Companhia de Saneamento Basico do Estado de Sao Paulo. - ADR Stock

Good morning, and welcome to SABESP's Second Quarter of 2026 Earnings Presentation. With us here today are Carlos Piani, CEO; Daniel Szlak, CFO; and Thiago Levy, Investor Relations. Before we begin, we clarify that the statements made during this presentation will not include projections or estimates of future events. However, they may contain forward-looking statements indicating potential trends and related to SABESP based on the reasonable expectations, beliefs and assumptions of SABESP's management as of today.

These statements involve risks and uncertainties and are based on assumptions and factors such as market, regulatory and economic conditions, which may not materialize in addition to the risk factors disclosed in SABESP's filings with the Brazilian Securities and Exchange Commission, CVM, B3 and on its Investor Relations website. Investors should understand that changes in such factors may lead to outcomes that differ from current trends and undue reliance should be placed on these statements. The full disclaimer will be presented next and must be read carefully by all participants. This presentation is being recorded. [Operator Instructions]

I will now turn the floor over to Daniel Szlak, who will discuss the results. Daniel, you may proceed.

Thanks, operator. Good morning, everyone, and thank you for joining SABESP's Second Quarter 2026 Earnings Call. I'm Daniel Szlak, CFO, and I'll present our operational and financial highlights for the quarter, after which I'll hand over the call over to our CEO, Carlos Piani, to update you on our priorities. We will then open the floor for the Q&A. In Q2 2026, total water production reached 779 million cubic meters, 4.3% lower year-over-year.

As mentioned last quarter, consumption continued to be affected by milder weather conditions compared to the prior year as well as the application of [indiscernible] Agua''s operational rule of the night pressure management implemented for approximately 10 hours per day to enhance the system resilience during Q2. Our active customer base remained stable with 9.5 million water and 8.2 million sewage connections. The slight year-on-year reduction is primarily driven by increased revenue assurance actions and the verticalization of the cities in which we operate. Quarter-over-quarter, we see a 0.2% increase in both water and sewage connections as a result of the Universal Access program.

Turning to Slide 5. Before I begin, I would like to clarify that this quarter, we started to consolidate EMAE's results into our operating figures. Therefore, the figures presented in this slide include EMAE's contribution. Adjusted net revenue grew by 9.4% year-on-year, mainly reflecting the tariff and the expansion of customers. Adjusted EBITDA was BRL 3.5 billion, down 2.3% compared to the same period of last year with an EBITDA margin of 58.3%.

This performance reflects investments associated with our customer service initiatives, as well as inflationary pressures, which I'll explore more in the next slides. Adjusted net income totaled BRL 1.2 billion, a decrease versus the prior year reflects the higher net debt to fund our Universal Access program. Cash conversion and generation remained solid with operating cash flow reaching nearly BRL 3 billion in the quarter and a solid conversion above 75%.

Moving to Slide 6. And before diving deeper into the quarter, I'll briefly go through the reconciliation between reported and adjusted figures. From this point onwards, I will focus on the adjusted figures, excluding the effects that do not reflect SABESP's operating performance. As in previous quarters, we exclude construction revenue and financial asset bifurcation effects, which are merely accounting in nature.

Keep in mind that while SABESP does not record a margin for construction, EMAE still does. We also exclude BRL 68 million mainly related to the Jaguaré incident and EMAE figures. Given EMAE is much smaller than SABESP, we will exclude its figures from the next pages so that we can properly discuss the core business performance. However, investors can find more information on EMAE's performance in the appendix in our filings at CVM and on EMAE's own filings, given it is also a publicly traded company.

Turning to Slide 7 and exploring our revenue drivers. Adjusted figures increased 6.7% year-on-year. The quarter was also affected by 2 additional factors: milder weather conditions with average temperatures about 1.1% lower year-on-year and our ERP implementation. Excluding these effects, underlying revenue would have grown by about 10%. Price contributed 8.7%, driven by January 2026 tariff cycle, partially offset by reforms, which will be subsequently adjusted in 2027's tariff review.

Second, volume contributed 1.1%, explained by a 1.0% contribution from new units and 0.6% from metering upgrades. These were partially offset by the negative weather impact on consumption. Finally, mix was a negative 3.1% effect, which is split into 2.3% from category mix, mainly reflecting the expansion of low-income tariffs versus the year ago, and a 0.6% impact from band mix driven by weather.

On Slide 8, we provide additional color on revenue performance. Roughly 2 million units now have access to discounted rates, representing an increase of about 15% year-on-year and almost doubling what we had before the privatization. This reflects our commitment to expanding access to sanitation services while supporting vulnerable populations. An interesting fact is that the new social tariff program has driven average price to consumer to be flat versus where it was before the privatization.

For SABESP shareholders, these discounts are contemplated within the regulatory framework and are expected to be addressed in future tariff reviews. We also experienced a temporary slowdown in metering replacement activity due to import constraints, which affected the pace of upgrades in the quarter.

Moving to EBITDA on Slide 9. Adjusted EBITDA declined 3.2% year-on-year to BRL 3.5 billion. Starting from the top, the positive contribution from net revenue was more than offset by a strong lapping in cost versus a year ago. G&A saw an impact as Q2 '25 benefited from BRL 230 million in reversals of legal accruals. Service costs were driven by investments in customer experience initiatives, including the expansion of service channels with agencies and Poupatempo's reinforcement of field operations and strengthening of customer service, expanding the call center and changing its provider.

It also includes higher customer communication and marketing outreach efforts as part of our commercial plan. We also saw inflationary pressures associated with the geopolitical environment for about BRL 28 million in the quarter, affecting mainly chemicals. We also wanted to share with investors a perspective of where we see the underlying EBITDA for the quarter, excluding the gains from 2025 legal victories, ERP timing effects, customer experience and extraordinary inflation, underlying EBITDA would have grown close to 20% year-over-year in the quarter.

Deep diving into costs on Slide 10. Personnel expenses remained controlled, increasing 1% year-on-year despite a 4.4% wage adjustment behind inflation. This was largely offset by the workforce optimization initiatives implemented over the last quarters with the voluntary dismissal plans. Power costs increased 2.2%, mainly due to transmission and sector charges, including the new one from Angra. However, migration to the free market helped mitigate part of these pressures with 88% of total consumption now sourced through the free market.

Moving to the next slide. Reported net income reached BRL 1.5 billion in the quarter. The main driver behind the year-on-year decline was the increase in financial reflecting a higher average net debt balance for the quarter. The increase in interest expense is consistent with the financing needs of our accelerated investment program. Depreciation and amortization expenses also increased, reflecting the expansion of our asset base, which grew from approximately BRL 55 billion to BRL 70 billion year-on-year. These effects were partially offset by a lower effective tax rate, which declined from 34% to 29%, driven by interest on capital paid in April.

Moving to Slides 12 and 13, we will update you on our CapEx. Investment execution remains one of the highlights of our transformation and continues to demonstrate our ability to bring definitive solutions to historical issues. CapEx totaled BRL 7.5 billion year-to-date, an increase of roughly 16% versus the year ago. We also ended the quarter with more than BRL 40 billion in contracted backlog through 2029, providing strong momentum for future execution. We would like to remind our investors of the historical seasonality of our CapEx, which is usually higher in the second half of the year.

U-Factor targets continue to evolve at a fast pace. As of July, we virtually met water targets for the year, and our sewage collection and treatment targets have reached 90% and 82%, respectively, giving us a good runway for this year and the next one. Physical evolution remains strong across our key programs. We delivered 2 new sewage treatment Caieiras and Água Vermelha, which together add 0.4 cubic meters per second of treatment capacity. 127,000 additional people now have access to treated sewage in their households. In the countryside, Phase 1 continues to advance with 11 projects in execution, representing BRL 5.1 billion in investments. The next phases continue to advance as expected.

Turning to Slide 14. Our balance sheet remains strong and well positioned to support the investment cycle. Gross debt totaled BRL 52 billion, while net debt stood at BRL 34 billion at the end of the quarter. It is worth highlighting that 54% of our debt is now covenant free. And once we reach our capital target for the year, we will have 2/3 of our debt with no financial covenants. Our average cost of debt remains close to CDI with a 6.1-year weighted average maturity.

In addition, 64% of our debt matures from 2031 onwards reflecting the long-term profile of our financing structure. We also ended the quarter with BRL 17.4 billion in cash, which covers more than 4 years of amortization and provides substantial liquidity and flexibility to continue executing our investment plan.

Finally, on Slide 15, our net debt closed at 2.5x EBITDA, a level we deem appropriate for a company executing one of the largest infrastructure investment programs in Brazil. Return metrics also showed resilience even in a higher for longer interest rate scenario. ROIC was 10% and ROE was 17%, reflecting the strength of the business as we continue investing for future growth.

With that, I will now hand over the call to our CEO, Carlos Piani, to discuss our priorities in greater detail.

Thanks, Daniel. Good morning, everyone. Before going to the operational highlights, I'd like to revisit what we call SABESP's culture on a page. This is the framework that has guided our transformation over the past 2 years. It brings together our purpose, our long-term dream, the strategic paths we need to execute to get there and importantly, our values, which define how we want to get there.

As we completed 2 years since privatization in July, I think it's useful to look at how far we have come and equally important, where we still need to improve. We have made significant progress across several of our strategic paths. We have accelerated universalization and strengthened water and sewage security, resilience and quality through both organic and inorganic investments. We have advanced innovation and digital transformation, made important progress in business efficiency and continue investing in people development.

But transformation at this scale is a journey, and there are areas where we still have significant work ahead of us, customer satisfaction being one of them. So this quarter, I would like to focus on 3 of our corporate values that are particularly relevant to our equity story today, deliver results with purpose, be guided by ethics and safety and put customer first.

Let me start with delivering results with purpose. For us, this means delivering exceptional results while creating sustainable value for all our stakeholders. Sustainability is, therefore, not something separate from our strategy. It is embedded in the way we operate and allocate capital. This quarter, we received an upgrade in our MSCI ESG rating to BBB, recognizing the progress we're making in integrating sustainability into our strategy and operations.

This is particularly relevant for SABESP because many of the most important ESG issues are also fundamental business issue for us, managing water resources, increasing system resilience, adapting to climate change, expanding sanitation coverage and providing reliable and affordable essential services. We see this upgrade as recognition of the progress already made, but also as an indication of where we can continue improving.

Now let me move to another value that is fundamental to our transformation, be guided by ethics and safety. The scale of our operations has changed dramatically over the past 2 years. 2 years ago, SABESP had a workforce of approximately 30,000 people, including our own employees and third-party workers and around 200 construction sites in execution. Today, our workforce is approximately 55,000 people, an increase of roughly 83%, and we have around 1,500 construction sites underway, 7.5x the level of 2 years ago.

This extraordinary increase in activity is what allow us to accelerate universalization, but it also materially increases the complexity of our operations and our exposure to safety risks. Although our lost time injury frequency rate has declined year-over-year, recent incidents made it clear to us that we needed to go further. We, therefore, conducted a comprehensive review of our safety procedures and decided to raise our standards beyond Brazilian technical requirements.

As you can see on the slide, we expanded the Attention Zone around underground infrastructure from 1 meter to 3 meters, strengthened verification procedures from natural gas and other underground infrastructure and made ground penetration radar mandatory throughout the Attention Zone. We have also tripled the number of field inspectors, reinforced supervision based on project risk and complexity and established mandatory training, qualification and certification requirements for both SABESP and third-party employees.

At the same time, we are increasingly using technology, including cameras and artificial intelligence to identify underground risks and strengthen field monitoring. And finally, we created an operational safety group reporting directly to me, reinforcing accountability and ensuring that safety has the appropriate visibility throughout the organization. The message here is straightforward. The acceleration of our investment program cannot come at the expense of safety. As our construction program grows, our safety standards, controls and capabilities must grow with it.

Let me now turn to the third value I want to highlight today, put customers first. Over the past 2 years, the transformation of SABESP has accelerated significantly across virtually every dimension of the company, but that transformation has also generated incremental demand across our customer channels. More construction, more connections, changes in our systems and processes and a much greater pace of activity inevitably create more interactions with our customers. We recognize that our customer-facing infrastructure needed to evolve at the same speed as the rest of SABESP.

So in the second quarter, we decided to accelerate both OpEx and CapEx investments across our entire customer service platform. Our commercial plan is organized around 3 priorities. First, strengthening our customer service infrastructure and capabilities. We created a dedicated customer experience executive team, added approximately 200 FTEs, including internal and outsourced personnel, expanded our physical presence with 12 new stores, 34 store retrofits and 20 new Poupatempo service centers, and strengthened our call center with a new provider, enhanced capabilities and 120 additional service positions.

Second, redesigning the customer journey and improving every point of interaction with SABESP with particular attention to our low-income customers. Since privatization, the number of customers with access to discounted tariffs has nearly doubled from approximately 1 million to almost 2 million households with an average discount of approximately 66% compared with the standard residential tariff. For us, universalization is not only about connecting households to water and sewage infrastructure. It is also about making those services accessible, affordable and easier to navigate.

And third, significantly increasing communication with our customers. We're transforming SABESP at an unprecedented speed, but the benefits of that transformation need to be understood and experienced by our customers. That required us to communicate more frequently and more proactively about planned maintenance, construction, water conservation, service changes and the improvements we are delivering.

In the second quarter, our proactive customer communications were approximately 2.4x the level of the second quarter of 2025. These initiatives are already producing tangible improvements. Average handling time in June was 87% lower than in December 2025, and complaints across critical channels declined 31% quarter-over-quarter. Altogether, we expect approximately BRL 800 million of spending and investment in commercial initiatives in 2026. As the new operating model becomes fully implemented and reaches maturity, we expect part of the remaining cost base to normalize and the overall structure to become increasingly efficient.

Ultimately, our objective is very clear. We want the customer experience to catch up with the transformation already taking place across the rest of SABESP. Before we move to Q&A, let me leave you with one final thought. 2 years into this transformation, SABESP is a very different company. We're investing and executing at an unprecedented scale, accelerating universalization, strengthening the resilience of our operations and building the capabilities required for the next phase of our journey.

But transformation is not only about doing more, it is about doing it better. That means delivering results with purpose, raising the bar on safety, putting our customer first and continuously improving business efficiency to generate the resources needed to help fund this transformation. We have made significant progress, but we know there's still a lot to do. Our ambition remains unchanged to build the global leader in water and sanitation while creating sustainable long-term value for our shareholders and for society.

With that, we can move to the Q&A.

[Operator Instructions] Our first question comes from Mr. Bruno Amorim from Goldman Sachs.

How much of the higher costs in the second quarter are either transitory or subject to future tariff coverage in your opinion? And just a follow-up to that, can you also better explain the nature of the components of the bridge in the bottom of Slide 9, especially the revenue and timing components, which you exclude from the calculation of the underlying EBITDA?

Bruno, thank you for your question, and this is Daniel. Good morning, everyone, once again. Thinking about -- maybe I'll start from the back. I think it helps explain the earlier part of your question, right? So on Page 9, what we tried to bring was what are the things that we've decided to do, what are the things that are new versus what we've been communicating with the market.

So one of the things that we started to disclose is the effect that weather has in our results. This is a good practice that happens across the globe with our peers. So we started to disclose that as this is very material to the business and something that will oscillate positive or negative depending on the quarter and to bring that sensitivity to the market.

The second part which is still on net revenue, about BRL 60 million of that and combined with the second item on the bridge of timing is related to the SAP go-live. The part that's hitting revenues is mainly due to a higher fiscal fees, a higher sales tax rate based on the go-live of the system because we had fewer invoices coming in where we are able to take credit -- tax credits from them. So we had more accruals to reflect the actual cost of the quarter. And hence, we expect that to transition down in Q3, so we expect to recover that in Q3.

When we look at the timing part of cost, I would say half of that is Q1 expenses that moved to Q2 and the other half are Q3 expenses that moved into Q2. So I'll expect half of that to be recovered over Q2. Thinking about all the other things, and I'll leave the customer experience to the end because that's the part that we want to deep dive a little bit more. But -- we had this year for 1 quarter, oil prices at [ BRL 115, BRL 110 ] that put an additional pressure to our chemical costs. That was about a 20% average increase in cost to our chemicals. There are chemicals that have increased more than that chemicals that didn't increase that are linked to the supply chain that comes all the way from the Middle East.

So in that aspect, we had extraordinary costs. Now our task and challenge is to negotiate that back down to the current levels and to try to bring that back for the second half of the year. We're already making progress to that, but we still have some things to be done. Thinking about the commercial plan, as Piani highlighted in his speech, we expect to spend about BRL 800 million this year in many areas. Some of that we'll see through cost. Some of that we'll see through revenue.

On the revenue front, one thing that we didn't mention here, but we had a BRL 50 million increase in reforms in this quarter, just rounding the numbers. We expect to see that continue. One of the things that we used to do when we think about reforms, we were more reactive than proactive when we saw that there was an increase in consumption volume for a given connection. And what we did was we anticipated the resolution time by being proactive in flagging that to the consumer and treating that.

We've increased that part of the cost also, comes from increasing the number of people that actually do that job and to reduce the friction on the consumer front. So that's about BRL 50 million in the quarter. And we have another BRL 150 million on the cost side that we flagged also on the bridge. That's mainly related to the communication outreach that Piani mentioned, about half of that is related to that.

And the other half is mainly linked to the expansion of customer service agencies such as Poupatempo, increasing to 100 people on the service agencies that actually provide the service to the population and another 120 people, call it, on the call center so that we can store a backlog of tickets that we had that accumulated. As we grew -- what we started noticing that we grew and we started also being more on point on collection. And as we started doing that, we realized that we had to also expand our service capacity to be able to meet the questions or the concerns that the clients had, and we wanted to improve the service.

So that's a little bit of the general picture. Of that general picture, what we expect based on the rules 106 by ARSESP and all the other rules on our contract, we expect that about a little bit more than half of that, to some extent, will either be a pass-through or it will be a -- something that will recover through the histogram in upcoming tariff cycles. When you think about that, a part of the amount that Piani flagged is also in anticipation of the public hearing that closed with regards to discounts to large clients.

So we've already placed a number inside that BRL 800 million, assuming that this comes live very soon to be conservative. And the rest of that, I would say that half of the half, so about 20%, 25% of that we expect to stick and the other half we expect to improve through productivity as we transition more to digital channels rather than physical channels. So this is more or less what we expect going forward and how we see this transitioning. I don't know if I was able to answer everything, Bruno, but of what I remember you asked, I think I addressed it.

[Operator Instructions] Our next question comes from Mr. Arthur Pereira from JPMorgan.

So still on these investments in commercial efforts. You mentioned that out of the BRL 800 million, you should consider OpEx and revenues just to make sure that nothing goes into CapEx. And you mentioned the BRL 150 million in expenses in the second quarter, BRL 50 million in revenues. So the remainder, BRL 600 million, should we consider in the second half of this year? Or was anything already disbursed in the first quarter?

And on the expenses, was this fully booked as third-party expenses also personnel because personnel expenses increased quarter-over-quarter. And maybe just wanted to recap a little bit what you see as underlying. You exclude the BRL 150 million in this quarter on the underlying figure that you presented. So how much of this OpEx on the commercial efforts should we consider as recurring in the upcoming years, thinking about 2027 onwards?

Thank you, Arthur. Thank you. Long question. I'll try to remember everything. I wrote down most of what you said, but let me know if I missed something. Look, thinking about '27 onwards. As I said, I think about 20% to 25% of that is what I expect will stick given to some extent, we'll recover a part -- so let me put it in a different way.

A part of that, which is a majority part of that will stick, but half -- more than half of that will come back through the tariff cycles, which is a part that's linked to revenues and large clients discounts and mandatory communication as we will commission construction work, so these are things that are mandatory by the regulation. So -- and these things will get eventually reimbursed. Another 20% are things that we are increasing cost and that will all stick. And the remainder of that, we expect we'll see in productivity over the next years improving.

So we don't expect that to stick over '27 and so on and so forth. So from an NPV perspective, the only lagging part is going to be the 20% that will stick in terms of cost. I know that's where you're going. In terms of personnel, a small portion of that is in personnel. I don't expect to see a big part of that plan hitting personnel. I wouldn't model that.

My view is that the oscillation that you see in personnel is more linked to timing of benefits and things like that, that we don't even deem worth of calling out. And in terms of the timing of commercial, you're right. We've cycled through BRL 200 million, give or take, of the BRL 800 million that we mentioned. We will see the next BRL 600 million over the next quarters between Q3 and Q4. That's where we expect we will land. Did I miss anything?

I think -- Daniel, I think you got everything. But just let me try to give a 10,000 feet overview. What we're doing, we're taking the customer by the hand instead of letting him complain, we're preempting just any big variations on customer bills and bringing those customers to a conversation, see if there's any -- according to the regulatory framework, any reforms that are available for that increase.

So what happened before was, we were reactive waiting for the client to complaint. Now we proactively -- we're using the rules of the game below our arms and trying to give that benefit to the consumer. That's why -- that's the piece of the commercial investment, in broader sense, that goes through revenues because it's a bill reform, okay? So this is basically an anticipation of something that we are going to be compensated through different tariff revisions moving forward. So just to be clear on that front.

The second piece that I think is worthwhile, we invested a lot much more than I think it's a recurring basis on communications. Besides everything that we're doing that we need to communicate, we're communicating all these changes to the consumer so that he can appreciate and know what are his rights. Of course, this has a bump at the beginning and then this has a reduction. And as -- in general, independent if it has a regulatory recognition or not. And part of these communications are also regulatory compliance that can be compensated for the tariff cycles.

And to be very specific on one of the measures that Daniel made is that we created -- as I mentioned on the opening of the call, we created an additional group that's small. I don't think it's relevant for you guys to model, but we have a dedicated team to improve the experience with the consumers. So yes, there's a pickup increase on personnel, but we don't believe that this is going to change the trajectory that we had before.

Our next question comes from Mr. Francisco Navarrete from Bradesco.

Can you hear me well?

Yes.

I just have 2 questions, if I may. One is, if you could comment about the CapEx level in 2Q '26. I think maybe the pace at which the CapEx showed in 2Q was a little bit below expectations. And if you could talk about that and then tell us what you envision for the CapEx for the full year '26. So that's one question.

And then the second, I know you already explained part of it, but if you could provide more detail on the revenue gap that we are seeing. I think we're estimating something that seems to be a little bit higher than in the first quarter. So if you could help us understand that. I know in the press release, you already mentioned BRL 177 million of mix. But what else should we consider there to close that gap?

Thanks for the question. I'll make a brief introduction, pass to Daniel and maybe I'll come back. But in terms of CapEx, usually, the first quarter is the softest quarter of the year because people are trying to pushing the -- until the end of the fourth quarter, given all the incentives that we have, annual revisions of the regulatory asset base and so forth. So this is -- there's a seasonality, there's a pacing and it's back-ended. This is natural as expected.

The second comment, I think it's worthwhile, the works that we were pursuing at the beginning of this journey, we're less than 2 years in were the projects that were closest to us, basically here in the north region of the metropolitan area of Sao Paulo. There were known and so forth. The change -- why are we confident that we're going to pick up and we're going to pick up strongly the pace? Because as I think we highlighted in the presentation, Daniel can give a little bit more color. We're concluding the hiring of 4 phases. So we highlighted 2, but there's 4 phases of the universalization program for the countryside of Sao Paulo that -- that's where we're going to be measured next year. So we need to pace that -- we need to pick up in 100% of the municipalities of [indiscernible].

So there's a lot of volume of works that are being hired, and this gives us conviction that we're going to aim towards the BRL 20 billion at year-end. Of course, there's a challenge, as always, it's not a piece of cake. But I think we have -- what I can tell you guys is that we have an action plan to get there, and we know how to get there, right? Of course, we need to prove this on a daily basis. But we have the contracts now signed, and we have a plan to get there back ended until the fourth quarter this year.

All right. Just to complement here, going to the CapEx, right? So -- we have about BRL 40 billion of backlog. Last quarter, we also had BRL 40 billion of backlog. So we executed almost BRL 4 billion and continue with BRL 40 billion, which means that we contracted BRL 4 billion through the quarter. We're now in the final stages of contract -- final, but I would say over the next 9 months or so, we'll be contracting another BRL 20 billion, give or take. So that will allow us to continue ramping up the CapEx.

