UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________

OR

¨       SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: ________________

Commission file number 001-31317

Companhia de Saneamento Básico do Estado de São Paulo-SABESP

(Exact name of Registrant as specified in its charter)

Basic Sanitation Company of the State of São Paulo-SABESP

(Translation of the Registrant’s name into English)

Federative Republic of Brazil D5

(Jurisdiction of incorporation or organization)

Rua Costa Carvalho, 300

05429-900 São Paulo, SP, Brazil

(Address of principal executive offices)

Daniel Szlak

dri@sabesp.com.br (+55 11 3388 8000)

Rua Costa Carvalho, 300 05429-900 São Paulo, SP, Brazil

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Shares are not listed for trading, but only in connection with the registration of American Depositary Receipts pursuant to the requirements of the New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

683,509,868 Shares of Common Stock

1 Share of Preferred Stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes x No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

TABLE OF CONTENTS

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

General

We maintain our books and records in reais. We prepare our consolidated financial statements (“Consolidated Financial Statements”) in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). Our audited consolidated financial statements as of December 31, 2024 and 2023 and for each of the three years in the period ended December 31, 2024 (“2024 Consolidated Financial Statements”) are included in this annual report on Form 20-F.

The financial statements of subsidiaries are included in the consolidated financial statements from the date we obtain control until the date when such control ceases to exist. All financial information for the years ended December 31, 2024 and 2023 were prepared on a consolidated basis, while all financial information for the year ended December 31, 2022 was prepared on an individual basis because we had no subsidiaries to consolidate in that year.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

Privatization

On December 8, 2023, the State of São Paulo enacted State Law No. 17,853/2023, providing the authorization for our proposed privatization and its general guidelines. This law authorized the State of São Paulo to reduce or dilute its controlling interest in us through a sale of its common shares through an auction or secondary offering on the relevant stock exchanges within and outside of Brazil or via a primary public offering of our common shares within and outside of Brazil. In addition to authorizing our privatization, the law also brought forward the target for providing drinking water to 99% of the population and sewage collection and treatment for 90% of the population (the “Universalization Target”) for the state of São Paulo from 2033 to 2029.

On July 22, 2024, the State of São Paulo closed a secondary offering of 220,470,000 of our common shares (including common shares represented by ADRs), effectively reducing their interest in us from 50.26% to 18.00% and completing our privatization process (the “Privatization”).

As part of this process, the State of São Paulo conducted a public competitive process pursuant to which it sold 15% of our total share capital through a priority offering to a “reference investor”. The finalist reference investor was Equatorial Energia S.A. (the “Reference Investor”).

On July 18, 2024, the State of São Paulo and the Reference Investor entered into an investment agreement substantially upon the terms set out in the Form 6-K furnished to the SEC on July 1, 2024 (the “Investment Agreement”). The Investment Agreement provides certain specific rights and obligations for the State of São Paulo and the Reference Investor and is valid until January 1, 2035. We highlight the following:

State Law No. 17,853/2023 also provided that, in case of our Privatization is consummated, our bylaws must be amended to provide for a special class of preferred share, owned exclusively by the State of São Paulo (referred to as a “golden share”), which will grant the State of São Paulo veto power over proposed changes to: (i) our name and headquarters; (ii) our corporate purpose of providing water and sewage services; and (iii) any provisions in our bylaws regarding limits on the exercise of voting rights attributed to shareholders or groups of shareholders. Our shareholders approved these changes to our bylaws conditional upon the consummation of our Privatization at an Extraordinary Shareholders’ Meeting held on May 27, 2024. These changes to our bylaws included, among others, an authorized capital provision, the golden share terms and conditions, and, in order to both stimulate the shareholding dispersion and avoid hostile takeover, our bylaws also establishes that, in case one or a group of shareholders acquires 30% or more of our common shares, such shareholder(s), will have to make a tender offer to our other shareholders at a price established in our bylaws that includes a 200% premium (antitakeover provision), subject to certain exceptions. Our antitakeover provision may be dismissed by approval of our shareholders´ meeting. These changes to our bylaws, including the voting limitation described below, became effective on July 22, 2024, the date of our Privatization. For more information, see “Item 3.D. Risk Factors—Risks Relating to Our Privatization—Our Privatization and the changes to our operational structure arising from our Privatization may still be challenged. A court ruling favorably to such challenge could adversely affect our operations and the market price of our common shares and ADSs. The absence of a single controlling shareholder or group of controlling shareholders may impact our ability to efficiently approve certain transactions and could potentially delay critical decision-making processes, which may adversely affect our business and results of operations.”

On May 24, 2024, we and URAE-1 signed the Concession Agreement for URAE-1, which came into force on July 23, 2024 following the consummation of our Privatization, and introduced significant changes to the prior economic-regulatory model. For more information, see “Item 4.B. Business Overview—Tariff Readjustments and Reviews—Economic-regulatory model in the draft Concession Agreement for Public Water Supply and Sanitation Services for the URAE-1 Southeastern region,” and “Item 3.D. Risk Factors—Risks Relating to the Regulatory Environment—We are exposed to risks associated with the Concession Agreement for URAE-1, which may materially impact our financial condition and operating results.”

For the risks associated with our Privatization, see “Item 3.D. Risk Factors—Risks Relating to Our Privatization.”

Other Information

In this annual report, unless the context otherwise requires, references to “we,” “us,” “our,” “Company,” or “SABESP” refer to Companhia de Saneamento Básico do Estado de São Paulo – SABESP.

In addition, references to:

Information in this annual report related to liters, water and sewage volumes, number of employees, kilometers, water and sewage connections, population served, operating productivity, water production, water and sewage lines (in kilometers), water loss index and investment in programs has not been audited.

Market Information

We make statements in this annual report about our market share and other information relating to Brazil and the industry in which we operate. We have made these statements on the basis of information from third-party sources and publicly available information that we believe is reliable, such as information and reports from the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística – “IBGE”), and the State Data Analysis System Foundation (Fundação Sistema Estadual de Análise de Dados – “SEADE”), among others. We have no reason to believe that any of this information is inaccurate in any material respect.

References to urban and total population in this annual report are estimated based on research prepared by SEADE entitled “Projections of Population and Residences for the municipalities of the State of São Paulo: 2010-2050” (Projeção da População e dos Domicílios para os Municípios do Estado de São Paulo: 2010-2050).

Our Contracts and the Municipalities We Serve

Throughout this document, we refer to the 375 municipalities we serve directly and the two municipalities which we account for in our wholesale segment (Mogi das Cruzes and São Caetano do Sul), since our revenue for the year ended December 31, 2024 is derived from these municipalities. The 375 municipalities include 371 municipalities covered by the Concession Agreement for URAE-1, and four governed by individual contracts (municipalities of Miguelópolis, Quintana, Nova Guataporanga and Olímpia).

CAUTIONARY STATEMENTS ABOUT FORWARD-LOOKING STATEMENTS

This annual report includes forward-looking statements, mainly in Items 3 through 5. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other factors:

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “expect” and similar words are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this annual report might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements. Forward-looking statements speak only as of the date they were made, and we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Any such forward-looking statements are not an indication of future performance and involve risks.

PART I

Not applicable.

Not applicable.

Not applicable.

Not applicable.

Summary of Risk Factors

This section is intended to be a summary of more detailed discussions contained elsewhere in this annual report. The risks described below are not the only ones we face. Our business, results of operations or financial condition could be harmed if any of these risks materialize.

Risks Relating to Our Privatization

Risks Relating to Brazil

Risks Relating to Our Business

Risks Relating to Suppliers

Risks Relating to Our Clients

Risks Relating to Our Management

Risks Relating to the Regulatory Environment

Risks Relating to Environmental Matters and Physical and Climate Transition Risks

Risks Relating to Our Common Shares and ADSs

Risks Relating to Our Privatization

Our Privatization and the changes to our operational structure arising from our Privatization may still be challenged. A court ruling favorably to such challenge could adversely affect our operations and the market price of our common shares and ADSs. The absence of a single controlling shareholder or group of controlling shareholders may impact our ability to efficiently approve certain transactions and could potentially delay critical decision-making processes, which may adversely affect our business and results of operations.

Following the consummation of our Privatization, there are ongoing legal proceedings challenging our Privatization, as set out in “Item 8.A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings.” Additionally, new legal challenges or proceedings with the relevant court may also still be filed. Despite the consummation of our Privatization, potential adverse rulings from judicial or administrative proceedings may have negative effects on our financial results and reputation.

Furthermore, the transition from having a controlling shareholder to a dispersed ownership structure presents new challenges. The absence of a single controlling shareholder or group of controlling shareholders may impact our ability to efficiently approve certain transactions and could potentially delay critical decision-making processes, which may adversely affect our business and results of operations.

Risks Relating to Brazil

The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This influence, as well as Brazilian political and economic conditions, could adversely affect us and the market price of our common shares and ADSs.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, changes in interest rates, tax policies, price and tariff controls, foreign exchange rate controls, currency devaluation or appreciation, capital controls and limits on imports and exports. Our business, financial condition and results of operations, as well as the market price of our common shares or ADSs, may be adversely affected by changes in public policy at federal, state and municipal levels with respect to public tariffs and exchange controls, as well as other factors, such as:

We cannot predict the measures that the Brazilian government will take due to mounting macroeconomic pressures or otherwise. Economic and political instability and uncertainty has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian capital markets and the securities of Brazilian issuers, which may adversely affect our activities, results of operations, and the trading price of our common shares and ADSs. For more information, see “Item 3.D. Risk Factors—Risks Relating to Brazil—Ongoing political instability has adversely affected the Brazilian economy and may lead to an economic slowdown, which may have an adverse effect on our financial condition and results of operations.”

Changes in Brazilian tax laws or conflicts in their interpretation may adversely affect us.

The Brazilian government frequently modifies tax laws, including tax treaties, rates, and benefits, which may increase our tax liabilities and adversely affect our profitability and results of operations. In addition, tax authorities may interpret laws in a way that differs from the interpretation we currently rely upon to carry out our transactions, potentially leading to adverse financial effects. We cannot assure that we will be able to maintain our projected cash flows and profitability following any increases in Brazilian taxes applicable to our operations, which may adversely affect our results of operations and financial condition.

Brazil is undergoing significant tax reform, particularly on the taxation of goods and services. On December 20, 2023, Constitutional Amendment No. 132/2023 (“EC 132”) was enacted, replacing several of the current “indirect taxes” (ICMS, IPI, ISS and PIS/Cofins) by three new ones: a Goods and Services Tax (IBS), a Contribution on Goods and Services (CBS) and an Excise Tax (IS). The transition period runs from 2026 to 2032, with full implementation by 2033.

The regulatory process for EC 132 through legislation (complementary and ordinary laws) is underway. On January 16, 2025, Complementary Law No. 214/2025 was enacted, establishing the general legal framework applicable to IBS, CBS and IS. It is expected that the standard rate for the sum of IBS and CBS to be generally levied on any type of services and goods (with some limited exceptions) will be 28.0%.

Further reforms on income and payroll taxation are also under discussion by the Brazilian government. EC 132 provides that the executive branch must submit to the National Congress, within 90 days of its enactment, bills of law for reforming income and payroll taxation. As of the date of this annual report, no such bills have been submitted.

Several bills aimed at reforming the Brazilian Income Tax system have been submitted to Congress. They are still at an early stage of the legislative process and are subject to change. Among the proposed changes are the taxation of dividends remitted abroad and the extinction or limitation of the Interest on Net Equity (Juros sobre o Capital Próprio) regime.

We cannot predict the effects of changes in Brazilian tax laws, and if they may have an adverse effect on our business, financial condition or results of operations.

Ongoing political instability has adversely affected the Brazilian economy and may lead to an economic slowdown, which may have an adverse effect on our financial condition and results of operations.

Brazil has experienced amplified economic and political instability, as well as heightened volatility, as a result of several investigations by national and foreign agencies responsible for corruption and cartel investigations. Investigations into allegations, trials and convictions of Brazilian government and State of São Paulo government officials and senior management of Brazilian companies may lead to further allegations and charges, which in turn may lead to political instability and a decline in confidence by consumers and foreign direct investors in the stability and transparency of the Brazilian government and Brazilian companies. This may have a material adverse effect on Brazil’s economic growth, the demand for securities issued by Brazilian companies, and access to the international financial markets by Brazilian companies.

Furthermore, the President has the power to impose policies and issue governmental acts (Medidas Provisórias) regarding the Brazilian economy that may affect our operations and financial performance. We cannot predict what policies the President will impose, much less whether such new policies or changes in current policies will have an adverse effect on our business or the Brazilian economy. Additionally, the Brazilian government’s potential difficulty in securing a majority in the National Congress could obstruct policy implementation, further contributing to economic instability. These uncertainties, along with any new measures that may be implemented, may increase the volatility of the Brazilian securities market.

Historically, political crises have affected investor confidence as well as public opinion, and any of the above factors may create additional political uncertainty, which could harm the Brazilian economy and, consequently, our business, results of operations, financial condition and the trading price of our common shares and ADSs.

Inflation and the Brazilian government’s measures to combat inflation may contribute to economic uncertainty in Brazil, adversely affecting us and the market price of our common shares or ADSs.

Brazil has historically experienced high rates of inflation and the Brazilian government’s measures to combat it have had and may in the future have significant effects on the Brazilian economy and our business, financial condition and results of our operations. Tight monetary policies with high interest rates may restrict Brazil’s growth, the availability of credit and our cost of funding. Conversely, other Brazilian governmental actions, including lowering interest rates, intervention in the foreign exchange market and actions to adjust or fix the value of the real, may trigger increases in inflation.

Brazil’s General Price Index (Índice Geral de Preços – Mercado – “IGP-M”), used to measure the country’s inflation, recorded inflation of 6.54% for the year ended December 31, 2024, deflation of 3.18% for the year ended December 31, 2023 and inflation of 5.45% for the year ended December 31, 2022. The SELIC, the Brazilian federal funds rate and official overnight interest rate in Brazil, was 12.15%, 11.65% and 13.65% in the years ended December 31, 2024, 2023 and 2022, respectively. Subsequently the target was gradually increased to 13.25%. Since then, it has been gradually increased to 14.25%, where it remains as of the date of this annual report. Inflation, along with government measures to combat inflation and public speculation about possible future government measures, has had significant negative effects on the Brazilian economy, and contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities market, which may have an adverse effect on us if such policies are reinstated.

The Brazilian annual inflation rates, as measured by the IPCA, were 4.83%, 4.62% and 5.79% in the years ended December 31, 2024, 2023 and 2022, respectively. In 2022, the accumulated inflation slowed down compared to 2021, and it continued to slow down in 2023. However, the inflation rates in the years ended December 31, 2024, 2023 and 2022 were all above the predetermined and previously announced target ranges, which were 3.00%, 3.25% and 3.50% respectively. If Brazil once again experiences substantial high inflation or deflation in the future, our business, financial condition or results of operations may be adversely affected, including our ability to comply with our obligations. In addition, a substantial increase in inflation may weaken investors’ confidence in Brazil, causing a decrease in the market price of our common shares or ADSs.

Exchange rate instability and developments and the perception of risk in other countries, especially in the United States and in emerging market countries, may adversely affect us, our foreign currency denominated debt and the market price of our common shares or ADSs and our ability to service our foreign currency denominated obligations.

The Brazilian real has historically been volatile, experiencing periodic depreciation against the U.S. dollar and other currencies. The Brazilian government has implemented various exchange rate policies, including devaluations, floating exchange rates, and exchange controls. The current floating system has contributed to significant fluctuations, with the real appreciating by 6.5% against the U.S. dollar in 2022 but depreciating to R$6.1923 per US$1.00 as of December 31, 2024. There can be no assurance that the real will not depreciate further against the U.S. dollar.

Foreign exchange rate fluctuations will impact the U.S. dollar value of our common shares on the B3, as well as the U.S. dollar equivalent of any distributions we make in reais with respect to our common shares.

Depreciation of the Brazilian real has created inflationary pressures in Brazil and has caused increases in interest rates, which could negatively affect the growth of the Brazilian economy and harm our financial condition and results of operations, curtail our access to financial markets and prompt government intervention, including recessionary governmental policies.

In addition, because we have debt denominated in foreign currencies, any significant devaluation of the real will increase our financial expenses as a result of foreign exchange losses that we must record. This would also increase our total debt, which could lead us to breach any debt/EBITDA covenants we are subject to in certain financings. We had total foreign currency denominated debt of R$3.4 billion as of December 31, 2024, and we anticipate that we may incur additional amounts of foreign currency denominated debt in the future. In December 2023, our Board of Directors approved our Hedging Policy, which is available on our website but is not incorporated herein, and in December 2024, we entered into derivative instruments (plain vanilla swaps) to hedge against a depreciation of the real against the U.S. dollar. We cannot guarantee we will always be able to enter into derivative instruments to hedge in favorable terms.

A devaluation of the real may adversely affect us and the market price of our common shares or ADSs. For more information, see Note 5.1(a) to our 2024 Consolidated Financial Statements. Further, the market price of securities of Brazilian companies is affected to varying degrees by economic and market conditions in other countries, including the United States, China and other Latin American and emerging market countries. Although economic conditions in these countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market price of securities of Brazilian issuers. Crises in other emerging market countries or economic policies of other countries may diminish investor interest in securities of Brazilian issuers, including ours. This could adversely affect the market price of our common shares or ADSs and could also make it more difficult for us to access the capital markets and finance our operations in the future, on acceptable terms or at all.

Downgrades in Brazil’s credit rating could adversely affect our credit rating, the cost of our indebtedness and the trading price of our common shares and ADSs.

Rating agencies periodically evaluate Brazil and its sovereign ratings, based on a number of factors, including macroeconomic trends, fiscal and budgetary conditions, debt metrics and the prospect of changes in any of these factors. Downgrades in Brazil’s credit rating can lead to downgrades in our credit rating and increase the cost of our indebtedness as investors may require a higher rate of return to compensate a perception of increased risk. Brazil lost its investment-grade status from all three major rating agencies (Standard & Poor’s, Moody’s and Fitch) in 2015 and, consequently, the trading prices of securities in the Brazilian debt and equity market were negatively affected.

As of the date of this annual report, Brazil’s sovereign credit ratings were BB with a stable outlook, Ba1 with a positive outlook and BB with a stable outlook by S&P, Moody’s and Fitch, respectively, which is below investment grade.

Any further downgrade in Brazil’s sovereign credit rating may increase investors’ perception of risk on the country and, consequently, of Brazilian companies (including us), which may increase future funding costs and negatively affect interest and profit margins, impacting the trading price of our common shares and ADSs.

Brazil’s economy is vulnerable to external and internal shocks, which may have a material adverse effect on Brazil’s economic growth and on the trading markets for securities.

Brazil’s economy is vulnerable to external shocks, including adverse economic and financial developments in other countries. For example, an increase in interest rates in the international financial markets may adversely affect the trading markets for securities of Brazilian issuers or a drop in the price of commodities produced by Brazil could adversely affect the Brazilian economy. Brazil could also be adversely affected by negative economic or financial developments in other countries. Brazil has been adversely affected by such contagion effects on several occasions, including following the 1998 Russian crisis, the 2001 Argentine crisis and the 2008 global economic crisis.

