Good afternoon, ladies and gentlemen. At this time, we would like to welcome everyone to SABESP’s Conference Call to discuss its results for the Second Quarter of 2018. The audio for this conference is being broadcast simultaneously through the Internet on the website, www.sabesp.com.br and on the MCIQ platform, where you can also find a slideshow presentation available for download. We inform that all participants will only be able to listen to the conference during the company’s presentation. After the company’s remarks are over there will be a Q&A period. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of SABESP’s management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events, and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of SABESP and could cause results to differ materially from those expressed in such forward-looking statements. Today, with us, we have Karla Bertocco Trindade, Chief Executive Officer, Rui Affonso, Chief Financial Officer and Investor Relations Officer; Mario Arruda Sampaio, Head of Capital Market and Investor Relations; Sílvio Xavier, Head of Costs and Tariffs; and Marcelo Miyagui, Head of Accounting. Now I’ll turn the conference over to Mario Sampaio. Sir, you may begin your conference.

Okay. Good afternoon, everybody. Thank you all for attending one more conference call this time to discuss our second quarter 2018 results and present some update on certain relevant matters. We have a 6-slide presentation after that as usual, we will move to the Q&A, session. Let's start on slide three. Here we can see a company's billed water volume which was up 3.1% in second quarter 2018, with an increase from 2.9% up 2.9% in water and 3.3% in sewage and with growth concentrated in the residential category something also seen first quarter 18. In this slide you can also see that water billed volumes, has been moving up since the third quarter of 2015. Among the many factors that contributed to this volume increase it is worth noting the rise in the number of water and sewage connections and the higher temperatures actually reported in the period. Let's now go to slide four. This is to discuss our financial results, in the second quarter of '18, the company reported net income of 181.9 million versus 331.8 million in the second quarter of '17. The main changes in the second quarter of '18, compared with the same period last year was the exchange variation. In this quarter we include the best in the quarter foreign exchange loss of 797 million, driven by the appreciation of the BRL against dollar and the yen versus the foreign exchange loss of 212 million in the same period last year, leading to a negative increase of 585 million in the period. Drop operating revenue related directly to sanitation services which does not include construction revenue, increased 348 million or 12% from 2.9 billion in the second quarter of 2017 to 3.2 billion this quarter. Revenue was influenced by a 7.9 tariff repositioning index…

Thank you. [Operator Instructions] And our first question comes from Michael Gaugler of Janney Montgomery Scott. Please go ahead.

Just one question, given your data offering that was postponed in earlier in the year, I am wondering how that impacts your plans on financing investments going forward?

I believe here I made a reference to the performance of a local debenture on the value of BRL650 million correct?

Correct.

That first we perform because the market conditions depreciated, we after the local strike of truck drivers, the [indiscernible] seemed to not be the most favorable one, we are okay in terms of our cash availability and cash generation in face of the remaining period of the year; so its something that we can bear, we have other replacements and substitute funding coming from other multilateral and public funding investments, so it doesn’t really alter, what -- how we’re dealing with our cash flow; and we can assume and we see the scenario better, we were very prepared local debenture issues where by the way the most frequent local issuer in Brazil, so we really don’t find any liquidity risk that may be a concern.

[Operator Instructions] Our next question comes from Snehal Amin of Windacre, please go ahead. Moving on our next question comes from Marcelo Sa of UBS. Please go ahead.

I have one question regarding derivatives, can you tell me the revenue that you were you were suppose to receive from derivatives related to the wholesale revenue, how much of this broader do you spent, just understanding how much is the loss that you have recover because you have not yet refined an agreement with [indiscernible]. Thank you.

Pardon me, Marcelo, could you please repeat your question for the speakers.

Question was regarding the revenues, from derivatives, so over that period is this money in the wholesale and really is and what really does out of deal. So can you actually, how much money in the company will be third quarter, because that really did not paying distribute, discussion was because of the act file an agreement with the city to end the long time dispute. Hello.

This is the conference operator. It appears we have lost the connection to the main speaker location. Please hold while we get them reconnected. This is the conference operator, thank you everybody for holding, I have reconnected the speaker location. Marcelo, I’m going to have to ask you to repeat your question a third time please with speaker location.

Hi, guys. So my question with regarding to - so the company -. So what I want to ask to how much the amount revenue that will be showed and how much revenue build just to get about a sense of how much many moving third quarter - disputes. Thank you.