As it stands today, we have about 1,500 different CapEx fronts active. We expect to reach at the end of next year at some point close to that, which is going to be our peak, about 4,000 simultaneous work sites. So that's definitely a big increase. As Piani alluded to, we have a lot of people working around internally and on the contractors front. This number is going to almost double by the end of next year. So we're very well advanced in the new factor targets for this year, right, as you can see from the presentation. And now we're turning our attention a lot to the U-Factor targets for next year. So that's where we are more or less with regards to that number.

In terms of the revenue gap versus the regulatory front. We have basically 3 items that are relevant. The first one is, as you mentioned, is the mix, about [ BRL 877 million ] from social tariffs and from consumption band mix because of the lower temperatures. The second part of that is the reforms that I mentioned. And as you correctly pointed out, about BRL 50 million in the quarter. And then when you look at the remaining BRL 50 million in our view that continues to exist, this is mostly related to large clients.

And basically, it has a BRL 50 million impact on the quarter that's mostly linked to very few clients that still have active contracts of discounts being half of that BRL 50 million. And the other half is another gap that's driven by the injunctions that are still active. Every quarter, we've been reducing that number, but we still have some injunctions that are active that prevent us from charging the full price to some clients, okay? So that's give or take where we see the regulatory gap today.

Our next question comes from Mrs. [indiscernible] from Moneda.

Well, if it's not the case that she doesn't have her mic on, I can read her question here. I think it's directly to Daniel. What percentage of universal coverage have you reached so far? And how many connections remain to be achieved? There are some other questions. How do you plan to finance the CapEx for universal coverage? And what percentage of the total CapEx is expected to be deployed for sewage and for water? How much CapEx is going to be used to improve the network?

Great. Thank you, Sophia, for your question. So when we think about our percentage coverage, this is something that we don't have -- I cannot give you a final number yet because we're still doing the census, right? And this is going to be -- what's going to be used to calculate what is a percentage coverage, and this is going to happen until the end of this year. What I can say today is that from our target that needs to be met by adding a net new number of economies, we've met 105% of the 3-year target for water, 90% of the sewage collection and 82% of the sewage treatment, which means that we're very advanced as we think that we still have 6 months to deliver.

And like I said, our attention is focused right now in contracting what is '27. So as we progress and as we have the result of the census, we'll be able to update everyone as to what's the percent coverage compared to the 99% that we need to reach by 2029, okay? How do we plan to finance the CapEx? We've been funding that mostly through debt, and we'll probably continue to do that over the next year and expected by '28 to start generating enough cash flow to be able to continue funding that with less percentage of debt.

About 2/3 of that CapEx goes into sewage treatment and 1/3 goes into water. That's just how much the split is. And in terms of improvement of the network, we've been doing about 10% of that total CapEx, which is maintenance, network upgrades and so on and so forth. The bulk of the CapEx really goes into expansion and expanding the network and extending the sewage treatment facility capacity so that we can plug more economies into that.

Our next question comes from Fillipe Andrade from Itau BBA.

If you could just please go through the increase on the allowance for doubtful accounts. What explains this increase from 1.4% in the past 3 quarters to the 2.5% figure on the second quarter of '26? And also, if you could just please comment on the unitization pace expected for 2026, if the company sees any changes on what it was expecting before the reduction on CapEx deployment of the second quarter?

Thank you, Fillipe. I'll take the first one. So in terms of allowance for doubtful accounts, I think it's worth rewinding a little bit further the movie. When we came in, the run rate of the allowance for doubtful accounts was about 4% of revenues, which meant that this created a very long backlog of collection that we could act on, and we've acted on that, and we've been able to achieve the lowest historical number, which was 1.4 at the end of Q1 of this year and even, I think, at the end of Q4 last year as well.

So we've reached the historical best, but that was also at the expense of collecting some of the backlog, right? And naturally, as you start working through that, this starts reducing, so that opportunity starts reducing. I think going forward -- and then I'll talk about Q2. But going forward, what we expect is something that will eventually land at something that's similar to other utilities from our benchmark is close to 2, a little bit less, a little bit more, but that's what we expect will be eventually the recurring pattern of the company.

As we upgrade to smart meters, that might be -- might present an opportunity for us to continue improving structurally. So as they become more -- a bigger part of our metering fleet, eventually, this is going to be able to improve. That said, for Q2, historically, Q2 is one of our highest allowance for doubtful accounts quarters from a seasonality perspective, okay?

So that's in the end, a little bit of that. I would look at that more in the first half rather than Q1, Q2, but that's where we see the numbers. In terms of unitization, we don't expect any change to what we've been communicating where we think that about 2/3 of the CapEx of the year usually is able to commission in that year, and 1/3 goes to the work in progress. This is more or less what we continue to expect. We don't see major changes here.

Our next question comes from Andre Sampaio from Santander. Our next question comes from Carolina Carneiro from Safra.

I wanted to go back to CapEx. If you can update us a little bit on the overall CapEx plan regards especially of the potential participation of the projects that are aiming to enhance the water resilience and the security of supply here in Sao Paulo. And also, how has been the conversations or conversations going already with the regulatory agency here in order to recognize that support that, especially noting that we are going to have this year, the application of the methodology to recognize the annual CapEx on tariff. So if you can give us a hint on these specific points would be great.

Thank you, Carolina. given, I think, since August of last year, there was a specific protocol that has been enacted by the state government, which has today biweekly meetings. Previously, it was weekly meetings where all the strategy regarding water scarcity involving all players was decided in that group. That group decided together to anticipate a couple of investments, as I think we mentioned in the past.

I think the major one that we have is it's a connection between Billings and our Alto Tietê watershed. So we can take water from Billings to the water treatment plant at Taiaçupeba, which represents roughly 30% of the water, potable water of the metropolitan region of Sao Paulo. This construction is expected to be concluded by the third quarter of next year, and it's around BRL 1.4 billion. So this has been aligned. Everybody knows. We still don't have clarity about the new methodology, as you mentioned, that had already a public hearing. We expect this to come out to the market probably -- maybe until the end of the third quarter.

But I think what I can tell you is everybody knows that we're doing the best we can to help avoid a tail event, okay? So this -- there's 2 other smaller investments, but I think the major one is the one I just described. Our strategy is to pull forward a couple of investments, but nothing that we can do is going to solve the next 2, 3 months, right? I think the night pressure management is the lever that as a community, we can pull together. But everything that we're doing is aligned, and we expect to be recognized in the tariff -- in the regulatory asset base independent of the methodology that's going to come forward in the next couple of quarters.

Our next question comes from Mr. Andre Sampaio from Santander and I will read it. I want to go back to OpEx, but focus more on the exterritorial long-term view. How the company views the efficiencies agenda moving forward?

Thank you, operator. Thank you, Andre. Look, the efficiency agenda continues to be one of the company's main strategic pillars, right? There are 3 strategic pillars: deliver the universal access, deliver the efficiency to fund the universal access, and then as we progress eventually as we reach good customer satisfaction, good service levels and so on and so forth, dream a little bit beyond our borders. That's basically our strategy in a nutshell, right?

We already achieved very important milestones. We started with, what I would say, maybe the low-hanging fruits and captured a lot of that. There's still some remaining opportunities on that front, but I think we've done a lot in that first wave. What I expect now is that we enter a different phase that comes from the top and from the bottom. On the top, we have important initiatives -- strategic initiatives like the integrated operations center, like the metering upgrade for smart meters, like the biogas projects, all the software upgrades that we're doing that will allow us in the future to start using artificial intelligence even more to gain productivity.

So all of these things are top-of-the-house initiatives that we push here from the center. But another thing that's important, as Piani started talking about our values is the culture, the culture of treating the company as your own, right, and making the right decisions on the day-to-day and really being frugal on the day-to-day of the company so that this provide a cumulative effect on savings and a compounding effect.

So I think what we'll see is from the top, very large initiatives with capital deployment and investment that has a J-curve nature. And from the bottom, the cultural change and how this evolves on the day-to-day and at the edge of the operation in the day-to-day. So that's more or less what I see for the future.

Our next question comes from Mr. Henrique Simoes from UBS.

I had a follow-up first on Bruno's question regarding the timing effect on revenues. I had in my mind that in the first quarter, you had 2 days of revenues that weren't billed due to the migration of the ERP and that you were -- I was expecting a reversal of that, that we should exclude days of revenues from this quarter, but you had a positive effect again on the timing.

I'm just curious if those are separate effects, and we should -- it would be fair to still make that adjustment to the revenues. And the second one was on the costs on the quality of service and communication, if that should be the new recurring level? Or is that temporary for this year and then we should go back to normal levels next year?

Thank you, Henrique. Thinking about -- taking your first question first. On SAP, when we went live with SAP, you saw a lower volume, but we also did an accrual for unbilled revenues. So from a revenue perspective, you don't see the impact in Q1 from the SAP go-live. On Q2, you'll see more volume, but the reversal of that accrual for revenue, so -- for unbilled revenue. So net revenue didn't change when you think about that by component from the SAP go-live.

What we are calling out as a positive carryover for Q3 from the SAP go-live versus Q2 is linked to the invoice entry that was delayed because of some contracts that we were not able to bind correctly through that phase. And as the invoices come in, in Q3, we are naturally able to take more tax credits on the sales tax whereas when we do the accruals to keep the cost in line with what we know the cost is, we're not able to take sales tax credits for that. So that's the difference between Q2 and Q3 that we called now in Q2.

Thinking about cost, I think overall, our efficiency agenda continues, right? And we will continue to pursue that. We saw very good results on the migration, for example, of power. We continue to carry over positive effects from the voluntary dismissal plans in terms of cost. So all of that is still continuing, and we see that momentum. What we did is, we selectively decided to invest in the commercial plan so that we want to explore more our value of putting the consumer first. And on the chemical side, we're fighting now to reduce those costs back to where they were before that oil increase. But that's it.

Our next question comes from [indiscernible] from Goldman Sachs, and I will read it. Provide an update on the company's funding strategy, including expected annual debt raising requirements over the next few years.

Thank you, [indiscernible], for your question. Thank you, operator, for reading. In terms of funding, right, we've anticipated our funding for the year of 2026 and between January and February, we raised about BRL 14 billion, 1-4. And by the end of Q3, we'll probably have met all our funding targets for the year. And that will put us in a position where we'll probably have more than 60% of our debt with no financial covenants and with a longer maturity and a more structured pace.

When we look at the next years, naturally, those funding needs, they will start declining as the cash flow of the company also starts picking up. But naturally, the year of '25 and '26 were the largest funding needs in our view. So that's what we can say. In terms of actual figures for debt raising requirements, all the sell-side models, they're fairly well designed, and they can provide some good clarity on that as we don't disclose guidance.

Our next question comes from Mr. Raul Cavendish from XP.

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

I'd like to thank everyone for participating in the call today and for the continued support, and hope to see you all on the next call. Have you all a nice day. Thank you very much. Bye-bye.

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

Good morning, and welcome to SABESP's Fourth Quarter of 2026 Earnings Presentation. With us here today are Carlos Piani, CEO; Daniel Szlak, CFO; and Thiago Levi, Investor Relations. Before we begin, we clarify that the statements made during this presentation will not include projections or estimates of future events. However, they may contain forward-looking statements indicating potential trends related to SABESP based on reasonable expectations, beliefs and assumptions of SABESP's management as of today.

These statements involve risks and uncertainties and are based on assumptions and factors such as market, regulatory and economic conditions, which may not materialize in addition to the risk factors disclosed in SABESP's filings with the Brazilian Securities and Exchange Commission, B3 and on its Investor Relations website. Investors should understand that change in such factors may lead to outcomes that differ from current trends and that undue reliance should not be placed on these statements. The full disclaimer will be presented next and must be read carefully by all participants. This presentation is being recorded. [Operator Instructions].

I will now turn the floor over to Daniel Szlak, who will discuss the results. Daniel, you may proceed.

Thanks, operator. Good morning, everyone, and thank you for joining us for SABESP's First Quarter 2026 Earnings Call. I'm Daniel Szlak, CFO, and I'll present our operational and financial highlights for the quarter, after which, I'll hand the call over to our CEO, Carlos Piani, to update you on our progress. We will then open the floor for the Q&A.

Before I begin, I would also like to clarify that all the numbers in this presentation are SABESP only and do not include MI's figures. For this first quarter, we have only consolidated the balance sheet. In the first quarter of 2026, total water production reached 778 million cubic meters, 4.6% lower versus a year ago. This decline reflects a milder summer with average temperatures 3.3 degrees Celsius lower than last year as well as the application of SCP Agua's operational rule of benight pressure management implemented for approximately 10 hours per day to enhance the system resilience.

Our active customer base remains stable with about 9.5 million water and 8.2 million sewage connections. The slight year-on-year reduction is primarily driven by increased revenue assurance actions and the verticalization of the cities in which we operate. Excluding the impact of such actions, water connection would have remained flat year-over-year, while sewage active connections would have increased by approximately 0.2%.

We continue to prioritize service quality and operational reliability for the nearly 30 million customers, ensuring consistent water supply and sewage services, even amid varying weather conditions and operational challenges.

Turning to our financial performance. Adjusted net revenue for the first quarter of 2026 was BRL 6 billion, an increase of 11% year-on-year. Adjusted EBITDA was BRL 3.8 billion, up 26% versus the year ago, reaching 62.9% margin, a significant expansion from where we were a year ago. This higher margin illustrates the impact of our continued efficiency efforts and disciplined cost control to free up resources for our CapEx plan.

Adjusted net income was BRL 1.5 billion, growing 32% year-over-year, supported by improved operating results and lower spreads in our debt stack. Before we deep dive into the operating performance, let me briefly walk you through the reconciliation between reported and adjusted figures, same as we did in previous quarters.

As usual, we exclude construction revenues for which we don't book any margin and the financial assets, which are merely accounting requirements and do not reflect in our view, the underlying operations of the business. In addition, during the quarter, we incurred BRL 16 million of one-off M&A expenses.

Adjusted net revenue grew 11% year-on-year in Q1, driven by 3 main factors. First, price contributed 12%. This reflects the last tariff increase implemented in January with a 9.1% phasing from last year's bills invoiced in 2026. It also reflects an additional 2.8% gain from commercial initiatives, particularly the termination of large client contracts.

Second, volume was up 2.4%. While the expansion of the customer base contributed 2.9%, this was partially offset by temperature effects that drove consumption per capita down 0.6%.

Finally, mix reduced revenue by 3.4%, reflecting the expansion of subsidized tariff programs year-over-year. These programs now benefit more than 2 million connections and remain a key mechanism to ensure access to basic sanitation services at affordable prices for underprivileged communities. While this affects revenue mix in the short term, it is fully aligned with our social mandate and is covered within the regulatory framework.

On the next slide, we deep dive into some of the aspects supporting the revenue performance. The price index, excluding mix effects, remained stable with a 9.1% increase driven by the January tariff adjustment. On the social front, the number of connections benefiting from subsidized tariffs surpassed 2 million. While this was virtually stable quarter-on-quarter, it represents a 23% increase year-over-year. This expansion reinforces SABESP's role in promoting social inclusion while continuing to broaden service coverage in a financially sustainable manner. Moving to EBITDA.

Adjusted figures grew 26% to BRL 3.8 billion. This was underpinned by higher revenue and cost efficiency across multiple areas. G&A saw a gain from a $30 million past due settlement with one of our cities and generally tighter cost discipline. Cower went down largely from an increase in mix with the free market now representing 86% of total consumption. Personnel costs have declined as a reflect of our workforce restructuring. The average workforce in Q1 '26 reduced 13% compared to the year ago to 8,800 employees. With revenues up and costs well contained, our EBITDA margin expanded to 63%, freeing up resources for our ambitious CapEx plan.

Now deep diving into personnel, we saw a reduction of 26% year-over-year, which reflects a combination of a 13% headcount reduction and a gain in workforce job and salary mix. These structural measures more than offset the 5.5% wage inflation applied during the period. Reported net income was BRL 1.7 billion for the quarter, up 18% from BRL 1.5 billion in the year ago.

The substantial EBITDA growth more than offset an increase in net financial expenses, which rose as expected due to higher interest rates and our higher average debt to fund the CapEx program. These effects were partially offset by a lower income tax expense aided by the deduction from interest on capital payments in the quarter.

Our transformation is most visible in the acceleration of the investment program. In the first quarter alone, CapEx reached BRL 3.7 billion, up 31% year-on-year. This strong start to the year puts us well on track to achieve our ambitious plan. We have already delivered a large portion of our multiyear universal access targets as of Q1. We have fulfilled 87% of our water connection goal, 77% of our sewage collection goal and 71% of our sewage treatment target for the years of '24 through '26.

Moving to the next slide. Our major projects are advancing as planned. For example, under our Countryside Universal Access program, Phase 1 is underway with 11 projects involving $5 billion of investments already in execution phase. And earlier this year, we launched the Phase 2 tenders for additional 8 projects, totaling another $5.4 billion in investments.

We made further advances in the Integra Tietê program with the expansion of the Barueri sewage treatment plant, a BRL 5.7 billion project that will boost the plant's capacity by 41%, benefiting about 4 million people by 2029.

Turning now to our balance sheet. Our leverage ratios remain controlled even as we ramp up investments. At the end of March, net debt stood at BRL 32.5 billion. Our average cost of debt remains low at roughly the benchmark rate, and we have extended our average debt maturity to 6.3 years. It's worth highlighting that 64% of our debt now matures in 2031 or later, reflecting our proactive efforts to push out maturity post universal access and lock in long-term financing.

We also maintain a very strong liquidity position, BRL 19.2 billion in cash at quarter end, which is sufficient to cover over 5 years of debt service. Our solid capital structure and balance sheet provides ample flexibility to continue executing our investment plan while safeguarding our financial stability. Finally, looking at our key financial ratios, net debt to adjusted EBITDA was 2.4% at the end of the quarter, still at a very comfortable level given our robust cash generation and long-term debt profile. Our profitability metrics remained strong and stable with a trailing ROIC of 11% and ROE about 17%, combining both growth with profitability.

With that, I will now hand over the call to Mr. Carlos Piani, our CEO, to discuss our strategic priorities and recent developments.

Thanks, Daniel. Good morning, everyone, and thank you for joining the call. I will now provide an update on the strategic and operational progress achieved during the first quarter of 2026.

Turning to Slide 17. You can see a summary of the key accomplishments across the 4 strategic pillars we presented at our Investor Day last April, quality, profitability, growth and society. Starting with growth and our universalization agenda, we maintained the strong investment pace established last year.

CapEx reached BRL 3.8 billion in the first quarter, approximately 31% higher year-over-year, clearly demonstrating our execution capacity and ability to accelerate project delivery. Visibility also remains high with a CapEx backlog of BRL 39.8 billion from April 2026 through 2029, providing a solid foundation to sustain this investment cycle over the coming years.

Turning to profitability and operational efficiency. As discussed during our fourth quarter 2025 earnings call, we have substantially closed the historic gap related to discounts granted to large clients. At this stage, 80% of the related injunctions have been rolled in SABESP's favor, reinforcing both revenue quality and regulatory alignment.

We also continue advancing our infrastructure modernization agenda with installation of 326,000 meters during the quarter, a 51% increase year-over-year. This initiative is expected to contribute to lower losses, greater billing accuracy and improve operational efficiency over time.

Collection performance also remained strong with a collection rate of 96.9% in the quarter, excluding court ordered debt payments. In digital transformation, the quarter was marked by the successful Go-live of SAP S/4HANA, a major milestone for the company. This implementation enhances agility, data quality and operational integration while also establishing an important foundation for the next phase of SABESP's transformation agenda.

On quality and customer experience, we continue to expand and strengthen our digital customer journey. Today, 10.5 million customers use our digital payment channels. Our WhatsApp platform continues to scale, averaging 2.8 million interactions per month while SABESP App maintains a strong 4.6 rating with approximately 1.5 million monthly interactions. At the same time, we're adapting our call center, branches and Bzman operations to a new commercial and operational reality. This includes redesigning processes, standardizing workflows and resizing teams to better match current demand volumes. Additional adjustments and improvements are planned for the coming quarters as we continue to enhance customer satisfaction and improve our Net Promoter Score.

Finally, on ESG, I would like to highlight 2 important achievements this quarter. Earlier this week, ISEP3 published its annual index composition and SABESP remains a member for the second consecutive year, reinforcing the strength of our ESG positioning in the Brazilian market. In addition, in January, we received a B rating in the CDP Climate Assessment, representing an improvement versus last year and reflecting continued advances in climate governance and environmental management. Taken together, these results demonstrate the consistency of our execution across all strategic pillars and reinforces our ability to deliver sustainable growth with quality, efficiency and positive social impact.

Moving now to Slide 18. While we're making strong progress across priorities, it is equally important to remain transparent about the challenges ahead as we advance towards our 2029 commitments presented at Investor Day. Each year, this transformational journey brings a distinct set of priorities. In 2026, one of our main challenges is the implementation of the new regulatory accounting principles, including the new RAB methodology, which we expect to conclude by year-end. This is a complex but fundamental step to ensure greater transparency, consistency and alignment with the evolving regulatory framework.

In this context, AE, our regulatory agency has launched a public consultation to discuss the new DRC methodology, and we intend to actively contribute to this process by submitting our recommendations by May 13 of this year. Successful delivery on this milestone will be critical not only from a compliance perspective, but also to support the next phases of our transformation agenda, including future tariff reviews, the advancement of universalization targets and the integration of new assets into our operating and financial model.

With that, I conclude the session of the presentation. We can now move on to the Q&A.

[Operator Instructions]. Our first question comes from Mr. Guilherme Lima from Santander.

I have here 2 questions. First, electricity and material expenses came in higher than we were expecting. Could you disclose to what extent these lines were impacted by the company's current hydrological situation? What could be normalized levels and whether a portion of these incremental costs could be subject to future reimbursement? And the other question is if you could share your expectations for the 2026 revenue loss stemming from social tariff benefits to be reimbursed in 2023 tariffs? That's it.

Thank you, Guilherme. Daniel here. Thank you for your questions. Look, starting from electricity materials, we don't see necessarily major shifts in electricity with regards to the hydrological situation versus what we had, for example, in the second half of last year.

What we see first is a decline year-on-year on power expenses. So we're actually consuming less versus the first quarter of last year as we have a lower production given by the fact that we're doing the night pressure management in connection with [ Epego's ] operating rule, which is good. What we see naturally, and we tried to signal that in the Investor Day is higher cost per kilowatt with regards to the captive market, given the price increases that have been already passed in the places where we operate. So this is one of the things.

Looking to materials, I would attribute that mostly through phasing than anything else. There was no specific major item on materials in the quarter that would lead me to believe that we're in a different path.

With regards to revenue loss from the social tariff, right, which is a timing effect naturally, what we see today, we have virtually stabilized the number of economies that actually access the benefit with about 2 million. If we look at year-on-year, this is a big impact, growing almost 50% year-on-year quarter. But when we look at Q4 versus Q1, the number is relatively stable. So I don't see major spikes from one quarter to the other.

What I do see and one thing that you have to keep in mind is every time that we grow, we're growing more and more to underprivileged communities. So as we grow, an important part of that growth is going to be eligible to the Tarifa Paulista or to the CadÚnico depending on each level of eligibility. So this is going to add to that number. Is it going to be one for one for each economy that we grow? This is going to go there? I don't think so, but this is going to be -- this is something that's less predictable from a day-to-day perspective. You will see some growth, but this is going to be much more organic now, and it's going to be less storeasting -- sorry, less discrete, sorry.

[Operator Instructions]. Our next question comes from Mrs. Maria Carolina from Safra.

I have 2, one on regulatory front and the other on growth opportunities, starting with regulation. Can you comment on the recent normative that RCESB published presenting the guidelines for the discount policies for large users? What's your thoughts on these guidelines, expectations surrounding this definition? And how can this help you guys in future negotiations with big clients?

And secondly, the government announced the public hearing, as you guys mentioned on the Investor Day for the Universaliza Sao Paulo program. So looking to the documents released, what's your first thoughts on that, expectations for the blocks per se, if it's going to be more than one block and potential size of blocks here in case you have any views on that? And of course, expectations on possible differences between this model -- new model versus the first version and maybe the time line for that?

