Earnings call transcript: Sanepar Q3 2025 beats EPS forecasts

Sanepar, the Brazilian sanitation company, reported its third-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.2235, compared to the forecasted $0.1919. Despite this earnings beat, the company’s revenue fell short of expectations, coming in at 1.75 billion USD against the anticipated 1.78 billion USD. The stock saw a decline of 1.13% in its price post-announcement, closing at $7.06.

Key Takeaways

• Sanepar exceeded EPS forecasts by 16.47%.
• Revenue fell short of projections by 1.69%.
• The stock price declined by 1.13% after the earnings announcement.
• The company launched an innovative Sanepar 5.0 program.
• Investments increased by 52% year-over-year.

Company Performance

Sanepar’s performance in the third quarter highlighted growth in certain areas despite overall revenue shortfalls. The company reported a 5.5% year-over-year increase in net revenue to 1.804 billion reais. However, EBITDA and net profit saw declines of 26.8% and 34.7% respectively, reflecting increased operational costs and market challenges. Over the first nine months, Sanepar’s net profit rose significantly by 51.7%, indicating strong underlying financial health.

Financial Highlights

• Revenue: 1.804 billion reais (+5.5% YoY)
• EBITDA: 556 million reais (-26.8% YoY)
• Net Profit: 236 million reais (-34.7% YoY)
• Nine-month Net Revenue: 5.315 billion reais (+4.8%)
• Nine-month EBITDA: 2.208 billion reais (+1.4%)
• Nine-month Net Profit: 1.718 billion reais (+51.7%)

Earnings vs. Forecast

Sanepar’s EPS of $0.2235 exceeded the forecasted $0.1919, resulting in a 16.47% positive surprise. This marks a significant beat compared to previous quarters, suggesting improved cost management or operational efficiencies. However, revenue fell short by 1.69%, indicating potential challenges in scaling operations or market conditions.

Market Reaction

Following the earnings announcement, Sanepar’s stock price fell by 1.13%, closing at $7.06. This decline reflects investor concerns over the revenue miss and potential implications for future growth. The stock remains within its 52-week range of $5.01 to $7.45, indicating relative stability despite short-term fluctuations.

Outlook & Guidance

Sanepar has outlined an ambitious investment cycle from 2025 to 2029, with a planned expenditure of 11.8 billion reais. The company aims to achieve 90% sewage coverage, enhancing its market position in Brazil and exploring new opportunities internationally. Future EPS and revenue forecasts suggest modest growth, aligning with strategic initiatives and market expansion efforts.

Executive Commentary

Gustavo Posset, Innovation Specialist, emphasized the company’s commitment to innovation, stating, "Innovation is everybody’s role." Abel Demétrio, CFO, highlighted the focus on universalization, saying, "We are working strongly towards universalization." These statements underline Sanepar’s strategic direction and focus on sustainable growth.

Risks and Challenges

• Revenue shortfall: Potential impact on future profitability.
• Increased operational costs: May affect EBITDA margins.
• Market competition: Challenges in maintaining market leadership.
• Legal challenges: Municipality-specific issues could hinder expansion.
• Economic conditions: Macro factors could impact consumer demand.

Q&A

During the earnings call, analysts inquired about rate payment sharing and the rise in third-party service costs. The management’s openness to new sanitation auctions and addressing legal challenges was also a point of discussion, indicating proactive strategies to mitigate potential risks.

Full transcript - Companhia de Saneamento do Parana S (SAPR4) Q3 2025:

Rodrigo, Conference Moderator, Sanepar: Good morning, everyone. Thank you for joining us for the conference announcing the results of Q3 2025 and the public meeting 2025 for Sanepar. For those requiring simultaneous translations, this feature is available on the platform. To access it, simply click the Interpretation button indicated by a globe icon at the bottom of the screen, then select your preferred language, Portuguese or English. For those listening in English, you also have the option to mute the original Portuguese audio by clicking Mute Original Audio. Please note that this video conference is being recorded and will be made available on the company’s investor relations website, ri.sanepara.com.br, where the full earnings release and presentation materials are accessible. You can download the presentation directly from the chat available in English. During the presentation, all participants will have their microphones muted, and the Q&A session will follow the presentation.

To ask questions, click the Q&A icon at the bottom of your screen and type your question into the queue. Once your name is called, a prompt will appear to activate your mic allowing you to ask questions. We recommend submitting all your questions at once for efficiency. If your question is not addressed during the event, please feel free to email it to ri@sanepara.com.br. Please be aware that the information provided during this presentation, including any forward-looking statements regarding Sane Para’s business outlook, projections, and financial targets, reflects management’s current beliefs and assumptions, as well as information available at the time. These statements are subject to risks, uncertainties, and changes in circumstances that could cause actual results to differ materially. Investors should consider general economic conditions, market factors, and other variables that could impact the company’s performance and cause actual results to differ from those expressed in forward-looking statements.

Now I’ll hand it over to our Chief Financial and Investor Relations Officer, Abel Demétrio. Thank you, Rodrigo. Good morning, everyone. Thank you for taking part in this event. I have with me our Directors, Investor DXA Janille, our Innovation Specialist, Gustavo Useki. Today we will discuss the earnings results of Q3 2025 and the public meeting 2025. This is our organization structure. Of course, General Assembly at the top, also the Fiscal Council, Board of Directors, Eligibility Committee, Statutory Audit Committee, Office of the President, Technical Committee, Internal Audit, Communication and Marketing Department, Governance, Risk, and Compliance Department, and the other boards that are part of the Executive Board of the company.

In the next slide, we can see in the ordinary, we have the state representing 60.8% of the ordinary shares, the working capital of the company, then the foreign shareholders, 27.42%, and municipalities in the ordinary participation. Concerning the total, the state has 20.03%, the municipalities 0.37%, national shareholders 52.18%, and the foreign shareholders 27.42%. Before starting presenting the earnings results of Q3 2025, I would like to clarify that our president is representing the governor in an event, so that’s why he’s absent today in this presentation. On the next page, I’d like to discuss the highlights of Q3 2025 related to investments. We will talk in more details later. We invested R$765 million with an increase of 52% compared to the same period of last year. Therefore, until September, it’s accumulated in 0.5% below our provision.

