Companhia de Saneamento Básico do Estado de São Paulo - SABESP

Good morning and welcome to SABESP's first quarter of 2026 earnings presentation. With us here today are Carlos Piani, CEO, Daniel Islac, CFO, and Thiago Levi, Investor Relations. Before we begin, we clarify that the statements made during this presentation will not include projections or estimates of future events. However, they may contain forward-looking statements indicating potential trends related to Sabesp based on reasonable expectations, beliefs, and assumptions of Sabesp's management as of today. These statements involve risks and uncertainties and are based on assumptions and factors such as market, regulatory, and economic conditions, which may not materialize in addition to the risk factors disclosed in Sabesp's filings with the Brazilian Securities and Exchange Commissions and on its investor relations website. Investors should understand that changes in such factors may lead to outcomes that differ from current trends and that undue reliance should not be placed on these statements. The full disclaimer will be presented next and must be read carefully by all participants. This presentation is being recorded and all participants will be in listen-only mode during the presentation. After that, we will begin the question and answer session for analysts and investors only. If you wish to ask a question, please raise your hand and submit it via the Zoom Q&A informing your name and company. I will now turn the floor over to Daniel Slak, who will discuss the results. Daniel, you may proceed.

Thanks, operator. Good morning, everyone, and thank you for joining us for SABESP's first quarter 2026 earnings call. I'm Daniel Slak, CFO, and I'll present our operational and financial highlights for the quarter. After which, I'll handle the call over to our CEO, Carlos Piani, to update you on our progress. We will then open the floor for the Q&A. Before I begin, I would also like to clarify that all the numbers in this presentation are SEBASP only and do not include EMAIS figures. For this first quarter, we have only consolidated the balance sheet. In the first quarter of 2026, total water production reached 778 million cubic meters, 4.6% lower versus the year ago. This decline reflects a milder summer with average temperatures 3.3 degrees Celsius lower than last year, as well as the application of SEP AGUA's operational rule of denied pressure management implemented for approximately 10 hours per day to enhance the system resilience. Our active customer base remains stable with about 9.5 million water and 8.2 million sewage connections. The slight year-on-year reduction is primarily driven by increased revenue assurance actions and the verticalization of the cities in which we operate. Excluding the impact of such actions, water connection would have remained flat year-over-year, while sewage active connections would have increased by approximately 0.2%. We continue to prioritize service quality and operational reliability for the nearly 30 million customers, ensuring consistent water supply and sewer services, even amid varying weather conditions and operational challenges. Turning to our financial performance, adjusted net revenue for the first quarter of 2026 was 6 billion, an increase of 11% year on year. Adjusted EBITDA was $3.8 billion, up 26% versus the year ago, reaching 62.9% margin, a significant expansion from where we were a year ago. This higher margin illustrates the impact of our continued efficiency efforts and disciplined cost control to free up resources for our CapEx plan. Adjusted net income was $1.5 billion, growing 32% year over year, supported by improved operating results and lower spreads in our debt stack. Before we deep dive into the operating performance, let me briefly walk you through the reconciliation between reported and adjusted figures, same as we did in previous quarters. As usual, we exclude construction revenues for which we don't book any margin and the financial assets, which are merely accounting requirements and do not reflect in our view the underlying operations of the business. In addition, during the quarter, we incurred in 16 million reais of one-off M&A expenses. Adjusted net revenue grew 11% year on year in Q1. driven by three main factors. First, price contributed 12%. This reflects the last tariff increase implemented in January, with a 9.1% base in from last year's bills invoiced in 2026. It also reflects an additional 2.8% gain from commercial initiatives, particularly the termination of large client contracts. Second, volume was up 2.4%. While the expansion of the customer base contributed 2.9%, this was partially offset by temperature effects that