Earnings Release - Amazon S3...Carlos Augusto Botrel Berto Rio Manso System Reservoir Belo...

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Rio Manso System Reservoir

Belo Horizonte, April 30, 2020 - COPASA MG - Companhia de Saneamento de Minas Gerais

- (B3: CSMG3) hereby announces its results for the first quarter of 2020 (1Q20). The financial

information, except where otherwise indicated, is presented in thousands of Brazilian Reais (R$

thousand) and the comparisons refer to the first quarters of 2020 (1Q20) and 2019 (1Q19). The

financial information refers to the Parent Company. The tables containing the results are

available for download at ri.copasa.com.br.

Earnings

Release

1Q20

Conference Call with

Simultaneous Translation

Date: May 15, 2020

3:00 p.m. (Brasília time)

2:00 p.m. (New York time)

Phones:

Brazil: +55 (11) 3137-8074

USA: +1 (786) 209 1795

UK: +44 (20) 3769 3830

Code: COPASA

Webcast: click here.

Participants:

Carlos Eduardo Tavares de

Castro

CEO

Carlos Augusto Botrel Berto

Chief Financial and Investor

Relations Officer

IR Contact:

Telephones:

+55 (31) 3250-1602

+55 (31) 3250-1386

+55 (31) 3250-1861

[email protected]

ri.copasa.com.br

COPASA: 4/29/2020

Closing price: R$49.82

Number of shares: 126.8 million

Market value: R$6.3 billion

FINANCIAL HIGHLIGHTS 1Q20 1Q19 Var. (%)1

Water, Sewage and Solid Waste Net Revenues 1,209,738 1,105,151 9.5%

Costs and Expenses 857,134 797,596 7.5%

Other Net Operating Income (Expenses) (17,971) 4,814 n.m.

Result before Financial Result and Taxes 315,463 297,185 6.2%

Financial Result (92,688) (41,469) 123.5%

EBITDA 474,926 442,540 7.3%

EBITDA Margin 38.1% 38.4% -0.3 p.p.

Net Income 160,835 186,735 -13.9%

Net Debt 2,674,787 3,076,313 -13.1%

Net Debt/EBITDA 1.5 2.0 n.m.

1) n.m. = not measurable; p.p. = percentage points.

OPERATIONAL HIGHLIGHTS 1Q20 1Q19 Var. (%)

Water

Units (1,000s) 5,330 5,249 1.5%

Distributed Volume (1,000 m³) 253,521 251,022 1.0%

Measured Volume (1,000 m³) 150,056 152,634 -1.7%

Network Extension (km) 56,473 55,451 1.8%

Sewage

Units (1,000s) 3,691 3,627 1.8%

Measured Volume (1,000 m³) 102,065 102,927 -0.8%

Treated Volume (1,000 m³) 77,597 79,412 -2.3%

Network Extension (km) 28,393 28,375 0.1%

(1) Data refers to COPASA and COPANOR combined, except for treated volume, which refers to the Parent Company.

Rio Manso Reservoir

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Table of Contents

1. Highlights...................................................................................................................................................... 3

1.1. Investment Program .................................................................................................................................... 3 1.2. Regulatory Framework ................................................................................................................................ 4 1.3. Coronavirus ................................................................................................................................................. 4 1.4. Shareholders’ Compensation ....................................................................................................................... 5

2. Operational Data ......................................................................................................................................... 7

2.1. Service Concessions .................................................................................................................................... 7 2.2. Operational Data ......................................................................................................................................... 8 2.3. Employees and Employees per Connection ................................................................................................ 9 2.4. Customer Base – 1Q20 ................................................................................................................................ 9

3. Hydrological Situation ............................................................................................................................... 10

3.1. Belo Horizonte Metropolitan Area (BHMA) ............................................................................................ 10 3.2. Other municipalities in the Minas Gerais State ......................................................................................... 11

4. Quarterly Performance ............................................................................................................................. 12

4.1. Revenues ................................................................................................................................................... 12 4.2. Costs and Expenses ................................................................................................................................... 13 4.3. Other Operating Revenues (Expenses) ...................................................................................................... 16 4.4. Equity Result (Subsidiary COPANOR) ................................................................................................... 16 4.5. Financial Result ......................................................................................................................................... 17 4.6. Taxes on Income ....................................................................................................................................... 17 4.7. Net Income ................................................................................................................................................ 17 4.8. EBITDA and EBITDA with Adjustments to Non-Manageable Items ...................................................... 18

5. Debt and Rating ........................................................................................................................................ 19

5.1. Gross Debt and Net Debt .......................................................................................................................... 19 5.2. Indexes and Average Coupon ................................................................................................................... 19 5.3. Corporate Ratings ...................................................................................................................................... 20

6. Exhibits ............................................................................................................. Erro! Indicador não definido.

6.1. Quarterly Income Statement ...................................................................................................................... 21 6.2. Statement of Financial Position – Assets .................................................................................................. 22 6.3. Statement of Financial Position – Liabilities ............................................................................................ 23 6.4. Debt ........................................................................................................................................................... 25 6.5. Cash Flow .................................................................................................................................................. 24

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1Q20 Earnings Release

1. Highlights

1.1. Investment Program

1.1.1. 2020 Investment Program

At a meeting held on March 19, 2020, the Company’s Board of Directors ratified the Capital Budget proposal

for 2020, which expects investments in the amount of R$853.3 million in the year, of which R$816.0 million

allocated to the Parent Company (COPASA MG) and R$37.3 million to the subsidiary COPANOR.

A total of R$101 million was invested in the first quarter of 2020, as shown below:

INVESTMENTS (R$ MILLION) 1Q20

Water 34

Sewage 39

Other 22

Parent Company (COPASA MG) 95

COPANOR 6

Total 101

1.1.1.1. Water Supply Systems

expansion of the production capacity in the Montes Claros and Nova Rezende Water Supply Systems;

expansion of the service capacity in Ibirité, Pedra Azul and Igarapé;

improvements and optimization of the Water Supply Systems in Betim, Caxambu, Paracatu, Divinópolis,

Lavras, Leopoldina and Divisópolis;

implementation of the Waste Treatment Unit of the Teófilo Otoni System’s Water Treatment Station;

implementation of distribution networks and water connections in buildings in several municipalities in the

Minas Gerais State.

1.1.1.2. Sewage Systems

expansion of the service capacity in the Sewage Systems of the municipalities of Pouso Alegre, Sabará,

Ribeirão das Neves, Araçuaí, Três Corações and Contagem;

implementation of the Sewage System in the municipalities of Felixlândia, Divino, Abaeté and Caratinga;

improvements and optimization of the Sewage Systems of Conselheiro Lafaiete and Divinópolis;

execution of works of the sewage treatment system in Perdões and Itamarandiba;

implementation of collecting networks and sewage connections in buildings in several municipalities in the

Minas Gerais State.

1.1.2. 2021 to 2024 Investment Program

The Investment Program for the 2021 - 2024 period foresees annual contributions of R$1.25 billion for the Parent

Company (COPASA MG) and R$37.3 million for the subsidiary COPANOR.

The new level of the annual Multi-Year Investment Program for 2021 foresees the expansion of resources

allocated to replace assets depreciated by R$200.0 million, the compliance with concession commitments totaling

R$250.00 million, and R$800.0 million to be invested in water supply and sewage systems, network extension

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and waste reduction initiatives, in order to achieve regulatory and efficiency goals. As a result, the Company

aims to meet the demands of clients and granting authorities, seeking to universalize its services.

