COMPANHIA DE SANEAMENTO BASICO DO ESTADO DE SAO PAULO-SABESP

Foreign Filer Report • May 30, 2023

6-K 1 sbsitr1q23_6k.htm 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For May, 2023

(Commission File No. 1-31317)

Companhia de Saneamento Básico do Estado de São Paulo - SABESP

(Exact name of registrant as specified in its charter)

Basic Sanitation Company of the State of Sao Paulo - SABESP

(Translation of Registrant's name into English)

Rua Costa Carvalho, 300 São Paulo, S.P., 05429-900 Federative Republic of Brazil

(Address of Registrant's principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F ______

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)__.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)__.

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes __ No _X___

If "Yes" is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b):

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Table of Contents

Company Information
Capital Breakdown	1
Parent Company’s Financial Statements
Statement of Financial Position – Assets	2
Statement of Financial Position – Liabilities	3
Income Statement	5
Statement of Comprehensive Income	6
Statement of Cash Flows (Indirect Method)	7
Statement of Changes in Equity
01/01/2023 to 03/31/2023	9
01/01/2022 to 03/31/2022	10
Statement of Value Added	11
Comments on the Company’s Performance	12
Notes to the Financial Statements	22
Comments on the Company’s Projections	78
Other Information Deemed as Relevant by the Company	79
Reports and Statements
Unqualified Reports on Special Review	81
Executive Officers’ Statement on the Financial Statements	82
Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm	83

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Company Information / Capital Breakdown

Number of Shares	Current Quarter
(Unit)	03/31/2023
Paid-in Capital
Common	683,509,869
Preferred	0
Total	683,509,869
Treasury Shares
Common	0
Preferred	0
Total	0

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Parent Company’s Financial Statements / Statement of Financial Position – Assets

(R$ thousand)

Code	Description	Current Quarter	Previous Year
		03/31/2023	12/31/2022
1	Total Assets	56,926,791	57,207,765
1.01	Current Assets	6,403,756	7,284,664
1.01.01	Cash and Cash Equivalents	836,450	1,867,485
1.01.02	Financial Investments	1,649,313	1,677,873
1.01.02.03	Financial Investments Valued at Amortized Cost	1,649,313	1,677,873
1.01.03	Accounts Receivable	3,392,786	3,268,367
1.01.03.01	Trade Receivables	3,194,099	3,062,574
1.01.03.02	Other Receivables	198,687	205,793
1.01.03.02.01	Related-Party Balances	198,687	205,793
1.01.04	Inventories	117,296	124,247
1.01.06	Recoverable Taxes	266,437	242,906
1.01.06.01	Current Recoverable Taxes	266,437	242,906
1.01.08	Other Current Assets	141,474	103,786
1.01.08.03	Other	141,474	103,786
1.01.08.03.01	Restricted Cash	48,301	37,474
1.01.08.03.20	Other Assets	93,173	66,312
1.02	Noncurrent Assets	50,523,035	49,923,101
1.02.01	Long-Term Assets	10,217,699	10,105,800
1.02.01.04	Accounts Receivable	213,390	215,234
1.02.01.04.01	Trade Receivables	213,390	215,234
1.02.01.09	Receivables from Related Parties	958,670	950,950
1.02.01.09.03	Receivables from Controlling Shareholders	958,670	950,950
1.02.01.10	Other Noncurrent Assets	9,045,639	8,939,616
1.02.01.10.04	Escrow Deposits	175,872	170,093
1.02.01.10.05	Water and Basic Sanitation National Agency – ANA	9,168	9,193
1.02.01.10.06	Contract Asset	8,714,054	8,613,968
1.02.01.10.20	Other Assets	146,545	146,362
1.02.02	Investments	196,265	157,491
1.02.02.01	Equity Interest	149,551	110,765
1.02.02.01.03	Equity Interest in Jointly-Owned Subsidiaries	117,304	104,666
1.02.02.01.04	Other Investments	32,247	6,099
1.02.02.02	Investment Properties	46,714	46,726
1.02.03	Property, Plant and Equipment	364,870	338,939
1.02.04	Intangible Assets	39,744,201	39,320,871
1.02.04.01	Intangible Assets	39,744,201	39,320,871
1.02.04.01.01	Concession Agreements	1,122,094	1,151,365
1.02.04.01.02	Program Contracts	19,904,574	19,602,451
1.02.04.01.03	Service Contracts	18,081,949	17,870,451
1.02.04.01.04	Software License of Use	577,503	595,404
1.02.04.01.05	Right of Use	58,081	75,052
1.02.04.01.06	Right of Use – Investments	0	26,148

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Parent Company’s Financial Statements / Statement of Financial Position – Liabilities

(R$ thousand)

Code	Description	Current Quarter	Previous Year
		03/31/2023	12/31/2022
2	Total Liabilities	56,926,791	57,207,765
2.01	Current Liabilities	6,163,795	6,657,342
2.01.01	Labor and Social Obligations	495,529	498,504
2.01.01.01	Social Obligations	34,205	64,801
2.01.01.02	Labor Obligations	461,324	433,703
2.01.02	Suppliers	257,746	430,946
2.01.02.01	Domestic Suppliers	257,746	430,946
2.01.03	Tax Obligations	338,254	293,461
2.01.03.01	Federal Tax Obligations	332,110	282,820
2.01.03.01.01	Income Tax and Social Contribution Payable	122,165	0
2.01.03.01.02	Pis-Pasep and Cofins Payable	110,329	134,624
2.01.03.01.03	INSS (Social Security Contribution) Payable	43,921	44,515
2.01.03.01.20	Other Federal Taxes	55,695	103,681
2.01.03.03	Municipal Tax Obligations	6,144	10,641
2.01.04	Borrowings and Financing	1,976,816	2,245,960
2.01.04.01	Borrowings and Financing	1,308,566	1,389,864
2.01.04.01.01	In Local Currency	1,009,732	1,077,277
2.01.04.01.02	In Foreign Currency	298,834	312,587
2.01.04.02	Debentures	562,407	739,534
2.01.04.03	Financing through Lease	105,843	116,562
2.01.05	Other Liabilities	2,184,402	2,264,433
2.01.05.01	Payables to Related Parties	1,694	1,694
2.01.05.01.03	Payables to Controlling Shareholders	1,694	1,694
2.01.05.02	Other	2,182,708	2,262,739
2.01.05.02.01	Dividends and Interest on Capital Payable	741,725	741,725
2.01.05.02.04	Services Payable	604,532	723,242
2.01.05.02.05	Refundable Amounts	30,256	30,885
2.01.05.02.06	Program Contract Commitments	62,601	100,188
2.01.05.02.07	Public-Private Partnership - PPP	225,982	222,413
2.01.05.02.09	Indemnities	9,272	8,556
2.01.05.02.20	Other Liabilities	508,340	435,730
2.01.06	Provisions	911,048	924,038
2.01.06.01	Tax, Social Security, Labor, and Civil Provisions	523,686	510,807
2.01.06.01.01	Tax Provisions	35,365	34,382
2.01.06.01.02	Labor Liabilities and Pension Plan Obligations	402,266	385,580
2.01.06.01.04	Civil Provisions	86,055	90,845
2.01.06.02	Other Provisions	387,362	413,231
2.01.06.02.03	Provisions for Environmental Liabilities and Decommissioning	2,983	15,289
2.01.06.02.04	Provisions for Customers	121,510	141,491
2.01.06.02.05	Provisions for Suppliers	262,869	256,451
2.02	Noncurrent Liabilities	22,682,251	23,216,890
2.02.01	Borrowings and Financing	16,319,107	16,712,711
2.02.01.01	Borrowings and Financing	8,907,163	9,167,759
2.02.01.01.01	In Local Currency	6,571,995	6,704,588
2.02.01.01.02	In Foreign Currency	2,335,168	2,463,171
2.02.01.02	Debentures	7,084,987	7,202,296

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Parent Company’s Financial Statements / Statement of Financial Position – Liabilities

(R$ thousand)

Code	Description	Current Quarter	Previous Year
		03/31/2023	12/31/2022
2.02.01.03	Financing through Lease	326,957	342,656
2.02.02	Other Liabilities	5,433,458	5,628,155
2.02.02.02	Other	5,433,458	5,628,155
2.02.02.02.04	Pension Plan Obligations	2,143,788	2,150,191
2.02.02.02.05	Program Contract Commitments	12,322	12,197
2.02.02.02.06	Public-Private Partnership - PPP	2,647,480	2,736,768
2.02.02.02.07	Indemnities	17,199	17,508
2.02.02.02.08	Labor Liabilities	1,619	1,620
2.02.02.02.09	Deferred Cofins/Pasep	161,314	159,723
2.02.02.02.20	Other Liabilities	449,736	550,148
2.02.03	Deferred Taxes	191,523	189,278
2.02.03.01	Deferred Income Tax and Social Contribution	191,523	189,278
2.02.03.01.01	Deferred Income Tax and Social Contribution	191,523	189,278
2.02.04	Provisions	738,163	686,746
2.02.04.01	Tax, Social Security, Labor, and Civil Provisions	300,537	291,317
2.02.04.01.01	Tax Provisions	40,041	29,113
2.02.04.01.02	Labor Liabilities and Pension Plan Obligations	242,639	254,718
2.02.04.01.04	Civil Provisions	17,857	7,486
2.02.04.02	Other Provisions	437,626	395,429
2.02.04.02.03	Provisions for Environmental Liabilities and Decommissioning	430,791	391,547
2.02.04.02.04	Provisions for Customers	6,176	3,306
2.02.04.02.05	Provisions for Suppliers	659	576
2.03	Equity	28,080,745	27,333,533
2.03.01	Paid-Up Capital	15,000,000	15,000,000
2.03.04	Profit Reserves	12,155,890	12,155,890
2.03.04.01	Legal Reserve	1,688,428	1,688,428
2.03.04.08	Additional Dividend Proposed	76,927	76,927
2.03.04.10	Reserve for Investments	10,390,535	10,390,535
2.03.05	Retained Earnings/Accumulated Losses	747,212	0
2.03.06	Equity Valuation Adjustments	177,643	177,643

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Parent Company’s Financial Statements / Income Statement

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2023 to 03/31/2023	01/01/2022 to 03/31/2022
3.01	Revenue from Sales and/or Services	5,698,369	4,870,390
3.02	Cost of Sales and/or Services	-3,653,723	-3,116,386
3.02.01	Cost of Sales and/or Services	-2,500,708	-2,248,865
3.02.02	Construction Costs	-1,153,015	-867,521
3.03	Gross Profit	2,044,646	1,754,004
3.04	Operating Income/Expenses	-652,173	-619,926
3.04.01	Selling Expenses	-388,462	-374,281
3.04.01.01	Selling Expenses	-225,657	-196,587
3.04.01.02	Allowance for Doubtful Accounts	-162,805	-177,694
3.04.02	General and Administrative Expenses	-284,679	-253,792
3.04.04	Other Operating Income	20,352	10,308
3.04.04.01	Other Operating Income	23,045	11,405
3.04.04.02	Cofins and Pasep	-2,693	-1,097
3.04.05	Other Operating Expenses	-5,718	-7,744
3.04.06	Equity Results of Investments in Affiliates	6,334	5,583
3.05	Income before Financial Result and Taxes	1,392,473	1,134,078
3.06	Financial Result	-259,528	340,124
3.06.01	Financial Revenue	219,119	199,013
3.06.01.01	Financial Revenue	230,108	210,043
3.06.01.02	Exchange Variation Gains	-201	-1,263
3.06.01.03	Cofins and Pasep	-10,788	-9,767
3.06.02	Financial Expenses	-478,647	141,111
3.06.02.01	Financial Expenses	-562,471	-453,018
3.06.02.02	Exchange Variation Losses	83,824	594,129
3.07	Profit before Taxes on Income	1,132,945	1,474,202
3.08	Income Tax and Social Contribution	-385,733	-498,663
3.08.01	Current	-383,488	-489,505
3.08.02	Deferred	-2,245	-9,158
3.09	Net Result from Continued Operations	747,212	975,539
3.11	Profit/Loss for the Period	747,212	975,539
3.99	Earnings per Share - (Reais/Share)
3.99.01	Basic Earnings per Share
3.99.01.01	Common	1.0932	1.42725
3.99.02	Diluted Earnings per Share
3.99.02.01	Common	1.0932	1.42725

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Parent Company’s Financial Statements / Statement of Comprehensive Income

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2023 to 03/31/2023	01/01/2022 to 03/31/2022
4.01	Net Income for the Period	747,212	975,539
4.02	Comprehensive Income for the Period	747,212	975,539

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Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2023 to 03/31/2023	01/01/2022 to 03/31/2022
6.01	Net Cash from Operating Activities	395,306	616,843
6.01.01	Cash from Operations	2,513,490	2,161,586
6.01.01.01	Profit before Income Tax and Social Contribution	1,132,945	1,474,202
6.01.01.02	Provision and Inflation Adjustments on Provisions	70,031	78,415
6.01.01.04	Finance Charges from Customers	-95,653	-81,830
6.01.01.05	Residual Value of Property, Plant and Equipment, Intangible Assets, and Investment Properties Written-off	3,515	2,406
6.01.01.06	Depreciation and Amortization	657,145	589,746
6.01.01.07	Interest on Borrowings and Financing Payable	316,805	219,454
6.01.01.08	Inflation Adjustment and Exchange Gains (Losses) on Borrowings and Financing	-13,316	-523,312
6.01.01.09	Interest and Inflation Adjustments on Liabilities	6,915	7,604
6.01.01.10	Interest and Inflation Adjustments on Assets	-28,976	-63,518
6.01.01.11	Allowance for Doubtful Accounts	162,805	177,694
6.01.01.12	Provision for Consent Decree (TAC) and Knowledge Retention Program (PRC)	-345	-743
6.01.01.13	Equity Results of Investments in Affiliates	-6,334	-5,583
6.01.01.14	Interest and Inflation Adjustment (Public-Private Partnership)	123,045	122,150
6.01.01.15	Other Adjustments	4,119	3,451
6.01.01.16	Transfer to the São Paulo Municipal Government	155,387	134,962
6.01.01.17	Construction Margin on Intangible Assets Arising from Concession Agreements	-26,519	-20,685
6.01.01.18	Pension Plan Obligations	51,921	47,173
6.01.02	Changes in Assets and Liabilities	-1,460,999	-897,725
6.01.02.01	Trade Receivables	-183,680	-299,418
6.01.02.02	Related-Party Balances and Transactions	10,172	-10,415
6.01.02.03	Inventories	6,951	-4,000
6.01.02.04	Recoverable Taxes	-23,531	12,978
6.01.02.05	Other Assets	-33,323	-36,990
6.01.02.06	Escrow Deposits	-742	-13,378
6.01.02.08	Trade Payables and Contractors	-414,033	-218,600
6.01.02.09	Labor and Social Obligations	-2,630	-73,155
6.01.02.10	Pension Plan Obligations	-58,324	-53,476
6.01.02.11	Taxes and Contributions Payable	-225,360	-64,184
6.01.02.12	Services Payable	-274,097	-55,564
6.01.02.13	Other Obligations	-232,389	4,652
6.01.02.14	Provisions	-31,604	-86,310
6.01.02.15	Deferred Cofins/Pasep	1,591	135
6.01.03	Other	-657,185	-647,018
6.01.03.01	Interest Paid	-543,850	-347,631
6.01.03.02	Income Tax and Social Contribution Paid	-113,335	-299,387
6.02	Net Cash from Investing Activities	-583,553	-1,102,680
6.02.01	Acquisition of Contract Asset and Intangible Assets	-570,332	-651,660
6.02.02	Acquisition of Property, Plant and Equipment	-30,954	-8,566
6.02.04	Restricted Cash	-10,827	1,261
6.02.07	Financial Investments	28,560	-443,715

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Parent Company’s Financial Statements / Statement of Cash Flows – Indirect Method

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2023 to 03/31/2023	01/01/2022 to 03/31/2022
6.03	Net Cash from Financing Activities	-842,788	259,400
6.03.01	Funding	121,611	1,084,506
6.03.02	Amortization	-716,239	-661,268
6.03.04	Public-Private Partnership - PPP	-208,764	-156,364
6.03.05	Program Contract Commitments	-39,396	-7,474
6.05	Increase (Decrease) in Cash and Cash Equivalents	-1,031,035	-226,437
6.05.01	Opening Balance of Cash and Cash Equivalents	1,867,485	717,929
6.05.02	Closing Balance of Cash and Cash Equivalents	836,450	491,492

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Parent Company’s Financial Statements / Statement of Changes in Equity / 01/01/2023 to 03/31/2023

(R$ thousand)

Code	Description	Paid-up Capital	Capital Reserves, Options Granted, and Treasury Shares	Profit Reserves	Retained Earnings/Accumulated Losses	Other Comprehensive Income	Equity
5.01	Opening Balances	15,000,000	0	12,155,890	0	177,643	27,333,533
5.03	Restated Opening Balances	15,000,000	0	12,155,890	0	177,643	27,333,533
5.05	Total Comprehensive Income	0	0	0	747,212	0	747,212
5.05.01	Net Income for the Period	0	0	0	747,212	0	747,212
5.07	Closing Balances	15,000,000	0	12,155,890	747,212	177,643	28,080,745

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Parent Company’s Financial Statements / Statement of Changes in Equity / 01/01/2022 to 03/31/2022

(R$ thousand)

Code	Description	Paid-up Capital	Capital Reserves, Options Granted, and Treasury Shares	Profit Reserves	Retained Earnings/Accumulated Losses	Other Comprehensive Income	Equity
5.01	Opening Balances	15,000,000	0	9,885,485	0	46,374	24,931,859
5.03	Restated Opening Balances	15,000,000	0	9,885,485	0	46,374	24,931,859
5.05	Total Comprehensive Income	0	0	0	975,539	0	975,539
5.05.01	Net Income for the Period	0	0	0	975,539	0	975,539
5.07	Closing Balances	15,000,000	0	9,885,485	975,539	46,374	25,907,398

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Parent Company’s Financial Statements / Statement of Value Added

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2023 to 03/31/2023	01/01/2022 to 03/31/2022
7.01	Revenue	5,949,048	5,020,137
7.01.01	Goods, Products and Services Sold	4,909,274	4,298,220
7.01.02	Other Revenue	23,045	11,405
7.01.03	Revenue from Construction of Own Assets	1,179,534	888,206
7.01.04	Allowance for/Reversal of Doubtful Accounts	-162,805	-177,694
7.02	Inputs Acquired from Third Parties	-2,502,821	-2,109,805
7.02.01	Costs of Goods, Products and Services Sold	-2,151,327	-1,815,325
7.02.02	Materials, Electricity, Outsourced Services, and Others	-345,776	-286,735
7.02.04	Other	-5,718	-7,745
7.03	Gross Value Added	3,446,227	2,910,332
7.04	Retentions	-657,145	-589,746
7.04.01	Depreciation, Amortization, and Depletion	-657,145	-589,746
7.05	Net Value Added Produced	2,789,082	2,320,586
7.06	Wealth Received in Transfer	236,241	214,363
7.06.01	Equity Results of Investments in Affiliates	6,334	5,583
7.06.02	Financial Revenue	229,907	208,780
7.07	Total Value Added to Distribute	3,025,323	2,534,949
7.08	Value Added Distribution	3,025,323	2,534,949
7.08.01	Personnel	663,868	592,898
7.08.01.01	Salaries and Wages	453,047	423,433
7.08.01.02	Benefits	172,881	134,812
7.08.01.03	Government Severance Indemnity Fund for Employees (FGTS)	37,940	34,653
7.08.02	Taxes and Contributions	959,120	980,831
7.08.02.01	Federal	898,314	922,600
7.08.02.02	State	43,235	42,331
7.08.02.03	Municipal	17,571	15,900
7.08.03	Value Distributed to Providers of Capital	655,123	-14,319
7.08.03.01	Interest	646,449	-20,789
7.08.03.02	Rentals	8,674	6,470
7.08.04	Value Distributed to Shareholders	747,212	975,539
7.08.04.03	Retained Earnings/Accumulated Losses for the Period	747,212	975,539

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Highlights

The Company recorded a net income of R$ 747.2 million in 1Q23, compared to the R$ 975.6 million reported in 1Q22, a decrease of R$ 228.4 million (-23.4%).