drove consumption per capita down 0.6%. Finally, mix reduced revenue by 3.4%, reflecting the expansion of subsidized tariff programs year over year. These programs now benefit more than 2 million connections and remain a key mechanism to ensure access to basic sanitation services at affordable prices for underprivileged communities. While this affects revenue mix in the short term, it is fully aligned with our social mandate and is covered within the regulatory framework. On the next slide, we deep dive into some of the aspects supporting the revenue performance. The price index excluding mixed effects remained stable with a 9.1% increase driven by the January tariff adjustment. On the social front, the number of connections benefiting from subsidized tariffs surpassed 2 million. While this was virtually stable quarter on quarter, it represents a 23% increase year over year. This expansion reinforces ABBESP's role in promoting social inclusion while continuing to broaden service coverage in a financially sustainable manner. Moving to EBITDA, adjusted figures grew 26% to $3.8 billion. This was underpinned by higher revenue and cost efficiency across multiple areas. G&A saw a gain from a 30 million past due settlement with one of our cities and generally tighter cost discipline. Power went down largely from an increasing mix with the free market now representing 86% of total consumption. Personnel costs have declined as a reflex of our workforce restructuring. The average workforce in Q126 reduced 13% compared to the year ago to 8.8 thousand employees. With revenues up and costs well contained, our EBITDA margin expanded to 63%, freeing up resources for our ambitious CapEx plan. Now, deep diving into personnel, we saw a reduction of 26% year-over-year, which reflects a combination of a 13% headcount reduction and a gain in workforce, job, and salary mix. These structural measures more than offset the 5.5% wage inflation applied during the period. Reported net income was $1.7 billion for the quarter, up 18% from $1.5 billion in the year ago. The substantial EBITDA growth more than offset an increase in net financial expenses, which rose as expected due to higher interest rates and our higher average debt to fund the CapEx program. These effects were partially offset by a lower income tax expense aided by the deduction from interest on capital payments in the quarter. Our transformation is most visible in the acceleration of the investment program. In the first quarter alone, CapEx reached 3.7 billion, up 31% year on year. This strong start to the year puts us well on track to achieve our ambitious plan. We have already delivered a large portion of our multi-year universal access targets as of Q1. We have fulfilled 87% of our water connection goal, 77% of our sewage collection goal, and 71% of our sewage treatment target for the years of 24 through 26. Moving to the next slide, our major projects are advancing as planned. For example, under our Countryside Universal Access Program, phase one is underway with 11 projects involving 5 billion of investments already in execution phase. And earlier this year, we launched the phase two tenders for additional eight projects, totaling another 5.4 billion in investments. We made further advances in the Integral Tietê program with the expansion of the Barueri Sewage Treatment Plant, a 5.7 billion project that will boost the plant's capacity by 41%, benefiting about 4 million people by 2029. Turning now to our balance sheet, our leverage ratios remain controlled, even as we ramp up investments. At the end of March, net debt stood at 32.5 billion. Our average cost of debt remains low at roughly the benchmark rate, and we have extended our average debt maturity to 6.3 years. It's worth highlighting that 64% of our debt now matures in 2031 or later, reflecting our proactive efforts to push out maturity, boost universal access, and lock in long-term financing. We also maintain a very strong liquidity position. $19.2 billion in cash at quarter end, which is sufficient to cover over five years of debt service. Our solid capital structure and balance sheet provides ample flexibility to continue executing our investment plan while safeguarding our financial stability. Finally, looking at our key financial ratios, net debt to adjusted EBITDA was 2.4% at the end of the quarter, still at a very comfortable level, given our robust cash generation and long-term debt profile. Our profitability metrics remain strong and stable, with a trading ROIC of 11% and ROE about 17%, combining both growth with profitability. With that, I will now hand over the call to Mr. Carlos Piani, our CEO, to discuss our strategic priorities and recent developments.