1.2. Regulatory Framework

On June 29, 2019, ARSAE-MG disclosed its Resolution 127/2019, which authorized the average adjustment of

8.38% in the water supply and sewage service tariffs of the Parent Company (COPASA MG). The application

occurred on a pro-rated basis for consumptions registered in August and in full as from September 2019.

Following the adjustments established in the tariff revision concluded in 2017, there was a change in the tariff

structure for sewage services and, as of the adjustment applied on August 1, 2019, the EDT tariff (Sewage with

Collection and Treatment) currently accounts for 97.5% of the water tariff, while the EDC tariff (Sewage with

Collection Only) currently accounts for 31.25% of water tariff.

For the 2020 adjustment, expected to be implemented in August, these percentages will account for 100% and

25% of the water tariffs, respectively.

The tariff revision, which consists of a reassessment of service rendering and market conditions, is scheduled for

2021.

1.3. Coronavirus

According to the Notice to the Market disclosed on March 23, 2020 and complemented by the Notice to the

Market released on April 27, 2020, with the objective of ensuring the best services and minimizing the impacts

of the coronavirus (COVID 19) pandemic to the population, the Company took several measures, with the

agreement of ARSAE - MG, in particular:

Clients in the Social Residential Category: no cuts to water supply until May 30, 2020, including non-

collection of interest and fines on overdue and unpaid bills by the same date.

The debts of the residential, commercial, industrial and public categories, the down payment value, for the

negotiation of debts, will be 5% of the total debt or the average of the last 12 months bills (whichever is less),

and the remainder in installments up to 24 months, with interest of 0.5%. The debts of customers of the Social

Tariff can be paid in up to 36 months, with down payment of 5% or the value of an average bills for the last 12

months (whichever is less). It is worth mentioning that, under normal circumstances, the debts of the Company's

customers were paid in up to 24 installments, with down payment of 20% of the bills amount and interest of 1%

per month.

Commercial customers, whose activities are suspended, due to the legal restrictions imposed by the various

levels of government: extension of the payment period for accounts due up to April 20, 2020 will be postponed

to May 20, 2020 and for accounts due from April 21 until May 30, 2020, will be postponed to June 30, 2020.

Suspension Notice: customers who received notice of suspension of water supply between February 23, 2020

and March 20, 2020, the payment deadline was extended to 20.04.2020. For those who received the suspension

notice between March 21 and April 30, 2020, the payment deadline will be extended to May 30, 2020.

Regarding customer assistance, the Customer Service Agencies have been closed since March 23, 2020. In this

period, customer assistance is being provided exclusively through remote channels - phone number 115, Copasa

Digital app, and Virtual Agency.

Internal water meters are not being read to avoid unnecessary contact between the population and our readers.

For these clients, the Company will use the average of the last few months. For properties where the water meter

is freely accessible at the street, the readings will proceed as usual.

http://www.arsae.mg.gov.br/images/documentos/legislacao/2019/Resolucao_127_ReajusteCopasa_2019.pdf

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The Company has been maintaining teams with special schedules in the operational area throughout the State to

ensure that the quality of the water supply and sewage services will not be compromised and the compliance

with the required legal standards.

Moreover, nearly all employees in administrative areas are working remotely (“home office”).

As for the financial impacts resulting from the business pandemic, the Company remains monitoring, in order to

measure any economic and financial effects that may impact financial and equity conditions and compromise

compliance with the Business Plan.

In this sense, the Company has also been acting in sectoral discussions with the Federal Government, in such a

way as to highlight the importance of support to, in particular, guarantee the continuity of service provision in

the most vulnerable municipalities and populations.

Also, the constant discussion with the regulatory body stands out, so that the conditions for maintaining the

economic-financial balance in the contractual relations signed with the Municipalities are observed, and in this

way, guaranteeing the economic and financial sustainability of the Company.

As measures to preserve the cash flow, the postponement of the payment of taxes will be adopted, as permitted

by the federal tax authorities: PIS, COFINS, Social Security Contribution referring to the employer's quota of

20% and the Environmental Risk of Work (RAT), as well as the deferral of FGTS, with a view to extending the

terms provided for in Provisional Measures and Normative Instructions, as well as adherence to the measure

disclosed by the BNDES for the suspension of payments of debt related to loans, for a period of 180 days from

April 15, 2020. In addition, the Costing Budget and the Investment Program may be revised to adapt to the

planned spending schedules.

The Company has been monitoring the collection of bills for water and sewage services on a daily basis, having

underperformed during April. These are the initial impacts of the pandemic currently being measured.

1.4. Shareholders’ Compensation

1.4.1. Dividend Policy (Revised by the ESM held on May 7, 2018)

1.4.1.1. Regular Dividends

The Board of Directors shall define, by March 31 of each year, the percentage of Adjusted Net Income to be

distributed, observing the statutory minimum of 25% and the limit of 50%.

Dividends shall be declared on a quarterly basis with payment in up to 60 days from the approval date, except

for amounts referring to the fourth quarter, which will be defined at the Annual Shareholders’ Meeting (ASM).

1.4.1.2. Extraordinary Dividends

In conjunction with the disclosure of the Annual Financial Statements (DFs) and the Interim Financial

Information (ITR) for the second quarter of each year, Management shall proceed with and disclose the

Calculation of the Regulatory Alignment, already considering the payment of Regular Dividends, in order to

evaluate if it is within the margin considered efficient (Efficient Margin of Regulatory Leverage) and if this index

is:

a) Above the margin: the Board of Directors will define that the distribution percentage of the Adjusted Net

Income will be the required legal minimum amount.

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b) Within the margin: payout will be based on the criteria and limits defined for the distribution of Regular

Dividends.

c) Below the margin: the Board of Directors may declare Extraordinary Dividends up to three (3) months after

the disclosure of the DFs and ITR of the second quarter of each year, which will consist of an additional

remuneration that is sufficient to so that the lower level of such margin is reached. This declaration will occur

after the conduction of studies that indicate that any payment of Extraordinary Dividends will not jeopardize the

Company’s financial health, its investment plan or current liquidity.

The calculation of the Regulatory Framework for the current regulatory cycle corresponds to the Net

Debt/EBITDA ratio (the Company’s current Net Debt divided by the accumulated EBITDA of the 12 months

prior to the calculation period), which should reach 2.10x, with a margin of 0.10x up or down.

1.4.2. Shareholders’ Compensation - 2020

1.4.2.1. Regular Dividends

At the meeting held on March 19, 2020, the Board of Directors approved that the distribution of dividends for

2020 will correspond to 25% of the Adjusted Net Income, as Interest on Equity (IOE).

In compliance with said Policy, on March 20, 2020 the Board of Directors approved the declaration of interest

on equity for 1Q20, as follows:

Reference Corporate

Event

Credit

Date

Total Value

(R$ million)

Value per Share

(R$)

Payment

Date

1Q20 BoDM 3/20/2020 3/25/2020 45.47 0.3597 to be defined

1.4.3. Extraordinary Dividends

At a meeting held on March 19, 2020, the Board of Directors resolved that, regarding any distribution of

Extraordinary Dividends, as per the Company’s Dividend Policy and the statutory covenants, the matter will be

discussed and resolved in up to ninety (90) days after approval of the Financial Statements for 2019, in view of

the current scenario of economic and social uncertainties resulting from the COVID 19 pandemic.

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2. Operational Data

2.1. Service Concessions

In February 2020, the Company renewed the concession for the provision of water supply and sewage services

with the municipality of Santa Luzia, which has an estimated urban population of approximately 202,000 people.

