About Companhia de Saneamento Básico do Estado de São Paulo - SABESP

Companhia de Saneamento Básico do Estado de São Paulo - SABESP engages in the provision of basic and environmental sanitation services in the state of São Paulo, as well as it supplies treated water and sewage services on a wholesale basis. As of December 31, 2022, the company provided water and sewage services to 375 municipalities in the state of São Paulo under concession agreements, program agreements, other forms of legal arrangements or without formal agreements. The company also supplied treated water and account for on a wholesale basis to two municipalities located in the São Paulo metropolitan region and conurbations. The majority of these concessions have 30-year terms. Between January 1, 2007 and December 31, 2022, the company entered into agreements with 351 municipalities in accordance with the Basic Sanitation Law, of which none were entered into in 2022. As of December 31, 2022, these 351 municipalities accounted for 95.4% of the company's gross operating revenues from sanitation services (excluding revenues relating to the construction of concession infrastructure). In addition to the contracts, the municipalities entered into cooperation contracts with the state of São Paulo, delegating the regulation and monitoring of the provision of services to the Sanitation and Energy Regulatory Agency of the state of São Paulo (ARSESP). As of December 31, 2022, one of the company's agreements or concessions had expired but it continued to provide water and sewage services to this municipality. From January 1, 2023 through 2030, 23 concession agreements will expire, accounting for 3.8% of the company's revenues (excluding revenues relating to the construction of concession infrastructure) for the year ended December 31, 2022 and 2.2% of the company's intangible assets and contract assets as of the same date, will expire. The company operates water and sewage systems in the state of São Paulo, which includes the city of São Paulo, Brazil's largest city. As of December 31, 2022, the company provided water and sewage services to a broad range of residential, commercial, industrial and governmental customers in 375 of the 645 municipalities in the state of São Paulo, including the city of São Paulo. Substantially all of the company's concessions or program agreements have 30-year terms. The company also supplied water and sewage treatment services on a wholesale basis to two municipalities located in the São Paulo metropolitan region (Mogi das Cruzes and São Caetano do Sul). Agreements to provide services on a wholesale basis must comply with the Basic Sanitation Law, which requires that the service be supervised by an independent agency, stipulates registration of the cost of the service with the rules published by ARSESP. The company's agreements comply with the provisions of the Basic Sanitation Law. In 2022, the company invoiced approximately 2,177.6 million cubic meters of water and 1,904.6 million cubic meters of sewage collected from these municipalities. For the year ended December 31, 2022, the São Paulo metropolitan region (including the municipalities to which the company provides water on a wholesale basis) accounted for 71.5% of the company's operating revenue (excluding revenues relating to the construction of concession infrastructure), while the Regional Systems accounted for 28.5%. As of December 31, 2022, the company provided water services through 10.1 million water connections to approximately 28.0 million people, representing approximately 62% of the total population of the state of São Paulo, and had a water coverage ratio of 98% with respect to all regions. As of December 31, 2022, the company provided sewage services through 8.6 million sewage connections to approximately 24.7 million people and had an effective sewage service ratio of 92%. As of December 31, 2022, the company operated using 91,638 kilometers of water pipes and water transmission lines and 63,557 kilometers of sewer lines. It also provides water and/or sewage services to four other municipalities through special purpose companies. The company's activities comprise water supply, sanitary sewage services, urban rainwater management and drainage services, urban cleaning services, solid waste management services and related activities, including the planning, operation, maintenance and commercialization of energy, and the commercialization of services, products, benefits and rights that directly or indirectly arise from its assets, operations and activities. The company is allowed to act in a subsidiary form in other Brazilian locations and abroad. Water Operations The company's supply of water to its customers generally involves water extraction from various sources, subsequent treatment and distribution to its customers' premises. In 2022, the company produced approximately 2,857.9 million cubic meters of water. The São Paulo metropolitan region (including the municipalities to which the