Furthermore, volatility and uncertainty in global financial and credit markets have generally led to a decrease in liquidity and an increase in the cost of funding for Brazilian and international issuers and borrowers, which may adversely affect our ability to access capital and liquidity on acceptable terms. It may also lead to a decline in foreign investment, which could negatively affect our business, the ability to take advantage of strategic opportunities and, ultimately, the trading price of our ADSs.

In addition, the escalation of geopolitical tensions could lead to higher oil and gas prices, the imposition of sanctions, travel and import/export restrictions, increased inflationary pressures and market volatility, among other potential consequences and disruptions in supply chains, in particular in connection with the military conflicts between Russia and Ukraine and the current conflict between Israel and Hamas. Economic sanctions imposed by the United States, the European Union, the United Kingdom and other countries as a direct consequence of these conflicts may create further instability.

The new United States administration has imposed or threatened to impose tariffs on a variety of countries and products. In addition, the United States has threatened the imposition of reciprocal tariffs on those countries who impose unequal tariffs or taxes on United States exports. While the administration announced a 90 day stay on the wide-ranging tariffs announced on April 2, 2025, there is no guarantee that these or other threatened tariff increases will not become effective in the future. This uncertainty has contributed to significant turmoil in global markets and fluctuations in the value of the U.S. dollar. Given the current uncertainty around the threat of tariff increases, it is not possible to estimate the potential effect or to determine the level of materiality for the Brazilian economy and, in turn, our results of operations.

Brazil’s economy is also subject to risks arising from the development of several domestic macroeconomic factors. These include general economic and business conditions of the country, the level of consumer demand, the general confidence in the political conditions in the country, present and future exchange rates, the level of domestic debt, inflation, interest rates, the ability of the Brazilian government to generate budget surpluses and the level of foreign direct and portfolio investment.

Our operating conditions have been, and will continue to be, affected by the growth rate of gross domestic product (“GDP”) in Brazil, because of the correlation between GDP growth and water demand. Therefore, any change in the level of economic activity may adversely affect the liquidity of, and the market for, our securities and consequently our financial conditions and the results of our operations.

Risks Relating to Our Business

Risks Associated with Revenue Transfers and Tariff Adjustments in respect of the Provision of Water and Sewage Services to the City of São Paulo 

The provision of water and sewage services in the city of São Paulo accounted for 52% of our gross operating revenues from sanitation services (excluding revenues relating to the construction of concession infrastructure) in the year ended December 31, 2024.

On June 23, 2010, the State and the city of São Paulo executed a convention agreement (convênio) with our intermediation and ARSESP’s consent, under which they agreed to manage the planning and investment for the basic sanitation system of the city of São Paulo on a joint basis. We executed a service contract with the State and the city of São Paulo on the same date to provide these services for the next 30 years, pursuant to which, among other things, we must transfer 7.5% of the gross revenues we obtain from this contract, less COFINS and PASEP taxes, and unpaid bills for services provided to properties owned by the city of São Paulo, to the FMSAI, as per Municipal Law No. 14,934/2009. For more information, see “Item 7.B. Related Party Transactions—Agreement with the State and the city of São Paulo” for a further discussion of the principal terms of this convention and the service contract we executed in accordance with this convention.

As a result of the second ordinary tariff revision, published in ARSESP Resolution No. 794/2018 (“Second Ordinary Tariff Revision”), ARSESP allows the pass-through of up to 4% of the municipal revenue we transfer to a legally established municipal infrastructure fund. ARSESP Resolution No. 1545/2024 subsequently established the criteria and conditions to permit the transfer of 4% of such revenue from service providers. In addition, for recognition as part of the tariff, municipal funds for environmental sanitation and infrastructure must be established by the municipality through a legal act, which specifies the allocation of resources. For the fourth tariff cycle (2021-2024) ARSESP has set a 4% cap on transfers to municipal funds, with these transfers requiring prior approval by ARSESP and formal recognition as part of the tariff structure. For more information, see “Item 4.B. Business Overview—Tariffs,” especially “Item 4.B. Business Overview—Tariffs—Tariff Readjustment and Revisions.”

Considering that ARSESP has capped the pass-through to tariffs for amounts transferred to municipal infrastructure funds at 4%, the mandatory contractual transfer of the remaining 3.5% of the gross revenues (excluding COFINS and PASEP taxes and unpaid bills of publicly owned properties in the city of São Paulo) to FMSAI will not be passed through to customers in full. We cannot guarantee when and if this will happen and if it may have an adverse effect on our business, financial condition or results of operations.

From 2010 to December 31, 2023, we transferred approximately R$5.9 billion to FMSAI. For additional information on ARSESP regulations, see “Item 4.B. Business Overview—Tariffs” and “Item 4.B. Business Overview— Government Regulations Applicable to Our Contracts—Establishment of ARSESP.”

On July 13, 2021, the city of São Paulo filed a public civil action against us, the State of São Paulo and ARSESP, aiming, in general terms, to discuss the possibility of including the charge to FMSAI in the tariff adjustment provided for in Resolution No. 870/2019, which in practice was already being transferred pursuant to Resolution No. 794/2018. In summary, this public civil action seeks: (i) the recognition of illegality of the transfer of 7.5% of our gross revenue, related to FMSAI, to the water and sewage tariff applicable in the city of São Paulo; (ii) to establish our liability for any damages caused to users affected by ARSESP Resolutions 794/2018 and 870/2019; and (iii) the recognition of the inexistence of liabilities to be paid to us for the transfers to FMSAI made by it since 2010, since they would already be included in the tariff value from the beginning.

On August 19, 2021, the city of São Paulo requested the suspension of the process in view of the ongoing negotiations in search of an amicable solution to the dispute. On September 13, 2021, the suspension of the case for a period of 90 days was granted. On August 15, 2022, the city of São Paulo reported that the settlement negotiations were still ongoing. On February 12, 2025, the city of São Paulo requested an additional suspension of the process for 30 days, and, as of the date of this annual report, there have been no further developments.

We have not yet been named and cannot predict the outcome of this proceeding, which, if unfavorable, could have an adverse economic impact on us.

The Concession Agreement for URAE-1 provides for the full acknowledgment of tariff payments to the FMSAI for the municipality of São Paulo, which means that the 7.5% rate is now recognized in the tariffs. See “Presentation of Financial and Other Information—Privatization” for further information about the contributions for this public consultation, and “Item 4.B. Business Overview—Tariffs—New Tariff Structure” for further information about our tariff structure.

Any failure to obtain new funding or to comply with covenants in our existing financing agreements may adversely affect our ability to continue our capital expenditure program.

Our capital expenditure program will require resources of approximately R$72.0 billion in the period from 2025 through 2029 For the year ended December 31, 2024, we recorded R$6.9 billion in capital expenditures. We intend to continue funding these capital expenditures with cash generated by our operations, issuances of debt securities in the domestic and international capital markets as well as borrowings in Brazilian reais and foreign currencies. A significant portion of our financing needs is obtained through long-term financing at attractive interest rates from Brazilian federal public banks, multilateral agencies and international governmental development banks. If the Brazilian government changes its policies regarding public financing or amounts available for water and sewage services, or if we fail to obtain long-term financing at attractive interest rates in the future, we may not be able to meet our obligations or finance our capital expenditure program, which could have a material adverse effect on our business, financial condition or results of operations.

Our debt includes financial covenants that impose indebtedness limits, as well as several non-financial covenants, including the pledging of assets, provision of financial statements and audit reports, change of control provisions and compliance with environmental laws and licenses, among others. Our failure to comply with any of these covenants could seriously impair our ability to finance our capital expenditure program, which could have a material adverse effect on us. For more information on these covenants, see “Item 5.B. Liquidity and Capital Resources—Indebtedness Financing—Financial Covenants.”

Any substantial monetary judgment against us or any of our directors and officers in legal proceedings may have a material adverse effect on our reputation, business or operating or financial condition and/or results.

We are and may in the future be party to legal proceedings related to civil, corporate, environmental, labor, tax, and/or criminal actions filed against us, which may require us to expend substantial funds and other resources.

These claims involve substantial amounts of money and other remedies. As of December 31, 2024, the total estimated number of claims related to our legal proceedings was R$24.7 billion (net of R$167.7 million in court deposits), of which R$2.4 billion were already provisioned, including contingent liabilities and remote loss contingencies.

Our provisions do not cover all legal proceedings involving monetary claims filed against us and may be insufficient to cover any amounts arising from unfavorable final decisions, which may have a material adverse effect on our financial condition and reputation. Further, one or more of our directors and officers may become parties to civil, administrative, environmental, criminal or tax judicial, administrative or arbitration proceedings, of which the initiation and/or outcome may adversely affect them and impair their ability to perform their duties with us, which could lead to a material adverse effect on our reputation, business or operating or financial condition and/or results.

Unfavorable judicial, administrative, and arbitral decisions against us, our subsidiaries, executives, and directors, particularly those involving substantial amounts or preventing us from conducting business as initially planned, may adversely affect our results, business, reputation, financial situation, and market value of our shares and ADSs. Negative decisions involving criminal proceedings, especially those related to corruption or administrative misconduct, could also impact our executives’ ability to perform their duties or restrict our ability to contract with the government and access tax benefits and significantly harm our reputation and business.

Furthermore, the Public Prosecutor’s Office and environmental agencies may initiate administrative procedures to investigate possible environmental damages caused by our activities, which may lead to recommendations, “conduct adjustment agreements” and/or general “terms of commitments” with the relevant authorities, assuming specific obligations for a determined period. Non-compliance with these terms could result in fines, enforcement, and filing of lawsuits.

Finally, parliamentary inquiry commissions and regulatory and oversight bodies, such as the State Audit Court (Tribunal de Contas do Estado de São Paulo – TCE), the National Water and Sanitation Agency (Agência Nacional de Águas e Saneamento Básico – ANA) and ARSESP, may scrutinize our operations, processes, contracts, procedures, and partnerships. Investigations or unfavorable decisions may (i) restrict our ability to conduct our business; (ii) require us to make payments that have not been provisioned for; (iii) affect the continuity or profitability of our service lines; (iv) prevent or delay the execution of our projects as initially planned;; and (v) prohibit us from entering into contracts with the public administration to receive fiscal incentives and benefits and access financing and resources. Furthermore, such bodies may initiate processes including judicial, administrative and arbitral proceedings, which may lead to unfavorable decisions and adversely affect our business, financial situation, and reputation. For more information, see “Item 8.A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings” and Note 22 to our 2024 Consolidated Financial Statements included in this annual report.

We are subject to anti-corruption, anti-bribery, anti-money laundering, sanctions and antitrust laws and regulations. Our violation of any such laws or regulations could have a material adverse effect on our reputation, our results of operations and our financial condition.

We are subject to anti-corruption, anti-bribery, anti-money laundering, sanctions, antitrust and other similar laws and regulations. We are required to comply with the applicable laws and regulations of Brazil and the U.S. Foreign Corrupt Practices Act (“FCPA”), and we may become subject to similar laws and regulations in other jurisdictions. The existence of any investigation, inquiry or proceeding of an administrative or judicial nature related to the violation of any of these laws or regulations, in Brazil or abroad, for acts against the public administration by our affiliates or subsidiaries, managers, employees or any third parties acting on our behalf, may result in the application of sanctions, which may include (i) administrative, civil or criminal fines and indemnities (the latter applicable to the directors who participated in the infraction); (ii) an obligation to repair the damage caused; (iii) a criminal conviction; (iv) the loss of the benefits or assets illicitly obtained; (v) partial or full suspension of activities; and (vi) a prohibition on entering into contracts with the government or receiving tax or credit benefits or incentives. There can be no assurance that our internal policies and procedures will be sufficient to prevent, detect and timely implement corrective measures in relation to any unlawful and inappropriate practices, fraud or violations by our employees, officers, executives, partners, agents and service providers, nor that any such persons will not take actions in violation of our policies and procedures.

From time to time, we receive or become aware of complaints or allegations of potential breaches of applicable anti-corruption, anti-bribery or other laws and regulations or our internal policies and procedures (including our procurement processes) through our whistleblower channel or other internal or external sources. Our internal audit team processes these complaints or allegations, and our audit committee may engage outside counsel to investigate given the nature of the complaints or allegations. The findings of our internal audit team and any outside counsel are reported to our audit committee. These complaints or allegations under the supervision of our audit committee, may lead to formal government inquiries or investigations and harm to our reputation.

If we or any of our subsidiaries, directors, officers, employees, partners, agents, service providers or other persons are deemed or perceived to have engaged in activities violative of applicable laws, regulations or internal controls or procedures, we could become subject to government enforcement actions, penalties, damages, fines and sanctions, as well as events of default or prepayment events under our outstanding indebtedness, that could result in a material adverse effect on our reputation, business, our ability to obtain financing for our business, our financial condition, our results of operations and the market price of our common shares and ADSs.

Our business is subject to cyberattacks and security and privacy breaches.

Our business involves the collection, storage, processing and transmission of customers’, suppliers and employees’ personal or sensitive data. We also use key information technology systems for controlling water, sewage and commercial, administrative and financial operations. Cybersecurity threats, including hacking, malware, and system vulnerabilities, could compromise our confidential information, disrupt operations, or cause financial and reputational harm. The evolving nature of cyber threats makes them difficult to detect and prevent, and attacks may originate from well-funded, sophisticated actors.

The techniques used to obtain unauthorized, improper or illegal access to our systems, our data or our customers’ data, to disable or degrade service, or to sabotage systems are constantly evolving, and it may be difficult to detect quickly, and often are not recognized until launched against a target. Unauthorized parties may attempt to gain access to our systems or facilities through various means, including, among others, hacking into our systems or those of our customers, partners or vendors, or attempting to fraudulently induce our employees, customers, partners, vendors or other users of our systems into disclosing usernames, passwords or other sensitive information, which may in turn be used to access our information technology systems. Certain efforts may be supported by significant financial and technological resources, making them even more sophisticated and difficult to detect.

Our information technology and infrastructure may be vulnerable to breaches due to human error, system failures, or third-party security lapses. Any actual or perceived breach of our security could interrupt our operations, result in our systems or services being unavailable, result in improper disclosure of data, materially harm our reputation and trademark, result in significant legal and financial exposure, lead to a loss of customer confidence in our products and services, and adversely affect our business, financial condition or results of operations. In addition, any breaches of network or data security at our suppliers (including data center and cloud computing providers) could have similar negative effects. Actual or perceived vulnerabilities or data breaches may lead to claims against us.

On October 16, 2024, we were subject to a cyberattack, which caused instability in our digital network, leading to some non-critical systems being unavailable for a few days and exfiltration and publication of non-sensitive information and low sensitive information. We immediately took all security and control measures and put into practice a plan to restore the affected systems. Following the attack, we engaged experienced external advisors to investigate the cyberattack and we also duly notified the Brazilian Data Protection Authority (“ANPD”) in accordance with applicable law. Our ability to maintain water supply and sewage collection and treatment operations was unaffected. We cannot guarantee that the protections we have in place to protect our operating technology and information technology systems are sufficient to protect against future cyberattacks and security and privacy breaches. For more information, see “Item 16.K. Cybersecurity.”

Failure to comply with the LGPD or any further privacy and data protection laws enacted in Brazil could adversely affect our reputation, business, financial condition or results of operations.

We are subject to data privacy laws, including Law No. 12,965/2014 (“Brazilian Internet Act”) and Law No. 13,709/2018 (“Brazilian General Data Protection Law” or “LGPD”) and their related regulations, including regulations to be enacted by the Brazilian National Data Protection Authority (“ANPD”).

The LGPD governs the collection, use, processing, storage, and disposal of personal data, in Brazil across all economic sectors, applying to both the digital and physical environment.

The ANPD oversees compliance with the LGPD, including issuing regulations, conducting investigations, and enforcing administrative sanctions.

Failure to comply with the LGPD, especially regarding ensuring data subjects’ rights, providing clear information about our personal data processing activities, adhering to the original purpose of data collection, observing legal data storage periods, and implementing required security standards, may result in penalties, including warnings, mandatory disclosures, data processing suspensions, and fines of up to 2% of revenue in Brazil (capped at R$50.0 million per violation). Additionally, violations may lead to lawsuits, consumer protection penalties provided for in the Consumer Defense Code (Law No. 8078/1990) and the Brazilian Internet Act, and reputational harm.

We cannot guarantee that our personal data processing activities will always be secure and will not be subject to fines and other types of sanctions. The application of penalties, publicizing of infractions or obligations to compensate for failures in the protection of personal data or compliance with the LGPD could adversely affect our reputation, and our results and, consequently, the value of our common shares and ADSs.

Our failure to protect our intellectual property rights may negatively impact us.

We own and license from third parties several intellectual property assets, including trademarks, patents, software, copyrights, and domain names. Therefore, we rely on intellectual property laws and registration authorities in Brazil and abroad, as well as on license agreements, to protect our intellectual property.

Events such as the rejection of patent applications or trademark registrations by the National Institute of Industrial Property (“INPI”), or the unauthorized use or other improper appropriation of our intellectual property assets, especially the “Sabesp” trademark and related brands, can diminish the value of our brands or affect our reputation. Furthermore, we cannot guarantee that the measures taken to protect our intellectual property rights will be sufficient against potential illicit actions by third parties. Similarly, third parties may claim that our products or services, or even our intellectual property assets, violate their intellectual property rights.

Any dispute or litigation related to intellectual property assets, even if it concerns assets of low relevance to our operations, can be costly and time-consuming. Therefore, any situation that affects the protection of our intellectual property assets may have adverse impacts on our business.

Additionally, we entered into licensing agreements for certain technologies essential to the development of our operations, such as software licensing agreements. If we are unable to renew or maintain the licenses for the necessary intellectual property rights, we may face difficulties in replacing these technologies. Furthermore, if we continue to use these technologies without the necessary licenses, the holders of these intellectual property rights may demand that we cease using such rights and seek compensatory damages.

Furthermore, third parties may claim that the products and/or services we provide infringe their intellectual property rights. Any alleged violation or infringement of intellectual property rights against us may result in costly and time-consuming litigation and, consequently, adversely affect our operational results. If we are not successful in defending against potential claims or reaching settlements, we may be required to pay damages, cease the use of third-party intellectual property, or enter into licensing agreements on unfavorable terms.

Industrial accidents, equipment failure, environmental hazards or other natural phenomena may adversely affect our operations, assets and reputation and might not be covered by our insurance policies.

Currently, we substantially withdraw our water supply from surface sources from rivers and reservoirs, with a small portion being withdrawn from groundwater. Our reservoirs are filled with impounding water from rivers and streams, by diverting the flow from nearby rivers, or by a combination of both methods. As of December 31, 2024, we had 30 large-scale reservoirs which are classified under Brazilian dam safety legislation and which may have associated potential damages. Our operations may be hampered by numerous factors, including unexpected or unusual geological and/or geotechnical operating conditions, industrial accidents, floods and/or droughts or other environmental occurrences that could result in structural damages and eventually rupture of our reservoirs, dams and other facilities or equipment.

