Companhia de Saneamento Básico do Estado de São Paulo - SABESP (SBS) Q2 2013 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. At this time, we would like welcome everyone to the SABESP's conference call to discuss 2Q '13 highlights and the tariff revision process. The audio for this conference is being broadcast simultaneously through the Internet at the website www.sabesp.com.br. At that same address, you can also find the slide show presentation available for download. [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. Now, I will turn the conference over to Mr. Mario Arruda Sampaio, Head of Capital Market and Investor Relations. Sir, you may begin your conference.

Well, good afternoon, everybody. And first, let me also present other participants. We have with us here our CFO, Mr. Rui Affonso; the Head of Tariff and Costs, Mr. Antonio Xavier, and the Head of Accounting, Mr. Marcelo Miyagui. So they'll be together with the rest of the CFO's team, available for question and answers. Today, we have basically 3 points to go through. Three slides regarding the second quarter, some second quarter highlights, the news on the Diadema municipality and the last would be news on the tariff's process. But before -- we do have a slide with some dates outlined where we would like to make some preliminary considerations for the reasons that we have been somewhat in a silent and not so much available or at all available for discussions with the market. As everyone knows, since the release of ARSESP's Resolution 427, which suspended the tariff revision process and requested SABESP to form the time necessary to revise the asset base due to inconsistency found, we have decided to remain silent. First, obviously, we ask you for your understanding, and at the same time, we would like to reinforce how great and important it is for SABESP and the importance we give towards contacting, communicating and interacting with shareholders, investor, analyst and the media. We make sure that this is not only valuable and important for you all, but also for SABESP's management and the process of which we manage this company. It is very important, this interaction. Therefore, we would like to expose the reasons for our decision to remain silent up to now, reminding that this situation has great similarity to that one that occurred during the fourth quarter 2012 release that is of a convergence of dates between the fourth quarter release, in this case, the second quarter release, and the resolution or a resolution issued by SABESP. More precisely, as you can see on August 2, ARSESP released Resolution 427, which suspended the tariff revision process as a whole for an indeterminated time and gave SABESP 30 days to inform the time it would take to revise its regulatory asset base. At that time, as you all probably know, SABESP has scheduled its second quarter 2013 results release for August 8 and the conference call for August 13. When SABESP became aware of ARSESP resolution, it started working intensively to assess the inconsistencies raised by the agencies in relation to the asset base estimates. Taking into account the short time period between the publication of this resolution and SABESP's results release, we postponed, at first, the result release for August 13 and the conference call for August 15. The objective was to give an answer to ARSESP before releasing the result such that, during the call, we could freely discuss both the company's results and the tariff revision process. However, in view of the complexity of the matter, it was not possible to complete our answer to SABESP in time for the conference call on August 15. In the meantime, 2 other facts occurred during this period. On August 9, the last tariff adjustment completed 12 months and on August 16, ARSESP's President resigned, leaving the agency's executive board with 2 officers, where the minimum quorum for resolution is 3 officers. Considering that we have not yet defined the deadline for work related to the asset base and the company's results came in line with the market expectation, we decided to cancel the conference call and remain silent until any relevant information about this process issue became available, in other words, would not fit to come to the market and do not address the issue of greater relevance, that is the tariff revision. With this decision, we understand we are observing the alignment with all shareholders, investors, analyst and other SABESP's stakeholders until we have a concrete fact to discuss, which we are doing right now. On our next slide -- I think it's Slide 4. We highlight some points of the quarter and some recent events. As already know, second quarter '13 came in line with the market expectation. Net income totaled BRL 361 million in second quarter '13 compared to BRL 292 million in second quarter 2012. And then the 6-month period, net income was up 9.3% from BRL 787 million in last quarter to BRL 857 million this quarter -- this last quarter -- this last second -- sorry, half. EBITDA grew 14.2% from BRL 798 million in second quarter 2012 to BRL 911 million in second quarter 2013. In the 6-month period, EBITDA was up 8.7% from BRL 1.686 million (sic) [BRL 1.686 billion], in other words, one point almost BRL 1.7 billion in the second quarter 2013 to almost BRL 1.8 billion in the second quarter 2013. EBITDA margin in second quarter 2013 came slightly higher, 32.6% compared to 32.3% in the second quarter 2012. In the 6-month period, EBITDA margin also slightly increased from 33.4% in the second quarter last year to 33.7% in second quarter 2013. If we exclude revenue and construction effects -- construction cost