Companhia de Saneamento Básico do Estado de São Paulo - SABESP

Hello, good morning everyone and welcome to our earnings call for Q1 2024. I'm Luiz Roberto Tiberio, I'm an investor relations superintendent. Andres Salcedo is here with us, he's the CEO, Katia Pereira. the company's CFO and IR director, and Marcelo Miaghi, who is the accounting superintendent. I'll turn it over to André, but before that, I'd like to share some announcements and guidelines. There's simultaneous translation into English and this call is being broadcast. This presentation and the video will be available for download on the Investor relation website. You can send your questions in writing using the platforms chat. The call will last one and a half hours, and we'll have time for questions and answers from investors, analysts, and journalists. Also, we'd like to mention that there might be forward-looking statements in this call referring to our business outlook, operating and financial results estimates, And they're based on the management's expectations and beliefs and on available information today and do not constitute any investment recommendation. Forward-looking statements do not guarantee performance. They involve uncertainties, assumptions, and risks presented in disclosed documents filed by SEBASP. They depend on future events and they might or not come true. So investors need to take into account industry and other operating conditions that might affect future results and might lead to results that are substantially different than the ones presented here. Now I'd like to turn it over to Andre Saucedo. Over to you, Andre. Thank you, Tiberio, and good morning, everyone. So let's have a look at our performance of Q1 2024. We tried to follow the adjustment journey of the company and to conclude some steps of the restructuring that we started last year.

There are some levels of accommodation.

for the new shared service center and a new IT strategy. Important to point out the performance of our engineering operations teams and regulatory team with the support of everyone on the company in defining the contribution for the regulatory model for the privatization process. So we had many debates and discussions. Management invested a lot of time to design a balanced model.

for privatization.

Also, a subsequent event after Q1 is that there was another tariff adjustment with actual gains for the company, which is a result of a good communication with the regulatory agency. And there is technical support to our claims. And we've been having very good communication with SASP. And they understand our needs. And that's why that was reflected in the tariff adjustment that goes into effect today, actually, enters into effect, this adjustment. And even more important than that, the definition of a new regulatory model

of a single contract.

In this quarter we end a journey started in December 2022 of designing what the new model should be, the new regulatory model, a model that would be the foundation for other future processes. It's a challenging process because there is a regional perspective and natural resources sharing considerations. But we work with the state government, with the environmental department of the state and other departments, the UFC team, our consultants. consultants to the state government are also engaged in this process. Everybody trying to build together and work together so as to provide good services and also as to be able to attract private capital because investments are considerable and that would ensure predictability levels along this journey, which is a long journey. It would be a 36-year contract, taking into account 2024 as year one. We are very excited, actually. So it was really important, what we've been doing last year, this year, on putting together this contract. And now, with the new regulatory framework, I think we're going to be able to capture more value in the company going forward. Also in the company, it should be pointed out our good market timing because of a very well thought out plan in the past. We concluded a very important funding process that will enable us to speed up this year nearly three billion real in the ventures. combining green financing and social agenda and the preservation of reservoirs, oceans and rivers with our blue certification. We are very happy. We think we can replicate the certification structure for the coming debenture issuings. with the certified bonds and very well-defined commitments in resource allocation and investments that do have an impact and change lives of peoples and communities and reduce human impact on the environment. So we're really happy with this event in Q1. Also, as a subsequent event, which is very important as well, something that Katia worked on with her team, Bruno, which was to reduce the company's risk. One of the important deliveries was that we approved our hedging policy that was introduced in April with contracts that are a pilot project. So we understand how it works and its behavior over time. So we are testing this model and this is going then to be an ongoing policy of hedging against FX exposure. Because we are exposed in our pricing and revenue dynamics. in the 2022 earnings call i mentioned that we are still speeding up the process of investments bringing forward the new investment plan for after the privatization up until april we launched 43 packages of linear networks to clean up and we renovated the most important sewage plants in Barueris, São Miguel, and also smaller sewage plants in Guarulhos and other sites. so that we can speed up the process of treating sewage. So these packages add up to more than 16 billion reals. The new constructions are going to be carried out in 24, 25, 26, and we are very excited with engagement of suppliers. We are adjusting the packages and contracting conditions so as to be more competitive and to be working with investment funds as well so that we can speed up mobilization of resources for construction companies.