Adjusted EBITDA totaled R$ 2,035.0 million, up by R$ 313.7 million (+18.2%) over the R$ 1,721.3 million reported in 1Q22.

Revenue from sanitation services

Increase of R$ 611.1 million, impacted by (i) an average tariff adjustment of 12.8% since May 2022; (ii) a 1.4% increase in total billed volume; and (iii) a higher average tariff due to the increase in the billed volume in the non-residential category.

Costs, administrative & selling expenses (excluding construction costs)

Growth of R$ 296.9 million, mainly due to the (i) R$ 112.8 million increase in services; (ii) R$ 76.1 million increase in salaries, payroll charges, benefits, and pension plan obligations; (iii) R$ 67.4 million increase in depreciation and amortization; and (iv) R$ 35.7 million increase with general expenses.

Impacts from the exchange variation

Exchange variation income on borrowings and financing fell by R$ 510.4 million, due to the lower appreciation of the Brazilian real against the U.S. dollar and the Japanese yen in 1Q23, compared to the appreciation of 1Q22, as shown in the table below:

	1Q23	1Q22
Foreign currency debt - R$ million	2,634.0	2,603.7
Foreign currency debt as a percentage of total debt	14.0%	15.0%
U.S. dollar variation in the quarter	(2.6%)	(15.1%)
Yen variation in the quarter	(3.3%)	(19.5%)

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1. Result for the period

R$ million
			Var.
	1Q23	1Q22	R$	%
Revenue from sanitation services	4,909.3	4,298.2	611.1	14.2
Construction revenue	1,179.5	888.2	291.3	32.8
COFINS and PASEP/TRCF taxes	(390.4)	(316.0)	(74.4)	23.5
(=) Net operating income	5,698.4	4,870.4	828.0	17.0
Costs and expenses	(3,173.8)	(2,876.9)	(296.9)	10.3
Construction costs	(1,153.0)	(867.5)	(285.5)	32.9
Equity pickup	6.3	5.6	0.7	12.5
Other operating income (expenses), net	14.6	2.6	12.0	461.5
(=) Earnings before financial result, income tax, and social contribution	1,392.5	1,134.2	258.3	22.8
Financial result	(259.5)	340.1	(599.6)	(176.3)
(=) Earnings before income tax and social contribution	1,133.0	1,474.3	(341.3)	(23.1)
Income tax and social contribution	(385.8)	(498.7)	112.9	(22.6)
(=) Net income	747.2	975.6	(228.4)	(23.4)
Earnings per share (R$)*	1.09	1.43

*** Number of shares = 683,509,869

Adjusted EBITDA Reconciliation (Non-accounting measures)

R$ million
			Var.
	1Q23	1Q22	R$	%
Net income	747.2	975.6	(228.4)	(23.4)
Income tax and social contribution	385.8	498.7	(112.9)	(22.6)
Financial result	259.5	(340.1)	599.6	(176.3)
Other operating income (expenses), net	(14.6)	(2.6)	(12.0)	461.5
(=) Adjusted EBIT*	1,377.9	1,131.6	246.3	21.8
Depreciation and amortization	657.1	589.7	67.4	11.4
(=) Adjusted EBITDA**	2,035.0	1,721.3	313.7	18.2
(%) Adjusted EBITDA margin	35.7	35.3

** Adjusted EBIT corresponds to income before: (i) other operating income (expenses), net; (ii) financial result; and (iii) income tax and social contribution.*

*** Adjusted EBITDA corresponds to income before: (i) other operating income (expenses), net; (ii) financial result; (iii) income tax and social contribution; and (iv) depreciation and amortization expenses.*

The net operating revenue, which considers construction revenue, totaled R$ 5,698.4 million in 1Q23, up by 17.0% over 1Q22.

Costs and expenses, which consider construction costs, totaled R$ 4,326.8 million, up by 15.6% over 1Q22.

Adjusted EBIT, of R$ 1,377.9 million, increased by 21.8% over the R$ 1,131.6 million recorded in 1Q22.

Adjusted EBITDA, of R$ 2,035.0 million, increased by 18.2% over the R$ 1,721.3 million recorded in 2022 (R$ 7,401.4 million in the last 12 months).

The Adjusted EBITDA margin was 35.7% in 1Q23, compared to 35.3% in 1Q22 (32.3% in the last 12 months).

Excluding the effects of revenue and construction costs, the adjusted EBITDA margin reached 44.5% in 1Q23, compared to 42.7% in 1Q22 (41.1% in the last 12 months).

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The Company recorded a net income of R$ 747.2 million in 1Q23, compared to R$ 975.6 million in 1Q22.

1. Revenue from sanitation services

The gross operating revenue from sanitation services, which excludes construction revenue, totaled R$ 4,909.3 million in 1Q23, an increase of R$ 611.1 million (+14.2%) over the R$ 4,298.2 million recorded in 1Q22.

The main factors that led to the increase were:

· Average tariff adjustment of 12.8% since May 2022; and

· Increase of 1.4% in the total billed volume.

1. Construction revenue

Construction revenue increased by R$ 291.3 million (+32.8%), due to higher investments made.

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1. Billed volume

The following tables show the water and sewage billed volumes, on a quarter-over-quarter basis, per customer category and region.

WATER AND SEWAGE BILLED VOLUME 1 PER CUSTOMER CATEGORY – million m 3
	Water			Sewage			Water + Sewage
Category	1Q23	1Q22	Var. %	1Q23	1Q22	Var. %	1Q23	1Q22	Var. %
Residential	472.2	472.6	(0.1)	412.8	409.5	0.8	885.0	882.1	0.3
Commercial	46.7	41.4	12.8	43.9	40.3	8.9	90.6	81.7	10.9
Industrial	8.6	8.1	6.2	9.3	9.1	2.2	17.9	17.2	4.1
Public	10.0	9.5	4.9	9.2	8.5	8.1	19.1	18.0	6.4
Total retail	537.5	531.6	1.1	475.2	467.4	1.7	1,012.6	999.0	1.4
Wholesale 3	12.2	11.9	2.5	5.6	5.8	(3.4)	17.8	17.7	0.6
Overall Total	549.7	543.5	1.1	480.8	473.2	1.6	1,030.4	1,016.7	1.4
	Water			Sewage			Water + Sewage
WATER AND SEWAGE BILLED VOLUME 1 PER REGION - million m3
	Water			Sewage			Water + Sewage
Region	1Q23	1Q22	Var. %	1Q23	1Q22	Var. %	1Q23	1Q22	Var. %
Metropolitan	358.8	354.3	1.3	316.5	311.0	1.8	675.2	665.3	1.5
Regional 2	178.7	177.3	0.8	158.7	156.4	1.5	337.4	333.7	1.1
Total retail	537.5	531.6	1.1	475.2	467.4	1.7	1,012.6	999.0	1.4
Wholesale 3	12.2	11.9	2.5	5.6	5.8	(3.4)	17.8	17.7	0.6
Overall Total	549.7	543.5	1.1	480.8	473.2	1.6	1,030.4	1,016.7	1.4

1 Unaudited by external auditors

2 Including coastal and interior regions

3 Wholesale includes volumes of reuse water and non-domestic sewage

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1. Costs, administrative & selling expenses, and construction costs

Costs, administrative and selling expenses, and construction costs increased by R$ 582.4 million in 1Q23 (+15.6%). Excluding construction costs, the increase was R$ 296.9 million (+10.3%).

Costs, administrative and selling expenses, and construction costs as a percentage of net revenue were 75.9% in 1Q23 compared to 76.9% in 1Q22.

R$ million
			Var.
	1Q23	1Q22	R$	%
Salaries, payroll charges and benefits, and Pension plan obligations	744.2	668.1	76.1	11.4
General supplies	87.5	71.9	15.6	21.7
Treatment supplies	164.9	147.3	17.6	11.9
Services	624.9	512.1	112.8	22.0
Electricity	395.8	412.0	(16.2)	(3.9)
General expenses	314.8	279.1	35.7	12.8
Tax expenses	21.8	19.0	2.8	14.7
Depreciation and amortization	657.1	589.7	67.4	11.4
Allowance for doubtful accounts	162.8	177.7	(14.9)	(8.4)
Costs, administrative & selling expenses	3,173.8	2,876.9	296.9	10.3
Construction costs	1,153.0	867.5	285.5	32.9
Costs, adm & selling expenses, and construction costs	4,326.8	3,744.4	582.4	15.6
% of net revenue	75.9	76.9

Salaries, payroll charges and benefits, and Pension plan obligations

The R$ 76.1 million increase (+11.4%) recorded in 1Q23 was mainly due to:

· The average salary adjustment of 12.9% (R$ 54.1 million) in May 2022 and the application of 1% referring to the Career and Salary Plan in February 2023, partially offset by the 1.8% decline in the average number of employees; and

· R$ 16.4 million in health care expenses.

General supplies

Increase of R$ 15.6 million (+21.7%), mostly with the maintenance of water and sewage systems, networks, and connections, totaling R$ 16.1 million.

Treatment supplies

Increase of R$ 17.6 million (+11.9%), due to (i) the increase in product prices, some of which were impacted by the international market, such as aluminum polychloride; and (ii) the higher use of algaecides, coagulants, and disinfectants in several water treatment stations to maintain the quality of raw water.

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Services

Service expenses totaled R$ 624.9 million, an increase of R$ 112.8 million (+22.0%) over the R$ 512.1 million recorded in 1Q22. The main increases were:

· R$ 38.2 million paid to technical services, mainly IT consulting, maintenance, and support;

· R$ 19.9 million for the maintenance of water and sewage networks, connections, and systems;

· R$ 18.5 million with meter reading and bill delivery;

· R$ 10.4 million with paving and replacing of sidewalks;

· R$ 9.1 million with advertising; and

· R$ 8.6 million with surveillance.

Electricity

Electricity expenses totaled R$ 395.8 million in 1Q23, a decrease of R$ 16.2 million (-3.9%) from the R$ 412.0 million recorded in 1Q22. Of the total, the Free Market Tariffs (ACL) accounted for 55.1% of total expenses in 1Q23 (52.0% in 1Q22) while the Regulated Market Tariffs (ACR) accounted for 44.9% (48.0% in 1Q22).

The main factors that contributed to this variation were:

· An average decrease of 2.2% in ACL prices (including Grid Market Tariffs - TUSD), with a 4.8% increase in consumption; and

· An average decrease of 14.0% in ACR tariffs, with a decrease of 2.1% in consumption.

Electricity tariffs were impacted, among others, by (i) the tariff flag from water shortage in 1Q22; and (ii) the lower tax burden on electricity bills since June 2022, as a consequence of Supplementary Law 194/2022.

General expenses

Increase of R$ 35.7 million (+12.8%), totaling R$ 314.8 million in 1Q23, compared to the R$ 279.1 million recorded in 1Q22, mainly from the higher provision for transfer to the Municipal Funds for Environmental Sanitation and Infrastructure, of R$ 23.5 million.

Expenses with municipal transfers totaled R$ 186.5 million in 1Q23, compared to the R$ 163.0 million reported in 1Q22 (+14.4%), mainly due to higher operating revenue.

Depreciation and amortization

The R$ 67.4 million increase (+11.4%) was mainly due to the beginning of operations of intangible assets, totaling R$ 5.3 billion.

Allowance for doubtful accounts

Decrease of R$ 14.9 million, from R$ 177.7 million in 1Q22 to R$ 162.8 million in 1Q23, due to the higher number of overdue bills received in 1Q23.

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1. Financial result

				R$ million
			Var.
	1Q23	1Q22	R$	%
Financial expenses, net of revenue	(257.2)	(171.9)	(85.3)	49.6
Monetary and exchange variations, net	(2.3)	512.0	(514.3)	(100.4)
Financial Result	(259.5)	340.1	(599.6)	(176.3)

Financial expenses, net of revenue

				R$ million
			Var.
	1Q23	1Q22	R$	%
Financial expenses
Interest and charges on domestic borrowings and financing	(273.1)	(189.6)	(83.5)	44.0
Interest and charges on international borrowings and financing	(21.0)	(8.6)	(12.4)	144.2
Other financial expenses	(122.1)	(114.3)	(7.8)	6.8
Total financial expenses	(416.2)	(312.5)	(103.7)	33.2
Financial revenue	159.0	140.6	18.4	13.1
Financial expenses, net of revenue	(257.2)	(171.9)	(85.3)	49.6

The main impacts resulted from:

· Increase of R$ 83.5 million in interest and charges on domestic borrowings and financing, mainly due to (i) higher interest on debentures, of R$ 49.5 million, including the effect from the amortization of the 17th and 21st issues, as well as the proceeds of the 30th issue, totaling R$ 32.2 million in financial expenses; and (ii) a rise in the average DI rate (from 10.27% in 1Q22 to 13.65% in 1Q23), which impacted interest on domestic borrowings;

· Increase of R$ 12.4 million in interest and charges on international borrowings and financing, mainly the lower appreciation of the Brazilian real against the U.S. dollar and the Yen in 1Q23 (2.63% and 3.29%, respectively), compared to the appreciation observed in 1Q22 (15.10% and 19.50%, respectively);

· Increase of R$ 18.4 million in financial revenues, mainly on financial investments in 1Q23, as a result of the higher average DI rate.

Monetary and exchange variations, net

				R$ million
			Var.
	1Q23	1Q22	R$	%
Monetary and exchange variations on liabilities
Monetary variations on borrowings and financing	(70.5)	(70.7)	0.2	(0.3)
Exchange variations on borrowings and financing	83.8	594.2	(510.4)	(85.9)
Other monetary variations	(75.7)	(69.9)	(5.8)	8.3
Total monetary and exchange variations on liabilities	(62.4)	453.6	(516.0)	(113.8)
Monetary and exchange variations on assets	60.1	58.4	1.7	2.9
Monetary and exchange variations, net	(2.3)	512.0	(514.3)	(100.4)

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The effect on the net monetary and exchange variations in 1Q23 was R$ 514.3 million, featuring the negative variation of R$ 510.4 million in exchange variations on borrowings and financing, due to the lower appreciation of the Brazilian real against the U.S. dollar and the Yen in 1Q23 (2.63% and 3.29%, respectively), compared to the appreciation observed in 1Q22 (15.10% and 19.50%, respectively).

1. Income tax and social contribution

The R$ 112.9 million decrease in 1Q23 was mainly due to:

· Higher costs and expenses, of R$ 582.4 million; and

· Lower gains with exchange variation, of R$ 510.4 million.

The factors above were mitigated by higher net operating revenue, of R$ 828.0 million.