effects, EBITDA margin was 42% in the first half of 2013 compared to 41.4% in the first half 2012. We also pointed out the net-debt-to-EBITDA ratio, which in the 6-month period, remained relatively in line at 1.6x and in the first half of 2013, against 1.91x in the first half 2012. Now when we see the total debt over EBITDA, the difference was even smaller from 2.42x in first half 2012 to 2.41x in first half 2013. So the numbers reinforce that the company has strong fundamentals the face adverse macroeconomic conditions as those seen currently with the devaluation of the real against foreign currencies and the increase in interest rates in Brazil and throughout the world. With respect to foreign exchange exposure, we'd like to highlight first from the point of view of the results, the company was less impacted this quarter compared for the same period last year due to the lower appreciation of the yen against the real. The depreciation was -- appreciation was 4.2% this second quarter against 14.6% in the second quarter 2012, and lower appreciation of the dollar against the real, in this case, 10% in second quarter 2013 from 10.9%, so slightly higher in second quarter 2012, all these causing a decrease in the exchange rate variation expense of BRL 80 million. In relation to total debt, as you can see on the chart, second quarter presented a foreign exchange exposure of 38.5%. That is 38% against second quarter 2012, so very, very stable. From the debt profile point of view, in our opinion, the situation is very tranquil. As you can see, the company continues to manage its foreign exchange exposure by diluting maturities in time -- throughout the time and maintaining sufficient cash availability to cover any relevant exchange rate variations that we might see as we move on. Other recent highlights are the signature of the PPP -- São Lourenço PPP. This is a contract, which the main objective is to expand the water supply in the metro region of São Paulo by another 4.7 cubic meters per second. This will be benefiting directly 1.3 million consumers and will, together with other initiatives, ensure water supply in the metro region of São Paulo, our biggest market, for the next 15 years. This contract foresees investments in the order of BRL 2.2 billion to be performed between this year and 2018. By this time, the water treatment station starts to operate the expectation. Besides the water treatment station investment, we will also invest in 80 kilometers of water mains. All these will be implemented. These mains will have diameters varying from 0.8 to 2.1 meters, and will be carrying water that should be able to -- that will overcome a 330-meter difference in ground level. The contractual mode of this investment through a PPP, it's important to note that this reinforces SABESP's commitment to invest and expand its services so that to ensure 100% water supply and reach also the sewage services 100% coverage commitment until 2020. Another point we would like to highlight is that on July 18 of this year, SABESP credit risk started to be covered by the credit rating agency, Moody's, which defined a BAA3 global risk rating, corresponding to an investment grade and a Brazilian national risk of AA1.BR, both of them with a stable outlook. With this credit rating, the agency ratifies the capital market's pricing. In other words, SABESP securities have been trading at spreads comparable with other large companies -- Brazilian companies rated as investment grade. Credit highlights pointed out by Moody's are supported by the company's solid cash generation, appropriate liquidity position and the access to national and international capital markets and public financing, which supports our CapEx program through low long-term and very low cost sets of instruments. Let's go to our next slide, and then let's comment on the municipality of Diadema, the news on our participation on that issue. As mentioned in our balance sheet, in 1995, the municipality of Diadema terminated the concession agreement with SABESP before its expiration, generating disputes of 2 kinds: First, the municipality did not pay the indemnity for the non-amortized assets. And second, the municipality company that renders the service -- that took over the service and began rendering the service has been buying water on the wholesale from SABESP and partly paying the invoices. This has led to disputes and losses whose total judicial value comes to near BRL 1 billion. This value obviously grows continuously either by interest and penalties incurred on the debts or because the water bills are still not paid in part on one side, and on the other, without the possibility of SABESP to enforce payment by cutting off the water supply. In 2008, SABESP signed the letter. So in other words, we have been working this debt already in the situation for some time. So in 2008, we signed a letter of intention for settling the debts of the municipality. The initial idea then was to create a company with shared control between SABESP and the municipality. In fact, in 2011, it was issued a -- it was published and issued or enacted a municipal law, which provided for the creation of a new water company -- sorry, a new water and sewage company in Diadema. However, there were several circumstances in the period that led to a change in the course of negotiations, and that allowed SABESP to negotiate what is now a full operation of service. SABESP's proposal, in fact, for this was accepted by the municipal executive branch at the end of last week, and in fact, yesterday night was approved by the legislative branch of the municipality, which with this approval now allows us