And finally, and maybe an important point today, .

Is the privatization process status up until March this year? We had concluded the public consultation process. We disclosed all the final materials in April. And the URAI assembly is scheduled for the 20th of the month. So this assembly will review the new concession contract and annexes and other items. your uri governance and how it's going to work also the board is going to be elected and the executive board just like an entity approve the municipal sanitation plan So on the 20th, we will hold the General Assembly to change the bylaws that will enter into effect later. And today, the expectation that we have is that the offering will be made in June. It might even be concluded in June itself. We should conclude the waivers in the coming days. Katia will give you more details about that if you want. And after the contract is approved at URI's company, the company would be able to sign the contract.

So that's what I had for you.

So we've been working hard to improve the different elements of the company. It's important to point out, as I mentioned before, that there's going to be some volatility, especially in material and service costs and the resignation plan. This quarter was slightly below our expectations, but we are working hard To improve figures, just like we did in the past, January and February,

There were some agreements that had been signed before and that had an impact on our performance.

We are coming up with new ways of negotiating with consumers that will reduce the risk of contract breach through collection services and other means of payment that will reduce our risk. So that's what I had for you. And later on, I'll be available for your questions. Thank you. Thank you, Andre. Now I'll turn it over to Katia. Katia, over to you for the financial highlights. You were on mute, Katia. Can you hear me now?

Good morning, everyone. So welcome to this earnings call.

We see that there's an increase in revenue, a 15.6% increase in revenue. This is growth because of the increase in tariff of 9.56 and the increase in 5.5 of volume. And there's also the effect of the tariff mix. Looking at the margin, a highlight there is that the adjusted margin without the effect, the non-recurring effect, which was the APS agreement, which was what Andrea was mentioning, And this also was part of the explanatory note of the 2023 results and the agreement we had with the It's a non-recurring event. Without that, we would have 2591. EBITDA margin was 45, and then it grows to 49.6. And the income, also, there was a 31.9% growth. Also, not taking into account the non-recurring event so that we can really assess the company's performance. and we see the kpis as well and the slide looking at this quarter but also at the journey the company is on so we see the past 12 month average it's a rolling average that shows us the performance not only of the last quarter but what's been happening in terms of revenue comparing 2022 the previous year and q1 2024 there was a increase and there is the volume effect and the tariff effect and the mix effect again when we. Looking at the 12 month average allows us to account for seasonability. When we compare quarter over quarter, there's different behaviors because of seasonality. But without seasonality, we can see the clear trends in a graph like this. The same applies to the EBITDA or cubic meter. Again, we see the trends over the past 12 months and we see 2023. So this is the upward trend we see today and we in the company also we also look at figures quarter over quarter to try to find improvement opportunities.

For the company.

