ITR - Quarterly Information Form – 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO Version: 1 - Form 6-K

ITR - Quarterly Information Form - 06/30/2022 - CIA SANEAMENTO BASICO EST SAO PAULO

Version: 1

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	7
Statement of Cash Flows (Indirect Method)	8
Statement of Changes in Equity
01/01/2022 to 06/30/2022	10
01/01/2021 to 06/30/2021	11
Statement of Value Added	12
Comments on the Company's Performance	13
Notes to the Quarterly Information	23
Comments on the Company's Projections	72
Other Information Deemed as Relevant by the Company	73
Reports and Statements
Unqualified Reports on Special Review	75
Executive Officers' Statement on the Financial Statements	76
Executive Officers' Statement on the Report of Independent Registered Public Accounting	77

Company Information / Capital Breakdown

Number of Shares	Current Quarter
(Unit)	06/30/2022
Paid-in Capital
Common	683,509,869
Preferred	0
Total	683,509,869
Treasury Shares
Common	0
Preferred	0
Total	0

Parent Company's Financial Statements / Statement of Financial Position - Assets

(R$ thousand)

Code	Description	Current Quarter	Previous Year
		06/30/2022	12/31/2021
1	Total Assets	53,953,038	53,165,485
1.01	Current Assets	6,209,715	6,502,998
1.01.01	Cash and Cash Equivalents	643,569	717,929
1.01.02	Financial Investments	1,967,901	2,433,385
1.01.02.03	Financial Investments Valued at Amortized Cost	1,967,901	2,433,385
1.01.03	Accounts Receivable	3,068,004	2,868,734
1.01.03.01	Trade Receivables	2,861,512	2,695,077
1.01.03.02	Other Receivables	206,492	173,657
1.01.03.02.01	Related-Party Balances	206,492	173,657
1.01.04	Inventories	122,879	113,506
1.01.06	Recoverable Taxes	287,213	276,104
1.01.06.01	Current Recoverable Taxes	287,213	276,104
1.01.08	Other Current Assets	120,149	93,340
1.01.08.03	Other	120,149	93,340
1.01.08.03.01	Restricted Cash	31,592	28,467
1.01.08.03.20	Other Assets	88,557	64,873
1.02	Noncurrent Assets	47,743,323	46,662,487
1.02.01	Long-Term Assets	10,245,863	9,741,933
1.02.01.04	Accounts Receivable	254,712	223,234
1.02.01.04.01	Trade Receivables	254,712	223,234
1.02.01.09	Receivables from Related Parties	648,143	644,895
1.02.01.09.03	Receivables from Controlling Shareholders	648,143	644,895
1.02.01.10	Other Noncurrent Assets	9,343,008	8,873,804
1.02.01.10.04	Escrow Deposits	155,592	141,667
1.02.01.10.05	Water and Basic Sanitation National Agency - ANA	16,566	20,666
1.02.01.10.06	Contract Asset	9,007,636	8,550,102
1.02.01.10.20	Other Assets	163,214	161,369
1.02.02	Investments	133,093	125,563
1.02.02.01	Equity Interest	86,991	79,437
1.02.02.01.03	Equity Interest in Jointly-Owned Subsidiaries	80,892	73,338
1.02.02.01.04	Other Investments	6,099	6,099
1.02.02.02	Investment Properties	46,102	46,126
1.02.03	Property, Plant and Equipment	297,228	291,157
1.02.04	Intangible Assets	37,067,139	36,503,834
1.02.04.01	Intangible Assets	37,067,139	36,503,834
1.02.04.01.01	Concession Agreements	1,130,199	1,172,498
1.02.04.01.02	Program Contracts	18,945,850	18,469,978
1.02.04.01.03	Service Contracts	16,318,459	16,158,771
1.02.04.01.04	Software License of Use	587,982	598,734
1.02.04.01.05	Right of Use	84,649	103,853

Parent Company's Financial Statements / Statement of Financial Position - Liabilities

(R$ thousand)

Code	Description	Current Quarter	Previous Year
		06/30/2022	12/31/2021
2	Total Liabilities	53,953,038	53,165,485
2.01	Current Liabilities	4,775,714	5,092,927
2.01.01	Labor Liabilities and Pension Plan Obligations	459,173	426,616
2.01.01.01	Pension Plan Obligations	36,267	53,506
2.01.01.02	Labor Liabilities	422,906	373,110
2.01.02	Suppliers	311,737	236,763
2.01.02.01	Domestic Suppliers	311,737	236,763
2.01.03	Tax Liabilities	201,555	257,130
2.01.03.01	Federal Tax Liabilities	195,390	248,251
2.01.03.01.02	Pis-Pasep and Cofins Payable	111,612	111,963
2.01.03.01.03	INSS (Social Security Contribution) Payable	43,460	39,902
2.01.03.01.20	Other Federal Taxes	40,318	96,386
2.01.03.03	Municipal Tax Liabilities	6,165	8,879
2.01.04	Borrowings and Financing	1,789,406	1,830,617
2.01.04.01	Borrowings and Financing	1,246,071	1,128,253
2.01.04.01.01	In Local Currency	940,649	769,136
2.01.04.01.02	In Foreign Currency	305,422	359,117
2.01.04.02	Debentures	439,209	596,418
2.01.04.03	Financing through Lease	104,126	105,946
2.01.05	Other Liabilities	1,150,727	1,531,980
2.01.05.01	Payables to Related Parties	2,120	931
2.01.05.01.03	Payables to Controlling Shareholders	2,120	931
2.01.05.02	Other	1,148,607	1,531,049
2.01.05.02.01	Dividends and Interest on Capital Payable	576	548,006
2.01.05.02.04	Services Payable	581,437	469,027
2.01.05.02.05	Refundable Amounts	30,865	31,687
2.01.05.02.06	Program Contract Commitments	99,973	77,652
2.01.05.02.07	Public-Private Partnership - PPP	165,597	142,757
2.01.05.02.09	Indemnities	8,332	6,975
2.01.05.02.20	Other Liabilities	261,827	254,945
2.01.06	Provisions	863,116	809,821
2.01.06.01	Tax, Social Security, Labor, and Civil Provisions	244,415	218,137
2.01.06.01.01	Tax Provisions	32,497	29,525
2.01.06.01.02	Labor Liabilities and Pension Plan Obligations	117,519	105,806
2.01.06.01.04	Civil Provisions	94,399	82,806
2.01.06.02	Other Provisions	618,701	591,684
2.01.06.02.03	Provisions for Environmental Liabilities and Decommissioning	21,315	20,223
2.01.06.02.04	Provisions for Customers	147,293	154,984
2.01.06.02.05	Provisions for Suppliers	450,093	416,477
2.02	Noncurrent Liabilities	22,903,098	23,140,699
2.02.01	Borrowings and Financing	15,937,198	15,893,219
2.02.01.01	Borrowings and Financing	8,007,737	8,739,774
2.02.01.01.01	In Local Currency	5,618,103	5,802,738
2.02.01.01.02	In Foreign Currency	2,389,634	2,937,036
2.02.01.02	Debentures	7,547,177	6,736,111
2.02.01.03	Financing through Lease	382,284	417,334

