Companhia de Saneamento Básico do Estado de São Paulo - SABESP (SBS) Earnings

Management highlights

### Overall Business & Financial Health - Management confirmed the company remains in a healthy financial condition, able to meet all contractual and legal obligations, and is on track to reach full water and sewage universalization by legal deadlines. The company's concession contract was renewed through 2042, providing long-term operational certainty. - 100% universal access to water service has already been achieved, and sewage access has reached 82.9% (with 100% of collected sewage treated). - Reservoir volumes stood at 88% as of the call, up from 83% at the end of June, providing a solid buffer for near-term operations. The new Miniguava reservoir is already improving operational resilience, currently holding 20% volume (up from 13% in June), and is expected to reach full operational levels by the end of the year. ### Operational Efficiency & Credit Quality - Delinquency on customer bills closed at 1.9%, in line with strategic plans and slightly below management expectations. Water loss per connection fell to 216 liters per day, one of the lowest levels in recent quarters and down from 220 liters per day in 2024 and 223 liters per day in June 2025. - The voluntary severance program implemented in prior years has delivered sustained cost savings: even with new hirings, total personnel costs are lower than the prior year accumulated level. Working capital turnover is 35 days, which management considers a strong performance. ### Balance Sheet & Capital Structure - Net debt closed at 2.6 billion reais, with a leverage ratio (net debt / adjusted EBITDA) of 1.0x. 47% of total debt matures after 2030, creating a well-diluted amortization schedule that is actively managed by the company. All debt covenants are currently being met. - Operating cash flow generated 1.309 billion reais in the first half of the year. Closing cash balance was 4.6 billion reais, down from 5.6 billion at the start of the year, primarily due to dividend payments and debenture amortization.

Guidance

• Management reaffirmed that 2026 annual investment targets are on track to meet planned levels, following a record investment year in 2025. Capital investment continues to be prioritized to advance the sewage universalization goal in line with legal requirements. • A final legal decision on the disputed regulatory liability allocation is expected within the next 15-20 days, with management holding a positive expectation that the original 75%/25% split (75% for broad-based customer tariff reductions, 25% retained by the company per prior rules) will be upheld. • The company is currently revising its 2027-2031 business plan, which will be completed in the second half of 2026. The board of directors will decide on dividend distributions, including any potential catch-up dividend, in December 2026 based on full-year second half performance. Dividend/JSCP payments for the first half have been suspended pending resolution of the regulatory dispute.

Segment performance

The company operates two core service segments: water and sewage. For the six months ended June 2026, the company reported total net revenue of 3.8 billion reais, a year-over-year increase from 3.5 billion reais in the prior period. Water segment: Measured water volume grew 3.3% year-over-year in the first half, with built volume growing 3.1% year-over-year. The segment added 24,643 new water connections (a 0.7% increase) in the first half, and has added 48,923 new connections over the last 12 months, reaching a total of over 3.55 million connections. This segment contributes 35% of the company's total six-month capital investments. Sewage segment: Built sewage volume grew 4% year-over-year in the first half. The segment added nearly 35,000 new connections (a 1.3% increase) in the first half, and has added 109,000 new economic units over the last 12 months, reaching a total of 2 million connections and 3.636 million total economic units. 100% of the company's sewage is treated, and the segment contributes 55% of the company's total six-month capital investments. Unadjusted consolidated results: Reported a net loss of 152 million reais for the first half, after a 843 million reais non-recurring charge related to regulatory liability. Adjusted consolidated results (excluding the regulatory liability charge): EBITDA of 1.6 billion reais (adjusted EBITDA margin of 42.7%), net profit of 950 million reais (adjusted net margin of 24.7%), up from 650 million reais in the prior year first half. For Q2 2026 alone, adjusted EBITDA was 800 million reais, adjusted net profit was 447 million reais, with an adjusted EBITDA margin of 41%. Total capital investments for the first half were 1.152 billion reais, a 4.8% year-over-year increase, with 65% funded by internal resources and 35% funded by third parties.

Risks & headwinds

• Regulatory and legal risk related to the precatorios (court-ordered debt) regulatory liability: AGEPAR revised the original allocation rules after the company recognized the liability, requiring a 50/50 split (50% for low-consumption customer tariff discounts, 50% for unremunerated investments). Management is disputing this change, but if the new rule is upheld, the company will bear the cost of unremunerated capital investments that would not be included in the regulatory asset base for future tariff adjustments. • El Niño climate risk: There is a 95% probability of a severe El Niño event, with a 69% chance it will be one of the most intense events since 1950. The company notes that intense El Niño can cause both drought-related reservoir shortages and extreme storm events that lead to blackouts, sediment contamination of raw water supplies, and flooding of operational facilities. • Energy cost risk: One of the company's free-market energy suppliers entered bankruptcy (judicial recuperation), forcing SaniPar to source emergency replacement energy at higher-than-budgeted prices, creating near-term upward pressure on energy costs. • IT and operational implementation risk: The company's IT team is fully occupied with mandatory tax reform changes required for new customer invoicing effective December 1, 2026, creating a bottleneck for implementing the disputed tariff discount program if required in the near term.

Analyst Q&A

• Q: What legal steps is SaniPar taking to dispute AGEPAR's revised regulatory liability allocation rule? /

  A: Management has already exhausted initial administrative appeals and initial injunctions, which were unsuccessful. The company is currently evaluating further legal options, including additional extraordinary or ordinary legal actions, to defend its position. Top management has committed to pursuing all available legal paths through the highest courts, hiring top external legal firms, and notes multiple internal and external legal opinions support the company's position that the original rule should be upheld. Management is not abandoning the challenge and will pursue all options to reclaim the right to the original 75%/25% allocation.

• Q: What is SaniPar's strategy for expanding into sanitation concessions in other Brazilian states? What preparations are in place for the upcoming severe El Niño? /

  A: Management confirms that new concession opportunities in other states are on the company's radar, but any expansion will be approached very responsibly. The company's current priority is executing the large capital investment plan for its existing concession in Paraná, and any new opportunities will only be pursued after rigorous financial and operational analysis. For El Niño, the company has developed comprehensive contingency plans, partnered on a state-wide climate monitoring platform, pre-positioned backup generators and pumping equipment, and maintains an active working group with state civil defense to respond to disruptions. Management confirmed the company is fully prepared to maintain water and sewage service through expected extreme events.

• Q: What criteria will the board use for dividend distributions going forward, and can shareholders expect a catch-up dividend after the regulatory dispute is resolved? /

  A: SaniPar's formal dividend policy allows for a distribution range of 25% to 50% of profits. Management suspended first half JSCP/credits pending resolution of the regulatory dispute with AGEPAR. The company is updating its 2027-2031 business plan in the second half of 2026, and the full board will make a final decision on dividend distributions, including any potential catch-up, in December 2026 based on full-year second half operating results and the final resolution of the regulatory dispute.

• Q: If the ruling does not go in SaniPar's favor, is there a possibility of a negotiated agreement with AGEPAR? Will the disputed 50% of the liability ever be included in the regulatory asset base? /

  A: Management is not currently pursuing any negotiated agreement outside of upholding the original Technical Note 7 rule. The company has requested state government mediation, but its only proposal is to reinstate the original allocation terms. Under AGEPAR's current proposed rule, the 50% allocated to unremunerated investment would not be included in the regulatory base, which management views as financially unfavorable to the company. All legal and administrative paths are being pursued to reverse this outcome.