Thanks, Daniel. Good morning, everyone, and thank you for joining the call. I will now provide an update on the strategic and operational progress achieved during the first quarter of 2026. Turning to slide 17, you can see a summary of the key accomplishments across the four strategic pillars we presented at our Investor Day last April, quality, profitability, growth, and society. Starting with growth and our universalization agenda, we maintained the strong investment pace established last year. CapEx reached 3.8 billion reais in the first quarter, approximately 31% higher year over year, clearly demonstrating our execution capacity and ability to accelerate project delivery. Visibility also remains high, with a CapEx backlog of 39.8 billion reais from April 2026 through 2029, providing a solid foundation to sustain this investment cycle over the coming years. Turning to profitability and operational efficiency, as discussed during our fourth quarter 2025 earnings call, we have substantially closed the historic gap related to discounts granted to large clients. At this stage, 80% of the related injunctions have been ruled in SubSB's favor, reinforcing both revenue quality and regulatory alignment. We also continue advancing our infrastructure modernization agenda with installation of 326,000 meters during the quarter, a 51% increase year over year. This initiative is expected to contribute to lower losses, greater billing accuracy, and improve operational efficiency over time. Collection performance also remained strong with a collection rate of 96.9% in the quarter, excluding court-ordered debt payments. In digital transformation, the quarter was marked by the successful go-live of SAP S4 HANA, a major milestone for the company. This implementation enhances agility, data quality, and operational integration, while also establishing an important foundation for the next phase of SAP's transformation agenda. On quality and customer experience, we continue to expand and strengthen our digital customer journey. Today, 10.5 million customers use our digital payment channels. Our WhatsApp platform continues to scale, averaging 2.8 million interactions per month, while SubSB's app maintains a strong 4.6 rating with approximately 1.5 million monthly interactions. At the same time, we're adapting our call center, branches, and ombudsman operations to a new commercial and operational reality. This includes redesigning processes, standardizing workflows, and resizing teams to better match current demand volumes. Additional adjustments and improvements are planned for the coming quarters as we continue to enhance customer satisfaction and improve our net promoted score. Finally, on ESG, I would like to highlight two important achievements this quarter. Earlier this week, ISEP3 published its annual index composition, and SABESP remains a member for the second consecutive year, reinforcing the strength of our ESG positioning in the Brazilian market. In addition, in January, we received the B rating in the CDP Climate Assessment, representing an improvement versus last year and reflecting continued advances in climate governance and environmental management. Taken together, these results demonstrate the consistency of our execution across all strategic pillars and reinforces our ability to deliver sustainable growth with quality, efficiency, and positive social impact. Moving now to slide 18, while we're making strong progress across priorities, it is equally important to remain transparent about the challenges ahead as we advance towards our 2029 commitments presented at Investor Day. Each year, this transformational journey brings a distinct set of priorities. In 2026, one of our main challenges is the implementation of the new regulatory accounting principles, including the new RAB methodology, which we expect to conclude by year end. This is a complex but fundamental step to ensure greater transparency, consistency, and alignment with the evolving regulatory framework. In this context, our regulatory agency has launched a public consultation to discuss the new DRC methodology, and we intend to actively contribute to this process by submitting our recommendations by May 13th of this year. Successful delivery on this milestone will be critical not only from a compliance perspective, but also to support the next phases of our transformation agenda, including future tariff reviews, the advancement of universalization targets, and the integration of new assets into our operating financial model. With that, I conclude this session of the presentation. We can now move on to the Q&A.

Thank you. We will now begin the Q&A session for investors and analysts. To ask a question, please submit it via the Zoom Q&A, informing your name and company. Our first question comes from Mr. Guilherme Lima from Santander. Mr. Guilherme, the microphone is open. You may proceed.

Good morning, guys. I have here two questions. First, electricity and material expenses came in higher than we were expecting. Could you disclose to what extent these lines were impacted by the company's current hydrological situation, what could be normalized levels, and whether a portion of these incremental costs could be subject to future reimbursement? and the other question is if you could share your expectations for the 2026 revenue loss stemming from social tariff benefits to be reimbursed in 2028 tariffs that's it