Parent Company's Financial Statements / Statement of Financial Position - Liabilities

(R$ thousand)

Code	Description	Current Quarter	Previous Year
		06/30/2022	12/31/2021
2.02.02	Other Liabilities	6,041,133	6,325,069
2.02.02.02	Other	6,041,133	6,325,069
2.02.02.02.04	Pension Plan Obligations	2,305,323	2,321,662
2.02.02.02.05	Program Contract Commitments	12,760	44,995
2.02.02.02.06	Public-Private Partnership - PPP	2,824,281	2,917,428
2.02.02.02.07	Indemnities	12,677	14,642
2.02.02.02.08	Labor Liabilities	1,430	3,047
2.02.02.02.09	Deferred Cofins/Pasep	160,677	159,456
2.02.02.02.20	Other Liabilities	723,985	863,839
2.02.03	Deferred Taxes	280,003	283,739
2.02.03.01	Deferred Income Tax and Social Contribution	280,003	283,739
2.02.03.01.01	Deferred Income Tax and Social Contribution	280,003	283,739
2.02.04	Provisions	644,764	638,672
2.02.04.01	Tax, Social Security, Labor, and Civil Provisions	278,028	263,855
2.02.04.01.01	Tax Provisions	27,191	25,291
2.02.04.01.02	Labor Liabilities and Pension Plan Obligations	242,396	228,292
2.02.04.01.04	Civil Provisions	8,441	10,272
2.02.04.02	Other Provisions	366,736	374,817
2.02.04.02.03	Provisions for Environmental Liabilities and Decommissioning	363,074	311,069
2.02.04.02.04	Provisions for Customers	2,910	2,494
2.02.04.02.05	Provisions for Suppliers	752	61,254
2.03	Equity	26,274,226	24,931,859
2.03.01	Paid-Up Capital	15,000,000	15,000,000
2.03.04	Profit Reserves	9,829,855	9,885,485
2.03.04.01	Legal Reserve	1,532,365	1,532,365
2.03.04.08	Additional Dividend Proposed	0	55,631
2.03.04.10	Reserve for Investments	8,297,490	8,297,489
2.03.05	Retained Earnings/Accumulated Losses	1,397,997	0
2.03.06	Equity Valuation Adjustments	46,374	46,374

Parent Company's Financial Statements / Income Statement

(R$ thousand)

Code	Description		YTD Current	Same Quarter	YTD Previous
		Current Quarter	Year	Previous Year	Year
		04/01/2022 to 06/30/2022	01/01/2022 to 06/30/2022	04/01/2021 to 06/30/2021	01/01/2021 to 06/30/2021
3.01	Revenue from Sales and/or Services	5,265,400	10,135,790	4,595,919	9,273,336
3.02	Cost of Sales and/or Services	-3,531,903	-6,648,289	-3,063,427	-6,111,470
3.02.01	Cost of Sales and/or Services	-2,402,428	-4,651,293	-2,063,521	-4,111,266
3.02.02	Construction Costs	-1,129,475	-1,996,996	-999,906	-2,000,204
3.03	Gross Profit	1,733,497	3,487,501	1,532,492	3,161,866
3.04	Operating Income/Expenses	-819,385	-1,439,311	-633,274	-1,157,663
3.04.01	Selling Expenses	-486,457	-860,738	-343,762	-659,607
3.04.01.01	Selling Expenses	-233,525	-430,112	-199,661	-394,455
3.04.01.02	Allowance for Doubtful Accounts	-252,932	-430,626	-144,101	-265,152
3.04.02	General and Administrative Expenses	-341,202	-594,994	-292,774	-520,049
3.04.04	Other Operating Income	13,562	23,870	11,954	19,750
3.04.04.01	Other Operating Income	14,937	26,342	15,734	27,935
3.04.04.02	Cofins and Pasep	-1,375	-2,472	-3,780	-8,185
3.04.05	Other Operating Expenses	-11,211	-18,955	-12,853	-9,972
3.04.06	Equity Pickup	5,923	11,506	4,161	12,215
3.05	Income before Financial Result and Taxes	914,112	2,048,190	899,218	2,004,203
3.06	Financial Result	-324,374	15,750	248,813	-105,557
3.06.01	Financial Income	230,160	429,173	93,551	205,009
3.06.01.01	Financial Income	239,441	449,484	99,009	215,434
3.06.01.02	Exchange Variation Gains	1,853	590	-854	-407
3.06.01.03	Cofins and Pasep	-11,134	-20,901	-4,604	-10,018
3.06.02	Financial Expenses	-554,534	-413,423	155,262	-310,566
3.06.02.01	Financial Expenses	-489,726	-942,744	-287,054	-615,303
3.06.02.02	Exchange Variation Losses	-64,808	529,321	442,316	304,737
3.07	Earnings before Income Tax	589,738	2,063,940	1,148,031	1,898,646
3.08	Income Tax and Social Contribution	-167,280	-665,943	-374,979	-628,736
3.08.01	Current	-180,174	-669,679	-374,219	-657,702
3.08.02	Deferred	12,894	3,736	-760	28,966

Parent Company's Financial Statements / Income Statement

(R$ thousand)

Code	Description		YTD Current	Same Quarter	YTD Previous
		Current Quarter	Year	Previous Year	Year
		04/01/2022 to 06/30/2022	01/01/2022 to 06/30/2022	04/01/2021 to 06/30/2021	01/01/2021 to 06/30/2021
3.09	Net Result from Continued Operations	422,458	1,397,997	773,052	1,269,910
3.11	Profit/Loss for the Period	422,458	1,397,997	773,052	1,269,910
3.99	Earnings per Share - (Reais/Share)
3.99.01	Basic Earnings per Share
3.99.01.01	Common	0.61807	2.04532	1.131	1.85793
3.99.02	Diluted Earnings per Share
3.99.02.01	Common	0.61807	2.04532	1.131	1.85793

Parent Company's Financial Statements / Statement of Comprehensive Income

(R$ thousand)