1. Indicators

a) Operating

Information*	1Q23	1Q22	%
Water Connections 1	10,206	9,872	3.4
Sewage connections 1	8,684	8,451	2.8
Population directly served - water 2	28.1	27.8	1.1
Population directly served - sewage 2	24.8	24.6	0.8
Number of employees	12,211	12,435	-1.8
Volume of water produced 3	733.0	714.5	2.6
IPM - Measured Water Loss (%) 4	29.5	27.9	5.7
IPDt (liters/connection x day) 4	255	248	2.8

1. Total connections, active and inactive, in thousand units at the end of the period.

2. In million inhabitants, at the end of the period. Does not include wholesale.

3. Millions of m 3 . Excludes volumes produced in the municipalities of Aguaí, Tapiratiba, and Tejupá in 1Q22.

4. Excludes volumes and connections in Mauá, Aguaí, and Tapiratiba in 1Q22.

5. Unaudited by external auditors

b) Economic

Economic variables at the close of the quarter *	1Q23	1Q22
Amplified Consumer Price Index (1)	2.09	3.20
National Consumer Price Index (1)	1.88	3.42
Consumer Price Index (1)	1.46	2.95
DI (2)	13.65	10.27
U.S. dollar (3)	5.0804	4.7378
Yen (3)	0.03827	0.03902

1. Accrued in the quarter (%)

2. Average quarterly rate (%)

. 3. Ptax sale rate on the last day

• Unaudited by external auditors

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1. Borrowings and financing

R$ thousand

DEBT PROFILE	2023	2024	2025	2026	2027	2028	2029 onwards	TOTAL	% of total
Local currency
Debentures	377,852	1,077,166	1,207,210	1,085,512	1,720,562	651,547	1,527,548	7,647,397	42
Brazilian Federal Savings Bank	74,079	101,891	108,253	115,014	122,187	129,675	901,743	1,552,842	9
BNDES	179,344	234,620	214,281	204,396	191,790	72,559	221,836	1,318,826	7
IDB 2202	90,674	181,349	181,349	181,349	181,349	181,349	1,257,504	2,254,923	12
IDB INVEST	32,770	53,650	82,575	144,821	147,159	182,022	695,813	1,338,810	7
IFC	80,000	80,000	80,000	80,000	80,000	80,000	271,224	751,224	4
Lease (Concession Agreements, Program Contracts, and Contract Asset) 1	55,373	16,401	9,518	4,061	476	0	0	85,829	1
Leases (others) 2	0	44,849	47,149	36,931	30,224	33,411	154,407	346,971	2
Other	8,296	2,986	2,753	141	0	0	0	14,176	0
Interest and other charges	348,622	2,301	0	0	0	0	0	350,923	2
Total in local currency	1,247,010	1,795,213	1,933,088	1,852,225	2,473,747	1,330,563	5,030,075	15,661,921	86
Foreign currency
IDB	26,108	52,217	63,444	22,455	22,455	22,455	328,061	537,195	3
IBRD	15,444	30,887	30,887	30,887	30,887	30,887	218,304	388,183	2
JICA	87,629	164,209	164,209	164,209	164,209	164,209	748,430	1,657,104	9
IDB 1983AB	39,010	0	0	0	0	0	0	39,010	0
Interest and other charges	12,510	0	0	0	0	0	0	12,510	0
Total in foreign currency	180,701	247,313	258,540	217,551	217,551	217,551	1,294,795	2,634,002	14
TOTAL	1,427,711	2,042,526	2,191,628	2,069,776	2,691,298	1,548,114	6,324,870	18,295,923	100

1 Refers to work contracts signed as Assets Lease;

2 Obligations related to leasing agreements, mainly vehicle leases.

Covenants

The table below shows the most restrictive clauses in 1Q23:

	Covenants
Adjusted EBITDA / Adjusted Financial Expenses	Equal to or higher than 2.80
EBITDA / Financial Expenses Paid	Equal to or higher than 2.35
Adjusted Net Debt / Adjusted EBITDA	Equal to or lower than 3.80
Net Debt / Adjusted EBITDA	Equal to or lower than 3.50
Total Adjusted Debt / Adjusted EBITDA	Lower than 3.65
Other Onerous Debt 1 / Adjusted EBITDA	Equal to or lower than 1.30
Adjusted Current Ratio	Higher than 1.00

1 “Other Onerous Debt” corresponds to the sum of pension plan obligations and healthcare plan, installment payment of tax debts, and installment payment of debts with the electricity supplier.

In 1Q23, the Company met the requirements of its borrowings and financing agreements.

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1. Investments

Investments totaled R$ 1,236.1 million in 1Q23, presented as additions in the notes to the quarterly information under Contract Asset, Intangible Assets, and Property, Plant and Equipment, of R$ 1,204.8 million, R$ 0.4 million, and R$ 30.9 million, respectively. Cash disbursed in 1Q23 referring to investments, including from previous periods, totaled R$ 601.3 million.

The table below shows investments broken down by water, sewage, and region:

R$ million — Investments per Region	Water	Sewage	Total
Metropolitan Region	315.8	568.4	884.2
Regional Systems (coastal and interior regions)	188.0	163.9	351.9
Total	503.8	732.3	1,236.1

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1 Operations

Companhia de Saneamento Básico do Estado de São Paulo (SABESP or Company) is a mixed-capital company headquartered in the municipality São Paulo, at Rua Costa Carvalho, 300, CEP 05429-900, controlled by the São Paulo State. The Company is engaged in the provision of basic and environmental sanitation services in the São Paulo State, and supplies treated water and sewage services on a wholesale basis.

In addition to providing basic sanitation services in the São Paulo State, SABESP may perform activities in other states and countries and can operate in drainage, urban cleaning, solid waste handling, and energy markets. SABESP aims to be a world reference in the provision of sanitation services, in a sustainable, competitive, and innovative manner, with a focus on customers.

As of March 31, 2023, the Company operated water and sewage services in 375 municipalities of the São Paulo State, 351 of which have already signed contracts, according to Law 11,445/2007. Most of these municipalities’ operations are based on 30-year concession, program, and service contracts, except for the municipalities of Guarulhos, Mauá, Santo André, São Bernardo do Campo, São João da Boa Vista, and Tejupá, which have a 40-year term.

The table below shows a summary of the contractual situation of the municipalities served:

	March 31, 2023	December 31, 2022	March 31, 2022
Total municipalities that have already signed contracts	351	351	342
Balance – intangible and contract assets	45,931,674	45,292,307	42,639,277
Percentage of intangible and contract assets	94.79%	94.49%	93.83%
Revenue from sanitation services (excluding construction revenue)	4,678,421	17,767,561	4,084,343
Percentage of revenue from sanitation services (excluding construction revenue)	95.30%	95.37%	95.02%
Municipalities with expired contracts:	1	1	8
Balance – intangible and contract assets	11,443	11,519	211,225
Percentage of intangible and contract assets	0.02%	0.02%	0.46%
Revenue from sanitation services (excluding construction revenue)	3,822	15,236	11,316
Percentage of revenue from sanitation services (excluding construction revenue)	0.08%	0.08%	0.26%
Municipalities with concession agreements due by 2030:	23	23	25
Balance – intangible and contract assets	1,064,090	1,072,138	1,110,000
Percentage of intangible and contract assets	2.20%	2.24%	2.44%
Revenue from sanitation services (excluding construction revenue)	189,704	711,452	170,205
Percentage of revenue from sanitation services (excluding construction revenue)	3.86%	3.82%	3.96%
Municipality of São Paulo:
Percentage of intangible and contract assets	43.21%	43.33%	43.15%
Percentage of revenue from sanitation services (excluding construction revenue)	44.53%	45.14%	44.12%

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The Company's shares have been listed on the Novo Mercado segment of B3 under ticker SBSP3 since April 2002 and on the New York Stock Exchange (NYSE) as Level III American Depositary Receipts (“ADRs”), under ticker SBS, since May 2002.

Since 2008, the Company has been setting up partnerships with other companies, which resulted in the following companies: Sesamm, Águas de Andradina, Saneaqua Mairinque, Aquapolo Ambiental, Águas de Castilho, Attend Ambiental, Paulista Geradora de Energia, Cantareira SP Energia, FOXX URE-BA Ambiental, and Infranext Soluções em Pavimentação. Although SABESP has no majority interest in the capital stock of these companies, the shareholders’ agreements provide for the power of veto and casting votes on certain issues jointly with associates, indicating the shared control in the management of these investees, except for Saneaqua Mairinque, which, as of August 2020, no longer has a shared control.

Management expects that the funds raised with the gradual recovery of the economic activities, the improved water security from the works carried out, the generation of operational cash, and credit lines available for investments, will be sufficient to meet the Company’s commitments and not compromise the necessary investments.

Approvals

The quarterly information was approved by the Board of Directors on May 11, 2023.

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2 Basis of preparation and presentation of the quarterly information

Presentation of the Quarterly Information

The quarterly information as of March 31, 2023, was prepared based on the provisions of CPC 21 (R1) – Interim Financial Information and the international standard IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), applicable to the preparation of the Quarterly Information Form – ITR, and is fairly presented consistent with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Accordingly, this Quarterly Information takes into consideration the Official Letter CVM/SNC/SEP 003 of April 28, 2011, which allows the entities to present selected notes to the financial statements in cases of redundant information already disclosed in the Annual Financial Statements. Therefore, the quarterly information as of March 31, 2023, does not include all the notes and reporting required by the standards for the annual financial statements, and accordingly, shall be read jointly with the Annual Financial Statements as of December 31, 2022, prepared under the International Financial Reporting Standards – IFRS, issued by the International Accounting Standards Board – IASB, and according to the accounting practices adopted in Brazil, which observe the pronouncements issued by the Brazilian Accounting Pronouncements Committee - CPC. Therefore, in this quarterly information, the notes below were either not presented or are not as detailed as and/or have the same references as those in the annual financial statements (according to numerical references):

i. Summary of significant accounting policies (Note 3);

ii. Changes in accounting practices and disclosures (Note 4);

iii. Risk management – Financial instruments (Note 5.4);

iv. Key accounting estimates and judgments (Note 6);

v. Related-party balances and transactions (Note 11);

vi. Investments (Note 12);

vii. Intangible assets (Note 15);

viii. Borrowings and financing (Note 17);

ix. Deferred taxes and contributions (Note 19);

x. Provisions (Note 20);

xi. Pension plan obligations (Note 22);

xii. Equity (Note 24);

xiii. Insurance (Note 27);

All material information related to the quarterly information, and this information alone, is being disclosed and corresponds to the information used by the Company’s Management in its administration.

The amounts disclosed in the Notes to the quarterly information are in thousands of Brazilian reais, unless otherwise stated.

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3 Summary of significant accounting policies

The significant accounting policies used in the preparation of the quarterly information as of March 31, 2023, are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2022, disclosed in Note 3 of such financial statements.

4 Risk management

4.1 Financial Risk Management

Financial risk factors

The Company's activities are affected by the Brazilian economic scenario, making it exposed to market risk (exchange rate and interest rate), credit risk, and liquidity risk. Financial risk management is focused on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance.

The Company has not utilized derivative instruments in any of the reported periods.

(a) Market risk

Foreign currency risk

Foreign currency exposure implies market risks associated with currency fluctuations, since the Company has foreign currency-denominated liabilities, arising from long-term funding, in development institutions, at more attractive interest rates, in U.S. dollars and Yen.

The management of currency exposure considers several current and projected economic factors, besides market conditions.

This risk arises from the possibility that the Company may incur losses due to exchange rate fluctuations that would impact liability balances of foreign currency-denominated borrowings and financing and related financial expenses. The Company does not maintain hedge or swap contracts or any derivative financial instrument to hedge against this risk.

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Part of the financial debt, totaling R$ 2,668,775 as of March 31, 2023 (R$ 2,809,441 as of December 31, 2022), is indexed to the U.S. dollar and Yen. The exposure to exchange risk is as follows:

| | March 31, 2023 — Foreign currency (in thousands) | R$ | December 31,
2022 — Foreign currency (in thousands) | R$ |
| --- | --- | --- | --- | --- |
| Borrowings and financing – US$ | 196,159 | 996,566 | 191,022 | 996,695 |
| Borrowings and financing – Yen | 43,368,135 | 1,659,699 | 45,369,189 | 1,795,259 |
| Interest and charges from borrowings and financing – US$ | | 9,142 | | 6,985 |
| Interest and charges from borrowings and financing – Yen | | 3,368 | | 10,502 |
| Total exposure | | 2,668,775 | | 2,809,441 |
| Borrowing cost – US$ | | (32,178) | | (31,037) |
| Borrowing cost – Yen | | (2,595) | | (2,646) |
| Total foreign currency-denominated borrowings (Note 16) | | 2,634,002 | | 2,775,758 |

The 5.1% decrease in the balance of the foreign currency-denominated debt from March 31, 2023, compared to December 31, 2022, was mainly impacted by the depreciation of the US dollar and Yen against the Brazilian real. The table below shows the prices and exchange variations in the period:

	March 31, 2023	December 31, 2022	Variation
US$	R$ 5.0804	R$ 5.2177	-2.6%
Yen	R$ 0.03827	R$ 0.03957	-3.3%

Borrowings and financing fell by R$ 83,825 from January to March 2023 (a decrease of R$ 692,434 from January to March 2022), due to exchange rare changes. See Note 16 (ii). As of March 31, 2023, if the Brazilian real had depreciated or appreciated by 10 percentage points, in addition to the impacts already mentioned above, against the U.S. dollar and Yen with all other variables held constant, the effects on the result before taxes on the three-month period ended March 31, 2023, would have been R$ 266,878 (R$ 263,032 for the three-month period ended March 31, 2022), lower or higher.

The probable scenario below presents the effect on the income statements for the next 12 months, considering the projected rates of the U.S. dollar and Yen.

The Company understands that the scenario presented is reasonable, given the instability of the Brazilian real against the U.S. dollar and the Yen.

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	Probable scenario
	(*)
Net currency exposure as of March 31, 2023 in US$ - Liabilities	196,159
US$ rate as of March 31, 2023	5.0804
Exchange rate estimated according to the scenario	5.2500
Difference between the rates	(0.1696)
Effect on the net financial result R$ - (loss)	(33,269)
Net currency exposure as of March 31, 2023 in Yen - Liabilities	43,368,135
Yen rate as of March 31, 2023	0.03827
Exchange rate estimated according to the scenario	0.04047
Difference between the rates	(0.0022)
Effect on the net financial result R$ - (loss)	(95,410)
Total effect on the net financial result in R$ - (loss)	(128,679)
(*) For the probable scenario in U.S. dollars and Yen, the exchange rates estimated for March 31, 2024, were used, according to the Focus-BACEN and B3’s Benchmark Rate report, of March 31, 2023, respectively.

Interest rate risk

This risk arises from the possibility that the Company could incur losses due to fluctuations in interest rates, increasing the financial expenses related to borrowings and financing.

The Company has not entered into any derivative contract to hedge against this risk; however, it continually monitors market interest rates, to evaluate the possible need to replace its debt.

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The table below provides the borrowings and financing subject to variable interest rates:

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| CDI (i) | 8,941,806 | 9,251,150 |
| TR (ii) | 1,655,154 | 1,635,587 |
| IPCA (iii) | 2,994,354 | 3,073,435 |
| TJLP (iv) | 1,368,508 | 1,433,029 |
| SOFR (v) | 996,567 | 996,697 |
| Interest and charges | 360,055 | 424,856 |
| Total | 16,316,444 | 16,814,754 |

(i) CDI - ( Certificado de Depósito Interbancário ), an interbank deposit certificate

(ii) TR – Interest Benchmark Rate

(iii) IPCA - ( Índice Nacional de Preços ao Consumidor Amplo ), a consumer price index

(iv) TJLP - ( Taxa de Juros a Longo Prazo ), a long-term interest rate index

(v) SOFR - Secured Overnight Financing Rate

Another risk to which the Company is exposed is the mismatch of inflation adjustment indices of its debts with those of its service revenues. Tariff adjustments of services provided do not necessarily follow the increases in the inflation indexes to adjust borrowings, financing, and interest rates affecting indebtedness.

As of March 31, 2023, if interest rates on borrowings and financing had been 1 percentage point higher or lower with all other variables held constant, the effects on profit before taxes for the three-month period ended March 31, 2022 would have been R$ 163,164 (R$ 153,698 for the three-month period ended March 31, 2022), lower or higher, mainly as a result of lower or higher interest expense on floating rate borrowings and financing.

(b) Credit risk

Credit risk is related to cash and cash equivalents, financial investments, as well as credit exposures of customers, including accounts receivable, restricted cash, and accounts receivable from related parties. Credit risk exposure to customers is mitigated by sales to a dispersed base.

The maximum exposure to credit risk as of March 31, 2023 is the carrying amount of instruments classified as cash and cash equivalents, financial investments, restricted cash, trade receivables, and accounts receivable from related parties on the balance sheet date. See Notes 6, 7, 8, 9, and 10.

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Regarding the financial assets held with financial institutions, the credit quality was assessed by reference to external credit ratings (if available) or historical information about the bank’s default rates. For the credit quality of the banks, such as deposits and financial investments, the Company assesses the rating published by three main international agencies (Fitch, Moody's and S&P), as follows:

Banks	Fitch	Moody's	Standard Poor's
Banco do Brasil S/A	AA(bra)	AAA.br	-
Banco Santander Brasil S/A	-	AAA.br	brAAA
Brazilian Federal Savings Bank	AA(bra)	AAA.br	brAAA
Banco Bradesco S/A	AAA(bra)	AAA.br	brAAA
Banco Itaú Unibanco S/A	AAA(bra)	AAA.br	-
Banco BV	-	AA.br	brAAA
Banco BTG Pactual S/A	AA(bra)	AAA.br	brAAA

The rating assessment disclosed by Fitch for deposit transactions and financial investments in local currency is as follows:

	March 31, 2023	December 31, 2022
Cash and cash equivalents and financial investments
AA(bra)	1,156,298	2,237,629
AAA(bra)	1,017,191	1,011,685
Others (*)	312,274	296,044
	2,485,763	3,545,358

(*) As of March 31, 2023, this category includes R$ 297,858 (R$ 289,908 as of December 31, 2022) referring to Banco BV, current accounts, and financial investments, which are not rated by Fitch.

(c) Liquidity risk

Liquidity is primarily reliant upon cash provided by operating activities and borrowings and financing obtained in the local and international capital markets, as well as the payment of debts. The management of this risk considers the assessment of its liquidity requirements to ensure it has sufficient cash to meet its operating and capital expenditure requirements.

The funds held are invested in interest-bearing current accounts, time deposits, and securities, with instruments with appropriate maturity or liquidity sufficient to provide margin as determined by the projections mentioned above.

The table below shows the financial liabilities, by maturity, including the installments of principal and future interest. For agreements with floating interest rates, the interest rates used correspond to the base date of March 31, 2023.

