Sustainability r e p o r t - Sabesp

Sabesp is for the third consecutiveyear part of the CorporateSustainability Index portfolio ofBM&FBovespaWe prioritized the Water Loss Reduction Program as it should. In 2009, waterlosses decreased to 26 percent of revenue. The goal for 2010 is to reduce lossratio to 24 percent, a decrease of 8 percentage points over 2006, when lossesreached 32 percent. If we reach this goal, in the 2007-2010 Sabesp will increasewater supply capacity by 1.7 million inhabitants, equivalent to the population ofCampinas and Osasco together, without the need to find new watersheds, andincur in the related power and material costs.The second work front was ensuring contract and market security, comprisingthe renewal of existing agreements and ensure closer cooperation with the citygovernments.In fact, the universal water and waste services goal requires actions from theCities in addition to our investments. It is necessary that each party’s effortsbe complementary. A municipal government can work to clear irregularlyoccupied, invaded and environmental preservation areas, eliminate unauthorizedconnections and make the connection to the sewage system mandatory, detectillegal wastewater discharges, etc.During the year several city councils approved 40 authorization acts, including inthe City of São Paulo. In 2009, we entered into 14 agreements, added to the 174agreements entered into since 2007. By January 2010, 30 authorization acts hadbeen approved that will soon permit the provision of sanitation services.The third work front was build-up sound pillars of economic and financialsustainability, to increase investment capacity and, therefore, the ability to betterserve our customers. Note, to this regard, the R$1.4 billion profit obtained in2009, the highest ever nominal profit in our history.To ensure our economic and financial soundness, we have been working to obtainefficiency and productivity gains. One of the most important actions in this senseis the mentioned loss reduction program. Note also the increase in productivity,from 684 connections by employee in 2006 to 837 connections by employee in2009, a considerable 22 percent increase.To reach these gains, we have undertaken significant efforts in cutting costs,optimizing the asset base, and improving our financing structure. The reductionin personnel, telecommunications, power, and treatment material costs, amongother, permitted savings of approximately R$180 million in the 2010 budget. Morethan this, they create a continuous cost efficiency and control culture, which iscrucial for a secure growth path. As part of the asset base reduction efforts, in2009 we sold nonoperating properties worth R$27 million. As regards fundraising,the need for more funds to finance increased investments was covered togetherwith an estimated two-percentage point reduction in the average interest ratepaid and an increase in the share of Government and multilateral funding. Thesefunds bear lower interest rates, have longer terms, and are, therefore, moreappropriate for the type of projects developed by SABESP.We also progressed in the elimination of outstanding financial items, withthe settlement of water and sewage bills owed by the State and the cities.There was equal progress in the actions taken to reduce water supply debts ofpermittee cities.Our financial soundness is confirmed by the upgrading of our rating awardedby Standard and Poor’s (S&P), a sign of our capacity to honor our financialobligations. Additionally, SABESP is for the third consecutive year part of theCorporate Sustainability Index portfolio of the São Paulo Mercantile and StockExchange (BM&F Bovespa).The fourth work front consisted on the comprehensive co rporate modernizationprocess. In 2009, we worked intensely to renew our staff. We conducted thefirst comprehensive public recruitment process in eight years to hire 1,771new employees. To ensure new talents succeed current leads, we prepared asuccession and career plan within Sabesp, including special training consistingof MBA classes, language courses, and a mentoring program. Additionally, westarted the scaled termination of retirees, in compliance with a Public ProsecutionOffice resolution. With a headcount formed by staff that passed the recruitmentexamination and trained and qualified new talent, we are ready to face thecoming challenges and enter new markets and industries.In the same line, it is important to emphasize the continuity of the pioneeringimplantation in a state-owned company of the Value Added Management(VAM) model, which is crucial to steer the actions related to the optimization ourasset base and improve the quality of investments, to strengthen SABESP and itslong-term sustainability.Enhancing the corporate governance practices is also one of our priorities. OurCode of Ethics and Conduct of Company was widely disseminated, including aQ&A section, and practical examples to facilitate their understanding by our10 Relatório de Sustentabilidade 2009 11