Thank you, Carlos. A few thoughts, not definitive yet because I think we're still early days in some of these initiatives. First, regarding the commercial discount policy, not policy or ruling that AESP did. I think the next step is for SABESP to submit a policy and how to -- how would this deliberation work. Our expectation is to do this in the next couple of weeks, to be honest. This has been long overdue. This segment of the market is expecting this since the privatization.

Our expectation is that SABESP will approve with any adjustments, the policy that we submit, I think, by the end of this quarter. And this would be, I think, valid for consumers on the second half of the year. The consequence would be, I think, consumers to adopt these new tariffs. We would probably -- this would have an impact on our second quarter -- second half of the year results as this rolls out, and we would be compensated 2 years down the road because of the volume, how the regulation works. But I think this would mitigate a lot of the pressure, a lot of the demands that some large clients, industrial and commercial clients have.

So all in all, I think that we'll have a clear view of definition of the policy that we're going to propose and if it's going to be approved by the end of that first half. And this would be applicable and valid for the second half of the year flowing through our numbers. Regarding Universalza, I think it was good to hear that this process is moving forward. I think the big unknown still is how many municipalities are going to be there for the formal process. This is still not set in stone. I think that's the big, I think, uncertainty.

We don't have a clear view how many blocks. I think that depends at the end of the day how many municipalities will be in the process when the process formally starts. I think the new news, I think, is the drainage. It's small, but there's a piece of drainage in the process. This is different from what we had at SABESP.

All the rest, I think, is most of the same. So that's good news because there's no surprise. There's also a provision of DRC to be -- what's going to be approved for SABESP is going to be rolled out for -- also for Universaliza Sao Paulo. So this is, I think, the unknown that may affect us and Universaliza, okay? So this is our takeaway for now and glad that see both of these initiatives moving forward during this year.

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

I can take it, Daniel can also comment if you want. But I think there's small seasonality. At the end of the day, there's a big push given how regulation works to have everything ready for the regulatory discussion by end of the year. So the fourth quarter is our peak and usually the first quarter is where from a seasonality standpoint, a little bit lower. I think nothing that concerns us. This has basically 2 things, the comp of the fourth quarter and I think the way that the construction works evolve through the year. I think the first quarter, usually, it's a little bit slower from a unitization standpoint.

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

So we lost probably 2 of the 90.

Our next question comes from Bruno Amorim from Goldman Sachs.

I have 2 here. The first one, could you comment or remind us where you are in the journey to improve operational efficiency of the company, just so we understand how much more room you still see for further cost and revenue efficiencies going forward? And the second question on the COPASA privatization, if SABES decides to participate, is it decided that, that would be together with Equatorial given none of those companies have exposure to Minas Gerais yet or are not necessarily?

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

Okay. So on the cost side, look, we have a lot of things that we did last year and thinking through why we're doing this, right? We've invested already BRL 22 billion. We've invested another BRL 3 billion plus this quarter. So we're investing a lot. And this is one of the ways that we free up resources for that investment, right? Interest rates are at 14.5%. So this is one of the things that why we do this, right? But thinking through this, we did a lot last year. There's a lot of carryover from last year. But naturally, we are doing other things this year.

And one of the things that we have that's big and it's going to come up is the auto production on power. We have some of that coming live now in Q2. some of that coming now live in the Q3. So we'll also see a carryforward benefit for that for next year. So this is one of the large things that we're doing. But otherwise, one of the things that we are looking also is through the structural things like the SAP go live.

We are also revisiting all our commercial efforts and our commercial processes also to improve the quality of the service and so on and so forth. So we try to avoid giving too much guidance on that front, as you are well aware, but this is what we can comment for now.

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

Our next question comes from Fillipe from Itaú.

A quick follow-up on the previous question here. At its Investor Day, SABESP presented a CapEx estimate of roughly BRL 20 billion for 2026. Could you please share your expectations on the disbursement curve in the coming quarters as well as the expected normalized utilization rate? And also if you could comment on the discussions with the regulatory agency regarding the CapEx plan for '24, '29. Do you have any sights on the timing or the outcome of these discussions?

Thank you for the question, Fillipe. Let me maybe start with the first part on the internal side and then talk a little bit more on the -- on the internal front, right, CapEx typically starts slower off the gate in Q1 and then ramps up throughout the year. Every place that I've worked in my life, this happened. It's no different here in SABESP. When we look at last year, a part of the slope of the curve of the acceleration was indeed because of how we were changing the processes, but there will always be a compounding curve throughout the year in terms of CapEx. A part of that comes from the fact that we have started the countryside programs now.

So we have split the countryside programs into 2 pieces. The first batch of those programs have started already. The second batch we're getting proposals now. So we'll start at some point still this year. And then we are also contracting the expansion of the major sewage treatment plants that will also increase the CapEx throughout the year, okay? So mechanically, this is how it will work.

In terms of unitization, unitization also has to do with the good being put into use, right? So it needs to be commissioned, right? There needs to be water or sewage passing through that. And usually, some of these things, they happen throughout the year. So the unitization curve also grows throughout the year. As we've invoicing, we do not expect that for one will be unitized in the first 2 or 3 years.

We expect that there will be more or less 2/3, 1/3 being left over 1/3 and unitizing about 2/3 of the CapEx, a little bit less than 2/3 of the CapEx every year and then reversing that trend in the last 2 years of the cycle. So this is more or less what we expect and what we are planning and seeing already in the day-to-day, okay? But then talking about the regulatory front, I'll defer to Piani, can provide better insight.

There's no time line from the regulatory standpoint for us to have a formal position on our CapEx projection. But we expect at least this discussion to have some -- we have some definition about the future in the beginning of the second half of this year because we need to start planning what we're going to do next year, right, and the years forward.

We already have a lot of the CapEx contracted given how things work here. And -- but there's some -- still some degrees of freedom how much money we're going to deploy next year and the following years. So from our perspective, I think we need to have some visibility of this alignment by the beginning of the third quarter of the year.

And we'll try to pursue, if possible, this definition with the regulatory agency. But just to be clear, there's no formal time frame, no obligation from the regulatory agency to provide that in that time frame, okay.

[Operator Instructions]. Our next question comes from Matteo Morin from [indiscernible].

Congratulations on the excellent results. I would like to understand a little bit more what are your actions through the remainder of this year regarding revenue assurance and how you're seeing this thing evolving throughout this year and maybe next year?

Thank you, Mateus. This is a very important pillar for us. I think that all the commercial efforts where revenue assurance resides are one of the major pillars of any transformation from a state-owned company to a privately held enterprise. We have been moving fast and furious on that front, many fronts like meters, substitution, collection workflow adjustments, putting a negative mark on consumers that don't pay on time and so forth. And this has generated a lot of volume on our customer service channels across the board that are at the same time being redesigned.

So as we described on the opening presentation, we're constantly discussing this balance between how much volume we put in the system and how much structure do we have to support this. And we know we are all customers as well from other utilities that usually the customer service is a little bit difficult. And we -- so we expect through this quarter that we're living, right, the second quarter already to the end of the year to make potential adjustments so we can help the consumer navigate this change of different commercial policies following the regulatory framework that it's a little bit tighter than it was in the past.

We have more flexibility with partial installments for adjustments in volumes that are higher because of the meters that were obsolete. So all in all, Mateus, I think we're going to adjust. I think we're focusing on the long term. If it's required, we're going to -- we may reduce a little bit of the volume or invest a little bit more in the structure, so we can continue to evolve with a good customer service level. This is our challenge. We're looking in the long term and help our consumer in this transition to pay on time even if the bill is a little bit [indiscernible] We will do so in the next -- in this -- in the next quarters to come by year-end.

[Operator Instructions]. Our next question comes from Giuliano Ajeje from UBS.

I have 3 questions. Let me start with the -- about the tariff -- about the mix tariff. So you reported growth in terms of households with tariffs with subsidies. I have 2 questions here. The first one, if the company project this growth pace of tariff with subsidies will continue through 2027, 2028. And if not, what should be the level? And my second one is regarding the status with the regulatory work to recompose this.

Also another question is about COPASA. So it's a simple one if you already registered for the process. And finally, another question about the CapEx. So the Slide 13, you showed the CapEx expected for 2024 to 2029. And this is considering the anticipation of the second cycle. So assuming that you will not consider to anticipate what should be the CapEx? So my question is the initial BRL 70 billion, how much should be adjusted by inflation and also -- and also second, how much should be the anticipation of the second cycle? Okay. So 3 topics here.

All right. Maybe I'll take the first one, and then I'll take here. So on the first one, thank you for the questions. It's very helpful. So on the first one, we started this adding new tiers, right? So first, we had a methodology that was SABESP. And then the contract dictated us to move from that methodology to the Castro Unico, which is the federal social security scheme. And we moved to that throughout the last quarter of 2024. And then we realized that some people lost the benefits that -- but they still needed the benefits.

So we maintain those benefits for a while to allow them to register into Cadastro Unico and so on and so forth. And then throughout that period, the concession approved another program called Tarifa Paulista. So throughout all this period, I think until the end almost of 2025, we had changing rules of who was entitled, what type of benefit and so on and so forth. It stabilized at the end of last year. So now I don't expect and one of the things that we'll also start seeing is some of these people getting into the transition tariffs, right? So people that had the benefit for 18 months and they transition to a different class and so on and so forth.

But given that and assuming that there are no changes going forward, I think the adjustments here, they are going to be only organic. And what I mean by that is mostly driven by growth. So if we grow to underprivileged communities, some people will be more eligible. Even when we grow into more formal areas, we also have people that are eligible for social or Tarifa Paulista and so on and so forth. But I don't expect to see the same amount of bumps up and down that we saw throughout last year going forward. I expect to see organic minor changes to those numbers going forward unless there are regulatory changes, okay? So that's the answer to your first question. To the second, talking about COPASA.

COPASA, yes, we're going to register. We're going to participate. I think simple as that and process will depending how it evolves, we can share our views with the market. But yes, we're going to participate. And I think the last one regarding the total CapEx, I think we need to wait for the regulator, and Ajeje, I know this is a tough one because we need to be aligned. But at the end of the day, there's a little bit of everything, right? Daniel can explore, but there's a little bit of inflation on top of the BRL 70 billion.

There was a little bit changes of scope basically when we did all the geo reference of all the consumers that needed to be connected. Some of these works, I think, would be not prudent to be made and we discuss how to do this with the government and the -- with the agency, sorry. And they're discussing maybe there's other alternatives ways to provide service like we are going to do to rural.

There are some formal areas with rural characteristics and we can offer service with the same out of the role to some of the formal areas. This would reduce, I think, in a material way, a sample of the connections that we need to make. So all in all, I think we need -- I would like to wait a little bit more to give you this visibility. I think what is certain is what we're going to invest this year.

I think we have been crystal clear. I think Daniel can give a little bit more detail. But I think that there's 3 components. There's inflation on the BRL 70 billion. There's a little bit more complex connections that increases the average cost per consumer that we're negotiating. And there's good visibility that this will decline given our conversations up to this moment with the agency, and there's some timing between cycles that at the end of the day is a cost of capital decision, right, because the net present value may change a little bit more, but it's not different, right? And I think the final number we need to wait for the regulator.

Okay. I agree. And can I have one more question. Okay. So the company reported a delinquency close to BRL 50 million, BRL 54 million this year. So my question is if the smart meters modernizations and also the digital channels improvement could change this for another level.

I think I'm going to join -- and let me start and then Daniel can pick it up later. But I think there's -- we reduced our provisions for our bad debt provision, right? And basically, the reduction was because the provision was made based on the behavior of the collection in the past.

Given that we changed a lot of the policies and procedures, we're improving the collection rate as we move on. And because of that, the accounting provisions, they decreased. That's why they declined. It's simple, right? So we don't -- the policy has not changed. The bad debt provision is based on the collection history and given that the history is improving, so the anticipated provision declines.

If the behavior changes, the provision will increase. It's simple as that. So we're aligned. Regarding the smart meters, I think they -- where they can help. We -- smart meters is not new in the world. I think we're a laggard regarding smart meters to the Europe, U.S., Asia and so forth. But in one area that we -- that I think we're leading is that we implemented Evolve on the smart meters. So this will facilitate these connections and connections according to the rules of ASESP, right? So I think this will help, I think, to be more efficient.

This will help the smart meters, as always, will help the consumer have a daily reading of their consumption. So there's going to be less surprises when they get -- they have a leak or they increase because they have visitors and they will discuss less and there's going to be less dispute, in my opinion, in aggregate of the final bills that they have, and we'll be able to collect more efficiency given my first comment.

So I think on the margin, there are some benefits, but this will take time. I think the smart meters that we have this daily consumption information. To be relevant, this will take, I think, 2 years to have a relevant sample to make a dent in our numbers given our size.

Just to add one thing, guys, specifically for this quarter, we had a settlement with one of the cities that we serve that was a BRL 30 million recovery. So this was also influencing the number for the quarter in a probably a bigger form than just like an aggregate number of the collection.

Our last question comes from João Pimentel from Citi.

I have a more broader question. I wanted to discuss how do you perceive SABESP acting allocating capital in eventually different markets, meaning like outside Brazil or eventually into different segments because SABESP is already $100 billion plus market cap company. Of course, we have COPASA, we have Uigasaliza. COPASA if you go in a consortium comparing to the size of the company, it's not that much of a big check. right? So just trying to understand how do you perceive or how do you think you are prepared in your journey of universalization in a sense that, okay, now we are more in the run rate. We know how things operate.

We are past the initial challenges of running -- of this migration from an SOE to a private company. And we're just too big eventually for where we currently operate. So how do you feel about investing in different segments or looking to other geographies, of course, taking into consideration different regulatory risks and FX exposure. So just trying to get your sense on that.

Thanks for the question. I think this is in all the options of nonorganic growth, these are the most risky, right? And probably the ones that we don't have probably there's less alignment between shareholders and stakeholders and so forth. But given the nature and our nature that you mentioned that the size -- from a -- we have the fiduciary duty to look at all opportunities to generate alpha, right? I would say that I think we need to learn and do our homework. I think this is -- we're still in early days of our journey, only less than 2 years. I think we're 19, 20 months in.

So I would say this is something that we're going to look at. Initially, if this makes sense, it needs to be almost like an option type of structure, right? It's easier that way. So if we have a very small opportunity outside in our industry, this would be a risk/reward relation easier to test the waters. But I would say there's nothing critical. I think there's -- just to be clear to the market, we're not looking to do a deal outside our geography or outside the industry that's major that's going to change the risk profile of SABESP, okay? But given the nature and how regulation works and how probably the market cap will follow the increase of the recognition of the investments, the market cap will evolve and will be very large to the Brazilian market, water and sewage market.

So we -- I think we have the obligation to look at this vis-a-vis the decisions to just distribute cash. And we have time for this. So I just want to be clear on the message. We are not going to try to be a holding company, invest a lot of things, but we're going to look at other opportunities to see how we can leverage our skill set, our knowledge, the people knowledge of the people that are here in different ways. If that -- if we believe that there is a risk-reward relationship that makes sense that we're convinced internally that we can convince our Board, we're going to try to convince the market.

If we believe that the opportunity is not there, we're just going to stick here to Sao Paulo, do our homework, try to provide a better service to everyone and move on and distribute the cash. I'm just passing you the framework. There's no -- nothing set in stone. But I think we have the skill set if the opportunity arises in outside a little bit of our backyard, I think we can do it, but we don't -- we're not there yet.

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

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

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

[Audio Gap] Men's on your right and women's on the left. The emergency exit is in the back of the auditorium. So this event is for you. We want you to get to know the company a little more in depth. We'll be describing our journey up until now, what's going on now and what we expect to happen in the future. I'll be starting off and let's take a look at the agenda. Anyway, let me get started. We've been here for 18 months, it looked like a lot. The company was privatized in July 2024. It took us 70 days to take over because that was a privatization through the stock exchange. On the very first day, we made changes in the Board. Right after that, we were surprised by ARSESP decision or deliberation to change the pressure. That was an important move for our operations. At year end, we started our first voluntary program. This is something we've been telling people. If you want to be here, you have to want to be here. If you want to leave, fine too. There were 2 of those programs, the first back in December ending in January, about 2,000 -- we had about 11,000 employees, 2,000 decided to take that program. And we had that phased out plan depending on how critical their positions were, and we're now adapting the same procedure up until now. We kept on hiring new people back in February, we had the major change brought about by the social tariff was a decision that impacted our results and we decided to support about BRL 150 million out of our own pockets. But we believed it was positive at the time. We're privatizing, there was a policy change and by talking to the government. And then the government adopted a state of Sao Paulo social tariff that was published a little later on. And in late December, I failed to mention it, we collected BRL 15 billion, and in May construction started.

Having access to credit is one thing to make that work for you is something else. We changed processes. It used to be turnkey. We improved the company's working capital, performance-based incentives, everything in production as of May. We're still discussing the system back in '23 and '24. But then in August, we had that crisis. I think you are way more adept at understanding meteorology, but we had that shortage last year. Last year was the third year of very bad rainfall. So the resilience of the system was enough for 3 years, but it started to suffer after the third year. Cantareira was 20.2%, almost at the limit, the low 20%. The federal government will be interfering and then management will be both federal state, very complex composition, especially in an election year. In November, we reached our goals in -- at the year's end. Let me just say this, when the company was privatized. We're talking about BRL 70 billion, but the company had only projects of about for 15 months. There was no predictability all the way to the universal access mark. We geo-referenced all connections that were needed to get that goal by 2029. And then we came up with a new investment plan, and we're still negotiating that assessment to communicate to the market. But we are very confident, we're more confident. Let me put it in the way that we had to be or what -- than it used to be. There are some variations between the concept and the executive projects, but we are more confident today than we were. Late last year, we had to match the revenues. It's very important to your analysis, and it was very clear when we had the first amendment to the contract that removed some of the risks. We define climate goals. We did a lot of things. Earlier this year, we issued more than USD 1.5 billion, the largest in history. We started with that collection. I'm not going to provide any regulatory information. But we've already collected almost 75% for the year. Amidst all that, we had [ da EMAE ]. There is hydrological risk in the metropolitan area of Sao Paulo, way above the public's perception. UN says that we have 1,500 cubic meters and Sao Paulo has 200 a year. So we are under stress because the city was developed very quickly. And that transaction with EMAE give us some more freedom hydrologically speaking as construction work advanced, Andre will be addressing that later on today.

Anyway, we've invested BRL 15 billion at year's end. And earlier this year, the reservoirs were recovered. February was a very good month, that alleviated that pressure. But still, we have a lot of things to do. In these 18 months, for 6 months of that period, we conducted surveys. We talked to the shareholders to the Board to define what is this new SABESP all about, where and how we want to get there. Where do we want to go? This is somewhat subtle, more subtle than what you're used to seeing in the companies, but we had to align our execution plan. Jose led that effort for 6 months. We developed our new culture, our purpose, where we want to go, the top activities we should focus on to get to that objective. And then we break that down into annual goals and monthly routines. This is what we have been doing. We've been looking at companies around the world. We went to Europe, to the U.S. And we came up with this one-page culture map. This is what we're all about. This is what we have to do in the coming years. We are a utilities company. Our purpose is to connect people to a better future. Our country has many inequalities, we still have people not served by water utility companies in the richest state in the country. So we want to provide excellent services, focusing on health and the environment. And our first multiyear objective is we want to be the largest company in the world. We look at Brazil, we look at Lat Am, but we are already the third largest in the world. American Waterworks is #1. Veolia is the second, a somewhat different animal, so to speak. The company had a market cap of 40% of those 2 companies -- 2 other companies. I think we shouldn't be second to none. There are companies in China with smaller value cap with more consumers. And we came to realize that there's no point in being smaller than these companies because of the -- all the opportunities we have. The way we see it, very few companies, especially those listed companies have achieved. We have to do 2 things at the same time. We want to have a positive impact and generating shareholder value. You don't usually combine the 2 things. If you generate positive social impact, you do not have that -- it's not that easy to generate shareholder value. We have people that work from every area. We are combining these 2 worlds. We want to both generate shareholder value and, of course, promoting good things to society. That's our goal.

Let me give you some perspective. Just last year, we had a TSR inflation at 49% -- plus 49% above the stock exchange index. There was COPASA that was different. Anyway, we monitor those indicators. We provided service to additional 6 million people, and reduced pollution by 22% of untreated sewerage systems. We had 63 million liters a month that was untreated. We brought that down by 22% last year. So we keep the direction.

Looking at other international companies, these are 10 activities that we have to be better than the competition to get to where we want to be. That's the next pillar. Well, the first thing we have to do is to provide universal access, it's aspirational to many people, but we are going to meet that goal by 2029 or in 2029.

Customer satisfaction, a natural monopoly. In practical terms, it's not something -- well, since you don't have competition, the competition is the regulation. Companies don't treat customers as well as in competitive environments. So I had the chance to work in more competitive markets but still, we have a huge opportunity to improve our services. Despite the short-term challenges to adapt those price policies to a private company, we are changing some of those flexibilities that was excessive regulation to customers. But still, we have that ambition to be regarded by the service level we provide to customers. That's our long-term goal. There's something that is even more subtle. And I'm referring to dealing with as stakeholders across the board in a complex world, the narrative that we see in social media is something else. We're dealing with the federal government. You have to provide good service and you have to be perceived as such. So we have an institution relations department run by Samanta, we invest in communications to communicate with stakeholders, politicians and the federal government. It's also the quality of our products. We're doing well in our core. If the other things aren't doing well, at some point, things will go south. We're currently providing water and sewage services. And we mapped out to understand that over 35 years of our concessions, about 40% of the cities we serve will need some sort of intervention in terms of water treatment or caption. We have 39 cities and 30 of them will need some sort of work. In the Santos area, all the other cities will need that intervention as well. So led by Roberval, supervised by Andre and Debora, we have a plan to address all of these issues over time so as to provide resilience considering the water stress that we're facing.

When it comes to environmental and social involvement, even [indiscernible] when it was trying to have its IPO looked back at what SABESP was doing. So SABESP enjoys a tradition in dealing with its nearing communities via community leaders wherever it operates. And this was an initiative that was sort of left to the wayside. So our purpose now is to strengthen that and to have that in focus. What we want is to have a social license to operate and to add value to the communities where we operate. We have a plan to do that in 40 different communities over the next few years in a distinguished way, and that's part of another project that we'll be showing you a little bit later.

When it comes to innovation and digital transformation, well, the world is changing. And for those of you who don't know, I studied IT back in the day. The world is changing. 10 years from now, it will look a lot different than it does now. And I think that whenever we think about our goals, we need that digitalization pillar very much in place. And we made a decision, we combined all different aspects in a single department just as what American Waterworks does and all with our customer in mind.

When it comes to efficiency, where we want us to do more, more quickly and better in every single term. Daniel will be talking a little bit more about this, but our regulatory model involves a little bit of CapEx. So this is 1 of our mantras here.

Now when it comes to regulation, this was a plan the company had. We are a regulated company, but regulation was not in our everyday agenda. We're changing that now, and we must be excellent when it comes to the regulatory debate, whether we're talking about people, processes, our understanding, we have an entire work stream to develop that part of the business. And we can't do any of that without the people. So we need to bring them in, train them, develop them and offer our talents new opportunity. So our motto is to mix and match people who are just coming in to people who are -- or have been with us for a while. So we have a very rich strategy in this sense and Joshua is spearheading that initiative.

And last but not least, over time, to reach our goals, considering the regulatory model that we're in, the possibility of growing inorganically will increase. So understanding our business and our capital allocation will be very important in that sense.

Another thing that's a bit more subtle when we're speaking to the market. We have set our goal. We have established our path, but it's also about how we'll be doing things. We could be throwing punches left and right. And we've worked in places where our goals are not collaborative. So it's also about the behavior that you want your company to have. So we also established the 6 main values we want to foster in the company. So first of all, this values and purpose [indiscernible] has to be very well founded. So if anything we're doing is having some impact, it has to be sustainable. We do not want to start things and then move backwards the next day. So we will not be sinking our OpEx to then try to come back. We want be sustainable in everything that we do, whether it's internally or whether that has an impact on third parties. Then it's also about ownership whether we're talking about our own company or other cultures. I think when people feel like they own the business, they've had that sense of ownership, the work becomes a lot easier. So we have a lot of initiatives in that sense, right? In our first assembly meeting, we approved with our shareholders a long-term incentive program. We have the initial allocation to our Board for 11 people, myself included. At the end of last year, we also allocated for 53 more people. So we have 63 members that have that long-term incentive program. And the purpose now is every year after we disclosed our goals to the regulator before it has an impact on our results, we will be proposing to the People's Committee another share of that to another group of people.