In the last three years, we can say 2024-2023, we had a very benign default. It is a, let’s say, it’s quite a healthy default, very much under control due to the actions the company has implemented more recently. I would like to pay an homage to all the people in the company. The company received the Transparency Award once again, granted by ANEFAC, and for the third consecutive year, it was a highlight in its net revenue results. Congratulations to everyone for this accomplishment for the company. Next page, I would like to talk a little bit about the operational result. We had measured volume and invoiced volume increasing in 1.1% and 0.9%. Obviously, we expected a higher increase, but this year we had climate issues related to a prolonged winter, less days of rain.

These days there was a report, and in 26 years, we had the coldest days in the state of Paraná with a reasonable amount of rain. This ends up impacting the volumes measured and invoiced volume. Related to sewage, the increase was 2.6% in collected volume, and in the invoiced volume, it also reflects the expansion towards universalization and the increase was more robust. We are universalized, the sewage we are moving very steadily towards universalization. On the right side of the screen, let’s talk about the connections. The accumulated until September was 34,571, which is a 1.3% increase. In terms of economies, it represents a 1.6% increase, reaching in 12 months 67,144 new economies of water. About sewage, we have 2.9% in the period of one year, 72,939 new sewage connections. In terms of economies, it’s more 106,473 new economies. Very significant for the company.

The next slide, the volume of the reservoir levels. In September was a period, the winter period, and obviously, we use the reservoirs to make up for the lower level of rain. Still, the volumes of the four reservoirs in this region were quite consistent with 70%, 91%, 78%. So now, I think in the next months, with spring and summer, we should recover these levels of the reservoirs. We have to remember that we are under the decree that determines that in our region, we managed to go through this period with this drought in better condition than we expected. In terms of the next year, we have a fifth reservoir that will reinforce more water supply for the region due to the beginning of filling up in the next few months. Our service indexes, the objective is very strong. It’s universalization.

The deadline, as we saw in the last 99 points, is the goal, and Sanepar already has 100% for water for the population, sewage. The goal is 90%. In September, we reached 81.9%, and the objective of the company is to reach this framework, bringing it closer to the goal. All the effort has been towards CAPEX, exactly to get this 8% that is missing for the universalization of the municipalities serviced by the company. Now, the next slide, we talk about the main financial indicators. As I said previously, in 2023, our default until September was quite benign, the 3.4%. We recovered past credits, 2023-24, and we had 0.8%, and this year 0.5% of the full. This default is measured in one day. Any late bill is considered the full.

In the losses per connection, we kept 223, which is the same level of 2024, a little higher than 2023, which was 221 liters per connection per day of losses. Our EBITDA margin at the end of September is 41.5%, ROIC 18.6%, ROIC annualized both ROIC 13.1%. Now, the quarter results, we had our net revenue reaching R$1,804,000, an increase of 5.5% compared to the same period of last year. Our EBITDA was R$556,000,000, a reduction of 26.8% compared to the same period of last year. We will see the reasons why, which reflects in the net profit, which was R$236,000,000, a decrease of 34.7%, about cost and expenses, an increase of 31%, R$1,249,000, margin EBITDA, liquid margin of 13.7%. Next slide, and we talk about the accumulated results. We have a net revenue increase in 4.8%, reaching R$5,315,000. EBITDA increases 1.4%, reaching R$2,208,000.

Net profit increases 51.7%, reaching R$1,718,000. Cost and expenses and impact EBITDA increased 7.3%, reaching R$3,107,000. Margin EBITDA 41.5%, as we saw previously, a reduction of 1.4% compared to the same period last year, and the net margin reaching 32.3%, an increase of 10% compared to the same period of last year. Now, the quarter results, our revenue increased 5.5%. The personnel cost was over R$4,000,000, a reduction of 2.1% compared to there were some compensations, labor compensations, voluntary dismissals. We have to remember that this plan of voluntary dismissal, the company made a provision in this year of R$174,000,000. We are still in a phase of dismissals, and we do not see the reflection of the people who were dismissed in September, the people who left at the end of October.

There is another step in November for the people who will leave the company due to this program. This number we expect that in the next few months will show impact in the payroll. Of course, the company rehired some employees for some jobs, but the account of personnel will have some positive reflexes in the management. PPR is directly related to the issue of net profit, a reduction of 34.7% in the quarter. Materials, there was an increase of 10.5%. It was not treatment material, basically, because my treatment material increased over 3%, but it’s material related to maintenance of networks, laboratories, and the issue of electromechanical issues. Electricity, Gustavo, in his presentation will speak about it with more details about free market, but the reflection in the quarter was a reduction of 13.2% with an expense of electricity of R$107 million in the period.

Services of third parties with an increase of 25.4%. Here we have the reflection of the PPPs, payment to the services for sewage, which were enforced in the two new micro-regions, an increase in some other accounts of services of third parties like surveillance, which has been impacting the results of the company, the registry and the billing services. This is above our forecast. We are working strongly on this commercial issue. These are the main items, especially related to clients. We also have the issue related to maintenance of networks. It’s quite relevant, and it has been bringing some impact in this issue of service of third parties. It reflected in this item of the general costs and the fiscal was 22.7% through judicial provisions and regulations. We have a provision of R$166 million, which was the main impact in the quarter.

We have to remember that the negative percentage of 230% is due to the theme because we had a reversion of provision of $168 million. This year, in the quarter, $166 million. What happens? We had a relevant provision for the municipality of $87 million, which impacted the results of this quarter. It’s an event. It’s not a recurrent event. For nine months, besides this, we had the issue of Itaú Construction, which had a relevant impact of $54 million of provision. Besides Ponta Grossa, we had $15 million, some civil actions impacting the results this year, especially in this quarter. Girard Station, provision for healthcare and social provision increased. It was predicted. Other costs and expenses. We had a reversion last year in the sense that last year we had an expense of $48,824,000. This year, the revenue was higher than the expense, $48,838,000, reflecting positively in the results.