Code	Description		YTD Current	Same Quarter	YTD Previous
		Current Quarter	Year	Previous Year	Year
		04/01/2022 to 06/30/2022	01/01/2022 to 06/30/2022	04/01/2021 to 06/30/2021	01/01/2021 to 06/30/2021
4.01	Net Income for the Period	422,458	1,397,997	773,052	1,269,910
4.03	Comprehensive Income for the Period	422,458	1,397,997	773,052	1,269,910

Parent Company's Financial Statements / Statement of Cash Flows - Indirect Method

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2022 to 06/30/2022	01/01/2021 to 06/30/2021
6.01	Net Cash from Operating Activities	1,763,870	1,973,029
6.01.01	Cash from Operations	4,353,847	3,618,620
6.01.01.01	Earnings before Income Tax and Social Contribution	2,063,940	1,898,646
6.01.01.02	Provision and Inflation Adjustments on Provisions	196,108	111,294
6.01.01.04	Finance Charges from Customers	-192,460	-175,324
6.01.01.05	Residual Value of Property, Plant and Equipment, Intangible Assets, and Investment Properties Written-off	6,132	4,961
6.01.01.06	Depreciation and Amortization	1,187,911	1,095,106
6.01.01.07	Interest on Borrowings and Financing Payable	467,713	290,429
6.01.01.08	Monetary and Exchange Variations on Borrowings and Financing	-367,162	-209,361
6.01.01.09	Interest and Monetary Variation Losses	16,962	18,805
6.01.01.10	Interest and Monetary Variation Gains	-23,479	-51,190
6.01.01.11	Allowance for Doubtful Accounts	430,626	265,152
6.01.01.12	Provision for Consent Decree (TAC) and Knowledge Retention Program (PRC)	-650	3,214
6.01.01.13	Equity Pickup	-11,506	-12,215
6.01.01.14	Interest and Inflation Adjustment - PPP	245,923	225,623
6.01.01.15	Other Adjustments	7,639	-19,510
6.01.01.16	Transfer - São Paulo Municipal Government	277,747	128,265
6.01.01.17	Construction Margin over Intangible Assets Resulting from Concession Agreements	-45,930	-46,005
6.01.01.18	Pension Plan Obligations	94,333	90,730
6.01.02	Changes in Assets and Liabilities	-1,354,538	-658,909
6.01.02.01	Trade Receivables	-430,272	-167,184
6.01.02.02	Related-Party Balances and Transactions	-13,148	25,505
6.01.02.03	Inventories	-9,373	-4,018
6.01.02.04	Recoverable Taxes	-11,109	-678,601
6.01.02.05	Other Assets	-17,477	4,763
6.01.02.06	Escrow Deposits	3,418	30,732
6.01.02.08	Trade Payables and Contractors	-223,755	-242,244
6.01.02.09	Labor Liabilities and Pension Plan Obligations	33,207	3,974
6.01.02.10	Pension Plan Obligations	-110,672	-100,547
6.01.02.11	Taxes and Contributions Payable	-64,599	665,664
6.01.02.12	Services Payable	-165,337	-85,480
6.01.02.13	Other Liabilities	-209,921	-24,973
6.01.02.14	Provisions	-136,721	-89,656
6.01.02.15	Deferred Cofins/Pasep	1,221	3,156
6.01.03	Other	-1,235,439	-986,682
6.01.03.01	Interest Paid	-574,784	-312,268
6.01.03.02	Income Tax and Social Contribution Paid	-660,655	-674,414
6.02	Net Cash from Investing Activities	-1,077,680	-746,901
6.02.01	Acquisition of Contract Asset and Intangible Assets	-1,494,633	-1,472,725
6.02.02	Acquisition of Property, Plant and Equipment	-22,800	-12,873
6.02.04	Restricted Cash	-3,125	7,792
6.02.07	Financial Investments	442,878	730,905

Parent Company's Financial Statements / Statement of Cash Flows - Indirect Method

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2022 to 06/30/2022	01/01/2021 to 06/30/2021
6.03	Net Cash from Financing Activities	-760,550	-1,372,597
6.03.01	Funding	1,181,233	141,922
6.03.02	Amortization	-1,007,862	-915,804
6.03.03	Payment of Interest on Capital	-603,541	-254,218
6.03.04	Public-Private Partnership - PPP	-316,230	-288,603
6.03.05	Program Contract Commitments	-14,150	-55,894
6.05	Increase (Decrease) in Cash and Cash Equivalents	-74,360	-146,469
6.05.01	Opening Balance of Cash and Cash Equivalents	717,929	396,401
6.05.02	Closing Balance of Cash and Cash Equivalents	643,569	249,932

Parent Company's Financial Statements / Statement of Changes in Equity / 01/01/2022 to 06/30/2022

(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
5.04	Capital Transactions with Partners	0	0	-55,630	0	0	-55,630
5.04.08	Additional Dividends Approved	0	0	-55,630	0	0	-55,630
5.05	Total Comprehensive Income	0	0	0	1,397,997	0	1,397,997
5.05.01	Net Income for the Period	0	0	0	1,397,997	0	1,397,997
5.07	Closing Balances	15,000,000	0	9,829,855	1,397,997	46,374	26,274,226

Parent Company's Financial Statements / Statement of Changes in Equity / 01/01/2021 to 06/30/2021

(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	8,194,706	0	-401,002	22,793,704
5.03	Restated Opening Balances	15,000,000	0	8,194,706	0	-401,002	22,793,704
5.04	Capital Transactions with Partners	0	0	-26,376	0	0	-26,376
5.04.08	Additional Dividends Approved	0	0	-26,376	0	0	-26,376
5.05	Total Comprehensive Income	0	0	0	1,269,910	0	1,269,910
5.05.01	Net Income for the Period	0	0	0	1,269,910	0	1,269,910
5.07	Closing Balances	15,000,000	0	8,168,330	1,269,910	-401,002	24,037,238

Parent Company's Financial Statements / Statement of Value Added

(R$ thousand)