company supplies water on a wholesale basis) is, and has historically been, the company's core market, accounting for approximately 68% of water invoiced by volume in 2022. Seasonality Although seasonality does not affect the company's results in a significant way, in general, higher water demand is observed during the summer and lower water demand during the winter. The summer coincides with the rainy season, while the winter corresponds to the dry season. The demand in the coastal region is increased by tourism, with the greatest demand occurring during the Brazilian summer holiday months. Water Resources The company withdraws substantially all of its water supply from surface sources from rivers and reservoirs, with a small portion being withdrawn from groundwater. Its reservoirs are filled by impounding water from rivers and streams, by diverting the flow from nearby rivers, or by a combination of both methods. In order to supply water to the São Paulo metropolitan region, as of December 31, 2022, the company relied nine water producing systems comprising the interconnected water system of the São Paulo metropolitan region, and the Guarulhos water supply system. In 2022, the Cantareira system accounted for 34.3% of the water that the company supplied to the São Paulo metropolitan region (including the municipalities to which it supplied water on a wholesale basis), which represented 71.5% of the company's operating revenues from sanitation services (excluding revenues relating to the construction of concession infrastructure) for the year. In the cities of the interior region of São Paulo, the company's principal source of water consists of surface water from nearby rivers and from wells, whereas in coastal areas, the company's principal source of water consists of surface water from rivers and mountain springs. Statewide, the company estimates that it is able to supply nearly all of the demand for water in all of the areas where it operates, subject to droughts and extraordinary climate events. The company installed 183.5 thousand new water connections in 2022. The interconnected water system of the São Paulo metropolitan region serves 31 municipalities, of which 29 are operated directly by the company under this system. Through this system, the company serves the other two municipalities on a wholesale basis whereas distribution is the responsibility of the companies or departments related to each municipality. In order to reach the final customer, the water is stored and transported through a complex and interconnected system. This water system requires permanent operational supervision, engineering inspection, maintenance, and quality monitoring and measurement control. Water Treatment The company treats all water at its water treatment facilities prior to dispatching it to its water distribution network. The company operates 237 treatment facilities, of which nine are a part of the Metropolitan Production System-located in the São Paulo metropolitan region and account for approximately 70% of all water the company produced in 2022. The type of treatment used depends on the nature of the source and quality of the untreated water. For example, water abstracted from rivers requires more treatment than water withdrawn from groundwater sources. All of the water the company treats receives fluoridation treatment. Water Distribution The company distributes water through its networks of water pipes and water transmission lines. Storage tanks and pumping stations regulate the volume of water flowing through the networks in order to maintain adequate pressure and continuous water supply. As of December 31, 2022, the company's water distribution pipes and water transmission lines included 49,073 kilometers in the São Paulo metropolitan region; and 42,564 kilometers in the Regional Systems. Sewage Operations The company is responsible for the collection, removal, treatment and final disposal of sewage. As of December 31, 2022, the company covered the sewage operations of approximately 91% and 93% of the households in the municipalities in which it operates in the São Paulo metropolitan region and in the Regional Systems, respectively. During 2022, the company covered the sewage operations of 92% of the households in the municipalities in which it operated in the state of São Paulo. The company installed 226.5 thousand new sewage connections in 2022. Sewage System The purpose of the company's sewage system is to collect and treat sewage and to adequately dispose of the treated sewage. As of December 31, 2022, the company was responsible for the operation and maintenance of 63,557 kilometers of sewage lines, of which approximately 34,355 kilometers are located in the São Paulo metropolitan region and 29,202 kilometers are located in the Regional Systems, respectively. The company's sewage system is generally designed to operate by gravitational flow, although pumping stations are required in certain parts of the system to ensure the continuous flow of