Other costs and expenses, a reduction of 3.4% in the period. Next page, in the accumulated, we will speak a little bit when we speak generally. The revenue increased 4.8%, personnel increased 20.4%. I want to highlight that we are working on hygiene issues of the processes, like all these issues related to civil. When we had some lawsuits that were reverted, so they left from provisions and they entered in the personnel account. PPR 40%, material 5% in nine months. It’s in line. Even with inflation, electricity in nine months, there was a drop of 22%. Services of third parties, 35.2% increase. General and fiscal, a drop of 8.6%. Judicial provisions, a provision of $1 billion impacted due to rates of payment. The provisions for healthcare follow the same percentage, 13%.

Financial expenses and other costs and expenses due to rates of payment, a reversion of R$1.5 billion. About CAPEX, I spoke at the beginning about the increase. In nine months, the increase was 35.6%, reaching R$8.864 billion, a significant increase compared to last year. These investments are divided in 30% investments in water, 58% in sewage, and 12% other investments. The origin of resources, 57% of own capital, 43% third parties and capital. Now, net debt and leverage in short term is a debt of R$945 million. Long term, R$6.311 billion. Total debt, R$7.256 billion. Here we have an impact in cash flow relevant due to the receivables of the judicial receivables, the rates of payment. We had over R$5 billion in cash flow, which makes our net debt R$1 billion, a reduction of 71.2% and a leverage of 0.5 times EBITDA.

In September 2024, this leverage was 1.7 times. Obviously, with the future definitions of management related to the destination of these rates of payment and destination of these resources, the cash flow will go back to lower levels, more normal levels. But this should take some time to take place. The generation of flow with the receivable, the switch of payments, we have the R$6,400,000,000, an increase of 210.8% compared to last year. And 210.9% is the conversion of EBITDA in the cash flow. The cost of capital increase of 1.4%, reaching 11.9%, and maintenance of CDI 15% throughout the year of 2025. It brings accumulated a higher cost for the company. It reflects in the total cost of our debt, which in the same period was 10.5%. Still, our debt is very well distributed in terms of indicators.

33% represented by financial with cash, 31% connected to deposits of interbanks, 27% DI, EPCA, 27%. EPC of EP representing 4%. That’s 3% euro is DI. We don’t have variation. We do not have revenue in foreign money and other 3% for CCM, TJLP 3%. This is the graph, the debt breakdown. About covenants, the covenants suffer a positive impact of this receivable of resources. The EBITDA debt is equal or less to 3%. EBITDA for service of debt is 2.8 in line of previous years. Other debts include the labor, the fiscal, and debts with electricity, among others. We are in limit of 1.4 times. The other debts with social security and healthcare. The contracts with Kaiser, we have EBITDA adjusted, which has to be higher or bigger than 1.5.

We had the impact of rates of payment causing the levels to be above the necessary contracts with Kaiser, with the debt adjusted 0.3 times. We are doing very well. Other debts, honors, adjusted in 0.3. It’s in Banco do Brasil, which is the new, the last of the operation that the company made of launching our debt. This commercial. The debt service coverage ratio is 8.1 times. It’s comfortable. Adjusted EBITDA net financial expense 0.3 is quite comfortable. We are meeting all the covenants. The issues of the benches, 9th to 14th emissions, we have two covenants, which is that that’s EBITDA adjusted by financial expenses reached all comfortable numbers. Contract KFW, we have the level also. We are doing well and quite comfortable in all these covenants.

Speaking about the balance sheet slide, we have in the issue of net debt an increase in the financial investments, which reduces the net debt. So from $1.7 billion we moved to over $5 billion reais in 2025. The turnover is benign. We have some receivables. We had a reduction of 5%. The increase of supplies from $33 million to over $400 million salaries. We have an increase of 77.7%, causing our turnover to be quite good in 24 days. We had an increase in the volume of investments, increasing 24%, reaching $3.464 billion reais. We have $12 billion reais as our investment. Our turnover, we have operational activities with a quite significant increase. Once again, the rates of payment over $6 billion reais. The investment, $1.8 billion reais, a significant increase. The finance investment, an increase of 63%.

We had an increase of R$4,079,000,000 from R$1,800,000 to R$5,880,000,000 at the end of September 2025. Continuing our presentation, I’ll hand over to our Director of Investment, Leora Lúcia Conti de Oliveira. Good morning, everyone. Concerning our investment plan in the cycle 2025-2029, we always work with some premises. The main is to ensure water supply and quality and compliance with the environmental and water use permit requirements. Environmental compliance, including demands established under the judicial agreement and also conditions and targets related to permits and environmental licenses. Also, we meet universalization targets as defined in the TA agreement under the MRAEs and within program and concessions contracts and other obligations with the 345 municipalities operated by SANEPAR, considering the standardized deadline of June 2048. Also, we comply with formal agreements entered into with the Public Prosecutor’s Office.

We adhere to the financial limits projected in the business plan and we’re always trying to operate and maintain systems efficiently and sustainably. We also, within our plan of investments, we work with guidelines that involve all the areas of the company. In the commercial areas, we meet the goals and also support the municipalities because who has the SANEPAR has the knowledge. We have to support the municipalities so that they have plans that are aligned to feasible plans so that we meet the mission of the company. In terms of financial investment based on cash available, that level and cost of that, seeking financial opportunities. Regulatory is investments. I cannot, I think I lost.

Investments based on cash availability, debt level, and cost of debt, seeking financial opportunities. Regulatory investments must be remunerated through tariffs in order to ensure the company’s financial sustainability, eligibility related to the provision of water and wastewater services, and usefulness and prudence, planned and executed under sound technical and cost efficiency assumptions. Environmental and water resources priority should be given to investment that ensure environmental compliance and maintenance and operations. Here we have the nature of each one of the CAPEX. We have $1 billion, practically $1.4 million in maintenance. We have 38% of our investments in water systems, 56.1% in sewage, and 5.6%. This name increased a little due to all the need of infrastructure that we have with this increase of the systems. 5.6% in infrastructure and solid residues.