The third one, collaborating with clarity. This is very common in engineering companies. It's about command and control, where sometimes a lot harder to talk about your problems moving up the ladder. So whenever you have an issue, you can't really solve that. And I usually say that in life, in school, for example, you'll be given a test and you have to be able to solve that. But in real life, you have to understand what is the problem you're doing -- you're dealing with. And in order to know what the problem is, you have to know what you're talking about. People have to be confident in speaking about them. Back when I worked in BTG Pactual, we usually say that -- we usually said that people knew too little too late. Leaders knew very little about things and too late, and that's very risky because once you're aware of what's going on, you can't do anything about it. So the idea of having an environment of trust where people can talk about their issues and we can address all of what's important, it's critical, and we have several initiatives in that sense as well. And one of the things that we are escalating now is what we call the great reveal. One of our coordinators just came up with that, and we are scaling that up to every region to offer people opportunity, the opportunity to talk about their issues. And then we can assign those issues and decide how we'll address them.

There's also a meritocracy. This is something that's new for people who came from the state-owned world. In the first year, we paid year-end bonuses and I think it was transformational for the company. A lot of people had never been awarded that sort of thing. And we usually say that there will be times when that will not be possible. But I think that, that was very important last year. We have a plan that will be taken to our shareholders in April, which is we want to have a double bonus for what we call N0. And then N1 Board members, N2 and so on and so forth, where we'll be doubling the bonuses for N3s and N4s. And the idea is to provide that for 1.5 to 3 years to those high performance so that we can increase our shareholder base as well. That's something we're proposing for this year.

And last but not least, ethics, I usually say that we will be relentless moving forward in how we run things. And we'll do that in a safe manner. There is a huge challenge for SABESP when it comes to developing new projects. We have about 40,000 people working for us. Unfortunately, we've already recorded 4 deaths this year. And that's because we are dealing with people who have never worked with SABESP before and at breakneck speed. So we have to be very rigid when it comes to safety because regardless of our results regarding finances, we're not here to kill people. And this is something I usually tell my team, we need to be highly focused on preserving lives. And considering the sheer amount of construction works we're dealing with, the probability of such events are very high, which is why we have to double our vigilance when it comes to safety. We've already certified companies and increased our efforts and safety protocols in order to do that.

So we have this multiyear plan. We know of the initiatives and KPIs that we have every year, but that's broken down into targets every year. And we have a routine -- a PCA routine management by objectives. This is older than me. This comes from Peter Drucker. And these are the company's current goals, which are my target. So last year, 40% of my personal target was to meet the universal access target, to have over 1.2 million connections. We have 2 million connections last year. Then reduce the regulatory gap. You probably know that better than me. We have a target of reducing that. We had 2 pillars of that. One was the firm demand, which were the contracts with large companies. And then remodeling and closures. So we were able to address most of that. This will be a target that will be extended to this year as well.

Where's Lu by the way? All right, so efficiency, I'll talk about where this is at with our EBITDA. This is the cash flow that you monitor via our disclosures. And then there's the Q factor. I think you're all aware of this. These are 6 in excess with the same weights. We also had the payment quality that was not met last year. This year, we have that, and we've met that as well. And then we had our NPS. And even though this is a year of major transformation, we set out to achieve a higher NPS than what we had last year or in 2024.

So what we have here on the right-hand side is how we measure all of that. But taking a step back, when you do not have a culture of monitoring results what happens is the hardest target is that for the company at large and the ones that trickle down are a lot easier because our ability to have granularity of that is lower. So we have a company-wide target a lot heavier. So how does it work when we look at our company target? If we look at the EBITDA, it multiples as if it were the size of the pie. So if we do more, it increases the potential and vice versa. So 40% of for these targets I just mentioned and then 60% of individual targets. Now if your EBITDA ranges from 90% to 110%, if it's under 90%, we have no bonus. And if it's over 110%, that's the cap, if we get over 110%, we mismeasured. So 118% to 120%, that's what we would have. So there's a leverage when we look up and when we look down as well. And in addition to those targets, we also have projects that are not necessarily targets, meaning they're not connected to variable compensation. This framework, which we introduced last year, we still have to rediscuss this for Q1, where we split our units in new challenges, new standards and new foundation. We have all of these projects that were required, and we have a routine with PMO that we monitor constantly. And here, we have a monitor of how we performed in each one of these projects last year. So let's look at a few ones that have more to do with you.

Looking at our real estate properties, we came in thinking that we would get rid of many of them. What happened was many of them are still in our base, so the cost of opportunity of selling is slightly different than what we imagined initially. And also, they are still a lot of properties that need to be regulated. In 50 years of SABESP, we have different registration numbers and so on and so forth. So we now have 3 different cohorts of properties for which we have different strategies. But that's what we have for real estate. And so we have sort of status levels for each one of these projects. So 9, we were above what we planned for, 3 below and 29 that we were pretty much where we thought we would be. So without giving you any spoilers now or any insider information, again, the universal access is our main pillar, 30% of the company's targets depend on us meeting the universal access target. So if we meet this, we will meet what we have in the contract easily.

Second, is our operations. We're moving up to 50%. This is connected to the Q factor and also the water source levels, we're moving into a more complex year. And the idea is to work to prevent water stress. Of course, we are less efficient in this case because we can't control the weather, but there are initiatives we can adopt to mitigate that. And the idea is to focus on that as well.

Third, we want to continue to move forward in our customer service. Last year, we measured that via NPS. This year, we'll be measuring with another index because of our maturity, but we have 15 points allocated to that.

Number four, if you remember, last year, we were dealing with operational free cash flow. Now we're dealing with free cash flow to firm, considering that the indicator we used was higher than expected, so that's essentially if we meet the target by spending more. This is where we're penalized and that's the idea.

Now second to last, what we call unitization, what we're talking about that's basically looking at the investment that was made and have an accounting and document-based framework that we can record [indiscernible] operator. Early in October, we had BRL 7 million that were not being used. So we have a unitization strategy that's slightly different from what the energy industry does, we -- our ability to break down investments is a bit different. And I think this will be clearer when Roberval speaks, but we're still working to unitize more quickly. So we are striving to unitize our CapEx. And we also have another target, an extra target compared to last year, which is safety. So again, this will not bring our targets to 0, and we will not be meeting that fully because of what happened between January and March. Now here, we have our most important projects for the year, and how they're moving forward. We monitor our PMO in parallel with our results-driven targets. And last year, we were mixing that first year of our privatization and other important things. So this year, we have a crosscutting projects. We have projects for the company that crisscross different departments. So the purpose of this framework is for initiatives that have these multi-department impact, we will monitor and oversee in a unified manner. Now looking back at that plan, I mentioned earlier with the 10 different path. Those 10 were split into 4 different areas: quality, profitability, growth and society. So we have 29 different projects, we'll have 1 extra in practice because the Board asked that of us. So we'll be also monitoring another one. So we have 30 projects, 5 of which until last year were slightly behind schedule.

So a few important things I could mention here. On the client front, we will be redesigning the entire customer journey from someone who asked for a new connection until them being disconnected. So we'll be outlining the process, identifying points of friction and establish KPIs for that.

Another important thing, the operation center is very -- so very analogical. we currently have about 50 operations center, you will be seeing one of them inside later. And what we'll do is we'll be centralizing all of them in a single place with redundancy, but also sensors and smart devices to not -- no longer rely so much on the technical experts. So we want to bring all of that to the digital world over the course of this year so that at the beginning of next year, we have that for the entire metropolitan area. And 2 years from now, we will have that for the entire state of Sao Paulo, all 375 cities.

Well, what else? We have macro processes. It's only natural that when you join a company, you have to redesign all the major projects. There are so many processes that will be redesigned. When you don't get results, usually, the culprit is the process. 4,000 people changed positions. So we want to redesign macro processes. I believe that's it.

Here are the major challenges. And then we can address them in Q&A. TRC, one of the major challenges, our VNR in the water industry. The methodology will be defined this year. There will be public hearings conducted by ARSESP, but we've been investing very quickly and our concern is that the methodology won't be fast enough to accommodate these new investments. We want the methodology to impact what we already have. Sometimes you have to hit the brakes to wait for the contracts to catch on -- catch up. We're still making contributions. There will be a proposal now shortly. Again, this is a challenge for this year. Next year, the tax reform, CBS, I think it's CBS, right? That for the PIS and COFINS taxes, we have to make everything work, change systems and all that. Next year, the goal is by city. Today, our goals are combined. And as of next year, we'll have separate goals by city, all 375 of them. We are auditing before the agency. We want to be robust enough to be able to achieve those individual goals. Next year, we'll be integrating the plan with EMAE. We're not executing that in 2027 but we want to explore all opportunities to maximize that opportunity with the integration of EMAE and SABESP. Because of that, water stresses and water conditions I mentioned.

2028, the test year for the revision of 2030. So it's a very important snapshot, if you will. And in 2029, we'll have to meet that goal providing universal access. This is our take on the situation. As we move along in operations, we'll gain some freedom to take a look at inorganic. Are we purchasing something? Of course, not. It's not a certainty, but we'll be freer, we'll have more freedom to look elsewhere. And we are going to do that in 3 principles: geography, product and industry. We are today in the middle. We service part of Sao Paulo with water and sewage. We can grow in Sao Paulo. We can grow in Brazil. There is COPASA. We can grow abroad. So this -- or these involve risks and the decision-making process is different as well. We only provide service today. We can do water collection and water treatment. We can service, supplementary revenue sources. We can do that, but they will only grow as the size of that industry allows you to, but we can also to move on to other industry, drainage, for example, we can do it at a micro level in our contract. We could even start providing those services because it's part of the contract. But the full drainage, we cannot provide the service yet. This is up for cities to provide, Maceio for example, there's an invitation for bid, they are bidding that service in the city of Maceio and we can address solid residue. I'm not saying we're doing it. I'm just saying there is that opportunity. And there are industries -- other industries as well. Equatorial was a sanitation company. Energies is now operating in gas. So there are those possibilities. As we grow, and we addressed the previous objectives I stated when we can move on to other larger goals. Last year, we started working with energy because of that in mind. We do not want to be an energy company, but that was a very interesting solution to add reservoirs with some yield. I'm not competing with Axia. I want to make that very clear. But again, this is our take on the model.

And in conclusion, 18 months, it looks like 18 years, but things are moving along just fine. The difference between American Water Works and the other, we're 40% market cap. We are 80% of that, we're just $3 billion shy of being the largest. We are $23 billion, American Works is $26 billion. Veolia about EUR 24.5 billion. Given all the circumstances in the regulatory model, we're going to get there. I don't know what they're up to. But again, the goal is not to generate erratic returns. We want to provide returns above our cost of capital for a long time. That's our challenge. We did great last year. We're still faced with that challenge this year. And we removed 6 million people that were not service, 2 million in Sao Paulo alone. It's just amazing, right? And Sao Paulo is the richest state in the country. 4 million people that were not serviced by water treatment, we reduced that DBO. That's the organic rate of sewage dramatically. That's it. I'll hand it over to Daniel. There's the QR code, you can submit your questions, and then we'll have a Q&A session to address all of them at once.

Thank you, folks. Good morning, everyone. Thank you for being here. I'm Daniel Szlak. I'm SABESP's CFO. I come from the sanitation world. and my boss trusts me because he said, money is no problem. All you have to do is use it wisely. So I think we're okay.

At the end of the day, what's our ultimate goal. We want to keep on growing with discipline, with sustainability. It has to be sustainable to the company and to all stakeholders. Let me give you a before and after picture. These are the 3 dimensions: people; management systems; and operations. Before, we had about 11,000 employees. We are at 9,000 today. We've given opportunity for those that were here. They took the task to be a civil servant way back when. And then we ask them. Do you want to keep on working here? Or would you like to do something different? 3,600 people joined that severance program. 2,000 new hires in the same time frame. And then we brought in new blood to our staff. We want to encourage people that have been working here for longer. They were about to retirement age, and we want to bring in that new blood, as I said. 22 years, now is 14, the average time of workers. Meritocracy, everyone had fixed salary. There was no room for those high performers to get more. And now we have tools in place to pay more those that have better performance. Fixed pay, short-term and long-term incentives.

On to management systems. The company was a government owned, it's a cash-based company, and so was the company. We changed that to the competence. We implemented the OBZ should look everything, bottom up, not top down. As a state-owned company, just like governments, it was funded on a short-term basis, and this is what I did, liability management to reduce our leverage, extending the maturity and adopting hedging to reduce exposure to foreign exchange and other indicators that it makes sense to us. On top of that, we had a budget to invest more, but we're competing -- or the company was competing for funds that could be allocated in hospitals and education, security, and the company did not invest as much in technology because of that.

Digital transformation and our goals and our advantages and all that. And now we are heavily investing in infrastructure, structure, cybersecurity, and tomorrow, we'll be going live with S/4HANA. We are replacing our SAP tomorrow.

SABESP was founded 52 years ago. It was a combination of a couple of companies, smaller companies with a lot of autonomy, there was no central command. Today, we have someone here that is in charge of water, Andre, who will be speaking to you shortly. He is now in charge of water at SABESP as a whole. It was not like that. We wanted to come up with that integration. It will take a lot of time. This is our goal, and we'll be adapting and implementing this new culture.

Our investment capacity was limited -- maybe BRL 3 billion, BRL 4 billion, BRL 5 billion a year. In 2025, we managed to invest BRL 15 billion. We had a limitation in the number of suppliers. The company had to be subjected to the law of bidding, 8.666. Companies did not want to be involved, so it required larger suppliers in that bidding process and we changed that to the market standard. And we are now able to raised funds, BRL 39 billion after the execution of BRL 22 billion. And the company was not digitized. It was a physical company per se. And now we have digital channels in place, but I'm not going to steal Denis' thunder because he'll be addressing that shortly.

Results in numbers now. We reached 60% EBITDA margin in the first year on the rise and CapEx, also on the rise as universal access speeds up or gains traction that will mean more people, more connections. But we have to compare ourselves with competitors. We compared to domestic and international competitors. We are the third largest in market cap, but we're the first water company -- public water company in the number of consumers. So we compare ourselves with ourselves as we improve the quality and the visibility of our internal indicators. We compare, again, to domestic and international competitors, we want to extract those good lessons.

Before I talk about comparisons, the product of CapEx. This is healthy and sustainable growth. We grew about BRL 8 million. We have 1 connection, connection could be a building, maybe 12 units and 12 economies as we put it, usually 2.7 people by economy. We're growing and improving our quality indicators. We are at 99.9 % for treated water and 98.8% in distributed water. This is above the Q factor. Internally, we talk about U factor. So U factor is gaining traction. This is a very common factor we discussed internally. I hear a lot from you the issue of affordability. SABESP has one of the cheapest residential rates. We compare to local and international peers. We have one of the lowest residential tariffs than any other large metropolitan areas. And when we compare that to the family's budget in terms of utilities, energy, water, water accounts for about 1/3, 2/3 energy. When you look at the purchasing power of the population, this is very positive. Still, we have economies and people that cannot afford. We have been providing subsidized tariffs. We have some social programs that are part of that. They are [indiscernible], legal water and the Paulista social tariff created in mid-2025. About 20% of our customer base will have that subsidized tariffs. Discounts can go from 70% to 50%. Of course, this is captured in the tariff reviews. These are discounts that are given based on the regulation and we're going to be compensated for that across subsidies. We closed the regulatory gaps too. SABESP gave discounts to large customers. There was a tariff gap about 500 contracts in that category entitled to that discount -- discounted -- discounts range from 45% to 60%, about BRL 600 million in the year. We have still 15 injunctions that's still pending. Contractual exposure is reduced to only 2 customers. Very relevant work done by the customer, regulatory and people's departments. And at the same time, we started the measurement or intelligent metering system, 4.4 million meters. This is a contract demand. We have 10 million meters in total. We'll be replacing 4.4 million. There will be smart meters, especially in Sao Paulo and Sao Jose dos Campos. It's a requirement in our contract. ROI is much better than that in concession. We can be way more efficient. We reduce losses and customers can see their consumption on an hourly basis so they can detect leaks more quickly. That's one of the things we used as a guarantee for the first blue bond we issued that was based on the IFC because that was a project that aimed at reducing losses.

Let me now address operational efficiency and cost reduction. This is something we talk about all the time. Why do we have to be excellent in operations? Number one, we have to invest heavily. And of course, no one is going to invest BRL 70 billion on day 1. We had to raise that money to generate that cash because the more efficient we are, the more money we have for investments. We don't have to pay all that interest. We now have to raise all that money. Another point is we have to be more efficient because we also need more affordable tariffs for the population. The first 5 years of that, we will be retaining that compensation. But after that, we also have to return that to the population, which is why we need to be more efficient. So now on -- what we're looking at. We have a few comparisons here on this slide. What does our OpEx look like both in reals per cubic meter as well as in absolute terms? And also adjusted for inflation. So we were able to adjust our OpEx very well over the course of '25 with a little bit of carryover to 2026 with issues such as the energy production, and we'll be addressing that a little bit later. And we're also looking at how we're doing versus our local peers. It's hard to look at the international peers, but SABESP was dealing with a much higher cost than what we needed to, and we were able to excel versus our peers. And this is something we were able to improve. We were able to improve our position significantly over time.

Now I'll talk a little bit about people and then energy. We talked a little bit about our labor force. There's been a decline. We're bringing on new blood and sort of renewing our labor base. And even before privatization, we already had those programs for voluntary dismission -- voluntary dismissal. And a little bit of what we've done that's interesting. We opened about 300 -- or 3,600 vacancies, and we had over 300 -- over 150,000 applications. We have 122 interns and 220 trainees here at the company. So we're trying to bring in new blood and sort of change the profile of our personnel and both making better use of people who are inside and bringing new people as well.

Another important thing in terms of energy. When we look at our efficiency in terms of cubic meter or kilowatt per cubic meter of treated water, we have improved our efficiency regardless of the challenges we've faced last year in terms of renewal, which also consume energy. We consume energy in 2 main points, of course, in treatment, but mostly when it comes to distribution. We consume energy in water distribution because our networks are pressurized, which is very energy intensive, but also consumption when it comes to transposing water sources, but we're still able to improve our efficiency with new equipment and more efficient operation and we also have help in managing the portfolio of equipment that we have. In addition to that, we move forward in migrating from the regulated market to the free market. These are yearly averages. Just to give you an idea in Q4, about 34% of the -- 85% of the electricity we consumed came from the free market. And now in 2026, as we mentioned before, we have new -- 2 new incentive -- incentivized contract -- consumption contracts, which will help us to lower our energy consumption. So we believe there are 2 major headwinds when it comes to energy consumption in 2026. Adjustment in distributor fees, which will help us a lot. It's important to have that in mind. And the second is even though the -- we have a better hydrological profile now, there's also an increase in consumption with the new water source use, so you have to think about how you'll be modeling for energy.

Now looking at our next initiatives, this is something Piani rushed on when he was talking about the master plan. Even though this is very profitable for the company, this is also very important for our management. And I'm talking here about COI, our integrated operations center. Ultimately, this will be the largest integrated operations center in the world. And we went all around the world to see what was most modern and interesting in that sense, and we're investing over BRL 3 billion, BRL 2 billion is just from our side, BRL 1 billion is to meet regulatory requirements. And we're looking at a return on investment of about 25%, and we expect that to be even higher.

Also chemicals, we spent about BRL 600 million a year on that. And there was no standardization before. We're bringing that in now. There's a lot of interesting things to monitor. There's also monitoring how we consume that so that we can work with that in a smarter way and monitor that in real time. Logistics optimization as well, we've already mentioned that we are looking into our entire network of storage units with eyes to lowering our costs and streamlining our operations.

Now a little bit on budget or balance. Our cost debt is very advantageous, even though the nominal cost for the country is very high. This gap sort of closed a little bit last year, especially because we've been issuing debt overseas, which is more expensive, but brings in more money. We've raised about BRL 36 billion BRL 14 billion of which in 2026 alone. So we ended the month of February. And by mid-March, we had already raised BRL 36 billion. So looking at that debt, 86% is in CDI. We were able to extend its maturity by about 1.5 years. And we were also able to improve our debt profile. We did some very interesting things here alongside a great team that joined our treasury department. We issued the first blue bond in Latin America and then the biggest blue in the world. We were awarded by A/B [indiscernible] because of initiatives we had with IFC last year, we were issuing overseas again. So really diversifying our funding sources. So when we look at our debt profile, it's very different from the average for Brazilian companies. About 1/3 of that is in DFIs. And that goes to our purpose when it comes to sustainability. 1/3 in international capital markets and 40% in the local market. And we are diversifying because of how much funds we have to raise. And most of those are connected to sustainability initiatives as well. When we look at investment, ultimately, we raised those funds for the purpose of moving our investment plan forward. And we'll be hearing more about that, but we've been growing that plan because as much as we can move forward our universal access plan, that's what we will do. About 25% of what we raise goes directly to the universal access fund, 7% goes to water resilience and 28% goes to anything else. We talked for example about COI, that's within those 28%. All of that allowed us to improve our return on invested capital. We've been expanding that, growing about 200 basis points versus 2023, and that's ultimately a product of everything I've just mentioned. Also improving our profit per share for our shareholders and also looking at [ EV/OREV ]. When we think about what all of that matter all of that means, we had a 93% TSR, 82% from asset prices and BRL 5.9 billion in our shareholders vesting shares, all of which we were able to do during this period since we took over. Now looking ahead, we have over 2 billion connections for sewage until 2026, 70% of that has already been delivered. We have an important systems during this year. We have S/4HANA, Salesforce and many other systems, we're introducing the engineering excellence center. We are also looking over a billing system. There's also the tax reform, which is very significant for how we work since this was a company that was not issuing local invoices or having that looked at. Also energy, as I mentioned, we have significant contracts, which will improve our price per megawatt over the course of the year. COI and IME, which will improve our metering systems. We want to go 100% smart meter. Also the integrated reservoir management with EMAE. We want to improve our CapEx plan via that threat and also the development and attraction of talent, which goes back to everything I just said, we want to bring in good people and also develop those that we already have in-house. A few days ago, we were looking at the structure of our staff inside, and we asked how many people do we have when it comes to attraction and talent development, and it was 0%. And it made perfect sense because we used to be government-owned. People were taking a government applied test to be able to come join us. So it makes perfect sense. This is something that we have in our minds is leadership to improve the company.

So on that note, I will finish my part and turn it over to Andre. Please.

Good morning, everyone. My name is Andre Gois. I am the Director for Water Operations. Our management now responds for the entire state from water sources to the management of even water walls. And I'd like to show you or to give you an overview about our entire water management system.

There's a milestone for us at SABESP, which was the water crisis in 2014. This was a trauma for all of society, and we learned a lot from that. So we would like to show you what happened during that time and afterwards. We are much better prepared in terms of infrastructure have been since then. So we are showing you how much of growth trends for -- between water sources since then? And when you have a wider flow, there's more resilience to mitigate climate impacts. So we've improved from 1.816 to 1.945 cubic meters per second and also improved the system or created a new system. We have the system of 5 cubic meters per second that's now operating in a very significant way. Also the transfer of treated water between systems. So we increased the capacity to transfer treated water between systems or across systems. So that gives you a lot of me way to increase or decrease your systems in the metropolitan area. We can, for example, decrease the Cantareira system and increased the Guarapiranga system to keep the population supplied according to which water source is doing better. And here you have in general terms, the size of each system. We have Guarapiranga 23% and Curitiba 14%. We also have Sao Louren with about 10%. And that's how we can move the water from one system to another, both treated and untreated water.

We had a very interesting snapshot of last year. This is the waterfall level year-by-year since 2013. And if you noticed, 2014 was the year of crisis, and all the society felt that. But after our works have been done in Sao Louren and [indiscernible] as well, connecting that to Cantareira. In 2018 and 2021, we also had challenges but we went through those without society feeling it. Last year, we had a very similar snapshot to what we had in 2021. If you look at the dry period, the bar in light blue is the dry season, and it was much longer than in previous years. And how did we manage to overcome that? Looking at the infrastructure that we already have in place, we also continue to work on bringing more resilience to the system and also we lowered the pressure by the middle of the year, and that allowed us to optimize the service throughout the year.