Thank you. Good morning Danielle here. Thank you for your questions. Look, starting from electricity materials. We don't see necessarily major shifts in electricity with regards to hydrological situation versus what we had, for example, in the 2nd, half of last year. uh what we see first is is a decline year on year on power expenses so so we're actually uh uh consuming less uh versus the first quarter of last year um as we have a lower production uh given by the fact that we're doing the night pressure management in connection with espagos operating rule which is good um What we see naturally and we try to signal that in the investor day is higher costs per kilowatt. with regards to the captive market, given the price increases that have been already passed in the places where we operate. So this is one of the things. Looking to materials, I would attribute that mostly to phasing than anything else. There was no specific major item on materials in the quarter that would lead me to believe that we're on a different path. With regards to revenue loss from the social tariff, right, which is a timing effect, naturally, what we see today, we have virtually stabilized the number of economies that actually access the benefit with about 2 million. If we look at year on year, this is a big impact, growing almost 50% year on year. But when we look at Q4 versus Q1, the number is relatively stable. So I don't see major spikes from one quarter to the other. What I do see and one thing that you have to keep in mind is every time that we grow, we're growing more and more to underprivileged communities. So as we grow, an important part of that growth is going to be eligible to the Tarifa Paulista or to the Cade Único, depending on each level of eligibility. So this is going to add to that number. Is it going to be one for one for each economy that we grow? This is going to go there? I don't think so, but this is less predictable from a day-to-day perspective. You'll see some growth, but this is going to be much more organic now, and it's going to be less stochastic. Sorry, less discrete, sorry.

Thank you, Daniel.

Thank you.

Remember that you ask a question submitted via the Zoom Q&A, informing your name and company. Our next question comes from Mrs. Maria Carolina from Suffolk.

Hi, everyone. Good morning. Thanks for the call and also for taking my questions. I have two, one on regulatory front and the other on growth opportunities, starting with regulation. Can you comment on the recent normative that RSSP published presenting the guidelines for the discount policies for large users? What's your thoughts on these guidelines, expectations surrounding this definition? And how can this help you guys in future negotiations with big clients? And secondly, the government announced the public hearing, as you guys mentioned, on the investor day for the Universaliza Sao Paulo program. So looking at the documents released, what's your first thoughts on that? The expectations for the blocks per se, if it's going to be more than one block and potential size of blocks here in case you have Any views on that? And of course, expectations on possible differences between this model, new model versus the first version and maybe the timeline for that. Thank you.

Thank you, Carol. A few thoughts, not definitive yet, because I think we're still early days in some of these initiatives. First, regarding the commercial discount policy, not policy or policy. ruling that the SSP did. I think the next step is for SBESP to submit a policy and how would this deliberation work. Our expectation is to do this in the next couple of weeks, to be honest. This has been long overdue. This segment of the market is expecting this since the privatization. Our expectation is that SASB will approve, with any adjustments, the policy that we submit, I think, by the end of this quarter. And this would be in... I think valid for consumers on the second half of the year. The consequence would be, I think, consumers to adopt these new tariffs. We would probably, this would have an impact on our second quarter, second half of the year results as this rolls out, and we would be compensated two years down the road because of the volume, how the regulation works. But I think this would mitigate a lot of the pressure Uh, a lot of the demands that some large clients, industrial commercial clients have. So, all in all, I think that we'll have a clear view of definition of the policy that that we're going to propose. And if it's going to be approved by, by the end of that 1st, half, and this would be applicable and valid for the 2nd, half of the year flowing through our numbers. Yochanan Shachmurove- Regarding universalism, I think it was good to hear that this process is moving forward. Yochanan Shachmurove- I think the big unknown still is how many municipalities are going to be there for the formal process. This is still not set in stone. Yochanan Shachmurove- I think that's the big uncertainty. We don't have a clear view of how many blocks. I think It depends at the end of the day how many municipalities will be in the process when the process formally starts. I think the new news, I think, is the drainage. It's small, but there's a piece of drainage in the process. This is different from what we had at Cebespi. All the rest, I think, is most of the same. So that's good news because there's no surprise. There's also provision of DRC to be – what's going to be approved for Cebesp is going to be rolled out for also for Universaliza São Paulo. So this is, I think, the unknown that may affect us and the universalism. Okay, so this is our takeaway for now. And glad that see both of these initiatives moving forward during this year.

