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 2019. The audio for this conference is being broadcast simultaneously through the Internet on the website, www.sabesp.com.br, where you can also find the slideshow presentation available for download. [Operator Instructions]Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of 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 as we have Mr. Rui Affonso, Chief Financial Officer and Investor Relations Officer. Mario Arruda Sampaio, Head of Capital Market and Investor Relations; Sylvio Xavier, Head of Costs and Tariffs; and Marcelo Miyagui, Head of Accounting. Please note this conference is being recorded.Now I'd like to turn the conference over to Mario Sampaio. Sir, you may begin your conference.

Thank you. Thank you all for attending our conference call to discuss our second quarter 2019 presentation today. We will go through the main events and after we will have the usual Q&A session.Let's start on Slide 3, where we show billed volume increased by 2.6% for billed volume of water and sewage in the second quarter of 2019. As a result of essentially a 6.1% increase in billed volume of sewage and 0.2% increase in the billed volume of water.Let's go to Slide 4, let's comment on our financial results. We reported a net income of R$ 454 million in the second quarter of 2019. This compared to the R$181.9 million posted in the second quarter of 2018, represents a 149% bottom-line increase. This change was due to the R$329 million year-over-year increase in gross operating revenues from R$3.25 billion in the second quarter of 2018 to R$3.58 billion in the second quarter of 2019 due to the 3.5% tariff repositioning index and the 4.7% tariff adjustment also the increase in sewage volumes and the operation in the municipality of water use, in this case representing a revenue increase of close to R$91 million.Associated with this, the better financial results appears in the second quarter of 2018 at R$681.6 million or 81.4% is mainly explained by the effects of monetary and exchange rate variations on the foreign currency loans and financing. Second quarter net operating revenues increased 8.9% year-over-year from R$3.67 billion to R$3.99 billion. Costs, administrative and selling expenses and construction cost increased by 22.1%. The increase was distributed among expenses lines of which we can highlight the increase in expenses with services, general expenses and expenses with salaries charges, benefits and Social Security obligations.Due to all these changes the adjusted EBITDA totaled R$1.23 billion, a decrease of…

[Operator Instructions]And our first question today comes from Hasan Doza with WAM Please go ahead.

Hi, good afternoon, Mario. Two questions. First on the Sao Lourenco system. First question is can you help please confirm the total cost including both OpEx and the interest expense associated with operating the Sao Lourenco system on annual basis?

Okay. What is the second question also, Hasan?

Sure. The second one I was going to ask is it's partly related to the first one is how much are you recovering in rates of the total cost which you are incurring for the Sao Lourenco system?

Okay. Let me just get the number and we'll comment in a second. Hasan, one more second, very detail, we will get done. We are struggling here to maybe understand better your question. You want to know the Sao Lourenco impact on OpEx or the monthly payment. Okay, so that specifically what is the OpEx impact of Sao Lourenco. In this quarter, just the OpEx, R$11 million.

Is that a good number to -- I'm looking more for an annual run rate. So is that a good number to annualize or what you gentlemen think is a good annual OpEx run rate of the -

But I recall from the contract is that there is the monthly payment which obviously includes the OpEx. And this is adjusted on a yearly basis. So if you were to analyze I would think that this would be a good start. I just don't know when the reset date, the adjustment date is. If it's next month or if it was last month. So I don't know, but again it is adjusted by inflation. It's not adjusted by the EPCA, adjusted by a local Sao Paulo EPC index. The slightly variation on a monthly, monthly basis, okay.

Got it. That's clear, thank you. And on the interest expense either you or Miyagui, can you please confirm either quarterly or an annual run rate, the interest expense associated specifically with the Sao Lourenco please.

Okay. Let me check here. Hasan, the interest for the Sao Lourenco this quarter was R$53 million and again I think if you want to use this number on an annual base, I won't confirm it will be the same but it is a number. It's a variation there, is an estimate based on an NPD of the contract at a discount rate, internal discount rate. So potentially it is not reliable. As for all these costs going through to the tariff, the answer is yes. In fact, the entire stock monthly installment including Opex, CapEx and interest, they all go through the tariff on the OpEx side. Okay, on the OpEx line.

I got it. I just want to confirm so your OpEx run rate is about R$40 million per year. As you said R$11 million this quarter and your interest expense run rate I'm rounding it's 50 so call it R$200 million annual. So these two costs R$240 million annual run rate, I just want to confirm. For example, when you received that 4.7% tariff increase on May of this year, was that R$240 million or whatever the exact cost is of the Sao Lourenco system both at the OpEx and the interest expense level. Were these costs included in that 4.7% tariff adjustment?

Okay. Hasan, first, let's do this a, the 4.7% is a tariff adjustment inflation. So you must be referring to the tariff reset of 3.5% of the year before. Said that on our business plan, the entire for the period payments, outlets to the Sao Lourenco contracts were registered as OpEx and yes they are considered in the three tariffs and on the 3.5 % increase. Although, you have to remember only today we are at full operation in Sao Lourenco, Sao Lourenco effectively started around August last year. So the answer to you is yes. It is captured fully by the business plan and by the tariff that is authorized by the regulator.

Okay. So final question on this plan. So when you go for your regular tariff adjustment in 2020 which is the inflation type increase in April or May of 2020. And you now have a full year run rate of operating the Sao Lourenco plan. Will you be as part of the regular tariff adjustment in 2020 be able to fully recover the costs of Sao Lourenco on an annual basis?

We will fully recover because it's already on the tariff. And we should maintain that recovery provided that the adjustment on a yearly basis for the Sao Lourenco payment is not exactly the same inflation in that but the similar inflation index. So ultimately what we're saying is, yes, the Sao Lourenco contract is being fully recovered in the tariff. And, yes, every year where there's a tariff adjustment on our tariff that adjustment is more than sufficient to capture the adjustment in the contract payment, yearly payment.

Perfect. That's very helpful. Thank you for the explanation. Just two quick remaining questions. Mario, can you please confirm or Miyagui the statutory tax rate that you're currently paying in Brazil? Statutory tax rate, yes.

34%.

That's fine. I got you and just want to close with your statement on the change in the employees from Guarulhos. You mentioned that it goes from a 1,000 to 400. So what's happening to those 600 employees? Can you just help me understand?

Yes. Let me tell you. First, they're not employees of SABESP. They are employees of the Guarulhos sanitation company, the one that is not operating the system anymore. So under the contract, we have the possibility to not to hire the employees but to pay them as service provided by them during a period. The first period, we paid the service for a slightly above 1,000. That agreement was until June this year, so yes until June on the service line we paid for 1,000 employees supporting our work as we take over the system. As of now, we are allowed to contract services from 400 which we will. We may remain with these 400 for four years after which we're not obligated to pay for their service, which doesn't mean that we may remain with 1 or 2, 10 whatever we think are good employees.But then only then if it happens they will become our employees. So it's not on the payroll salaries like this you will always see until we are provided-- they are providing the service in the service line.End of Q&A

It appears there are no further questions. I'll now like to turn the conference back over to SABESP for their final remarks. And this will conclude the question-and-answer session. I'd like to turn the conference back over to SABESP for their final remarks.

Okay. Everybody, thank you and again any questions you may have, please call me, Angela. We're here to answer and clarify any point and see you next quarter. Thanks. Bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time. And have a great day.