In this cycle, we increased the service of water, seeking to guarantee service for the population. Concerning CAPEX, when we break down, we have R$1.4 billion in investments in maintenance, in expansion of market, which is always R$7.8 billion. Environmental compliance is a significant amount, practically R$2 billion, and infrastructure, R$658 million. As you can see, with the issue of expansion of the market, we still have room to grow when our investments are focused, strongly focused on that. The total CAPEX of our period is R$11.8 billion, and in 2025, R$2.361 billion. Right now, we are reassessing, but these are the numbers, consolidated numbers we have. Here we have the looking at the state of Paraná concerning the coverage of service. Today, the company has 68% of the population serviced by SANEPAR with levels quite significant. We have above 80% of sewage service.

We have to remember that in the state of Paraná, all our system of collection go through treatment. So we do not have any situation where we implement wastewater treatment without having treatment of this sewage, of this wastewater. It’s quite a lot of people, 7.5 million people out of the 11 million people serviced by Paraná, by SANEPAR. We have here our level today is 81.92%, close to 82%, as Abel mentioned. We still have 8% left where we seek alternatives to have as partners the PPPs so that we can support us, so that we can reach the universalization before 2033. That’s where our efforts are focused. We have a population, a small population, but for us, it means a lot.

We have been working in a very consistent way to meet the 6.9% of the population serviced by SANEPAR that still do not receive treatment, over 700,000 people. I want to show a little bit of the scenario of Brazil. As you can see, we have in the north of our country, low level, and it makes us sad, but we know that there are areas that are poorly populated. The arrival of universalization will actually take time, take longer. In the northeast, 42.9% of the population receives, has access to treatment. We are talking about collection. We’re not even talking about treatment. In the west center, 73.1% of the population has access to service. And southeast is the best level, 85.4% with the state of São Paulo with big numbers.

In the south, 59.3%, where in the graph on the left, graph SANEPAR really pulls the number up. Unfortunately, our other two states, the neighbors, Rio Grande do Sul and Santa Catarina, they have levels that are not so significant, do not deserve so much praise, but they show that Paraná really sought the right path, the path for universalization. This causes us to be able to advance. As you can see, these rates are from 2024, and we are in 2025. So we are in 81.93% already. But in 2024, that Brazil with 67.5% and Paraná 81.2%. Here it’s a general overview of where we place our investments in the state. As you can see, we have five regions divided in southeast, southwest, northeast, northwest, and Curitiba and Metropolitan Region, which we call CETE Curitiba.

In this management, this general city, we have all the municipalities, which is in pink, and we will have in 2025, 182 works or projects implemented. In the cycle 2025-29, it will be 567 projects. It’s quite a significant project of water, sewage, maintenance service, and investments for operational improvements where we cover all this number of projects to reach and maintain and guarantee universalization that many municipalities in the region have reached universalization. Here we have the southeast region with 81, 89 projects in the cycle, 207 projects in all this region, yellow region. Southwest region, we have 177 projects in 2025 and 526 projects during the cycle. As we see, we have small municipalities and SANEPAR does not, it tries hard to give access to all municipalities. Here we have the northwest region with 114 projects and 454 projects in the cycle.

Also in the northeast region, we have 101 projects for 2025, many of them concluded, and in the cycle, 556. These points in white are the municipalities that are not operated by the company. This volume of work, of projects causes us to make sure that we will reach universalization. In the cycle, we will have 2,373 projects executed, concluded in all our park of municipalities in 2025. 663 projects are our challenge. It’s a big challenge, but we are involved. We are committed to reach it. These are just some, just as illustration, some works that are concluded. These are the reservoirs. These are two beautiful reservoirs that help us serve the region. We have, of course, not only the reservoir, but the works involve more activities. Here we have a semi-buried reservoir.

We have five kilometers of new networks of distributions to reach new regions of the municipality that have new buildings. We have 14 kilometers of service implemented in this system in Londrina. Here we have an intake of water in Rio Ouro Verde in the region, the Medianeira region. Sometimes they look like simple structures, but they give a lot of support and they guarantee the supply of water. Here we have another intake and the treatment station, Tijucas do Sul. It’s a small system, but it was a success. The inauguration was a big success. We had the mayor very happy with this infrastructure that sometimes a small town is really a landmark. The treatment station that we have in the lower picture, it’s a small station, but it makes all the difference for the municipality.

The next station, we have a new treatment, wastewater treatment in Assis Chateaubriand. The investment there was around R$44 million. We have a station for 100 liters per second, sludge, activated sludge. You have the drying beds there at the background of the picture. Next slide. We have another station, 30 liters per second. We spent R$29 million. It sounds simple, but of course, the investment is not only in the treatment station, but we also see the treatment station here because this is the localized unit. We have 54 kilometers of networks that we created in the system with collection and emissaries and a lot of connections giving access to thousands of families, bringing good health to this population. Here we have an icon. We have in Cornélio Procópio a treatment station called Tangaráites.

On the left side, you can see there is a part with plants and all that. This is a sludge treatment that we use, a solution using nature. It’s a technology that is very promising for these investments, future investments that we have to make in these small locations. It might not be useful for treatment of a big amount of water, but for the small stations, we have hundreds of them in municipalities below 10,000 inhabitants. This fits very well for this population. This is a case that we are learning, finding solutions and finding solutions, operationally speaking, changing the operational logic, but finding solutions of activated sludge, more technical solutions, and also integrating nature into that. Here is a station in Maringá, Floriano District. It has 7.5 liters per second. As you can see, it’s in the middle of an agricultural area.

It brings solutions for water treatment for a population of 280 connections. It’s at the beginning of a system, but R$11 million we spent, we invested in that to serve this population of the municipality of Floriano. It was a request from the City Hall of Maringá that is very concerned with all the districts of the region. Here we have an ETA in water intake in Itaipu Lancha with efforts for us to stop carrying, bringing material into the Itaipu Lake. Here is one of the alternatives we are working on in the municipality of Itaipu Lancha with around R$18 million invested in this system. Here we have a post-treatment ETA or water intake station. This caused us to find a solution. We have a treatment station, Modular 1 in Toledo, the municipality of Toledo.