Okay, amazing. If I may add only one additional one here. We noted this quarter that the unitization curve seemed a little bit slower compared to the previous quarter. Of course, we're talking about tough comps, right, given you guys did a great job last year. But just to understand if there was any kind of events this quarter that changed a little bit the rhythm here or nothing to be noted on that. Thank you.

I can take it. Daniel can also comment if you want, but I think there's small seasonality. At the end of the day, there's a big push given how regulation works to have everything ready for the regulatory discussion by end of the year. So the fourth quarter is our peak, and usually the first quarter is where, from a seasonality standpoint, a little bit lower. I think nothing that concerns us. This has basically two things, the COP of the fourth quarter, and I think that the way that the construction works evolve through the year. I think the first quarter, usually it's a little bit slower from a unitization standpoint.

I just wanted to add something here, Carol. We also had the cut over for SAP. We had to cut the month a little bit earlier in March. So we didn't have the typical days that we take at the end of every month to go through the unitization process. So this is going to be picked up in Q2. Okay?

Okay. Thank you, guys.

So we lost two, probably two of the 90s plus.

Okay. Thanks. Our next question comes from Bruno Morin from Goldman Sachs.

Hi, good morning, everybody. Thanks for taking my questions. I have two here. The first one, you know, could you comment or remind us where you are in the journey to improve operational efficiency of the company, just so we understand, you know, how much more room you still see for further cost and revenue efficiencies going forward? And the second question, you know, on the Copasa privatization, if Sabesp decides to participate, is it decided that that would be together with Equatorial, given none of those companies have exposure to Minas Gerais yet or not necessarily? Thank you very much.

Daniel, you take the first one. I can take the second.

Okay. So on the cost side, look, we have a lot of things that we did last year. And thinking to why we're doing this, right, we've invested already $22 billion. We've invested another $3 billion plus this quarter. So we're investing a lot. And this is one of the ways that – That we free up resources for that investment, right? Interest rates that are at 14.5%. So, so this is 1 of the things that why we do this, right? But thinking through this, we did a lot last year. There's a lot of carry over from last year. Um, but naturally, we're doing other things, uh, this year, uh, and and and. One of the things that we have that's big and it's going to come up is the auto production on power. We have some of that coming live now in Q2, some of that coming now live in the Q3. So we'll also see a carry forward benefit for that for next year. So this is one of. the large things that we're doing. But otherwise, one of the things that we're looking also is through the structural things like the SAP go live. We are also revisiting all our commercial efforts and our commercial processes, also to improve the quality of the service, and so on so forth. So we try to avoid giving too much guidance on that front as you are well aware. But this is what we can comment for now.

Regarding M&A opportunity, the one you mentioned, I think given everything that's happening with us, because we're still, we're doing a transformation while being a public company and so forth, I think the partnership is welcome at this phase for any major opportunity. I cannot to confirm partnership, but I think that partnership is something that we want to seek, and Equatorial is a partner of choice if we decide to move forward. I think we're ready for the process, and the partnership is something that we think it's good for us at this moment in time, and Equatorial would be a good partner. And in the right time... when we publicly make the decision in the process this decision is going to become public that's what i can say thank you have a good day our next questions our next question comes from philippe from itaú

Good morning, everyone.

Thanks for taking my questions. A quick follow-up on a previous question here. At its investor days, Abes presented a capex estimate of roughly 20 billion RAS for 2026. Could you please share your expectations on the disbursement curve in the coming quarters, as well as the expected normalized unitization rate? And also, if you could comment on the discussions with the regulatory agency regarding the capex plan for 2024-2029, Do you have any insights on the timing or the outcome of these discussions? Thank you.