Our water and sewage pipes are susceptible to degradation caused by factors such as aging, intense traffic, interventions resulting from disorderly urban planning and action by other companies, which may provoke accidents in the networks, increasing the risk of physical loss of water and leakage of sewage, which could affect the regular provision of our services, impacting our customers, the society and the environment. Regarding sanitary sewage, our sewage pipes may also be obstructed due to misuse resulting from the improper release of solid waste and rainwater in the sewage systems, which could also lead to the risks mentioned above.

In particular, the increasing degradation of our water sources (mananciais) may affect the quantity and quality of water available to meet demand from our customers. For more information, see “Item 4.B. Business Overview—Description of Our Activities—Water Operations—Water Distribution” and “Item 4.B. Business Overview—Description of Our Activities—Sewage Operations—Sewage System.”

The occurrence of any of these events could lead to personal injury or death, adverse social impacts on the communities located near our facilities, monetary losses and possible legal liability arising from environmental and social damages, other environmental and social damages, the loss of prime materials, substantial financial costs potentially not covered by insurance and damage to our reputation. For more information, see “Item 4.B. Business Overview—Water Operations—Water Resources.”

Our insurance policies may not cover or may be insufficient to cover claims which may arise.

Due to the high premiums associated with insurance policies and other factors relating to our risk management, it is not always possible to obtain insurance against all types of risks and liabilities associated with our activities and related assets. We cannot guarantee that our existing insurance policies are adequate and sufficient for all circumstances that may arise or against all inherent risks and for amounts that cover all the losses we may occur.

If a claim is not covered by our insurance policies, or if damages exceed the policy limits, we may incur additional costs for the repair or replacement of damaged assets or for compensation to third parties, which could adversely affect our results of operations and reputation. Furthermore, for insured events, coverage is contingent upon the payment of a premium; failure to pay such premium, coupled with the occurrence of an event giving rise to a claim, could put us at further risk, as damages - even if insured - would not be covered by the insurer.

We cannot guarantee that we will be able to renew our existing insurance policies at reasonable rates, and if renewed, we cannot guarantee that they will be renewed under the same conditions and coverage originally acquired, or at reasonable commercial rates, or on acceptable terms, whether in terms of costs or coverage.

Losses caused by events not covered by insurance, or partially covered, may cause us to incur significant costs and the resources available to maintain our current activities and allocated towards our expansion activities will be reduced, which could ultimately have a material adverse effect on our financial performance and operating results.

We cannot guarantee that our third-party suppliers and/or service providers will not become involved in any irregular practices.

Our internal controls, corporate policies and procedures, Code of Conduct and Integrity and compliance program may not be sufficient to prevent irregularities in the operations of third-party suppliers and/or service providers. We have no control over and cannot guarantee that certain of our third-party suppliers and/or service providers will not experience labor-related issues or issues related to environmental legislation and sustainability and, if such third-party suppliers or service providers do so, we may suffer financial losses, damage to our image and, consequently, reduce the value of our common shares and ADSs.

In addition, if our third-party suppliers and service providers fail to comply with their labor or environmental obligations and laws related to social security and the environment, we may be held subsidiary and/or jointly liable for such non-compliance, which may result in fines, obligation to pay the amounts in question and other sanctions that may substantially and negatively affect us. We may also be held liable for the bodily injury or death of employees of third parties who are providing services to us within our facilities or for environmental damages caused, which may adversely affect our reputation and business.

Furthermore, if our third-party suppliers and/or service providers act in breach of ethical business practices and fail to comply with applicable laws and regulations, such as any laws against child or slave labor or environmental protection, our reputation could be adversely affected, as could negative publicity or the imposition of joint or several liability.

Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes.

Our financial and operating performance may be adversely affected by the outbreak of pandemics, as well as other catastrophes and health epidemics on a regional or global scale. Such outbreaks may result, at different levels, in the adoption of governmental and private measures, including restrictions, as a whole or in part, on the circulation and transportation of persons, goods and services and consequently, in the closure of private establishments and public offices, interruptions to the supply chain, reduction of consumption in general by the population and increased intervention in their economies.

In addition, the occurrence of any of these adverse events may increase delinquencies which can negatively impact our results of operations. Our allowance for doubtful accounts decreased by 14.6% for the year ended December 31, 2024 compared to the year ended December 31, 2023 and decreased by 16.5% for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Epidemics, natural disasters and other catastrophes may have a negative and significant effect on the world economy and on Brazil’s economy, and include or may include reduction in the level of economic activity; currency devaluation and volatility; increase in the fiscal deficit and constraints to the capacity of the Brazilian government or state governments to make investments and payments and to contract services or acquire goods; delays in judicial, arbitral and/or administrative proceedings; imposition, even if only temporarily, of a more onerous tax treatment of our business activities; decrease the liquidity available in the international and/or Brazilian market; and volatility in the price of raw materials and other inputs, among other effects.

We cannot assure that the occurrence of any of these events and their duration may have material adverse effects on our operating results and financial condition, as well as the trading price of our common shares and ADSs.

If we are not successful in addressing issues related to the occupational health and safety of our employees and the facilities where we conduct our activities, our results and operations could be adversely affected.

Our operations are subject to extensive federal, state and municipal legislation on occupational health and safety, the implementation of which is overseen by government agencies. Failure to comply with these laws and regulations may result in administrative and criminal penalties, as well as legal repercussions in the labor, civil, tax and/or criminal spheres. There is a possibility of accidents involving our employees and outsourced workers if the technical and legal recommendations are not properly adopted.

The provision of sanitation and waste management services, including the handling of chemicals and hazardous waste, involves operational risks such as equipment defects or malfunctions, problems in training professionals, failures and natural disasters and other unexpected occurrences, which may result in accidents involving our employees, or the need to shut down or reduce the operation of our facilities while corrective actions are taken.

We also need to meet a quota for people with disabilities, which varies from 2% to 5% depending on the total number of employees, and we need to adapt our facilities to provide accessibility and reasonable accommodation for these employees. If we do not comply with these quotas, fines may be imposed by the competent authority, in accordance with the Brazilian Law on the Inclusion of People with Disabilities (Law No. 13,146/2015, as amended) and Law No. 8,213/1991, as well as possible legal proceedings filed by labor authorities seeking compliance with said quota and the potential payment of collective moral damages.

If any of our assets are deemed assets dedicated to providing an essential public service, they will not be available for liquidation and will not be subject to attachment to secure a judgment.

A substantial portion of our assets, including our sewage treatment facilities, could be deemed by Brazilian courts to be related to the provision of essential public services. Accordingly, these assets would not be available for liquidation or attachment. In either case, these assets would revert to the relevant municipalities pursuant to Brazilian law and the applicable concession agreements. We cannot assure you that any indemnity we receive for such assets would be equal to the market value of the assets or sufficient to reimburse the investments made by us in such assets, which could adversely affect our financial condition.

Strikes, work stoppages or labor unrest by our employees or by the employees of our suppliers or contractors could adversely affect our business.

We face strikes and work stoppages from time to time. Disagreements on issues involving changes in our business strategy, reductions in our personnel, as well as potential employee contributions and benefits, could lead to labor unrest. We cannot ensure that future strikes or work stoppages will not affect our operations or administrative routines.

Strikes, work stoppages, or other forms of labor unrest at our company or our subsidiaries or any of our major suppliers, contractors or their facilities could impair our ability to complete major projects and adversely impact the results of our operations, financial condition, and ability to achieve our long-term objectives. For further information regarding strikes, labor unions and work stoppages, see “Item 6.D. Directors, Senior Management and Employees —Employees.”

We are subject to obligations regarding respect for the human rights of all of our stakeholders, which may result in additional costs and significant contingencies.

Social risks arise from the potential and actual adverse impacts of our business activities on the human rights of all stakeholders involved in our operations, including our employees, customers, suppliers, investors, and the local communities in which we operate, whether directly or indirectly connected to our activities.

It is essential that we ensure suitable working conditions for our employees, safeguarding their health, safety, and well-being, and ensuring their right to association and participation in union entities, in compliance with local laws and regulations. A workplace identified as hazardous, hostile, or discriminatory may result in legal contingencies and inhibit our ability to attract and retain talent, negotiate with labor unions, prevent incidents of health and safety at work, and drive innovation.

Similarly, if we do not undertake structured and integrated long-term planning initiatives to promote diversity, equity, and inclusion in respect of our workforce and management and leadership, we may face scrutiny and possible judicial challenges.

There is no guarantee that we will successfully manage these social risks in accordance with all national and international parameters and guidelines, which could potentially harm our results of operations and reputation.

If we do not remedy the material weakness in our internal controls, the reliability of our financial statements may be materially affected.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance IFRS Accounting Standards. As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies. In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis. In the course of completing our assessment of internal control over financial reporting as of December 31, 2024, we did not design or maintain effective internal control due to material weaknesses identified as of that date. These weaknesses were related to the design, implementation, and monitoring of general information technology controls (ITGCs) in the areas of programme change management and user access, which impacted business processes. Additionally, there were deficiencies in the design and implementation of controls over the completeness and accuracy of reports and spreadsheet parameters (Information Produced by Entity - IPE), as well as in the design of controls for new risks arising from business process changes, including ITGCs, segregation of duties, and personnel changes. These deficiencies in financial statements could potentially lead to significant errors in account balances or disclosures. Therefore, management concluded that these deficiencies constitute material weaknesses. The material weaknesses did not result in any identified misstatements to the consolidated financial statements and there were no changes to previously released financial results. Although these material weaknesses did not result in any material misstatement of our consolidated financial statements for the periods presented, they could lead to a material misstatement of account balances or disclosures. Accordingly, management has concluded that these control deficiencies constitute material weaknesses.

Our internal controls department is responsible for overseeing the implementation of action plans and reports periodically to the Board of Directors and the Audit Committee. If our future efforts are not sufficient to remedy all the inconsistencies identified, we could continue to experience material weaknesses in our internal controls in the future. Any such material weaknesses could adversely affect our ability to accurately prepare our financial statements, which may result in a restatement of our historical financial statements or in misstatements in our future financial statements and, consequently, adversely affect our business and financial condition. See “Item 15—Controls and Procedures” for further details.

Transactions with related parties, including as part of our Privatization, may not have comparable market terms available and may not be entered into on an arm’s length basis, which could expose us to lawsuits and affect our financial results.

We were a company controlled by the State of São Paulo and certain transactions that we entered into with companies controlled by the State of São Paulo or governmental entities have no comparable market terms available. Additionally, we cannot guarantee that these transactions have been entered into on an arm’s length basis. This risk remains even following our Privatization as the State of São Paulo remains our significant shareholder.

Furthermore, we must comply with Brazilian antitrust and competition regulations, as well as with the disclosure requirements of the CVM, the SEC, and the stock exchanges on which our securities are listed. Any noncompliance with applicable requirements relating to related party transactions could adversely affect our financial condition, may result in regulatory penalties and may expose us to lawsuits from third parties.

Risks Relating to Suppliers

Any interruptions in the supply of electricity and water may adversely affect our operations.

Electricity and the price we pay for it have a significant impact on our operating results. Any material interruptions in the supply of energy could have a considerable negative effect on our activities, financial condition, results of operations and prospects.

The Brazilian power generation system is based on hydro, thermal, wind and solar energy, with the majority of energy being produced by hydroelectric powerplants. It is not possible to predict rain patterns in the future. Increases in the price of energy could have a material impact on our business, financial condition, or results of operations. Moreover, electricity shortages could lead to instability in water supply and sewage collection and treatment services, which could adversely affect our reputation and operations. Additionally, as one of the largest electricity consumers in the State of São Paulo, a potential increase in electricity tariffs due to a shortage of hydroelectric power could have a significant financial impact on us.

Finally, adverse weather conditions and continuous droughts can interrupt the electricity supply and may impact our distribution of water and prevent us from providing water to our customers and perform our obligations in accordance with the terms of our concession agreements. For more information, see “Item 4.B. Business Overview—Energy Consumption.”

Our business may be adversely affected by reliance on services and products from third-party suppliers.

We rely on third parties to supply services, products and equipment used in our facilities. If these third parties fail to comply with deadlines or contractual conditions, we may be adversely affected by any delays or higher costs and penalized for any resulting failure by us to perform a necessary service to the population. If we have to turn to other suppliers to cover any shortfall, changes in market conditions may significantly increase the cost of projects or operations, making them unfeasible, which may have an adverse effect on our results of operations and financial results.

The ability of these third parties to fulfill their obligations may be adversely affected by financial or economic crises or other factors. In addition, several supply chain risks, such as strikes or lockouts, loss of or damage to equipment or its components while in transit or storage, natural disasters, contagious diseases that prevent free circulation, or war, may limit the supply of products and/or equipment used in our operations and facilities. Further, the imposition of the Universalization Targets may adversely affect the availability of third-party services and the supply of products and equipment, as the entire sanitation industry is looking to comply with these targets.

In some cases, there are only a few suppliers for products we use, such as polyethylene and concrete pipes, chlorine, sodium hypochlorite, ferric chloride, and fluosilicic acid. There are also highly specialized micro-tunneling contractors that we use in the expansion projects of some of our facilities, as well as suppliers for information systems platforms that we use in our commercial, financial and administrative processes.

If any supplier or contractor discontinues the production or sale of its products and services, we may not be able to purchase these products and services from other suppliers for the same price or on the same terms. In this case, the provision of our services or our ability to maintain our commercial, financial and administrative processes may be significantly jeopardized, which could adversely impact our financial condition and results of operations. Additionally, the Universalization Targets for sanitation could lead to a shortage of raw materials and affect the capacity of current hydrometer suppliers to meet our future demand.

Risks Relating to Our Clients

We are owed some substantial unpaid debts. We cannot assure you as to when or whether we will be paid.

Historically, the State of São Paulo and some State entities have delayed payment of substantial amounts related to water and sewage services owed to us. As of December 31, 2024, the State of São Paulo owed us R$123.1 million for water and sewage services. Additionally, the State of São Paulo also owes us substantial amounts related to reimbursements of state-mandated special retirement and pension payments that we make to some of our former employees for which the State of São Paulo is required to reimburse us.

With respect to payment of pensions on behalf of the State of São Paulo, we had a disputed credit of R$1.7 billion as of December 31, 2024, recorded in the line item “disputed amount”. We have not recorded this disputed amount as a reimbursement credit for actuarial liability due to the uncertainty of payment by the State of São Paulo, considering that the amount is under judicial discussion in a civil lawsuit filed on November 9, 2010, against the State of São Paulo. We also had an uncontested credit of R$1.0 billion which is recorded as related-party receivables, recorded in the line item “undisputed amount”. For further information, see Note 11 of our 2024 Consolidated Financial Statements.

In addition, as of December 31, 2024, we recorded a provision for an actuarial liability of R$1.9 billion with respect to future supplemental pension payments for which the State of São Paulo does not accept responsibility. For further information, see Note 11(v) of our 2024 Consolidated Financial Statements.

In addition, certain municipalities and other government entities also owe us payments. We cannot assure you when or if the State of São Paulo and such municipalities will pay the contested credits, which are still under discussion, and the remaining overdue amounts they owe us. The amounts owed to us by the State of São Paulo, municipalities and other government entities for water and sewage services and reimbursements for pensions paid may increase in the future, given that we are currently making some payments on behalf of the State of São Paulo.

Risks Relating to Our Management

We depend on the technical qualifications of the members of our management, and we cannot guarantee that we will be able to maintain them or replace them with suitable individuals.

Part of the success of our operations and the implementation of our strategy depends on the knowledge, skills and efforts of our management and certain key employees. If the members of our management or key employees choose to no longer participate in the management of our business and/or resign, we may not be able to find skilled professionals to replace them. The New Legal Framework for Basic Sanitation set a target of December 31, 2033 for the universalization of water and sewage services in Brazil. However, in relation to the Concession Agreement for URAE-1, this date was brought forward to December 31, 2029. The increase in companies operating in our industry, as a result of the New Legal Framework for Basic Sanitation, may lead members of our management or other professionals to leave us. The loss of members of management and key employees, as well as the difficulty in hiring professionals with similar expertise and experience, could have a negative effect on our results of operations, financial condition and our reputation.

Risks Relating to the Regulatory Environment

Pursuant to the New Legal Framework for Basic Sanitation, ANA will be responsible for issuing reference standards. Any non-compliance will prevent municipalities or operators from accessing financings and public resources managed or operated by the Brazilian government.

According to Federal Law No. 11,445/2007 and Federal Law No. 9,984/2000, both modified by the New Legal Framework for Basic Sanitation on Federal Law No. 14,026/2020, ANA can issue reference standards (guidelines) for how subnational regulatory agencies should regulate certain topics in the sector. Consequently, ANA’s reference standards can apply to the basic sanitation sector nationwide, setting the guidelines for regulation and supervision by the regulatory entities at the state, municipal, and district levels, and ensuring regulatory uniformity in the sector and legal certainty for the provision and regulation of the service.

Nevertheless, the application of the reference standards is not mandatory a priori. The New Legal Framework for Basic Sanitation provided that the access to financing and public resources managed or operated by the Brazilian government depends on compliance with the reference standards, by the sanitation service titleholders, service providers, and the subnational regulatory agencies, such as ARSESP. Accordingly, there is an incentive for adherence to these reference standards. If ARSESP and/or any other regulatory agency responsible for overseeing and supervising the services provided by us do not adopt ANA’s reference standards, we will be ineligible for federal funding. In this case, we would be unable to execute financing agreements with federal public banks. Access to federal funding is also contingent upon compliance with the additional requirements established in Article 50 of the New Sanitation Legal Framework.

Moreover, Federal Decree No. 11,468/2023 created the National Secretariat for Environmental Sanitation, linked to the Ministry of Cities, with several competences, including: (i) coordination of the implementation of the Federal Basic Sanitation Policy in Brazil; (ii) proposition of national guidelines for financing the sanitation sector; and (iii) definition of guidelines for the preparation of reference standards.

Non-compliance by any municipalities with the reference standards could adversely affect our activities, especially as we and any non-complying municipalities would be prevented from accessing public resources from the Brazilian government.

We are exposed to risks associated with the Concession Agreement for URAE-1, which may materially impact our financial condition and operating results.

Pursuant to the Concession Agreement for URAE-1 and the internal regulations of the URAE-1 deliberative council, any municipality may withdraw from the Concession Agreement for URAE-1. The withdrawal of a municipality, particularly one that generates a significant portion of our revenue—such as the city of São Paulo—could have a material adverse effect on our business and results of operations. Moreover, we may not be able to meet the targets, performance indicators, and other obligations stipulated in the Concession Agreement for URAE-1, potentially leading to the imposition of penalties against us. If we do not comply with the Universalization Targets, non-compliance may result in a reduction of the tariff adjustment index, potentially leading to tariff increases being below prevailing annual inflation rates. Failure to achieve contractual targets may have a material adverse impact on our results of operations and financial condition, and we cannot assure compliance with all contractual targets within the prescribed deadlines.

Pursuant to the Concession Agreement for URAE-1, we are responsible for the contractual risks assigned to it, including: (i) failure to contract or inadequate/insufficient contracting of performance guarantees; (ii) failures, errors, or omissions in the engineering projects necessary for investment execution, including execution methodology and/or technology used by us, or in the surveys that supported them; (iii) costs arising from obsolescence, instability, and malfunctioning of the technology employed by us in our services; (iv) shortfalls or fluctuations in tariff revenue; and (v) any issues, of any nature, arising from our relationship with our contractors, among others. If any of these risks materialize, we will not be entitled to an economic-financial rebalancing of the contract and may consequently face increased costs and/or reduced revenues, potentially impairing our ability to fulfill targets set out in the Concession Agreement for URAE-1, which could impact our results of operations and financial condition.