Having a look at our volumes, that was a 5% increase in water. 5.7 in sewage. Our greatest volume is in residential consumers. This is where we see most growth, but there's also Marginal growth in volume in the other consumer categories, but average is a 5.5% increase. In December 2023, there was a similar growth rates and there's a mixed growth that has an impact on revenues which is slightly larger than we see today so basically that's because of the mix and because of the vacation period where there's a consumer migration the people travel from Sao Paulo City to other places, and because of that there's a lower average tariff. That's why it's important to look at the quarters, taking into account this volume growth. But when we look at mix and average tariff, we see these differences because of seasonality. So this is an important point. This is the financial performance of the company, net income 1Q2022 was 747. There's a significant increase of 705 in revenue, which is a 15% growth in revenue. Construction results, again, this is a proxy. There's nearly no impact on results. Costs and expenses. We see the breakdown there because it's important to understand what is recurring or not recurring. So we see the AAPS effect, which is 162. That was an important agreement for the company because last year We had expenses of 45 million because of a deficit of health care insurance. And with this agreement, we will no longer have any future responsibilities. We will no longer have costs or expenses in the future related to retired employees and their dependents. So that's the driver for this agreement. So there is going to be a clear benefit for the company. And there was another case in the company that could also generate the post-employment benefit for employees. So this was a very important agreement for the company that will ensure us better future results, visibility, and no future impacts. So that's why we entered into this agreement. Of the 272 million thereof, costs and expenses, there's this important impact of depreciation. I'll give you more details later on. And events such as the bad pay allowance and service variation. So this is the expenses there. Other than APS, other expenses or not as impactful. Financial expenses is 79 million. Quarter over quarter, there was a benefit last year of FX variation with the appreciation of the real. And this year we are moving sideways. There was an impact of the US dollar on Q1, which was offset by the yen. When we use a Q1, the FX variation was closely null. But when compared to 2023, there was a loss, so to speak, because back there we recognized the financial revenue from FX variation. In addition to that, there's also an increase in some debts last year. We had almost 1.5 of new debts, and that's the breakdown of national results of expensive income tax. and consequence of that's the consequence of our results and that income 823 without adjustments aaps is just highlighted there but there was no adjustments in this net income figure Some details here, as was expected, we've been delivering the PDI that was designed back there and approved and introduced starting in July 2023. 1360 people resigned by Q1 and in June the plan will be concluded with Looking at the net of 4.8, actually that figure when we look at that financially and using at the resignation plan alone, the effect would be much larger. In May there was also an increase of 4.9 of union agreement and salary adjustment. So year over year or quarter over quarter without the resignation plan, that figure would be 5% greater. So 4.8 shows the impact of the resignation plan PDI. I know you're going to see In the second half of the year after the PDI has been concluded, we will have a greater capture and in one year horizon that what we see is the 15% reduction. Of course, always comparing to the baseline, which was when the program was introduced, because over time there are salary adjustments every year, so that's also something that needs to be taken into account. General supplies also moving sideways. We are working hard on general supplies and treatment supplies, junior consumption and demand planning. And the D plus one after privatization, so that's going to be more predictability, long-term contracts, so that there's going to be no seasonal impacts. There was a positive impact of consumption and prices of some supplies. Reservoirs were full in Q1, so we could manage water treatment. So that's a benefit that was captured by the company.

And in services, there was a 60 million increase.

Part of that impact is from maintenance of systems and pipelines. So we see that effect on Q1. Electricity. is aligned with what we presented last year for the same queue. Again, with the same strategies that were designed, looking at the free market and distributed generation, making progress with the solar panels. We've been working to have a supply of renewable energy and with managed costs. General expenses was a big impact. We have the breakdown there so that you have visibility of general expenses. You see what the municipal fund is. So that's a pass-through to the tariff, and this is not managed by the company. Significantly increased because of the increase in revenue, but also because of new municipalities that are now receiving after Q1 last year. So the impact is larger than the revenue because of that. And in general expenses, what we see is the AAPS, which was the agreement we mentioned before, and 68 million, which is general expenses, which is updates of ongoing processes. So even excluding APS, there's been this increase of ongoing processes. There's nothing new, nothing significant, just an update. In depreciation and amortization, there's nearly 120 million increase because of the increase of immobilization last year we ended the year with 6.3 billion of fixed assets and that generates depreciation and amortization expenses we see a small graph below showing the performance of fixed assets, because this is what has an impact on depreciation. The PCLD, which is the bad payer allowance, there's a nearly 30 million impact. In Q4 last year, we mentioned that there were two very good quarters. And there was an important non-recurring event then that had an impact on our Q3 and Q4 results, and also structuring actions are underway with the customer team, working with new types of collection and also speeding up service termination or suspension, So this year, to give you an idea, basically, we doubled the number of service disconnections, giving our contracts negotiated with our global maintenance suppliers. So that's what we've been working on. In Q1, there was no FAE round. We started late in March, actually, but there was the effect of not having had that and events such as new agreements, So we are working on that so as to introduce new payment methods that can help consumers and will also ensure our revenues. We are adjusting that and the customer team is working hard on that. And last year we ended with 3% and now it's 3.4% of the bad payer allowance. And this year in the short and mid run, we wanted to remain on a 3% level. before we start using digital payments and different types of payments so that then we will be able to reduce the default level. So there's this accommodation period. But again, 2023 is the starting point for this journey in 2024. And so this is the baseline we are adopting. Looking at our indebtedness, again, the indebtedness level, the net debt adjusted EBITDA.