and the executive branch to sign a contract. In fact, the expectation is that, all going well, we would start operating directly this business so moving from wholesale to retail in Diadema as of January of next year. The municipality is inserted in the region that SABESP already operates with large economies of scales. To be more precise, it fits exactly between the City of São Paulo and São Bernardo do Campo, which is another city we operate. And the main data that we highlight here on the municipality, and you have, I believe, a little bit more there with you. But the ones I'll highlight is the population of close to 400,000 and water distribution is already at SABESP level of 100%. Sewage collection is very high, 96.2%. This operation will provide for 94,000 water connections, 87,000 sewage connections, which means we have to serve 120,000 residential units of water and 110,000 residential units of sewage. The agreement's main characteristics are, if we will have full operation of water supply and sewage services, there should be the signing of a contract for provision of services for 30 years. It's a service contract. There will be a litigation settlement in lawsuits that were filed by SABESP. We will take over the employees currently working in the municipality, so they'll all move to SABESP. We have to be in our investment plan to be in compliance with the municipal sanitation plan. That would represent about BRL 160 million of investments we're going to have to be executing in the years to come. Tariff regulation and control will be delegated to ARSESP. There will be a leveling of municipal -- Diadema's municipal current tariffs with the metropolitan region of São Paulo tariffs that when we practice in the metro region in those cities we operate. This should be done 5 years as of 2015. Well, I believe that gives you an idea of what we're dealing with Diadema. So let's move to our last slide, and then let's comment on the recent developments on tariff's front. As everyone knows, the tariff revision is suspended. The final decision on the average tariff is subject to ARSESP's approval of SABESP's asset base. But first, let's go through a brief history of this process. In order to estimate the regulatory asset base, ARSESP -- this was in 2010, I believe, defined that work should be performed by appraisers accredited by the agency prior to the bidding and hiring process by SABESP. In such, SABESP hired 2 specialized company, one for the metro region of São Paulo and another for the inland and coastal regions. The prerequisite for revision completion was that SABESP would inspect the report. In December 2012, ARSESP hired an audit company to support the inspection process. The audit results rate, as we all know now, inconsistencies in SABESP's report. In such, in August 2 this year, the agency issued, what we already mentioned, the Resolution Deliberation 427 in which the suspension of the remaining steps of the SABESP tariff review was maintained until issues with the asset base were solved. Through such resolution, ARSESP requested SABESP to inform within 30 days the period necessary to reassess certain items of its regulatory asset base, and by means of an official letter later afterwards, the agency sent the list of items to be revised. In reply, SABESP requested 3 months to assess, to clarify and make the adjustments necessary to the regulatory asset base. So one central point in the discussion related to the company's asset base is the inclusion of working progress and working capital. In the preliminary tariff issued in the beginning of the year, the one that granted a 2.35% increase by SABESP, both of these issues were excluded from the regulatory asset base. SABESP has, once again, requested the agency to analyze the technical appeal that we filed in the occasion that was late April 2013, immediately after the publication of the preliminary tariff. With regards to the tariff adjustments to inflation, in view of the referred resolution and subsequent evaluations on the issues to be revised in the regulatory asset base, SABESP filed a petition for the agency to authorize a tariff adjustment by inflation, that is by the EPCA. As usual, it occurs every year, and you probably know, in August and September. What we can say is that the official letter has not yet been answered by the agency. Remember that what we are requesting -- that is SABESP is requesting that the 2.35% granted in April as a preliminary tariff is now considered as recomposition of the inflationary effects in this period, that is from August last year to September this year, such that the adjustment would correspond to the EPCA accumulated until August, which discounted at 2.35%. It means there's a residual increase of 3.83% that we are proposing if all the entire request is accepted. With regards to the nomination now of our ARSESP officers, came a very important issue. In order to ARSESP proceed with its works, whether referring to tariff revision or to evaluate the petition for adjustment by inflation, it is necessary to reestablish the quorum of agency's executive board, which currently has only 2 of 5 offices -- officers. On September 3, the name of Mr. José Bonifácio de Souza Amaral was submitted by the governor of São Paulo to the legislative assembly of São Paulo to compose ARSESP's Executive Board as Economic Financial and Market Regulation Officer, reminding that according to the law that created SABESP, if examination by the legislative body of São Paulo does not occur within 30 days, the nomination is automatically approved. Those were our considerations. I would now -- please feel free to place your questions.