Furthermore, as ARSESP is responsible for implementing tariff adjustments and conducting periodic and extraordinary reviews of the Concession Agreement for URAE-1, we cannot guarantee that ARSESP will approve tariff adjustments in a timely manner or accept the imbalance events presented by us during periodic and extraordinary reviews. Any refusal and/or delay in applying tariff adjustments or any failure to restore the contractual economic-financial balance may impact our results of operations and financial condition.

Finally, URAE-1 may, at any time and in the public interest, take over the services or part of them, provided that a prior law authorizing them to do so is enacted and compensation is paid to us in advance. Although, we will receive compensation in such an event, and we also struggle to find other concessions or other investment opportunities to redeploy our funds and for which we will obtain similar tariffs, which could adversely affect our results of operations, financial condition and reputation in the market.

In addition to taking over the services, URAE-1 may also declare the termination of the Concession Agreement for URAE-1 if we commit a serious violation of the Concession Agreement for URAE-1 and such violation is recognized by ARSESP through an administrative proceeding. Such a takeover of the Concession Agreement for URAE-1 and/or the declaration of termination, as well as the unsatisfactory resolution of compensation arising from the early termination of the Concession Agreement for URAE-1 before its contractual term, could have a material adverse effect on our results of operations, financial condition and reputation in the market, as well as the trading price of our common shares and ADSs. For more information, please see “Item 4.B. Business Overview—Tariff Readjustments and Reviews—Economic-regulatory model in the draft Concession Agreement for Public Water Supply and Sanitation Services for the URAE-1 Southeastern region”.

If we do not meet the targets established by the Concession Agreement for URAE-1, our tariff adjustments might be reduced, which could materially adversely affect our business, financial condition, or results of operations.

The New Legal Framework for Basic Sanitation set a target of December 31, 2033 for the universalization of water and sewage services in Brazil. However, in relation to the Concession Agreement for URAE-1, this date was brought forward to December 31, 2029 for us following our Privatization.

In addition to anticipating the Universalization Targets, rural areas and consolidated informal centers were included in our service area. The terms of the Concession Agreement for URAE-1 also introduced a new set of targets to be reached simultaneously. Compliance with the new set of targets will be verified on an annual basis by an independent party, with the approval of ARSESP.

Although much of the effort to achieve these targets falls on us, there are imponderable elements that are beyond our control, and which could affect our ability to achieve these targets – such as, for instance, delays in issuing environmental licenses and municipal authorizations to carry out construction works, processes for vacating areas of interest, the possible finding of archaeological sites, among others. If we do not meet the targets pursuant to the Concession Agreement for URAE-1, the tariff adjustment index (Índice de Reajuste Tarifário – IRT) could be reduced through the application of the Universalization Factor (“Factor U”), which could materially adversely affect our business, financial condition, or results of operations.

The granting/contracting authorities may terminate contracts before they expire in certain circumstances. The indemnification payments we receive in such cases may be less than the value of the investments we made, or may be paid over an extended period, adversely affecting our business, financial condition, or results of operations.

The granting/contracting authorities that entered into concession agreements with us, such as the URAE-1 and the municipality of Olímpia, or pursuant to individual agreements, have the right to terminate our contracts early if we fail to comply with our contractual or legal obligations (forfeiture or “caducidade”), or if they decide to resume the services based on public interest (encampação). In the case of forfeiture, we are entitled to indemnification for any unamortized or undepreciated assets, though compensation will only be paid after an administrative process, in which we will have the opportunity to present our defense for maintaining the contract and discuss the amount to be paid as compensation for the unamortized assets. It is not possible to predict how long such an administrative process will take, nor whether we will receive the compensation we believe we are owed. Other penalties may also apply, such as the suspension of our right to participate in government bidding processes. In the second scenario (encampação), indemnification must be paid prior to the contract termination, and it will also cover any assets not amortized or depreciated. The granting authority must demonstrate that it is no longer in the public interest to continue the concession contract through the approval of a law.

In both cases, public entities must indemnify us for any unamortized or undepreciated investments. The New Legal Framework for Basic Sanitation assigns ANA the authority to issue a reference standard regarding the methodology for calculating indemnities for investments made and not yet amortized or not depreciated. On April 16, 2024, ARSESP published Resolution No. 1,515/2024, which established the methodology and criteria for the reversal and possible indemnification of assets at the end of the concessions in the sanitation sector (water supply and sewage services) in the State of São Paulo under the supervision and regulation of ARSESP.

However, the deliberative council for URAE-1 is responsible for any decisions related to the early termination of the URAE-1 Concession Agreement.

We cannot prevent any granting authorities from terminating our contract early based on the events above described. If this occurs and we do not receive adequate indemnification for our investments, or the indemnification is paid over an extended period, our business, financial condition, or results of operations may be materially adversely affected. We also cannot predict the effects that ANA or ARSESP’s methodology may have on our business, as it is possible that the indemnification payments may be lower than the remaining value of the investments we made. Additionally, municipalities may refuse to pay indemnification voluntarily, potentially leading to judicial disputes. In such cases, there is a risk that judicial decisions could result in indemnification being set at a lower value or deemed undue. Finally, it is important to highlight that we are a party to proceedings related to indemnification issues regarding the resumption of water supply and sewage collection services by certain municipalities. For more information, see “Item 3.D. Risk Factors—Risks Relating to Environmental Matters and Physical and Climate Transition Risks”.

If the water from our water sources (mananciais) does not meet our water treatment conditions, we may have to interrupt the water treatment process until we are able to treat the water or to substitute the supply of water from another water source.

Our water supplies are potentially subject to contamination by sewage infiltration into our water distribution networks, which can alter their quality. If this occurs, we do not distribute the contaminated water and maintenance and disinfection is carried out in the distribution network, which generates additional costs for our business.

In addition, water sources may possibly be contaminated by third parties through irregular or accidental dumping of large quantities of pollutants affecting the final quality of the water and impact the result for the quality of services factor (Factor Q - ICAD) on tariff adjustment.

Risks of contamination in our distribution system include potential failures in network maintenance procedures, which may carry unwanted material to the supply network. If we are found liable for water contamination resulting in human exposure to hazardous substances, we could face administrative, civil and/or criminal enforcement actions, litigation, and other proceedings or obligations to remediate environmental damages and compensate affected individuals. Such incidents could also significantly harm our reputation. Environmental remediation and compensation typically involve significant costs and may last several years. Additionally, claims or complaints from residents or communities near our sites may have adverse effects on our business, reputation or ability to obtain funding, especially from multilateral institutions. Residents or communities may have claims or complaints against us if they believe that our activities may be harming their health or well-being. Failure to effectively manage these claims could adversely affect our results of operations, financial condition, and reputation.

Furthermore, cleaning up water sources can be costly and if we are required to do so, it could have a material and adverse effect on our business, results of operations and financial condition. If our water supply fails to meet treatment standards, we may have to interrupt or stop the use of that water supply until we can treat the water or replace it with water from another source. Adapting the treatment process, either by expanding current facilities or developing new methods, could incur significant costs. Using a more distant water source may also result in increased expenses. Additionally, if we need to interrupt the water supply, we will have to notify our consumers, further impacting our operations.

Additionally, the increase in the population density of the contributing basins is another factor that may reduce the availability of raw water. Any decrease in the amount of raw water available to us could have a negative effect on our financial results and activities.

Water and sewage treatment involve environmental risks in the event there is a system failure. For example, if there is an overflow in a sewage treatment plant, the sewage could impact neighboring areas or even natural water resources, which could have a material adverse effect on our reputation, financial condition and results of operations. In addition, sludge, a byproduct of the sanitation process, needs to be disposed of appropriately in order to prevent harm to the environment. In some cases, the landfills in which the sludge is deposited are not located in the same municipalities as the water and sewage treatment facilities and, therefore, we are required to transport the sludge to the closest landfill, which increases the risk of contamination. Furthermore, some landfills may stop operating, which may increase our operating costs. These events could also lead to environmental liabilities in the administrative, criminal and civil spheres, as mentioned above.

Any of the above events could have a material adverse effect on our results of operations, financial condition, cash flow, liquidity, and reputation.

Risks associated with the collection, treatment and disposal of wastewater and the operation of water utilities may impose significant costs that may not be covered by insurance, which could result in increased insurance premiums.

The wastewater collection, treatment and disposal operations of our utilities are subject to substantial regulation and involve significant environmental risks. If collection or sewage systems fail, there are pipe leaks, bursts, overflow or our systems do not otherwise operate properly, untreated wastewater or other contaminants could spill onto nearby properties or into nearby streams and rivers, potentially causing damage to persons or property, injury to the environment including aquatic life and economic damages, which may not be recoverable in rates. This risk is most acute during periods of substantial rainfall or flooding, which are the main causes of sewer overflow and system failure.

Liabilities resulting from such damage could adversely and materially affect our business, results of operations and financial condition. In the event that we are deemed liable for any damage caused by overflow, losses might not be covered by insurance policies, and such losses may make it difficult to secure insurance with the same coverage and insured amounts in the future at acceptable insurance premium rates. Similarly, any related business interruption or other losses might not be covered by insurance policies, which would also make it difficult for us to secure insurance in the future at acceptable insurance premium rates.

We may also incur liabilities under environmental laws and regulations requiring investigations and recovery of environmental contamination at our properties or at off-site locations where there have been adverse environmental impacts. The discovery of previously unknown conditions, or the imposition of cleanup obligations in the future, could result in significant costs, and could adversely affect our reputation and financial condition, results of operations, cash flow and liquidity. Such remediation losses may not be covered by our current insurance policies, or the insured amount may not be sufficient and may make it difficult for us to secure the coverage as part of insurance policies in the future at acceptable insurance premiums with similar types of coverage and amounts.

We cannot guarantee that our existing insurance policies provide comprehensive coverage for all circumstances that may arise or for all inherent risks or that they would cover all potential damages claimed or that we will be able to renew our existing insurance policies or on what terms. The occurrence of a significant uninsured or uninsurable loss, in part or in full, or the failure of our subcontractors to comply with their indemnity obligations, may adversely affect our results of operations, financial condition and reputation.

We are exposed to risks of delays or failures in payments associated with the provision of water and sewage services.

According to our contracts, we are required to meet specific service targets and continue supplying water and sewage services to clients with overdue or irregular payments. In these situations, we cannot guarantee when payments for the services will be received. Meanwhile, we incur significant costs for providing these public services, like water abstraction and sewage discharge fees, and there is a risk we may not be able to fully pass these costs -on to our customers.

The tariffs charged by us may not be increased in line with the relevant charges or inflation adjustments and operating expenses, including taxes, or may not be increased in a timely fashion, due to legal and contractual restrictions that prevent us from passing on to our customers any increases in our cost structure. Reducing physical water losses caused by leaks and overflows primarily depends on investments made in leak detection and repairs, pressure management in distribution networks, operational improvements, and the renewal of the distribution network. Reducing levels of non-physical water losses (which result from unauthorized consumption (theft) or inaccurate measurement) depends mainly on investments made in the acquisition and installation of water meters, the re-registration of customers and combat of irregularities, such as illegal water connections. If we do not make sufficient investment in activities and projects to reduce our levels of water loss, we could be materially and adversely affected. These investments must mainly be aligned with the goals established in contracts with municipalities and the ideal levels of losses in supply systems.

Furthermore, the New Legal Framework for Basic Sanitation establishes, among other things, that providers of public water supply and sewage services must meet qualitative and quantitative targets. Among these targets is the reduction of losses in the distribution of treated water. If we do not implement the necessary actions to reduce the loss rates, or if the projects aimed at reducing water loss levels do not produce satisfactory results, our cash flow, results of operations and financial condition may be adversely affected, and we may be penalized by the granting authority if we fail to meet the targets established in the relevant concession agreements related to losses. For more information about the New Legal Framework for Basic Sanitation, see “Item 4.B. Business Overview— The Basic Sanitation Law and the New Legal Framework for Basic Sanitation.”

Securing new concessions, new public-private partnerships and new acquisitions involve risks related to the integrations of the adjudicated or acquired businesses, the situation of the assets and the regularity of the operations related to the concessions.

There may be risks related to the new concessions, new public-private partnerships and to the contracts held by us, such as: (i) the assets related to the contract may be different from the description provided in the public bidding documents, in the public-private partnership contracts and in the other contracts; (ii) the absence of and/or the irregularity of required environmental licenses; (iii) the absence of grants for the operation of wells; or (iv) land irregularities.

In addition, we may face difficulties transferring the assets related to the contracts, or they may be in a bad state, which may result in the need to incur additional investments. These irregularities make it difficult to enter or prevent us from entering into financing agreements with financial institutions, which may compromise the achievement of the targets originally included in our contracts.

Additionally, in the case of companies acquired by us, there may be delays in obtaining the consent of the granting authority or their creditors to confirm the change of control or we may not obtain such consents at all. Furthermore, other factors such as contingencies not identified during due diligence, lack of synergies, failure to integrate activities, among others, may arise. This could result in increased expenses for us and, as a result, impact our financial condition.

Our expansion strategy involves acquisitions, which may entail various risks and challenges.

As part of our strategy to expand our activities, we may undertake acquisitions from time to time, which will depend on several factors, including our ability to identify suitable companies or assets for acquisition, negotiate appropriate prices, integrate and maintain the quality of operations of the acquired companies or assets, obtain synergies from the integration of the acquired assets, and reduce costs while protecting ourselves from potential contingencies.

We may not achieve the expected gains from acquisitions, which could adversely affect our activities. If we select assets for acquisition that do not perform or integrate as expected, our results of operations and financial condition may be adversely affected.

Potential acquisitions may also require us to increase our debt or access to the financial and capital markets, including through the issuance of new shares and ADSs. This could lead to increased indebtedness and exposure, as well as dilution of our current shareholders’ and ADR holders’ ownership in our share capital. Acquisitions also pose the risk of exposure to the obligations and contingencies of the acquired companies or assets due to prior acts of management and previously incurred liabilities. The legal due diligence process conducted by us to evaluate the legal and financial situation of potential acquisition targets and any contractual guarantees or indemnities we may receive from our counterparties may be insufficient to protect or indemnify us against potential contingencies. If significant contingencies arise from such acquisitions, as well as any unidentified contingencies during these processes, they could adversely affect our activities, results of operations and financial condition.

Moreover, we could face setbacks during any acquisition process and, in general, such processes could divert the time and attention of our management team towards transitional or integration-related issues and away from other business needs.

Lastly, we are subject to potential scrutiny by authorities due to corporate reorganizations that we may undertake in connection with our acquisitions.

As of the date of this annual report we have not made any acquisitions, however, any failure or delay in implementing future acquisitions or other strategic investment operations could have a significant adverse effect on our business and results of operations.

Risks related to encumbrances, which may adversely affect us in the event of default on the obligations guaranteed by our properties.

There may be risks in relation to some of our properties subject to encumbrances and legal restrictions, such as unavailability and easements (right-of-way).

According to real estate record certificates, some of our properties are burdened with unavailability, which is a temporary judicial measure that imposes significant restrictions on certain assets and a taxpayer’s rights over such assets to ensure the compliance and payment of overdue taxes by the taxpayer before they can alienate, transfer, or use specific assets previously identified by the public treasury as debt collateral.

As a rule, the non-payment of debts leading to the declaration of unavailability may result in the forced sale of the properties, the proceeds of which will be used to pay the outstanding debts. In such cases, the new owners of the properties may request possession of the assets, which could require the relocation of activities carried out at these locations.

Furthermore, even if the debts which resulted in the declaration of unavailability have already been paid, the failure to cancel the encumbrance in the property registrations may hinder possible transactions or operations involving such properties in the future.

Additionally, some of our properties are encumbered by easements. In case the existing easements are not being respected, the respective beneficiaries can demand that their area be vacated and enforce the real right of such easements, as well as the losses and damages incurred, such as payment of fines and compensation for any damages caused by non-compliance with the real right. Additionally, the beneficiaries may file a lawsuit to ensure their right of way is respected.

Non-payment of the amounts that generated the unavailability may lead to the forced sale of the properties, and the proceeds of any sale would be used to pay the outstanding debts. In these cases, the new owners of the properties may seek possession of the assets, which could lead to the need to relocate the activities carried out in these locations.

If we are unable to obtain or renew environmental permits and/or licenses, we may be subject to fines and the closure of any irregular facilities, with the interruption of activities carried out by us at such facilities.

We may not be able to keep in force or renew with the appropriate public authorities all permits and/or licenses necessary for our operational assets and for the development of our activities.

If we are unable to obtain or renew such permits and/or licenses, we may be subject to fines and the closing of any irregular facilities, with the interruption of the activities carried out by us at such facilities. Any factors that impact the failure to obtain or renew such licenses and permits may cause us to incur additional costs, which may force us to reallocate resources to meet any additional charges. Failure to obtain, maintain or renew environmental licenses and authorizations may also lead to environmental, administrative or criminal or civil liabilities.

Additionally, we cannot guarantee that permits, licenses and authorizations, such as use and operating permits and/or documents relating to the regularity of built-up areas, have not been breached in the past when in the process of obtaining or renewing them. For example, the existence of a built-up area without prior authorization from the relevant city hall, or in disagreement with the project approved, could lead to risks and liabilities for the property if the area is not regularized and it is inspected by the responsible bodies. These risks include: (i) the impossibility of registering the construction; (ii) the refusal for us to issue an operating license; (iii) the refusal for us to take out or renew property insurance; and (iv) fines; and/or (v) forced closure of the establishment.

According to the Brazilian law regulating concessions and public-private partnership matters, our corporate structure is composed of some special purpose entities, which may result in our responsibility for tax, labor, environmental protection, consumer and bankruptcy matters originated from our subsidiaries.

Pursuant to Federal Law No. 11,079/2004, the execution of public-private partnerships must be preceded by the incorporation of a special purpose entity. In the event of one of our subsidiaries incorporated for such purpose does not comply with the contractual obligations or its financial disability to honor with the due capital contribution installments, as provided in the public-private partnership agreement, as their controlling shareholder and/or guarantor are the same, we may be liable to perform supplementary investments and to provide additional services in order to maintain the minimum financial rates provided for under the relevant agreements.

Federal Law No. 8,987/1995, which establishes provisions for concessions and permission of public services, sets forth that the concessionaire, incorporated as a special purpose entity or not is responsible for the provision of the service granted in the concession, and is liable for any and all damages to the public entity, users or third parties, it being understood that the inspection carried out by the competent authority does not exclude nor mitigates such liability, which may significantly adversely affect our business and results. In the case of the concessionaire is incorporated as a consortium, the consortium leading company is liable before the public grantor for the compliance with the concession agreement, without prejudice to the joint and several liability of the additional members of the consortium. The risks inherent to our subsidiaries also include bankruptcy and potential enforcement of piercing the corporate veil by the Brazilian Courts and any event impacting the image of our partners, business partners and service providers of our subsidiaries may adversely affect our brand.

Additionally, we may be liable for certain obligations of our subsidiaries, including tax, labor, environmental protection, regulatory and consumer matters, which, in the event they materialize, may adversely affect our business and results.