Okay, thank you. Thank you for the question, Felipe. Let me maybe start with the first part of the internal side and then if you want to talk a little bit more on the external side. On the internal front, right, CapEx typically starts slower off the gate in Q1 and then ramps up throughout the year. Every place that I've worked in my life this happened. It's no... It's no different here is when we look at last year, a part of the, the, the, the slope of the curve of the acceleration was indeed because of how we were changing the processes. But there will always be a compounding curve throughout the year in terms of topics apart. A part of that comes from the fact that we have started the countryside programs. Now, so we have split the countryside programs into two pieces. The first batch of those programs have started already. The second batch regret getting proposals now. So we'll start at some point still this year. And then we are also contracting the expansion of the major sewage treatment plants that will also increase the capex throughout the year. Okay. So, so mechanically, this is how it will work in terms of unitization. J. Eduardo Campos- unitization also has has to do with the good being put into use right, so it needs to be commissioned right there's need there needs to be water or sewage passing through that and usually. some of these things they happen throughout the year. So the unitization curve also grows throughout the year. As we've been voicing, we do not expect that one for one will be unitized in the first two or three years. We expect that there will be more or less two thirds, one third being left over, one third and unitizing about two thirds of the COPEX, a little bit less than two thirds of the COPEX every year, and then reversing that trend in the last two years of the cycle. So this is more or less what we expect and what we are planning and seeing already in the day-to-day. But then talking about the regulatory front, I'll defer to Piani. He can provide better insight.

There's no timeline from the regulatory standpoint for us to have a formal position on our COPX projection. But we expect at least This discussion to have some definite, we have some definition about the future and the beginning of the second half of this year, because we need to start planning what we're going to do next year. Right. And the years forward, we already have a lot of the CapEx contracted, given how things work. work here. But there's still some degrees of freedom, how much money we're going to deploy next year and the following years. So from our perspective, I think we need to have some visibility of this alignment by the beginning of the third quarter of the year. And we'll try to pursue, if possible, this definition with the regulatory agents. But just to be clear, there's no formal timeframe, no obligation from the regulatory agency to provide that in that timeframe, okay?

Thank you very much.

Thank you. Remember that to ask a question, submit it via the Zoom Q&A, informing your name and company. Our next question comes from

Matheus Amorim from Navi Capital.

Hello, thank you for taking the question. Congratulations on the excellent result. I would like to understand a little bit more what are your actions through the remainder of this year regarding revenue assurance and how you're seeing this thing evolving throughout this year and maybe next year. Thank you very much.

Thank you, Mateus. This is a very important pillar for us. I think that all the commercial efforts where revenue assurance resides are one of the major pillars of any transformation from a state-owned company to a privately held enterprise. We have been moving fast and furious on that front. Many fronts like meters, substitution, collection, workflow adjustments, putting a negative mark on consumers that don't pay on time and so forth. And this has generated a lot of volume on our customer service channels across the board that are at the same time being redesigned. So As we described on the opening presentation, we're constantly discussing this balance between how much volume we put in the system and how much structure do we have to support this. And we know we're all customers as well from other utilities. Usually, customer service is a little bit difficult. We expect through this quarter that we're living, the second quarter already, to the end of the year, to make potential adjustments so we can help the consumer navigate this change. of different commercial policies following the regulatory framework that it's a little bit tighter than it was in the past. We have more flexibility with Parcel installments for adjustments in volumes that are higher because of the meters that were obsolete. So all in all, Mateos, I think we're going to adjust. I think we're focusing on the long term. If it's required, we may reduce a little bit of the volume or invest a little bit more in the structure so we can continue to evolve with a good customer service level. This is our challenge. We're looking at the long term. and help our consumer in this transition to pay on time, even if the bill is a little bit higher because of the meter that was obsolete and was not measuring correctly. So if we have to adjust, we'll do so in this and the next quarters to come by year end.

Thank you very much.

Thank you. Remember that to ask a question, submit it via the Zoom Q&A, informing your name and company.

Our next question comes from Juliano Ajeje from UBS.

Daniel, good morning.

I have two, three questions. Let me start with the, about the therapy, about the mixed therapy. you reported growth in terms of households with therapies with subsidies. I have two questions here. The first one, if the companies project this growth pace of therapies with subsidies will continue through 2027, 2028? And if not, what should be the level? And my second one is regarding the status with the regulatory work with our CESP to recompose this. Also, another question is about COPASA. So it's a simple one if you already registered for the process. And finally, another question about the CAPEX. So the slide 13, you showed the CAPEX expected for 2024 to 2039. And this is considering the anticipation of the second cycle. So, assuming that RCSP will not consider to anticipate, what should be the cap? So my question is, the initial 70 billion reais, how much should be adjusted by inflation and also by, and also second, how much should be the anticipation of the second cycle? Okay, so three topics here.