It's 15.8 net debt.

With the effect of the funding this first queue, we are a low leveraging rate, This is going to be good for us.

So that we can comply with our investment levels.

So this leveraging rate will enable us to, in the coming few years, to increase the indebtedness ratio, of course, respecting our covenant so that we can improve our capital structure so that we can be able to make the investments that are required and that will be greater in 2029. So we ended with 167. The good margin and EBITDA, not that adjusted EBITDA or just EBITDA financial expenses are also very good. We still see the 12% of debt in foreign currency and the next quarter we're going to be 100% real linked debt back to our indicators in Brazilian real. So that's it for me. And I'll be available for your questions later on. Thank you, Katia. Also, well, that's it in terms of our presentation. Now we begin the Q&A session. You can send in your questions in writing only using the q a button and this platform first we will take questions from analysts and investors and then we will take questions from journalists that said we already have some questions Let's begin. Carolina Carnero says, well, good morning, everyone. We have two questions. One, in addition to the AAPS agreement, what other initiatives are underway in terms of personnel that will have an impact on the company's turnaround and should be highlighted. Two, on the new contracts with URAE, are there any variables such as asset base to be used in initial calculations and the OPEX? Because they have not been disclosed. Do you know when these pieces of information will be disclosed? Good morning, Carol.

In terms of personnel, We have different initiatives.

There are initiatives of when we're still state-owned. And then there's the resignation program and centralization of management and CAPEX and overall management of service agreement that many of them have been migrated to the CFP. These policies are on the way. So that's why we see a journey of reduction in the long run. That might be some noise, quarter over quarter, structurally. unit cost and the several lines tended to the aaps agreement there's a different reasoning which is risk mitigation it's something that was a good opportunity for the company when it was presented as cartier mentioned we had an agreement with the healthcare insurance company And Sabesp was the guarantor of payment flows. And we had to make some payments to them because of actuarial imbalances that happened in 2022. And we wanted to solve that problem. And we started to charge from beneficiaries and that's what led to this agreement so together we combined two issues one lawsuit that we didn't know what the outcome would be but it could have been a significant impact on our balance sheet and even if we are entitled to to to charge the beneficiaries that was not beneficial for us so we did the agreement to mitigate risk first and foremost and this was very beneficial for the company As a state-owned company, we don't have such leeway. But as we become a privatized company, there's going to be other opportunities for agreements that will mitigate risks and that will help us reduce current liabilities. As to the URAE contract, the asset base is being validated. According to our CESP orientation, we hired independent consultants. It's probably going to be ready by the end of May. And that and the OPEX, CESP and the government know how important it is for you to set this figure as early as possible. And we are working on that. OPEX itself has a calculation formula starting in 2022 with a number of factors. That's annex 8, I think. So there you find the formula. And later on, we can put you in touch with our regulatory team that can give you more details on this formula. Thank you.

Thank you, Andre.