We are subject to penalties related to our registrations, authorizations, licenses and permits for the development of our activities.

We depend on licensing and registration before federal, state and municipal authorities and agencies, as well as operating permits. We cannot guarantee that we will be able to obtain all the necessary licenses, permits and authorizations, or obtain their renewals in a timely manner. Obtaining the necessary licenses, permits and authorizations depends on clearance from environmental agencies and other authorities, whose deadlines we do not control. The failure to obtain or renew such licenses may prevent us from operating our units and lead to suspension and closing of irregular units, as well as the application of fines. Our strategy may be adversely affected if it is impossible to open and operate new units or the operations our current units are suspended or terminated due to the failure to obtain or renew the required registrations, permits and licenses, which may adversely affect our results of operations.

In addition, we are required to comply with the administrative limitations provided by environmental laws, such as the preservation of environmentally protected areas, and of nature conservation areas (e.g., parks, reserves, protected areas, etc.). Our non-compliance with these restrictions may result in penalties and other liabilities, including substantial fines, criminal/administrative sanctions and the obligation to repair and/or indemnify any damages.

Risks Relating to Environmental Matters and Physical and Climate Transition Risks

Noncompliance with environmental laws and environmental liability could have a material adverse effect on us and our reputation.

We are subject to extensive Brazilian federal, state and municipal laws and regulations related to human health and environmental protection. These regulations establish requirements for environmental licensing, water use grants, and drinking water quality standards, as well as limits on discharge of non-domestic sources entering effluents into our treatment systems. Additionally, they define the quality standards that treated sewage must meet before being discharged into waterways. We may also face incidents such as leaks or pipe ruptures that can lead to liability for environmental damages, including groundwater and soil contamination, as well as regulatory and environmental infractions.

We are a party to several environmental proceedings and could be subject to other types of criminal, administrative and civil proceedings for non-compliance with environmental laws and regulations, including licensing requirements and water grants, that could expose us to administrative penalties and criminal sanctions, such as fines, closure orders and significant indemnification obligations. Furthermore, we are party to commitment terms regarding the regularization of licenses and water grants requirements for our operations. Failure to comply with these terms could result in administrative, civil and criminal liabilities. Such expenses may lead us to reduce expenditure on strategic investments, which may adversely affect our business, financial condition, results of operations or reputation.

We are also involved in environmental proceedings related to the discharge of untreated sewage into waterways or the disposal of sludge from treatment plants. These proceedings subject us to civil proceedings and investigations concerning environmental remediation and compensation for damages caused. In addition, we are involved in civil/administrative proceedings challenging the water withdrawn during the 2014-2015 water crisis. Any unfavorable judgment in relation to these proceedings, or any material environmental liabilities, may have a material adverse effect on our reputation, business, financial conditions or results of operations.

For more information on these proceedings, see “Item 8.A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings.” For more information on investments in environmental programs, see “Item 4.A. History and Development of the Company—Main Projects of our Capital Expenditure Program,” “Item 4.B. Business Overview—Description of our Activities—Sewage Operations—Sewage Treatment and Disposal,” “Item 4.B Business Overview—Environmental Matters” and “Item 4.B. Business Overview— Environmental Matters—Environmental Regulation.”

Environmental, social and governance considerations could expose us to potential liabilities, increased costs (regulatory or otherwise), compliance failures and reputational harm, including with respect to the B3 Green Shares classification we have been granted.

We are subject to laws, regulations and other measures that govern a wide range of topics, including those related to matters beyond our core business. New or amended laws, regulations, policies, and international accords relating to ESG matters, including sustainability, climate change, human capital and diversity, are being developed and formalized in Brazil, the U.S. and elsewhere, which may require us to comply with specific, target-driven frameworks and/or disclosure requirements. For instance, in the U.S., the SEC has proposed broad climate change disclosure requirements which would require significant compliance efforts, if and when adopted. The final form of any of these regulations or other measures is still uncertain. The implementation of these goals and initiatives, as well as compliance with emerging regulatory obligations, and forward-looking milestones may require considerable management time and may result in significant expense to us, and we cannot guarantee that we will achieve our objectives. Moreover, increasingly different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG will be perceived negatively by at least some stakeholders and adversely impact our reputation. Such regulatory regimes could impose significant compliance burdens and costs on us, and as with all new regulation, we could be subject to ambiguous interpretation that could result in inadvertent noncompliance. Our business could be negatively affected by increased regulation of ESG research, ratings and data.

Additionally, on June 7, 2024, the B3 granted us the B3 Green Shares (B3 Ações Verdes) classification. In compliance with Circular Letter No. 002/2024-VPE, dated May 7, 2024, issued by the B3, S&P Global Ratings Shades of Green (the “Specialized Consultant”), certified that we met the criteria established by B3 and that we derive: (i) more than 50.0% of our annual gross revenue from activities contributing to the green economy; (ii) more than 50.0% of our annual investments and operational expenses allocated to activities contributing to the green economy; and (iii) less than 5.0% of our annual gross revenue derived from fossil fuel activities. However, as the B3Green Shares classification is provided by a Specialized Consultant, which is a third-party provider, there is no assurance that the scrutiny process meets investor criteria and expectations. We are the first company in Brazil to obtain the B3 Green Shares seal, and there are no standardized processes and regulatory frameworks for this classification. Accordingly, we cannot assure that we will continue to meet the criteria and expectations regarding environmental impact and sustainability performance in upcoming years, and we can give no assurance that we will continue to meet the requirements, voluntary taxonomies or standards, whether currently in place or implemented in the future, to maintain this classification.

Any failure, or perceived failure, by us to comply fully with ESG laws and regulations or meet evolving and varied stakeholder expectations and standards could harm our business, operating results, and financial condition.

Droughts, such as the 2014 – 2015 water crisis, can cause a material impact on consumption habits and, consequently, on our business, financial condition or results of operations.

We experience shortages in our water supply from time to time due to droughts. The precipitation index was below that expected in the hydrological years of 2014-2015, 2019-2020, 2020-2021 and 2023-2024, specifically highlighting that the dry period of the 2023-2024 hydrological year was the most severe observed in the last 20 years. Decreased levels of rainfall compromise the recovery of water storage levels that are necessary to serve the population during the dry period, which runs from April to September. It is not possible to predict the behavior of rain in the future, especially considering the increasing climate change we are experiencing. If we experience consecutive periods of droughts, we may be required to adopt measures to mitigate the impacts and maintain the water supply in our areas of operation.

The drought in 2014 and 2015 severely affected the level of water sources that supply the metropolitan region of São Paulo, forcing us to adopt a series of measures from 2014 to 2016 to mitigate its impact and maintain the water supply served in the metropolitan region of São Paulo. The measures to continue services to consumers were gradually discontinued, starting in early 2016, with the increase of the level of water in the reservoirs that provide water to the population of the São Paulo metropolitan region. However, heightened public awareness of the need to conserve water during the crisis and other more recent droughts resulted in our customers continuing to adopt lower water consumption practices. Sustainable management of water resources and water shortages can impact consumption habits and consequently impact our business and our operating results. There is a risk that there might be further periods of drought in the future when we consider what has happened in the past, forcing us to adopt similar or more severe measures as those adopted in 2014-2015, which can cause further material changes to consumption habits. These uncertainties could have a material adverse effect on our results of operations and financial condition.

Extreme Weather Conditions and Climate Change may have a material adverse impact on our business, financial condition or results of operations.

Our business may be affected by droughts, and by other extreme weather conditions, such as torrential rain and other changes in climate patterns. A possible increase in the severity of extreme weather conditions in the future may adversely affect the water available for abstraction, treatment, and supply, whether from the standpoint of quality or quantity. Droughts could adversely affect the water supply systems, resulting in a decrease in the volume of water distributed, and consequently, the volume of water billed (i.e. the revenue derived from water supply services). Extreme climate conditions may compromise our facilities’ conditions to operate and supply of inputs. Additionally, increases in air temperature could affect demand for water.

Since we are dependent upon energy supplies to conduct our business, extreme weather events may also reduce water levels in the reservoirs that power hydroelectric power plants in Brazil, which may cause energy shortages, which could affect water and sewage services. Increased electricity prices may also adversely affect our costs and results of operations. For more information, see “Item 3.D. Risk Factors—Risks relating to Our Suppliers—Any interruptions in the supply of electricity and water may adversely affect our operations” and “Item 4.B. Business Overview—Energy Consumption.”

In February 2023, there were torrential rains on the northern coast of the State of São Paulo, especially in the city of São Sebastião, where we operate. Within 24 hours, 683mm of rain fell in São Sebastião. As a result, our water treatment plants in the region were damaged, and the water supply was interrupted for a few days due to siltation, the inability to store water, and lack of electricity. If similar incidents occur in the future or become more frequent, these events may have other additional material adverse effects on our results of operations and financial condition.

We cannot predict all of the effects of extreme weather events, making it difficult to estimate the resources needed to mitigate these effects. It is possible that as a result of the difficulty to predict these events, we may be required to make other significant investments or incur substantial costs in their remediation or prevention measures, which may have a material adverse impact on our business, financial condition or results of operations. We also cannot guarantee that we will be able to pass on any of these additional costs and expenses to our customers.

New laws and regulations relating to climate change and changes in existing regulation may result in increased liabilities and increased capital expenditures, which could have a material adverse effect on us.

We are subject to federal, state and international climate change regulations aimed at reducing greenhouse gas (“GHG”) emissions. Among these, Decree No. 65,881/2021 formalizes the State of São Paulo’s commitment to global initiatives such as the “Race to Zero” and “Race to Resilience” campaigns, which focus on lowering emissions and enhancing climate resilience. The decree also mandates the development of the 2050 Climate Action Plan (PAC 2050) by the State of São Paulo government, which is expected to set sector-specific emissions targets, including for the sanitation industry.

Additionally, new regulation could introduce further obligations. For example, Law No. 15,402/2024 establishes the Brazilian Greenhouse Gas Emissions Trading System (or the Brazilian Carbon Market Regulation), which introduces a framework for limiting GHG emissions and trading carbon-related assets.

Given Brazil’s commitments under international climate agreements, the state government’s firm stance on reducing emissions, and the establishment of new legislation, we may be required to increase investment in emission mitigation measures by (i) enhancing operational efficiency and adopting more sustainable processes to reduce GHG emissions; (ii) implementing infrastructure and equipment to capture and utilize biogas and process-generated sludge; (iii) expanding the use of clean and renewable energy sources and alternative fuels; and (iv) offsetting GHG emissions through intensified conservation and reforestation initiatives. New climate change regulations present significant challenges due to the complexity and scale of our operational facilities, where changes in process design can impact both our existing and future operations.

On March 6, 2024, the SEC approved new climate-related disclosure rules that will require public companies to report material climate risks, GHG emissions inventories, climate targets and goals, and the financial implications of physical and transition risks. However, the implementation of these rules has been temporarily halted following multiple legal challenges, and the SEC has stayed enforcement pending judicial review by the Court of Appeals for the Eighth Circuit. If these rules are ultimately upheld, our compliance costs—such as legal, accounting, and reporting expenses—could increase significantly, and the associated compliance efforts may divert management’s time and attention.

In addition, the CVM approved Resolution No. 193/2023, which allows publicly held companies to voluntarily prepare and disclose sustainability-related financial reports in accordance with the International Sustainability Standards Board (“ISSB”) guidelines. According to CVM Resolution No. 193/2023, disclosure will become mandatory as of January 1, 2026.

We may be exposed to legal or regulatory action or claims as a result of the new SEC (if approved) and CVM rules. Although we are assessing and structuring our processes to fit these regulations, these risks could have a material adverse effect on our business, financial condition, results of operations and the prices of our securities.

New expenditures resulting from new climate change regulations and from the prevention or correction of effects of extreme weather could have a material adverse effect on our results of operations. For more information, see “Item 4.B. Business Overview—Environmental Matters—Climate Change Regulations: Reduction of Greenhouse Gases (GHG) Emissions” and “Item 4.B. Business Overview—Energy Consumption”.

Risks Relating to Our Common Shares and ADSs

We may issue additional common shares or enter into a merger, consolidation or other similar corporate transaction, which could dilute your interest in our common shares underlying the ADS.

We may have to raise additional funds (in order to finance, for example, capital expenditures and consideration due in connection with new concessions) in the future through private or public offerings of shares or other securities convertible into shares issued by us. The funds we raise through the public distribution of shares or securities converted into shares may be obtained with the exclusion of preemptive rights of our existing shareholders, including investors in our common shares underlying the ADS, as provided by the Brazilian Corporate Law and CVM Regulation, which may dilute the interest of our then-existing investors. In addition, a dilution of your interest in our common shares underlying the ADS may occur in the event of merger, consolidation or any other corporate transaction of similar effect in relation to companies that we may acquire in the future.

International judgments may not be enforceable when considering our directors or officers’ status of residency.

All our directors and officers named in this annual report reside in Brazil. We, our directors and officers and the members of our audit committee have not agreed to receive service in the United States. Substantially all of our director and officers’ assets are located in Brazil. As a result, it may not be possible to file service within the United States or other jurisdictions outside of Brazil to such persons, pledge their assets, or enforce decisions under civil liability or securities laws of the United States or the laws of other jurisdictions against them or us in the courts of the United States, or in the courts of other jurisdictions outside of Brazil.

We may not always be in a position to pay dividends or interest on shareholders’ equity and ADSs.

Pursuant to Brazilian Corporate Law and our bylaws, we are required to distribute to our shareholders a mandatory minimum dividend equivalent to 25% of our adjusted net income for the previous fiscal year.

Except for the mandatory minimum dividend, we can retain profits in statutory reserves for investment and/or capital reserves. If we incur a net loss or a net profit insufficient to allow dividend payments, including the mandatory minimum dividend, management may recommend dividend payments using profit reserves, after offsetting the net loss of the current fiscal year and previous years, if any. Losses for the current fiscal year must be absorbed by accrued profits, profit reserves, and legal reserves, in such order. If we are able to declare dividends, management may still decide to defer the payment of dividends or, in limited circumstances, not declare dividends. We cannot declare dividends from certain reserves under Brazilian Corporate Law.

Finally, pursuant to Law No. 14,026/2020, the New Legal Framework for Basic Sanitation, the distribution of profits and dividends is prohibited for service providers who are in breach of the objectives and deadlines established in the specific contract for the provision of basic sanitation services. The Concession Agreement for URAE-1 stipulates that, if it is proven that we are failing to meet the targets and schedules established in the Concession Agreement for URAE-1 or any concession agreement, and if the specific contractual provisions on this matter are observed, we may not be able to pay dividends and/or interest to our shareholders and ADS holders for as long as the breach continues.

For more information, see “Item 8.A. Consolidated Financial Statements and Other Financial Information—Dividends and Dividend Policy.”

Mandatory arbitration provisions in our bylaws may limit the ability of a holder of our ADRs to enforce liability under U.S. securities laws.

Under our bylaws, any disputes among us, our shareholders, our directors, executive officers, members of the fiscal council, effective and alternates, and members of statutory and non-statutory committees, with respect to the Novo Mercado Listing Regulation, the Brazilian Corporate Law and Brazilian capital markets regulations will be resolved by arbitration conducted pursuant to the B3 Arbitration Rules in the Market Arbitration Chamber. Any disputes among shareholders and ADR holders, and any disputes between us and our shareholders and ADR holders, will also be submitted to arbitration. As a result, a court in the United States might require that a claim brought by an ADR holder predicated upon the U.S. securities laws be submitted to arbitration in accordance with our bylaws. In that event, a purchaser of ADSs would be effectively precluded from pursuing remedies under the U.S. securities laws in the U.S. courts. However, a court in the United States could allow claims predicated upon the U.S. securities laws brought by holders who purchased ADSs on the NYSE to be submitted to U.S. courts.

For more information, see “Item 10.B. Additional Information—Memorandum and Articles of Association—Redemption and Rights of Withdrawal.”

A holder of our common shares and ADSs might be unable to exercise preemptive rights and tag-along rights with respect to the common shares.

U.S. holders of common shares and ADSs may not be able to exercise the preemptive rights and tag-along rights relating to common shares unless a registration statement under the U.S. Securities Act of 1933, as amended (“Securities Act”), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obliged to file a registration statement with respect to our common shares relating to these rights, and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, an ADR holder may receive only the net proceeds from the sale of his or her preemptive rights and tag-along rights or, if these rights cannot be sold, they will lapse, and the ADR holder will receive no value for them.

Holders of our ADSs do not have the same voting rights as our shareholders.

Holders of our ADSs do not have the same voting rights as holders of our shares. Holders of our ADSs are entitled to the contractual rights set forth for their benefit under the deposit agreements. ADS holders exercise voting rights by providing instructions to the depositary, as opposed to attending shareholders meetings or voting by other means available to shareholders. In practice, the ability of a holder of ADSs to instruct the depositary as to vote will depend on the timing and procedures for providing instructions to the depositary, either directly or through the holder’s custodian and clearing system. The deposit agreement also provides that if the depositary does not receive any instructions from a holder of ADRs, the ADR holder may be deemed to have given a discretionary proxy to a person designated by our company and the underlying shares may be voted by such person. However, we have chosen not to designate any person to exercise these deemed proxy rights with respect to any annual or special general meetings, and ADSs for which no specific voting instructions were received by the Depositary were therefore not voted at that meeting.

Judgments of Brazilian courts with respect to our common shares are required to be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our common shares, we may not be required to discharge our obligations in a currency other than reais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than reais must only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank of Brazil, in effect (1) on the date of actual payment, (2) on the date on which such judgment is rendered or (3) on the date on which collection or enforcement proceedings are commenced. The then prevailing exchange may not provide non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the common shares or the common shares represented by ADRs.

Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to a disposition of our shares or ADS.

Law No. 10,833/2003, provides that the disposition of assets located in Brazil by a non-resident to either a Brazilian resident or a non-resident is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. This provision results in the imposition of withholding income tax on the gains arising from a disposition of our common or preferred shares by a non-resident of Brazil to another non-resident of Brazil. There is no judicial guidance as to the application of Law No. 10,833/2023 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADSs between non-residents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADSs, this tax law would accordingly result in the imposition of withholding taxes on the disposition of our ADSs by a non-resident of Brazil to another non-resident of Brazil. For purposes of Brazilian taxation, the income tax rules on gains related to disposition of common shares or ADSs can vary depending on the domicile of the non-Brazilian holder, and the form by which the non-Brazilian holder has registered its investment.

A. History and Development of the Company

Overview

We were incorporated as a public, mixed capital company of unlimited duration on September 6, 1973, under the laws of the Federative Republic of Brazil. In 1994, we were registered with the CVM as a publicly held company and are therefore subject to CVM’s rules, including those relating to the periodic disclosure of extraordinary facts or relevant events. Our common shares have been listed on the B3 under the ticker “SBSP3” since June 4, 1997. In 2002, we joined the Novo Mercado segment of the B3 and registered our common shares with the Securities and Exchange Commission (“SEC”) and started trading our shares in the form of ADR – level III on the New York Stock Exchange (“NYSE”) under the ticker “SBS.”