In March 2020, the Company was the concession holder of water supply in 641 municipalities and sewage

services in 311 municipalities, as shown below:

Concessions1

3/31/2020 3/31/2019

Total Parent

Company COPANOR Total

Parent

Company COPANOR

Water Concessions 641 592 49 639 590 49

Running 629 581 48 629 581 48

Sewage Concessions 311 255 56 309 253 56

Running 264 224 40 259 222 37

1) Only one concession/operation is considered per municipality, regardless of whether there is more than one contract, in cases of COPASA and

COPANOR service in the same municipality, or if it is a contract that covers only districts and localities.

The chart below shows the Company’s ten (10) main concessions, which, together, accounted for approximately

52.8% of the Company’s water and sewage net revenues, as well as their respective expiration years:

Municipality Expiration of the

Concession/Program Contract

Belo Horizonte 2034

Contagem 2073

Betim 2042

Montes Claros 2048

Ipatinga 2022

Ribeirão das Neves 2034

Divinópolis 2041

Pouso Alegre 2046

Santa Luzia 2050

Varginha 2047

On March 31, 2020, 79.5% of the Company’s water and sewage net revenues came from concessions expiring

after January 2034. On the same date, concessions with 64 municipalities, accounting for approximately 2.7% of

water and sewage net revenues, were expired. In compliance with Federal Law 11,445/2007, in view of the

principle of continuity of essential public services, the Company continued providing and billing services until

payment of indemnity for unamortized assets occurs.

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2.2. Operational Data

Data - Parent Company (COPASA MG) 1Q20 1Q19

1Q20

vs.

1Q19

1T18

1Q19

vs.

1Q18

Water

Connections (1,000s) 4,312 4,247 1.5% 4,196 1.2%

Units (1,000s) 5,222 5,146 1.5% 5,085 1.2%

Population Served (1,000 inhabitants) 11,405 11,364 0.4% 11,336 0.3%

Distributed Volume (1,000 m³) 249,510 247,230 0.9% 238,688 3.6%

Measured Volume (1,000 m³) 147,754 149,991 -1.5% 146,522 2.4%

Network Extension (km) 53,836 52,980 1.6% 51,049 3.8%

Water Metering Index (%) 99.8 99.7 +0.1 p.p. 99.7 -

Loss Index¹ (%) 40.5 40.2 +0.3 p.p. 38.0 +2.2 p.p.

Sewage

Connections (1,000s) 2,884 2,834 1.8% 2,731 3.8%

Units (1,000s) 3,640 3,579 1.7% 3,460 3.5%



Treated Volume (1,000 m³) 77,597 79,412 -2.3% 73,941 7.4%

Network Extension (km) 26,860 26,902 -0.2% 25,550 5.3%

Water and Sewage

Consumption Days (quarter) 91.90 91.30 0.7% 91.75 -0.5%

Consumption Days (monthly average) 30.63 30.43 0.7% 30.58 -0.5%

1) Difference between the distributed volume and the measured volume, divided by the distributed volume in the last twelve months.

Data – COPANOR 1Q20 1Q19

1Q20

vs.

1Q19

1T18

1Q19

vs.

1Q18

Water

Connections (1,000s) 104 99 5.3% 98 1.1%

Units (1,000s) 108 103 5.1% 102 0.9%

Population Served (1,000 inhabitants) 213 209 1.7% 206 1.9%




Sewage

Connections (1,000s) 48 45 6.2% 45 1.7%

Units (1,000s) 50 47 5.9% 47 1.4%

Population Served (1,000 inhabitants) 99 94 4.6% 94 0.5%

Measured Volume (1,000 m³) 1,013 1,022 -0.8% 976 4.7%


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Consolidated Data

(COPASA MG + COPANOR) 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Water

Connections (1,000s) 4,416 4,346 1.6% 4,295 1.2%

Units (1,000s) 5,330 5,249 1.5% 5,187 1.2%





Sewage

Connections (1,000s) 2,932 2,879 1.8% 2,776 3.7%

Units (1,000s) 3,691 3,627 1.8% 3,507 3.4%




2.3. Employees and Employees per Connection

The number of employees and the indicator of employees per thousand connections of water and sewage are

presented below:

Employees and Employees per Connection 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

COPASA MG

Employees 11,481 11,534 -0.5% 11,259 2.4%

Employees/Connection¹ 1.60 1.63 -2.0% 1.63 0.2%

COPANOR

Employees 465 457 1.8% 444 2.9%


COPASA MG + COPANOR

Employees 11,946 11,991 -0.4% 11,703 2.5%


1) Number of employees / 1,000 connections of water and sewage.

2.4. Customer Base – 1Q20

The distribution of the customer base, as well as billing by consumer category (Residential, Social Residential,

Commercial, Industrial and Public) are as follows:

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3. Hydrological Situation

3.1. Belo Horizonte Metropolitan Area (BHMA)

3.1.1. Rio Manso, Vargem das Flores and Serra Azul Reservoirs

As of 2014, the evolution of the Rio Manso, Vargem das Flores and Serra Azul reservoir levels, which account

for 47% of supplying the BHMA, is as follows. Due to the heavy rains registered in the state of Minas Gerais,

during the first quarter of 2020, the volume of these reservoirs showed a significant recovery and are practically

full, as can be seen in the graph below:

3.1.2. Das Velhas River

The water drawn from Rio das Velhas, responsible for approximately 42% of the volume distributed at BHMA,

is collected directly from the stream, thus being greatly influenced by the occurrence of rainfall, given its location

in the upper part of the watershed. The table below shows information on this collection system:

Rio das Velhas System

BHMA population served 42%

Water collection concession 8.7 m³/s

Average flow in the last 15 days prior to 15.04.2020 51.4 m³/s

Average flow used in the last 12 months 6.8 m³/s

3.1.3. Rupture of the Mina Córrego do Feijão Dam - Brumadinho (MG)

Due to the rupture of the Mina Córrego do Feijão Dam on January 25, 2019, located in the municipality of

Brumadinho and operated by Vale, the Company took actions to identify and mitigate the risks to its operation.

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Preventively, the company closed the floodgates of the water collection unit in the Paraopeba River on the same

day of the rupture, aiming at the preservation of the collection facilities, whose assets did not deteriorate, so they

were not compromised.

In July 2019, the Prosecution Office of the Minas Gerais State and Vale signed a Term of Commitment, with

COPASA MG as intervening party, for the construction of a new collection point on the Paraopeba River, which

is expected to be concluded on September 30, 2020. The Term also includes the obligation to provide other

structures necessary for the conduction of water.

Under the Term of Commitment, the actions are accompanied and audited by the Public Prosecution Office of

the Minas Gerais State by means of an independent consulting firm.

Regarding the Rio das Velhas System, as provided for in the Term of Commitment, Vale has already concluded

preventive works to mitigate risks to said System, as there are tailing dams located in Rio das Velhas basin,

classified as alert 3 level.

3.2. Other municipalities in the Minas Gerais State

The Company’s activities in the interior of the State are dispersed over several municipalities and different

watersheds. Generally speaking, most of the locations where the Company provides services has e a local source

of water production. Therefore, any water restriction imposed on supply will only impact locally and marginally

the Company’s total revenues.

In order to minimize the impacts of the water situation, the Company uses means that contribute to the

regularization of supply in the affected locations, such as water trucks, well drilling and investments in alternative

collections, according to the options available in each region and the level of scarcity criticality in each case.

Additionally, awareness campaigns on the rational consumption of water are intensified.