The environmental parameters are very strict. We must have this project ready in six months. By May 2026, we expect to have the station ready and implemented, serving part of the system of Toledo. As you can see, we have a lot of solutions with tanks, like semi-ready, which make things more agile, the installation more agile, and give flexibility for the system in case we need to remove, to change places, to move from this place to another place, we can make use of the assets. This is a sludge, activated sludge station in Veracruz do Oeste. There were R$25 million invested there. It’s a very nice station. Here we have an intake in the water intake in Cascavel, in Rio do Salto. This area is growing in a very promising way. Sanepar is always trying to find solutions.

It’s another intake with 167 liters per second, with that 600. It’s a lot of water to guarantee the supply in Cascavel. The piping is 400 meters width, almost two kilometers of pipelines. Now we have the reservoir Tatuquara in Curitiba. It will be very nice. The walls are higher than the image we have here, but it’s the only reservoir that will serve a big area of Curitiba, and it’s part of this integrated system of Curitiba and the Metropolitan Region. The investment here was R$40 million. It will also be done in the same structure, which is pre-molded structure. Here we have in Apucarana a treatment station with environmental parameters, very strict, and R$41 million were invested there. We expect to finish this project in February 2026.

I mean, it’s more advanced than the picture shows, but we have tanks and reactors and a whole treatment system to reach the environmental parameters or requirements. We also will build a laboratory to make the analysis of all the region. Here we have a water treatment plant in Apucaran with strict requirements, and we must have this project ready by mid-2026 with investments of over R$60 million. Here we have Yapor, the station. It had 80 liters. It’s being expanded to 160 liters per second. R$48 million were invested. We should have this ready by March 2026. As you can see, we have an amount of projects, very high, over 200 projects ongoing right now, each one of them either starting or intermediary phase or concluding or pre-operation phase.

Today, our treatment stations, from the moment they have their installations, their physical installations concluded, we also have a period of assisted operations and pre-operations where our technicians work together with our suppliers so that we can learn and be ready to operate all these treatment stations, which are not simple, are not like ordinary. They present a lot of challenges. In the next slide is the treatment station. I think I showed it previously in Atuba Sul. It is in its final phase. We have it almost in the phase of automating it and installing the electrical parts, but we have the decanters on the upper left side. They are all in operation and very properly operating. We are meeting the environmental requirements, and we are finishing it. There were over R$300 million invested to guarantee the water supply for all the region of Curitiba.

We have over more than 10 municipalities where sewage is taken inside this treatment station. The operation is assisted, and the end should be ready by mid-2026. Everything should be concluded by then. Here we have another treatment station, quite significant, which is Sikishisto. This is a big effort. It’s focused on this work, R$376 million with all the electrical installation that we need to do here. It is very unique. It’s from over 1,068 liters per second treated. It’s a treatment process quite advanced. We will have solutions based on nature-based solutions for the treatment of sludge. It’s a station that in the next presentations, we will be able to show the evolution, its evolution and how it has evolved, that we are very proud of it. This is the last station I want to show you.

Also working with Itaipu and all the region of Foz do Iguaçu, we have R$49 million invested. It’s a big challenge, Gustavo, here because as you can see, we have all the area around. It is surrounded by trees, nature. We did not cut down any tree. We kept our work in a region that was where we already had some treatment station, and we just used the same area. It will be a landmark for the region. It will contribute for us not to have the problem of the Itaipu, not to compromise Itaipu region. If Gustavo wants to say some things, I will hand over to Gustavo because this is the end of my presentation. A good day to everyone. Good morning, everyone. Leora, Abel, Osiris, and all of you. We are very proud of this project, engineering projects and the innovation.

In this ETA, we had to change the tires of the car while the car was in movement. It was very challenging. It was an important articulation across all the institutions that take part in this association: Sanepar, Itaipu, Itaipu Parque Tec. Besides the aspects mentioned, we will have biogas energy recovery, which will generate, maintain, and bioenergy. The systems were checked at the end of last month, and they are being mobilized for the plant. We hope that by March, we will conclude this work. I am Gustavo Posset. I’m specialized in research and innovation in Sanepar. I was recommended by our president. Our president is with the government. I was asked to share with you the experiences we had, innovations, new businesses.

This is reverberated in the ordinary results from the point of view of financial presentations as presented by Abel and through new alternatives and new solutions. They are incorporated ordinarily by the new works, projects, and activities that are core of the company associated with the processes of water and sewage. In this context, it’s very important to remember that innovation is part of strategic planning, of this strategic vision of the company. It drives our mission. Consequently, it is anticipated in the vision of Sanepar to be a protagonist company, reference company in the national scenario and international scenario. Therefore, as we always revisit with over 6,000 employees, it is a value in the company.

Our strategic map contemplates innovation as a perspective to ensure the financial balance of our business through constant improvement of our projects and processes, involving, of course, all the company in this journey of innovation. Innovation is everybody’s role with discipline in our policy of innovation and new businesses. We are speaking of a contemporary approach that is innovability, innovation for sustainability, where innovation is a tool for generation of value for society. Within this context, one of the subjects, most current subjects when we think of innovation, is connected to digital solutions. Today, Sanepar, despite being a company of infrastructure, of engineering, of services, of sewage services, has several solutions today implemented digitally. In this approach, we find solutions, commercial solutions, platform of management and support, engineering solutions, operational solutions, and other solutions that systematize and bring transparency and agility to our projects.

In this approach of different solutions, they come up in a context, more expanded context to the understanding that technology is made by people for people and inspired by our president, Blay. Sanepar starts implementing strategies and projects with a vision for the future towards society 5.0 through sewage services, looking at digitalization as a primary step for the development of its actions with a digitalization that is integrated and also thinking in a movement of transportation that culminates in a movement of digital transformation. Recently, we were in Spain, where President Blay launched the program Sanepar 5.0, connected to the future with five important guidelines, pillars turned to digital infrastructure and cybersecurity, intelligent and connected operations, sustainable connections, data intelligence, and integrated management involving the client in its experience and with digital services. Sanepar 5.0 is ongoing.