Until June 2024, the State of São Paulo owned a majority of our voting common shares. In July 2024, we were privatized, and the State of São Paulo ceased to be our controlling shareholder. As part of our Privatization, Equatorial Energia S.A. became a reference shareholder holding 15% of our voting capital. In accordance with our amended bylaws, we no longer have a controlling shareholder: our bylaws prohibit any shareholder or group of shareholders from exercising votes over 30% of our issued and outstanding voting capital or from entering into shareholders’ agreements for the exercise of voting rights in excess of 30% of our issued and outstanding voting capital. We are subject to Brazilian Corporate Law and to any and all laws and regulations that govern Brazilian private legal entities.

We are registered with the Commercial Registry of the State of São Paulo (Junta Comercial do Estado de São Paulo) under registration number NIRE 35300016831. Our principal executive offices are located at Rua Costa Carvalho, 300, 05429-900 São Paulo, SP, Brazil. Our telephone number is +55 11 3388-8000. Our agent for service of process in the United States is CT Corporation System, with offices at 818 West Seventh Street – Team 1, Los Angeles, CA 90017.

As of December 31, 2024, we provided water and sewage services to numerous residential, commercial and industrial consumers, as well as various public entities, in 375 municipalities in the State of São Paulo, including the city of São Paulo, under concession agreements, with 371 covered by URAE 1 until 2060. Since December 2023, we operate water and sewage services in Olímpia, a municipality located in the interior of the State of São Paulo, through our wholly-owned subsidiary Sabesp Olimpia S.A. This new contract with the municipality of Olímpia is the first bidding process won without being part of a consortium under the New Legal Framework for Basic Sanitation.

In addition, we have partnerships with three private companies for water and sewage services: Águas de Castilho, Águas de Andradina and Sesamm - Serviços de Saneamento de Mogi Mirim S.A. (sewage-only).

In the basic sanitation sector, we are minority shareholders in two special purpose companies: Aquapolo Ambiental S.A., supplying industrial reclaimed water to the Capuava Petrochemical Complex since 2012 and Attend Ambiental S.A., providing non-domestic wastewater treatment services in the São Paulo metropolitan area since 2014.

We also engage in the electric power generation sector through minority partnerships, including Paulista Geradora de Energia, which utilizes the hydraulic potential of the Cantareira System. It sells 4.1 MW from the PGE Guaraú plant (since March 2023), 2.9 MW from the PGE Cascata plant (since April 2024). Cantareira SP Energia, currently in the pre-operational phase, is focused on the development, production, and commercialization of photovoltaic energy. For more information, see Note 12 to our 2023 Consolidated Financial Statements – Investments.

Since December 2022, we have held a 20% equity stake in Barueri Energia Renovável SA, a plant designed to process municipal solid waste from Barueri and nearby municipalities. It is expected to commence operations in February 2027. Additionally, we established SPE Infranext Soluções e Pavimentação S/A (currently in the pre-operational phase), which operates in the segment of cold asphalt commercialization and related products.

Our Strategy

New Strategic Guidelines

We are currently in the process of reformulating our new strategy post-Privatization along the following five pillars:

The challenges for the coming years are organized into three strategic axes:

The main challenge of the new strategy is to advance the Universalization Targets from 2033 to 2029, with projected investments of around R$70.0 billion by 2029 and R$260.0 billion by 2060. As part of this process, we strive to become one of the world’s leading sanitation companies.

Universalization is a significant challenge, as it involves not only the expansion of infrastructure, but also the need to ensure our financial sustainability and efficiency in service delivery. Universalization is also regarded as a fundamental step to promote public health, environmental preservation, and economic development in the communities we serve.

To support the execution of our new strategy, our remuneration model will be aligned with the Universalization Targets established by the Concession Agreement for URAE-1, in an attempt to align stakeholders’ interests.

We are guided by commitments to ethics and a profound sense of duty to the population we serve. This transformation process is guided by ten principles of a high-performance culture: (i) long-term view; (ii) doing the right thing, the right way; (iii) ownership; (iv) meritocracy; (v) results-orientation; (vi) alignment of goals and incentives; (vii) reliable partner to our clients; (viii) innovation with calculated risks; (ix) rigorous cost control and discipline in capital allocation; and (x) ethics, transparency and simplification.

Corporate Organization

Following our Privatization and the changes to our bylaws, we updated our governance structure. Key changes included reorganizing departmental responsibilities of each executive officer and creating new structures to optimize our growth and adapt to recent regulatory changes in the sanitation sector.

Our executive management currently comprises eleven officers with responsibilities allocated by the Board of Directors and our by-laws. This includes overseeing compliance and risk management, led by a statutory officer appointed by the Board, as well as administrative oversight of internal audit.

Statutory Executive Officers:

·        Chief Executive Officer;

·        Chief Financial and Investor Relations Officer; and

·        Chief Engineering Officer.

Non-statutory Executive Officers:

Capital Expenditure Program

Our capital expenditure program aims to enhance and expand our water and sewage system, striving for universal sanitation services in the municipalities we operate. It focuses on ensuring water security, meeting the increased demand for treated water in the State of São Paulo, improving operating efficiency and reducing environmental impacts. To achieve this, our investment plan is structured around four pillars:

As of the date of this annual report, we anticipate investments of approximately R$70.0 billion from 2025 to 2029, financed by own resources, loans, and long-term financing. We invested R$6.9 billion, R$6.3 billion, and R$5.4 billion in the years ended December 31, 2024, 2023, and 2022, respectively.

The following table presents the number of incremental connections in water coverage, sewage coverage, and sewage treatment that correspond to the goals to be achieved in the coming years of 2025 and 2026.

Our capital expenditure program from 2025 through 2029 will continue to focus on achieving our targets by making regular investments to maintain and expand our infrastructure and to reduce water losses in the 375 municipalities we served as of December 31, 2024.

Main Focus of Our Capital Expenditure Program

The following is a description of the main focuses of our capital expenditure program.

Investments in water

Expansion of Water Systems: Investments aimed at expanding the supply infrastructure in urbanized areas of the municipalities, in rural communities and in vulnerable communities and informal areas, ensuring the availability of safe and sustainable drinking water to keep up with growths in population, urban development and the growing existing demand, including the implementation of networks, formalization of connections and alternative solutions adapted to the local reality and also new distribution networks, reservoirs, pipelines and reinforcements in existing systems or, for rural areas, well drilling, implementation of simplified systems and decentralized supply technologies.

Water Resilience: Continuity of our actions to ensure water security in face of extreme weather events, prolonged droughts, and increased demand. These investments include diversification of water sources, interconnection of systems, expansion of reservoirs and modernization of operational processes.

Vegetative Growth: Gradual expansion of our supply infrastructure to meet the increase in population and the verticalization of municipalities we cover. These investments provide for reinforcements in production and distribution of water, ensuring continuity and quality of supply.

Investments in sewage

Expansion of Sewage Systems (Coverage and Treatment): Investments focused on at expanding the sanitary sewage infrastructure in vulnerable communities and informal areas to ensure viable technical solutions that are appropriate to the local reality, as well as in the expansion of collection networks, connection of new economies and expansion of the installed capacity of sewage treatment plants in urban areas of the municipalities, aiming to serve new residences and promote the reduction of the environmental pollution load of the receiving bodies. For rural areas, these investments are aimed at bringing sewage collection and treatment to rural communities, using appropriate technologies such as septic tanks and compact treatment stations.

Vegetative Growth: Expansion of sewage networks and treatment capacity to keep up with the demographic growth of cities. These investments provide for new collection networks, interceptors and modernization of treatment plants to ensure the universalization of sanitation.

Loss Reduction

Implementation of measures to reduce infrastructure damages or losses (including leaks, pipe ruptures, etc.) and losses arising from consumer fraud (under-metering and other methods of tampering with our measurement devices) in the water distribution system. Our actions include the sectorization of distribution networks, therefore segmenting extensive networks into smaller sections, enhancing the management and operational oversight of the distribution system, replacement of old pipes, replacement of water meters, modernization of measurement methods and combating irregular sewage or water networks.

Automation

Digitization and modernization of our operating systems in order to increase our efficiency and reduce costs. Our actions include using telemetry, smart sensors, remote control of pumping stations and implementation of operational control centers to optimize the management of sanitary supply and sewage.

B. Business Overview

Our Operations

As of December 31, 2024, we provided water and sewage services to a broad range of residential, commercial, industrial and governmental customers in 375 of the 645 municipalities in the State of São Paulo, including the city of São Paulo, under concession agreements, with 371 covered by URAE 1 until 2060. These 371 municipalities accounted for 99.3% of our gross operating revenues from sanitation services (excluding revenues relating to the construction of concession infrastructure).

Four municipalities (Miguelópolis, Quintana Nova Guataporanga and Olímpia) continue under their existing individual contracts, which we entered into before our Privatization. These concession agreements will expire between 2027 and 2053 and accounted for 0.1% of our gross operating revenues from sanitation services (excluding revenues relating to the construction of concession infrastructure) as of December 31, 2024.

We also supplied water and sewage treatment services on a wholesale basis to two municipalities in the São Paulo metropolitan region (Mogi das Cruzes and São Caetano do Sul). For more information on these agreements, see Note 10 to our 2024 Consolidated Financial Statements.

As of December 31, 2024, we generated net operating revenue of R$36,145.5 million and profit of R$13,642.8 million. Our total assets amounted to R$80,965.4 million and our total shareholders’ equity amounted to R$36,928.1 million. Our revenues from wholesale water services were R$115.5 million and from wholesale sewage services were R$45.2 million. We provided water services to approximately 28.1 million people, and sewage services to approximately 25.1 million people in the State of São Paulo.

For more information on laws and regulations related to our concession operations, see “—Government Regulations Applicable to our Contracts.”

Description of Our Activities

Our corporate purpose is to render basic sanitation services, aimed at the universalization of basic sanitation in the State of São Paulo. Our primary activities comprise water supply, sanitary sewage services, urban rainwater management and drainage services, urban cleaning services, and solid waste management services. Our related activities include the planning, operation, maintenance of systems for the production, storage, conservation commercialization of energy, and the commercialization of services, products, benefits and rights that directly or indirectly arise from our assets, operations and activities. Additionally, our shareholders, at the General Shareholders’ Meeting held on April 29, 2025, approved the amendment of our bylaws to include in our corporate purpose the generation of electricity for self-consumption, with the option to sell any surplus, aiming to enhance the efficiency of basic sanitation services and optimize the use of our assets. For more information, see “—Government Regulations Applicable to Our Contracts—ARSESP.” For a description of our operating segments please see Note 28 to our 2024 Consolidated Financial Statements.

We set forth below a description of our activities.

Water Operations

Our supply of water to our customers generally involves water extraction from various sources, subsequent treatment and distribution to our customers’ premises. For the year ended December 31, 2024, we produced approximately 3,086.3 million cubic meters of water.

The following table sets forth the volume of water that we produced and invoiced for the periods indicated:

Seasonality

Although seasonality does not affect our results in a significant way, in general, we observe higher water demand during the summer and lower water demand during the winter. The summer coincides with the rainy season, while the winter corresponds to the dry season. The demand in the coastal region is increased by tourism, with the greatest demand occurring during the Brazilian summer holiday months.

Water Resources

Our water withdrawals are limited to authorized volumes by SP Águas, with federal approval from the National Water and Sanitation Agency (Agência Nacional de Águas e Saneamento Básico – ANA) required for basins crossing state lines. We primarily source our water supply from rivers and reservoirs, with a small portion from groundwater. Our reservoirs are filled by impounding and/or diverting river flows. For more information on water usage regulation, see “—Environmental Matters—Water Usage.”

As of December 31, 2024 we operated eleven water systems in the São Paulo metropolitan region. The total capacity of the water sources available for treatment in this area is 1.945 million m³. The average monthly production was 67.2 m³/s, with the Cantareira, Guarapiranga and Alto Tietê systems providing approximately 80% of the water distributed. The Cantareira system alone supplied 42.7% of region’s water. For more information, see “Item 3.D. Risk Factors—Risks Relating to Environmental Matters and Physical and Climate Transition Risks—Droughts, such as the 2014 – 2015 water crisis, can cause a material impact on consumption habits and, consequently, on our business, financial condition or results of operations.”

We participate in the decentralized and integrated management of water resources established by the National Policy on Water Resources. We are represented by our employees in all River Basin Committees in the State of São Paulo.

The following table sets forth the water production systems from which we produce water for the São Paulo metropolitan region:

Water Treatment

We operate 250 water treatment facilities, where all water is treated before being distributed by our water supply network. The type of treatment used depends on the nature of the source and quality of the untreated water. For example, water abstracted from rivers requires more treatment than water withdrawn from groundwater sources. All of the water we treat receives fluoridation.

Water Distribution

We distribute water through our networks of water pipes and water transmission lines. Storage tanks and pumping stations regulate the volume of water flowing through the networks in order to maintain adequate pressure and continuous water supply.

The following table sets forth the number of connections in our network as of the dates indicated:

Water Loss

Water loss is calculated as the difference between the volume of water produced and the volume of water measured by the water meters installed in our clients’ properties. Water losses are divided into: apparent (non-physical) losses, which result mainly from inaccurate water meters, fraud and registration errors, and real (physical) water losses, resulting from leaks in the distribution network and overflows in tanks.

We exclude from the calculations of water loss: (i) water discharged for periodic maintenance of water distribution lines and cleaning of water storage tanks; (ii) water supplied for municipal uses, such as fighting fires; and (iii) estimated water loss related to the supply of water to urban areas occupied by low-income populations in irregular areas (favelas).

As of December 31, 2024, we experienced 262 liters per connection per day of water loss. Real (physical) water loss decreased from 22.2% as of December 31, 2008 to 19.4% as of December 31, 2024.

In respect of the Concession Agreement for URAE-1, we must meet the targets established for the municipalities for 2025, as set out in Annex II of the Concession Agreement for URAE-1.

Water Quality

We believe that we supply high quality treated water that is consistent with the standards set by Brazilian law, which establishes water quality standards (Annex XX of Consolidation Ordinance No. 5 – amended by Ordinance No. 888 of May 2021), requiring us to comply with significant regulatory obligations.

In general, the State of São Paulo has excellent water quality. However, there are anthropogenic and natural factors that can cause changes in water quality. Currently, we treat this water to make it potable and we are also investing in improvements in our water transmission lines and our treatment systems to ensure the quality and availability of water for the coming years.

Water quality is monitored at all stages of the distribution and is carried out by our quality control laboratories distributed in various regions of the State of São Paulo, equipped with modern analytical equipment and qualified professionals. Our laboratories are ABNT NBR ISO IEC 17025 accredited, awarded by INMETRO. Quality control of the chemicals used in water treatment is also performed to verify compliance with the specifications established in national and international recommendations, aiming to ensure the absence of toxic substances harmful to human health.

As of the date of this annual report, we believe that there are no material instances where our standards are not being met.

Fluoridation

As required by Brazilian law, we add fluoride to the water at our treatment facilities prior to its distribution into the water supply network. Fluoridation primarily consists of adding fluorosilicic acid to water at between 0.6 mg/L and 0.8 mg/L to assist in the prevention of tooth decay among the population.

Sewage Operations

We are responsible for the collection, removal, treatment and final disposal of sewage. We installed 197.3 thousand, 191.4 thousand and 226.5 thousand new sewage connections in the years ended December 31, 2024, 2023 and 2022, respectively.

Sewage System

The purpose of our sewage system is to collect and treat sewage and to adequately dispose of the treated sewage. The following table sets forth the total number of sewage connections in our network for the periods indicated:

Our sewage system is generally designed to operate by gravitational flow, with pumping stations used where necessary, employing cast iron sewage lines.

The public sewage system is designed to handle both household and portion non-domestic effluents (such as industrial sewage) which require compliance with specific legal standards to protect the sewage collection and treatment systems, the health and safety of operators and the environment Non-effluents must meet standards set by State Decree No. 8,468/1976, and may require pretreatment. We conduct acceptance studies to ensure compliance and capacity before permitting discharge, formalizing conditions in agreements with effluent producer. Non-compliance can result in penalties, with CETESB notified for severe breaches.

Effluents from our treatment facilities must comply with limitation guidelines for discharge into receiving water bodies, ensuring water quality is not compromised, as established by State Law No. 997/1976 regulated by State Decree No. 8,468/1976 and the National Environmental Council (Conselho Nacional de Meio Ambiente – “CONAMA”) Resolution No. 357/2005, as amended by CONAMA Resolution No. 430/2011.

Sewage Treatment and Disposal

As of December 31, 2024, we operate 622 sewage treatment facilities, including eight ocean outfalls, with an installed capacity of approximately 56.7 cubic meters of sewage per second.

In the São Paulo metropolitan region, the treatment process used by most treatment facilities is the activated sludge process. In other regions, sewage treatment varies according to the particularities of each area. In the interior region of São Paulo State, treatment consists largely of stabilization ponds. The majority of sewage collected in the coastal region receives treatment and disinfection and is then discharged into rivers and also into the Atlantic Ocean through our ocean outfalls, in accordance with applicable legislation.

In this regard, we are a party to legal proceedings related to environmental matters. For more information, see “Item 8.A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings.” In addition, our capital expenditure program includes projects to increase the amount of sewage that we treat. For more information, see “Item 4.A. History and Development of the Company—Capital Expenditure Program” and “Item 4.B. Business Overview—Environmental Matters—Environmental Regulation—Sewage Requirements.”

Sludge Disposal

The generation of sludge is inherent in the sanitation cycle. We use various methods, such as filter presses, belt filter presses, drying beds and centrifugation machines, to dewater sludge, reducing its volume and final disposal costs.

We are exploring innovative technological sludge disposal methods. Since 2018, we have produced an agricultural organic fertilizer, Sabesfértil, which is created by bio-drying sewage sludge, and which was approved for sale by the Ministry of Agriculture.

Other projects include a plasma system which uses specialized technology to transform sludge into an inert solid vitreous product to be re-used in construction work, and a sludge dryer that uses sunlight and automated processes.

In 2024, we installed a pilot thermal sludge treatment plant using pyrolysis which was completed in December 2024. In February 2025, the pilot unit started its six-month period of operational tests to evaluate byproducts like biocarbon, pyrolytic oil and syngas.

Sludge disposal must comply with State and Federal law requirements. In the State of São Paulo, CETESB has reissued the technical standard P4,230, second edition, of May 2021, which addresses the “application of sludge from biological treatment systems of sanitary liquid effluents in soil – guidelines and criteria for the project and operation.” This allows sludge use for soil recovery, creating new opportunities in the interior of the State of São Paulo.

Principal Markets in Which We Operate

We provide water and sewage services directly to a large number of residential, commercial and industrial consumers, as well as to a variety of public entities.

Our Concession Agreements

The Concession Agreement for URAE-1

The Concession Agreement for URAE-1 provides for significant changes to our economic-regulatory model. Under the Concession Agreement for URAE-1 we provide services for water and sewage to 371 municipalities in the state of São Paulo. The Concession Agreement for URAE-1 also provides for specific targets such as the Universalization Target. Under the Concession Agreement for URAE-1, the tariff adjustment index (Índice de Reajuste Tarifário – IRT) also provides for significant changes to our Tariff Structure, as defined below. We cannot guarantee that these changes will not have a significant financial impact on us. The main provisions of the Concession Agreement for URAE-1 are as follows:

As of the date of this annual report, we are a party to (i) the Concession Agreement for URAE-1; and (ii) four individual contracts entered into with the municipalities of Miguelópolis, Nova Guataporanga, Quintana, which chose not to join the Concession Agreement for URAE-1, and Olímpia.