Wait for a second. So, well the revenue on the monthly basis that we obtain from volume should be BRL19 million a month, that is how much we invoice it, then on a monthly basis; they have been paying 80% of that all the way to January this year; since they began paying regulatory payments that we are eligible to receive based on final court rulings they suspended payment on the services we rendered but they’re now saying the fiduciary obligations which totaled -- which should be totaling around about BRL70 million so another words from a cash flow perspective we’ve not been impacted of lack of cash flowing from [indiscernible] to SABESP. So that’s that position we’re at today; that also part explains why the delinquency level was higher and as we mentioned in the call but again they are basically substituting invoicing the obligations to the payments of fiduciary obligations.

So you’re saying, you confirm the numbers so you're saying the total invoice were BRL19 million for the month so would be something close to 60 million per quarter and you’re saying that the order books that now [indiscernible] totals BRL17 million but this 17 million is for most quarter until now from January until now, what is the time frame of timeframe modality.

It's an absolute number, it’s actually 44,000, they say four days after the quarter -- the second quarter finalized that’s why we didn’t see any of that in our release; and there’s 36 additional coming in which actually weighing in BRL -- sorry for the number and that is what we have in front of us in the next few months.

So we’re moving 80% of the BRL19 million and then reaching somewhere close to BTL80 million if you look at to what I am saying over 12 months, so at the end the invoice was additional payment you wouldn’t have any measure for the cash flow impact on that respect, that's what I mean.

No Marcello it works this way. Including February to today, we’ve not paid the monthly invoicing of BRL19 million, so we did not get of paying any cash flow from that and obviously this adds to the delinquency and etc on one side on the other side there’s are fiduciary payments that are due -- were due and are due to us from [indiscernible] which what we have already received sums to BRL44 million and we'll receive BRL36 million, that is in full, no discount other than the full number, I just gave you, there are separate things, so they continue on their delinquency so far, we’re not saying that they will not retake at anytime the payments whether in full or 80% but we don't know we can assure you that. The only thing we can assure you is that we received from fiduciary payments 44 and we have 36 coming up in the next month or so which means soon. So that basically not sure if I made myself clear.

Our next question comes from Steven Goldberger of WindAcre. Please go ahead.

Hi its Snehal, two questions, if it does not provide the compensation that's due to the company, through the process you’re going through what other stuff then can the company take to protect itself and protect the shareholders and then second on, [indiscernible] what I think the number understanding with time quite a long-time ago, is there a reason that this deal that you signed can’t get formalized and if it doesn’t get formalized what steps can the company take, to get these non paying municipalities to start paying. I know the company have taken steps in the past, calling that about with the state government etc, bit, it doesn’t seem to have solved the problem and so the shareholders are essentially paying for free water, for people that aren't paying, so how do we stop that process.

So just a second so we can organize and we'll address your two points. One more second please.

Hi. Good.

Nice talking to you. Talking about the key question uptick we are waiting for a response from our - from our requirements to be done in few, through this year of course we expect to have it soon. And what we have been discussing with the board of officers and our representative on the board, we have if this effort doesn't come in line with what we think would be fair. So, if it’s represents something rather than that we have not agree, the idea that we have discussing this year is to hire our - peer review and the experts on the issue that made we received not about to sit back so that we can have like a third opinion and then bring it to the board to this type. So, if we peer review things that we have right than we might go to the surface and include this report from this expert in our defense. Or if this guys comes with another point then we will bring this back to the board to discuss. So, just to make it clear, we wait for our network from the result - soon. Of course we went to have this deal and we believe that it will be done - because they have concluded the technical report and they are waiting for the legal departments to give their legal opinion and then they will decide both the requirements and as soon as we get it, we will of course review it here internally. And if, we have something that we can also agree that we think it’s relevant we will take it to the board - so that we can hire a third part and express to bring the highlight and the report to us. And then we will touch the next set, if we will see this consider this points that might be brought by the experts or if we don’t agree and then we will review this report to go to the surface. This is what we are discussing right now, I don’t know if this is clear for you.

Yeah. That is clear and it’s so it sounds like which I appreciate that if you don't get the answer that you want you’re not going to -- you were not going to give up?

Of course not.