It’s a recent event which involved all the companies, all the employees in the company, where we had to talk in depth about this topic. The perspective of innovation takes place in the company through a committee of innovation. This committee is presided by the council, by the board involving, besides the Director, the Operations Director, the Director of Investment, our Director of Governance, Risks, and Compliance, who on a monthly basis dialogs and checks, follows up on the development of the process. There is a board inside the company, as we mentioned, which is the Innovation and New Business Board Department. At the beginning of this week, it contemplated and celebrated two years of existence.

I’m very proud to take part in this process since the beginning and with some very interesting results that have been reverberating in important actions of immediate applications in the company and also in future approaches. As mentioned here, innovation is everybody’s function. Over the 6,000 employees that get involved in this journey, we learn to interact with ecosystems of innovation, with startups, with the academy, universities, suppliers, and other companies that help us understand new perspectives, accelerate the process, and advance with important approaches for the company. Today, the innovation actions in Sanepar are dealt with through a tripod: innovation in processes, culture of innovation that involves the professionals, involves the mindset turned to innovation and entrepreneurship, and new businesses. I would like to share with you a little bit of each one of these approaches.

When we talk of innovation and process, we talk about an integrated process across the different departments. Leora, Director, she mentioned some technologies that are a result of this process of innovation, a result of prospection, new pilot projects, result of scale implementation, both scale implementation that generate results. So today, innovations are driven by demands. In the last repercussion, we collected at least 70 challenges, and the 70 challenges, when they were collected, they are addressed internally or in an interaction with the ecosystem of innovation. Out of that, we have programs like Sanepar Labs project, idealized by our President, Blay, in partnership with other startups that causes Sanepar to create some bids, some call for projects. They are challenges addressed to mature companies that can be implemented with mature solutions that can be implemented in the short term.

We have some calls for projects that selected some companies, and sometimes it goes to development of new solutions, like a digital solution turned to Sanepar 5.0, which was our second call for project, which right now is going through a process of selection of other five startups or with other calls for projects or bids which are contemplated in Sanepar Labs that can start the higher public hiring for solutions. Likewise, this inspiration comes from Sanepar startups where we interact and select among over 200 proposals, 10 startups with whom we talk and accelerate, and some of them are scaled, as I will present. The Hadar Tegi program brought an important thing. We have a program of international surveillance of technological solutions.

The challenges are offered to the surveillance, the services of surveillance, and from there, we can identify the best practices, best technological solutions for the challenges we presented. Together with Lab Teki and the Future Grid competence, we will dialogue how digital solutions and convergence of digital solutions and operational solutions can help us drive startups that effectively help us in the solutions of our everyday challenges. Besides innovation in processes, we have been working with the perspective of culture of innovation, causing Sanepar employees to produce solutions in a program of entrepreneurship. There is a portal in this department that gives guidelines for innovations. This portal has shown videos, like drops of innovations that show some practices implemented by the employees that are encouraged to generate their ideas and register them in a platform called Sunny Days.

Every year, we have over 1,000 new ideas that are generated and assessed by a committee decentralized and allocated in every department of the company with autonomy to approve and implement them as they like. Recently, we had, on the Week of Innovation, we had a day dedicated to dialogue about innovation with the high board, with the participation of the President, Vice President, and other important leadership and directors in the company. In this act, we had an award, the Innova Award, which calls for or invites the employees to present their ideas. In the perspective of new businesses, Sanepar organized itself in the past two years, structuring and processing the mechanism to apply especially the tools for development of opportunities of business. Several opportunities were identified in the market, and some of them were prioritized so that we can advance.

Within this mechanism, all this process was systematized in a document approved by the administration board and the executive board called New Business Master Plan. How we are going to build and what are the strategies for the future related to these businesses. Although we have these plans presented and disciplined by regulations, expedited, and presented by the administration board, Sanepar is open to new perspectives, new approaches, and therefore, the address in the website presents, you can access a portal for an open prospection, proposing your solutions for new businesses, for the company, and of course, for a methodology flow so that we can assess by the criteria, the correct criteria. I would like to finish this presentation with some success cases and opportunities.

I will start with the free market of energy, which is a new model for the context of Sanepar, following the guidelines of GEPAR and disciplining the acquisition of energy of its management for units of high tension and middle tension. We have two phases. Phase one, consolidated via bids and cooper, and the second phase through trader, also through bids. Concerning the first contract, 49 consumer units, we have 100% in the free market. We concluded our migration timeline. On the phase two, we have over 90% of the charges migrated. By the end of this year, we should migrate over 50 units, consumer units. This operation from 2024 to 2028 has an economy anticipated, predicted about acquisition of energy in the amount of R$600 million.

What we have observed is that perhaps this economy will exceed its expectations because in the first year, we had an estimate of R$51 million of economy and we reached R$64 million. Concerning the market, the conventional market, we have 42% bringing an important repercussion as a GEPAR. 75% of this economy is shared in the form of fees with the society, and 25% repercussion is directly with the company. This approach of energy has unfolded with the optimization of processes. I give an example here, optimization of our integrated system of water supply of Curitiba. We started with a pilot with validation of a platform from Portugal that uses the hydraulic modeling to build the digital twins of our system of transference of water across reservoirs to serve over 300,000 people.

With algorithms, intelligence algorithms that from the data collected from our control operations, they help us to optimize this process, causing us to be able to predict more accurately the consumption of water and have a reduction of costs with electricity from the automatic work of frequencies. We have a project of a reference project, and we are about to implement it after a pilot with a virtual operator where we work with our operators to optimize the distribution of water, saving water and energy resources. Speaking of water, we work in a very structured way with a program of water losses. We adopt the best world practices in what regards the fight of water losses.

In this context, to improve new technologies, we went to Israel, Holland, or we sought in the local startups that helped us a lot and find solutions that help us apply artificial intelligence to detect quickly water losses and implement some measures. Today, we utilize satellites. We use intelligent poles that have sensors connected to it inside the tubes, especially to identify the main leak points so that we can identify things more effectively and reduce the time to detect and reduce the levels of water losses. Each technology has a trajectory, and they have been scaled inside the company within their realities, regional realities. We are thinking in digital engagement with the consumer. In Sanepar Labs, we have advanced solutions of telemetry for measurement and partnerships with communication disruptive devices.