Competition

The competition for concessions arises mainly from the municipalities, metropolitan regions, microregions and regional units not currently part of the Concession Agreement for URAE-1, as they may commence bidding procedures which we may not win or resume the water and sewage services that were granted to us and start providing these services directly to the local population. In this latter case, the relevant governments would be required to indemnify us for the unamortized portion of our investment. For more information, see “Item 3.D. Risk Factors—Risks relating to the Regulatory Environment—Municipalities may terminate contracts before they expire in certain circumstances. The indemnification payments we receive in such cases may be less than the value of the investments made, or may be paid over an extended period, adversely affecting our business, financial condition, or results of operations.”

The New Legal Framework for Basic Sanitation brought a significant change to the relationship between the municipality as granting authority and us as service provider since it introduced the mandatory use of public bids for the execution of future contracts for the provision of sanitation services, which has the potential to intensify competition between public companies and the private sector.

Additionally, we may participate in competition for other concessions for the provision of water and sewage services in municipalities, metropolitan regions, microregions and regional units outside of the State of São Paulo.

Use of Alternative Water Sources

In recent years, we have experienced an increasing level of use of alternative sources, including to residential condominiums and non-residential, industrial customers. One reason for the use of alternative water sources is because some users require water with different technical specifications than the water made available to the public.

This trend has increased in recent years, especially since the 2014-2015 water crisis, when non-residential customers and residential condominiums sought independent solutions to supply water and dispose of non-residential, commercial and industrial sludge in the São Paulo metropolitan region. Private companies offer stand-alone water treatment solutions inside the facilities of their customers.

In addition, the treatment of non-residential, commercial and industrial sewage treatment in the São Paulo metropolitan region has increased in recent years as private companies have started to offer customized solutions for customers’ facilities.

Competition for new municipalities

As described in our bylaws, we may operate through subsidiaries in any part of Brazil or abroad to provide sanitation services. We believe this makes us a potential competitor for other sanitation companies, both Brazilian and foreign.

The New Legal Framework for Basic Sanitation imposes mandatory bidding processes for municipalities to hire companies providing basic sanitation services. This opened up a new business environment in which state-owned and private companies could compete. Participating in a bidding process is now the only method of maintaining and/or expanding our market share, whether in the State of São Paulo or in other states.

Billing Procedures

The procedure for billing and payment of our water and sewage services is largely the same for all customer categories. Under the current Tariff Structure, water and sewage bills are based on water usage determined by monthly water meter readings. Sewage billing is included as part of the water bill and is based on the water meter reading.

The readings of the water meters for billing purposes are carried out by our own team and/or by third parties through mobile application, with simultaneous printing and delivery of the bill to the customer or, when the customer so chooses, the bill can be forwarded by e-mail or mail to an address of the customer’s choice.

Water and sewage bills can be paid at certain banks and other locations in the State of São Paulo. Customers must pay their water and sewage bills by the due date if they wish to avoid paying a fine and interest on late bill payments. Delinquent customers are subject to administrative payment collection proceedings, water supply cuts and judicial payment collection proceedings.

In 2024, we had a reduction in default rates due to more rigorous payment collection proceedings, such as blacklisting defaulting customers, increased execution of supply cuts, negotiation of debts with major debtors and the holding of auctions to negotiate the debt of customers (Feirões de Negociação) (“Large credit campaigns”).

In addition, since 2019, we used an Internet of Things (“IoT”) application to monitor the daily consumption of 100,000 customers representing approximately 2% of the connections and 45% of the revenue derived from the São Paulo metropolitan region. In 2021, we used the IoT application for 3,500 customers of the interior of the State of São Paulo and in the coastal regions of São Paulo. In 2022 and 2023, we expanded our operations, installing more than 100,000 new devices in the central area of the city of São Paulo. In 2024, we further expanded our operations, installing more than 40,000 new devices in the central area of the city of São Paulo. This technology has helped us improve our customer care management. We believe this model has become a benchmark in the utilities sector, as the entire management is carried out by monitoring the quantity and quality indicators of the data delivered, an innovative approach in relation to telemetry in the sanitation sector.

Customer relationship

Every year, we seek to improve our relationship with our customers, aimed at ensuring a more satisfactory and efficient experience. As a result, we have adopted what we consider to be a competitive and transparent approach, expanding the use of digital channels and tools that we believe will ensure quality services and increase public satisfaction with our services.

Our digital channels have been consolidated and enhanced to offer greater navigability and an expanded range of services. We seek to ensure accessibility in our service channels, whenever possible, to serve customers with disabilities.

Our customer satisfaction rating for the year ended December 31, 2024 reached 83% of customers, indicating they were satisfied with our services, a slight variation from the 84% rate recorded for the year ended December 31, 2023, as pointed out by the annual satisfaction survey conducted by the GMR Market Intelligence Institute.

In addition, we continue to invest in our ombudsperson’s office as an exclusive channel to respond to complaints, suggestions, criticism and requests for information that have not been resolved on our primary channels.

Following our Privatization, we now have greater operational flexibility and autonomy in hiring suppliers and contractors, which allows us to envision a future with greater agility, cost reduction, and strengthening of our digital transformation we believe. These advances will directly contribute to the improvement of the quality of our customer service.

Tariffs

Tariffs are our main form of remuneration for the services we provide under the Concession Agreement for URAE-1.

Under the Concession Agreement for URAE-1, the tariffs aim to remunerate the investment effectively made and incorporated into the concession’s asset base. There are two tariffs: the application tariff, which is what the user actually pays, and the equilibrium tariff, which is owed to us. Any difference in the application tariff and equilibrium tariff is covered by FAUSP.

Tariff adjustments for our services follow the guidelines established by regulatory standards including the Concession Agreement for URAE-1 and its schedules, especially Schedule V. These guidelines establish procedural steps and the terms for the annual adjustments, which are to be conducted by ARSESP. For more information, see Exhibit 4.11 of this Annual Report.

The approved regulatory model adopted by ARSESP for the Concession Agreement for URAE-1 defines a maximum average tariff (“P0”), based on the guarantee of the economic and financial balance of the provider, such as us, in its business segment and on efficient costs projected for the tariff cycle, to encourage the provider to permanently seek to reduce its costs. Accordingly, an average tariff is established, expressed in reais per cubic meter, which reflects the economic cost of providing water and sewage services in a certain tariff cycle. The methodology is based on a discounted cash flow model, which aims to calculate the P0, ensuring that the Net Present Value (NPV) of the tariff cycle is equal to zero and considering a rate of return equal to the WACC.

Further to the reviews, the tariffs under the Concession Agreement for URAE-1 are adjusted annually. In accordance with ARSESP regulations, we use the IPCA price index (accumulated over the past 12 months), minus a productivity factor calculated as part of the Factor X and, since 2020, the adjustment of IGQ that can be zero, positive or negative, according to the deviation between the targets we set and the actual values.

For more information, see “Item 3.D. Risk Factors— We are exposed to risks associated with the Concession Agreement for URAE-1, which may materially impact our financial condition and operating results” and “Item 10.F Additional Information – C. Material Contracts - Concession Agreement for URAE-1”.

Tariff Structure

Our current tariff structure, governed by State Decree No. 41,446/1996 and by the Concession Agreement for URAE-1, is divided into residential and non-residential categories (“Tariff Structure”). The residential category is subdivided into standard residential, residential-social and vulnerable residential tariffs. Social tariffs benefit low-income families, the unemployed, and collective living residences, while vulnerable tariffs support urban areas lacking urban infrastructure. The non-residential category consists of: (i) commercial, industrial and public customers; (ii) non-profit entities that pay 50.0% of the prevailing non-residential tariff; (iii) government entities that adhere to the Rational Use of Water Program (Programa de Uso Racional da Água – “PURA”) and pay 75.0% of the prevailing non-residential tariff; and (iv) public entities that have entered into program agreements, for municipalities with a population of up to 30.0 thousand and with half or more classified according to their degree of social vulnerability by the Social Vulnerability Index of São Paulo (Índice Paulista de Vulnerabilidade Social) 5 and 6, of the SEADE, obtained through the analysis of the 2000 Census figures, which start to receive tariff benefits, in accordance with our normative ruling, for the category of public use, at the municipality level. The tariffs are equal to those offered to the non-profit entities mentioned in item (ii) above and that corresponds to 50.0% of the public tariffs without contractual provisions referred to in item (iv) above.

There are tariff tables with the values due for each consumption pricing ranges for these categories: up to 10 m³, from 11 to 20 m³, from 21 to 50 m³ and above 50 m³. The “Residential Social” and “Residential Vulnerable” categories have five consumption pricing ranges: up to 10 m³, from 11 to 20 m³, from 21 to 30 m³, 31 to 50 m³ and above 50 m³. The amount charged is always progressive.

Large consumers and municipalities served by wholesale have separate tariff tables.

Water and sewage services tariffs

Under the current Tariff Structure, we establish separate tariff schedules for our services in each of the São Paulo metropolitan regions and each of the interior regions of the State of São Paulo and the coastal regions, depending on whether a customer is located in the São Paulo metropolitan region or the interior of the State of São Paulo and in the coastal regions of São Paulo. Each tariff schedule incorporates regional cross-subsidies, taking into account the customer type and volume of consumption. Where tariffs paid by customers with high monthly water consumption rates exceed our costs of providing water services, we use the excess tariff billed to high-volume customers to compensate for the lower tariffs paid by low-volume customers. Similarly, tariffs for non-residential customers are set at levels that subsidize residential customers. In addition, the tariffs for the São Paulo metropolitan region generally are higher than tariffs in the interior region of the State of São Paulo and the coastal regions. In the years ended December 31, 2024, 2023 and 2022, the average tariff calculated for the interior of the State of São Paulo and in the coastal regions of São Paulo was approximately 22% below the average tariff of the São Paulo metropolitan region.

The following table sets forth the water tariffs by (i) customer category and class; and (ii) volume of water consumed, charged in cubic meters during the years and period stated in the São Paulo metropolitan region:

(1) The minimum volume charged is ten cubic meters per month.

Sewage charges in each region are fixed and based on the same volume of water charged. In the São Paulo metropolitan region and the coastal region, the sewage tariffs are equal to the water tariffs. In the majority of the municipalities of the interior region of the State of São Paulo, sewage tariffs are approximately 20.0% lower than water tariffs. Wholesale water rates are the same for all municipalities served in the São Paulo metropolitan region. We provide sewage treatment services to those municipalities in line with the applicable contracts and tariffs. In addition, various industrial customers pay an additional sewage charge, depending on the characteristics of the sewage they produce. Each category and class of customer pays tariffs according to the volume of water consumed. The tariff paid by a certain category and class of customer increases progressively according to the increase in the volume of water consumed. The first tranche (0-10) corresponds to the minimum fee that is charged to our customers for the consumption of water.

Government Regulations Applicable to our Contracts

Basic sanitation services in Brazil are subject to extensive federal, state and local legislation and regulations.

The Basic Sanitation Law and the New Legal Framework for Basic Sanitation

The sanitation sector was predominantly self-regulated until 2007, with tariffs negotiated directly between state and municipal governments and companies. The Basic Sanitation Law, effective from January 5, 2007, established nationwide guidelines for basic sanitation and encouraged state-municipal cooperation.

The New Legal Framework for Basic Sanitation, enacted on July 16, 2020, aims for universal water and sewage services by 2033, delegating regulatory authority to ANA and prohibiting new program contracts. Existing contracts remain in effect until the end of their contractual term, subject to the Universalization Targets for services being met by December 31, 2033.

Federal Decree No. 11,598/2023, enacted on June 12, 2023, outlines the methodology for demonstrating the economic and financial capacity of public service providers for drinking water supply or sanitary sewage. One of the main changes was the exclusion of the prior provision that the contracts for the public provision of such services made by the public companies which do not prove their economic and financial capacity must be declared invalid. On March 28, 2022, ARSESP confirmed our economic and financial capacity under the terms of the New Legal Framework for Basic Sanitation and the Federal Decree No. 10,710/2021. Following the procedure established by the applicable legislation, ARSESP’s decision was later confirmed by the ANA.

Functions of ANA

The New Legal Framework for Basic Sanitation assigns to ANA the responsibility for the publication of technical norms for the regulation of public basic sanitation services. ANA is also the authority responsible for introducing reference standards for the methodology for calculating indemnities due to investments made and not yet amortized or depreciated.

The ANA’s reference standards could be considered by subnational sanitation regulatory agencies (municipal, intercity, district and state) in their regulatory action.

According to the New Legal Framework for Basic Sanitation, ANA will have the role of issuing reference standards on:

The New Legal Framework for Basic Sanitation provides for ANA’s guidelines will apply to the basic sanitation sector nationwide, ensuring regulatory uniformity and legal certainty for the provision and regulation of services. ARSESP will be subject to these guidelines and will be required to incorporate any reference guidelines issued by ANA within a reasonable timeframe, which may not be less than 12 months from the publication of the respective reference standards.

ANA Standards

As a result of the New Legal Framework for Basic Sanitation, ANA is responsible for setting national reference standards for the regulation of the sanitation sector.

For 2025-2026, ANA plans to review tariff structures, set guidelines for treated sewage reuse, and standardize operational indicators for waste and rainwater management.

Agreements with Municipalities and Metropolitan Regions

In metropolitan regions, conurbations and microregions, the authority for public water and sewage systems is shared between states and municipalities. For other municipalities, the primary responsibility rests with the municipality itself.

ARSESP

ARSESP regulates, controls and supervises piped gas and basic sanitation services in São Paulo. It oversees state-owned service and those delegated to the state, including tariff regulation, while respecting municipal competencies. ARSESP charges a fee of 0.50% of the revenue directly obtained with the service provision it regulates, less taxes levied on it.

ARSESP has addressed the methodology and criteria for updating the Regulatory Remuneration Base (Base de Remuneração Regulatória), along with the procedures for the Annual Certification of Investments for companies in the basic sanitation sector. Topics covered include asset control for basic sanitation concessionaires, general conditions for the provision and use of public urban cleaning and solid waste management services, and the risk allocation matrix associated with the provision of water supply and sewage services.

Following our Privatization, ARSESP Resolution No. 1635/2025 established the regulatory agenda for 2025 and 2026, which includes:

Marketing Channels

As of December 31, 2024, we were the concessionaire responsible for the provision of water supply and collection, treatment and disposal of sewage services directly to end consumers for 375 municipalities in the State of São Paulo. For more information on our marketing channels aimed at individual customers, see “Item 4.B Business Overview—Customer relationship.”

We also supplied water and sewage services to two municipalities located in the São Paulo metropolitan region which we accounted for on a wholesale basis. It is the responsibility of these municipalities to then distribute the water to end consumers. Due to our distribution infrastructure, end consumers to whom we offer water services on a wholesale basis cannot alternatively acquire such services directly from us. For more information on service concessions, see “Item 4.B Business Overview—Water Operations.”

For more information on our marketing channels aimed at municipalities, see “Item 4.B Business Overview—Competition—Competition for new Municipalities.”

Power Consumption

Power is essential to our operations and, as a result, we are one of the largest users of energy in the State of São Paulo. In the year ended December 31, 2024, we used 2.841 GWh. Any significant disruption of energy to us could have a material adverse effect on our business, financial condition, results of operations or prospects. Energy prices have a significant impact on our results of operations. For the year ended December 31, 2024, we purchased approximately 68.0% of our total energy consumption in the independent energy contracting market (Ambiente de Contratação Livre or Mercado Livre de Energia – “ACL”) where we can more efficiently negotiate the supply of energy because we can take advantage of market opportunities; and the remainder of our energy consumption comes from the regulated energy contracting market (Ambiente de Contratação Regulado or Mercado Cativo – “RCL”) where energy is valued through tariffs set by the regulatory agency, which in this case is the National Electric Energy Agency (Agência Nacional de Energia Elétrica – “ANEEL”).

Additionally, we are developing projects that aim to generate clean, renewable and sustainable energy. In 2019, we began to structure a distributed power generation program (Programa de Geração Distribuída – Energia Fotovoltaica) focused on solar energy. The program estimates that until the end of 2025 we will have a power generation capacity of around 60 MW, with a daily average output of 12 MW, corresponding to about 4.5% of our total energy consumption (base year 2018). By 2024, we had installed 27 photovoltaic power generation plants, with a power generation capacity of 35.6 MW. The credits obtained as part of this distributed generation were used to offset energy consumption of low voltage installations, which have a higher tariff. As such, about 74% of energy consumption carried out in low voltage will be supplied by renewable energy. The investment of approximately R$320.0 million foreseen in this program has an estimated payback of 7 to 8 years.

Insurance

We maintain insurance covering, among other things, fire or other damage to our property and office buildings and third-party liabilities. We also maintain insurance coverage for directors’ and officers’ liability (“D&O Insurance”). We currently obtain our insurance policies via Request for Proposal’s (“RFPs”) involving major global insurance companies that operate in Brazil. For the year ended December 31, 2024, we paid R$77.0 million in premiums (of which R$6.0 million are related to our D&O Insurance policy). Our insurance policies covered R$83.0 billion in assets and third-party liabilities, including R$200.0 million for D&O, Engineering Risk Insurance, Operational Risk Insurance, Environmental Risk Insurance and General Liability Insurance. We do not have insurance coverage for business interruption risk because we believe that the low risk of significant interruption to our activities does not justify the high premiums for such insurance. We believe that we maintain customary insurance levels for our type of business in Brazil. For further information, see “Item 3.D. Risk Factors—Risks Relating to the Regulatory Environment—Risks associated with the collection, treatment and disposal of wastewater and the operation of water utilities may impose significant costs that may not be covered by insurance, which could result in increased insurance premiums.”

Intellectual Property

Trademarks and copyrights

We have secured registration of our nominative trademark (“Sabesp”) at the Brazilian Institute of Industrial Property (Instituto Nacional da Propriedade Industrial – “INPI”). In addition, we have registered at least 50 other trademarks with the INPI.

We have also registered trademarks for twelve characters and have secured copyright registration for the character “Sani” with the School of Fine Arts of the Federal University of Rio de Janeiro (Escola de Belas Artes da Universidade Federal do Rio de Janeiro – UFRJ).

Furthermore, we have filed trademark applications with the INPI for the three nominative and composite trademarks.

Patents

We have six patents granted by the INPI: (i) a device for the removal of supernatants during the sewage treatment process, (ii) a rotary device used to clean water reservoirs transported by trucks with high-pressure hydro-jetting systems, (iii) a bubble removal system, autonomous micro-laboratory, and use of an autonomous micro-laboratory to monitor water quality, together with USP, (iv) a chemical composition sensor, its fabrication process and its use to measure pH in microfluid systems, together with USP, (v) water leakage detection equipment: method and simulation bench for leakage in lines, together with FAPESP and UNESP, and (vi) a device for the installation of water meters.

We have filed eleven patent applications for additional devices or inventions, some of which have been jointly filed with certain Brazilian universities as a result of our cooperation agreements with these institutions. We are currently awaiting the INPI’s decisions.