[Operator Instructions] Our first question comes from Bruno Pascon with Goldman Sachs.

I have 2 questions. First, regarding the tariff revision process. I would like to understand the inconsistencies appointed by the regulator on the calculation of the regulatory asset base and whether those inconsistencies were related to pumping systems, treatment stations and pipelines in terms of the amount considering the calculation. Are those inconsistency are more connected to pricing? So that will be my first question. And then the second one will be specifically in the case of the royalties discussion, the 7.5% arrived at in the municipality of São Paulo and whether this will be discussed and approved at the conclusion of the tariff revision process as well and on whether countries still have the opinion that in order to preserve the economic equilibrium of the contract that it's illegal not to pass through those royalties to win tariffs of SABESP [ph] ?

Bruno, a question you made on the inconsistencies, in summary, you want to know if they're more related to physical aspects, if the assets are there or not there? Or price assets, price issues if the assets is there? Or -- and the value for the asset is something that is not matching? Is that the question you made?

Yes, exactly. Yes, exactly.

Okay, just give me a second. Okay, Bruno, I mean, we're -- obviously, we went off for a second to see what we could detail. But the fact is that they come on both sides. There's a physical questioning. There's price questioning. There are 19 items. Obviously, within each of that 19 items, there are many -- so I don't think there's anything we can say that would be helpful for you regarding these inconsistencies. What we can say is there are sufficiently enough that we believe we can appraise this in 3 months, fine, which is obviously much less than we spent all in this process before. And we're very optimistic that this will not be an issue for delaying the process. Now on the 7.5% royalty, as we mentioned on the last call, the Portuguese call, understanding here is that everything continues equal. In other words, the only information we have on that is what you know. And that is this pass through. And let them -- first of all, it's a personal -- correction, it's not a royalty, it's a transfer, okay? It is suspended until the application of the final tariff. So we are in this, absolutely, same page as you. We will obviously have tracked this. If we have any relevant information, we will come back to you on this, okay?

Our next question comes from Hasan Doza with Water Asset Management.

I just wanted to clarify, just making sure I understand your comment about the inflation increase you'll be requesting. So right now, inflation is, what, around 6%?

Yes, the inflation in the period is about 6.3%. Something like that.

Okay. And the way that you plan to get to that inflation increase, what you're proposing, just so I understand correctly, is that you're saying let us keep the preliminary 2.35%, which was given, but subject to, obviously, the final process being complete. So you are saying let us keep the 2.35% and then add 3.8% on top of it to get to an inflation-type increase basically. Is that generally what you're planning to request?

Yes. So we're, more specifically, and Rui, correct me if I'm wrong here, what we're saying is the following. Since it has been 12 months since our last tariff revision and the 2.35% is a provisional, it's a preliminary, it's not the final tariff; and given that there will be, by the time of all the asset base is evaluated and so forth, it will be more than a year since the preliminary asset base value was granted to us based on December numbers, okay, we understand that all this should be postponed, that it has been postponed, the revision has been postponed for more than 1 year in such that we should be granted the tariff readjustment of 1 year due in September. So the 2.35% will no more be a preliminary, but will be part of the inflation to be given for the period. So 2.35% plus 3.83%, I believe, yes, is the total 6.37% inflation for the period. And then at the end of the process, hopefully, as soon as possible, we will be granted the final tariff one at a time, not preliminary, okay?

Okay. I understood. Did you look -- the only comment I would have is did -- the model, as it was set up, was supposed to be an inflation plus real tariff increase model. I mean, my only concern would be if you are kind of willing to compromise, like, splitting the difference on the inflation increase...

No.

One, wouldn't you be you kind of compromising the integrity of the original model, which was real tariff increase? So my question would be why not just ask for a 6% inflation increase like you are entitled to as per the model every year? So I mean, what is the argument against just asking for a inflation type increase as you have done every year and leave that 2.35% outside of this kind of a compromise?

So we're not compromising anything here. We're saying that the tariff revision process is postponed indefinitely, and all the indications is that it will be something to happen by the end of this year, beginning of next year. Of that, the 2.35% can be part, together with 3.83%, of the total inflation that should be accrued for the period up to August this year. So we're not compromising. We're just saying that we still want and we will still go after the new tariff. We are still requesting. We have not changed our position that we are requesting a 13% above inflation tariff review. But we're only saying, since the review is not happening this year and it has been more than 12 months of the last tariff adjustment, in order not to hurt SABESP's cash flow and financials and our overall plan and stress the company unnecessary, we are requesting for the agency to consider since the tariff revision has been pushed to next year to consider giving us the inflation for this period. That's it. So [indiscernible] now considering that it has already -- we have already increased our price in 2.35% for us to complete a 6.37% increase, which is inflation up to August this year, we would only need an additional 3.83% increase. So we're not compromising, okay? We're just being very realistic and asking what we think we have the right to receive. So the process is defined.