sewage. Where pumping stations are required, the company uses sewage lines made of cast iron. Sewage Treatment and Disposal In 2022, approximately 75% and 99% of the consumer units of the sewage services used the company's sewage treatment system in the São Paulo metropolitan region and the Regional Systems, respectively, or 83% of the consumer units of the company's sewage services in the state of São Paulo, was connected at its treatment facilities and afterwards discharged into receiving water bodies, such as rivers and the Atlantic Ocean, in accordance with applicable legislation. Though the company has not yet reached full coverage of sewage collection and treatment services in the regions where it operates, it is making efforts to reach this goal. As of December 31, 2022, the company operated 581 sewage treatment facilities, including eight ocean outfalls, of which the five largest, located in the São Paulo metropolitan region, have a treatment capacity of approximately 24.5 cubic meters of sewage per second. Sewage treatment in the Regional Systems will vary according to the particularities of each area. In the interior region of São Paulo State, treatment consists largely of stabilization ponds. The company has secondary treatment facilities in the interior region of São Paulo State that have treatment capacity of approximately 16.8 cubic meters of sewage per second. Similar to the company's disposal process for treated sewage collected in the São Paulo metropolitan region, the majority of sewage collected in the coastal region receives treatment and disinfection and is then discharged into rivers and also into the Atlantic Ocean through its ocean outfalls, in accordance with applicable legislation. The company has 45 sewage treatment facilities in the coastal region (including the outfalls). Sludge Disposal The company uses filter presses, belt filter presses, drying beds and centrifugation machines, among other processes, to dewater the sludge, which reduces the volume of residues for transportation and final disposal and, consequently, reduces the costs of these activities. In addition, after dehydration, the calorie value of the sludge increases, and the conditions for its mixing with other components improve, which can be an opportunity for the advancement of new uses and products. The company's technological innovation actions aim to test technologies seeking full scale use of sludge in its operations. The sludge generated through the company's activities goes mainly to landfills authorized to receive it. In some cases, in return, the company treats the leachate generated in these landfills. The company is also developing two other projects. The first project is a plasma gasification system which uses specialist technology to transform sludge from sewage treatment plants into a solid vitreous product, weighing 5% of its initial weight, which can be re-used in construction work. The second project consists of a sludge dryer that uses sunlight and automated processes, resulting in a final product that weighs 25% of its initial weight. Principal Markets As of December 31, 2022, the company operated water and sewage systems in 375 of the 645 municipalities in the state of São Paulo. In addition, the company supplied water and accounted for on a wholesale basis to two municipalities located in the São Paulo metropolitan region with a total population of approximately 0.6 million people. Customer Relationship In 2022, the company applied digital transformation to the implementation of new relationship channels. Also in 2022, the company inaugurated a customer relationship center in Itapetininga, located in the countryside of São Paulo. This new customer relationship center serves customers in all 375 municipalities in which it operates and is fully interconnected with the first customer relationship center in the city of São Paulo. During 2020, the company implemented partnerships with the Iti and PicPay and, in 2021, with AgZero digital wallets, offering additional options for the company's customers to pay their water bills. In 2022, aiming to expand the options for payments of bills by customers, the company offers the option to pay bills in full or in installments through debit or credit cards at its physical service centres. The company also continues to provide an ombudsman service to customers. Marketing Channels As of December 31, 2022, the company was the concessionaire responsible for the provision of water supply and collection, treatment and disposal of sewage services directly to end consumers for 375 municipalities in the state of São Paulo. The company also supplied water and sewage services and accounted for on a wholesale basis to two municipalities located in the São Paulo metropolitan region. It is the responsibility of these municipalities to then distribute the water to end consumers. Because of its distribution infrastructure, end consumers to whom the company offers water services on a wholesale basis cannot