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| | April to December
2023 | 2024 | 2025 | 2026 | 2027 | 2028 onwards | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| As of March 31, 2023 | | | | | | | |
| Liabilities | | | | | | | |
| Borrowings and financing | 2,470,033 | 3,756,930 | 3,808,172 | 3,528,549 | 3,853,172 | 13,740,507 | 31,157,363 |
| Trade payables and contractors | 257,746 | - | - | - | - | - | 257,746 |
| Services payable | 604,532 | - | - | - | - | - | 604,532 |
| Public-Private Partnership - PPP | 377,136 | 459,463 | 419,969 | 419,969 | 419,969 | 3,617,986 | 5,714,492 |
| Program Contract Commitments | 61,996 | 1,192 | 1,192 | 1,192 | 1,192 | 12,529 | 79,293 |
| Total | 3,771,443 | 4,217,585 | 4,229,333 | 3,949,710 | 4,274,333 | 17,371,022 | 37,813,426 |

Cross default

The Company has borrowings and financing agreements including cross-default clauses, i.e., the early maturity of any debt may imply the early maturity of these agreements. The indicators are continuously monitored to avoid the execution of these clauses, and the most restrictive ones are shown in Note 16 (c).

(d) Sensitivity analysis on interest rate risk

The table below shows the sensitivity analysis of the financial instruments, prepared under CPC 40 (R1) to evidence the balances of main financial assets and liabilities, calculated at a rate projected for the twelve-month period after March 31, 2023, or until the final settlement of each contract, whichever occurs first, considering a probable scenario.

The purpose of the sensitivity analysis is to measure the impact of changes in the market on the financial instruments, considering constant all other variables. At the time of settlement, the amounts may be different from those presented, due to the estimates used in the measurement.

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Notes to the Financial Statements

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March 31, 2023 — Indicators	Exposure	Probable scenario
Assets
CDI	1,735,296	12.8900%(**)
Financial income		223,680
Liabilities
CDI	(8,941,806)	12.8900%(**)
Interest to be incurred		(1,152,599)
CDI net exposure	(7,206,510)	(928,919)
Liabilities
TR	1,655,154	0.0174%(**)
Expenses to be incurred		(288)
IPCA	(2,994,354)	5.9559%(*)
Expenses to be incurred		(178,341)
TJLP	(1,368,508)	6.5800%(*)
Interest to be incurred		(90,048)
SOFR (***)	(996,567)	0.0435%(**)
Interest to be incurred		(434)
Total expenses to be incurred, net		(1,198,030)
(*) Source: BACEN of March 31, 2023
(**) Source: B3 of March 31, 2023
(***) Source: Bloomberg

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4.2 Capital management

The Company’s objectives when managing capital are to ensure its ability to increase investments in infrastructure, provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to reduce the cost of capital.

Capital is monitored based on the leverage ratio, which corresponds to net debt divided by total capital (shareholders and providers of capital). Net debt corresponds to total borrowings and financing less cash and cash equivalents and financial investments. Total capital is calculated as total equity plus net debt, as shown in the statement of financial position.

	March 31, 2023	December 31, 2022
Total borrowings and financing (Note 16)	18,295,923	18,958,671
(-) Cash and cash equivalents (Note 6)	(836,450)	(1,867,485)
(-) Financial investments (Note 7)	(1,649,313)	(1,677,873)
Net debt	15,810,160	15,413,313
Total equity	28,080,745	27,333,533
Total (shareholders plus providers of capital)	43,890,905	42,746,846
Leverage ratio	36%	36%

4.3 Fair value estimates

The Company considers that balances from trade receivables (current) and trade payables by carrying amount less impairment approximate their fair values, considering the short maturity. Long-term trade receivables also approximate their fair values, as they will be adjusted by inflation and/or will bear contractual interest rates over time.

4.4 Financial instruments

The Company did not have financial assets classified as fair value through other comprehensive income and fair value through profit or loss. The financial instruments included in the amortized cost category comprise cash and cash equivalents, financial investments, restricted cash, trade receivables, balances with related parties, other assets and balances receivable from the Water National Agency (ANA), accounts payable to suppliers, borrowings and financing, services payable, balances payable deriving from the Public-Private Partnership (PPP) and program contract commitments, which are non-derivative financial assets and liabilities with fixed or determinable payments, not quoted in an active market, except for cash equivalents and financial investments.

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The estimated fair values of the financial instruments are as follows:

Financial Assets

	March 31, 2023 — Carrying amount	Fair value	December 31, 2022 — Carrying amount	Fair value
Cash and cash equivalents	836,450	836,450	1,867,485	1,867,485
Financial investments	1,649,313	1,649,313	1,677,873	1,677,873
Restricted cash	48,301	48,301	37,474	37,474
Trade receivables	3,407,489	3,407,489	3,277,808	3,277,808
ANA	9,168	9,168	9,193	9,193
Other assets	239,718	239,718	212,674	212,674

Additionally, SABESP has financial assets receivable from related parties, totaling R$ 1,157,357 as of March 31, 2023 (R$ 1,156,743 as of December 31, 2022), which were calculated under the conditions negotiated between the related parties. The conditions and additional information related to these financial instruments are disclosed in Note 10. Part of this balance, totaling R$ 1,067,536 (R$ 1,060,040 as of December 31, 2022), refers to reimbursement of additional retirement and pension plan - G0, indexed by IPCA plus simple interest of 0.5% p.m. On the transaction date, this interest rate approximated that of National Treasury Notes (NTN-b), with a term similar to the terms of related-party transactions.

Financial Liabilities

	March 31, 2023 — Carrying amount	Fair value	December 31, 2022 — Carrying amount	Fair value
Borrowings and financing	18,295,923	18,348,334	18,958,671	19,260,133
Trade payables and contractors	257,746	257,746	430,946	430,946
Services payable	604,532	604,532	723,242	723,242
Program Contract Commitment	74,923	74,923	112,385	112,385
Public-Private Partnership - PPP	2,873,462	2,873,462	2,959,181	2,959,181

The criteria adopted to obtain the fair values of borrowings and financing, in preparing the quarterly information as of March 31, 2023, are consistent with those used in the preparation of the Annual Financial Statements for the fiscal year ended December 31, 2022.

Financial instruments referring to financial investments and borrowings and financing are classified as Level 2 in the fair value hierarchy.

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Notes to the Financial Statements

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Considering the nature of other financial instruments, assets, and liabilities, the balances recognized in the statement of financial position approximate the fair values, except for borrowings and financing, considering the maturities close to the end of the reporting date of this quarterly information, comparison of contractual interest rates with market rates in similar operations at the end of the reporting period, their nature, and maturity terms.

5 Key accounting estimates and judgments

The preparation of the quarterly information requires Management to disclose judgments (except for those that involve estimates) that have a significant impact on the amounts recognized based on experience and other factors deemed as relevant, which affect the values of assets and liabilities and present results that may differ from the actual results.

The Company establishes estimates and assumptions regarding the future, which are reviewed on a timely basis. Such accounting estimates, by definition, may differ from the actual results. The effects arising from the reviews of the accounting estimates are recognized in the period in which the estimates are reviewed.

The Company assessed the main accounting policies that involve judgments, except for those that involve estimates, and concluded that none of them have a significant effect.

The areas that require a higher level of judgment and greater complexity, as well as assumptions and estimates that are significant for the quarterly information, are (i) allowance for doubtful accounts; (ii) intangible assets arising from concession agreements and program contracts; (iii) pension plan obligations; (iv) deferred income tax and social contribution; (v) provisions; and (vi) unbilled revenue.

6 Cash and cash equivalents

	March 31, 2023	December 31, 2022
Cash and banks	56,149	139,844
Cash equivalents	780,301	1,727,641
Total	836,450	1,867,485

Cash and cash equivalents include cash, bank deposits, and high-liquidity short-term financial investments, mainly represented by repurchase agreements, fund shares (accruing CDI interest rates), and CDBs, whose original maturities or intention of realization are lower than three months, which are convertible into a cash amount and subject to an insignificant risk of change in value.

As of March 31, 2023, the average yield of cash equivalents corresponded to 95.83% of CDI (95.69% as of December 31, 2022).

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7 Financial investments

The Company has financial investments in CDB, with daily liquidity, which it does not intend to use in the next three months, as shown below:

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| Banco BV | 297,858 | 289,909 |
| Banco Itaú Unibanco S/A | 340,461 | 403,732 |
| Banco Bradesco S/A | 594,689 | 578,752 |
| Banco BTG Pactual S/A | 415,160 | 404,363 |
| Banco do Brasil S/A | 1,145 | 1,117 |
| | 1,649,313 | 1,677,873 |

As of March 31, 2023, the average yield of the financial investments corresponded to 102.90% of CDI (102.90% as of December 31, 2022).

8 Restricted cash

	March 31, 2023	December 31, 2022
Agreement with the São Paulo Municipal Government (i)	41,432	30,231
Brazilian Federal Savings Bank – escrow deposits	512	433
Other	6,357	6,810
	48,301	37,474

(i) Refers to the amount deducted from the transfer of 7.5% of the revenue earned in the municipality to the Municipal Fund for Environmental Sanitation and Infrastructure, corresponding to eventual amounts unpaid by direct management bodies, foundations, and government agencies, as established in the agreement entered into with São Paulo Municipal Government (PMSP).

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9 Trade receivables

(a) Statement of financial position details

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| Private sector: | | |
| General (i) and special customers (ii) | 2,400,402 | 2,287,782 |
| Agreements (iii) | 432,196 | 416,550 |
| | 2,832,598 | 2,704,332 |
| Government entities: | | |
| Municipal | 596,384 | 609,731 |
| Federal | 4,220 | 10,644 |
| Agreements (iii) | 361,425 | 372,943 |
| | 962,029 | 993,318 |
| Wholesale customers – Municipal governments: (iv) | | |
| Mogi das Cruzes | 3,758 | 4,048 |
| São Caetano do Sul | 45,145 | 45,367 |
| Total wholesale customers – Municipal governments | 48,903 | 49,415 |
| Unbilled supply | 964,400 | 959,260 |
| Subtotal | 4,807,930 | 4,706,325 |
| Allowance for doubtful accounts | (1,400,441) | (1,428,517) |
| Total | 3,407,489 | 3,277,808 |
| Current | 3,194,099 | 3,062,574 |
| Noncurrent | 213,390 | 215,234 |
| Total | 3,407,489 | 3,277,808 |

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(i) General customers - residential and small and mid-sized companies;

(ii) Special customers – large consumers, commercial industries, condominiums and special billing customers (fixed demand agreements, industrial waste, wells, among others);

(iii) Agreements - installment payments of past-due receivables, plus inflation adjustment and interest, according to the agreements; and

(iv) Wholesale basis customers - municipal governments. This balance refers to the sale of treated water to municipalities, which are responsible for distributing to, billing, and charging final customers.

(b) The aging of trade receivables is as follows:

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| Current | 2,397,133 | 2,244,754 |
| Past-due: | | |
| Up to 30 days | 504,992 | 489,709 |
| From 31 to 60 days | 268,663 | 248,128 |
| From 61 to 90 days | 171,855 | 165,306 |
| From 91 to 120 days | 143,411 | 150,941 |
| From 121 to 180 days | 265,634 | 281,530 |
| From 181 to 360 days | 73,728 | 58,702 |
| Over 360 days | 982,514 | 1,067,255 |
| Total past-due | 2,410,797 | 2,461,571 |
| Total | 4,807,930 | 4,706,325 |

(c) Allowance for doubtful accounts

| Changes in assets | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Balance at the beginning of the period | 1,428,517 | 1,280,088 |
| Reversal of losses | (8,449) | (10,516) |
| Recoveries | (19,627) | (18,265) |
| Balance at the end of the period | 1,400,441 | 1,251,307 |

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Notes to the Financial Statements

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| Reconciliation of estimated/historical losses at the result | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Write-offs | (190,138) | (205,069) |
| (Losses) with state entities – related parties | (743) | (1,406) |
| Reversal of losses with the private sector/government entities | 8,449 | 10,516 |
| Recoveries | 19,627 | 18,265 |
| Amount recorded as expense (Note 27) | (162,805) | (177,694) |

The Company does not have customers individually representing 10% or more of its total revenues.

As of March 31, 2023, the Company has registered warrants issued in its favor, currently totaling R$ 2,869,198 (R$ 2,807,318 as of December 31, 2022), which are not recognized in the Financial Statements because of the difficulty to obtain a reasonable estimate to measure such assets, due to uncertainties related to the beginning and end of their realization. Register warrants are recognized upon the beginning of their receipt or when they are traded.

Debtor	March 31, 2023	December 31, 2022
Municipality of São Paulo	2,716,516	2,656,113
Municipality of Cotia	105,845	103,729
Municipality of Cachoeira Paulista	13,951	13,672
Other	32,886	33,804
TOTAL	2,869,198	2,807,318

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10 Related-party balances and transactions

(a) São Paulo State

(i) Accounts receivable, interest on capital, revenue, and expenses

	March 31, 2023	December 31, 2022
Accounts receivable
Current:
Sanitation services	138,798	144,937
Allowance for losses	(50,338)	(49,595)
Reimbursement of additional retirement and pension benefits paid (G0):
- Monthly flow	8,767	13,376
- GESP Agreement – 2015	101,460	97,075
Total current	198,687	205,793
Noncurrent:
Agreement for the installment payment of sanitation services	1,361	1,361
Reimbursement of additional retirement and pension benefits paid (G0):
- GESP Agreement – 2015	957,309	949,589
Total noncurrent	958,670	950,950
Total receivables	1,157,357	1,156,743
Assets:
Sanitation services	89,821	96,703
Reimbursement of additional retirement and pension benefits paid (G0)	1,067,536	1,060,040
Total	1,157,357	1,156,743
Liabilities:
Interest on capital payable	372,550	372,550

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| | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Revenue from sanitation services | 162,966 | 143,699 |
| Payments from related parties | (167,612) | (131,301) |
| Payment received from reimbursement referring to Law 4,819/1958 | (52,593) | (36,632) |

(ii) Disputed amounts

As of March 31, 2023 and December 31, 2022, the disputed amounts between SABESP and the São Paulo State, referring to additional retirement and pension benefits paid (Law 4,819/1958), totaled R$ 1,505,719 and R$ 1,482,140, respectively, for which allowances for doubtful accounts were created for the total amount.

(iii) Actuarial Liability

The Company recognized an actuarial liability corresponding to additional retirement and pension benefits paid to employees, retired employees, and pensioners of the G0 Plan. As of Marcy 31, 2023 and December 31, 2022, the amounts corresponding to such actuarial liability were R$ 2,010,180 and R$ 2,002,075, respectively. For detailed information on additional retirement and pension benefits, see Note 21.

(b) Use of Reservoirs – EMAE

Empresa Metropolitana de Águas e Energia S.A. (EMAE) planned to receive the credit and obtain financial compensation for alleged past and future losses in electricity generation arising from water collection, and compensation for costs already incurred and to be incurred with the operation, maintenance, and inspection of the Guarapiranga and Billings reservoirs used by SABESP in its operations.

As of October 28, 2016, the Company entered into an agreement based on a Private Transaction Agreement and Other Covenants to fully and completely settle the disputes and SABESP will continue using the reservoirs.

As of March 31, 2023, the balance of the agreement totaled R$ 8,786 and R$ 99,686 (R$ 8,456 and R$ 95,033 as of December 31, 2022), recorded in Other liabilities, under current and noncurrent liabilities, respectively.

(c) Agreements with reduced tariffs for State Entities that join the Rational Water Use Program (PURA)

The Company has agreements with government entities related to the São Paulo State Government that benefit them with a 25% discount on water supply and sewage services tariffs when they are not in default. These agreements provide for the implementation of the rational water use program, which provides for water consumption reduction.

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(d) Guarantees

The São Paulo State provides guarantees for some of the Company’s borrowings and financing and does not charge any related fees. See Note 16.

(e) Personnel assignment agreement among entities related to the São Paulo State Government

The Company has personnel assignment agreements with entities related to the State Government, whose expenses are fully charged.

From January to March 2023, expenses with employees assigned to other state entities totaled R$ 672 (R$ 164 from January to March 2022).

No expenses with employees from other entities assigned to the Company were recorded from January to March 2023 and in the same period in 2022.

(f) Non-operating assets

As of March 31, 2023 and December 31, 2022, the Company’s land and lent structures totaled R$ 3,613.

(g) SABESPREV

The Company sponsors a defined benefit plan (G1 Plan), which is operated and administered by SABESPREV. The net actuarial liability recognized until March 31, 2023, totaled R$ 133,608 (R$ 148,116 as of December 31, 2022). See Note 21.

(h) Compensation of the Fiscal Council and Management Key Personnel

From January to March 2023, expenses related to the compensation of the members of the Fiscal Council appointed by the controlling shareholder and Management members totaled R$ 1,658 (R$ 1,597 from January to March 2022).

From January to March 2023, additional amounts of R$ 285, referring to the executive officers’ bonus, were recorded (R$ 360 from January to March 2022).

(i) Loan agreement through credit facility

The Company holds interest in certain Special Purpose Entities (SPEs), in which it does not hold the majority interest but has cast vote and power of veto in some matters but cannot use such power of veto in a way to affect the returns of its investments. Therefore, these SPEs are considered for accounting purposes as joint arrangements.

Aquapolo Ambiental

The Company entered into a loan agreement through a credit facility with SPE Aquapolo Ambiental S/A to finance the operations of that company, until the borrowings and financing requested with financial institutions are granted.

As of March 31, 2023, the balance of principal and interest of this agreement totaled R$ 7,351 recorded in current assets under “Other assets” (R$ 12,953 as of December 31, 2022), at CDI + 1.2% p.a.

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The loan originally matured on April 30, 2015, but was extended to October 30, 2015. On November 25, 2015, a new amendment changed the payment schedule for three annual installments, the first of which mature on December 30, 2021, and the last on December 30, 2023.

Águas de Andradina

The Company entered into a loan agreement through a credit facility with SPE Águas de Andradina S/A to finance the operations of that company.

As of March 31, 2023, the balance of principal and interest of this agreement totaled R$ 321 and R$ 2,814, which was recorded in “Other assets” under current and noncurrent assets (R$ 242 and R$ 2,814, respectively, as of December 31, 2022), at CDI + 3% p.a.

This agreement was executed on August 17, 2021. The amount of principal, adjustment, accrued interest, and any other taxes must be paid in full by August 31, 2025.