The idea is with knowledge and patience together with the environment of innovation to migrate bigger and bigger engagement with the consumer, digital engagement. This is a reality already. The PIX payment, for example, these are things that lead to adaptation, and we expect that with these new technological approaches, but with our feet on the ground, to offer new functionalities for our clients. I spoke a lot about technology application, new solutions, Sanepar 5.0, but this is also connected with an approach of critical infrastructure with the value of subproducts and new destinations. The sludge is one of these examples we can improve more and more, considering the circular economy approach and considering the challenges of non-availability of barrels, of dumping that could receive these residues as input, as raw material.

We have a strategy nowadays that involves a series of projects that go from strategies of drying of sludge, disposal, and perhaps new businesses can come out of this. This promotes co-digestion. We are receiving organic residues in these generators. Today, we are reaching the maximum capacity of 150 tons of these residues to treating residues, bringing new complementary revenue, generating more energy. With the energy-generated period, we have compensation of 40 units in the company, more than $4.5 million a year. This is such an important endeavor. With the expansion of EcoBerlin, we have more generation of sludge, and consequently, we are studying the opportunity to expand it in the future to serve this sludge. The drying of sludge is a reality. We have implemented in Tubasu a system that can dry 5 tons per hour of humid sludge.

It’s a rotational circular system that is actually moved to biogas, dry sludge. Biomass, biogas, and biomass, which is sludge, dry, is converted into heat, and this heat is put in touch with the humid sludge, reducing its volume. Therefore, we have a reduction of around 80% to 90% of the volume that previously was destined to these burial grounds. The economy with the sludge handling is around R$6 million per year, representing our total cost of around 10%. So it’s a very significant approach that can be replicated. We have created a work in HSU in Londrina. The co-processing is also an interesting approach, especially because we can not only follow processes of clinkerization and cement processing, not only the sludge, but also sludge coming from the water treatments and residues coming from screening and sand.

We are studying opportunities that we can have to transport the subproducts seen as residue as input, duly treated and conditioned for cement producers. We are building, we’re trying to understand a business opportunity, just like solution based on nature presented by LERA, which are reality in some sewage treatment stations, but they can represent business opportunities. We can see this opportunity operating in France, and we connected to a company called FitoRestore that works with a concept of biofarms. In other words, allocating organic materials with solutions based on nature and to create aggregated products that can represent an important route in the whole set of alternatives called sludge route, which has been studied carefully by Sanepar.

To finish that, I want to show you we have a partnership with Japanese Kyoaka Co Company, a project assisted by the Japanese government in a very strategic way, especially recently by JICA. It is a cooperation agency, and it is called we tested this system, aerated hyperthermolytic composting process without adding complementary substrate. We promoted organic material generating from this treatment, organic fertilizer. The opportunity for new business is being studied in details so that we can understand if this technology can actually help us in the company. We have also ongoing an interesting project. The first two kilometers of network of optic fiber installed in sewage networks were implemented in a zoo in Curitiba, showing an opportunity, very interesting opportunity to be exploited. In the three past years, we studied in detail with the FC of the World Bank. There’s opportunity of business.

Right now, through a call for project, we are selecting a strategic partner to develop this opportunity and try to understand how the shared infrastructures of the sewage networks and telecommunications can represent an opportunity for these two important segments of infrastructure. We also, as we mentioned, Sanepar has been studying all the opportunities that come up, especially here in Brazil, about new approaches and market expansion. Therefore, the bids, when they are open, the call for proposals, we can access them and study mechanisms of how we can participate, for example, in some bids for PPCs or sewage and water treatment works. We want to have partners. The Spanish Acciona, Spanish company is one of these partners where we can, through an environment, through guidelines, we can study opportunities that open up in other frontiers beyond the state of Paraná.

In the same perspective, but with a look of cooperation and institutional strengthening, Sanepar has been looking to a closer territory here in Paraguay. Today, through a diplomatic partnership involving our government and the government of Paraguay through ISAPI, which is the public company in Paraguay, and JICA, the German company, we have been developing a program of reduction of water losses for Paraguay. Sanepar’s role and our mentoring and technical mentoring, applying the best practices we have in the context of Paraguay. Through Paraguay, if we can understand a little bit the context of South America, it’s a similar partnership, but in this case, involving the German government through GIZ, we have an approach to institutions connected to the government of Honduras.

We are helping them to strengthen their institutions and the Honduras companies and the natural resources secretariat, applying the concepts of energy efficiency and control of water losses so that we can have more guidelines turned to resilience in Latin America. I thank you for your attention and for the opportunity, and I’m available to be able to help with any doubts and debates. Let’s work for innovation, sustainability with Sanepar stronger and stronger. Thank you, Gustavo. Rodrigo, if you want to now open for questions and answers. Thank you. We will now start the Q&A sessions. To ask questions, we advise you to send them by Q&A icon at the bottom of your screen. By default of dynamics, your names will be announced for them to ask the questions live.

At this point, a request to activate your microphone will appear on the screen. If you are unable to open your microphone, please write "no mic" at the end of the question, and our operator will read it aloud. The first question comes from Yuri Gular and Daniel Travitzky Safra. Both questions about the same thing. What is your understanding of the company for change in the way you understand the sharing of rates of payment? Any updates on what’s the deadline for the solution of this solution with due to TCA manifestation? Can you explain the recognition of R$106 million related to rates of payment in this quarter? Thank you, Yuri, for your questions, Daniel. We had a complaint to the Tribunal of Accounts by the Association of the Consumers’ Defense, and the Tribunal asked us to comment on that.

AGEPAR decided to suspend the item of technical note that spoke of the sharing of 75% in favor of improvement of fees until they assess the theme. This issue, like the DGEPAR meeting said, is a complex and sui generis issue. They decided to reassess the whole theme, and obviously, the company is waiting for the answers which should come from GEPAR. Both the company and GEPAR are right now working to offer the answers that should be given by the Tribunal of Accounts. We have no answer right now to conclude this item. In the third quarter concerning our accounting, we had the maintenance accounts based on our legal advisor saying that although it’s suspended a new merit decision, the company maintained the same dealings, accountable dealings, which same was done in March and June in the previous quarters.