Code	Description	YTD Current Year	YTD Previous Year
		01/01/2022 to 06/30/2022	01/01/2021 to 06/30/2021
7.01	Revenue	10,388,334	9,627,425
7.01.01	Goods, Products and Services Sold	8,749,692	7,818,433
7.01.02	Other Revenue	26,342	27,935
7.01.03	Revenue from Construction of Own Assets	2,042,926	2,046,209
7.01.04	Allowance for/Reversal of Doubtful Accounts	-430,626	-265,152
7.02	Inputs Acquired from Third Parties	-4,598,509	-4,335,152
7.02.01	Costs of Goods, Products and Services Sold	-3,891,503	-3,742,958
7.02.02	Materials, Electricity, Outsourced Services, and Others	-688,051	-582,222
7.02.04	Other	-18,955	-9,972
7.03	Gross Value Added	5,789,825	5,292,273
7.04	Retentions	-1,187,911	-1,095,106
7.04.01	Depreciation, Amortization, and Depletion	-1,187,911	-1,095,106
7.05	Net Value Added Produced	4,601,914	4,197,167
7.06	Wealth Received in Transfer	461,580	227,242
7.06.01	Equity Pickup	11,506	12,215
7.06.02	Financial Income	450,074	215,027
7.07	Total Value Added to Distribute	5,063,494	4,424,409
7.08	Value Added Distribution	5,063,494	4,424,409
7.08.01	Personnel	1,281,549	1,167,600
7.08.01.01	Salaries and Wages	921,256	832,169
7.08.01.02	Benefits	286,789	272,709
7.08.01.03	Government Severance Indemnity Fund for Employees (FGTS)	73,504	62,722
7.08.02	Taxes and Contributions	1,678,239	1,543,193
7.08.02.01	Federal	1,564,208	1,425,880
7.08.02.02	State	81,906	85,725
7.08.02.03	Municipal	32,125	31,588
7.08.03	Value Distributed to Providers of Capital	705,709	443,706
7.08.03.01	Interest	693,345	432,564
7.08.03.02	Rentals	12,364	11,142
7.08.04	Value Distributed to Shareholders	1,397,997	1,269,910
7.08.04.03	Retained Earnings/Accumulated Losses for the Period	1,397,997	1,269,910

Highlights

The Company recorded a net income of R$ 422.4 million in 2Q22, compared to the R$ 773.1 million reported in 2Q21, a decrease of R$ 350.7 million (-45.4%).

Adjusted EBITDA totaled R$ 1,509.9 million, up by R$ 56.7 million over the R$ 1,453.2 million reported in 2Q21 (+3.9%).

Revenue from sanitation services

Increase of R$ 570.3 million, impacted by (i) tariff adjustments of 7.0% since May 2021 and 12.8% since May 2022; (ii) 1.8% increase in billed volume; and (iii) higher average tariff due to the increase in the billed volume in the commercial and public categories.

Costs, administrative & selling expenses (excluding construction costs)

Growth of R$ 530.0 million, mainly due to the (i) R$ 119.2 million increase in services; (ii) R$ 108.8 million increase in the allowance for doubtful accounts; (iii) R$ 97.7 million increase with salaries, payroll charges, benefits, and pension plan obligations; and (iv) R$ 60.2 million increase with treatment supplies.

Impacts from the exchange variation

Exchange variation expenses on borrowings and financing increased by R$ 507.1 million, due to the appreciation of the U.S. dollar and the depreciation of the Japanese Yen against the Brazilian real in 2Q22, compared to the depreciation reported in 2Q21 for both currencies, as shown in the table below:

	2Q22	2Q21
Foreign currency debt - R$ million	2,695.1	3,096.2
Foreign currency debt as a percentage of total debt	15.2%	18.8%
U.S. variation in the quarter	10.6%	(12.2%)
Yen variation in the quarter	(1.1%)	(12.6%)

1.	Result for the period

R$ million
			Var.			Var.
	2Q22	2Q21	R$	%	6M22	6M21	R$	%
Revenue from sanitation services	4,451.5	3,881.2	570.3	14.7	8,749.7	7,818.4	931.3	11.9
Construction revenue	1,154.7	1,022.9	131.8	12.9	2,042.9	2,046.2	(3.3)	(0.2)
COFINS and PASEP/TRCF taxes	(340.8)	(308.2)	(32.6)	10.6	(656.8)	(591.3)	(65.5)	11.1
(=) Net operating income	5,265.4	4,595.9	669.5	14.6	10,135.8	9,273.3	862.5	9.3
Costs and expenses	(3,230.1)	(2,700.1)	(530.0)	19.6	(6,107.0)	(5,290.9)	(816.1)	15.4
Construction costs	(1,129.5)	(999.9)	(129.6)	13.0	(1,997.0)	(2,000.2)	3.2	(0.2)
Equity pickup	5.9	4.2	1.7	40.5	11.5	12.2	(0.7)	(5.7)
Other operating income (expenses), net	2.4	(0.9)	3.3	(366.7)	4.9	9.8	(4.9)	(50.0)
(=) Earnings before financial result, income tax, and social contribution	914.1	899.2	14.9	1.7	2,048.2	2,004.2	44.0	2.2
Financial result	(324.4)	248.8	(573.2)	(230.4)	15.7	(105.6)	121.3	(114.9)
(=) Earnings before income tax and social contribution	589.7	1,148.0	(558.3)	(48.6)	2,063.9	1,898.6	165.3	8.7
Income tax and social contribution	(167.3)	(374.9)	207.6	(55.4)	(665.9)	(628.7)	(37.2)	5.9
(=) Net income	422.4	773.1	(350.7)	(45.4)	1,398.0	1,269.9	128.1	10.1
Earnings per share (R$)*	0.62	1.13			2.05	1.86

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

Adjusted EBITDA Reconciliation (Non-accounting measures)

R$ million
			Var.			Var.
	2Q22	2Q21	R$	%	6M22	6M21	R$	%
Net income	422.4	773.1	(350.7)	(45.4)	1,398.0	1,269.9	128.1	10.1
Income tax and social contribution	167.3	374.9	(207.6)	(55.4)	665.9	628.7	37.2	5.9
Financial result	324.4	(248.8)	573.2	(230.4)	(15.7)	105.6	(121.3)	(114.9)
Other operating income (expenses), net	(2.4)	0.9	(3.3)	(366.7)	(4.9)	(9.8)	4.9	(50.0)
(=) Adjusted EBIT*	911.7	900.1	11.6	1.3	2,043.3	1,994.4	48.9	2.5
Depreciation and amortization	598.2	553.1	45.1	8.2	1,187.9	1,095.0	92.9	8.5
(=) Adjusted EBITDA**	1,509.9	1,453.2	56.7	3.9	3,231.2	3,089.4	141.8	4.6
(%) Adjusted EBITDA margin	28.7	31.6			31.9	33.3

* 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$ 5,265.4 million in 2Q22, up by 14.6% over 2Q21.

Costs and expenses, which consider construction costs, totaled R$ 4,359.6 million, up by 17.8% over 2Q21.

Adjusted EBIT, of R$ 911.7 million, increased by 1.3% over the R$ 900.1 million recorded in 2Q21.