Specifically with regard to Montes Claros, the Company's largest concession in the interior of the State, an

alternative fundraising operation in the São Francisco River is in the bidding process. This undertaking aims to

meet the commitments agreed upon when the concession was renewed for the provision of water supply and

sewage services in Montes Claros, signed in July 2018.

On April 15, 2020, five (5) municipalities were in a rationing situation: Curral de Dentro, Divisa Alegre, Ipaba

(Vale Verde de Minas), Itanhomi (Edgard Melo) and Urucânia, which together represent approximately 17

thousand water connections

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4. Quarterly Performance

4.1. Revenues

The following chart shows gross revenue, deductions (PIS/COFINS) and net revenues of water, sewage and solid

waste in the comparative periods:

Gross Revenue, Deductions and Net Revenue 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Gross Revenue – Water 847,883 784,910 8.0% 734,403 6.9%

Gross Revenue – Sewage 484,845 433,868 11.7% 397,208 9.2%

Gross Revenue – Solid Waste 592 558 6.1% 676 -

Total Gross Revenue 1,333,320 1,219,336 9.3% 1,132,287 7.7%

PIS/COFINS (123,582) (114,185) 8.2% (104,739) 9.0%

Total Net Revenue 1,209,738 1,105,151 9.5% 1,027,548 7.6%

Net revenue from water, sewage and solid waste totaled R$1.21 billion in 1Q20, up 9.5% from 1Q19, as shown

in the table below:

Net Revenue 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Direct Net Revenue – Water 748,155 689,152 8.6% 637,920 8.0%

Direct Net Revenue – Sewage 436,278 390,275 11.8% 355,737 9.7%

Direct Net Revenue - Water and Sewage 1,184,433 1,079,427 9.7% 993,657 8.6%

Indirect Net Revenue – Water 21,070 22,232 -5.2% 28,508 -22.0%

Indirect Net Revenue – Sewage 3,716 2,951 25.9% 4,707 -37.3%

Indirect Net Revenue - Water and Sewage 24,786 25,183 -1.6% 33,215 -24.2%

Net Revenue – Solid Waste 519 541 -4.1% 676 -

Net Revenue – Water, Sewage and Solid Waste 1,209,738 1,105,151 9.5% 1,027,548 7.6%

The Company’s comments on the main factors that influenced water and sewage net revenue in the comparative

periods are as follows:

average tariff adjustment of 8.38%, applied for consumptions registered from August/2019;

growth in the number of consumer units of water (1.5%) and sewage (1.7%);

change in the tariff level in the last 12 months in five (5) municipalities in several regions of the State, where

approximately 57,000 units migrated from EDC (Sewage with Collection only) to EDT (Sewage with Collection

and Treatment), due to the start of sewage treatment.

change in client registration in the social residential category, due to revision in the CadÚnico basis

nationwide;

2.8% decrease in water and sewage volumes per unit, mainly due to the heavy rains recorded in the months

of January and February 2020, in a large part of the State, with emphasis on the BHMA;

deductions totaling R$2.1 million from exemptions of billings to assist victims affected by storms in the Minas

Gerais State; tariff compensations will be carried out later, as agreed upon with ARSAE-MG. (See Notice to the

Market disclosed on February 4, 2020).

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The table below shows direct water and sewage billing in the comparative periods. See the breakdown of billing

per consumer category in item 2.4 of this Release:

Billing 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Billing – Water 853,563 777,021 9.9% 733,588 5.9%

Billing – Sewage 503,250 446,415 12.7% 414,019 7.8%

Billing – Total 1,356,813 1,223,436 10.9% 1,147,606 6.6%

4.2. Costs and Expenses

Costs and Expenses 1Q20 1Q19

1Q20

X

1Q19

1T18

1Q19

X

1Q18

Manageable Costs 557,617 536,169 4.0% 528,997 1.4%

Personnel¹ 337,410 314,496 7.3% 312,823 0.5%

Outsourced Services 95,522 110,233 -13.3% 99,997 10.2%

Rio Manso PPP 19,654 20,475 -4.0% 18,599 10.1%

Material 12,034 11,972 0.5% 12,431 -3.7%

Provision for Doubtful Accounts (PDA) 51,592 50,251 2.7% 57,004 -11.8%

Tariff Transfers to Municipalities 33,503 22,480 49.0% 21,136 6.4%

Sundry Operational Costs 7,902 6,262 26.2% 7,007 -10.6%

Non-Manageable Costs 134,345 113,794 18.1% 85,957 32.4%

Electricity 109,023 114,415 -4.7% 80,857 41.5%

Telecommunication 3,150 2,906 8.4% 3,071 -5.4%

Treatment Chemicals 28,673 19,845 44.5% 21,929 -9.5%

Fuels and Lubricants 6,297 6,172 2.0% 6,202 -0.5%

Tax Credits (12,798) (29,544) -56.7% (26,102) 13.2%

Capital Cost 158,984 145,096 9.6% 141,744 2.4%

Depreciation and Amortization 158,984 145,096 9.6% 141,744 2.4%

Charge for Usage of Water Resources² 6,188 2,537 143.9% 4,757 -46.7%

Total Costs and Expenses 857,134 797,596 7.5% 761,455 4.7%

1) Not including Employee Profit Sharing.

2) The charge for using water resources covers, at the state level, the basins of Piracicaba and Jaguari, Araguari, Verde Grande,

Velhas, Pará, Piracicaba, Caratinga, Piranga, Suaçuí Grande, Santo Antônio and Manhuaçu, Pomba and Muriaé, Preto and Paraibuna

Rivers. At the federal level, such transfers cover the basins of Doce, Paraíba do Sul, São Francisco and PCJ (Piracicaba, Capivari

and Jundiaí) Rivers. This charge is transferred to clients through a specific item in water supply and sewage service billings.

The following section presents the Company’s comments on the items that make up the costs of sales and services

rendered, selling and administrative expenses (excluding construction costs) that presented the most significant

changes:

4.2.1. Manageable Costs

4.2.1.1. Personnel

Personnel expenses increased by 7.3% from the same period in 2019, mainly due to:

increase in salaries and charges, due to provision for the 2019 collective bargaining agreement, which was

based on the National Consumer Price Index (INPC) accumulated from May 2018 to April 2019 (5.07%);

8.8% increase in health plan expenses.

14


4.2.1.2. Outsourced Services

This item fell by 13.3%. The most significant changes as follows:

R$9.8 million decrease in expenses with services for the conservation and maintenance of assets and systems,

due to the revision of the breakdown of operational service costs in new agreements signed, enabling contracting

services with prices below those already charged in several regional managements of the State, as well as

prioritizing the performance of part of the services through its own team, due to intense rains recorded in a large

part of the state in the months of January and February;

R$8.6 million decrease in vehicle fleet lease expenses, which, due to the adoption of CPC 06 (R2), which

started to be booked as depreciation and interest in profit or loss;

R$3.7 million decrease in expenses with collection and charging services, as a result of the non-recurring

payment of R$3.7 million in 1Q19, from negotiations with the main collection agent; and

R$2.3 million increase in marketing and advertising expenses, due to the need to implement several

advertising campaigns, especially those related to initiatives implemented to mitigate the impacts to victims of

heavy rains in January and February 2020.

4.2.1.3. Rio Manso PPP

The year-over-year decrease recorded in 1Q20 was due to the reduction in expenses with electricity, due to the

lower use of this input after the suspension of water intake from the Paraopeba River.