The company is interested in this subject. It’s relevant. It’s complex, but we are all involved in an issue, involved in trying to answer properly. In the right time, this theme should be object of assessments. It’s being evaluated right now by the agency, by Sanepar, but we still do not have a definition on the theme. The construction is being elaborated by the regulating agency. So both the company and the AGEPA, which is the Tribunal account, we are now, this is the status. In the next few days, we will have other updates concerning this topic. Next question from Yuri Gular. In third-party services, we had an increase of 60% in the third quarter of 2023 to the third quarter of 2025. For the monopoly nature of the company, it seems very high, seeing that the revenue increased to a fraction of that.

Could you break down on that? How can you think of it looking ahead? Yuri, thanks for your question once again. This issue of the third-party services is something the company has been following. In this period, we had, we have to remember that we had, by the PPPs, the micro-regions and the municipalities conceded. So some items like electricity, personnel, that were being serviced by the PPPs, we migrated the accounts for the third-party service. We had, in 2020, the COVID issue, have to remember that. For 42 months, we did not cut water. From 2023, as we resumed the cuts, the suspension of services of supply and the measurements, that also all the service, commercial services, field services gained a bigger impact than what we had seen previously in the period where we did not cut.

All these connections, reconnections, these are items that in the past few years brought an additional cost to our third parties, but not necessarily due to an increase, but this is the comparative base, which was very low because they were not being practiced. We can observe that the third-party services need to refresh. We have the maintenance service of networks. We have to remember in this regard, we had a problem in the contract, a relevant problem in the region of Londrina, where many services stopped being executed. As we resumed them, we had to hire the new company with the right price through bidding. The previous price was not feasible. This all brought to the third-party services this impact that you mentioned. The issue of surveillance services is another point.

We had two, three years ago, a series of thefts in our installations in the water treatments and sewage treatment plants that compromised the population, that affected negatively with complaints from our employees. The image of the company was very badly affected. We remodeled the surveillance system, and that brought impact in the cost of third-party services. On the other hand, through fiscalization and better surveillance, it also brings revenue because we don’t stop the supply. We have the water losses with the thefts that end up requiring the company to acquire materials and other services. All that is mitigated due to proper surveillance system. This is a reality. Sanepar operates in over 600 localities. Some very distant from, let’s say, populated regions. They are rural areas.

It is very necessary to have security surveillance, both for the employees and for the protection of the patrimony, the assets. That also increased the costs. The company has a plan to plan the costs related to third-party services. There is an event related to third-party services, which is the advocacy expenses, the lawyer, due to the rates of payment. This amount is around R$129 million, and this impacts the third-party services. Our analysis, which is done recurrently, we identify that most of the items that have increased in the third-party accounts, we have a very detailed analysis, we have the accounting, which you called analysis, which is expenses, but each nature of account, few of them exceeded what we had anticipated, what we had projected. They are all within our forecast. One or another can be beyond what we wanted, what we wished for.

But we have to remember that in the state of Paraná, we have been facing a lack of labor due to, and there are people coming from other states because in what concerns civil construction and sewage areas, which is our sector, the prices, the labor prices, expenses, they have gone up due to lack of labor, available personnel. I hope I have covered all the points, but basically, these are all the points. Thank you. Now we’ll continue in our next question. Comes from Gibran, from MIPORT. He questions whether you can explain the provision of Andjira municipality. This is his question. Thank you, Gibran. I will hand over to our Accountant, Osiris, for him to answer. Good morning. Thank you, Gibran, for your question. Andjira is a municipality that Sanepar, where Andjira is not operating.

We have a contract of concession until 2032, but in 2023, the municipality took over the operation of the system. This area, this terrain, this land is very old. In the decade of the 60s and 70s, there is a process, a compensation lawsuit. Sanepar had considered this as liability until the second quarter, but the process evolved, and they are executing the sentence. That was the provision. We are considering a loss for the third quarter. The provision was based on this lawsuit, on this compensation, considering the interest of 6% for this compensation. Throughout the month of October, there was a deposit because during the process, the lawsuit, there is a demand of compensatory interest of 12%. For Sanepar not to have to pay 10% of fine, we decided to give this interest.

That’s why we kept this amount as a probable loss. This is the likely loss. We can appeal. Our legal advisors are working on this process. Thank you. The next question comes from Reinaldo Veríssimo, an investor. Sanepar, does Sanepar intend in 2026 to seek a consent for sewage, for the services in other states? What are the choices to take part in an auction or not? Thank you, Reinaldo, for your question. As previously said, in other locations, the company addressed universalization of the state of Paraná. Water is universalized since 2007, 2008, 100%. We exceeded the legal framework, which is the 99% goal. Now, the strategy, as mentioned, both the works that Leura showed and the PPTs, they come in to reach the legal framework.

The company, with proven qualification, operational qualification, and with proven capacity to seek financial resources, is a company that is open to work in other areas, not only Brazil, outside Brazil as well. Of course, the company seeks partners in the sense that we can participate in businesses that are businesses that make sense to the company. Yes, the company looks to new markets, to opportunities, and possible definitions of participations or not in the time. They will depend on all the contexts of legal analysis to see the advantages for the company to participate. Yes, the company is at a point where it can afford to participate and cooperate with Brazil in this issue of sanitation, seeing its long history of services rendered. Now we close the session of Q&A sessions. The questions that could not be read, they will be answered later.

Now I will hand over the word to Abel Demetrio for the final considerations. Well, I would like to thank you for participating, and I would like to apologize for our long presentations, but I think they are relevant themes. I would like to reaffirm what Rodrigo said. If there is any issue that we may not, we did not answer, just send to us, and we will answer your questions. I wish you a great weekend, and thank you so much. Our earnings presentation of third quarter of 2025 in the public meeting is concluded. Thank you for your participation, and I have you all a great day.

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