(j) FEHIDRO

The Company has financing agreements under the State Fund for Water Resources (FEHIDRO). These funds will be aimed at the execution of works and sewage services. As of March 31, 2023, the balance of these financings totaled R$ 7.8 million (R$ 5.1 million as of December 31, 2022).

11 Investments

The Company holds interest in certain Special Purpose Entities (SPE). Although SABESP has no majority shares of its investees, the shareholders’ agreement provides for the power of veto in certain management matters, however, it cannot use such power of veto in a way to affect the returns over the investments, implying a mutually shared control (joint venture – CPC 19 (R2)).

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The Company holds equity interest valued by the equity accounting in the following investees:

| | Equity — March 31, 2023 | December 31, 2022 | Contribution — January to March 2023 | Profit (loss)
for the period — January to March 2023 | () | January to March 2022 |
| --- | --- | --- | --- | --- | --- | --- |
| Sesamm | 64,001 | 59,371 | - | 4,630 | - | 1,289 |
| Águas de Andradina | 31,166 | 30,777 | - | 389 | - | (2) |
| Águas de Castilho | 11,189 | 10,787 | - | 402 | - | 267 |
| Attend Ambiental | 33,745 | 29,729 | - | 4,016 | - | 2,922 |
| Aquapolo Ambiental | 82,536 | 73,926 | - | 8,610 | - | 7,677 |
| Paulista Geradora de Energia () | 15,535 | 10,486 | - | (28) | - | (148) |
| Cantareira SP Energia () | 6,181 | 1,000 | 5,439 | (258) | - | - |
| FOXX URE-BA Ambiental | 67,034 | 69,258 | 4,325 | (122) | (6,427) | - |
| Infranext Soluções em Pavimentação (**) | 6,710 | 7,050 | - | (340) | - | - |

(*) The amount presented refers to changes in the equity of the investee, as its financial statements for the year ended December 31, 2022 were issued after the disclosure of SABESP’s financial statements.

(**) SABESP contributed R$ 5,077 as of December 2022, corresponding to 25% of the interest in the PGE. As of March 31, 2023, Servitec and Tecniplan had an outstanding payable amount of R$ 10,156 related to the remaining interest of 75% in PGE.

(***) SABESP contributed R$ 5,439 as of January 2023, corresponding to 49% of the interest in Cantareira SP Energia. As of March 31, 2023, Pacto SP Energia had an outstanding payable amount of R$ 5,661 related to the remaining interest of 51% in Cantareira.

(****) Infranext’s share capital will be R$ 12,000. As of March 31, 2023, SABESP had an outstanding payable amount of R$ 4,950.

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	Investments — March 31, 2023	December 31, 2022	Contribution — January to March 2023	Equity accounting — January to March 2023	(*)	January to March 2022	Interest percentage — March 31, 2023	December 31, 2022
Sesamm	23,041	21,374	-	1,667	-	464	36%	36%
Águas de Andradina	9,349	9,233	-	116	-	(1)	30%	30%
Águas de Castilho	3,357	3,236	-	121	-	80	30%	30%
Attend Ambiental	15,186	13,379	-	1,807	-	1,315	45%	45%
Aquapolo Ambiental	40,442	36,223	-	4,219	-	3,762	49%	49%
Paulista Geradora de Energia	6,422	6,429	-	(7)	-	(37)	25%	25%
Cantareira SP Energia	5,803	490	5,439	(126)	-	-	49%	49%
FOXX URE-BA Ambiental	13,407	13,852	865	(24)	(1,286)	-	20%	20%
Infranext Soluções em Pavimentação	297	450	-	(153)	-	-	45%	45%
Total	117,304	104,666	6,304	7,620	(1,286)	5,583
FOXX URE-BA Ambiental – Fair value (**)	26,148	-
Other investments	6,099	6,099
Overall total	149,551	110,765

(*) Refers to changes in the equity of investees, as their financial statements for the year ended December 31, 2022 were issued after the disclosure of SABESP’s financial statements.

(**) The amount presented refers to the fair value adjustment in the acquisition of FOXX URE-BA in 2022.

12 Investment Properties

	December 31, 2022	Depreciation	March 31, 2023
Investment properties	46,726	(12)	46,714

	December 31, 2021	Depreciation	March 31, 2022
Investment properties	46,126	(12)	46,114

As of March 31, 2023, the market value of these properties was approximately R$ 393,600 (R$ 386,000 as of December 31, 2022).

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13 Contract asset

| | December 31, 2022 | Additions (i) | Transfers | Transfers of works
to intangible assets (ii) | March 31, 2023 (iii) |
| --- | --- | --- | --- | --- | --- |
| Total contract asset | 8,613,968 | 1,204,867 | 280 | (1,105,061) | 8,714,054 |

| | December 31, 2021 | Additions | Transfers | Transfers of works
to intangible assets | March 31, 2022 |
| --- | --- | --- | --- | --- | --- |
| Total contract asset | 8,550,102 | 958,070 | 193 | (973,984) | 8,534,381 |

(i) The largest additions of the period are located in the municipalities of São Paulo, Guarulhos, and São Bernardo do Campo, totaling R$ 521 million, R$ 61 million, and R$ 31 million, respectively.

(ii) The largest transfers of the period are located in the municipalities of São Paulo, Franca, and São Bernardo do Campo, totaling R$ 533 million, R$ 103 million, and R$ 99 million, respectively.

(iii) The largest works are located in the municipalities of São Paulo, Francisco Morato, and Franca, totaling R$ 2,818 million, R$ 229 million, and R$ 227 million, respectively.

As of March 31, 2023, the contract asset included R$ 175,145, recorded as a lease (R$ 276,893 as of December 31, 2022). Leases are part of construction costs and, since June 2020, additional works are being executed by the Company.

(a) Capitalization of interest and other finance charges

The Company capitalizes interest, and inflation adjustments, and exchange rate changes in the contract asset during the construction period. From January to March 2023, the Company capitalized R$ 167,802 (R$ 120,324 from January to December 2022).

(b) Construction margin

The Company is primarily responsible for the construction and installation of the concession infrastructure, either by using its employees or contracting third parties, and is significantly exposed to its risks and benefits. Accordingly, the Company recognizes revenue from construction services corresponding to construction costs increased by gross margin.

Constructions related to the concessions are usually performed by third parties. In such a case, the margin is lower to cover administration costs and the assumption of responsibility for primary risks. As of March 31, 2023 and 2022, the margin was 2.3%.

From January to March 2023, the construction margin was R$ 26,519 (R$ 20,685 from January to March 2022).

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(c) Expropriations

As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate third-party properties, whose owners will be compensated either amicably or through court.

The costs of such expropriations are recorded in the contract asset during the execution of the works. From January to March 2023, expropriations totaled R$ 4,015 (R$ 29,863 from January to March 2022).

14 Intangible assets

(a) Statement of financial position details

| | March 31, 2023 — Cost | Accumulated
amortization | Net | December 31,
2022 — Cost | Accumulated
amortization | Net |
| --- | --- | --- | --- | --- | --- | --- |
| Intangible right arising from: | | | | | | |
| Concession agreements – equity value | 725,410 | (227,941) | 497,469 | 722,730 | (223,404) | 499,326 |
| Concession agreements – economic value | 1,573,971 | (949,346) | 624,625 | 1,585,271 | (933,232) | 652,039 |
| Program contracts | 27,415,393 | (8,762,569) | 18,652,824 | 26,875,408 | (8,537,949) | 18,337,459 |
| Program contracts – commitments | 1,709,757 | (458,007) | 1,251,750 | 1,709,757 | (444,765) | 1,264,992 |
| Service contracts – São Paulo | 26,086,961 | (8,005,012) | 18,081,949 | 25,584,703 | (7,714,252) | 17,870,451 |
| Software license of use | 1,265,086 | (687,583) | 577,503 | 1,249,881 | (654,477) | 595,404 |
| Right of use – Other assets | 169,465 | (111,384) | 58,081 | 170,921 | (95,869) | 75,052 |
| Right of use – Investments | - | - | - | 26,148 | - | 26,148 |
| Total | 58,946,043 | (19,201,842) | 39,744,201 | 57,924,819 | (18,603,948) | 39,320,871 |

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(b) Changes

| | December 31, 2022 | Additions | Transfer of contract
asset | Transfers | Write-offs and disposals | Amortization | March 31, 2023 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Intangible right arising from: | | | | | | | |
| Concession agreements – equity value () | 499,326 | - | 4,098 | (955) | (6) | (4,994) | 497,469 |
| Concession agreements – economic value | 652,039 | - | 2,589 | 331 | (85) | (30,249) | 624,625 |
| Program contracts () | 18,337,459 | 2 | 569,717 | (288) | (2,055) | (252,011) | 18,652,824 |
| Program contracts – commitments | 1,264,992 | - | - | - | - | (13,242) | 1,251,750 |
| Service contracts – São Paulo | 17,870,451 | - | 513,453 | (1,720) | (1,056) | (299,179) | 18,081,949 |
| Software license of use | 595,404 | - | 15,204 | - | - | (33,105) | 577,503 |
| Right of use – Other assets | 75,052 | 320 | - | - | (30) | (17,261) | 58,081 |
| Right of use – Investments | 26,148 | - | - | (26,148) | - | - | - |
| Total | 39,320,871 | 322 | 1,105,061 | (28,780) | (3,232) | (650,041) | 39,744,201 |

(*) As of March 31, 2023, Concession agreements – equity value, and Program contracts included leases totaling R$ 51,692 and R$ 165,104 ( R$ 54,356 and R$ 168,216 as of December 31, 2022) , respectively.

| | December 31, 2021 | Additions | Transfer of contract
asset | Transfers | Write-offs and disposals | Amortization | March 31, 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Intangible right arising from: | | | | | | | |
| Concession agreements - equity value () | 491,057 | - | - | - | - | (4,657) | 486,400 |
| Concession agreements – economic value | 681,441 | - | 5,948 | 46 | - | (27,004) | 660,431 |
| Program contracts () | 17,152,021 | 5,189 | 769,541 | (107) | (1,255) | (231,923) | 17,693,466 |
| Program contracts – commitments | 1,317,957 | - | - | - | - | (13,241) | 1,304,716 |
| Service contracts – São Paulo | 16,158,771 | 181 | 176,705 | 3,640 | (976) | (260,765) | 16,077,556 |
| Software license of use | 598,734 | - | 21,790 | - | - | (27,899) | 592,625 |
| Right of use – Other assets | 103,853 | 8,730 | - | - | (1) | (17,696) | 94,886 |
| Total | 36,503,834 | 14,100 | 973,984 | 3,579 | (2,232) | (583,185) | 36,910,080 |

(*) As of March 31, 2022, the lines Concession agreements – equity value and Program contracts included leases in the amounts of R$ 62,359 and R$ 2021 (R$ 65,012 and R$ 180,669 as of December 31, 2022), respectively.

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As of June 30, 2020, a contract was signed for the provision of treatment services and final disposal of solid waste and collection of garbage tax in the Municipality of Diadema for 40 years. To reach the best operationalization format, treatment services and final disposal of solid waste are in the study phase and, based on the contractual provision, are subject to a partnership between SABESP and a private party, which will occur through a public call.

(c) Intangible right arising from concession agreements

As of March 31, 2023, the amounts not yet disbursed were recorded in “Program contract commitments” under current and noncurrent liabilities, totaling R$ 62,601 and R$ 12,322 (R$ 100,188 and R$ 12,197 as of December 31, 2022), respectively.

(d) Public-Private Partnership - PPP

SABESP carries out operations related to the PPPs mentioned below. These operations and their respective guarantees are supported by agreements executed according to Law 11,079/2004.

The amounts recorded in intangible assets are as follows:

	March 31, 2023	December 31, 2022
Alto Tietê	247,467	251,545
São Lourenço	2,683,425	2,725,900
Total	2,930,892	2,977,445

The obligations assumed by the Company are as follows:

	March 31, 2023 — Current liabilities	Noncurrent liabilities	Total liabilities	December 31, 2022 — Current liabilities	Noncurrent liabilities	Total liabilities
Alto Tietê	98,809	-	98,809	91,782	36,645	128,427
São Lourenço	127,173	2,647,480	2,774,653	130,631	2,700,123	2,830,754
Total	225,982	2,647,480	2,873,462	222,413	2,736,768	2,959,181

(e) Amortization of Intangible Assets

The average amortization rate totaled 5.0% and 4.8% as of March 31, 2023 and 2022, respectively.

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(f) Right of use

Nature	March 31, 2023	December 31, 2022
Leases - Contract asset	175,145	276,893
Leases - Concession and Program Contract
Cost	405,431	405,431
Accumulated amortization	(188,635)	(182,859)
(=) Net	216,796	222,572
Other assets (*)
Vehicles	152,501	153,384
Properties	11,138	11,711
Equipment	5,826	5,826
Accumulated amortization	(111,384)	(95,869)
(=) Net	58,081	75,052
Right of use	450,022	574,517

The lease liability corresponds to total future fixed lease payments, adjusted to present value, considering an incremental rate on borrowings. For further information, see Note 16.

The table below shows the impact on the Company’s result:

| Impact on the
result | March 31, 2023 | March 31, 2022 |
| --- | --- | --- |
| Right of use amortization | (23,037) | (23,461) |
| Financial result – interest expense and inflation adjustment | (18,127) | (17,398) |
| Expenses of short-term leases with low value | (8,518) | (6,322) |
| Reduction of profit for the period | (49,682) | (47,181) |

(g) Performance Agreements

As of March 31, 2023, the accounting balances of the agreements in force recorded in contract asset and intangible assets were R$ 107,882 and R$ 2,284,215 (R$ 138,550 and R$ 2,126,106 as of December 31, 2022), respectively.

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15 Property, plant and equipment

(a) Statement of financial position details

| | March 31, 2023 — Cost | Accumulated
depreciation | Net | Annual average
depreciation rate | December 31,
2022 — Cost | Accumulated
depreciation | Net | Annual average
depreciation rate |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Land | 94,228 | - | 94,228 | - | 94,228 | - | 94,228 | - |
| Buildings | 91,262 | (42,638) | 48,624 | 2.1% | 90,311 | (42,343) | 47,968 | 2.1% |
| Equipment | 427,609 | (296,254) | 131,355 | 14.6% | 412,828 | (291,963) | 120,865 | 15.3% |
| Transportation equipment | 14,323 | (9,918) | 4,405 | 10.1% | 12,578 | (10,083) | 2,495 | 9.9% |
| Furniture and fixtures | 41,640 | (15,257) | 26,383 | 6.7% | 38,528 | (15,032) | 23,496 | 6.7% |
| Other | 60,199 | (324) | 59,875 | 5.0% | 50,189 | (302) | 49,887 | 5.0% |
| Total | 729,261 | (364,391) | 364,870 | 11.0% | 698,662 | (359,723) | 338,939 | 11.2% |

(b) Changes

	December 31, 2022	Additions	Transfers	Write-offs and disposals	Depreciation	March 31, 2023
Land	94,228	-	-	-	-	94,228
Buildings	47,968	1,037	(85)	-	(296)	48,624
Equipment	120,865	16,881	87	(243)	(6,235)	131,355
Transportation equipment	2,495	-	2,059	-	(149)	4,405
Furniture and fixtures	23,496	3,027	291	(40)	(391)	26,383
Other	49,887	10,009	-	-	(21)	59,875
Total	338,939	30,954	2,352	(283)	(7,092)	364,870

	December 31, 2021	Additions	Transfers	Write-offs and disposals	Depreciation	March 31, 2022
Land	94,213	-	-	-	-	94,213
Buildings	45,498	35	(272)	(12)	(290)	44,959
Equipment	115,154	7,579	(2,946)	(143)	(5,728)	113,916
Transportation equipment	2,472	-	(80)	-	(151)	2,241
Furniture and fixtures	22,079	899	(576)	(19)	(358)	22,025
Other	11,741	53	102	-	(22)	11,874
Total	291,157	8,566	(3,772)	(174)	(6,549)	289,228

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16 Borrowings and financing

| Borrowings and financing outstanding balance — Financial institution | March 31, 2023 — Current | Noncurrent | Total | December 31,
2022 — Current | Noncurrent | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Local currency | | | | | | |
| 12th issue debentures | 45,450 | 56,350 | 101,800 | 45,450 | 67,681 | 113,131 |
| 17th issue debentures | - | - | - | 144,632 | - | 144,632 |
| 18th issue debentures | 50,581 | 39,750 | 90,331 | 49,937 | 45,649 | 95,586 |
| 22nd issue debentures | 166,684 | 167,090 | 333,774 | 199,901 | 326,433 | 526,334 |
| 23rd issue debentures | - | 864,948 | 864,948 | - | 864,910 | 864,910 |
| 24th issue debentures | - | 499,772 | 499,772 | - | 488,478 | 488,478 |
| 26th issue debentures | - | 1,269,022 | 1,269,022 | - | 1,239,645 | 1,239,645 |
| 27th issue debentures | 299,692 | 698,405 | 998,097 | 299,614 | 698,339 | 997,953 |
| 28th issue debentures | - | 1,197,849 | 1,197,849 | - | 1,197,756 | 1,197,756 |
| 29th issue debentures | - | 1,293,662 | 1,293,662 | - | 1,275,295 | 1,275,295 |
| 30th issue debentures | - | 998,139 | 998,139 | - | 998,110 | 998,110 |
| Brazilian Federal Savings Bank | 98,979 | 1,453,866 | 1,552,845 | 99,767 | 1,422,145 | 1,521,912 |
| Brazilian Development Bank - BNDES PAC | 3,379 | - | 3,379 | 6,736 | - | 6,736 |
| Brazilian Development Bank - BNDES PAC II 9751 | 7,237 | 21,616 | 28,853 | 7,214 | 23,344 | 30,558 |
| Brazilian Development Bank - BNDES PAC II 9752 | 4,903 | 14,709 | 19,612 | 4,887 | 15,884 | 20,771 |
| Brazilian Development Bank - BNDES ONDA LIMPA | 27,036 | 26,974 | 54,010 | 26,949 | 33,617 | 60,566 |
| Brazilian Development Bank – BNDES TIETÊ III | 154,934 | 619,647 | 774,581 | 154,437 | 656,264 | 810,701 |
| Brazilian Development Bank - BNDES 2015 | 33,916 | 382,938 | 416,854 | 33,807 | 390,127 | 423,934 |
| Brazilian Development Bank - BNDES 2014 | 6,593 | 14,944 | 21,537 | 6,572 | 16,525 | 23,097 |
| Inter-American Development Bank – IDB 2202 | 181,349 | 2,073,574 | 2,254,923 | 181,349 | 2,164,009 | 2,345,358 |
| Inter-American Development Bank – IDB INVEST | 37,340 | 835,221 | 872,561 | 37,340 | 853,725 | 891,065 |
| Inter-American Development Bank – IDB Invest 2022 | 14,100 | 452,149 | 466,249 | 14,100 | 452,085 | 466,185 |
| International Finance Corporation - IFC | 80,000 | 671,224 | 751,224 | 80,000 | 670,996 | 750,996 |
| Leases (Concession Agreements, Program Contracts, and Contract Asset) | 44,849 | 302,122 | 346,971 | 44,453 | 313,391 | 357,844 |
| Leases (others) | 60,994 | 24,835 | 85,829 | 72,109 | 29,265 | 101,374 |
| Other | 9,043 | 5,133 | 14,176 | 6,241 | 5,867 | 12,108 |
| Interest and other charges | 350,923 | - | 350,923 | 417,878 | - | 417,878 |
| Total in local currency | 1,677,982 | 13,983,939 | 15,661,921 | 1,933,373 | 14,249,540 | 16,182,913 |