4.2.1.4. Provision for Doubtful Accounts (PDA)

The 2.7% variation was mainly due to the 2019 tariff adjustment, applied from August 2019, as well as the

improvement, in 1Q20, of the methodology for recognizing these losses.

The net PDA value of receivables, arising from the difference between PDA and the recovery of written-off

accounts (recorded under Other Operating Revenues) increased 30.9% in 1Q20 compared to 1Q19, as follows:

Net Impairment of Receivables (R$ thousand) 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

(+) Provision for Doubtful Accounts (PDA) 51,592 50,251 2.7% 57,004 -11.9%

(-) Recovery of Written-off Accounts 14,678 22,051 -33.4% 25,645 -14.0%

(+) Net PDA 36,914 28,200 30.9% 31,359 -10.1%

4.2.1.5. Tariff Transfers to Municipalities

The 49.0% increase in 1Q20 vs. 1Q19 was mainly due to the transfer of 59 new municipalities to municipal

sanitation funds, as of the tariff adjustment in August 2019. For this adjustment, 60 municipalities that met the

requirements established by the Agency were qualified, of which only the amount referring to the municipality

of Belo Horizonte was recognized in the tariff applied until then. The estimated amount for transfers in the annual

tariff cycle (August 2019 to July 2020) corresponds to R$75.1 million, of which R$49.9 million refers to the

municipality of Belo Horizonte and the remaining R$25.2 million to the other 59 municipalities. ARSAE-MG

Resolution 110/2018 regulated the tariff recognition of transfers to municipal sanitation funds.

The complete list of municipalities qualified for the current tariff cycle can be found on pages 23 and 24 of the

GFE Economic Inspection Report 06/2019.

4.2.2. Non-Manageable Costs

http://arsae.mg.gov.br/images/documentos/rf_gfe_2019_006_fisc_periodica_copasa_copanor_site.pdf

15


4.2.2.1. Electricity

Electricity expenses increased 4.7% in 1Q20. Comments on the main factors that influenced electricity are as

follows:

impacts from the change in the accounting of PIS/PASEP and COFINS credits which, as described in item

4.2.2.4. Tax credits, are now directly recorded in each expense account deemed as input in the production process.

With this change, this item fell by R$11.5 million in 1Q20 vs. 1Q19.

2.1% increase in electricity consumption, due to higher operational demand; and

7.3% increase in electricity costs, due to Cemig’s tariff adjustment and the 3 p.p. decrease of the tariff subsidy,

both of them in May 2019, as well as the impacts of expenses with tariff flags.

4.2.2.2. Telecommunication

The 8.4% increase was mainly due to readjustments of data transmission contracts and higher data consumption.

4.2.2.3. Treatment Chemicals

The variation in this item is mainly due to the increase in the price of the main treatment materials used in the

water treatment process, as well as higher prices of the main chemicals used.

4.2.2.4. Tax Credits

The 56.7% decrease was due to the gradual implementation of a solution for the automatic accounting of

PIS/COFINS tax credits. With the change, tax credits are directly recorded in each expense account deemed as

input in the production process (materials, services, electricity, fuels, among others).

Considering the methodology previously used, tax credits totaled R$32.6 million in 1Q20, up 10.5% from 1Q19.

16


4.3. Other Operating Revenues (Expenses)

Other Operating Revenues (Expenses) 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Other Operating Income 29,277 37,951 -22.9% 40,003 -5.1%

Revenue from Technical Services 20 66 -69.7% 18 266.7%

Reversal of Non-Deductible Provision 10,521 9,579 9.8% 8,797 8.9%

Recovery of Written-off Accounts 14,678 22,051 -33.4% 25,645 -14.0%

Other Revenues 4,058 6,255 -35.1% 5,543 12.8%

Other Operating Expenses (47,248) (33,137) 42.6% (35,496) -6.6%

Payment and Non-Deductible Provision (24,428) (10,847) 125.2% (18,565) -41.6%

Eventual or Non-Recurring Losses (2,679) (2,289) 17.0% (1,438) 59.2%

Service Inspection Fee (9,852) (9,387) 5.0% (8,303) 13.0%

Other Expenses (10,289) (10,614) -3.1% (7,190) 47.6%

Other Operating Revenues (Expenses) (17,971) 4,814 n.m. 4,507 n.m.

4.3.1. Other Operating Revenues (Expenses)

Other Operating Income (Expenses) went from +R$4.8 million in 1Q19 to a negative amount of R$18.0 million

in 1Q20, mainly due to:

a decrease of R$7.4 million in the recovery of written-off accounts (other operating income).

R$13.6 million increase in the Payment and Non-Deductible Provision account (Other Operating Expenses),

of which (i) R$7.9 million due to risk reclassification, monetary restatement and the constitution of a provision

for civil and labor lawsuits sprayed; and (ii) R$4.8 million referring to the write-off of judicial deposits of

completed cases, in which the Company was not successful.

4.4. Equity Income (Subsidiary COPANOR)

Summarized Statement of COPANOR 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Net Revenue from Sales and/or Services 8,507 7,590 12.1% 7,160 6.0%

Construction Revenue 4,524 7,570 -40.2% - n.m.

Other Operating Revenue 400 806 -50.4% 429 87.9%

Operating Costs and Expenses (12,473) (11,563) 7.9% (8,595) -

Construction Costs (4,524) (7,570) n.m. - n.m.

Other Operating Expenses (444) (372) 19.4% (393) -5.3%

Net Financial Revenues (Expenses) 226 182 24.2% 208 -12.5%

Impairment (5,200) - n.m. - n.m.

Net Income (Loss) (8,984) (3,357) 167.6% (1,191) 181.9%

17


4.5. Financial Result

Net Financial Revenues (Expenses) 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Financial Revenues 52,212 22,124 136.0% 20,668 7.0%

Monetary Variation 970 1,340 -27.6% 1,523 -12.0%

Foreign Exchange Variation 26,918 4,237 535.3% 360 1076.9%

Interest 9,193 3,251 182.8% 4,765 -31.8%

Real Gains from Financial Investments 6,550 6,563 -0.2% 8,670 -24.3%

Capitalization of Financial Assets/Other 8,581 6,733 27.4% 5,350 25.9%

Financial Expenses (144,900) (63,593) 127.9% (71,615) -11.2%

Monetary Variation (19,294) (14,329) 34.7% (15,272) -6.2%

Foreign Exchange Variation (82,639) (870) n.m. (7,284) -88.1%

Interest on Loans (42,894) (48,223) -11.1% (48,688) -1.0%

Other Expenses (73) (171) -57.3% (371) -53.9%

Financial Result (92,688) (41,469) 123.5% (50,948) -18.6%

4.5.1. Financial Revenues

The 136.0% increase in financial revenue in 1Q20 vs. 1Q19 reflects the foreign exchange variation on assets in

dollars in the amount of USD22.9 million (equivalent to BRL119.2 million), which will pay off the last

installment to mature from debt in that currency in 2024.

4.5.2. Financial Expenses

The increase of 127.9% in financial expenses, in relation to 1Q19, is mainly due to the 29% appreciation in the

dollar and 26% in the euro observed during 1Q20. It is worth mentioning that the Company's debt in dollars, on

March 31, 2020, was USD25.6 million (equivalent to BRL133.4 million) and, in euros, it was EUR 44.7 million

(equivalent to BRL256.0 million).

In 1Q19, the exchange rate remained basically stable.