Here, we look at the water uptake throughout the year. And you can see how it fell throughout the year. All of that was for reserves for our water reservoirs or water sources. And this all goes to how the operations are being managed.

Again, looking at GDN, our reservoirs started going up in January. But other than that, you see a continued drop in our levels last year. We came to the very limit by December. And after January, it began going up again. We're still managing that and we're being able to make better use of this period of higher rainfall. And these charts show what the rainfall levels are going down or moving closer to the historical average this year unlike what happened last year.

We also run our projections. I mean, how are we projecting for this year considering what happened last year? Will we go through another crisis or not? Our thinking is if the rainfall levels fall in line with the historical average, we will come to about 10% of the metropolitan -- integrated metropolitan system. So it won't go to 0, we'll be able to make it. But this works as if there was no one working but we have people working on this. So as it goes down, we'll be able to manage it. And what happens is we are at 70% of the historical average, which is the green line. And if that's the picture we have this year, things will be a bit easier.

The thing is we haven't seen the historical average in the last 10 years. So that's not something we're counting on. Here, we show you some of the structural investments we'll have through 2030. Roberval will talk about that as well. And SABESP never stops, we need more and more water resilience. That's something we are always discussing and always focusing on. Whenever you're investing, your focus is bringing more resilience to the system, more water resilience. We'll be hearing more about that in our initiatives to -- for more resilience to the Tiete system. We've also increased the resilience of the Cantareira and other systems in the metropolitan area.

Here, you have a list of the most important investments. We'll have on both untreated and treated water as well. And this is to show you that we can stop investing in water resilience. Otherwise, we'll be swallowed by climate uncertainty. Climate uncertainty is a certainty, in fact, and we're always trying to mitigate that.

Now I'll hand it over to Luciane.

Good morning, folks. I'm Luciane. I am the Regulatory Department Director. I couldn't be here earlier because I was meeting with the regulator. We had to come up with a policy by 12:00 today. So I was working on that.

Just like Andre said, we have been investing in water resilience. We are now implementing this new asset allocation. As far as costs are concerned, if we are faced with the crisis, we'll have to maybe reduce that supply. We're still protected by the contract. URAE-1, that's the risk allocation. There are some triggers since objectives. They are all mandatory. In extreme weather-related event, we need official statement from SP A�guas because they'll have to declare that shortage. We have that declaration for both Cantareira and also Tiete water sources. We have to have a technical report that the ISH water safety index, it has to be below the parameters set forth by ARSESP and SP A�guas. We have to be compliant, we have to come up with a long-term plan. This is the long term to provide water security as well as a contingency plan. We've already presented those plans to ARSESP, so we are compliant with those requirements, and we are now executing our contingency plan. As of August last year, we're now executing that plan.

As far as economic protection is concerned, we have some rebalancing through tariff revisions that are regular or extraordinary depending on the level of impact in the company's financial reports. Everything set forth by the contract that is clause 37 article N.

And we also have mitigation and governance. We have a structured contingency plan. There are 3 contingency plans actually started from the strategic index all the way to the tactical and institutional coordination. We are part of a committee that is made up of SP A�guas, ARSESP and SABESP is always invited. Either we show our plans. Anyway, it's up to them. They'll demand that commission. We have weekly meetings on Mondays, with all these agencies to work together. So it's a very coordinated effort. That's it.

I'll hand it over to Roberval now. Roberval is a great engineer and he's a great beach tennis player. You should invite him to your doubles tournament.

Well, if I say, I should say that I play beach tennis. We have many players in the audience. Good morning, folks. I'm Roberval Tavares, head of Engineering. I have a -- I have 33 years of to experience. Now I'm also a sanitation expert, I'm almost a financial investor because to come up with that CapEx, allocate all that CapEx, he had to teach me a lot of things. Anyway, it's great to be here today. It's great to be part of the effort to provide universal access.

All right. Let's go. These are major challenges. Number 1 is undoubtedly universal access. In 2025, we met our goals in the concession contract in water, above 44%. This is formerly in urban areas and informal in rural areas. We more than doubled the plan for 2025. Sewage collection 43% above, informal in rural areas. We are meeting the contract numbers. And the #1 challenge is treatment, water treatment. We're up 33% above the goal. In late December, we had already achieved 33% of our goal for 2026. We have already reached that back in 2025. As to CapEx, Daniel and Piani, we allocated BRL 15 billion historical levels back in 2025.

Just to give you some context on the chart on your right, fourth companies in terms of investments. Petrobras at 108 billion, [indiscernible] is BRL 26 billion, Veolia is BRL 25 billion, SABESP at BRL 15 billion. In terms of infrastructure, we are ranked third in terms of investments. These are the major projects in 2025. Expansion of our treatment facility at the [indiscernible] from 2 cubic meters to 6.2 cubic meters per second. We're now implementing a system in Perus, a new water treatment plant. The only district in Sao Paulo that had no treatment facilities whatsoever. We're now opening a new treatment facility. Many mains. This is an example over 200,000 economies in the coastal area of Sao Paulo, that's the water treatment.

Facility Melvi in informal areas, my dear friend, Debora and her team are in charge of providing universal access in formal areas. Over 279,000 new connections in informal areas, most of them in the Metropolitan Sao Paulo area, but also in the Sao Paulo state coastal region. We're not operating that up until 2025. The pace is very good, indeed, looking ahead. As Piani said, we have many contracts underway, BRL 39 billion underway in 2026. Metering is still for the entire state as of 2027, that will be broken down by city. We're at the third line, that's the planning. That's our goal. The planning has a larger number than the second line, which is actually a part of the contract, a concession contract. So we expect to reach '26 end with 238,000 economies above the number in the contract. That means we're already bringing in savings of 2027 to 2026, especially in smaller cities.

Our strategy for the year is as follows: waves of hiring. So the supply teams run by Gustavo could have some more predictability. So the state of Sao Paulo is broken down by 2 waves. Wave 1 and 2. We're now at wave 2, the metropolitan region Sao Paulo, the coastal area and at the same time, the largest de-pollution system in Brazil. That's the Integra Tiete program. We'll be addressing that shortly. All these construction projects in Sao Paulo is for providing treatment access for sewage. That involves a lot of hard work around the clock and are going to provide universal access by 2028 actually.

We'll have 325 cities serviced by SABESP with universal access metropolitan region of Sao Paulo, the coastal area of Sao Paulo because these are more complex projects that will take more time. In the rest of the state, we have a different approach. It's a value-based engineering process. There's a partnership of SABESP and other companies to develop projects that can benefit our CapEx even more, which is to do more with less. That, of course, will boost the work we're doing in the rest of the state.

Let me address Integra Tiete, the largest project in metropolitan regions. We now have under contract BRL 17 billion, BRL 9 billion for water treatment plants, another BRL 7 billion for linear projects. We broke that region in 42 lots, and they are being operated at the same time. Over 1,400 construction of linear projects. These are main ducts implemented next to rivers. There are many water treatment plants and we're still delivering some in 2026. And phase 2, we're now ahead of schedule. We've reached 229 kilometers of construction projects already finalized. It's a major construction site across the board. I'll give you an example of the city called Guarulhos, that's the largest investment per resident in the metropolitan area of Sao Paulo. These are the water treatment facilities and the sewage treatment facilities. We are now expanding the 4 major plants, the ABC region, Parque Edmundo, Bariri and Sao Miguel. We're implementing other, Perus, Caieiras, Aguas Vermelhas, Sao Joa, [indiscernible]. These are new plants now being implemented as we speak.

And major collectors, major collectors, major ducts, that are being implemented. Let me say that treatment is not connecting every unit. You have a major collector alongside rivers and you can collect all these economies at the same time. That's a major collector from the [indiscernible]. We connected 10,000 economies at the same time and so on and so forth. These major sewerage systems can improve the conditions of all rivers and all the creeks or the streams alongside those major rivers. All affluence of the Tiete river were measured with organic matter content smaller than the numbers in 2024. Again, proof that we're removing sewage from rivers. We're now redirecting into treatment plants. This is according to CETESB numbers. As far as capacity is concerned, it's going from 23 cubic meters per second to 42 cubic meters per second, 80% increase. At 42, we can reach universal access. All treatment plants are part of our technological route prioritizing circular economy going through every step of the way. Not all plants follow the same route, but all plants will be prioritizing around that is more suited to that facility and to the company. Focus is in reducing OpEx.

Now on to informal economies. A lot of work in the Western region of the state, over 59,000 connection between water and sewage. The state is playing an important part, the metropolitan areas in the north and the south and also on the coast, many projects being conducted as we speak as well. And the goal is to address informal homes.

Water security, this is very important as well. We want to anticipate BRL 7.8 billion of investments that were scheduled for the cycle starting in 2030. We are prioritizing those that can generate more impact to the system. And these are the most important projects for 2026, '27 and then '28, 2030. Let me point out to this. When we prepare all the planning for the year, before 2025, we did not consider EMAE as a partner, now being part of SABESP. Once we have that partnership, we are reviewing those plans because it will definitely benefit our water resilience program. Some of these items may be impacted -- may change. They'll be better, actually. It will generate even more efficiency to our company as well as ensuring more water security to the entire metropolitan region of Sao Paulo. Baixo Cotia expansion of the water treatment plant. After the Sao Lourenco inclusion that was put in the back burner, we are recovering it now. We are renovating it so that it can be operational again. Yet another cubic meter for the population. The largest project financially speaking, is the water transfers from Billings to Taiacupeba, a 38-kilometer duct, the diameter is between 1,500 and 1,800 millimeters. We'll be bringing water from Billings to Taiacupeba reservoir, going through those cities, Sao Bernardo, Santo Andra, [indiscernible] Rio Grande do Sul, Suzano all the way to Mogi das Cruzes.

Along the same lines we're now carrying out a very different project in Sao Paulo. We had to go to Barcelona for a benchmark. They had to recharge those water sources. And we're implementing something similar. So we can recharge order, refill the water sources in Suzano. That's a pilot unit and that can be transferred to [indiscernible] pending approval, of course, from regulatory agencies. But this will be a very important project for '26, '27.

Now on to CapEx management. In the company, we work on that considering 5 different investment fronts. The most important as Daniel said is universal access or the expansion of our system. 65% of everything we invest goes to expanding access. We have another important route, which is safety and water resilience, asset renewal, operational efficiency and then indirect investments, which will support us in moving all other operations within the company. So within that context, we started the project back in 2024 with investments of as much as BRL 24 million. And since then, we have been working on a few different aspects such as moving forward, the 2030 cycle, which goes to our resiliency project. There were also important things that took place in 2024 and 2025. And we are now at the stage of discussing with our regulator, ARSESP, the approval of the figures involved in our investment plan.

Another thing I would like to highlight before we move from this slide, as Piani said, we have the conception of the project for all those 371 cities. So we have the detailed map of everything we need to do for each one of these municipalities, which goes back to our universal access plan. So in every front of our CapEx, as detailed in our portfolio when it comes to expansion, this is everything we have in terms of expansion, operational efficiency, which involves the water meters, smart metering, water safety and the renewal of assets, which is another very important item we need to look at very closely. And we have a specific methodology of monitoring everything we have in terms of potential issues with our assets and staying ahead of that, moving projects that will keep the company in good state. And expansion, as I said, is our main focus. Again, 64.8% or 65%, as Daniel said, of our CapEx is what's planned for us by 2020 -- by the end of 2029. As you see the blue part of the chart goes as long as 2029. And then we have the vegetative growth of cities that we also have to manage. And here, I'd like to show you the case of Guarulhos, just to give you an idea by showing you one city and how things have been changing. SABESP took over water and sewage management in the city back in 2018 and now 40% of the water in the city goes to our treatment plants. So in just a couple of years, it went from 18% to 40% of the water treated with -- collection rates also went from 91% to 96% to the benefit of over 300,000 residents of that city. And between 2023 and 2025, we've invested BRL 1.8 billion in that city alone. This is a great example of what we need to do in terms of sanitation. And if you've been to Guarulhos, you know this is a city with a population of over [ 200 billion ]. And here, the map show the green part is where we had water treatment access, and you see what it looks like in 2023 and what it looks like now in 2025. So that's what's important, right, Rafael.

Also on the informal side, we are now serving 50,000 residents. Again, informal areas or another highlight for that area. Important projects, we have delivered the treatment plans of Fortaleza and Cabucu, very important ones. And this is on the fringes of those cities, part of that now goes to the plant that we just open and others go to other plants that we opened this year. Other plants underway -- those projects are underway, Bonsucesso, [indiscernible] and Sao Joa, these were existing plants that we are expanding so that we can treat more water and serve more people. We'll have over 23 million connections.

So that's what I had. Thank you so much for your attention. And I just wanted to say how proud I am to be part of the greatest universal access plan in Brazil, perhaps even the world.

I'd like to invite and turn it over to my friend, Denis Maia.

Thank you, Roberval. Well, the first thing I'd like to say is to suggest the green stain to blue stain because that's SABESP color and not my rival team's color.

Good morning, everyone. Well, my name is Denis Maia. I'm the Executive Director for Technology. As Pierini said, we've combined 2 different departments to one executive department. We later understood or later learned that American Water Works has the same structure inside. So we'll be talking about clients and technology at the same time.

First, as was said, our smart metering system is very interesting. And I'd like to show you a quick video.

[Presentation]

Well, as we said earlier, when we came in, this regulatory requirement was given to us, we needed to install smart metering across the Board by 2029. So every city or every household that we serve would have to be -- we have to have the meter replaced.

So the first question we asked was well, what is the greatest metering renewal in the world? We found out that in Barcelona, there was 1.4 million. And in Beijing, they had 1.8 million. So by 2029, our mandate was to develop a project that was 4x larger than the largest smart metering projects in the world. What we did since then was we ran the world to study everything that there was in terms of experience and technology.

We went to different places, England, France, Spain. In France, we looked at another industry. We looked at EDF. Now in France, every household has a smart energy meter. We also looked at the experience in the gas industry in Italy. So we looked beyond water and sanitation. We went even to China, visiting major players precisely so that we could understand what was out there. This was a benchmarking and analysis time so that we could really understand the scope of the project. We issued an RFI. We went to different consultants until early August when we signed the agreement.

And I'll talk a little bit about our strategy. Just in terms of time frame, we had the first smart meter here on campus.It's now in operation, but we can also look at it right here if you want to look at it up close. This is what the smart meter looks like, the one we have working here on site.

On directory #2, you will also be able to see it in action. We'll show you what it looks like and how it works. So this is the time frame and what we did to launch our new smart meter. And these are a few things we learned from all of these visits and the best practices we looked at in each one of them.

Well, first of all, we wanted to ensure the highest effectiveness rate and the highest RCA. So we realized it was very important for us to have embedded modules, whether we're talking about communication module or any other required module, it had to be embedded into the meter. There's a lot of technology of external modules, but that leads to a lot of failure.

The second was we had to decide what type of technology we would be relying on. Would it be radio frequency or a public network, just the cellphone network. If we were to use radio, we would have to build our own frequency. And this is something that in previous years, especially in the electricity industry, they invested in a lot of radio frequency networks, but that's an investment in a network that only you will use. But it felt like it wouldn't make sense when you already have an IoT, the narrowband IoT, where you have a frequency of a public mobile phone network that was available.

So you would need to invest on a new network because it's already there and it works as it would with a smartphone. It uses a smartphone chip. So we decided for NB-IoT to lower the initial investment, relying on a public investment with a standard, which is 3GPP. Every mobile operator uses it. So there's also interoperability. We would not be hostage to a single supplier. And we worked with a meter that would rely on an eSIM, much like your smartphones nowadays. So if you want to change vendors, if you want to change operators, you can do that remotely. So that's what we decided to go with NFP.

And it's very important to remember that we supply water. So unlike the electricity industry that already has a meter, we needed electricity. So we have 1 or 2 batteries per meter, but that battery has to last as long as the meter itself, so at least 10 years. So we ran a number of tests, stress tests on labs because we had to make sure that over the course of those 10 years, that battery would not need to be replaced. All of that was outlined. This is the meter that you saw here. And as a result of all of that design is this will be, at the same time, the largest IoT project and the largest NB-IoT project in the world. The largest NB-IoT supplier in the world has over 50 million points of access in the world, considering every industry from vehicles to the agribusiness industry. We will now have 4.4 million to 50 million today.

So what was our strategy in terms of our contract? All of you are aware of that. And we thought long and hard about how we would go about this. One of the things we looked at is there are many components. We have measuring. We have the communication platform. We have software to communicate with the billing system and MDN. You need people to install it, to commission it. And the highest risk in a contract of this size is points of failure where one vendor will be pointed to another to who was to blame. But ultimately, what we want is to get the information from our clients and build them accordingly.

So we built this project where we have a single vendor who will provide us all of these guarantees. So Vivo won this bidding, and it is now responsible for supplying all 4.4 million meters and offer us the guarantee until the end of the contract, which goes to all through 2039. So it offers 99% connectivity. They need to meet that target if we do not have that SLA. So this was the strategy we had for the contract in this project.

Now another very important point. Because of the sheer scope, first of all, we did not have the production of a meter such as the one we needed. We had to design one from scratch, combining different elements as we showed you before. So whatever supplier we would choose, they would have to prepare for that and sanction one such meter. So we also had a roadshow for international vendors so that they could participate as well.

As a result, we now have 3 international suppliers now opening their doors in Brazil, among which is Sagemcom, one of the largest ones in the world, which provided BRL 20 million to France, but also Axioma and Caifa. So we have players from France, Lithuania, China, all which are opening their doors in Brazil to supply our demand.

And another important thing, the technology we'll be using for the smart meter is the ultrasound metering technology, which is a lot more accurate. Now when we started, the price of one such meter was about BRL 1,300. Now because of the number of items we're asking the market, the cost has now gone down to BRL 380. So this is something that came with the system to provide the ultrasound and electronic metering units. So as we've shared before, this was an investment of about BRL 3.9 billion, 40% of return on investment, many benefits, remote reading and so on and so forth. And when it comes to revenue protection, which is very important, fraud detection, just as on the operational side, it helps us to detect leaks as well, which is a very significant source of losses.

Now this is something we saw quickly in that video and it's something I myself consider very important. From the customer standpoint, via the app that we will offer, this is already operating for those clients that already have the smart meter. They'll be able to monitor their daily consumption day by day and hour by hour. They can monitor their use and begin to use their water more consciously. There was recently a story on TV where they interviewed one of our customers, and there was actually a joke when the customer mentioned that she can now monitor the length of her daughter's showers.

And I have 2 daughters, so I know exactly what she was talking about. But it's very interesting because when you look at your consumption levels, you know when you took a shower, when you wash your dishes or when you ran a cycle and your washing machines. So you become more aware, you can lower your consumption. It's good for your budget. It's good for the environment. And most importantly, we can also notify you, for example, there's any abnormality in your consumption rate. So say you have a fixed level of consumption, especially throughout the night, that's probably a leak. And that's a huge problem for our customers. They will get their bill for 1 month and say, well, this has gone up significantly. So there's probably a leak unless there's any change in your behavior.

So now as opposed to being surprised by the bill at the end of the month, they will be able to monitor that and address that before it becomes an expense. In Madrid, where they've had a smart metering program for 7 years, they've mentioned that about 10% of their customers are notified for leaks, and they're able to address that in time. So it also adds a huge benefit to society at large.

Now let me talk a little bit about revenue protection. When we came in, this was a department that I created myself. Renato is a Head of Revenue Protection now. And this was a combination of billing losses and metering departments. Not to mention losses by leakage, which is under Debora's operations department, we have these loss categories.

And another important source of loss is the loss for wrong metering or mismetering because as meters age over time, they will also measure less effectively. So when we talk about a speed-based metering, after 10 years, we have losses of over 10%. When we talk about a volume-based meter, after 6 months, you have -- after 6 years, you have over 10%.

Now with a smart one after 10 years, it has losses of under 1%, which is why it's important to adopt them. So what we did was from about BRL 800,000 to about BRL 1.5 million. So that's about 85% increase in replacements, which brought to the company about BRL 220 million in revenues precisely because of that replacement.

On to fraud detection. This has been in the press. The operations called illegal connection. Is there a fraud in one of the distribution systems? Well, let's see. We detected over 55,000 fraudsters, including large corporations, restaurants, construction companies, hotels, 177 police reports and 27 arrests that brought BRL 86 million in additional revenue to the company.

On to billing. This is the highlight in terms of results. Our billing rate, everything we bill, everything revenue of 98.1% in '24. In 2025 was 101.7%, BRL 800 million of additional cash to the company. Of course, institutional relations department was very important in that effort. We managed to collect that payment made to the judicial system. Additionally, every billing activity, and I'll be addressing each one of them, including digital payments, we reduced the number of disconnections. We disconnected almost 760,000 customers a year in 2024 that was brought down to 1.75 million over 126%.

Disconnections is a tough measure, but it's necessary. When you are depleted of any other alternative, you have to disconnect the customer period. We've increased that collection of the payment. We are over 2 percentage points in terms of billing on top of disconnections, digital payment was the main driver. We have through the app, the virtual branch and over WhatsApp. We established a partnership with Meta. We were the first team to implement payment through WhatsApp. You can pay your bill either with the PIX system. You can pay cash, you can pay using your credit card, installments.

We are now at BRL 1.5 billion in first quarter through our digital channels, the app, the website and WhatsApp. The number is at BRL 250 billion. The run rate is about BRL 3 billion. We're almost at 15% of our revenue coming through our own digital channels. And this is also something new. We have that large number of disconnections. Let give them POS for all the disconnecting teams because that customer can prevent that disconnection from happening. That's the main benefit of the POS. You don't disconnect it. It's bad for the customer. They will not be serviced. They have to pay a fee. They have to wait for a couple of days to reconnect the service.

So every disconnection person will have that POS to prevent that disconnection from happening. We prevented over 250,000 disconnections by using this tool. Let me address the customer experience. Much has been talked about AI, especially generative AI and SABESP can be a great example. I remember Rafael sent a message to the Directors group, a report from MIT, 95% of companies that try to use AI projects failed. Tell them that we are in the minority that was successful.

Anyway, we had Sani is our agent, our virtual agent. Sani and WhatsApp. We also have Sani and URAE. We use 2 different technologies. OpenAI, in other words, ChatGPT, WhatsApp and we use WhatsApp from IBM and URAE. You can use voice using WhatsApp or text messages. More than 50% of all the service we provide is through generative AI, either through WhatsApp or URAE. And these are the numbers.

Customer satisfaction is set that's a company's KPI, 4.4 out of 5 through WhatsApp and 4.1 at URAE. This is a great example of how much we have come along since 2025 by providing digital service using the state-of-the-art technology.

Anyway, on top of that, our app that was introduced back in July, URAE in November. In August, we launched the new SABESP app as a native app, a new outlook with digital payment and that exceeded our expectations. We have almost 1.2 million active users, over 2 million downloads, almost 100,000 scores or assessments for both iOS and Apple Store. 4.8 and 4.9 Play Store and the Apple Store, that's the best ranking app. That's our #1 digital payment, more than WhatsApp in terms of volume.

When you combine the old virtual agency, the app, the new virtual agency, all 84% of our service calls are through the digital channel.

In conclusion, Daniel, Pierini, everyone talked about our integrated operation center. This is a major project with the operations, a lot of embedded technology BRL 2 billion worth of investments. Expected TIR is above 25%.

Three main drivers. Number one, people, energy and then treatment or chemicals. By optimizing and everything that will be integrated by COI, we' have gains in all these areas. This is the benchmark we adopt. So here are the benefits. When we consider centralizing the entire operation, we can consider operational excellence, standardized procedures and rules because we have almost 50 distribution centers. Each will have their own processes, different technologies.

So now efficiency gains are substantial. And that includes quality, being right in investments, the correct allocation of investments, we'll be able to identify losses and can more easily manage the entire operation, and that will define investments. We will allocate investments more specifically.

When we talk about COI, the I stands for integrated from river to the river. We look all the way to the catchment all the way to the sewage with that integrated view. You can simply monitor, analyze, decide or operate either automatically or remotely. These are the steps along the way, either for water and sewage. Automation is total or it can be partial given the specific conditions of each step of the way.

We expect major gains once this entire project is concluded. We're starting with the metropolitan region of Sao Paulo and then the coast and then the rest of the state. But in 2 years, we'll gain a lot of benefit from this operation.

