, thank you André. Now there are no further questions. Now I would like to turn the floor over to you for your final remarks. So once again, I would like to thank you all, thank the company, the employees and associates. This has been a very rich year in terms of challenge, changes. It's a very impressive company. It really responds well when seeing the purpose and the rationale for transformation. I would like to congratulate my C-level colleagues and and also congratulate all employees of the company employees who've been with the company for many decades that are embracing this project that build this new company every day to make it a more modern company closer to people with a broader view of our role as a public utility concessionaire to take to bring quality of life So, I would like to thank investors, all those present here for listening to us and contributing to this journey of creating a company that's a benchmark in Brazil and as well as worldwide when we speak of sanitation, innovation and new technologies. Thank you, everybody.