4.6. Taxes on Income

Taxes on Income 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Income and Social Contribution Taxes on Net

Income (61,940) (68,981) -10.2% (43,828) 57.4%

The decrease in taxes on income was mainly due to the 12.9% decrease in the earnings before taxes on income

during the comparison period (see item 4.7 of the table).

4.7. Net Income

Net Income And Earnings per Share 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Result before Financial Result and Taxes 315,463 297,185 6.2% 259,008 14.7%

Net Financial Result (92,688) (41,469) 123.5% (50,947) -18.6%

Earnings before Taxes on Income 222,775 255,716 -12.9% 208,061 22.9%

Taxes on Income (61,940) (68,981) -10.2% (43,828) 57.4%

Net Income 160,835 186,735 -13.9% 164,233 13.7%

Earnings per Share (R$) 1.27 1.48 -13.9% 1.30 13.7%

18


The decrease in net income was mainly due to the financial result, which was a negative R$92.7 million in 1Q20,

compared to a negative R$41.5 million in 1Q19, as explained in item 4.5 of the Financial Result.

4.8. EBITDA and EBITDA with Adjustments to Non-Manageable Items

4.8.1. EBITDA

EBITDA is a non-accounting measure adopted by COPASA MG, calculated in accordance with CVM Instruction

527/2012, consisting, as shown below, of net income plus taxes on income, financial result,

depreciation/amortization and these same items of the subsidiary COPANOR.

EBITDA 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

Net Income 160,835 186,735 -13.9% 164,233 13.7%

(+) Taxes on Income 61,940 68,981 -10.2% 43,828 57.4%

(+) Financial Result 92,688 41,469 123.5% 50,947 -18.6%

(+) Depreciation and Amortization 158,984 145,096 9.6% 141,744 2.4%

(+) Non-Operating Result – COPANOR 479 259 84.9% (208) n.m.

(=) EBITDA 474,926 442,540 7.3% 400,544 10.5%

EBITDA Margin 38.1% 38.4% -0.3p.p 37.3% +1.1 p.p.

4.8.2. EBITDA with Adjustments to Non-Manageable Items

EBITDA with adjustments to non-manageable items is not a measure recognized by the Accounting Practices

Adopted in Brazil or by IFRS, does not have a standard meaning and may not be comparable to measures with

similar securities provided by other companies.

According to its methodology, the Regulatory Agency estimates the amounts to be spent by the Company in the

annual tariff cycle, referring to non-manageable costs (electricity, treatment chemicals, fuels and lubricants,

telecommunications, and taxes and fees).

An off-balance sheet account is created throughout the annual tariff cycle in order to guarantee neutrality in the

variation prices of these items. This account records any differences between the estimated prices and those

actually observed. The balance of this account is adjusted by the Selic rate and included in the calculation of the

tariff repositioning index, with positive or negative impacts on the adjustment.

See below the calculation of EBITDA, considering the estimated adjustments to non-manageable items:

EBITDA with adjustments to Non-Manageable Items 1Q20 1Q19

1Q20

vs.

1Q19

EBITDA (a) 474,926 442,540 7.3%

Electricity 14,618 9,748 50.0%

Treatment Chemicals 208 7 n.m.

Fuels and Lubricants (151) (1,680) n.m.

Telecommunication 16 (113) n.m.

Taxes and Fees (except income and social contribution taxes) 6,110 7,015 -12.9%

Estimated Compensation for Non-Manageable Items (b) 20,801 14,977 38.9%

Regulatory EBITDA = (a)+(b) 495,727 457,517 8.4%

Regulatory EBITDA Margin 39.7% 39.7% -

19


5. Debt and Rating

5.1. Gross Debt and Net Debt

As shown in the graph below, a gross accounting debt, which was R$3.48 billion in March 2019, decreased by

3.1%, reaching R$3.37 billion in March 2020. The net debt reached R$2.67 billion in March 2020 (R$3.08 billion

in March 2019). The leverage ratio, measured by the Net Debt / EBITDA ratio in the last 12 months, reached

1.5x (2.0 in March 2019).

Foreign currency debt represented 11.5% of gross debt in March 2020 (9.9% in March 2019). For the operation

with the bank KfW, whose outstanding balance was €44.7 million (equivalent to BRL 256.0 million in March

2020), there was no hedge mechanism contracted. The debt with Banco do Brasil (debt originally contracted

from external financial institutions and inserted into an agreement between the Brazilian government and

international financial community, for restructuring the external debt of the Brazilian public sector with

international private creditors), whose outstanding balance was USD 25.6 million (equivalent to BRL 133.6

million in March 2020), is guaranteed by Brazilian Securities Bonds in foreign exchange, in the amount of USD

22.9 million (equivalent to BRL 119.2 million at the end of 1Q20), guaranteed by Banco do Brasil, adjusted by

the average prices of the United States Treasury's Zero Coupon bonds.

5.2. Indexes and Average Coupon

The chart below presents the evolution of the average coupon and the relative weight of the debt by contractual

indices in 1Q20, 1Q19 and 1Q18.

20


5.3. Corporate Ratings

On January 24, 2020, the Rating Agency Moody’s published a report raising the Company’s ratings for corporate

and senior debt without guarantee, from Ba3 to Ba2 in the global scale, and from A1.br to Aa3.br in the Brazilian

scale. The ratings’ outlook was changed from positive to stable. At the same time, Moody’s raised the assessment

of the individual credit risk profile from ba3 to ba2.

According to the Agency, the rise in the ratings was driven by the solid operating performance, which led to the

maintenance of strong credit metrics, as well as the Company’s more robust corporate governance structure, with

the creation of an audit committee and a dividend policy based on leverage.

The last report from Fitch Ratings was disclosed on July 11, 2019. The Company’s Long-Term National Rating

and its debenture issues remained with the AA(bra) rating. At the time, the corporate rating’s outlook was

changed from stable to positive.

The summary of COPASA MG’s rating is as follows:

Agency National Scale Global Scale Outlook Date Report

Link

Moody’s LatAm Aa3.br Ba2 Stable 1/24/2020 Report

Fitch Ratings AA(bra) – Positive 7/11/2019 Report

https://apicatalog.mziq.com/filemanager/v2/d/8bdb3906-0618-4e78-bbe3-a0be9f02d8cc/319c9511-3efc-afd6-8d15-b5b9b8f55edb?origin=2

https://apicatalog.mziq.com/filemanager/d/8bdb3906-0618-4e78-bbe3-a0be9f02d8cc/34a57dce-9633-cc8a-a227-ba6c19ce1fe4?origin=2