Next question asked by Gabriel Francisco. He says, hello and thank you for answering my question. Can you explain if part of the increase in the service line is due to more outsourcing because you have fewer headcount? Is there an effect of consultants and legal and financial advisors because of the privatization process? Is the service expense level the same you can expect for the future if nothing else changes. Thank you, Gabriel, for your question. Actually, what you see there is a demand effect. It's not associated to outsource the services in operations.

Depending on our needs in the future,

We will need to hire contractors, but in operations and maintenance we already have contractors, so that increase is not directly related to that. It's not related to the fact that they're. Lower headcount. We are still consolidating the service levels. We are centralizing some activities that were being carried out by the business units. And in April, we concluded the centralization process. Now we are in this transition of this migration to shared services model and also strategic procurement is something that is also being incorporated by procurement. So this is a number of initiatives underway and we are migrating contracts, but they have different expiration dates and as contracts expire, a strategy that we adopted last year is that any new contract or contract renewal is for 12 months. with the termination clause so that we could go through the privatization process, have the ability to talk and bilaterally negotiate our agreements. So we still see this level of expenses in the company. We are working to reduce it. And in 2025 the expectations is that we're going to have the full benefit, so the company will have been privatized for a while, the contracts will have expired and we will scale up what we are negotiating. So in the coming quarters we expect to see similar levels, but as of the second half of the year there will be some reductions. The benefit, the full benefit and the big incentive and opportunity of doing things differently is something that we will see after the company has been fully privatized. There are some important levers. The way we are structured today as a company gives us a much better view of what can be achieved. It's a long question. Did I answer it? I think you covered everything. He also asked if there's an effect of hiring consultants or legal advisors.

There's a value that is supported by the government.

Consultants that we hired have a contract that is mostly based on success fee.

And nearly all of them

follow the privatization law. So there is the expense, but the government can reimburse us later on. So it's a state law, Gabriel, that defines how that should be carried out. Thank you. And there are two questions asked by Marcelo Sa. First, selection of board members per ticket. this ensures that strategic will appoint three board members three board members from the states and three independent board members in the bylaws there is the possibility of adoption of multiple voices if a relevant shareholder tries to enforce that, can it make this board composition infeasible? And the second question is about the poison pill. And the bylaw says that would be the largest value between 200% of the capital increase price that happened in the past 36 months and 200% of the average price of the past 90 days after the tender offer announcement date. It's not clear to me what happened if this poison pill limit is achieved in four years of the due. So only the 200% of the average press of the past 90 days would be taken into account. Marcelo, the bylaws, there would be nine board members, and the government would appoint no more than three board members. That's in the bylaws. That's the makeup today. And also, there's a minimum number of independent board members. So that's the structure today. And if there's a strategic shareholder, it is likely that they will also appoint board member even an independent board member that would be possible as well the multiple vote is a right of shareholders and that does not make the bylaws invalid Of course, there are changes in the dynamics because you wouldn't have a ticket, but you would have individual vote per board member. So indeed, these are two different mechanisms, the multiple vote or the ticket vote. These are two possible mechanisms according to our bylaws. Poison pill. I don't understand your question. I'm reading it again. Basically, it's the largest of the two figures. It's the largest of the 90 previous 90 days or the stock issuing price. So if there's no increase in capital, this metric is not taken into account. So only one of the items is valid. Thank you. Next question, Vladimir. Actually, two questions by Vladimir. First one, good morning. The new municipalities who have had approved funds, why is there the new collection? Is this the privatization? And the second, the PCOD value, which is the bad payer allowance, is substantially higher than that indicated in the non recoverable revenues of the new regulatory framework. Can we expect value convergence over 2024? What has been going on? I'll answer the first one. Thank you, Vladimir, for your question. So the new contracts, the new municipal funds have been waiting for approval of our SASPs for many years. They had filed for that many years ago. The largest municipalities already have their established funds and the smaller municipalities had not realized that there was this opportunity. They need a municipal law to be passed and then after that to have to file with our SASP and then our SASP approves that and then we make payments after the approval by our SASP. And if there's any retroactive payments to be made, we make them according to what our CESP decides. So for us, from the economic point of view, this is neutral because there's a full pass through to the tariff. And the impact of the new municipalities is not relevant. And that's not to do with privatization. In the post-privatization model, it is much more clear the type of discipline that will guide the payments made into the municipal funds. the totality will be included in the tariff. In São Paulo, we pay 7.5% of São Paulo Municipal Fund and only 4% is recognized in the tariff. But after privatization, the totality of that is going to be included in the tariff. The same will happen to the other municipalities. You still need a municipal law to be passed.