Adjusted EBITDA, of R$ 1,509.9 million, increased by 3.9% over the R$ 1,453.2 million recorded in 2Q21 (R$ 6,514.4 million in the last 12 months).

Adjusted EBITDA margin was 28.7% in 2Q22, compared to the 31.6% reported in 2Q21 (32.0% in the last 12 months).

Excluding the effects of revenue and construction costs, the adjusted EBITDA margin reached 36.1% in 2Q22, compared to 40.0% in 2Q21 (40.2% in the last 12 months).

The Company recorded a net income of R$ 422.4 million in 2Q21, compared to R$ 773.1 million in 2Q21.

2.	Revenue from sanitation services

The gross operating revenue from sanitation services, which excludes construction revenue, totaled R$ 4,451.5 million in 2Q22, an increase of R$ 570.3 million (+14.7%) over the R$ 3,881.2 million recorded in 2Q21.

The main factors that led to the increase were:

·Average tariff adjustment of 7.0% since May 2021;

·Average tariff adjustment of 12.8% since May 2022;

·Higher average tariff due to the increase in the billed volume in the commercial and public categories; and

·Increase of 1.8% in the total billed volume.

3.	Construction revenue

Construction revenue increased by R$ 131.8 million (+12.9%), due to higher investments made.

4.	Billed volume

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

WATER AND SEWAGE BILLED VOLUME(1) PER CUSTOMER CATEGORY - million m3
	Water	Sewage	Water + Sewage
Category	2Q22	2Q21	Var. %	2Q22	2Q21	Var. %	2Q22	2Q21	Var. %
Residential	465.9	468.4	(0.5)	406.7	406.5	-	872.6	874.9	(0.3)
Commercial	46.7	40.0	16.8	44.8	38.0	17.9	91.5	78.0	17.3
Industrial	8.7	8.6	1.2	9.5	9.3	2.2	18.2	17.9	1.7
Public	11.7	8.3	41.0	10.1	7.4	36.5	21.8	15.7	38.9
Total retail	533.0	525.3	1.5	471.1	461.2	2.1	1,004.1	986.5	1.8
Wholesale (3)	12.1	12.5	(3.2)	4.1	3.7	10.8	16.2	16.2	-
Overall Total	545.1	537.8	1.4	475.2	464.9	2.2	1,020.3	1,002.7	1.8
	Water	Sewage	Water + Sewage
Category	1H22	1H21	Var. %	1H22	1H21	Var. %	1H22	1H21	Var. %
Residential	935.2	946.7	(1.2)	813.4	817.5	(0.5)	1,748.6	1,764.2	(0.9)
Commercial	91.1	81.5	11.8	87.7	77.0	13.9	178.8	158.5	12.8
Industrial	17.0	17.1	(0.6)	18.7	17.9	4.5	35.7	35.0	2.0
Public	21.3	17.2	23.8	18.7	15.1	23.8	40.0	32.3	23.8
Total retail	1,064.6	1,062.5	0.2	938.5	927.5	1.2	2,003.1	1,990.0	0.7
Wholesale (3)	24.2	25.7	(5.8)	9.9	7.6	30.3	34.1	33.3	2.4
Overall Total	1,088.8	1,088.2	0.1	948.4	935.1	1.4	2,037.2	2,023.3	0.7
WATER AND SEWAGE BILLED VOLUME(1) PER REGION - million m3
	Water	Sewage	Water + Sewage
Region	2Q22	2Q21	Var. %	2Q22	2Q21	Var. %	2Q22	2Q21	Var. %
Metropolitan	359.3	362.9	(1.0)	316.8	318.5	(0.5)	676.1	681.4	(0.8)
Regional (2)	173.7	162.4	7.0	154.3	142.7	8.1	328.0	305.1	7.5
Total retail	533.0	525.3	1.5	471.1	461.2	2.1	1,004.1	986.5	1.8
Wholesale (3)	12.1	12.5	(3.2)	4.1	3.7	10.8	16.2	16.2	-
Overall Total	545.1	537.8	1.4	475.2	464.9	2.2	1,020.3	1,002.7	1.8
	Water	Sewage	Water + Sewage
Region	1H22	1H21	Var. %	1H22	1H21	Var. %	1H22	1H21	Var. %
Metropolitan	713.7	722.4	(1.2)	627.9	629.8	(0.3)	1,341.6	1,352.2	(0.8)
Regional (2)	350.9	340.1	3.2	310.6	297.7	4.3	661.5	637.8	3.7
Total retail	1,064.6	1,062.5	0.2	938.5	927.5	1.2	2,003.1	1,990.0	0.7
Wholesale (3)	24.2	25.7	(5.8)	9.9	7.6	30.3	34.1	33.3	2.4
Overall Total	1,088.8	1,088.2	0.1	948.4	935.1	1.4	2,037.2	2,023.3	0.7

(1) Unaudited by external auditors

(2) Including coastal and interior regions

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

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

Costs, administrative and selling expenses, and construction costs increased by R$ 659.6 million in 2Q22 (+17.8%). Excluding construction costs, the increase was R$ 530.0 million (+19.6%).

Costs, administrative and selling expenses, and construction costs as a percentage of net revenue were 82.8% in 2Q22, compared to 80.5% in 2Q21.

R$ million
			Var.			Var.
	2Q22	2Q21	R$	%	6M22	6M21	R$	%
Salaries, payroll charges and benefits, and Pension plan obligations	776.0	678.3	97.7	14.4	1,444.2	1,299.8	144.4	11.1
General supplies	109.5	78.0	31.5	40.4	181.4	146.3	35.1	24.0
Treatment supplies	142.5	82.3	60.2	73.1	289.8	181.3	108.5	59.8
Services	599.4	480.2	119.2	24.8	1,111.4	984.1	127.3	12.9
Electricity	376.1	340.7	35.4	10.4	788.0	699.6	88.4	12.6
General expenses	356.7	325.7	31.0	9.5	635.8	584.6	51.2	8.8
Tax expenses	18.8	17.7	1.1	6.2	37.9	35.0	2.9	8.3
Subtotal	2,379.0	2,002.9	376.1	18.8	4,488.5	3,930.7	557.8	14.2
Depreciation and amortization	598.2	553.1	45.1	8.2	1,187.9	1,095.0	92.9	8.5
Allowance for doubtful accounts	252.9	144.1	108.8	75.5	430.6	265.3	165.3	62.3
Subtotal	851.1	697.2	153.9	22.1	1,618.5	1,360.3	258.2	19.0
Costs, administrative & selling expenses	3,230.1	2,700.1	530.0	19.6	6,107.0	5,291.0	816.0	15.4
Construction costs	1,129.5	999.9	129.6	13.0	1,997.0	2,000.2	(3.2)	(0.2)
Costs, adm & selling expenses, and construction costs	4,359.6	3,700.0	659.6	17.8	8,104.0	7,291.2	812.8	11.1
% of net revenue	82.8	80.5			80.0	78.6

Salaries, payroll charges and benefits, and Pension plan obligations

Increase of R$ 97.7 million (+14.4%) in 2Q22, mainly due to the application of 1% referring to the Career and Salary Plan in February 2022, and an average salary adjustment of 12.9% in May 2022, partially offset by the 2.3% decline in the average number of employees.