21


6. Annexes

6.1. Quarterly Income Statement

PARENT COMPANY NOTE¹ 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

OPERATING REVENUE FROM SERVICES

Water services 27 769,225 711,384 8.1% 666,428 6.7%

Sewage services 27 439,994 393,226 11.9% 360,444 9.1%

Revenue from solid waste 27 519 541 -4.1% 676 -

Construction revenue 27 57,565 91,711 -37.2% 96,753 -5.2%

NET OPERATING REVENUE FROM

SERVICES 1,267,303 1,196,862 5.9% 1,124,301 6.5%

Cost of services rendered 28 (634,921) (589,491) 7.7% (540,480) 9.1%

Construction costs 28 (57,565) (91,711) -37.2% (96,753) -5.2%

COST OF SERVICES RENDERED 28 (692,486) (681,202) 1.7% (637,233) 6.9%

GROSS INCOME 574,817 515,660 11.5% 487,068 5.9%

Selling expenses 28 (105,768) (99,115) 6.7% (102,696) -3.5%

General and administrative expenses 28 (126,631) (108,990) 16.2% (118,279) -7.9%

Other operating revenues 27 29,277 37,951 -22.9% 40,003 -5.1%

Other operating expenses 28 (47,248) (33,137) 42.6% (35,496) -6.6%

Employees’ profit sharing² 29 - (11,827) n.m (10,401) 13.7%

Equity result 8 (8,984) (3,357) 167.6% (1,191) 181.9%

OPERATING EXPENSES/REVENUES (259,354) (218,475) 18.7% (228,060) -4.2%

EARNINGS BEFORE FINANCIAL RESULT

AND TAXES 315,463 297,185 6.2% 259,008 14.7%

Financial revenues 30 52,212 22,124 136.0% 20,668 7.0%

Financial expenses 30 (144,900) (63,593) 127.9% (71,615) -11.2%

FINANCIAL RESULT (92,688) (41,469) 123.5% (50,947) -18.6%

EARNINGS BEFORE TAXES ON INCOME 222,775 255,716 -12.9% 208,061 22.9%

Provision for income tax 17 (45,066) (50,300) -10.4% (31,812) 58.1%

Provision for social contribution on net income 17 (16,874) (18,681) -9.7% (12,016) 55.5%

NET INCOME FOR THE PERIOD 160,835 186,735 -13.9% 164,233 13.7%

Number of outstanding shares at the end of

the period (thousands) 20 126,394 126,394 0.0% 126,394 0.0%

Earnings per Share (R$) 1.27 1.48 -13.9% 1.30 13.7%

1) Note to the Interim Financial Information (ITR).

2) The Company changed the form of accounting for Employee Profit Sharing, which started to be realized directly as cost of services

rendered, selling expenses and general/administrative expenses. In 1Q20, the Employee Profit Sharing was R$ 10.2 million.

22


6.2. Statement of Financial Position – Assets

PARENT COMPANY NOTE¹ 1Q20 1Q19

1Q20

vs.

1Q19

1Q18

1Q19

vs.

1Q18

CURRENT ASSETS

Cash and cash equivalents 5 694,778 401,746 72.9% 570,482 -29.6%

Trade accounts receivable 6 1,164,509 1,210,981 -3.8% 1,108,689 9.2%

Inventories 62,713 50,235 24.8% 43,304 16.0%

Recoverable taxes 30,173 29,928 0.8% 16,763 78.5%

Technical cooperation agreement 18 15,760 108,508 -85.5% 87,386 24.2%

Banks and agreement investments 23 17,717 8,545 107.3% 16,551 -48.4%

Sundry receivables 6 17,216 17,562 -2.0% 13,740 27.8%

TOTAL CURRENT ASSETS 2,002,866 1,827,505 9.6% 1,856,915 -1.6%

NON-CURRENT ASSETS

LONG-TERM ASSETS

Trade accounts receivable 6 - n.m. 65,807 n.m.

Bond to secure financing 7 186,426 183,401 1.6% 172,738 6.2%

Related financial investment 7 86,105 83,119 3.6% 79,096 5.1%

Financial assets - investment at BRK Ambiental

Foz Jeceaba 22 75,074 64,721 16.0% - -

Credits with subsidiaries 23 2,125 - n.m. - n.m.

Deferred income and social contribution taxes 17 232,727 161,778 43.9% 143,739 12.5%

Financial assets 4,6,23 558,714 683,417 -18.2% 634,924 7.6%

Long-term technical cooperation agreement 18 26,967

Sundry receivables 48,779 39,447 23.7% 32,524 21.3%

Contract asset 9 1,191,067 1,238,084 n.m. - n.m.

Right of use - lease 12 48,953 36,581 33.8% - n.m.

TOTAL LONG-TERM ASSETS 2,456,937 2,490,548 0.7% 1,128,828 120.6%

Investments 8 147,127 122,561 20.0% 154,438 -20.6%

Intangible assets 10 5,523,570 5,140,152 6.4% 6,136,501 -16.2%

Property, plant and equipment 11 1,564,004 1,649,997 -5.2% 1,738,707 -5.1%

TOTAL FIXED ASSETS 7,234,701 6,912,710 4.7% 8,029,646 -13.9%

TOTAL NON-CURRENT ASSETS 9,691,638 9,403,258 3.1% 9,158,474 2.7%

TOTAL ASSETS 11,694,504 11,230,763 4.1% 11,015,389 2.0%


23


6.3. Statement of Financial Position – Liabilities

PARENT COMPANY (R$ thousand) NOTE

¹ 03/2020 03/2019

03/2020

X

03/2019

03/2018

03/2019

X

03/2018

CURRENT LIABILITIES

Contractors and suppliers 23 155,152 182,999 -15.2% 171,440 6.7%

Taxes, charges and contributions 14 88,196 74,649 18.1% 62,642 19.2%

Loans and financing 15 184,724 176,113 4.9% 169,788 3.7%

Debentures 15 205,343 368,910 -44.3% 433,693 -14.9%

Right of use - Lease 12 31,312 8,039 n.m. - n.m.

Public-Private Partnership 13 55,914 65,673 -14.9% 72,248 -9.1%

Employees profit sharing 56,210 29,275 92.0% 11,347 158.0%

Provision for vacations and Christmas bonus 126,921 123,963 2.4% 120457 2.9%

Taxes paid in installments 14 - 72,510 n.m. 71,789 1.0%

Technical cooperation agreement 18 1,959 - n.m. - n.m.

Retirement benefit liabilities 19 30,135 32,880 -8.3% 30,300 8.5%

Interest on equity 20 123,948 143,799 -13.8% 116,611 23.3%

Sundry liabilities 14 86,709 19,764 338.7% 27,122 -27.1%

TOTAL CURRENT LIABILITIES 1,146,523 1,298,574 -11.7% 1,287,437 0.9%

NON-CURRENT LIABILITIES

LONG-TERM LIABILITIES

Loans and financing 15 1,155,242 1,201,588 -3.9% 1,235,749 -2.8%

Debentures 15 1,800,122 1,684,148 6.9% 1,434,046 17.4%

Right of use - Lease 12 19,440 28,892 n.m. - n.m.

Public-Private Partnership 13 290,997 336,374 -13.5% 381,736 -11.9%

Provision for litigation 16 194,269 133,190 45.9% 124,346 7.1%

Taxes paid in installments 14 - - n.m. 65,807 n.m.

Retirement benefit liabilities 19 136,671 101,007 35.3% 75,741 33.4%

Sundry liabilities 14 92,182 86,611 6.4% 84,066 3.0%

TOTAL NON-CURRENT LIABILITIES 3,688,923 3,571,810 3.3% 3,401,491 5.0%

SHAREHOLDERS’ EQUITY

Paid-up capital stock 20 3,402,385 3,402,385 0.0% 3,402,385 0.0%

Treasury shares (8,576) (8,576) 0.0% (8,576) 0.0%

Profit reserves 20 3,378,939 2,834,829 n.m. 2,815,704 0.7%

Equity valuation adjustments 20 (29,118) (2,094) n.m. 34,458 n.m.