Got you. And for this inflation request, you would -- ARSESP, you would still need to have a third member, which currently it doesn't have, okay?

Yes. The third member, as I mentioned on the speech, has been appointed by the governor to the state legislative body, and the legislative body has a process of approving that can take up to 60 days or so. Or if it doesn't comment on anything, the nomination is automatically approved in 30 days. So expectation is in a couple of months to have the full executive -- not the full, but the necessary Executive Board members, a number of members.

[Operator Instructions] The next question comes from Diego Moreno with Merrill Lynch.

So we already did a lot of [indiscernible] turns [ph] after the process of the tariff revision and the Diadema thing, but one that is remaining from my side is really regarding the revenue share with São Paulo city. I know that the process they are like going in parallel or through the tariff revision, but when do you think that the situation will be solved that you're going to allow it to incorporate into your tariffs the pass-through of this revenue sharing? Do you think that they needed to, first, to finalize the whole process of tariff revision for them to discuss about it, or is that kind of discussion that is going completely outside of the discussion of the tariff review? And also what you are planning to request as the retroactive effect because like I think that since 2010, you already paid BRL 800 million. And which the amount of this year, that's going to be close to BRL 1.2 billion. Also this is a considerable amount, and how are you planning to recover this point?

Okay, Diego, just a second. Diego, on the revenue sharing and, unfortunately, I'm going to be as blunt as we were in the last question and the last call on this matter. But we definitely are in the same schedule as everybody in terms of the ARSESP's determination is that it will be implemented at the same time the new tariff is implemented. So our expectation today is that it will -- it should be implemented by this timeframe. Obviously, we all would like to have more visibility exactly when that is. In the meantime, we believe that the government must be in some discussions around this matter. But I can tell you that we are not aware of it to the extent that we can comment on it. And with all the difficulties that the process brings, especially next year when we have a very sensible political year. On the retroactive effect, let me see if Rui can comment on this. Rui de Britto Álvares Affonso: Well, this is the same thing. We -- at the time we have signed this contract with São Paulo city, we have 2 potential entities that could be considering the future power -- we have the power of concession water and sanitation, the state and the municipal level. Since this year with the decision finally made from the Supreme Court, we have 2 entities in place. We are still waiting for the final specifics of this decision from the Supreme Court. But we have -- we can say that, yes, in the metropolitan region, we have 2, the state and the municipal, entities ruling the same concessionaire. So from our perspective, at the end of this tariff revision process, we have to get deep on this issue, either with the state and also with the municipal level. We have said already to you that in our evaluation of the São Paulo city, we don't -- we haven't considered the pass through cost only to the citizens of the São Paulo city. And the assumption behind our evaluation was that we have to pass these costs through to the whole metro region. So this will be, this has to be addressed at the end of this tariff review process. And the retroactive cost that we have incurred during this period is part of this discussion. From our point of view, of course, we have -- we will go for it. We will ask these to be recovered. But we have to discuss this with 2 levels of government now because these 2 have been empowered by the Supreme Court in this year. That's our understanding. So there will be a very complex discussion at the end of this process of tariff revision.

[Operator Instructions] We have a question from Antonio Junqueira with BTG.

I have some questions on Diadema. I'd like you to provide us a bit more details if you could provide us the revenue, annual revenue of this operation, annual EBITDA, if they have financial liabilities, not with you, like with the other parties. And with the liability they have with you, the speed [ph], and I would like to know how is this booked in your balance sheet today, because it seems the number that is there, the gross number is way smaller than BRL 1 billion and part of it is provisioned. So I would like to know how will the treatment with this -- the accounting treatment. And also what did you negotiate with them in regards to this BRL 1 billion liability they have with you?

Okay. Just a second, Antonio. Antonio I think the first comment on the balance sheet, I will pass the word to Marcelo Miyagui, then we can cover off the other points eventually.

Antonio, this is Marcelo. First, we have recorded accounts receivable from Diadema, amounts to BRL 193 million, and its start-up provision for allowance for that account. And we also have the indemned [ph] regarding the assets in amount of BRL 60 million, and it's also provision for losses. So this provision is going to be reversed, and the costs that they're going to pay for the concession is going to -- will be regarded as intangible asset according to the FY '12. So [indiscernible] Okay?