General supplies

Increase of R$ 31.5 million (+ 40.4%), mainly the:

·R$ 9.5 million for the maintenance of water and sewage systems, connections, and networks.

·R$ 8.2 million with fuel and lubricants, due to higher prices and an increased volume of field works in 2Q22 because of the cooling down of the COVID-19 pandemic; and

·R$ 3.2 million with conservation of buildings and facilities.

Treatment supplies

Increase of R$ 60.2 million (+73.1%), mainly due to higher product prices and higher use of algaecides, coagulants, and disinfectants in several Water Treatment Stations to maintain the quality of raw water.

Services

Service expenses totaled R$ 599.4 million, an increase of R$ 119.2 million (+24.8%) over the R$ 480.2 million recorded in 2Q21. The main increases were:

·R$ 18.8 million for the maintenance of water and sewage systems;

·R$ 18.4 million paid to technical services, especially computer technical support;

·R$ 17.8 million with paving and replacing of sidewalks;

·R$ 15.1 million with surveillance;

·R$ 13.3 million with customer service channels; and

·R$ 5.8 million with conservation of buildings and facilities.

Electricity

Electricity expenses totaled R$ 376.1 million in 2Q22, an increase of R$ 35.4 million (+10.4%) over the R$ 340.7 million recorded in 2Q21. Of the total, the Free Market Tariffs (ACL) accounted for 49.3% of total expenses in 2Q22 (51.0% in 2Q21) while the Regulated Market Tariffs (ACR) accounted for 50.7% (49.0% in 2Q21).

The main factors that contributed to this variation were:

·Average increase of 6.6% in ACL prices (includes Grid Market Tariffs - TUSD), with a 3.7% decrease in consumption; and

·Average increase of 28.8% in ACR tariffs, with a 20.0% decrease in consumption.

General expenses

Increase of R$ 31.0 million (+9.5%), totaling R$ 356.7 million in 2Q22, compared to the R$ 325.7 million recorded in 2Q21, mainly from the higher provision for transfer to the Municipal Funds for Environmental Sanitation and Infrastructure, of R$ 23.7 million.

Expenses with municipal transfers totaled R$ 172.2 million in 2Q22, compared to the R$ 148.6 million reported in 2Q21 (+15.9%), mainly due to higher operating revenue reported in 2Q22.

Depreciation and amortization

The R$ 45.1 million increase (+8.2%) was due to the beginning of operations of intangible assets, totaling R$ 3.7 billion.

Allowance for doubtful accounts

Increase of R$ 108.8 million, from R$ 144.1 million in 2Q21 to R$ 252.9 million in 2Q22, due to higher provisioning arising from the increase in default in 2Q22.

6.	Financial result

				R$ million
			Var.
	2Q22	2Q21	R$	%
Financial expenses, net of revenue	(157.2)	(134.9)	(22.3)	16.5
Monetary and exchange variations, net	(167.2)	383.7	(550.9)	(143.6)
Financial Result	(324.4)	248.8	(573.2)	(230.4)

Financial expenses, net of revenue

				R$ million
			Var.
	2Q22	2Q21	R$	%
Financial expenses
Interest and charges on domestic borrowings and financing	(215.8)	(106.6)	(109.2)	102.4
Interest and charges on international borrowings and financing	(9.8)	(10.4)	0.6	(5.8)
Other financial expenses	(92.7)	(74.8)	(17.9)	23.9
Total financial expenses	(318.3)	(191.8)	(126.5)	66.0
Financial revenue	161.1	56.9	104.2	183.1
Financial expenses, net of revenue	(157.2)	(134.9)	(22.3)	16.5

The main impacts resulted from:

·Increase of R$ 109.2 million in interest and charges on domestic borrowings and financing, mainly due to (i) higher interest on debentures, of R$ 63.8 million, mainly from the proceeds of the 28th, 29th, and 30th issues; and (ii) rise in the average DI rate (from 3.24% in 2Q21 to 12.38% in 2Q22), which impacted interest on several domestic borrowings;

·Increase of R$ 17.9 million in other financial expenses, mostly due to higher recognition of interest on lawsuits in 2Q22; and

·Increase of R$ 104.2 million in financial revenues, mainly on financial investments in 2Q22, as a result of the higher average DI rate.

Monetary and exchange variations, net

				R$ million
			Var.
	2Q22	2Q21	R$	%
Monetary and exchange variations on liabilities
Monetary variations on borrowings and financing	(91.3)	(43.0)	(48.3)	112.3
Exchange variations on borrowings and financing	(64.8)	442.3	(507.1)	(114.7)
Other monetary variations	(80.1)	(52.2)	(27.9)	53.4
Total monetary and exchange variations on liabilities	(236.2)	347.1	(583.3)	(168.0)
Monetary and exchange variations on assets	69.0	36.6	32.4	88.5
Monetary and exchange variations, net	(167.2)	383.7	(550.9)	(143.6)

The effect of net monetary and exchange variations was R$ 550.9 million in 2Q22, higher than in 2Q21, mainly from:

·R$ 48.3 million increase in monetary variations on borrowings and financing, due to the rise in the IPCA consumer price index (from 1.68% in 2Q21 to 2.22% in 2Q22), and the 29th issue debenture;

·R$ 507.1 million increase in exchange variations on borrowings and financing, due to the appreciation of the U.S. dollar and the depreciation of the Yen against the Real in 2Q22 (10.6% and -1.1%, respectively), when compared to the depreciation recorded in both currencies in 2Q21 (-12.2% and -12.6%, respectively);

·R$ 27.9 million increase in other monetary variations, due to (i) higher monetary variation on lawsuits, of R$ 17.7 million; and (ii) higher monetary variation on asset leases (leases), of R$ 8.1 million, due to the rise of IPC in the quarter; and

·Increase of R$ 32.4 million in monetary and exchange variation on assets, mainly due to higher adjustments on installment payment agreements and overdue invoices in 2Q22.