All right, maybe I'll take the first one and then I'll take turns with Piany here. So on the first one, and thank you for the questions, very helpful. So on the first one, We started this adding new tiers, right? So first we had a methodology that was sub SP and then the contract dictated us to move from that methodology to the cadastro unico, which is the federal social security scheme. And we moved to that. throughout the last quarter of 2024. And then we realized that some people lost the benefits, but they still needed the benefits. So we maintained those benefits for a while to allow them to register into Cadastro Único and so on and so forth. And then throughout that period, the concession approved another program called Tarifa Paulista. So throughout all this period, I think until the end almost of 2025, we had changing rules of who was entitled, what type of benefit and so on and so forth. This stabilized at the end of last year. So now I don't expect, and one of the things that we'll also start seeing is some of these people getting into the transition tariffs, right? So people that had the benefit for 18 months, then they transitioned to a different class and so on and so forth. But given that, and assuming that there are no changes going forward, I think the adjustments here, they're going to be only organic. And what I mean by that is mostly driven by growth. So if we grow to underprivileged communities, some people will be more eligible. Even when we grow into more formal areas, We also have people that are eligible for social or Taifa Paulista and so on and so forth. But I don't expect to see the same amount of bumps up and down that we saw throughout last year going forward. I expect to see organic minor changes to those numbers going forward, unless there are regulatory changes. So that's the answer to your first question. Thank you. to the second talking about COPASA planning?

Copasa? Yes, we're going to register. We're going to participate. I think simple as that. And the process will can, depending how it evolves, we can share our views with the market. But yes, we're going to participate. And I think that the last one regarding the total COPEX, I think we need to wait for the regulator And I know this is a tough one because we need to be aligned. But at the end of the day, there's a little bit of everything, right? Daniel can explore, but there's a little bit of inflation on top of the 70%. building highs, there was a little bit changes of scope. Basically, when we did all the reference of all the consumers that needed to be connected, some of these works, I think, would be not prudent to be made. And we discussed how to do this with the government and with the agency, sorry. And they're discussing maybe there's other alternative ways to provide service like we are going to do to rural. There are some formal areas with rural characteristics and we can offer service with the same amount of the rural to some of the formal areas. This would reduce I think in a material way, a sample of the connections that we need to make. So all in all, I think we need, I would like to wait a little bit more to give you this visibility. I think what certain is what we're going to invest this year. I think we have been clear. I think Daniel can give a little bit more detail. But I think that there's three components. There's inflation on the 70 billion highs. There's a little bit more complex connections that increases the average cost per consumer that we're negotiating. And there's good visibility that this will decline given our conversations up to this moment with the agency. And there's some timing between cycles that at the end of the day is a cost of capital decision, right? Because the net present value may change a little bit more, but it's not different, right? And I think the final number, we need to wait for the regulator.

OK, I agree. Can I have one more question? Yeah, sure. OK, so the company reported a delinquency close to 50, 54 million reais this year. So my question is if the smart meters modernizations and also the digital channels improvement could change this for another level.

I think I'm going to join and I'm going to start and then Daniel can pick it up later. But I think there's, we reduce our provisions for our bad debt provision, right? And basically that the reduction was because the provision was made based on the behavior of the collection in the past. Given that we changed a lot of the policies and procedures, we're improving the collection rate as we move on. And because of that, the accounting provisions, they decrease. That's why they're declining. It's simple, right? So we don't, the policy has not changed. The bad debt provision is based on the collection history, and given that the history is improving, so the anticipated provision declines. If the behavior changes, the provision will increase. It's simple as that. So we're aligned. Regarding the smart meters, I think where they can help uh we we smart meters is not new in the world uh i think we're laggards uh regarding smart meters to the europe us asia and so forth but in one area that we that i think we're leading is that we implemented evolve on these smart meters. So this will facilitate these connections and connections according to the rules of SESB, right? So I think this will help, I think, to be more efficient. This will help the smart meters, as always, will help the consumer have a daily reading of their consumption. So there's going to be less surprises when they get a they have a leak or they increase because they have visitors, and they will discuss less, and there's going to be less dispute, in my opinion, in aggregate, of the final bills that they have, and we'll be able to collect more efficiency, given my first comment. So I think on the margin, there's some benefits, but this will take time. I think the smart meters that we have this daily consumption information, To be relevant, this will take, I think, two years to have a relevant sample to make a dent in our numbers, given our size.