No, that's great. But what's the difference between this BRL 1 billion? Because you gave BRL 193 million plus BRL 60 million, that's BRL 250 million, so there's BRL 750 million off balance sheet.

Antonio, the BRL 1 billion is the judicial, the judicial value. That is the nominal value plus inflation, plus penalties and interests. That is the book value of our legal -- what the value is from a legal dispute standpoint, okay? Which we have, to some extent, a great -- we will have great difficulties in receiving. That's on one side. That's around the BRL 250 million that's, let's put it, on the balance sheet, that is all -- that is provision and so forth. The final details, and this is what I think we have to say here, the final details of the financial liabilities. What is the EBITDA? What is the revenue? We're not going to disclose this right now, in fact, because we're still -- to sign the contract. We still have to sign the contract. So there's a some details we don't want to share until we have the contract signed. What we can say is that this equates and it actually provides also an example of how to equate this awkward situation where we provide water, we don't get -- they're not received. We're going to the courts. We're winning. On the flip side, we have to continue to proceed with the supply of water. We have no ways to cut out the -- and enforce collection. And what we can say now that although we will be paying about BRL 95 million in 2 installments, at this point, we can say that financial liabilities and all the liabilities obviously were due diligence by us. But all this in bulk were not sufficient for us not to move on with this process in such to equate this problem with Diadema, bring this operation from wholesale to retail with all the benefits, add more connections in services into a very highly scaled area and obviously, set precedents for the future. So we are going to retrieve from right now jumping into revenue EBITDA because, again, we're not buying the company there. We are taking over the services. So we did not diligence the company. What we did is we appraised values of the asset. We appraised the value of what is the future cash flows. And we did our evaluation, and we put that against what was the proposal from the Diadema side. And I think we came into a very good agreement in benefit of Diadema, which had in its back a potential BRL 1 billion legal claim, a claim that is growing as we speak from all aspects as we mentioned on the call. So overall, this is what we want to -- I believe this is today as far as we would like to comment, Antonio.

Our next question comes from Felipe Mattar with Goldman Sachs.

So I have 3 quick questions. The first one is how confident are you about the 3.8% additional inflation increase? And if there are any pushbacks by the regulator by the time the new director takes over with respect to the number, where do you believe that could come from? This is my first question. The second question, I want to understand better if there are any further risks of potential pushbacks in the calculation of the asset base? Meaning within 3 months by the time you publish the asset base if there is a new round of this agreement between the regulator and the company, could be talking about a potential new round. And so my question is, what is the risk that after 3 months, there is not an agreement between the company and the regulator? We enter into another 3 months round and so on that we lose a little bit of sight on when the effective timeline for the conclusion of the process is going to be? And the final question I have is just to become clear about what is the referential date for the 3 months? I apologize if you already answered this question, but I want to understand if we're talking 3 months from August 2 when ARSESP published the deliberation 427 or if we are talking now 3 months from the date, meaning last Monday, that you -- or last Friday, sorry, that you actually gave the timeline to the regulator?

Okay. Felipe, on the referential date for the 3 months, we believe, is starting the date ARSESP provides an okay for our proposal, which we expect anytime soon because we understand that this decision is not a decision that has to go through the executive, ARSESP's Executive Board voting. So it's -- I can say our expectations is anytime soon to get the okay, and that counts 3 months. Nonetheless, we are already working on it, so we are counting 3 months from the date we -- in our side, we said we can do it in 3 months. So if they -- it's on their hands. It's on ARSESP's side to, in fact, not only approve the 3 months, but also provide for a new schedule. So that's how we look at it. Rui, do you want to comment on the 3.83% and then the risk pushback on the calculation, on asset calculation? Rui de Britto Álvares Affonso: On the 2 other questions, first one's how confident we are about the 3.83% of inflation increase. We are quite confident. We are very confident whether to resume its our opinion. Second, further east looking ahead, well, from our perspective, what we are seeing, it's this gap of this agreement, it's narrowed down. It's my understanding. We are narrowing this gap of disagreement or misunderstanding as time goes by. But again, of course, it could be a new round of disagreement. But we cannot see it -- large ones in the near future. So we're sensitive about this 2 points you have raised up.

There appears to be no further questions at this time. So I'd like to turn the conference back over to Mr. Sampaio for any final remarks.

Well, thank you, everybody, for the call, to be with us with the call. We are obviously now open for conversations. So as you need further clarifications, please call me, Angela, who will be available. Thanks a lot. See you soon. Bye-bye.