And finally, just like any control center, these are the aisles. We expect to have about 100 people, almost 200 in total, considering all the shifts. This is the COI. You have the chance to take a look at it after lunch. The center is right here. But once the project is concluded, it's going to be way bigger. That's it folks.

You still awake? Now Q&A, right? We have way too many directors. We should all stand. I shouldn't be standing right next to you. You are way too tall. Who is going to be selecting the questions?

Yes, I'll be doing it.

All right.

Very quickly introduce yourselves, those of you that did not present. Gustavo Fehlberg, I'm in charge of Corporate Services and Debora, Operations and Maintenance.

Good morning Samanta de Souza, Institutional Relations and Sustainability Director.

Good morning. Joshua Bressane, I'm incharge of People and Management.

Rafael Strauch, Strategy, New Business and Transformation Director.

Maria could not make it. She is the Legal Director. She couldn't be here today. This is the entire Board.

And Lu is also addressing some problems.

Giuliano Ajeje from UBS is about universal access goals. Concession contract has daring goals by 2029. What are the major bottlenecks, environmental license, suppliers? And how is the company addressing each one of these problems?

Okay. On to the bottlenecks. We've mapped them out and starting in 2024, and we have mitigating activities for each one of those bottlenecks. Today, the #1 concern is project suppliers. This is something that was on our radar from the get-go. We're doing 4x more than what we used to. We had to adapt, and we couldn't find that many suppliers. But with that mitigating or the mitigation plan, we changed the methodology. We started from the conception all the way to the execution of the construction of the project, and that is part of our contract with that added value engineering department. And we could overcome that problem to deliver those projects in time.

The other matter of concern, maybe Gustavo could help me out here. As far as labor is concerned, we are subject to the supply and demand. Prices are above inflation because we are doing 4x more than what we used to. Labor will migrate civil construction. There are other alternatives. Many people coming from other parts, other regions, trying to work in the residual market. We managed to accommodate all the mitigation activities were successful. Would you like to say something, Gustavo?

Yes, let me give you my two cents. 140 categories. We mapped 8 were more troublesome. We've mitigated 7, except for the one that project. We are sharing the responsibility using that integrated contraction from these outsourced companies. And we were very successful in that interaction from private company to another private company to bring in companies that did not operate in the sanitation industry outside of the state of Sao Paulo. They had some restrictions to work with state-owned companies. There has been an important movement of expansion and some of a renewal of our new business partners.

As far as environmental licenses, we have been working directly with CETESB, the regulatory agency, and we've received some approvals, maybe Samanta could address some structural change. And that's the licensee legislation, right?

Yes. Let me address the licensing governance. We put together a strategy to monitor on a weekly basis with regulatory agencies. We are compliant with everything they demand. Everything is running according to plan. We have a lot of volume to be carried out in the coming months in the rest of the state because of that waves of licensees in the rest of the state.

And we are very optimistic as to the new environmental legal framework that is effective as of last February. And they set forth licensing rules. They're about to be approved in the coming months. We have to wait for the adoption of the state regulation phase. It was approved at the federal government. It's going to be implemented at the state level. So the outlook for licenses is positive and also for the near future. Thank you.

We also have to have the authorizations of the granting. They are being proactive. We have an internal committee to address that. We have the URAE and the local governments, the municipalities have been granting the licenses so that we can carry on with the projects.

Next question. The second was about CapEx inflation. We already addressed it. Let me address the first and the third questions.

Number one, micro drainage, what's the status in Sao Paulo? And the third question, what are the quick wins to provide the unitization project? Can you give us some examples?

Well, there are 2 comments I would like to make about drainage. We've been talking with the infrastructure secretariat to come up with the model. Starting early last year, we've been talking to the Secretary, Natalia to address these issues. We'll come up with a proposal to have a regulatory sandbox. This is one front.

And the other one is universalize that is going to be presented now. There will be a drainage component, maybe linked to the PPP. We're still not very familiar with the entirety of that effort. In a nutshell, there is not a model in place. We'll have to test a couple of proposals, some things that we may discuss with the granting power and yet validated by SABESP. They have to validate everything. But we're trying to come up with a pilot project so that we can test with controlled risk and then we can scale up. That's what we have been trying to do.

These were two. The third we had answered already, right? All right, unitization. Yes, you can take it over and then talk about the engineering project as well.

All right. So on unitization, because the larger share of CapEx is being executed in engineering followed by operations with Debora here. We have a full plan that we've outlined and including several improvements we've made over the course of 2025. We have actually changed the structure of the company, and this has been strengthened by the regulatory agenda as well. We want unitization to move in tandem with the start of operations of our construction projects.

Now on the operations side, because what we're doing is too granular unitization is pretty much automatic. For example, when we change a water channel, you do that on 1 day, on the second day material goes up for unitization. With construction, it takes some time until it's in operation. So a lot of the projects we started in 2024 and '25 will start operating now in 2026.

Going back to examples I showed, we are starting operations with several treatment plants and long-term projects, 2-, 3-year long projects only start operating at the end when you conclude your works and sewage starts being pumped into the plant.

Now with others, we are working with partial operations with collection or catchment. So if you have anything to add?

Yes. I just wanted to add something to what Roberval said. We are now setting up a large engineering excellence center whose main concept will be to create working packets, unitization packets. So across the digital engineering center, the project concept will be devised and then you have a team. All of that will come from the unitization project. And then it will be tracked throughout its lifetime by a management platform by Oracle.

And lastly, when it comes time for commissioning for the installation of equipment, we'll have even the geographical coordinates with geo reference units so that we have the entire visibility for unitization from the project's conception until its rightful commissioning. And in fact, the components will be the unitization component. So our entire investment will be based on unitization units.

So until we get to that wonderful world, we are centralizing now at the beginning because we're investing highly on that. So that's under Luciane's purview to make sure that we are making the regulatory requirements. This is something that we as a group are learning, and we are moving -- working very closely with engineering and operations under Debora.

Our next question comes from Guilherme Lima with Santander.

Could you talk a little bit about the tax impacts of the tax reform, CVS and IBS and if you can see any tax pressure coming from that?

Great question. Well, first of all, we do not have the entire regulation for the tax reform yet. But yes, we do expect some tax impact once it's fully in effect. And we've been talking a lot with URAE with about that. We expect an impact in the high single digits on our tariff because of that reform.

There's also some discussion around IBS because nowadays, the PIS/COFINS tax is levied on a different item. So it will depend on what RCEP decides.

Okay. So now we have 2 very similar questions. So I'm going to combine those, one from Guilherme with Santander and the other from Jessica. About new business, could you talk about the possibility of part of the bidding for the Buenos Aires treatment facility?

And the other question along the same lines was about how management thinks about the trade-off between inorganic growth and capital requirements to fulfill the obligations in your contract.

Well, about the cases that you mentioned, we do not have the contract relative to the project in Argentina, but we are looking into that, just as we're looking into several other opportunities that are popping up in the industry, both in Brazil and around the world, as Piani mentioned. With COPASA, what we have is the contract from Belo Horizonte. They operate in a similar way to us with a few differences, many of which are positive, but we have no guidance as to how the other cities will work. We do not know how it will work or timing.

All we have access to is what the entire market has access to, but we do not know at this point if we will be taking part or how. But we are paying attention to that, and we're looking into the details.

Well, as to the trade-off between organic and inorganic growth, I think there's an objective side to it and a subjective side. I remember when I was in the electricity industry, when we would manage regular jerry rigs with other concessions. And at the time we ran the numbers that it was equivalent to buying a company of 3x the EBITDA that we had at the time.

So the discussion about internal returns and outside returns, of course, we also have to look at the demand and all of that will be considered. When we think about investments, first, we have to convince ourselves and convince the higher ups and then everyone else. So it's a natural process. And of course, we're looking into everything, but it doesn't mean we'll be involved in every project. Some people like these things, other people like those other things. So it's controversial.

But even for the sake of learning and understanding the process, we are looking into every opportunity. M&As are critical. But over the course of your lifetime, you'll do 1 or 2 that work. But we're looking at it on a case-by-case basis.

Well, we have a few questions from Safra. I'll ask the second one first because it's related to what we just answered. In the model that you've just presented, is it clear to you what variable you're most mature in? And then it goes back to operation. When we talk about new efficiency operations with logistics, can you give us more granularity in terms of introduction and the time horizon for these initiatives?

Well, I think that the riskiest is when it comes to product, but it's the one that brings the highest returns. I mean, generating alpha over BRL 100 billion in market cap is a huge challenge. So I mean, spending money is easy, but generating returns is harder. Of course, we're talking about things that are closer to us in this case. I think geography comes second and moving to a different industry is highly complex.

And again, I provided a framework. I'm not saying that we're moving to any other side right now, but these really are the drivers. So as we explore, we ultimately develop and meet our goals. And so we allow ourselves to look to our side. But I think there's a very similar go-to-market when it comes to water, electricity or gas, we have a lot in common. So this is one thing that brings us together. But theoretically, it could happen, but it's a case-by-case basis. But again, product geography industry.

Operational efficiencies. From the logistics standpoint, when we think about an infrastructure industry to transport the product, water sewage, we're talking about the transportation projects that we've heard about. But our mindset is there are several materials and accessories, chemicals and so on and so forth that also need to be available at the right time in the right place.

So obviously, we revisited from 1 year ago to now, the goods and consumption goods mindset. So if you do not have the inputs at the right time, you've lost your sales. So that's what we're understanding now. So we're looking at the TIFF of each product to make sure that each team is supplied with the right material at the right time. And this can be seen in our balance sheet. You've seen things going down substantially, and we believe more opportunities will come up soon.

Now when it comes to the transportation of mud and water, as Danny mentioned earlier, we have the outbound of these products in our operations. There are more efficient technological routes as well as some not as efficient. And we've been seizing the opportunity of dehydrating mud so that there's a smaller volume to carry and other initiatives such as optimizing our routes and bringing the mindset of a streamlined operation.

Well, as to the COI, this is a project that's already being introduced. So by the end of the year, we will already have the metropolitan area of Sao Paulo with the metering and the operations being monitored. So by next year, we will start part of state and the coastal region. And as of 2028, we'll have all 175 municipalities operated by Sao Paulo being monitored by the smart meter.

Great. I have 2 questions here about CapEx, one by Vladmir with Bloomberg and one by Bruno, who's right beside him. The first one is, could we talk about what areas or municipalities where the change in verifying, meeting the target is seen. And considering your CapEx for 2026, is that a good frame of reference for the next few years? And could you explain the delta for the initial plan for privatization?

The second question, could you repeat that? The BRL 20 billion in CapEx, give or take, for 2026, is that a good frame of reference for the next few years? And if so, could you explain the initial delta since the privatization.

All right. Let me take the first one. As for the 371 municipalities, what we planned was as follows. In the first half, we have what we are calling the universalization or universal access compass. And with that compass, we identify the further municipalities thinking about 2027, which is our first finish line when it comes to the indexes by municipality. And we are already prioritizing those, thinking about what we need to start doing now to deliver by 2027.

Highlights. Metropolitan, Sao Paulo, with what relates to sewage. So these 38 cities in the metropolitan area are our major challenge because we have complex projects with a high impact in urban area. We're talking, for example, about a collector in a street called Vinte e Tres de Maio. And if you've been there, you understand how big the challenge we have is. And this is a challenge that's multiplied by the millions of collectors we need to build.

So metropolitan area of Sao Paulo, this is our challenge, which goes all the way through 2029. And there's no escape. That's technically what we're facing.

The other cities upstate, that's the opposite. We are confident that we'll be delivering them earlier than expected. And of course, they will not be all by December 2028. We will be little by little delivering these municipalities, which will continue to grow organically. Each municipality that we provide universal access to, I will hand the keys over to her and she'll have to move forward with them. So that's it. The highlight is metropolitan area of Sao Paulo. Daniel, please?

Thank you. Well, we should keep things as they're going until the end of our universal access project. When we think about the differences, I think that a lot of that will come from inflation. I think we've talked about inflation a lot here today. What we did not mention is that in addition to inflation, our demand is being multiplied. We have several other projects in the state, and we're talking about the biggest, most thriving state in the country. That obviously leads to competition.

So the biggest impact comes from inflation, and there are also other projects that we've been discussing with the agencies, such as water safety and everything else we've discussed. They were in general terms provided for in the contract for our next cycle. So we've been discussing what we should and should not do.

Now we're looking at the metropolitan area vis-a-vis the acquisition of EMAE, which might provide some respite within that realm and a few investments such as the replacement of meters, which is being concluded earlier than expected. Our contract provided for 7 cycles of metering replacements over this period. We are replacing the old ones by meters that last 10 years.

So thinking about the next cycle from an efficiency standpoint, it is very positive. And there's also the operations center. We are actually building on something [indiscernible] has asked us in terms of having more points of access across the network. And we took the opportunity to build the center. So because of the requirement, we decided to do that, thinking also about the efficiency for following future cycles as well. So these are the most important factors. Also changes in regulatory requirements, which is pavements, new networks being acquired upstate and other requirements that came up that also pressure our execution costs.

Let me just make a couple of comments. We have 2 major projects, the expansion of Barueri, Sao Miguel. We retrofitted -- of all that capacity, we retrofitted part of it. We'll have to expand it. That involves billions of reals. But if you look at Roberval presentations in detail, you've seen that CapEx curve is a peak in '27, it will come down substantially. especially of the sewage treatment plants that will use up cash for about 2 years.

And on to resilience, we had to anticipate that because of the crisis. That's a conversation we have been having with the government as to the pace of those projects. That 5 time or 5-year horizon can help us, but it has to be negotiated next year. And finally, that evolution in targets to have more freedom to deal with the coverage by city. We have time to readjust our priorities. Maybe 50%, 60% of the entire project will give us some leeway to look at Roberval's barometer to better calibrate what we have to do, just what we have to do.

There's a question from the webcast. It's about the cultural transformation journey from a state-owned to a private company now. It's not over yet. It's a long journey. 3,800 people left the company decided to do it voluntarily, but we hired 2,000 people because we are very attractive. We have no hard time hiring people, especially at this point in time.

The second issue is internal. We have to work with the leadership. It used to be a command and control company. Now it's a more collaborative approach. employees will be directly benefiting from the company's results. This first year was outstanding when we paid all the bonuses way above what they received in the past. And that's the proof of what we were going to say or what we said on October 1. So it's now part of our culture. It's not a simple journey, but it is transformational. 7,000 people that have been here and now they are adopting a new mental model of a company that is growing exponentially.

We have 2 more questions.

From Goldman Sachs. My question is about the reduction of regulatory gap. What's the expected level of reduction for commercial discounts, mix discount, among others?

Go ahead. Go ahead.

There were 2 big gaps and a couple of other smaller things. The number one was discounts for large customers. We have 2 customers that have a contract with discount. All the others have been terminated. There are some pending injunctions. Some customers try to reduce volumes and we can have better prices. We may lose some volumes. But the net effect is positive to us. There, we are not expecting other major changes. And the track record as far as injunctions go is very positive. This is the first gap.

The second gap was for renovations and cancellations. The first tariff revision we had in the new contract, this issue has been addressed. The number will come down substantially. And as our revenue grows, if we do not improve the cancellation percentage points, that would still be a gap, but a smaller one. We will keep on trying to improve it. There is still a minor gap in there, nonetheless. For the rest, there are some temporal effects unbilled revenue. There are some temporary gaps in revenue.

But as far as regulatory gaps is part of the past. It's becoming more and more part of the past. We still have costs. There are some legal or legal related issues, but we still keep working to try to turn the page. That's it. In reality, we'll never be able to eliminate that completely. It's almost impossible. There will always have some in there, but it's going to be residual at year's end. That's our expectation.

We have an additional question still to go. Victor from JPMorgan. In the smart metering, how do you write off existing assets?

Accounting -- based on the accounting approach and the financial approach and the regulatory one, over 2 million were over 10 years of age. And we're starting replacing the oldest to mitigate that impact. Based on our track record, the regulatory life use is 10 years. We have 2 meters, mechanical volume and speed and the ultrasound. Those that are mechanic will not last 10 years, physically speaking. They're not metering or measuring properly. The ultrasound and ultrasonic meters can last 10 years. Of course, we are choosing the ultrasonic. Given our scale, we can bring purchasing price by more than 70%. So it's a very large business. And some of our suppliers are putting together assembly plants to bring that cost down even further.

This is the meter we're now experimenting with. We want to build it in plastic instead of having that metal cabinet so that we can bring that to the [indiscernible]. The first prototype will be operational in the second half of this year. We have over BRL 2 million above 10 years of use. But when we look to the coming years, we have at least BRL 1.5 million, BRL 1.7 million that will be reaching that 10-year mark. In terms of accounting write-offs, we can speed up that modernization program now taking all that asset that has already been depreciated.

Okay. The final question, Fillipe from Itau. Are you considering acquiring private competitors that are under pressure or leverage pressure?

Well, there are 2 types of private players. One is the financial investor that raised fund with customers, they'll have to return capital. They'll find a way out. And those that are private that are families and groups that capital is everlasting. It's easier to buy than sell things. Humans are like that. Those that are financial in nature, they'll be sellers in due time. Depending on the circumstances, whether it's appropriate or not, we're considering given our size and our footprint, we'll be looking at everything. Of course, we will all come down to the price.

The private market is expecting larger multiples than what the market can provide. To buy something with a multiple, if it's bigger than what we're negotiating, there should be something else behind it. Again, we have to be careful in considering these opportunities. These opportunities will arise and then we'll make a decision if it's right or not.

Well, let me address a couple of opportunities. We acquired some of those cities in the state of Sao Paulo from the private companies. We are now integrating them. It's a different incentive from the cities that are part of [ Euro E1 ], they do not have that universal access target. It's a contract unlike what you've seen so far today. And of course, we are considering everything, analyzing it. It has to be efficient capital allocation with the appropriate returns. We make all the calculations for all these opportunities. If it does not make financial sense, we're not taking it. We're not doing it.

All right. That's it. Thank you. That concludes the Q&A session and the morning portion of our conference. So the finance department will be buying lunch for everyone.

All right. Lunch will be served just outside in about 45 minutes. The first group, about 40 people will take the tour to the Integra. They'll be back after 45 minutes and the second group starts, and then we'll have the Q&A session in the separate rooms, and they will be done -- and we are concluding the online transmission. Thank you for attending through the webcast. Have a great day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, and welcome to SABESP Fourth Quarter of 2025 Earnings Presentation. With us here today are Carlos Piani, CEO; Daniel Szlak, CFO; and Thiago Levy, Investor Relations.

Before we begin, we clarify that the statements made during this presentation will not include projections or estimates of future events. However, they may contain forward-looking statements indicating potential trends related to SABESP based on the reasonable expectations, beliefs and assumptions of SABESP management as of today.

These statements involve risks and uncertainties and are based on assumptions and factors such as market, regulatory and economic conditions, which may not materialize in addition to the risk factors disclosed in SABESP filings with the Brazilian Securities and Exchange Commission, B3, and on its Investor Relations website. Investors should understand that changes in such factors may lead to outcomes that differ from current trends and that undue reliance should not be placed on these statements.

The full disclaimer will be presented next and must be read carefully by all participants. This presentation is being recorded. [Operator Instructions]

I will now turn the floor over to Daniel Szlak, who will discuss the results. Daniel, you may proceed.

Thank you, operator. Good morning, everyone. Thank you for joining us for SABESP's Full Year 2025 Earnings Call. I'm Daniel Szlak, CFO of the company. Today, I'll present our financial and operational highlights, then pass the mic to our CEO, Carlos Piani, where he'll discuss the strategic transformation underway, and then we'll open the floor for Q&A.

Let's begin with our operational highlights for the quarter. Operational KPIs remain solid as we continue expanding service coverage and advancing towards universalization targets. Water production totaled 789 million cubic meters in the quarter, broadly stable as a result of our disciplined system management to ensure water safety. At the same time, our customer base continued to expand. Water connections reached approximately 9.5 million, increasing 0.4% year-over-year, while sewage connections grew 0.8%, reaching 8.3 million. These numbers reflect the advance of our investment program and the expansion of sewage infrastructure across our concession area, improving the standard of living for the population of Sao Paulo.

Moving to financial highlights for the quarter. Our results once again demonstrate the operational and financial improvements achieved since the company's transformation began, which gives us the capacity to continue investing back and expand service for our population. Adjusted net revenue reached BRL 5.7 billion, growing 2.1% year-over-year. Adjusted EBITDA totaled BRL 3.4 billion, representing 13% growth versus the year ago, with margins expanding to 60%, reflecting cost discipline and efficiency initiatives. Adjusted net income remained stable at around BRL 1.9 billion. Cash generation was particularly strong. Cash flow from operations reached BRL 3 billion, representing a 24% growth and cash conversion increased to 83%, showing the quality of our earnings and disciplined working capital management, which pumps more resources to our CapEx program.

Looking at the full year for 2025, the transformation becomes even clearer. Adjusted net revenue totaled BRL 22.2 billion, representing a 2.2% growth versus '24. However, the key highlight is profitability. Adjusted EBITDA reached BRL 13.2 billion, growing 17% year-over-year, with margins expanding to 60%. Adjusted net income reached BRL 6.3 billion, representing a 22% growth, reflecting both operational improvements and stronger financial discipline. Operational cash generation also improved meaningfully with cash flow from operations reaching BRL 8.1 billion, reinforcing our ability to fund our investment program while maintaining a fortress-like balance sheet.

To start deep diving into the results, let me briefly explain the bridge between reported and adjusted figures for the quarter. As usual, we exclude construction and the financial asset bifurcation, which are mainly derived from accounting norms. In addition, this quarter includes some specific nonrecurring items like BRL 60 million from the continuation of our logistics network restructuring, a reduction of legal accruals of BRL 28 million, mostly behind settlements and a BRL 370 million in one-off tax gains recognized during the quarter. Adjusting for these effects, we get net revenue of BRL 5.7 billion and EBITDA of BRL 3.4 billion, which, in our view as management better represent the underlying performance of the business.

A similar reconciliation applies to full year results where we have the impact of, among others, SABESP Gente, court-ordered payments in favor of the company and other items. A detailed bridge by line of these effects can be found in the appendix. Once these items are excluded, we arrive at an adjusted EBITDA of BRL 13.2 billion, representing a 17% increase year-over-year.

Let's now break down the drivers of revenue growth for the quarter. We saw a 2% growth driven by 3 factors: first, pricing, which includes the continued removal of discounts previously granted to large clients. This initiative alone contributed about 1.5 percentage points to revenue growth. Second, volume growth, reflecting the addition of new units, which contribute roughly 3 percentage points to revenue growth. And third, mix, where we've doubled the number of consumers with access to our subsidized rate program. These programs are an important tool of affordability for those in need and their financial impacts are expected to be addressed in the next rate revision.

Looking at the full year revenue bridge, the drivers follow the same pattern with revenue growing 2.2% behind the removal of large client discounts and 2024's rate cycle carryover combined with volume growth behind the expansion of our consumer base. We also see a partial offset through mix from the full year impact of the expansion of subsidized rate programs. This dynamic reflects SABESP's dual mandate, expanding access and affordability while maintaining financial sustainability.

The next slide shows the evolution of pricing and consumer mix in more detail. The price index, excluding mix effects, remained stable as expected, given there were no rate reviews for the year 2025. However, prices for large clients have increased, reflecting the ongoing removal of discounts. This process has already delivered meaningful improvements in revenue quality. At the same time, the number of units benefiting from subsidized rates reached nearly 2 million connections or roughly 6 million people. This is about double the average from 2024 and reinforce SABESP's role in supporting social inclusion while expanding service coverage.

Moving now to EBITDA performance. We grew 13% in the quarter and 17% in the year. Key drivers include G&A improvements, partly driven by better collection performance, energy efficiency, supported by the migration to the free market achieving 82% of our consumption in that market, which more than offset higher power prices in the captive market throughout 2025.

Headcount optimization following the voluntary dismissal program, and lower consumption of general and treatment materials. Partially offsetting these improvements were higher services expenses, mainly related to IT and automation, which we expect to generate a return for the company in the midterm.