from the municipal.

And then I need to file that with the HRSA aspect, which needs to approve that. And in the next tariff cycle, there is a payment of or a reimbursement of the payments made and the inclusion of future payments. And now the question about bad payer allowance. When you look at the regulatory model says that you should take into account the past 16 months in terms of non-recoverable revenues and we're taking into account the average of bed pavements before the pandemic, so the percentage is much lower than we're that we see in 2024. So eventually there's going to be a convergence. I don't think it's going to be 2024. When you look at 16 months, basically we're talking about five years and irrecoverable. Is that what you cannot collect in the five year horizon so? So this is a PCOD of 261. You see of irrecoverable according to the regulatory agency. They look at the tail. 3.4%, but their allowance does not mean that we won't try to still collect. So we still pursue collection of above 360 in accounting terms, we do the allowance, but commercially, we're still working to collect those amounts. So there are different concepts in the timeline. It's a five-year horizon, 60 months, and the bed-payer allowance is a 260-day or one-year horizon. Eventually, they will converge when we look at the five-year average. So in answer to your question, according to the new regulations, if I'm not mistaken, It's 1.9 as a target, so we will try to achieve that, but we are still working on that with our customer team. 165, not 1.9. So there's still some ways ahead. before we know when we're going to be able to get there. Thank you, Katia. Next question asked by Liliana Young. She says, thank you for this opportunity and congratulations on your delivery so far. Two questions. what did assess not recognize in terms of sub-s tariffs referring the irt of may 2024 or 6.4 for example the repass of the municipal fund of the sao paulo city is it four percent or seven point five percent two What should be the offering format and when we will have more details about that? For instance, the price to be paid at the offering by minority investors is going to be the same paid by a strategic investor? Thank you. Thank you, Juliana, for your questions. There are two important points that were not addressed by the tariff adjustment and that are recognized in the new contract. that have an impact on the revenue.

First, fixed demand contracts, so key accounts, 2023.

There were 720 million real discounts that were not recognized in the new contract. There is a 300 million real forecast to be recognized in the tariff. So we will be adjusting this volume of 720 in our budget. This is a very important point. This was not recognized in the tariff adjustment, even if There was an item there which was not included in the new regulation. The second point that had an important impact is reforms and cancellations. We talked to the regulatory agency about that issue, that we have the obligation of letting them know the build amounts but in that period in that time frame we are not able to review all of the requests for review and then a new contract is going to be 90 days and this addresses 90 of the problems we have with wrong measurements of revenue because the figure may be polluted by reforms and cancellation which should account for two percent of the revenue and the 2022 values. And in answer to your first question, the value of the tariff includes 4%. The 7.5% is the new regulatory framework. The second question is the privatization offering. This is being led by the government.

They've been having meetings.

with the privatization agency. So the government is analyzing that. We give them support whenever they request us to. Our advisors and consultants are also at their government service, but the figures have not been set yet. And I think that this is going to be published as soon as possible, as soon as the model is established. Thank you, Andre. Next question, asked by Luisa Candiota. She says, good morning and thank you for taking your questions. Could you share more details about your vision regarding the final documents of public consultation regarding the new regulatory framework. What were the most important contributions made by the company and addressed points? We see that commercial programs will be included in the tariff with an annual limit. That said, what should be the strategy to apply tariff discounts going forward?