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| Borrowings and financing outstanding balance — Financial institution | March 31, 2023 — Current | Noncurrent | Total | December 31,
2022 — Current | Noncurrent | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Foreign currency | | | | | | |
| Inter-American Development Bank - IDB 1212 – US$ 25,695 thousand (US$ 30,834 thousand in December 2022) | 52,217 | 78,325 | 130,542 | 53,628 | 107,256 | 160,884 |
| Inter-American Development Bank - IDB 4623 – US$ 83,978 thousand (US$ 74,299 thousand in December 2022) | - | 406,653 | 406,653 | - | 367,441 | 367,441 |
| International Bank for Reconstruction and Development (IBRD) – IBRDs 7662 and 8916 - US$ 78,794 thousand (US$ 78,197 thousand in December 2022) | 30,888 | 357,295 | 388,183 | 31,722 | 365,648 | 397,370 |
| JICA 15 – ¥ 7,490,795 thousand (¥ 8,067,010 thousand in December 2022) | 44,104 | 242,569 | 286,673 | 45,602 | 273,610 | 319,212 |
| JICA 18 – ¥ 6,735,040 thousand (¥ 7,253,120 thousand in December 2022) | 39,654 | 217,962 | 257,616 | 41,001 | 245,865 | 286,866 |
| JICA 17 – ¥ 3,753,048 thousand (¥ 3,753,048 thousand in December 2022) | 11,048 | 131,740 | 142,788 | 11,424 | 136,227 | 147,651 |
| JICA 19 – ¥ 25,389,252 thousand (¥ 26,296,011 thousand in December 2022) | 69,403 | 900,624 | 970,027 | 71,761 | 967,124 | 1,038,885 |
| IDB 1983AB – US$ 7,692 thousand (US$ 7,692 thousand in December 2022) | 39,010 | - | 39,010 | 39,962 | - | 39,962 |
| Interest and other charges | 12,510 | - | 12,510 | 17,487 | - | 17,487 |
| Total in foreign currency | 298,834 | 2,335,168 | 2,634,002 | 312,587 | 2,463,171 | 2,775,758 |
| Total borrowings and financing | 1,976,816 | 16,319,107 | 18,295,923 | 2,245,960 | 16,712,711 | 18,958,671 |
| Exchange rates as of March 31, 2023: US$ 5.0804; ¥ 0.03827 (as
of December 31, 2022: US$ 5.2177; ¥ 0.03957). As of March 31, 2023, the Company did not have balances of borrowings and
financing raised during the year, maturing within 12 months. | | | | | | |

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| Local currency | Guarantees | Maturity | Annual interest
rate | Inflation adjustment |
| --- | --- | --- | --- | --- |
| 12th issue debentures | Own funds | 2025 | TR + 9.5% | |
| 17th issue debentures | Own funds | 2023 | CDI + 0.75% (series 1), 4.5% (series 2), and 4.75% (series 3) | IPCA (series 2 and 3) |
| 18th issue debentures | Own funds | 2024 | TJLP + 1.92 % (series 1 and 3) and 8.25% (series 2) | IPCA (series 2) |
| 22nd issue debentures | Own funds | 2025 | CDI + 0.58% (series 1), CDI+ 0.90% (series 2), and 6.0% (series 3) | IPCA (series 3) |
| 23rd issue debentures | Own funds | 2027 | CDI + 0.49% (series 1) and CDI+ 0.63% (series 2) | |
| 24th issue debentures | Own funds | 2029 | 3.20% (series 1) and 3.37% (series 2) | IPCA (series 1 and 2) |
| 26th issue debentures | Own funds | 2030 | 4.65% (series 1) and 4.95% (series 2) | IPCA (series 1 and 2) |
| 27th issue debentures | Own funds | 2027 | CDI + 1.60% (series 1) and CDI+ 1.80% (series 2) and 2.25% (series 3) | |
| 28th issue debentures | Own funds | 2028 | CDI + 1.20% (series 1), CDI+ 1.44% (series 2), and 1.60% (series 3) | |
| 29th issue debentures | Own funds | 2036 | CDI + 1.29% (series 1), 5.3058% (series 2), and 5.4478% (series 3) | IPCA (series 2 and 3) |
| 30th issue debentures | Own funds | 2029 | CDI + 1.30% (series 1) and CDI+ 1.58% (series 2) | |
| Brazilian Federal Savings Bank | Own funds | 2023/2042 | 5% to 9.5% | TR |
| Brazilian Development Bank - BNDES PAC | Own funds | 2023 | TJLP + 1.82% | |
| Brazilian Development Bank - BNDES PAC II 9751 | Own funds | 2027 | TJLP + 1.72% | |
| Brazilian Development Bank - BNDES PAC II 9752 | Own funds | 2027 | TJLP + 1.72% | |
| Brazilian Development Bank - BNDES ONDA LIMPA | Own funds | 2025 | TJLP + 1.92% | |
| Brazilian Development Bank – BNDES TIETÊ III | Own funds | 2028 | TJLP + 1.66% | |
| Brazilian Development Bank - BNDES 2015 | Own funds | 2035 | TJLP + 2.18% | |
| Brazilian Development Bank - BNDES 2014 | Own funds | 2026 | TJLP + 1.76% | |
| Inter-American Development Bank – IDB 2202 | Government | 2035 | CDI + 0.86% | |
| Inter-American Development Bank – IDB INVEST | Own funds | 2034 | CDI+ 1.90% and CDI 2.70% | |
| Inter-American Development Bank – IDB Invest 2022 | Own funds | 2036 | CDI + 2.50% | |
| International Finance Corporation - IFC | Own funds | 2032 | CDI + 2.00% | |
| Leases (Concession Agreements, Program Contracts, and Contract Asset) | | 2035 | 7.73% to 10.12% | IPC |
| Leases (others) | | 2027 | 5.20% to 15.39% | |
| Other | Own funds | 2025 | 3% (FEHIDRO) TJLP + 1.5% (FINEP) | |

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| Foreign currency | Guarantees | Maturity | Annual interest
rate | Exchange variation |
| --- | --- | --- | --- | --- |
| Inter-American Development Bank - IDB 1212 – US$ 25,695 thousand | Government | 2025 | 3.31% () | US$ |
| Inter-American Development Bank - IDB 4623 – US$ 83,978 thousand | Government | 2044 | 1.12% () | US$ |
| International Bank for Reconstruction and Development (IBRD) – IBRDs 7662 and 8916 - US$ 78,794 thousand | Government | 2034 | 2.85% () | US$ |
| JICA 15 – ¥ 7,490,795 thousand | Government | 2029 | 1.8% and 2.5% | Yen |
| JICA 18 – ¥ 6,735,040 thousand | Government | 2029 | 1.8% and 2.5% | Yen |
| JICA 17 – ¥ 3,753,048 thousand | Government | 2035 | 1.2% and 0.01% | Yen |
| JICA 19 – ¥ 25,389,252 thousand | Government | 2037 | 1.7% and 0.01% | Yen |
| IDB 1983AB – US$ 7,692 thousand | - | 2023 | 2.08% to 2.38% () | US$ |

(*) Rates comprising SOFR + contractually defined spread.

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(i) Payment schedule – accounting balances as of March 31, 2023

	2023	2024	2025	2026	2027	2028	2029 to 2044	TOTAL
LOCAL CURRENCY
Debentures	377,852	1,077,166	1,207,210	1,085,512	1,720,562	651,547	1,527,545	7,647,394
Brazilian Federal Savings Bank	74,079	101,891	108,253	115,014	122,187	129,675	901,746	1,552,845
BNDES	179,344	234,620	214,281	204,396	191,790	72,559	221,836	1,318,826
IDB 2202	90,674	181,349	181,349	181,349	181,349	181,349	1,257,504	2,254,923
IDB INVEST	18,670	39,550	44,300	106,390	108,728	143,591	411,332	872,561
IDB INVEST 2022	14,100	14,100	38,275	38,431	38,431	38,431	284,481	466,249
IFC	80,000	80,000	80,000	80,000	80,000	80,000	271,224	751,224
Leases (Concession Agreements, Program Contracts, and Contract Asset)	-	44,849	47,149	36,931	30,224	33,411	154,407	346,971
Leases (others)	55,373	16,401	9,518	4,061	476	-	-	85,829
Other	8,296	2,986	2,753	141	-	-	-	14,176
Interest and other charges	348,622	2,301	-	-	-	-	-	350,923
TOTAL IN LOCAL CURRENCY	1,247,010	1,795,213	1,933,088	1,852,225	2,473,747	1,330,563	5,030,075	15,661,921
FOREIGN CURRENCY
IDB	26,108	52,217	63,444	22,455	22,455	22,455	328,061	537,195
IBRD	15,444	30,887	30,887	30,887	30,887	30,887	218,304	388,183
JICA	87,629	164,209	164,209	164,209	164,209	164,209	748,430	1,657,104
IDB 1983AB	39,010	-	-	-	-	-	-	39,010
Interest and other charges	12,510	-	-	-	-	-	-	12,510
TOTAL IN FOREIGN CURRENCY	180,701	247,313	258,540	217,551	217,551	217,551	1,294,795	2,634,002
Total	1,427,711	2,042,526	2,191,628	2,069,776	2,691,298	1,548,114	6,324,870	18,295,923

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(II) Changes

| | December 31, 2022 | Addition (lease) | Funding | Borrowing costs | Inflation adjustment
and exchange rate changes | Inflation adjustment
/ exchange rate changes and incorporated interest- Capitalized | Interest paid | Amortization | Accrued interest | Provision for
interest and fees - Capitalized | Expenses with
borrowing costs | March 31, 2023 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| LOCAL CURRENCY | | | | | | | | | | | | |
| Debentures | 8,166,366 | - | - | (516) | 60,883 | 5,463 | (206,330) | (363,123) | 162,197 | 46,336 | 2,859 | 7,874,135 |
| Brazilian Federal Savings Bank | 1,526,185 | - | 50,852 | - | 6,250 | 1,718 | (29,853) | (27,891) | 23,539 | 6,393 | - | 1,557,193 |
| BNDES | 1,380,993 | - | - | - | 3,354 | 984 | (25,753) | (61,940) | 19,891 | 5,670 | 65 | 1,323,264 |
| IDB 2202 | 2,450,550 | - | - | - | - | - | (165,514) | (90,674) | 26,253 | 58,942 | 239 | 2,279,796 |
| IDB INVEST | 943,619 | - | - | - | - | - | (71,521) | (18,670) | 22,661 | 12,244 | 166 | 888,499 |
| IFC | 774,525 | - | - | - | - | - | - | - | - | 29,484 | 228 | 804,237 |
| IDB INVEST 2022 | 469,327 | - | - | - | - | - | - | - | 18,405 | - | 64 | 487,796 |
| Leases (Concession Agreements, Program Contracts, and Contract Asset) | 357,844 | - | - | - | - | - | (13,603) | (10,873) | 13,603 | - | - | 346,971 |
| Leases (others) | 101,374 | 320 | - | - | - | - | (4,523) | (20,389) | 9,047 | - | - | 85,829 |
| Other | 12,130 | - | 3,629 | - | 22 | - | (161) | (1,581) | 160 | 2 | - | 14,201 |
| TOTAL IN LOCAL CURRENCY | 16,182,913 | 320 | 54,481 | (516) | 70,509 | 8,165 | (517,258) | (595,141) | 295,756 | 159,071 | 3,621 | 15,661,921 |
| FOREIGN CURRENCY | | | | | | | | | | | | |
| IDB | 532,693 | - | 50,342 | - | (15,365) | - | (2,474) | (26,343) | 5,062 | - | 237 | 544,152 |
| IBRD | 399,762 | - | 18,892 | (1,588) | (10,585) | - | (10,061) | (16,014) | 8,691 | 56 | 106 | 389,259 |
| JICA | 1,803,109 | - | - | - | (56,819) | - | (14,057) | (78,741) | 6,635 | 289 | 51 | 1,660,467 |
| IDB 1983AB | 40,194 | - | - | - | (1,056) | - | - | - | 661 | 221 | 104 | 40,124 |
| TOTAL IN FOREIGN CURRENCY | 2,775,758 | - | 69,234 | (1,588) | (83,825) | - | (26,592) | (121,098) | 21,049 | 566 | 498 | 2,634,002 |
| Total | 18,958,671 | 320 | 123,715 | (2,104) | (13,316) | 8,165 | (543,850) | (716,239) | 316,805 | 159,637 | 4,119 | 18,295,923 |

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| | December 31, 2021 | Addition (lease) | Funding | Borrowing costs | Inflation adjustment
and exchange rate changes | Inflation adjustment
/ exchange rate changes and incorporated interest- Capitalized | Interest paid | Amortization | Accrued interest | Provision for interest
and fees - Capitalized | Expenses with borrowing
costs | March 31, 2022 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| LOCAL CURRENCY | | | | | | | | | | | | |
| Debentures | 7,467,968 | - | 1,000,000 | (2,733) | 69,242 | - | (100,409) | (311,166) | 112,677 | 45,709 | 2,696 | 8,283,984 |
| Brazilian Federal Savings Bank | 1,483,113 | - | 39,320 | - | 1,360 | 941 | (28,947) | (24,385) | 17,152 | 11,845 | - | 1,500,399 |
| BNDES | 1,392,844 | - | - | - | 114 | 123 | (25,644) | (52,463) | 12,737 | 12,890 | 64 | 1,340,665 |
| IDB 2202 | 2,589,442 | - | - | - | - | - | (108,419) | (90,674) | 19,752 | 47,473 | 239 | 2,457,813 |
| IDB INVEST | 956,942 | - | - | - | - | - | (44,803) | (16,130) | 27,039 | - | 166 | 923,214 |
| Leases (Concession Agreements, Program Contracts, and Contract Asset) | 397,311 | - | - | - | - | - | (13,451) | (10,834) | 13,451 | - | - | 386,477 |
| Leases (others) | 125,969 | 8,730 | - | - | - | - | (3,947) | (21,370) | 7,894 | - | - | 117,276 |
| Other | 14,094 | - | 1,715 | - | 2 | - | (202) | (1,269) | 196 | 7 | - | 14,543 |
| TOTAL IN LOCAL CURRENCY | 14,427,683 | 8,730 | 1,041,035 | (2,733) | 70,718 | 1,064 | (325,822) | (528,291) | 210,898 | 117,924 | 3,165 | 15,024,371 |
| FOREIGN CURRENCY | | | | | | | | | | | | |
| IDB | 387,837 | - | 32,205 | - | (60,014) | - | (3,277) | (28,316) | 1,739 | - | 55 | 330,229 |
| IBRD | 420,881 | - | - | (1,547) | (63,833) | - | (944) | (15,214) | 398 | - | 76 | 339,817 |
| JICA | 2,401,887 | - | 15,546 | - | (457,218) | - | (17,588) | (89,447) | 6,116 | 1,214 | 51 | 1,860,561 |
| IDB 1983AB | 85,548 | - | - | - | (12,965) | - | - | - | 303 | 122 | 104 | 73,112 |
| TOTAL IN FOREIGN CURRENCY | 3,296,153 | - | 47,751 | (1,547) | (594,030) | - | (21,809) | (132,977) | 8,556 | 1,336 | 286 | 2,603,719 |
| Total | 17,723,836 | 8,730 | 1,088,786 | (4,280) | (523,312) | 1,064 | (347,631) | (661,268) | 219,454 | 119,260 | 3,451 | 17,628,090 |

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(a) Main events in the three-month period ended March 31, 2023

Debentures

In the first quarter of 2023, the Company paid the final amortization of the 17th issue debentures, totaling R$ 152,157 million, of which R$ 145,284 million in principal and R$ 6,873 million in interest.

In the first quarter of 2023, the Company paid the final amortization of the 2nd series of the 22nd issue debentures, totaling R$ 214,404 million, of which R$ 200,000 million in principal and R$ 14,404 million in interest.

(b) Lease

The Company has lease agreements signed as Assets Lease. During the construction period, work costs are capitalized to contract assets and the lease amount is recorded in the same proportion.

After startup, the lease payment period starts (240 monthly installments), and the amount is periodically restated by the contracted price index.

The amounts payable for the right of use of assets are also recorded in this line. See Note 14 (f).

(c) Covenants

The table below shows the covenants as of March 31, 2023.