Overall, these results demonstrate the progress of our efficiency agenda to unlock resources for the CapEx program. In the quarter, personnel expenses declined despite a 5.5% collective bargain increase, reflecting a 15% reduction in head count following the voluntary dismissal programs. Net for the year, we had about 3,800 departures and 2,500 arrivals ending the year at 9,200 people in December. These changes are part of a broader effort to update our workforce while investing heavily in technology and process standardization.

Moving to reported net income. For the fourth quarter, we reached BRL 2.7 billion, representing 87% growth year-over-year, mainly driven by strong EBITDA growth with the operational improvements we discussed earlier. For the full year, reported net income reached BRL 8.5 billion. This result was negatively impacted by lapping of BRL 4.5 billion noncash gain from 2024 related to the contract with [ URAE-1 ] the bifurcation of financial assets and positively impacted by stronger operational EBITDA and the BRL 1.5 billion monetary update of court-ordered payments. But our transformation is mostly visible in the investment program.

In 2025, CapEx reached BRL 15.2 billion, representing more than double the level invested in 2024. In the fourth quarter alone, investments totaled BRL 4.8 billion, more than a full year of the SOE SABESP used to do. These investments are directly supporting the targets established in our concession agreement.

On the universal access targets, we achieved 2025 target a month in advance and started 2026 strong out of the gate. As of February, we have already reached 84% of water targets, 74% of sewage collection and 70% of sewage treatment for the year of 2026. Diving into what was physically delivered in 2025, 32 major projects with more than 827 kilometers of new infrastructure and expanded sewage treatment access to more than 3.8 million people.

Looking ahead, 38 additional projects are scheduled to be delivered in 2026, including key initiatives under the Integra Tiete Program, water safety projects and infrastructure expansion in both coastline and the countryside. We have also concluded at the end of 2025, all conceptual engineering designs through '29.

With that, we also took the opportunity to update our CapEx plan for the period. Starting from the BRL 70 billion defined at 2022's prices, we've updated for inflation through December 2025, and also brought forward some progress from the next cycles, mainly in water safety and metering upgrades combined with [ network sensing ]. These projects will help us fight water losses and provide all our consumers with more water safety. Lastly, there were some changes in regulatory requirements. We are discussing this plan with the regulator and will keep our shareholders informed of developments on this front.

Turning now to our balance sheet. At the end of 2025, gross debt stood at BRL 40 billion with net debt at BRL 28 billion. Our average cost of debt remains attractive. At CDI, our benchmark rate, minus 0.2%, and the weighted average maturity is approximately 5.6 years, more importantly, 49% of our debt matures after 2031, reflecting a well-structured long-term maturity profile.

We also ended the year with BRL 12 billion in cash, which covers more than 3 years of amortizations, providing strong liquidity and flexibility to support our investment program. Finally, looking at our key financial ratios. Our net debt to adjusted EBITDA stands at approximately 2.2x, remaining at a comfortable level despite the acceleration of the investment program.

Profitability indicators also continue improving. ROIC achieved 11% and ROE achieved 17%, reflecting both stronger earnings and more efficient capital structure. These indicators reinforce that SABESP is successfully combining investment with financial discipline and profitability growth.

With that, I will now pass the floor to our CEO, Mr. Carlos Piani, see you back in the Q&A.

Thanks, Daniel. Let's now move to the second part of today's presentation, our strategic focus areas and the progress we made during the quarter. As we've been outlining, our strategy remains centered on 3 priorities: first, delivering the new concession agreement obligations, accelerating universalization, closing regulatory gaps and continuing to add new consumers to affordable tariffs. Second, achieving a step change in operational and commercial efficiency with higher quality, stronger service reliability and improved revenue assurance. Third, improving financial efficiency by optimizing costs and strengthening our capital structure. In the fourth quarter, we made progress across all 3 fronts with clear and measurable results.

Turning to Slide 21. I'll start with investment execution. In the fourth quarter alone, CapEx reached BRL 4.8 billion, bringing total investments in 2025 to BRL 15.2 billion, a 120% increase year-over-year. This reinforces our commitment to accelerate universalization and expand the required infrastructure capacity.

These investments translated into tangible outcomes, an additional 1.8 million people now have access to potable water, an additional 2.1 million gain access to sewage collection and an additional 3.8 million now have their sewage treated. Most importantly, we have reached the quarterly execution pace required to deliver our universalization targets.

On people and culture, we embedded our new SABESP culture principles into daily routines, reinforcing transparency, ethics and collaboration. Through the SABESP Gente Program, we expanded internships, launched our first training program and completed an organizational optimization cycle that improved efficiency and strategic alignment.

Building on these efforts, last quarter, we also strengthened long-term alignment and retention by expanding our long-term incentive plan to 52 leadership employees reinforcing meritocracy and alignment with SABESP's long-term value creation agenda. Over time, we expect to further broaden participation as the organization continues to evolve.

Our expansion backlog remained strong with approximately BRL 39 billion in contracted investments through 2029. On the regulatory front, 74% of injunctions related to large client discounts have already been rolled in SABESP's favor. We also launched a new integrated community engagement plan, working side by side with major communities to support universalization and address local social needs.

In operational efficiency, we advanced the renewal of our metering infrastructure. During 2025, we installed 1.5 million new meters, improving accuracy and fairness in billing. We expect to install around 9 million additional meters between 2026 and 2029. We also completed the first full zero-based budgeting cycle in the company's history, strengthening accountability and reinforcing a cost disciplined culture across the organization.

Service quality and customer experience continued to improve. Our Net Promoter Score reached 47, up 2 points year-over-year. WhatsApp service scaled rapidly, reaching 2.6 million conversations in February, reducing average service time by 21% and achieving a 4.4 satisfaction rating. Quality indicators remain strong. Distributed water quality reached 98.8%, treatment plant quality 99.9% and wastewater regulatory compliance, 96.2%, the highest level ever recorded by the company. Collection performance also remained solid with a 100% collection rate in the quarter, excluding court-ordered payments.

Moving to Slide 22. Water resilience remains a center pillar of our long-term strategy. Between 2015 and 2025, we increased system transfer capacity by 14.2 cubic meter per second. Looking ahead, projects scheduled between 2026 and 2030, we'll add another 12.8 cubic meters per second, supported by BRL 5.9 billion in investments. These projects were brought forward due to their strategic importance in our strong capital structure. Reservoir levels have been improving month-over-month with the Metropolitan integrated system above 50% and Cantareira surpassing 40% as we approach the end of the rainy season in April.

Turning to Slide 23. SABESP's growth continued to translate into tangible benefits for society. In 2025, we generated BRL 8.5 billion in net income with 75% reinvested to support infrastructure expansion. These investments supported BRL 15.2 billion in economic activity, approximately 40,000 jobs, BRL 5.8 billion in taxes, BRL 1.3 billion through FAUSP to smoothen tariff impacts. Social tariff access expanded to about 6 million people, a 60% increase year-over-year.

Finally, on Slide 24, we concluded the acquisition of EMAE's voting and nonvoting controlling shares in January of this year. In addition, last week, we acquired an additional stake from the Oceania Fund representing 23.17% of EMAE's common shares and 9.22% of its total capital at 80% of the price paid to the controlling shareholder of the voting shares adjusted by CDI.

As a result, SABESP now holds approximately 98% of EMAE's common shares and the tender offer for the remaining voting shares is expected to take place in April. EMAE is a highly strategic asset with the potential to increase reservoir capacity in the metropolitan system by up to 52% in the long term. Ultimately, these results reinforce that SABESP's transformation is not only about operational efficiency and financial performance, it's about converting scale, discipline and capital into long-term value for society and shareholders.

With this, I conclude this session. We can now move to the Q&A.

[Operator Instructions] Our first question comes from Bruno Amorim with Goldman Sachs.

The first one is related to the message that you conveyed in Slide 16 of the presentation. Can you give us an idea of the potential upside to the BRL 70 billion number for total CapEx in this cycle? Also, what types of investments are we talking about? Is it investments that could drive further cost efficiency gains, additional volumes, just so we have an idea of how much value you can create with this additional investment.

And the second question on the fourth quarter, the analyzed level of CapEx was around BRL 19 billion per year. So does it mean we can see another step up in CapEx to this level? Or it was fourth quarter kind of a one-off?

Thank you, Bruno. Good morning to all our shareholders once again. Look, in terms of your first question, right, the number of CapEx that we've been conveying to the market has been defined at 2022, 2023 levels. So since then, we've naturally seen a cumulative impact from inflation that adds up to that number. So that's one piece of the story. The other piece of the story is we understand better the business and we start seeing the different needs of the business.

As the business evolves, there are investments that were initially planned for cycles in the future that are now being advanced to this cycle. So one of the examples is water safety, naturally. So one of the things that we're doing is we're doing the first indirect reuse water facility at scale here in the metropolitan region.

We're integrating and bringing new water sources into our integrated system. So this is one of the things that we are doing. The other thing that we are doing is we are advancing metering upgrades with the smart meters. In the contract, we had about 5 cycles -- sorry, 7 cycles of meter upgrade every 5 years. We're doing that with the different technology, more advanced technology that requires less updates, but we're doing more early on. And on top of that, we're trying to add sensors and control remotely a big part of a network that gives us better operational flexibility and improves our loss prevention and detection, thus saving water, which is an important resource.

So going back to your first question, those are the main drivers behind that increase. And we expect that this is more or less the plan. We're still negotiating them and discussing them with the regulator to make sure that these are prudent and that makes sense for the consumers in general, and we'll keep the market updated on that. I think the second question about the pace look, we're trying to accelerate as much as we can.

If we are -- if we believe that we are able to deliver universal access before, for sure do it. So in the end, that's our main goal, right? Last year, we had 3.8 million people that didn't have sewage treatment. Imagine the impact to their lives, right? I grew up with that for my whole life, but for didn't have that, that makes a lot of sense. So we're trying to anticipate as much as we can.

We're trying to accelerate as much as we can. If we believe and if we are able to execute more in 2026, we will do more in 2026 and we'll try to maintain that pace if not accelerate that pace as much as we can.

Our next question comes from Francisco Navarrete with Bradesco BBI.

Just have a sort of like an operational question and then more of a strategic one. But on the operational one, just to check on 4Q results, the payroll line came quite low. And I think that there's a lot -- you're collecting a lot of the benefits from reducing cost, workforce and becoming more efficient. But at the same time, I just wanted to check if there's a higher level of capitalization of this expense in 4Q '25 as it was in 4Q '24 and if there is, should this be -- is this a seasonal effect or it's a one-off, and we should not consider that number going forward?

And then the second question, more a strategic one, goes in the line of the CapEx deployment that you have in the concession that you already own in Sao Paulo, and that number probably will grow and maybe who knows will grow substantially versus investing in concessions or in opportunities of privatization of assets outside of Sao Paulo, for example, COPASA or any other opportunity that may come in the sanitation sector in the next 12 to 36 months, the pipeline is quite robust. How are you thinking about that?

And specifically, which is capital allocation, specifically about COPASA, what are the points of attention that you have about that asset beyond price, of course. We understand that that's one of the most critical points. But what else is there that you're looking at and you're thinking, well, this is a condition for me to be at that auction and participate, again, beyond price?

And with this, I'll do it with this. Without this, I will not, just for us to understand how you're thinking about it, again, versus the scenario where you might have a really big opportunity to keep investing in Sao Paulo. We've seen Secretary, Natalia Resende talk about urban drainage as well. So that may be part of the story as well here in the state.

Maybe I'll take the first one and you take the second, Piani. Sounds good? Okay. Look, with regards to personnel expenses, every year-end, we revise all our cost centers and as CapEx also grew, we are able to absorb more through CapEx. We have more indirect expenses with regards to CapEx. So in the end, this is a reflection of a full year result. Navarrete, I wouldn't take that as a single quarter but we've been revising that. Last year, we did a first revision. This year, we did that once again, specifically also looking at the operational cost centers that this is something that we haven't done before. So as we change and we're starting to centralize the operation, it's much easier for us also to assess what is directly linked to CapEx and what is not and allows us to more properly reflect that between OpEx and CapEx.

Regarding the second one, the second part of your question. So basically, it has a large market cap. It's a huge company in the water space. To bring incrementality from an NPV standpoint is a challenge. So I think looking for inorganic opportunities, we try to focus more on large deals, basically to do a very accretive, very -- a deal with high return, but very small. I think for all shareholders, this will be almost irrelevant, right? So size matters to us. I think COPASA is the second largest publicly listed asset in our space. So of course, we're interested in this opportunity. I believe that there's 2 major, I think, pillars for our decision-making process internally and with our Board.

I think number one is, how is the regulatory framework set up? I'm talking besides price. And the second, how is the tender offer or the book building process, right? I think the regulatory -- speaking a little bit about these 2 items for COPASA, I think the time frame has been very challenging for the privatization of COPASA and the regulatory decisions have been, I think, a little bit laggard to the process.

And I think public knowledge is the delay of the renewal of the Belo Horizonte's contract with COPASA. So I think this will be critical at least for us to infer what type of economics -- the sharing of the profit pool of the business is going to be there. We're a little bit over 30% of the business and we can extrapolate this role with some level of probability for the other municipalities. So I think this is a pillar.

The second one is how the bidding process will go -- will be defined. This may benefit more of the market, more strategic players. This may impact our interest as well. So I think these are the two pillars. And at the end of the day, I think there's good companies and there's good investments. We're always going to try to do good investments in good companies, not all the time, that's feasible. So I think these conditions are going to be necessary for us to advance in this opportunity. Having said that, I think we'll keep posted waiting to see the new developments of the deal. And myself, Daniel and Thiago will share our interest with the market.

Regarding other opportunities, I think in the state of Sao Paulo, despite the NPV challenge, we're executing and pursuing smaller deals because we're defending our home turf, it's our geography. So we're doing tuck-in opportunities. We bought 2 to 3 small municipalities. We look at these deals on a constant basis.

So I think at the end of the day, we'll have a -- we can do more of this independently [ Universaliza ], and this makes sense for us. I think the marginal cost to serve is 0. So that's why we're pursuing these deals.

[ Universaliza ], I think it's a great opportunity. The state is conducting this process the time frame, I think, never doubt this government, they achieved many incredible things since I met them. So if this deal comes through this year, we're going to be ready to look at this opportunity.

And I think we're going to be competitive given it's in our backyard. Regarding drainage, I think drainage, we have had conversations with the state government of Sao Paulo with the regulator for a little bit over a year, I think this is more a mid- to long-term opportunity instead of short-term opportunity and challenge.

What we're trying to do is try to explore a pilot that can be outside or inside [ Universaliza ] if we are a winner in all or part of this process. And then based on this pilot, we can extrapolate the rules of engagement moving forward. I think the opportunity from a CapEx standpoint is huge.

I think there's a lot of -- much more uncertainty to the current business that we have. So I think we should approach this with caution and see if we can set the right regulatory framework, so we can explore this opportunity mid and long term for a long period of time. I think these are my comments.

Our next question comes from Ricardo Bello with Safra.

Congratulations on the results. My question here is about tariffs. Could you please elaborate on the evolution of the reduction of discounts granted to larger customers. How much of this gap still remains to be closed? And on CapEx related to water security, if you guys could provide an update on the progress of these projects for this year and the next year and the expected time lines. These are my two questions.

Thank you, Ricardo. Answering to the first question, right? So with regards to large clients discounts, we have captured about BRL 450 million worth of discounts removal in the year of 2025. And we have virtually zeroed all the contracts that we have in the company. We have less than a handful right now that are still active. And we'll continue to see the capture because of the timing of when they ran out through 2025. So we'll have a positive lapping into 2026. We've seen a small volume decline in these cases. But all in all, it's still a very positive net impact for the company. We still have about between BRL 50 million and BRL 100 million worth of injunctions that we're still fighting. We've won more than 2/3 of them, about 70% of them, like Piani said, and we'll continue to pursue -- to 0 that gap, okay?

With regards to CapEx for water safety, we've spent about BRL 700 million last year out of the total CapEx for water safety. This year, we expect to spend something between BRL 1.5 billion and BRL 2 billion for water safety. And the total pipeline that we expect is close to BRL 8 billion that was scattered through the rest of the contract that we're looking if we are going to anticipate or if we're not going to anticipate. So we're looking at all the construction work that we're going to do if we're going to anticipate some if we're going to anticipate all. So this is one of the discussions that we're having with SP Aguas, with the regulator and with the [ concession ] to make the best decisions for the population and improve the water safety for the population.

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

Thank you for your questions and for your continued interest in SABESP. We appreciate your participation and ongoing engagement, and we look forward to keeping you updated on our progress in the quarters ahead. Have you all a great day. Thank you. Bye-bye.

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

Good morning, and welcome to SABESP Third Quarter of 2025 Earnings Presentation. With us here today are Carlos Piani, CEO; Daniel Szlak, CFO; and Thiago Levy, Investor Relations.

Before we begin, we clarify that the statements made during this presentation will not include projections or estimates of future events. However, they may contain forward-looking statements indicating potential trends related to SABESP based on the reasonable expectations, beliefs and assumptions of SABESP management as of today.

These statements involve risks and uncertainties and are based on assumptions and factors such as market, regulatory and economic conditions, which may not materialize in addition to the risk factors disclosed in SABESP filings with the Brazilian Securities and Exchange Commission, B3, and on its Investor Relations website. Investors should understand that changes in such factors may lead to outcomes that differ from current trends and that undue reliance should not be placed on these statements.

The full disclaimer will be presented next and must be read carefully by all participants. This presentation is being recorded. [Operator Instructions]

I will now turn the floor over to Daniel Szlak, who will discuss the results. Daniel, you may proceed.

Thanks, operator. Good morning, everyone. Thank you for joining us for SABESP's Third Quarter 2025 Earnings Call. I'm Daniel Szlak, CFO of the company. Today, I will present our financial and operational highlights, then pass the mic to our CEO, Carlos Piani, where he will discuss the strategic transformation underway, and then we'll open the floor for Q&A.

On the operational highlights, this quarter marks another step in SABESP's transformation journey. Water production reached 809 million cubic meters, up 4.4% year-over-year and active connections grew 0.6% in the quarter. Sewage connections rose 1.1%, reflecting the investment focus on the sewage front. These operational gains reflect our ongoing commitment to reaching universal access and improving service delivery, building on the momentum established post privatization.

Now moving to the financial highlights. Our results continue to demonstrate the impact of our efficiency initiatives. Adjusted net revenue was BRL 5.5 billion, stable year-over-year, while adjusted EBITDA grew 15% to BRL 3.2 billion, reaching a 59% margin. Adjusted net income reached BRL 1.2 billion, a 9.5% growth versus prior year, and cash flow from operations increased 22% to BRL 1.7 billion with EBITDA to cash conversion reaching 54% in the quarter, underscoring disciplined execution and resource optimization.

To start, we will bridge from reported to adjusted figures in the quarter. You can also find more detailed info on this topic in the appendix. As usual, we exclude construction and the financial asset bifurcation, but this quarter, we also had a few nonrecurring events, namely, as published in a notice to the market in September, we have received communication from the regulator that the FAUSP rate is at 3.78% rather than the 3.28% that we had been accruing since July '24. Hence, we had to book a catch-up adjustment for July '24 through June '25 that we are removing from the adjusted results and impacts both revenue and EBITDA.

Moving to EBITDA and net profit only adjustments. Additionally, we executed voluntary dismissal plans in the quarter under the SABESP Gente Program, where we accrued BRL 478 million for severance and incentives. Under the program, we have about 1,800 employees departing until year-end. We also restructured our warehouse and logistics operations to improve fulfillment and inventory levels that had a onetime cost of BRL 74 million and also wrote off water pipeline infrastructure that we no longer expect to use for BRL 61 million, where we will make a larger investment in its place for a more long-lasting solution in that region.

In Q3 last year, we also had onetime costs from the privatization of the company. And in this quarter, we got a reimbursement for some of these costs for BRL 14 million. To maintain coherence, we're calling this reimbursement a one-off gain. Last but not least, we booked in Q3 a onetime gain from court order payments, Precatórios, with the city of Sao Paulo as the uncertainty of the amount has been significantly reduced. They totaled BRL 1.9 billion, of which BRL 430 million are hitting in EBITDA and the remaining in financial results. Of the BRL 1.9 billion, we have collected to date about BRL 1.1 billion and expect to collect the remaining amount over the next few months.

With that, we believe we can see, as a result, the underlying performance in our business, and we'll focus on the adjusted numbers in the next pages.

Moving on and looking at adjusted revenue growth, we have 4 core drivers. FAUSP increased year-on-year from the 3.78% versus 3.28% rate I just mentioned and an increase driven by higher revenues. Discount removal for larger clients, a key initiative that started in late '24, now delivering tangible gains.

On the volume front, the gains came from new connections for 1.5% and also a 1% gain from consumption and metering upgrades. And now last but not least, we have mix, where about 1.8 million units now benefit from subsidized rates. The mix impacts from 2H '25 are expected to be adjusted in 2027 rate cycle as per the concession contract amendment signed in 3Q '25.

Deep diving into revenue, we see flat overall price index to 100 compared to 3Q '24 as expected and also a continuous pickup from large clients prices as we continue to eliminate discounts from that group. Last but not least, we have reached 1.8 million units with access to subsidized rates, keeping a relatively stable cohort versus the second quarter of '25.

Now looking at EBITDA, efficiency gains are evident in our cost structure. G&A brought gains behind lower municipal funds versus the anticipation we did in the third quarter of '24. Additionally, we also improved our collection rate, reaching 101% in the quarter, among the highest historically. Last but not least, in G&A, we also continue to improve on the legal front and have executed settlements in the quarter that brought a BRL 50 million gain.

Moving to power. We improved despite higher power prices, and that was largely driven by the migration from captive to free market, where about 66% of our spend is on the free market and 80% of our consumption is also there. On the services front, we increased our spend in IT and some specific consulting works in the quarter. On the next page, we will deep dive in personnel. But all in all, we've standardized procurement, optimized supply chain management and leveraged technology to drive further savings, initiatives that began in the third quarter of '24 and accelerating in 2025.

Moving into personnel. Expenses fell 6.6% year-over-year despite a 5% increase from collective bargaining, driven by a headcount reduction of 13% that offset that through voluntary dismissal plans. Zooming in on reported net income for the third quarter of 2025, we lapped the construction margin and financial asset bifurcation from the third quarter of last year, where we no longer record construction margin as of 2025 have only the update of the financial asset for BRL 90 million in net profit in the third quarter of 2025.

On the positive front, we also recognized the BRL 1.4 billion gain in financial results from the court order debt payment in addition to the BRL 430 million that I already mentioned in EBITDA.

Our balance sheet remains robust with leverage under control and no effective exposure to currency risk. Strategic transformation is most visible in our investment program. CapEx accelerated to BRL 4 billion in the quarter, growing 175% versus prior year and 10% versus the second quarter of 2025. This performance is helping SABESP achieve solid compliance to our first milestone on new factor targets. We are only 3% away from meeting the minimum 95% threshold on sewage treatment.

On the next page, looking at the major projects, Integra Tiete, Coastal and Metropolitan region works, upgrades to Barueri, ABC, Parque Novo Mundo and São Miguel sewage treatment plants. Specifically, in Parque Novo Mundo, we are piloting our first treatment plant using Nereda technology and will be one of the largest applications of such technology globally. It helps reduce treatment area, in particular space-constrained stations and will help multiply our capacity by 2.5x, serving almost 3 million people in that specific site.

We've shifted from public procurement to a private model, fragmenting large projects to attract more suppliers and minimize execution risk, a key change since the privatization. Our financial transformation also includes a proactive approach to capital structure. BRL 4.9 billion in new debt was issued in the third quarter with maturities for 5, 7 and 10 years. With that, 59% of our debt now matures from 2030 onwards, improving our long-term profile. And we also hold BRL 11.6 billion in cash, covering more than 4 years of amortizations.

Our efficiency agenda can be seen in our key ratios, where net debt to EBITDA remained stable in the quarter and ROIC and ROE have reached 10% and 14%, respectively. In summary, SABESP's third quarter results highlight the success of our strategic transformation and efficiency gains. We are scaling infrastructure, improving service quality, enhancing customer experience and strengthening our financial position. Our commitment to universal access, operational excellence and sustainable growth remains unwavering.

Thank you for your attention. I will now pass the ball to our CEO, Carlos Piani. The floor is yours.