7.	Income tax and social contribution

The R$ 207.6 million decrease in 2Q22 was mainly due to:

·Higher costs and expenses, of R$ 530.0 million;

·Negative exchange variation, of R$ 507.1 million, from a revenue of R$ 442.3 million in 2Q21 to an expense of R$ 64.8 million in 2Q22; and

·Higher net operating revenue, of R$ 669.5 million.

8.	Indicators

a)

Operating

Information (*)	2Q22	2Q21	%
Water connections (1)	9,916	10,174	(2.5)
Sewage connections (1)	8,500	8,608	(1.3)
Population directly served - water (2)	27.8	27.6	0.7
Population directly served - sewage (2)	24.6	24.5	0.4
Number of employees	12,381	12,667	(2.3)

⁽¹⁾ Total connections, active and inactive, in thousand units at the end of the period. Excludes water connections in Mauá.

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

^(*) Unaudited by external auditors

b)

Economic

Economic variables at the end of the quarter (*)	2Q22	2Q21
Amplified Consumer Price Index (1)	2.22	1.68
National Consumer Price Index (1)	2.12	1.95
Consumer Price Index (1)	2.33	1.67
Interbank Deposit Certificate (2)	12.38	3.24
U.S. dollar (3)	5.2380	5.0022
Yen (3)	0.03860	0.04505

⁽¹⁾ Accrued in the quarter (%)

⁽²⁾ Average quarterly rate (%)

⁽³⁾ Ptax sale rate on the last day

^(*) Unaudited by external auditors

9.	Borrowings and financing

On July 15 and 26, 2022​, Sabesp raised R$ 466 million and R$ 760 million referring to the financing contracts executed with IDB Invest and International Finance Corporation - IFC, respectively.

The funds from IDB will be used for expansion works of the sanitation system in the Metropolitan Region of São Paulo to support Sabesp's counterpart in the IDB financing for Stage IV of the Tietê Project. The total financing term is 14.5 years and it has a grace period of one year.

The funds from IFC will be used for works in the New Pinheiros River, a state program to expand sewage collection and treatment in the basin, aiming at the river's clean-up by December 2022, as well as to improve water and sewage systems in coastal municipalities of the São Paulo State. The funds will also be used for the construction of a new water main in the São Lourenço System, in Greater São Paulo. Under the financing, Sabesp, in partnership with IFC, is carrying out the first blue loan transaction in Latin America, which consists of an innovative instrument by which the funds raised are certified and monitored to ensure the sustainable use of resources for economic growth, livelihood improvements, and preservation of the health of oceans and rivers. The total financing term is 10.5 years and it has a grace period of up to one year.

									R$ thousand
DEBT PROFILE
INSTITUTION	2022	2023	2024	2025	2026	2027	2028 onwards	TOTAL	% of total
Local currency
Debentures	59,586	739,210	1,073,347	1,203,403	1,092,291	1,709,755	2,108,794	7,986,386	45
Brazilian Federal Savings Bank	51,260	97,083	96,530	102,565	108,980	115,784	936,957	1,509,159	9
BNDES	105,137	203,541	196,851	176,661	166,842	154,365	282,845	1,286,242	7
IDB 2202	90,674	181,349	181,349	181,349	181,349	181,349	1,438,136	2,435,555	14
IDB INVEST	18,670	37,340	39,550	44,300	106,390	108,728	554,424	909,402	5
Lease (Concession Agreements, Program Contracts, and Contract Asset) (1)	34,693	46,969	13,308	8,360	3,786	619	-	107,735	1
Leases (others) (2)	40,854	43,405	46,111	35,905	31,352	34,406	146,642	378,675	2
Other	2,964	6,228	2,966	2,734	141	-	-	15,033	0
Interest and other charges	393,324	10,037	-	-	-	-	-	403,361	2
Total in local currency	797,162	1,365,162	1,650,012	1,755,277	1,691,131	2,305,006	5,467,798	15,031,548	85
Foreign currency
IDB	26,918	53,837	53,837	60,649	13,624	13,624	207,457	429,946	2
IBRD	15,923	31,845	31,845	31,845	31,845	31,845	204,531	379,679	2
JICA	82,813	165,625	165,625	165,625	165,625	165,625	920,379	1,831,317	10
IDB 1983AB	-	39,910	-	-	-	-	-	39,910	1
Interest and other charges	14,204		-	-	-	-	-	14,204	0
Total in foreign currency	139,858	291,217	251,307	258,119	211,094	211,094	1,332,367	2,695,056	15
TOTAL	937,020	1,656,379	1,901,319	2,013,396	1,902,225	2,516,100	6,800,165	17,726,604	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 2Q22:

	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, healthcare plan, installment payment of tax debts, and installment payment of debts with the electricity supplier.

As of June 30, 2022, the Company had met the requirements of its borrowing and financing agreements.

10.	Investments

Investments totaled R$ 1,240.1 million in 2Q22, presented as additions in the notes to the quarterly information under Contract Asset, Intangible Assets, and Property, Plant and Equipment, of R$ 1,213.1 million, R$ 12.8 million, and R$ 14.2 million, respectively. Cash disbursed in 2Q22 referring to investments, including from previous periods, totaled R$ 857.2 million.

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

R$ million
Investment - April to June/22	Water	Sewage	Total
Metropolitan Region	423.8	480.9	904.7
Regional Systems	164.2	171.2	335.4
Total	588.0	652.1	1,240.1

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, as well as 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 June 30, 2022, the Company operated water and sewage services in 375 municipalities of the São Paulo State, 342 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 40-year term contracts.

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

	June 30, 2022	December 31, 2021	June 30, 2021
Total municipalities that have already signed contracts	342	342	342
Balance - intangible and contract asset	43,250,729	42,260,091	40,935,847
Percentage of intangible and contract asset	93.87%	93.80%	93.82%
Revenue from sanitation services (excluding construction revenue)	8,316,280	15,490,808	7,439,706
Percentage of revenue from sanitation services (excluding construction revenue)	95.05%	95.01%	95.16%
Municipalities with expired contracts:	8	8	8
Balance - intangible and contract asset	216,347	214,329	216,167
Percentage of intangible and contract asset	0.47%	0.48%	0.50%
Revenue from sanitation services (excluding construction revenue)	21,975	41,194	19,556
Percentage of revenue from sanitation services (excluding construction revenue)	0.25%	0.25%	0.25%
Municipalities with concession agreements due by 2030:	25	25	25
Balance - intangible and contract asset	1,105,098	1,127,920	1,148,988
Percentage of intangible and contract asset	2.40%	2.50%	2.63%
Revenue from sanitation services (excluding construction revenue)	346,511	653,408	299,480
Percentage of revenue from sanitation services (excluding construction revenue)	3.96%	4.01%	3.83%
Municipality of São Paulo:
Percentage of intangible and contract asset	43.22%	43.11%	42.30%
Percentage of revenue from sanitation services (excluding construction revenue)	45.21%	44.45%	43.94%

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, and Paulista Geradora de Energia. 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.