The expert makes a lot of sense and it give a credibility something straight that we’re not going to give up in the process until every avenue…

So, we do feel that it's thoughtful even to improve the reserve price framework that as we discuss all the points. So, we feel that of course we must read from the year’s end first okay. And we know that - the surface in Brazil is not transferring so quick and so how can I say it takes time to have an answer. So, but we think it is still a possibility, but we discuss it with the board and we do think it's really helpful to have this peer review to have this I expect of course it depends on the issue so, but we started to discuss whole [indiscernible] to higher and to us what kind of activity because we believe that having discussed opinion, we will make ourselves more comfortable if we have to discuss again with regulatory authority or if we have to go the court we will have a third opinion that makes our position stronger I believe that’s what I believe. And about [indiscernible]…

No had explained here if I get off track the theme well correct me. Well first let’s make sure that you understand that we’re negotiating -- negotiation is underway with [indiscernible] there’s no disruption in the process except for that it is obviously a very accomplished process very detailed involves many opinions and approvals from the municipal attorneys and state attorneys, it’s absolutely tiresome and complex which does not mean anybody of any side has given up in anything, so we’re moving. So we’ve said what we can do in many cases for any reason the deal does not move on is that we will do what we always have done; we will file the municipality and the state that they’re at risk which they weren’t before starting negotiations which you still remember that restricts the assets to turn tax that are transferred from state and federal level in other words we reduced their cash flow and that’s the restriction. The second thing which is something we have been doing for since the beginning of this process we will take all this to court; what we have seen is that if it takes a long time for the courts to rule but we’ve been winning all the court rulings and all this results in an obligatory residual payment that has to be made by the municipality in other words this is something they cannot default period. So, this is what we’re going to do; in terms of -- basically this is what we’re going to do and that we can do; there’s nothing else we can do except for that; so in summary that’s where we are; we are actually optimistic about the process and we can tell you when, but it could take long or any time soon.

Two follow-up questions on that. Was it necessary to take them off of the bad debt or lift when they started negotiations so wonder if it kind of takes the pressure off of them like to find a resolution and find a deal once they’re off of that list, I mean they have access to their cash flow again, that’s one question? Again second question legally whenever you have any customer whether it’s municipality or any individual or industrial company if they start paying you, you have the legal right to turn the water off or if there’s an industrial company from a household and starts paying you are you still forced to providing water even though I don’t pay you for it?

I’ll go back with -- let me start from backwards, there’s -- for any industry for any residents there’s potentially an alternative supplier which they can go out there and buy water and do something, so there’s no restriction actually the law allows us to interrupt to cut water provide water we can cut, the service to those consumers that are not payers or in delinquency. So we can do that because essentially they have an alternative supply. When you think of city, with more than 1 million population we definitely do not have an alternative supplier even more in the metro regions Sao Paulo. So based on those two it maybe can compliment these comment and eventually move to the first question.

Adding to what Marty just mentioned, it’s important is to highlight that in the past, and due to provision 7 it was not clear if we could or could not turn that water off. Then our legal decision some of them said that we could, some said that we couldn’t. Then we had the law the regulatory frame work for water and sanitation 2007 that established that industrial consumers, residential consumers, yes that we could turn the water off and it established some kind of procedure to do that including even some public interest of [indiscernible] that we still could cut the water. The problem that we have, that’s why we don’t have a high delinquency level for this kind of consumers. What happens in this case is that the consumers are paying for the municipality for the water that is provided today. So that’s the problem that was highlighted in the legal discussion. The problem is that the consumers are paying, so I cannot just go there and cut the water because, we don’t have delinquency, the problem is that the municipality are probably empty they receive the money and use our money, your money to finance themselves to do other business, other things. And but as the consumers are paying the legal discussion that we could not turn the water off because there were few things. So that’s why we wanted to, if I’m not mistaken for the beginning of 2000 that we said having received kind of legal act against the municipality, because the problem is with the municipality and not with the users, the customers are paying and the way that we can deal with the municipality, is the way that SABESP has been dealing since its beginning with this kind of legal procedure that they…

The issue - next question is why does we take the municipality out of the paid back their lift? So the deal is design why it’s taking off the time.

No I understand the reason that the amount that’s part of the goodwill for the negotiation.

It’s rather than, so where the negotiation beginning, around February or March at least. This movement was made to show - and the what movement, I think it’s important to highlight is that first half, although and as we have the faster begin to see, we definitely understand all the fact that you must face and all the commitment that you might have some believe in the department, the judge. So conclude this kind of production is not something that is easy and that is not continues go fast. So, far we don’t feel that we have production - we don’t have this agreement. We have the problem that we have to work together to fulfill all the mission, or all the points that we must have done so that we can conclude this transaction -it's more a problem of complexity and time rather than our problem of this agreement.

Yeah. Okay. That’s helpful. Okay. Good to understand.

[Operator Instructions] It appears to be no further questions. Now, I’ll turn the conference back to SABESP for their final remarks.

Okay. Then thank you everybody. And usual we are here to like 24/7 to support you on your question. Call myself and IR team and see you next quarter. Bye, bye.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.