	Covenants
Adjusted EBITDA / Adjusted Financial Expenses	Equal to or higher than 2.80
EBITDA / Financial Expenses Paid	Equal to or higher than 2.35
Adjusted Net Debt / Adjusted EBITDA	Equal to or lower than 3.80
Net Debt / Adjusted EBITDA	Equal to or lower than 3.50
Total Adjusted Debt / Adjusted EBITDA	Lower than 3.65
Other Onerous Debt (1) / Adjusted EBITDA	Equal to or lower than 1.30
Adjusted Current Ratio	Higher than 1.00
(1) The contractual definition of “Other Onerous Debts” corresponds to the sum of pension plan obligations and healthcare plan, installment payments of tax debts, and installments payments of debts with the electricity supplier.

As of March 31, 2023, and December 31, 2022, the Company met the requirements set forth by its borrowings and financing agreements.

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(d) Borrowings and financing – Credit limited

Agent	March 31, 2023
	(in millions of reais (*))
Brazilian Federal Savings Bank	1,042
Brazilian Development Bank (BNDES)	279
Inter-American Development Bank (IDB)	1,097
International Bank for Reconstruction and Development (IBRD)	1,210
Other	14
TOTAL	3,642

(*) Brazilian Central Bank’s exchange rate as of March 31, 2023 (US$ 1.00 = R$ 5.0804; ¥ 1.00 = R$ 0.03827).

Financing resources contracted have specific purposes and are released for the execution of their respective investments, according to the progress of the works.

17 Taxes and contributions

(a) Current assets

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| Recoverable taxes | | |
| Income tax and social contribution | 216,462 | 206,517 |
| Withheld income tax (IRRF) on financial investments | 41,879 | 33,283 |
| Other federal taxes | 8,096 | 3,106 |
| Total | 266,437 | 242,906 |

(b) Current liabilities

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| Taxes and contributions payable | | |
| Income tax and social contribution | 122,165 | - |
| Cofins and Pasep | 110,329 | 134,624 |
| INSS (social security contribution) | 43,921 | 44,515 |
| IRRF (withholding income tax) | 6,314 | 63,361 |
| Other | 55,525 | 50,961 |
| Total | 338,254 | 293,461 |

On February 08, 2023, the Federal Supreme Court (STF) unanimously decided that a final decision favorable to companies on taxes paid on a continuous base would lose its effects if the STF later rules against it.

The Company analyzed the matter judged in this decision, which covers Social Contribution on Net Profit, as well as other taxes that fit into the decision granted and did not identify any impact on the Financial Statements.

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18 Deferred taxes and contributions

(a) Statement of financial position details

	March 31, 2023	December 31, 2022
Deferred income tax assets
Provisions	573,119	560,404
Pension plan obligations - G1	136,832	141,606
Donations of underlying assets on concession agreements	45,800	46,088
Allowance for doubtful accounts	192,670	199,363
Other	169,577	171,798
Total deferred tax asset	1,117,998	1,119,259
Deferred income tax liabilities
Temporary difference on concession of intangible asset	(350,319)	(353,817)
Capitalization of borrowing costs	(465,454)	(457,669)
Profit on supply to government entities	(345,260)	(346,650)
Actuarial gain – G1 Plan	(93,561)	(93,561)
Construction margin	(42,637)	(43,323)
Borrowing costs	(12,290)	(13,517)
Total deferred tax liabilities	(1,309,521)	(1,308,537)
Deferred tax liability, net	(191,523)	(189,278)

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(b) Changes

Deferred income tax assets	December 31, 2022	Net change	March 31, 2023
Provisions	560,404	12,715	573,119
Pension plan obligations - G1	141,606	(4,774)	136,832
Donations of underlying assets on concession agreements	46,088	(288)	45,800
Allowance for doubtful accounts	199,363	(6,693)	192,670
Other	171,798	(2,221)	169,577
Total	1,119,259	(1,261)	1,117,998
Deferred income tax liabilities
Temporary difference on concession of intangible asset	(353,817)	3,498	(350,319)
Capitalization of borrowing costs	(457,669)	(7,785)	(465,454)
Profit on supply to government entities	(346,650)	1,390	(345,260)
Actuarial gain – G1	(93,561)	-	(93,561)
Construction margin	(43,323)	686	(42,637)
Borrowing costs	(13,517)	1,227	(12,290)
Total	(1,308,537)	(984)	(1,309,521)
Deferred tax liability, net	(189,278)	(2,245)	(191,523)

Deferred income tax assets	December 31, 2021	Net change	March 31, 2022
Provisions	503,374	(537)	502,837
Pension plan obligations - G1	150,577	(2,131)	148,446
Donations of underlying assets on concession agreements	47,589	118	47,707
Allowance for doubtful accounts	183,963	(7,207)	176,756
Other	127,092	(668)	126,424
Total	1,012,595	(10,425)	1,002,170
Deferred income tax liabilities
Temporary difference on concession of intangible asset	(368,235)	3,930	(364,305)
Capitalization of borrowing costs	(404,931)	(6,590)	(411,521)
Profit on supply to government entities	(353,262)	2,311	(350,951)
Actuarial gain – G1	(109,271)	-	(109,271)
Construction margin	(46,079)	690	(45,389)
Borrowing costs	(14,556)	926	(13,630)
Total	(1,296,334)	1,267	(1,295,067)
Deferred tax liability, net	(283,739)	(9,158)	(292,897)

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(c) Reconciliation of the effective tax rate

The amounts recorded as income tax and social contribution expenses in the financial statements are reconciled to the statutory rates, as shown below:

| | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Profit before income taxes | 1,132,945 | 1,474,202 |
| Statutory rate | 34% | 34% |
| Estimated expense at statutory rate | (385,201) | (501,229) |
| Permanent differences: | | |
| Provision Law 4,819/1958 – G0 (i) | (10,772) | (7,972) |
| Donations | (1,065) | (2,377) |
| Other differences | 11,305 | 12,915 |
| Income tax and social contribution | (385,733) | (498,663) |
| Current income tax and social contribution | (383,488) | (489,505) |
| Deferred income tax and social contribution | (2,245) | (9,158) |
| Effective rate | 34% | 34% |

(i) Permanent difference related to the provision for the actuarial liability. See Note 21 (ii) and (v).

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19 Provisions

(a) Lawsuits and proceedings that resulted in provisions

(I) Statement of financial position details

The Company is a party to several legal claims and administrative proceedings arising from the normal course of business, including civil, tax, labor, and environmental matters. Management recognizes provisions consistently with the recognition and measurement criteria established in Note 3.15 to the Annual Financial Statements as of December 31, 2022. The terms and payment amounts are defined based on the outcome of these lawsuits.

| | March 31, 2023 — Provisions | Escrow deposits | Provisions net
of deposits | December 31,
2022 — Provisions | Escrow deposits | Provisions net
of deposits |
| --- | --- | --- | --- | --- | --- | --- |
| Customer claims (i) | 134,033 | (6,346) | 127,687 | 151,023 | (6,226) | 144,797 |
| Supplier claims (ii) | 263,582 | (54) | 263,528 | 257,080 | (53) | 257,027 |
| Other civil claims (iii) | 105,046 | (1,134) | 103,912 | 99,462 | (1,131) | 98,331 |
| Tax claims (iv) | 91,767 | (16,361) | 75,406 | 79,532 | (16,037) | 63,495 |
| Labor claims (v) | 657,408 | (12,503) | 644,905 | 654,277 | (13,979) | 640,298 |
| Environmental claims (vi) | 433,810 | (37) | 433,773 | 406,872 | (36) | 406,836 |
| Total | 1,685,646 | (36,435) | 1,649,211 | 1,648,246 | (37,462) | 1,610,784 |
| Current | 911,048 | - | 911,048 | 924,038 | - | 924,038 |
| Noncurrent | 774,598 | (36,435) | 738,163 | 724,208 | (37,462) | 686,746 |

(II) Changes

| | December 31, 2022 | Additional provisions | Interest and
inflation adjustment | Use of the accrual | Amounts not used (reversal) | March 31, 2023 |
| --- | --- | --- | --- | --- | --- | --- |
| Customer claims (i) | 151,023 | 1,918 | 3,790 | (21,540) | (1,158) | 134,033 |
| Supplier claims (ii) | 257,080 | 1,992 | 5,552 | (1,042) | - | 263,582 |
| Other civil claims (iii) | 99,462 | 5,701 | 7,154 | (3,478) | (3,793) | 105,046 |
| Tax claims (iv) | 79,532 | 11,039 | 1,658 | (7) | (455) | 91,767 |
| Labor claims (v) | 654,277 | 9,894 | 13,486 | (5,799) | (14,450) | 657,408 |
| Environmental claims (vi) | 406,872 | 22,400 | 18,655 | - | (14,117) | 433,810 |
| Subtotal | 1,648,246 | 52,944 | 50,295 | (31,866) | (33,973) | 1,685,646 |
| Escrow deposits | (37,462) | (271) | (696) | 533 | 1,461 | (36,435) |
| Total | 1,610,784 | 52,673 | 49,599 | (31,333) | (32,512) | 1,649,211 |

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| | December 31, 2021 | Additional provisions | Interest and
inflation adjustment | Use of the accrual | Amounts not used (reversal) | March 31, 2022 |
| --- | --- | --- | --- | --- | --- | --- |
| Customer claims (i) | 168,258 | 7,053 | 8,247 | (8,595) | (3,238) | 171,725 |
| Supplier claims (ii) | 477,854 | 1,459 | 13,032 | (60,604) | (10) | 431,731 |
| Other civil claims (iii) | 95,601 | 3,048 | 3,540 | (2,973) | (1,151) | 98,065 |
| Tax claims (iv) | 57,509 | 11,928 | 3,582 | (703) | (204) | 72,112 |
| Labor claims (v) | 349,962 | 10,077 | 8,889 | (7,467) | (12,241) | 349,220 |
| Environmental claims (vi) | 331,326 | 10,440 | 14,651 | (300) | (39) | 356,078 |
| Subtotal | 1,480,510 | 44,005 | 51,941 | (80,642) | (16,883) | 1,478,931 |
| Escrow deposits | (32,017) | (13,349) | (3,041) | 7,325 | 2,749 | (38,333) |
| Total | 1,448,493 | 30,656 | 48,900 | (73,317) | (14,134) | 1,440,598 |

(b) Lawsuits deemed as contingent liabilities

The Company is a party to lawsuits and administrative proceedings relating to environmental, tax, civil, and labor claims, which are assessed as contingent liabilities in the financial statements, since it either does not expect outflows to be required or the amount of the obligations cannot be reliably measured. Contingent liabilities, net of deposits, are represented as follows:

| | March 31, 2023 | December 31,
2022 |
| --- | --- | --- |
| Customer claims (i) | 205,668 | 200,966 |
| Supplier claims (ii) | 1,187,990 | 1,147,606 |
| Other civil claims (iii) | 1,183,563 | 1,146,048 |
| Tax claims (iv) | 1,946,987 | 1,869,583 |
| Labor claims (v) | 2,540,106 | 1,471,423 |
| Environmental claims (vi) | 3,870,028 | 3,302,843 |
| Total | 10,934,342 | 9,138,469 |

(c) Explanation of the nature of main classes of lawsuits

(i) Customer claims

Refer mainly to lawsuits from customers claiming that their tariffs should be equal to those of other consumer categories, lawsuits for reduction of sewage tariff due to system losses, consequently requiring the refund of amounts charged by the Company, and lawsuits for reduction of tariff for being eligible to the Social Welfare Entity category.

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(ii) Supplier claims

Include lawsuits filed by some suppliers alleging underpayment of inflation adjustments and economic and financial imbalance of the agreements, and are in progress at different courts.

(iii) Other civil claims

Refer mainly to indemnities for property damage, pain and suffering, and loss of profits allegedly caused to third parties, such as vehicle accidents, claims, and challenges on the methodology to collect tariffs, among others, filed at different court levels.

(iv) Tax claims

Tax claims refer mainly to tax collections and fines in general challenged due to disagreements regarding notification or differences in the interpretation of legislation by the Company's Management.

(v) Labor claims

The Company is a party to several labor lawsuits, involving issues such as overtime, shift schedule, health hazard premium, hazardous duty premium, prior notice, change of function, salary equalization, service outsourcing, and others, which are at various court levels.

(vi) Environmental claims

These refer to several administrative proceedings and lawsuits filed by government entities, including Companhia Ambiental do Estado de São Paulo (CETESB) and the Public Prosecution Office of the São Paulo State, which aim at certain obligations to do and not to do, with the provision of fines for non-compliance and imposition of compensation for environmental damages allegedly caused by the Company.

The main objects in which the Company is involved are: a) blame SABESP for discharging or releasing sewage without proper treatment; b) invest in the water and sewage treatment system of the municipality, under penalty of paying a fine; c) pay compensation for environmental damages; amongst others.

(d) Guarantee insurance

As of May 25, 2022, the Company executed an agreement effective for one year for the issue of policies under several types of guarantee insurance. The limit that can be used is R$ 600 million. The guarantee insurance for escrow deposit is used in legal claims, where instead of immediately disbursing cash, the Company uses the guarantee provided by the insurance until the end of these proceedings, limited to up to five years. As of March 31, 2023, R$ 390.4 million was available for use.

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20 Labor liabilities and pension plan obligations

	March 31, 2023	December 31, 2022
Salaries and payroll charges	40,707	70,089
Provision for vacation	251,709	254,469
Provision for Christmas bonus	20,421	-
Healthcare plan (i)	72,745	70,136
Provision for profit sharing (ii)	103,028	96,227
Consent Decree (TAC)	5,501	6,114
Knowledge Retention Program (PRC)	1,418	1,469
Total	495,529	498,504

(i) Healthcare plan

Benefits granted are paid after the event, free of choice, and are sponsored by the contributions of SABESP and the employees. In the first quarter of 2023, the Company contributed 9.8%, on average, of gross payroll, totaling R$ 75,505 (8.3% in the first quarter of 2022, totaling R$ 57,102).

(ii) Provision for profit sharing

Based on an agreement with the labor union, the Profit Sharing Program corresponds to up to one month’s salary for each employee, depending on the achievement of the goals established, from January to December, and should be paid in the subsequent year.

21 Pension plan obligations

The Company has Post-Employment Benefit Plans in the following modalities: Defined Benefit (BD) – G1 (i) and G0 (ii); and Defined Contribution (CD) – Sabesprev Mais (iii) and VIVEST (iv), whereby only the latter is open for new adhesions. See the reconciliation of expenses with such plans in item (v).

Defined benefit plans

Summary of pension plan obligations - Liabilities

	G1 Plan	G0 Plan	Total
Pension plan obligations as of December 31, 2022	(148,116)	(2,002,075)	(2,150,191)
(Expenses) / revenues recognized in 2023	4,384	(56,305)	(51,921)
Payments made in 2023	10,124	48,200	58,324
Pension plan obligatinos as of March 31, 2023	(133,608)	(2,010,180)	(2,143,788)

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	G1 Plan	G0 Plan	Total
Pension plan obligations as of December 31, 2021	(129,600)	(2,192,062)	(2,321,662)
(Expenses) recognized in 2022	(2,935)	(44,238)	(47,173)
Payments made in 2022	9,501	43,975	53,476
Pension plan obligations as of March 31, 2022	(123,034)	(2,192,325)	(2,315,359)

(i) G1 Plan

The defined benefit plan (“G1 Plan”) managed by SABESPREV receives similar contributions established in a plan of subsidy of actuarial study of SABESPREV, as follows:

· 0.99% of the portion of the salary of participation up to 20 salaries; and

· 8.39% of the surplus, if any, of the portion of the salary of participation over 20 salaries.

(ii) G0 Plan

According to State Law 4,819/1958, employees who started providing services before May 1974 acquired a legal right to receive supplemental pension payments, which rights are referred to as "G0 Plan". The Company pays supplemental retirement and pension amounts on behalf of the São Paulo State and seeks reimbursements of such amounts, which are recorded in the “Balances with related parties” line, limited to the amounts considered virtually certain to be reimbursed by the São Paulo State.

(iii) Sabesprev Mais Plan

Managed by SABESPREV, the sponsor's contributions correspond to the result obtained by applying a percentage of 100% to the basic contribution made by the participant.

(ii) VIVEST Plan

Managed by VIVEST, the sponsor's contributions correspond to the result obtained by applying a percentage of 100% to the basic contribution made by the participant.

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(v) Reconciliation of expenditures with pension plan obligations

	January to March 2023	January to March 2022
G1 Plan (i)	(4,384)	2,935
G0 Plan (ii)	56,305	44,238
Sabesprev Mais Plan (iii)	6,603	5,878
VIVEST Plan (iv)	84	58
Subtotal	58,608	53,109
Capitalized	(764)	(771)
Reimbursement of additional retirement and pension benefits paid (G0)	(24,622)	(20,791)
Other	1,441	1,245
Pension plan obligations (Note 27)	34,663	32,792

22 Services payable

This line records the balances payable, mainly from services received from third parties, such as the supply of electric power, reading of hydrometers and delivery of water and sewage bills, cleaning, surveillance and security services, collection, legal counsel services, audit, marketing, and advertising and consulting services, among others. The amounts payable to the municipal governments related to transfers provided for in the concession agreements are also recorded. The balances as of March 31, 2023, and December 31, 2022, were R$ 604,532 and R$ 723,242, respectively.

23 Equity

(a) Share capital

As of March 31, 2023, and December 31, 2022, the authorized, subscribed, and paid-in capital, totaling R$ 15,000,000, was composed of 683,509,869 registered, book-entry common shares with no par value, as follows:

| | March 31, 2023 — Number of shares | % | December 31,
2022 — Number of shares | % |
| --- | --- | --- | --- | --- |
| São Paulo State | 343,506,664 | 50.3 | 343,506,664 | 50.3 |
| Other shareholders | | | | |
| In Brazil (1) | 257,305,517 | 37.6 | 257,339,417 | 37.6 |
| Abroad (2) | 82,697,688 | 12.1 | 82,663,788 | 12.1 |
| Total | 683,509,869 | 100.0 | 683,509,869 | 100.0 |

(1) As of March 31, 2023, the common shares traded in Brazil were held by 33,511 shareholders. It includes six shares held by Cia Paulista de Parcerias – CPP, a company controlled by the São Paulo State.