Economic instability worsened by COVID-19

Regarding the effects of COVID-19, we emphasize the migration, in 2020, of the billed volume of the public, commercial, and industrial categories that have average tariffs higher than the tariff charged from the residential category, which slightly recovered in 2021 compared to 2020. Moreover, in the second quarter of 2022 compared to the same period in 2021, there has been a recovery in the volume of the commercial, industrial, and public categories, with the volume of the residential category remaining virtually flat.

Expenses with allowance for doubtful accounts are still rising over the same period in 2021, due to the higher delinquency in 2022.

New Legal Sanitation Framework

On July 15, 2020, Federal Law 14,026/2020, known as New Legal Framework for Basic Sanitation, was sanctioned. The new law expands competition in the sector by extinguishing program contracts, encourages the region-wise provision of services to promote economies of scale, and provides for strengthening the service regulation.

Additionally, the New Legal Framework imposes performance goals to reach 99% of the population served with drinking water and 90% with sewage collection and treatment by December 31, 2033, encouraging operators to increase efficiency. The new Law also granted the National Water Agency (ANA) with power to edit reference rules to regulate sanitation services, aiming to standardize the operation of the regulatory agencies and minimize regulatory uncertainties, thus creating a more stable and attractive environment for investments in the sector.

On May 31, 2021, Federal Decree 10,710 was published, regulating article 10-B of Law 11,445/2007, establishing the methodology for proving the economic and financial capacity of public providers of drinking water supply and sewage services, to make it possible the compliance with the universalization goals by 2033. Said Decree determines economic and financial evaluation metrics on service providers to prove their ability to make investments within the intended deadlines and several conditions for current contracts to be considered regular. Any adjustments to them should be made by March 31, 2022, in line with paragraph 1 of article 11-B of the New Legal Framework.

According to the aforementioned Decree, as of December 30, 2021, the Company presented a requirement to the São Paulo State Utility Services Regulatory Agency (ARESESP) containing documents that prove its capacity to maintain the provision of services in the operated area by meeting the goals of universal water and sewage collection and treatment by 2033, defined by the New Legal Framework, attested and certified by the independent auditors. As of March 28, 2022, ARSESP recognized the Company's economic-financial capacity, under the applicable legislation.

In this new context, the Company understands that it is important to highlight that: i) it has 366 regular contracts that have already been adapted to the provisions of the New Legal Framework, which ensure 99.5% of revenue; ii) it has access to public capital and the private capital market, due to its sound reputation, favoring the maintenance and/or expansion of its operating base and compliance with the universalization of services within the deadline established by the new law; and iii) it has high governance level.

Management expects that the financial funds raised with the gradual recovery of the economic activities, improved water security from the works carried out, 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 August 11, 2022.

2	Basis of preparation and presentation of the quarterly information

Presentation of the Quarterly Information

The quarterly information as of June 30, 2022, 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 June 30, 2022, does not include all the notes and reporting required by the annual financial statements, and accordingly, shall be read jointly with the Annual Financial Statements as of December 31, 2021, prepared under the International Financial Reporting Standards - IFRS, issued by the International Accounting Standards Board - IASB, and 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.

3	Summary of significant accounting policies

The accounting policies used in the preparation of the quarterly information as of June 30, 2022, are consistent with those used to prepare the Annual Financial Statements for the year ended December 31, 2021, 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 used derivative instruments in any of the reported periods.

(a)	Market risk

Exchange risk

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 the U.S. dollar 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.

Part of the financial debt, totaling R$ 2,724,742 as of June 30, 2022 (R$ 3,321,489 as of December 31, 2021), is indexed to the U.S. dollar and Yen. The exposure to exchange risk is as follows:

	June 30, 2022	December 31, 2021
	Foreign currency (in thousands)	R$	Foreign currency (in thousands)	R$
Borrowings and financing - US$	167,330	876,475	163,538	912,624
Borrowings and financing - Yen	47,514,591	1,834,063	49,324,813	2,390,774
Interest and charges from borrowings and financing - US$		3,684		4,121
Interest and charges from borrowings and financing - Yen		10,520		13,970
Total exposure		2,724,742		3,321,489
Borrowing cost - US$		(26,939)		(22,486)
Borrowing cost - Yen		(2,747)		(2,850)
Total foreign currency-denominated borrowings (Note 16)		2,695,056		3,296,153

The 18% decrease in the balance of the foreign currency-denominated debt from June 30, 2022, compared to December 31, 2021, was mainly impacted by the depreciations of the US dollar and Yen against the Brazilian real. The table below shows the prices and exchange variations in the period:

	June 30, 2022	December 31, 2021	Var.
US$	R$ 5.2380	R$ 5.5805	-6.1%
Yen	R$ 0.03860	R$ 0.04847	-20.4%

The exchange variation in borrowings and financing fell by R$ 528,639 from January to June 2022 (R$ 302,873 from January to June 2021), which accounted for 88% of the reduction in borrowings and financing. See Note 16(ii). As of June 30, 2022, if the Brazilian real had depreciated or appreciated by 10 percentage points, in addition to the impacts already mentioned above, against the US dollar and Yen with all other variables held constant, the effects on results before taxes on the six-month period ended June 30, 2022, would have been R$ 272,474 (R$ 311,656 for the six-month period ended June 30, 2021), lower or higher.

The probable scenario below presents the effect in 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.

	Probable scenario
	(*)
Net currency exposure as of June 30, 2022 in US$ - Liabilities	167,330
US$ rate as of June 30, 2022	5.2380
Exchange rate estimated according to the scenario	5.1103
Difference between the rates	0.1277
Effect on net financial result R$ - (gain)	21,368
Net currency exposure as of June 30, 2022, in ¥ - Liabilities	47,514,591
Yen rate as of June 30, 2022	0.03860
Exchange rate estimated according to the scenario	0.04138
Difference between the rates	(0.00278)
Effect on the net financial result R$ - (loss)	(132,091)
Total effect on the net financial result in R$ - (loss)	(110,723)
(*) For the probable scenario in U.S. dollars and Yen, the exchange rates estimated for June 30, 2023 were used, according to the projections of LCA Consultores and B3's Benchmark Rate report, of June 30, 2022, respectively.

Public link

Please use the above public link if you want to share this noodl on another website.