Thanks, Daniel. Let's move now to the second part of today's presentation, our strategic focus areas and the progress we made this quarter. As we've discussed before, our strategy continues to rest on 3 clear priorities: first, delivering on the commitments of the new concession agreement, accelerating universalization and closing regulatory gaps; second, driving a step change in operating and commercial efficiency, improving quality, reliability and revenue assurance; and lastly, strengthening financial efficiency, optimizing costs and reinforcing our capital structure.

In the third quarter, we delivered measurable progress across all 3 fronts.

Let's turn to Slide 18. Execution remains strong and disciplined. In the quarter, CapEx reached BRL 4 billion, totaling BRL 13.2 billion over the last 12 months, while our backlog increased to BRL 39 billion in contracted projects through 2029, and that considers only future investments. On the regulatory front, we made tangible progress resolving legacy discount disputes. 71% of injunctions from large clients have already been rolled in our favor, strengthening the foundation of our revenue base.

We also launched SABESP's first full zero-based budgeting cycle with a redesigned chart of accounts and cost center structure, a major step toward lasting cost discipline. We are also advancing in commercial and financial efficiency. Collection efficiency, excluding court order debt, reached 101%, our best performance since privatization. We installed over 1 million meters so far this year, which I'll detail on the next page. And on the customer experience front, our WhatsApp channel handled more than 8 million interactions and 1.2 million payments since launch, improving convenience and engagement.

Finally, we announced clear carbon reduction targets for 2035, covering Scope 1, 2 and 3, which we'll detail shortly.

Moving to the next slide. We're rolling out the world's largest smart metering program in the water sector. 4.4 million IoT-enabled smart meters will be installed through 2029 with BRL 3.8 billion in contracted investments. Rollout begins in December, enabling real-time consumption data for consumers, reducing leakages, lowering operational costs and further strengthening revenue assurance.

In the quarter, we installed around 500,000 meters, more than doubling the speed from last quarter, reaching nearly 1 million replacements in the first 9 months. By prioritizing older and depreciated meters, we're improving billing accuracy, reducing losses and directly supporting revenue growth.

Now turning to Slide 20. We continue to strengthen Sao Paulo's integrated water system, building structural resilience to climate variability. Over the past years, we've expanded reservoir capacity and increased transfer capabilities between systems, materially improving our ability to absorb extreme events.

Looking ahead, we'll add indirect water reuse and incremental production and transfer capacity totaling 22 cubic meters per second by 2030 through 7 retrofits and expansion projects, 3 indirect reuse projects, the reactivation of the Billings - Taiaçupeba interconnection and the Paraíba Sul-Alto Tietê transfer. The estimated CapEx for these projects is around BRL 6.3 billion brought forward from the second tariff cycle of 2030, 2034. These initiatives will make SABESP less dependent on rainfall cycles and better equipped to serve a growing population with greater reliability.

Moving to the next slide. Our purpose remains to connect people to a better future, delivering essential services with excellence and unwavering commitment to the environment. In the first 9 months, BRL 13 billion were reinvested in construction, goods and services, supporting over 40,000 direct and indirect jobs with around BRL 1 billion allocated to FAUSP. Today, 1.8 million people benefit from social tariffs, a 40% increase in 1 year, demonstrating that this transformation is already delivering tangible and inclusive results.

Moving ahead to the next slide. We also formalized our 2035 decarbonization road map with clear measurable targets. SABESP will reduce total combined emissions, Scope 1, 2 and 3 by 15%, cut emission intensity by 41% and lower Scope 2 emissions by 43% through the generation and purchase of clean energy. What's most notable is that these targets are achieved while we expand sewage treatment, serving more people and emitting less per cubic meter treated.

In other words, we'll grow, universalize and decarbonize at the same time, combining sustainability, investment and long-term value creation.

Lastly, a brief update on the EMAE acquisition. Following the signing, all regulatory documentation was filed with CADE and ANEEL in early October. We now move into the approval phase, consistent with transactions of this nature and scale. Subject to regulatory approvals, closing is expected between late Q4 and early Q1 of next year with payment occurring only upon completion. This transaction reinforces long-term water security and energy efficiency, further integrating SABESP's strategic infrastructure.

With that, I conclude my remarks. We can now move on to the Q&A session. Thank you.

[Operator Instructions]

Our first question comes from Guilherme Bosso with Goldman Sachs.

Are there any updates you could share with us regarding the ongoing annual tariff review process? Also, if there are any initiatives from the company to make the preliminary results public? And what could you expect in terms of timing?

Thank you, Bosso. Daniel here. With regards to timing with the review, we are in the final steps of trying to determine the regulatory asset base addition of 2024. As soon as we have that, we have to obtain informal consent from the regulator to disclose that first step with the market. And then after that, we will move on to finalize the percent readjustment, including all the other items that are pertinent to the review. And once that happens, then this is going to be published by the regulator.

So that's the mechanic. We are -- hopefully, in a few weeks, we'll be able to share a little bit more updates on that. But since this is the first, a lot of back and forth to make sure that this comes out as technical and as clear as possible to all of you.

Our next question comes from Fillipe Andrade with Itau BBA.

I would like to hear your thoughts in 2 points. Firstly, if you could please share your expectations on the improvements on the hydro resilience front considering the coming rainy period. Also, if you could please further comment on how EMAE's acquisition can improve the company's access to hydro resources as well as the efficiency of its current operations.

Thank you. Thank you for your question. I think there's a short-term and a long-term strategy regarding water security. In terms of short-term strategy, I think what has been proposed by the government and the regulatory agency is what we have for this time horizon. So there's a contingency plan in place. There's triggers to increase pressure management. And we believe that this is the lever that's possible and more effective with the time frame for the next 12 months.

Regarding the EMAE transaction, we believe that this will benefit in a couple of ways to SABESP. First, it will shorten the time frame to increase the degrees of freedom and incremental capacity for our systems in terms of water security. The alternatives without EMAE will take longer. The environmental license permitting process will be longer, and the CapEx would take more years, in our expectation around 2 to 3 years.

Besides that, given that this water -- raw water that we would go after would be further away, the OpEx to capture and distribute would be higher. So the EMAE will offer in the future the possibility for us to capture raw water that's closer to the metropolitan region with less complex environmental permitting process and consequently, less -- smaller OpEx to distribute this water. So of course, all of this will be detailed after we conclude the deal and we step in, in the business. But this is the direction that we foresee for the benefits of EMAE with SABESP.

Our next question comes from João Pimentel with Citi.

My question comes on the M&A front. We are seeing the development of Copasa's privatization. It seems everything is advancing. There is an expectation that it should happen, I don't know, first quarter, first half of next year. Is this something that you're currently wasting your time on today? This is something you're actively studying or still waiting for the process to be more developed to finally dig in.

Is this an opportunity that makes sense for SABESP at this point in time, considering that there's a lot of challenges on the universalization front, et cetera? Or are you guys eventually more focused on -- having your attention more focused on the privatization blocks that will come within the state of Sao Paulo, supposedly the second half of next year? So just trying to get your thoughts on these 2 events and other inorganic potential opportunities.

Pimentel, thank you for the question. As we comment, Daniel, myself, Thiago and all the team, I think our #1 priority is to deliver on the obligations that we signed with the privatization of SABESP. Having said that, we believe that we are on track. We are posting good cadence to those obligations, which allows us to start looking a little bit outside our organic activity. Of course, M&A, as you know, as well, this is -- usually is very opportunistic. Maybe we're going to have a vintage next year of a couple of deals coming to the market.

And I think we have the duty to look at every opportunity. If we're going to do it or not, if we're going to pursue it in a firm way, it depends on the process. But for sure, what we can tell the market is we're -- our attention is focused on the business, but we're also looking at the deals that may come to market. The ones that you mentioned are important for different -- from different aspects. The blocks in Sao Paulo is in our backyard. So it makes total sense. I think the cost to serve for us is -- we're very competitive, let's put in this way, in the cost to serve given our presence in the state.

And Copasa, if this deal comes through, a lot of challenges still need to be solved. But I think this is an amazing asset, and I think it would make sense for us to take a look at the opportunity as well. But I think the first thing, we need to be in a good position. I think on a quarterly basis, we're improving our execution that allow us to look a little bit outside. If these deals come through, we'll look at them as well.

Our next question comes from Daniel Travitzky with Safra.

So I have 2 questions. First one, the company implemented like recognized provisions for severance program this quarter. So I want to know if the company is planning to implement more of those going forward? And if there are other initiatives that can reduce personnel costs going forward? The second one, I would like to hear about the company's perspective on the Cantareira reservoirs currently and how the company plans to deal? You already talked a little bit about it, but if you can explain a little bit more on how the current situation is affecting company's operations, it would be helpful.

Thank you for the 2 questions. I think in terms of voluntary dismissal program, we don't expect to offer a new program. I think this was the last one. So we gave the opportunity to every employee who wanted to leave. I think we did this twice. We had roughly 4,000 people that decided to leave. We had a quite -- we put a process in place where the people that decided to leave, if they were part of a critical process or activity, there was a process and a time and a handover process before they left. So even people enrolling in this program, we have people that are going to leave only early next year given the nature of their activity. So this is it.

I think Daniel can explore a little bit about the provisions, but we don't expect anything additional to what we proposed. And then starting 2026 is life as usual and without any voluntary -- new voluntary dismissal programs.

Regarding the Cantareira system, I think I'm going to take the opportunity just to take 2 steps back. I think we had the combination of 2 very tough, almost -- we're starting the third wet period. The second wet period where the level of rain has been below the average. So the last period between October and March, October 2004 up to March 2025, it was one of the worst rainfall seasons in the last 10 years. The dry season that goes from March, April to October that just ended was below average. It was not one of the worst, but it was below average.

And now we just started the new wet season, rainy season for us here in the region of Sao Paulo. We -- so -- given all these combinations, I think the state of Sao Paulo, the regulatory agency, [ SSB ] [indiscernible] the new water agency, they put in place a very robust process to monitor the situation. They put in place a contingency plan that we think is robust to deal with this environment, okay?

Cantareira system is a little bit over 23% as we speak. We don't foresee this going below 20% for now. Of course, it's very hard to have visibility over 15 days in terms of weather. But everything that we -- all the simulations that we've done by ourselves with the government give us comfort, at least for now, that's -- the possibility of the Cantareira system going below 20%.

But if this happens, there's this contingency plan that was put in place by the regulatory agency, it has the provisions to deal with the situation. So just for the knowledge of the market, we have weekly meetings with the government, with the regulatory agency, with the water agency about the situation, where we looked at what happened the previous week and what's the forecast to the following weeks and decide on a weekly basis if we need to change our action plans.

So all in all, just to shorten the answer, I think we are in a tougher situation than previous vintages of this dry season -- wet season, sorry. But we are -- don't see anything now that things are going to get worse, and we're going to get to lower levels of the contingency plan that has been put in place. Of course, we are going to update the market as this outlook changes. But for now, I think -- we think that's it's going to improve from where we stand right now.

Our next question comes from Francisco Navarrete with Bradesco BBI.

One very simple question, and I think it will be helpful to clarify for some investors that might be confused. But can you remind us about the impact of the social tariff in your revenue in 3Q '25? What was that impact? And then very important, how any lower revenue will be recovered later by the company according to the regulation and the rules already in place? I think that this will help because I think there's no regulatory accounting to neutralize that and I think makes look -- make revenue look lower, but I understand it will be recovered later. If you could help us clarify this.

Thank you, Nava. Thank you for the question. Daniel here. Good question and always good to clarify that to our investors. Look, I'm going to take the movie a little bit a few quarters back, right? So when the new concession agreement was signed in July 2024, there was a specific provision. SABESP already had a mechanism for subsidized tariffs for vulnerable economies. And that was a mechanism that had its own criteria.

In the new contract, there was a provision that we had to change the mechanism and change the criteria to adapt to the Cadastro Unico, which is the federal welfare program. And that happened -- that started happening in September all the way to November. So we saw, for example, when we look at the last -- at Q2 last year, we see about 900,000 economies with access to subsidized rates. In Q3, that number jumped to 1.3 million. And right now, we have about 1.8 million.

And the way that we got here, right, so there was an overlap of the old mechanism and the new mechanism from September to November of 2024. And then in December, we shut down the old mechanism. And then what we realized was that there were a lot of economies that needed those subsidized rates that were not necessarily eligible to the federal welfare program. And one of the things that we work together with the concession and to figure out how we could create some sort of program for those economies, and that happened throughout the first half of 2025.

And then in July, we had an amendment to the concession agreement creating [ Tarifa Paulista ] class, right? So when we look at Q3 specifically and then going directly to your question, we have about 1.8 million economies with access to subsidized rates that has been relatively stable compared to Q2. So that means that we're looking like we've gotten where we needed to be in terms of people that actually need that benefit.

That said, as we go and as we grow, naturally, we grow more to underprivileged communities rather than to more wealthy communities. So it's natural that we will have a few additions there. The impact in dollars or in real actually to our Q3 numbers was about BRL 117 million as we disclosed in Page 8 of the earnings call. And the way that this gets recovered later on is when we do the tariff revision, the annual incorporations of the RAB, we also submit the consumption histogram by class, by tariff class, and that gets adjusted into the mix.

So when we talk -- and going back to the contract and the timings of the contract, right? So in 2025, numbers are going to be delivered to the regulator by SABESP until May 2026. And they should be captured into the tariff adjustment that's going to go live in January 1, 2027, okay? So just to clarify where we come from, what's the impact and how we expect that to be adjusted in the future and compensate us in the future. Was that clear?

Our next question comes from Thomas Peredo with F8 Capital.

Can you guys hear me?

Yes. Thomas, go ahead, please.

Yes. No, I just want to get a little bit color on what is the level of the discounts that you already reduced to large clients and eventually looking at the price mix, there was a lower gain in this quarter when we look versus second Q '25. So trying to understand if there was any other additional impact from the mix, except from the tariff -- from the social tariff.

Great question, Thomas. Good thing to clarify as well. So on Page 8 as well, the total gain that we got from the discount removal was BRL 133 million in the quarter. Going back, Q1 was BRL 100 million; Q2, BRL 110 million; Q3, BRL 133 million. And the actions behind that were we did a first wave of contract terminations at the end of last year that started affecting this year. We did the second wave in Q2. Those had a little bit longer cure period. So we had a little bit more unwinding time in those contracts.

So we're starting to see these contracts have the discount removed now. And the reason why you see this when we try to break down the impacts is the discount removal from large clients actually hits us in 2 places: price and mix because these guys, they -- some of them, they have a change into their rate and some of them move from a subclass in terms of how we build them.

So they move from a class of Demanda Firme to a regular consumption class, and that hits us in mix. So a part of -- so when you look at, for example, Page 7, we have BRL 77 million impact of mix. But the impact from the social tariff is BRL 117 million. So the difference comes from a gain in Demanda Firme came from large clients. So it hits us in these 2 places, okay? And that's why when you look at the bridge in Page 7 and compare to the numbers in Page 8, we try to isolate to you the actual impacts from the actions and the bridge in the page prior, we try to isolate to you the impacts by lever, okay?

Our next question comes from Andre with [indiscernible] Investimento.

The [indiscernible] commented the universalization would be achieved ahead of schedule. With this in mind, we can expect early dividend payout, imagining that universalization will be achieved early?

Again, look, first, when we say that we think universalization is going to be met earlier, we're talking more about 2025. We're still looking a little bit where we can have a little bit more certainty, which is a little bit more on the short term than on the long term. We're trying to finalize some of the conceptual studies all the way through '29. So this is one thing that we're doing and will give a little bit more clarity to us and certainty.

But that said, Andre, one of the things that we have to keep in mind, I think we have 2 or 3 things to keep in mind before looking at discussing the dividend policy, which is set, right, and needs alignment from our Board. But we have to think about cost of capital, which is very high right now in our country. And two, we have to think about the question that some of you asked about M&A opportunities.

So leaving a little bit more room in our balance sheet to have the ability to deploy capital at a rate of return that's better than our stock, the than implied rate of our stock gives us an impression that's a good thing to do, at least for a little bit, and then we'll figure out how we move that in the future. But this is definitely something that's a subject that we continually revisit. But the main point here is to make sure that we have the resources to achieve the universalization and then potentially act on opportunities to deploy your capital in a rate of return that's greater than the implied rate of the stock.

Our next question comes from Arthur Pereira with JPMorgan.

So 2 questions on our side. The first one, if you could provide a little bit more details on the layoff program. If I'm not mistaken, you mentioned 1,800 employees. Just to get a sense on the expected payback and how many employees do you expect to hire back new employees? And the second on the delinquency rates, this was also a positive surprise to our numbers. Just to get a sense if is there any special initiative on place if the -- what we saw in the third quarter is the run rate that we can assume for the upcoming quarters?

Thanks for the question. I'll take the first part, Daniel will take the second part. I think we don't disclose the returns of this program, but what I can tell you is that we have threshold we need to justify the investment that we make to our Board and we passed this threshold that was required by them. I think one information that we can disclose based on the past one, give or take, the first one, a little bit over 2,000 people enrolled, and we hired, give or take, 1,000 back, give or take, okay? So this is ongoing regarding the second one. It's not that we're not going to replace any of them. But if the last program that we did, we rehired, let's put it this way, for the positions, okay? Daniel?

Yes. Thank you. Thank you for your question. So with regards to delinquency, look, we've been acting on the fronts that we've been communicating, I think, since we came here that we would start acting first, right, removal of discounts to large clients, looking at all our legal claims and the legal wallet and trying to do settlements where applicable, where we had a good gain this quarter for BRL 50 million also that we disclosed in the G&A page. And also on the collection, right, the company had historically presented a gap versus the regulatory allowance for delinquency.

And we've started using technology to improve our collection rates, right? So we're starting using WhatsApp. We're the first company -- utility company to use Pix Automático in the country. So we're starting to improve and have better collection tools, and this is starting to show, like Piani commented on his speech on the presentation, we had 101% collection rate in the quarter, where historically the company was more like 97%. So we're starting to improve there.

Naturally, the backlog is bigger as we come in. In the future, this probably needs to stabilize at some point. But in the beginning, we have more opportunity than at the end. So that's where we're focusing now, and we're spending a lot of money and effort here to achieve those impacts.

Our next question comes from Guilherme Bosso with Goldman Sachs.

Just one more question from our side. If you could please share more details on the OpEx performance in the quarter. We noticed a significant year-over-year decrease in some lines such as energy and general expenses. What we could expect going forward in terms of recurring costs?

Thank you, Guilherme, Daniel again here. Look, on power, I think one of the things that we are doing super well and that's kudos to Luciane, Gisele and the team here that manages that front. We're expanding our consumption in the free market, right? Just to give you, for example, one data point, in September, 82% of the consumption was in the free market. That's a big change versus a year ago where we had about 50%, 55% in the free market. So that's a great improvement. And naturally, the cost of that is better. And also, it's something that's more sustainable for us thinking about having knowledge of where that power comes from and being renewable and so on and so forth.

In that front, we have already issued a notice to the market in the past that we're also pursuing auto production projects that we are going to start ramping up throughout 2026, both with partners and also in-house. So we have about 45 -- we will achieve about 40 farms -- 44 solar farms over the next months. So this is something that's going to allow us to continue improving there, which is one of our most important cost lines, right?

Allowance for doubtful accounts goes back to the last question, where we're starting to apply technology and starting to apply artificial intelligence to our collection process. And there's a lot of room here to continue improving. And I think it's very hard to think about what are going to be recurring costs right now. Thiago often says that it's going to take a while for us to think about recurring costs.

We have opportunities that are probably going to be step reductions and productivity improvements, right? But -- and there will be things that are going to gradually improve. So I think we have the combination of the 2 things. And even for us internally, it's very tricky to think about recurring costs right now.

Our next question comes from Francisco Navarrete with Bradesco BBI.

About the FAUSP fund, you mentioned -- Daniel and Piani mentioned that increase of 50 basis points in the rate you're paying to the FAUSP. And of course, this was adjusted on adjusted EBITDA, which was the right thing to do. But just if you could remind us how this could be recovered back and how it will be adjusted going forward? Just to make clear that this is not...

Sure. Sure. Thank you, Nava. Look, when we started the contract, right, there was a specific provision about the actual balancing rate and the rate that's actually being charged to the consumers. And we interpreted that when we read the contract and because we needed to start accruing for that from the onset, right? So what we did was we -- our interpretation was that this was 3.28%. And in parallel, we asked the regulator for clarification to make sure that we had something in writing. We got that clarification in Q3 -- in early Q3 2025.

And the clarification came that the rate was actually 3.78%. So the difference is 0.5%. Naturally, when we did -- what we had to do was a catch-up accrual from July '24 to June '25, that was BRL 108 million that we removed from the quarter's results, given that this is something that's relative to the past and to make sure that this was up to date. But the actual rate impact from 3.28% to 3.78% over the revenue of Q3 is still in the organic recurring results, okay? This goes to FAUSP, right?

So in the end, this increases the size of the fund that in the future will be used to amortize the rate impact to the population as we continue investing in the universalization. So in the end, this is something that eventually will come back to the company. But when that dynamic of balancing rate and application rate shifts from the balancing rate being lower -- being higher than the application rate, which is the opposite today. So that's how it works.

Our next question comes from Mariel Abreu from T. Rowe Price.

I just wanted to -- since it's clear that you're looking at inorganic opportunities that may come to the market, how should we think about the potential -- maybe a potential tap of the current bond or issuance of more debt at this point?

Thank you, Mariel. Good to see you here, and thank you for your question. Look, when we think -- even if we don't think about M&A right now, right, we have a BRL 70 billion commitment that was disclosed in the concession contract, right? Our view is that BRL 40 billion to BRL 50 billion of that is going to come through debt. To date, we have raised BRL 13 billion out of the BRL 40 billion to BRL 50 billion and are in the process offering another BRL 5 billion, which is going to be -- which is going to be finished by the end of this week. So we'll continue to raise that. And I think our objective as management is to keep all the doors open for ourselves because given the scale of that challenge, mechanically the challenge, we need to make sure that we are not exposed to [ take ] risk in any of the markets.

So that's why we're leaving all the doors open and trying to be innovative and trying to do new things. For example, when I mentioned about the BRL 13 billion, we just raised out of that, about BRL 1 billion is a loan that we just executed with JICA that had not lent money to the company for more than 10 years. So that was a great thing that the team here did and continuing to open more doors and continuing to really future-proof our ability to raise money to ensure that we deliver the universal access, Mariel. But thank you for the question.

And just to add one point of Daniel, some of these opportunities, mainly the ones that are going to be the sale of 100% of the asset, most of them are unleveraged. So the asset will have the capacity to leverage. So the blocks in Sao Paulo will be debt free, depending on one of the deals that was mentioned here before. If it's a controlled deal with [indiscernible], there's opportunity to leverage. So not necessarily the deals that are going to come to market are going to be LBOs. They need to be leveraged at the acquired level.

Our next question comes from Luiza Candiota with Itaú.

I have a question regarding the CapEx execution in the quarter. So we know that the company has been accelerating its investment pace over the last quarter. And I just want you to provide more details on the breakdown of this BRL 4 billion of CapEx in the quarter and how the plan regarding water metering improvement is progressing within this agenda?

Look, maybe let me start from the end. On water metering, right, Q3 saw us executing 500,000 meter replacements, which is the same that we did in the first half entirely. So we doubled the pace at which we are replacing meters. We're not yet live with the EMAE contract with [ Vivo. ] This is going to start now in January as the ultrasonic meters, they start arriving with the EMAE technology. So we've been increasing the pace here. Naturally, most of our investment right now is in sewage, right, because this is really where the gap is in terms of service, right?

So a lot of the investment right now is happening in the wastewater -- in the sewage treatment plants in the metropolitan region in Sao Paulo in the retrofits and now starting the expansion phase, right, and also in sewage collection networks so that we can increase the amount of the sewage that actually becomes treated. So that's really where the bulk of the CapEx is right now.

One of the things that we mentioned, and Piani talked about water safety and future-proofing our cash flows and the service to the population, we've -- we're starting to look at additional investments to enhance the water safety of the region. We're going to do about BRL 5 billion over the next 2 years in incremental investments to increase the ability to have more reservation and to have more production and more connections of water.

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

I just want to thank you all once again for joining the call and for your continued interest in SABESP. We appreciate all questions, the engagement, and we look forward for updating you all in the progress in the next quarter. Have you all a great day, and see you in the next earnings call.

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