(2) Shares traded as American Depositary Receipts (ADR) on the New York Stock Exchange, through The Bank New York Mellon, the depositary bank of the Company’s ADRs.

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(b) Interest on capital

The Annual Shareholders’ Meeting of April 28, 2023, approved the distribution of dividends as interest on capital totaling R$ 741,301, corresponding to minimum mandatory dividends and R$ 130,857 as supplementary minimum dividends, totaling R$ 872,158, to be paid on June 26, 2023.

24 Earnings per share

Basic and diluted

Basic earnings per share are calculated by dividing the equity attributable to owners by the weighted average number of outstanding common shares during the period. The Company does not have potentially dilutive common shares outstanding or debts convertible into common shares. Accordingly, basic and diluted earnings per share are equal.

| | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Profit attributable to the Company’s owners | 747,212 | 975,539 |
| Weighted average number of common shares issued | 683,509,869 | 683,509,869 |
| Basic and diluted earnings per share (reais per share) | 1.09320 | 1.42725 |

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25 Operating segment information

The Company’s Management, composed of the Board of Directors and the Executive Board, has determined the operating segment used to make strategic decisions, such as sanitation services.

Result

| | January to March
2023 — Sanitation (i) | Reconciliation to
the income statement (ii) | Balance according
to the financial statements |
| --- | --- | --- | --- |
| Gross operating revenue | 4,909,274 | 1,179,534 | 6,088,808 |
| Gross sales deductions | (390,439) | - | (390,439) |
| Net operating revenue | 4,518,835 | 1,179,534 | 5,698,369 |
| Costs, selling, general, and administrative expenses | (3,173,849) | (1,153,015) | (4,326,864) |
| Income from operations before other operating expenses, net and equity accounting | 1,344,986 | 26,519 | 1,371,505 |
| Other operating income (expenses), net | | | 14,634 |
| Equity accounting | | | 6,334 |
| Financial result, net | | | (259,528) |
| Income from operations before taxes | | | 1,132,945 |
| Depreciation and amortization | (657,145) | - | (657,145) |

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| | January to March
2022 — Sanitation (i) | Reconciliation to
the income statement (ii) | Balance according
to the financial statements |
| --- | --- | --- | --- |
| Gross operating revenue | 4,298,220 | 888,206 | 5,186,426 |
| Gross sales deductions | (316,036) | - | (316,036) |
| Net operating revenue | 3,982,184 | 888,206 | 4,870,390 |
| Costs, selling, general, and administrative expenses | (2,876,938) | (867,521) | (3,744,459) |
| Income from operations before other operating expenses, net and equity accounting | 1,105,246 | 20,685 | 1,125,931 |
| Other operating income (expenses), net | | | 2,564 |
| Equity accounting | | | 5,583 |
| Financial result, net | | | 340,124 |
| Income from operations before taxes | | | 1,474,202 |
| Depreciation and amortization | (589,746) | - | (589,746) |

(i) See Note 31 for further information about non-cash items, other than depreciation and amortization that impact segment results, and for additional information on long-lived assets.

(ii) Construction revenue and related costs are not reported to the CODM. Revenue from construction is recognized under ICPC 01 (R1) / IFRIC 12 (Concession Agreements) and CPC 47/IFRS 15 (Revenue from Contracts with Customers), as all performance obligations are met over time. See Note 13 (b) for further information.

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26 Operating revenue

(a) Revenue from sanitation services:

	January to March 2023	January to March 2022
Metropolitan Region of São Paulo	3,475,670	3,048,853
Regional Systems	1,433,604	1,249,367
Total	4,909,274	4,298,220

(b) Reconciliation from gross operating revenue to net operating revenue:

	January to March 2023	January to March 2022
Revenue from sanitation services (i)	4,909,274	4,298,220
Construction revenue	1,179,534	888,206
Sales tax	(370,298)	(297,585)
Regulation, Control and Oversight Fee (TRCF)	(20,141)	(18,451)
Net revenue	5,698,369	4,870,390

(i) Includes R$ 24,019 from the TRCF charged from customers from January to March 2023 (R$ 20,961 from January to March 2022), referring to the municipalities regulated by ARSESP.

27 Operating costs and expenses

	January to March 2023	January to March 2022
Operating costs
Salaries, payroll charges, and benefits	(583,855)	(508,873)
Pension plan obligations	(1,656)	(7,057)
Construction costs (Note 25)	(1,153,015)	(867,521)
General supplies	(85,831)	(66,490)
Treatment supplies	(164,899)	(147,308)
Outsourced services	(435,484)	(365,892)
Electricity	(395,026)	(411,084)
General expenses	(227,169)	(198,626)
Depreciation and amortization	(606,788)	(543,535)
	(3,653,723)	(3,116,386)

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Selling expenses — Salaries, payroll charges, and benefits	(70,517)	(67,909)
Pension plan obligations	(185)	(959)
General supplies	(1,067)	(1,130)
Outsourced services	(109,177)	(84,363)
Electricity	(191)	(414)
General expenses	(27,626)	(25,127)
Depreciation and amortization	(16,894)	(16,685)
	(225,657)	(196,587)
Bad debt expense, net of recoveries (Note 9 (c))	(162,805)	(177,694)
Administrative expenses
Salaries, payroll charges, and benefits	(55,142)	(58,521)
Pension plan obligations	(32,822)	(24,776)
General supplies	(601)	(4,299)
Outsourced services	(80,267)	(61,833)
Electricity	(583)	(445)
General expenses	(60,011)	(55,387)
Depreciation and amortization	(33,463)	(29,526)
Tax expenses	(21,790)	(19,005)
	(284,679)	(253,792)
Operating costs and expenses
Salaries, payroll charges, and benefits	(709,514)	(635,303)
Pension plan obligations (Note 21 (v))	(34,663)	(32,792)
Construction costs (Note 25)	(1,153,015)	(867,521)
General supplies	(87,499)	(71,919)
Treatment supplies	(164,899)	(147,308)
Outsourced services	(624,928)	(512,088)
Electricity	(395,800)	(411,943)
General expenses	(314,806)	(279,140)
Depreciation and amortization	(657,145)	589,746
Tax expenses	(21,790)	(19,005)
Bad debt expense, net of recoveries (Note 9 (c))	(162,805)	(177,694)
	(4,326,864)	(3,744,459)

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28 Financial income (expenses)

	January to March 2023	January to March 2022
Financial expenses
Interest and charges on borrowings and financing – local currency	(273,106)	(189,553)
Interest and charges on borrowings and financing – foreign currency	(21,049)	(8,556)
Other financial expenses	(101,732)	(91,244)
Inflation adjustment on borrowings and financing	(70,509)	(70,718)
Other inflation adjustments	(50,463)	(48,365)
Interest and inflation adjustment on provisions	(45,612)	(44,582)
Total financial expenses	(562,471)	(453,018)
Financial income
Inflation adjustment gains	60,314	59,684
Income on financial investments	103,217	79,662
Interest income	66,560	70,684
Cofins and Pasep	(10,788)	(9,767)
Other	17	13
Total financial income	219,320	200,276
Financial income (expenses), net of exchange variation	(343,151)	(252,742)
Exchange gain (losses)
Exchange rate changes on borrowings and financing	83,825	594,030
Exchange rate changes on assets	(201)	(1,263)
Other exchange rate changes	(1)	99
Exchange rate changes, net	83,623	592,866
Financial income (expenses), net	(259,528)	340,124

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29 Other operating income (expenses), net

| | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Other operating income, net | 20,352 | 10,308 |
| Other operating expenses | (5,718) | (7,744) |
| Other operating income (expenses), net | 14,634 | 2,564 |

Other operating income includes revenue from the sale of property, plant and equipment, contracts awarded in public bids, right to sell electricity, indemnities and reimbursement of expenses, fines and guarantees, property leases, reuse water, PURA projects and services, net of Cofins and Pasep.

Other operating expenses usually record derecognition of concessions assets due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, losses on property, plant and equipment, estimated losses and operational assets indemnification.

30 Commitments

The Company has agreements to manage and maintain its activities, as well as to build new projects aiming at achieving the objectives proposed in its target plan. The main unrecognized committed amounts as of March 31, 2023 are as follows:

	1 year	1-3 years	3-5 years	More than 5 years	Total
Contractual obligations – Expenses	1,305,561	1,310,451	278,540	643,643	3,538,195
Contractual obligations - Investments	3,426,343	2,992,419	1,947,122	140,005	8,505,889
Total	4,731,904	4,302,870	2,225,662	783,648	12,044,084

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31 Supplemental cash flow information

| | January to March
2023 | January to March
2022 |
| --- | --- | --- |
| Total additions to contract assets (Note 13) | 1,204,867 | 958,070 |
| Total additions to intangible assets (Note 14 (b)) | 322 | 14,100 |
| Items not affecting cash (see breakdown below ) | (634,857) | (320,510) |
| Total additions to intangible and contract assets according to the statement of cash flows | 570,332 | 651,660 |
| Investments and financing operations affecting intangible assets but not cash: | | |
| Interest capitalized in the period (Note 13 (a)) | 167,802 | 120,324 |
| Contractors payable | 240,833 | 233,889 |
| Performance agreements | 199,383 | (63,118) |
| Right of use | 320 | 8,730 |
| Construction margin (Note 25) | 26,519 | 20,685 |
| Total | 634,857 | 320,510 |

32 Events after the reporting period

· Result of the Extraordinary Tariff Review and Annual Tariff Adjustment

As of April 6, 2023, further to the Material Facts disclosed on December 21, 2022 and February 16, 2023, SABESP informed its shareholders and the market in general that ARSESP disclosed Resolution 1,394/2023, referring to the Extraordinary Tariff Review, and Resolution 1,395/2023, which provides for the new tariff amounts, authorizing the Company to apply the total tariff adjustment of 9.5609%, regarding the tariffs in effect, resulting from:

· IPCA (February 2022 to February 2023) of 5,5964%;

· Efficiency factor (X Factor) of 0.2142%;

· General Quality Index (GQI 2023) to be discounted, of 0.1280%;

· Result of the Extraordinary Tariff Review, of 5.5532%;

· Compensatory adjustment (referring to 2021), of 1.4040%, to be discounted.

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· Contract with the International Finance Corporation - IFC

On April 7, 2023, SABESP informed its shareholders and the market in general about the ratification of the unenforceability of the bidding process for the contracting of specialized technical services to provide support and consultancy services to the State regarding the studies on the Privatization of SABESP.

Accordingly, the contract with the International Finance Corporation - IFC was executed on April 10, 2023. IFC is an agency linked to the World Bank that will act as an advisor to this process.

· Separation Incentive Program - PDI

On May 11, 2023, further to the Company’s restructuring and in the context of the new strategic guideline for efficiency and process simplification, the final approval stage for the implementation of the Separation Incentive Program (PDI) was concluded. The Program will focus on preserving knowledge and ensuring the continuity of the Company’s activities, with adhesions occurring in June 2023 and a schedule of dismissals between July 2023 and June 2024. The Company expects 2,000 employees to adhered to the Program.

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Comments on the Company’s Projections

Comments on the Company’s Projections

The projections presented in the Reference Form are annual and not on a quarterly basis. Therefore, the quarterly comparison between information disclosed in the Reference Form with quarterly results shall not apply.

Projections are monitored every year and disclosed in the Reference Form.

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Other Information Deemed as Relevant by the Company

1. CHANGES IN INTEREST HELD BY THE CONTROLLING SHAREHOLDER, BOARD MEMBERS, AND EXECUTIVE OFFICERS

| CONSOLIDATED SHAREHOLDING POSITION
OF CONTROLLING SHAREHOLDERS AND MANAGEMENT, AND OUTSTANDING SHARES Position as of 03/31/2023 — Shareholder | Number of Common Shares (units) | % | Total Number of Shares (units) | % |
| --- | --- | --- | --- | --- |
| Controlling Shareholder | | | | |
| Treasury Department | 343,506,664 | 50.3% | 343,506,664 | 50.3% |
| Companhia Paulista de Parcerias - CPP | 6 | 0% | 6 | 0% |
| Management | | | | |
| Board of Directors | 100 | 0% | 100 | 0% |
| Executive Board | 1,300 | 0% | 1,300 | 0% |
| Fiscal Council | - | - | - | - |
| Treasury Shares | - | - | - | - |
| Other Shareholders | | | | |
| Total | 343,508,070 | 50.3% | 343,508,070 | 50.3% |
| Outstanding Shares | 340,001,799 | 49.7% | 340,001,799 | 49.7% |

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| CONSOLIDATED SHAREHOLDING POSITION
OF CONTROLLING SHAREHOLDERS AND MANAGEMENT, AND OUTSTANDING SHARES Position as of 03/31/2022 — Shareholder | Number of Common Shares (units) | % | Total Number of Shares (units) | % |
| --- | --- | --- | --- | --- |
| Controlling Shareholder | | | | |
| Treasury Department | 343,506,664 | 50.3% | 343,506,664 | 50.3% |
| Companhia Paulista de Parcerias - CPP | 6 | 0% | 6 | 0% |
| Management | | | | |
| Board of Directors | - | - | - | - |
| Executive Board | 200 | 0.0% | 200 | 0.0% |
| Fiscal Council | - | - | - | - |
| Treasury Shares | - | - | - | - |
| Other Shareholders | - | - | - | - |
| Total | 343,506,870 | 50.3% | 343,506,870 | 50.3% |
| Outstanding Shares | 340,002,999 | 49.7% | 340,002,999 | 49.7% |

2. SHAREHOLDING POSITION

| SHAREHOLDING POSITION OF HOLDERS OF MORE THAN 5% OF EACH TYPE AND CLASS OF COMPANY SHARES, UP TO THE INDIVIDUAL LEVEL — Company: CIA SANEAMENTO BÁSICO
ESTADO SÃO PAULO | | | Position as of 03/31/2023 (number of shares) | |
| --- | --- | --- | --- | --- |
| | Common Shares | | Total | |
| Shareholder | Number of Shares | % | Number of Shares | % |
| Treasury Department | 343,506,664 | 50.3 | 343,506,664 | 50.3 |

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Reports and Statements / Unqualified Report on Special Review

(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail.)

Report on Review of Interim Financial Information

To the Shareholders, Directors and Management of

Companhia de Saneamento Básico do Estado de São Paulo – SABESP

São Paulo – SP

Introduction

We have reviewed the accompanying interim financial information of Companhia de Saneamento Básico do Estado de São Paulo (“Company”), included in the Interim Financial Information Form (ITR) for the quarter ended March 31, 2023, which comprises the Statement of financial position as of March 31, 2023 and the related income statement, statement of comprehensive income, the statements of changes in equity and cash flows for the three months then ended, including a summary of significant accounting policies and other explanatory notes.

Management is responsible for the preparation of the interim financial information in accordance with Technical Pronouncement NBC TG - 21- Interim Financial Reporting and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Interim Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on the interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the Interim Financial Information Form (ITR) referred to above is not prepared, in all material respects, in accordance with NBC TG – 21 and IAS 34 applicable to the preparation of interim financial information and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM).

Other matters

Statement of value added

The quarterly information referred to above includes statements of value added for the period of three months ended March 31, 2023, prepared under the responsibility of the Company's management and presented as supplementary information for the purposes of IAS 34. These statements were submitted to the same review procedures in conjunction with the review of the Company's interim financial information in the order to conclude they are reconciliated to the interim financial information and to the accounting records, as applicable, and whether the structure and content are in accordance with the criteria established in the NBC TG 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added were not prepared, in all material respects, in accordance with the interim financial information taken as a whole.

São Paulo, May 11, 2023

Élica Daniela da Silva Martins

Accountant CRC 1SP-223.766/O-0

Grant Thornton Auditores Independentes Ltda.

CRC 2SP-025.583/O-1

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Reports and Statements / Executive Officers’ Statement on the Financial Statements

Executive Officers’ Statement on the Quarterly Information STATEMENT

The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayers’ ID (CNPJ/MF) number 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, according to paragraph 1 of article 25, item VI of CVM Instruction 480, of December 7, 2009, that:

They reviewed, discussed, and agreed with the quarterly information for the period ended March 31, 2023. São Paulo, May 11, 2023.

Companhia de Saneamento Básico do Estado de São Paulo - SABESP

André Gustavo Salcedo Teixeira Mendes CEO

Catia Cristina Teixeira Pereira

Chief Economic, Financial, and Investor Relations Officer

Sabrina de Menezes Correa Furstenau Sabino

People and Corporate Management Officer

Paula Alessandra Bonin Costa Violante Engineering and Innovation Officer

Roberval Tavares de Souza

Operations and Maintenance Officer

Bruno Magalhães D'Abadia

Regulation and New Businesses Officer

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Reports and Statements / Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm

Executive Officers’ Statement on the Report of Independent Registered Public Accounting Firm STATEMENT

The Executive Officers of Companhia de Saneamento Básico do Estado de São Paulo - SABESP, with Corporate Taxpayers’ ID (CNPJ/MF) number 43.776.517/0001-80, headquartered at Rua Costa Carvalho, nº 300, Pinheiros, São Paulo, declare that, according to paragraph 1 of article 25, item V of CVM Instruction 480, of December 7, 2009:

They reviewed, discussed, and agreed with the Report of Independent Registered Public Accounting Firm on the quarterly information for the period ended March 31, 2023.

São Paulo, May 11, 2023.

Companhia de Saneamento Básico do Estado de São Paulo - SABESP André Gustavo Salcedo Teixeira Mendes

CEO

Catia Cristina Teixeira Pereira

Chief Economic, Financial, and Investor Relations Officer

Sabrina de Menezes Correa Furstenau Sabino

People and Corporate Management Officer

Paula Alessandra Bonin Costa Violante Engineering and Innovation Officer

Roberval Tavares de Souza

Operations and Maintenance Officer

Bruno Magalhães D'Abadia

Regulation and New Businesses Officer

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city São Paulo, Brazil.

Date: May 26, 2023

Companhia de Saneamento Básico do Estado de São Paulo - SABESP
By:	/s/ Catia Cristina Teixeira Pereira
	Name: Catia Cristina Teixeira Pereira Title: Chief Financial Officer and Investor Relations Officer

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.