alternatively acquire such services directly from it. Strategy The key elements of the company's strategy are to secure water availability in the areas where it operates; ensure the quality and availability of its services in its existing service area through excellence in service provision and improving its operating efficiency; continue to seek sustainable growth; maintain and expand its operating base; seek opportunities to adopt and develop innovative technology; establish efficient and competitive ways of motivating, retaining and attracting personnel; and expand its sewage treatment coverage. Intellectual Property Trademarks The company has secured registration of its logo and composite trademark (Sabesp) at the Brazilian Institute of Industrial Property (Instituto Nacional da Propriedade Industrial - INPI). In addition, the company has registered with the INPI several other trademarks, such as: Sabesp Soluções Ambientais, Projeto Tietê, Programa Córrego Limpo, Programa Onda Limpa, PROL - Programa de Reciclagem do Óleo de Fritura, Revista DAE, Ligação Sabesp, Agente da Gente - Sabesp na Comunidade, PURA - Programa de Uso Racional da Água, Sabesp Inteligência Ambiental, Uso Racional da Água, Parque da Integração, Sabesp Semana do Meio Ambiente, Água Sabesp Aquífero Guarani, Água Sabesp Estação Cantareira, Contrato de Fidelização Sabesp, Esgoto Não Domestico Sabesp, PEA - Programa de Educação Ambiental - Sabesp, Sabesp Abraço Verde, Água de Reúso Sabesp, Eu Sou Guardião das Águas Sabesp Eu Não Desperdiço, Calculadora de Sonhos, Parque Sabesp Mooca, Parque Sabesp Butantã, Parque Sabesp Cangaíba, Programa Água Legal Sabesp, Signos - Sistema de Informação Geográfica no Saneamento Sabesp, Sistema de Suporte a Decisões Sabesp, Fertilizante Sabesfertil Sabesp, Pitch Sabesp, Novos Negócios Sabesp, Centrais de Geração Hidreletrica Sabesp, Biogás Sabesp, Energia Fotovoltaica Sabesp, Energia Eólica Sabesp, Resíduos Sólidos Urbanos Sabesp, Fertilizantes Sabesp, Tocha de Plasma Sabesp, Serviços Tecnicos Sabesp, Afinidades Sabesp, Fibra Ótica nas Redes Sabesp, Geosabesp Sabesp, Waste To Energy Sabesp, Redução de Perdas Sabesp, Serviços Imobiliários Sabesp, and Clubinho Sabesp, which is a tool for environmental education directed to children through its website, and of its characters: Super H2O, Gota Borralheira, Gotucho, Ratantan, Dr. Gastão, Cauã, Denis, Gabi, Iara Sayuri and Cadu. The company has also filed applications with the Brazilian Institute of Industrial Property (Instituto Nacional da Propriedade Industrial - INPI) for registration of the following trademarks: Somos Água Sabesp; Somos Água Somos AmazÔnia Sabesp; and Hydria Sistema Sabesp. Patents The company has two patents granted by the Brazilian Institute of Industrial Property (Instituto Nacional da Propriedade Industrial - INPI): a device for the removal of supernatants during the sewage treatment process and a rotary device used to clean water reservoirs transported by trucks with high-pressure hydrojetting systems. The company has also filed eighteen patent applications for the following additional devices or inventions, awaiting the INPI's decisions, some of which have been jointly filed with certain Brazilian universities as a result of its cooperation agreements with these institutions: a biofilter odor control unit; a digital leakage detection system, jointly filed with the University of São Paulo (Universidade de São Paulo - USP); a chemical composition sensor, its fabrication process and use to measure pH in microfluid systems, jointly filed with USP; a bubble removal system, autonomous microlaboratory and use of autonomous microlaboratory to monitor water quality, jointly filed with USP; a modular system for the treatment of sanitary sludge and process using this system; a box for installation of water meters; a three-phase separator for UASB reactors with the Federal University of Minas Gerais (Universidade Federal de Minas Gerais - UFMG); a drinking water sampling device for quality control; a fluid turbidity analysis system and method for fluid turbidity analysis; a device for sewage collection wells; a device for water meters installation; water leakage detection equipment patent applications, jointly filed with FAPESP and São Paulo State University Júlio de Mesquita Filho (Universidade Estadual Paulista Júlio de Mesquita Filho - UNESP), such as method and simulation bench for leakage in lines; method and system for analyzing and providing a quality index for a noise correlator; automatic frequency band selection process and system in noise correlation for leak detection; and system and process for estimating leakage noise propagation speed and delay in at least one duct; a water collection device, device installation kit and process and water sample collection method; and two more patent applications that are in the confidentiality period. In addition to these Brazilian patent applications, the company filed two international patent applications under the Patent Cooperation Treaty (PCT), which are in the process of registration in the European Union. Software The company has adopted an internal policy that provides for an active and effective audit and prevention of unauthorized software use. The company has acquired the software licenses for all its workstations. The company has also developed certain computer programs for management and control of water and sewage treatment facilities, as well as for third-party services management, called AQUALOG (Control Water Treatment Plants), SGL (Bid Management System), SCORPION (Software to Operational Control), Electronic Price Quotation, PREGÃO SABESP ONLINE, SISDOC (Document Control System), system for analyzing the metrological behavior of water meters, MPLT (Standardized Model of Technical Report), SGH (Hydrometry Management System), SIA (Audit Information System), NETCONTROL (Automation System of Sanitary Control Laboratories), SAN (Navigation Support System), online software for managing specific articles published in the DAE engineering journal, Dashboard panel, COP (Online Control of Water Losses), GEL (Power Management System), CADGEO, LIGGEO, Intellectual Property Management System, SOE (Business Organization System), Application for Predicting the Concentration of Cyanobacteria through Artificial Intelligence, Sabesp PM Mobile, Sabesp Decision Support System - SSD, Frequency Band for Leakage Noise Correlators (BAFCORV) and Hydria Sabesp - Specialist System for the management and control of the water treatment process and Electric energy management system. Among them, the company highlights: AQUALOG is a software designed to monitor water treatment through the employment of artificial intelligence. In 2001, the company completed the first rendering of services based on the AQUALOG software to a third party with the automation of a water treatment plant in the city of Jaguará do Sul, state of Santa Catarina. The company has entered into an agreement to license the software to Sanesul, in the state of Mato Grosso do Sul and to Teuto's drugs factory, in the city of Anapólis, state of Goiás; SGL is an electronic price quotation system that allows the company to view and control all bid and acquisition proceedings in real time; CADGEO and LIGGEO are computer programs used to locate the water and sewage infrastructure in times of installation, maintenance or expansion in real time via satellite; Application for Predicting the Concentration of Cyanobacteria through Artificial Intelligence, is an application that was developed as a result of a joint research project by the company, FAPESP and the Federal University of São Paulo (Universidade Federal de São Paulo - UNIFESP); Sabesp PM Mobile is a mobile application to register and assist the company's technicians in monitoring and managing asset maintenance activities; Frequency Band for Leakage Noise Correlators (BAFCORV), developed from a joint research project with Fundação de Amparo à Pesquisa do Estado de São Paulo, the São Paulo State Research Foundation (FAPESP) and São Paulo State University Júlio de Mesquita Filho (Universidade Estadual Paulista Júlio de Mesquita Filho - UNESP); and Sabesp Decision Support System - SSD is a software that contains graphic interfaces for updating data, queries of information in the form of graphs and tables, regarding the operation of water-producing systems and dissemination of data to society through newsletters generated by the system. The company has also registered all of these programs at the Brazilian Institute of Industrial Property (Instituto Nacional da Propriedade Industrial - INPI). Domain Names The company owns the domain names described below which have been registered with the relevant entity in Brazil, Registro.br, such as www.sabesp.com.br; and www.revistadae.com.br. Regulations The company's services are regulated by the São Paulo State Public Services Regulatory Agency (Agência Reguladora de Serviços Públicos do Estado de São Paulo) (ARSESP) who the terms and conditions of contracts for the supply of public services of water supply and sewage with retail customers, stating that the invoices must be issued and sent to the customer and not the owner of the property. Ratifying its commitment to this global agenda, in 2020, the company joined the São Paulo Environmental Agreement, an initiative of the Secretariat for Environment, Infrastructure and Logistics of the state of São Paulo, which recognizes the signatories as part of a community of leaders in climate change, with a special focus on sustainable development. The company maintains a partnership with the United Nations Framework Convention on Climate Change since 2021, when it participated in COP 26 in Scotland, and 2022. when the company participated at COP 27, held in Egypt. reaffirming its commitment to climate and sustainability issues. History Companhia de Saneamento Básico do Estado de São Paulo - SABESP was founded in 1954. The company was incorporated in 1973 under the laws of the Federative Republic of Brazil.