Retained earnings 115,428 133,835 n.m. 82,490 62.2%

TOTAL SHAREHOLDERS’ EQUITY 6,859,058 6,360,379 7.8% 6,326,461 0.5%

TOTAL LIABILITIES AND

SHAREHOLDERS’ EQUITY 11,694,504 11,230,763 4.1% 11,015,389 2.0%


24


6.4. Cash Flow

FLUXO DE CAIXA - CONTROLADORA (R$ mil) 1Q20 1Q19

Net Income (Loss) for the year 160,835 186,735

Adjustments to reconcile net income and net cash

Recovery of written-off invoices - (22,051)

Monetary and foreign exchange variation and charges, net 72,063 7,031

Interest income and expenses 32,173 41,622

Deferred income and social contribution taxes (28,818) (1,886)

Equity income 8,984 3,357

Gain/loss on intangible assets and property, plant and equipment 42,116 (2,870)

Depreciation and amortization 158,984 145,096

Constitution of provisions (2,540) 3,841

Provision for retirement benefits 14,443 13,075

Financial assets (9,039) -

Provision for inventories loss (711) -

Provision for allowance for loan losses 51,592 43,532

Adjusted profit 500,082 417,482

Increase (decrease) in operational assets

Accounts receivable from clients (29,930) (64,487)

Inventories (4,971) (3,513)

Banks and agreement investments - (497)

Security deposit in financing guarantees - 7,117

Investments of securities/restricted investments - 161,349

Other financial assets - (6,470)

Advancement of tariff transfer (2,945) (5,161)

Technical cooperation agreement (6,662) -

Other 606 3,730

Increase (decrease) in operational liabilities

Suppliers (26,336) (16,412)

Taxes, fees, contributions and social obligations 84,886 62,281

Provision for vacations and 13th salary 10,950 8,606

Employees' profit sharing 10,186 11,826

Technical Cooperational Agreement (4,535) 634

Contingencies 4,361 (661)

Retirement benefit liabilities (18,575) (17,496)

Electricity/other 19,255 (14,079)

Payment of actuarial liabilities (6,707) (6,522)

Tax installments payment (14,289) (19,586)

Cash from operations 15,294 100,659

Income Tax (IR) and Social Contribution (CSLL) payment (75,646) (61,918)

Interest paid (59,252) (71,207)

Interest paid from the Public Private Partnership (2,433) -

NET CASH FROM OPERATING ACTIVITIES 378,045 385,016

Cash flow from investing activities:

Payment to PPP (11.985) (13,709)

Capital increase of subsidiaries (Copanor) (21.868) (21,061)

Amount received from the sale of property, plant and equipment 1.291 3,447

Purchase of Contract Assets (94.002) -

Purchase of Intangible Assets and property, plant and equipment (37.999) (140,345)

Loan collateral deposits 21.810 -

Bank and financial investments of agreement 2.473 -

NET CASH USED IN INVESTING ACTIVITIES (140.280) (171,668)

Cash flow from financing activities:

Income from loans, financing and debentures 6.504 8,686

Amortization of loans, financing and debentures (56.155) (115,323)

Funding costs (3.516) -

Liabilities write-off from leasing - (2,483)

Payment of leasing (12.212) -

Interest paid from leasing 1.088 -

NET CASH USED IN FINANCING ACTIVITIES (64.291) (109,120)

Net increase (decrease) in cash and cash equivalents 173.474 104,228

Cash and cash equivalents at beginning of the period 521.304 297,518

Cash and cash equivalents at end of the period 694.778 401,746

25


6.5. Debt

Debt – Funding Lines Fixed Rate

(Annual) Index Issue Date

Maturity

Date

Outstanding

Balance (R$

million)

%

In Local Currency:

FGTS funds* 7.64% TR ** 8/16/2042 666.4 19.7%

Finame 3.98% - 3/28/2011 1/15/2025 46.0 1.4%

BNDES - Borrowing 6.62%

Long-term

interest rate

(TJPL)

1/15/2008 5/15/2025 241.4 7.1%

BNDES/4th Debenture Issue

Series 1 6.64%

Long-term

interest rate

(TJLP)

7/15/2010 7/15/2022 60.0 1.8%

Series 2 9.05% IPCA 7/15/2010 8/15/2022 134.2 4.0%

Series 3 6.64%

Long-term

interest rate

(TJLP)

7/15/2010 7/15/2022 79.5 2.4%

Brazilian Savings Bank/5th Debenture

Issue 9.00% TR 9/20/2011 9/01/2031 202.2 6.0%

Market Debentures - 7th Issue

Series 2 7.39% IPCA 4/15/2014 1/15/2024 72.9 2.2%


Series 1 6.96%

Long-term

interest rate

(TJLP)

6/15/2015 6/15/2028 65.2 1.9%

Series 2 8.18% IPCA 6/15/2015 6/15/2028 32.3 1.0%


Series 1 7.71%

Long-term

interest rate

(TJLP)

1/15/2017 1/15/2031 106.9 3.2%

Series 2 8.85% IPCA 1/15/2017 1/15/2031 50.3 1.5%


Series 1 5.06% IPCA 2/08/2018 1/15/2024 205.3 6.1%

Series 2 5.27% IPCA 2/08/2018 1/15/2026 88.4 2.6%


Series 1 3.90% DI 7/15/2018 7/15/2021 93.4 2.8%

Series 2 4.02% DI 7/15/2018 7/15/2023 545.0 16.1%

Series 3 6.50% IPCA 7/15/2018 7/15/2025 72.3 2.1%


Series 1 3.87% DI 6/15/2019 6/15/2024 56.6 1.7%

Series 2 4.30% IPCA 6/15/2019 6/15/2026 147.8 4.4%

Other Liabilities:

Libertas (Private Pension Plan) 6.01% INPC 1/08/2001 11/08/2021 24.1 0.7%

In Foreign Currency:

Banco do Brasil*** 5.11% Libor 8/05/1998 4/10/2024 133.6 4.0%

Kfw 2.07% - 11/29/2011 12/20/2023 256.0 7.6%

Total Short + Long Term Debt 3,379.9 100.0%

Securities Funding Cost 10.3

Total Short + Long Term (Accounting) 3,369.6

Cash and Cash Equivalents 694.8

Net Debt 2,674.8

*FGTS Funds: Brazilian Savings Bank.

**Several dates

*** Debt originally contracted from foreign financial institutions, as covered in an agreement entered into between the Brazilian

government and the international financial community to restructure the foreign debt of the Brazilian public sector with international private

creditors. Under this agreement, approved by the Federal Senate by means of Resolution 98 of December 29, 1992, the debt was exchanged

for bonds issued by the Federal Government, which became the debtor before foreign creditors. Several types of bonds at interest rates

consistent with those used in the international financial market were issued to replace the principal installments.

26


About COPASA MG

Companhia de Saneamento de Minas Gerais – COPASA MG is a mixed capital company, controlled by the

Minas Gerais State, whose stock has been traded since February 2006 in Novo Mercado, the highest corporate

governance segment of B3 – Brasil, Bolsa, Balcão, under the ticker CSMG3. The Company’s activities are to

plan, execute, expand, remodel and operate public sanitation services, involving water supply, sewage and solid

waste services. COPASA MG has concessions in about 75% of the municipalities of the Minas Gerais State,

supplying water to approximately 11.6 million people and providing sewage services to 8.2 million people.

Contact

Companhia de Saneamento de Minas Gerais – COPASA MG

Rua Mar de Espanha, 525

Bairro Santo Antônio

Belo Horizonte - MG

30330-900

Phone: +55 (31) 3250-2015.

Any information contained in this document regarding COPASA MG’s business prospects, projections and operational and financial goals

is considered as assumptions and expectations of the Company’s Management, based on information currently available. They involve

risks and uncertainties, as they refer to future events and therefore depend on circumstances that may or may not occur. Changes in

macroeconomic policy, legislation or other operating factors may affect the future performance of COPASA MG and lead to results that

materially differ from those expressed in such considerations.

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