Just just to add one thing I just specifically for this quarter. We had a settlement with one of the cities that we serve there was a 30 million has recovery. So this was also influencing the number for the water. You know probably be bigger form than just like a an aggregate member of the collection.

Thank you there.

Thank you.

Our last question comes from João Pimentel from City.

Okay.

Hi, guys. Good morning. I have a more broader question. I wanted to discuss, you know, how do you perceive Sabesp, you know, acting allocating capital in eventually different markets, meaning like outside Brazil? or eventually into different segments because you know subesp is already 100 billion plus market cap company of course we have copasa we have universalisa uh copasa if you go in a consortium uh comparing to the size of the company it's not that much of a big check Right. So just trying to understand, you know, how do you perceive or how you how do you think you are prepared in your journey of universalization in a sense that, OK, now we're more in the run rate. We know how things operate. You know, we are past the initial the initial challenges of running of this migration from an SOE to a private company. And, you know, we're just too big eventually for where we currently operate. So how do you feel about investing in different segments or look into other geographies? Of course, take into consideration different regulatory risks and effects exposure. So just trying to get your sense on that. Thank you.

Thanks for the question. I think this is in all the options of non-organic growth. These are the most risky, right? And probably the ones that we don't have, probably there's less alignment between shareholders and stakeholders and so forth. But given the nature that you mentioned, that the size, we have the fiduciary duty to look at all opportunities to generate alpha, right? I would say that... I think we need to learn and do our homework. I think this is, we're still in early days of our journey, only less than two years. I think we're 19, 20 months in. So I would say this is something that we're going to look at. Initially, if this makes sense, it needs to be almost like an option type of structure, right? It's easier that way. So if we have a very small opportunity outside in our industry, this would be a risk-reward relationship, easier to test the waters. But I would say there's nothing critical. I think there's, just to be clear to the market, we're not looking to do a deal outside our geography or outside the industry that's major, that's going to change the risk profile the best, okay? But given the nature and how regulation works and how probably the market cap will follow the increase or the recognition of the investments, the market cap will evolve and will be very large to the Brazilian market, water and sewage market. So I think we have the obligation to look at this vis-a-vis to the decisions to just distribute cash. And we have time for this. So I just want to be clear on the message. We are not going to try to be a holding company, invest a lot of things, but we're going to look at other opportunities to see how we can leverage our skill set, our knowledge, the people knowledge of the people there are here, in different ways. If we believe that there is a risk-reward relationship that makes sense, that we're convinced internally, that we can convince our board, we're going to try to convince the market. If we believe that the opportunity is not there, we're just going to stick here to Sao Paulo, do our homework, try to provide a better service to everyone and move on and distribute the cash. I'm just passing you the framework. There's nothing set in stone, but I think we have the skill set. If the opportunity arises outside a little bit of our backyard, I think we can do it, but we're not there yet.

All right. Thank you. Super to you. Thank you, Piano.

The Q&A session is now over. We wish to give the floor to Mr. Carlos Piani for the company's closing remarks.

So again, I just want to thank everyone for the questions and for the continued interest in Subaspi. We appreciate everyone joining on a quarterly basis our calls. Looking forward to keep you guys all updated on our progress on the quarters ahead. Have all a great day and see you next quarter. Bye-bye.

SABESP's learning presentation is now closed. Thank you very much for your participation and we wish you all a very good day.