There's changes in revenue, so there's commercial agreements. There's going to be a budget for existing contracts.

The contract inventory is 720 million reals of discount. It's going to be adjusted to 300 million reals. This is going to take some time. There's a forecast. And then we're going to be working with the regulatory agency that the figure grows in the future, but then it needs to... be something we built together with the agency so to look at the new commercial agreements and not be limited to 200 million reals but the context that with the new consumers the unit cost will decrease for everyone so this is an important point to be addressed And in terms of cost, we had the recognition of PPR of the employees. This is an important point that is going to be recognized in expenses. And sharing efficiencies in the first cycle up until 2030, we capture 100%. The company captures 100% of efficiencies generated and then 50% in the second cycle, 75% and then 90%. And an interesting point of the municipal funds that can help us reduce the municipal fund allow us to keep some pass-throughs if there's any municipality that doesn't pay so because it's an important mechanism for us we'll be able to retain resources from municipal funds in case the the municipalities don't pay their their bills with us that's a very important mechanism next question Asked by Gabriel Francisco, can you give us more details on the cost basis for 2022 that is the basis for the OPEX calculation and the tariff review according to the new regulation? It seems to me that some costs such as the management bonus and losses are removed from the calculation base. Do you have any idea of the magnitude of the costs no longer taken into account? Actually, the basis was 2022 because that was a closed year that was audited already and then it was used for the analysis for the new contract. 2022 had not been closed yet, so the baseline is 2022 because the figures had been audited already. And as to, well, Andrea answered that, that one of the achievements was the recognition of the bonus as something not to be discounted, but as we say here, and that can give you figures later on, it's 100 million, roughly 100 million. It's not that significant. An important point here that is part of the new contract is that is going to be an obligation, which is the insurance, mandatory insurance. And this is an account that was the company, the insurance premium, that because of the requirements that will be in terms of coverage we will have that as a pass-through into the tariffs we are going to present the company's insurance program for our sas the right and when that is approved that's going to be passed on through to the tariff so this is going to be an expense that is going to increase for the company because there's more coverage requirement insurance but that is going to be introduced in the tariff as a non-manageable expense So that's helpful when we look at what is discounted today in the regulations is going to be in the contingencies lines and insurance is going to be helpful and we'll be able to treat that in a structured way, in a more comprehensive way. And there are some other initiatives that we adopted to reduce risk that are also going to be helpful for our contingency management. Thank you. Thank you, Katia. Thank you, Andre. So that was the last question from investors and analysts. Again, if you want to ask questions, you can use the Q&A button. And so this was the last question from analysts and investors. And now we can answer questions from journalists. Actually, there's an additional question here. Adela Souza asks, the initial tariff P0 is going to be in the contract signed by URI before privatization? Good morning. The formula is there. The P0 tariff will depend on the conclusion of the 2023 asset base. So we wanted to announce that as soon as possible. But by the 20th, I'm not sure that's going to have been approved by our CESP. So probably this contract is going to be signed as is today. Thank you. OK, we can now answer the questions from journalists. asks, what's not ready yet in terms of the offering model? is it not just this is not too short a time thank you thais for your question the regulatory model i don't think it's going to be adjusted by the urai meeting because we think it's been concluded already we already have the new concept for the regulatory framework so that is set as to the offering model there are some points that are still open the price for instance it's going to be different prices or not and some other details so the government needs to set that and then the process is that there's a meeting with the state privatization team and then they announced to the market what they decided So that doesn't need to be ready by the URAE meeting. It's a different logic. It's a construction of a new contract model that has an impact on the offering, but it's not part of what URAE needs to approve. And the June timeline, it is feasible today, yes.

I mentioned before that the window is from end of May until beginning of August.

So with the current figures, we can have an offering up until the beginning of August. In case we needed to change that schedule, we have this Flexibility. To adjust the schedule. Up until August. Thank you, Andrew. That has another. Question on your. It's a follow up on the P0 tariff. So if I understood you correctly, privatization would begin without the initial tariff. Is that correct?

No, that's not correct.

the methodology of p0 is not being established so the variables are there except the 2023 base and if the offering is done without that defined that's just in the next tariff cycle it's not a problem So whatever is not available today can be recognized later in the next tariff cycle. Thank you, Andrew. Next question, Alberto Alerigi Junior says. this apparent hurry for privatization with many non-defined points don't you think that create legal risks that could compromise the processing and its legitimacy why is there such a hurry for such a complex process that's an excellent question i think it's the opposite We've been making very well founded decisions since the beginning of last year when hired at UFC and defined the phase zero and the foundations of why going forward with the process, the benefits that would be accrued, all of the details in phase one, a notification to municipalities, definition of the new regulatory framework.

Everything is being done with great technical rigor.

The final model, as I mentioned earlier today, is very innovative and has been adopted elsewhere. And I think this is what should be done not only here with this regional view and interdependencies and coexistence of assets and natural resources that serve to more than one municipality. There's the Rurai meeting and then the 30-day time and the offering follows the rules of the equity markets. And as new information is made available, we can change the offering schedule because we want people investors wanted to take part in the process to be comfortable. As I mentioned before, in answer to Thais's question, we can have the offering up until early August. And this is a decision that we make together with other parties. So we decide when the best time for the offering would be. It's a robust regulatory model. which is very suitable to the sanitation challenges today. And all of the important variables are defined in the contract model. So it's the opposite of what you say. Everything is being done very carefully with all of the technical consideration. And the state government is also doing its part. And there's also the legislative processes in parallel. So you're doing things according to schedule. And this is something that is going to be a breakthrough in Sao Paulo and in Brazil as a whole. And we are confident that the process is being led the best way possible. Thank you, Andre. Thais has another question. If you don't have the offering by August, do you think it would be done still in 2024? Well, we today are working with the first Q window. We don't have a plan B. In case there's anything that will make us rethink, well, then we will see what would be the best way to go about it. So yes, so these were the questions from the journalists. And I'll turn it over to Katia for your final remarks. So I'd like to thank everyone in the company, the superintendents, the operating teams, and everyone in the company. This has been a very fruitful journey. We've been learning a lot.

And it's a transformation journey for the company, for the consumers, and the company.

is being able to respond to changes in a very positive way. So what we've been doing in 2023, 2024 is the result of hard work, dedication. I'm not going to name names because I don't want to be unfair, but I'd like to thank everyone, the support teams, financial team, HR, engineering, operations, customer, regulatory, new business, So everyone's been working really hard in this process. Also, the company has had this unparalleled ability to mobilize whenever there's any event that puts lives at risk. Last week, there was this atypical weather event in Rio Grande do Sul and very quickly 40 people in the company and the company were engaged engineers technicians people in maintenance and operations and they traveled to Rio Grande do Sul there are 14 crews working in Porto Alegre and municipalities working with the state government and Rio Grande do Sul to help with the disasters there, sending also water. We sent many trucks of water to Rio Grande do Sul to help them reestablish the services there. helping them reestablish the services, but also helping supply hospitals and shelters with water with our trucks. So thank you to our heroes that traveled to Rio Grande do Sul, people from Sabesp and everyone who donated to help.

I'd like to thank you all.

I'd like to thank everyone in the company once again. Also, I want to thank everyone in my team. Everyone's been working very hard because of this privatization process. the turnaround process. So thank you everyone in finances. I'd like to thank my colleagues, the managers and directors and their teams. We've been rethinking this company, rethinking processes, and this is a journey. And every day there's more information and we are always aiming for continuous improvement. There's a long way ahead, but I'm happy to see that we've been making progress, working together so that we can deliver the best to society, which is to deliver sanitation, more affordability and better results for the company. Thank you, everyone. thank you so with that we end this earnings call thank you everyone and have a great day