In addition to these Brazilian patent applications, we also filed two international patent applications under the Patent Cooperation Treaty (“PCT”), which are in the process of registration in the European Union.

For more information on our cooperation agreements with Brazilian universities and FAPESP, see “Item 5. Operating and Financial Review Prospects—C. Research and Development, Patents and Licenses, etc.—Research and innovation.”

Software

We have adopted an internal policy that provides for an active and effective audit and prevention of unauthorized software use. We have acquired the software licenses for all our workstations.

We have also developed 26 computer programs for management and control of water and sewage treatment facilities, as well as for third-party services management for the management and control of the water treatment process and Electric energy management system.

We have also registered all of these programs at the INPI.

Domain Names

We own the domain names listed below, which have been registered with the relevant entity in Brazil, Registro.br:

· www.sabesp.com.br;

· www.revistadae.com.br; and

· Sabesp2via.net.

Environmental Matters

Considering the multidisciplinary nature of sanitation services, in addition to elaborating a corporate climate strategy, we also undertake several initiatives aimed at preserving the environment. Our current corporate strategy places sustainability as essential to our business, and environmental fronts and initiatives have gained strength and have reflected our commitment to proactively address the most current environmental and climate challenges.

Environmental management is inherent in the provision of our services and part of our core business strategy. Our performance is guided by standards and monitored through an integrated approach to ensure the sustainability of our operations. With the recent organizational restructuring, the environmental licensing process for works and projects, which was previously decentralized among our various business areas, has been centralized in a single department, enabling a global overview that covers all phases of the process, from conception to decommissioning of facilities. Additionally, our management of compliance with the conditions of the environmental licenses has also been incorporated into this area.

This centralized management brings us several benefits. By concentrating the licensing process in a single area, we enhanced the efficiency of our management, standardized and simplified procedures, and optimized internal communication. This also provides a more comprehensive and integrated perspective of activities, enabling a more strategic and consistent approach to environmental issues. Additionally, by incorporating the management of compliance with environmental license conditions, we reinforce our commitment to legal compliance and sustainability.

We have the following ongoing environmental programs allocated to the Environmental, Regulatory and Sustainability corporate areas.

Management of environmental and climate issues such as:

To provide technical support for environmental programs, we carry out corporate training on topics related to environmental management. This initiative aims to promote continuous professional development with specific content aimed at strategic, management and operational teams.

In addition to corporate environmental management actions, we have several projects and initiatives underway to benefit the environment, such as actions to protect water springs, projects for the rational use of water, reuse of effluents, projects for the use of photovoltaic energy and biogas as vehicle fuels, as well as other environmental projects focused on the engagement of the population at large.

We are a signatory of the United Nations Global Compact, support the 17 United Nations Sustainable Development Goals and maintain a partnership with the United Nations Framework Convention on Climate Change (UNFCCC). These initiatives aim to stimulate actions in areas of crucial importance to humanity, the planet, countries and companies, including the enhancement of sanitation services for the preservation of the environment, quality of life and the mitigation of climate change.

Climate Change Regulations: Reduction of Greenhouse Gases (GHG) Emissions

We are required to comply with laws and regulations related to climate change, including international agreements and treaties to which Brazil is signatory. At the state level, we are also subject to the State Policy on Climate Change for the State of São Paulo (Law No. 13,798/2009), regulated by Decree No. 68,308/2024. At the federal level, we are subject to the National Climate Change Policy (Law No. 12,187/2009), regulated by Decree No. 9,578/2018.

In 2024, we concluded our annual GHG inventory, revealing that sewage collection and treatment activities are our main source of GHG emissions, accounting for 76.8% of our total annual GHG emissions in the year ended December 31, 2024. Electricity accounted for 4.55% of our total annual GHG emissions in the year ended December 31, 2024.

As we expand our services, we expect increased organic loads and GHG emissions but also contribute to reducing GHG emissions in aquatic ecosystems, aligning with the Climate Action Plan 2050. We are exploring less carbon-intensive alternatives in our operational activities and with the support of a specialized consultancy, both in the context of adaptation and climate mitigation.

We have already evaluated plans for a series of actions aimed at reducing GHG emissions, including:

·        the use of complementary technologies and the optimization of the operations in sewage treatment plants;

·        the expansion of the beneficial use of biogas and generated sludge;

·        the expansion of the use of clean and renewable energy sources and alternative fuels; and

·        activities of forest conservation and restoration.

Among the actions already implemented or currently in progress, we highlight the following examples, as detailed in the paragraphs below.

In 2023, incentivized energy from ACL accounted for 14% of our energy consumption. As of December 31, 2024, we increased this to 21% due to purchases of energy on the ACL market and our distributed power generation program (Programa de Geração Distribuída – Energia Fotovoltaica). This program added 12 more photovoltaic power generation plants, totaling 27 operating plants with an estimated generation capacity of 60 MW, scheduled to be completed in 2026. We also use solar energy in other operational processes such as radio data transmission, flow measurement systems in wastewater treatment plants, effluent disinfection systems, lighting for administrative unit headquarters, and a floating photovoltaic power plant project.

We produce agricultural compost, “Sabesfértil”, from sludge at a wastewater treatment plant in the municipality of Botucatu. Similar projects for the use of sludge from wastewater treatment plants are under development at our other plants. In the coastal region, we have developed a system for the solar drying of wastewater treatment plant sludge with forced ventilation and mechanized mixing and fragmentation of the sludge. A similar project is already in operation in a wastewater treatment plant located in the central-west region of the state.

In the Franca wastewater treatment plant, we use biogas to produce vehicle fuel to supply part of our fleet, reducing GHG emissions. We also have projects to cover sewage treatment anaerobic lagoons to capture and burn the biogas. We are developing methane reduction projects and energy recovery initiatives at wastewater treatment plants, along with research into small hydro-generators. We have also implemented projects for the covering of anaerobic lagoons with the covering supported in the liquid surface.

We are implementing sustainability initiatives in our corporate vehicle fleet. This significantly reduced annual gasoline consumption, avoiding GHG emissions.

We engage in discretionary forest reserve maintenance and restoration activities, contributing carbon sequestration and climate adaptation. We preserve approximately 49,000 hectares within conservation units, with nine thousand hectares of floods areas and 39,000 hectares of rain forest, where the main metropolitan springs are located.

Water Usage

The use of water resources in Brazil is regulated by Federal Law No. 9,433/1997, which establishes the National Water Resources Policy. This law requires prior authorization for any use of water resources that may impact the natural system, quantity, or quality of water in a given body of water.

As a result, our water use—including water supply and effluent discharge—requires a water grant (outorga de uso da água) or, in specific cases, a formal waiver, provided that all legal requirements are met.

The authority responsible for issuing the water grant depends on the domain of the water body, for example, whether it is under federal or state domain. If the water body falls under federal domain, ANA is responsible, and the legal requirements are outlined in Federal Law No. 9,433/1997 and ANA’s Resolution No. 1,941/2017. For water bodies under the domain of the State of São Paulo, SP Águas is the public authority which grants the authorization, and the legal requirements are outlined in the State Water Policy, Law No. 7,663/1991, and in the State Supplementary Law Lei Complementar No. 14,013/2025, as well as DAEE’s Ordinance No. 1,630/2017.

Noncompliance with the applicable law regarding the use of water resources may result in environmental liabilities, such as administrative infraction and environmental crime, without prejudice to the obligation to indemnify eventual damages caused to the environment. At the administrative federal level, sanctions can range from simple warning, the application of fines ranging from R$5,000.00 to R$50.0 million and the prohibition of the source of use of water resources, which may indirectly impact related developed activities. This amount can be doubled in the event of a repeat offense. In addition, water pollution may subject the offender to fines ranging from R$5,000.00 to R$50.0 million.

State law establishes the basic principles governing the use of water resources in the State of São Paulo in accordance with the State constitution. These principles include:

State Law No. 12,183/2005 established the basis for charging for the use of the water resources under the domain of the State of São Paulo. The criteria for calculating the amount of the charge are proposed by the river basin committees and must be submitted for approval to the state water resources council and formalized by a specific decree issued by the Governor of the State of São Paulo.

In accordance with current legislation, the river basin committees prepare and approve rules and criteria for the implementation of the charges, and the National Water Agency, SP Águas and the Basin Agencies (Agências da Bacia) are authorized to charge users, such as us, for the water collection or discharge of effluents into water bodies.

The State of São Paulo has a total of 21 river basin committees, four of which operate in basins that extend across more than one state, classified as interstate. Charging for the use of water resources has already been implemented by all river basin state committees since 2024.

For the year ended December 31, 2024, we paid approximately R$80.0 million for the collection and discharge into federal and state-controlled rivers.

Water Quality

Annex XX of Consolidation Ordinance No. 5, amended by Ordinance No. 888 of May 2021, issued by the Ministry of Health of the federal government, provides the standards for potable water for human consumption and establishes potability standards in Brazil. It also outlines rules for sampling and limits related to substances that are potentially hazardous to human health.

In compliance with Brazilian law, the physical-chemical, organic and bacteriological analyses carried out for water quality control must follow national and international standards, such as: Standard Methods for the Examination of Water and Wastewater, amongst others. Federal Decree No. 5,440/2005 determines the disclosure of water quality information to consumers. We have been complying with this regulation by publishing the required information in monthly bills and annual reports delivered to all consumers that we serve.

Environmental Regulation

The development, implementation and operation of water and sewage systems are subject to federal, state and local laws and regulations on environmental and water-resource protection.

CONAMA and IBAMA are the primary federal agencies overseeing activities with potential environmental impacts. At state level, CETESB is responsible for controlling, supervising, monitoring and licensing of polluting activities. Environmental control and planning in Brazil are governed by a combination of federal and state laws and regulations. These legal instruments establish guidelines for pollution control, water resource management, and environmental licensing.

Federal Laws and Regulations

We are subject to the following federal environmental laws and regulations in our operations:

State Laws and Regulations (São Paulo):

We are subject to the following state environmental laws and regulations in our operations:

Our reservoirs that were operational before the enactment of these abovementioned laws and regulations are exempt from developing a PACUERA, as such obligation applies only to reservoirs established thereafter.

Environmental Licensing

Environmental licensing in Brazil is governed by federal, state, and local laws, requiring license for activities that (i) use natural resources, (ii) are effectively or potentially polluting, or (iii) can cause environmental damage. Federal Law No. 6,938/1981 mandates prior licensing, while Supplementary Law No. 140/2011 divides responsibilities among IBAMA, state and municipal authorities.

Projects with significant environmental impact require an Environmental Impact Assessment and Environmental Impact Report (Estudo de Impacto Ambiental – EIA and Relatório de Impacto Ambiental – RIMA), with a minimum 0.5% offset.

Licensing process usually consists of three stages: preliminary license; installation license; and operation license. Environmental licenses must be periodically renewed, with renewal requests filed up to 120 days prior to the expiration date.

Non-compliance with license conditions may lead to administrative sanctions, including fines or license revocation. Operating without a valid environmental license constitutes an administrative infraction and environmental crime, with fines up to R$50.0 million and jointly and severally liability for environmental damage, regardless of fault or intent.

In the State of São Paulo, CETESB oversees licenses and pollution control. CETESB Executive Officers’ Resolution No. 012/2022/C launched a program for water treatment plants and sewage treatment plants, to be completed by 2027. We have implemented corporate programs for obtaining and maintaining licenses, covering water treatment plants and sewage pumping stations, and for environmental recovery Commitment Terms, including forest restoration and environmental compensation, aligned with CETESB Resolution No. 012/2022/C.

Sewage Requirements

In the State of São Paulo, effluent must meet public sewage system requirements before discharge.

Compliance with water quality standards can be defined as follows. Effluent treated at our sewage treatment facilities must comply with: (i) effluent limitation guidelines and (ii) water quality standards applicable to the receiving water bodies, as established by federal and state legislation.

CETESB is authorized to: (i) monitor effluent discharges into water bodies and (ii) issue environmental licenses to polluting sources, including sewage treatment plants.

Both state and federal water resource legislation establish fees for the discharge of treated effluents into water bodies. This charge is already in effect in most river basins.

Especially Protected Areas or Spaces

We manage and protect approximately 49,000 hectares within conservation units, as defined by Federal Law No. 9,985/2000.

The Cantareira System management plan for its Environmental Protection Area (Área de Proteção Ambiental – APA) was formally approved by Decree No. 65,244/2020.

This structured approach ensures the preservation and sustainable management of critical water resources in compliance with federal and state environmental legislation.

Environmental Liabilities

Environmental liability in Brazil is comprehensive and strict, applying to individuals and legal entities that cause direct or indirect environmental damage through action or omission. It is regulated under civil, administrative, and criminal law, ensuring that environmental harm is remediated, sanctioned, and prevented.

Pursuant to Federal Law No. 6,938/1981, Brazil adopts a strict liability standard for environmental damages considering civil environmental liability, meaning (i) liability is applied regardless of fault or intent, and (ii) evidence of a causal link between the damage and an enterprise or activity is sufficient to trigger the obligation to remediate the environmental harm.

Environmental civil liability is joint and several, meaning all parties (individuals and legal entities) directly or indirectly involved in the activity that caused environmental damage can be held fully liable. If multiple parties are responsible, the financially strongest party may be required to bear the full remediation cost but may later seek recourse against other responsible parties through: (i) contractual agreements, or (ii) judicial action demonstrating the involvement of others.

Courts may pierce the corporate veil when a party obstructs environmental remediation, even without proof of fraud or misuse of the corporate structure. The mere failure to remediate environmental damage is enough to justify holding shareholders personally liable in the civil sphere.

There is no cap on the amount courts may award for: (i) repairing environmental damage, or (ii) compensation if the damage is deemed irreparable. A recent precedent from the Brazilian Federal Supreme Court (STF) abolished the statute of limitations for lawsuits seeking reparation or compensation for environmental damage.

Administrative Environmental Liability, under Federal Decree No. 6,514/2008, can be defined as any action or omission that violates legal environmental regulations constitutes an environmental administrative infraction, even if no actual environmental damage has occurred. Administrative sanctions and penalties vary based on the severity of the infraction and the economic capacity of the offender. Sanctions may include: (i) fines (single or daily), (ii) warnings, (iii) restriction of rights, (iv) seizure of products and byproducts, (v) closure of facilities, (vi) prohibition from contracting with public entities, (vii) suspension of permits, (viii) loss of financial or fiscal benefits, and (ix) full or partial suspension of activities.

Legal entities can be held criminally liable for environmental offenses. If convicted, penalties may include: (i) fines, (ii) temporary bans on rights, (iii) partial or total suspension of activities, and (iv) other sanctions, independent of any administrative penalties or civil liabilities related to the same facts.

The criminal liability of legal entities does not exclude the criminal liability of natural persons (e.g., officers, board members, or technical staff) who authorized, participated in, or facilitated the offense.

Scope of Business

In connection with the scope of our services, State Supplementary Law No. 1.025/2007 amended State Law No. 119/1973 and expanded the range of services that we can render, with the inclusion of urban rainwater drainage and management, urban cleaning and solid waste management, as well as power generation, storage, conservation and sales activities, for our own or third-party use.

Not applicable.

Our principal property, plant and equipment comprise administrative facilities which are stated at historical costs less depreciation. The reservoirs, water treatment facilities, water distribution networks consisting of water pipes, water transmission lines, water connections and water meters, sewage treatment facilities, and sewage collection networks consisting of sewer lines and sewage connections are recorded as contract assets and intangible assets (concession assets). We operated 250 water treatment facilities and 622 sewage treatment facilities, including eight ocean outfalls, as well as 16 water quality control laboratories.

As of December 31, 2024, the total net book value of our property, plant and equipment, intangible assets and contract assets (including concession assets) was R$50,210.3 million.

All of our material properties are located in the State of São Paulo.

Not applicable.

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our audited Consolidated Financial Statements included elsewhere in this annual report. The Consolidated Financial Statements included elsewhere in this annual report have been prepared in accordance with IFRS as issued by the IASB. This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Item 3.D. Risk Factors.”

In the following discussion, references to increases or decreases in any period are made by comparison with the corresponding prior period, except as the context otherwise indicates.

The financial statements of subsidiaries are included in the consolidated financial statements from the date we obtain control until the date when such control ceases to exist. All financial information for the years ended December 31, 2024 and 2023 were prepared on a consolidated basis, while all financial information for the year ended December 31, 2022 was prepared on an individual basis because we had no subsidiaries to consolidate in that year.

A. Operating and Financial Review and Prospects Overview

As of December 31, 2024, we operated water and sewage systems in the State of São Paulo, including in the city of São Paulo, Brazil’s largest city. Our operations extended into a total of 375 municipalities, or 58% of all municipalities in the state. We also provided water services and accounted for on a wholesale basis to two municipalities located in the São Paulo metropolitan region in which we did not operate water distribution systems. Our capital expenditure program is our most significant liquidity and capital resource requirement.

Since December 11, 2023, we started providing water and sewage services in Olímpia, through our wholly-owned subsidiary Sabesp Olimpia S.A. As a result, we started to present our financial information on a consolidated basis starting with our 2023 Consolidated Financial Statements. Prior to that date, we did not have any subsidiaries whose results we consolidated on a line-by-line basis.

Factors Affecting our Results of Operations

General Factors Affecting our Business

Our results of operations and financial condition are generally affected by our ability to raise tariffs, control costs and improve productivity, general economic conditions in Brazil and abroad, climate conditions, impacts of regulation for sanitation services, global and local catastrophes and health epidemics and extreme weather events.

In the event of a significant devaluation of the real in relation to the U.S. dollar or other currencies, our ability to meet our foreign currency denominated obligations could be adversely affected because our tariff revenue and other sources of income are denominated solely in reais. In addition, as we have debt denominated in foreign currencies, any significant devaluation of the real will increase our financial expenses as a result of foreign exchange losses that we must record. Accordingly, a devaluation of the real may adversely affect us and the market price of our common shares or ADSs. In December 2023, our Board of Directors approved our Hedging Policy, which is available on our website but is not incorporated herein, and in December 2024, we entered into derivative instruments (plain vanilla swaps), with expiration dates ranging from July 2025 to March 2048, to fully protect us against a devaluation of the real against the U.S. dollar or the Yen. For more information with respect to our foreign currency risk, see Note 5.1(a) to our 2024 Consolidated Financial Statements.

Effects of Tariff Increases

Our results of operations and financial condition are dependent on tariff increases for our water and sewage services. Since the enactment of the Basic Sanitation Law in 2007, regulatory agencies are responsible for setting, adjusting and reviewing tariffs, taking into consideration, among other factors:

Readjustment of our tariffs continues to be set annually and depends on the parameters established by the Basic Sanitation Law and ARSESP, except for Olímpia The guidelines also establish procedural steps and the terms for annual adjustments. The annual adjustments must be announced 30 days prior to the effective date of the new tariffs. For more information, see “4.B. Business Overview—Tariffs.”

The following table sets forth, for the years indicated, the percentage increase of our tariffs, as compared to three inflation indexes:

On April 6, 2023, ARSESP published Resolution No. 1,394/2023 related to the Extraordinary Tariff Review and Resolution No. 1,395/2023, which presented the new tariffs and authorized us to apply a total tariff readjustment of 9.5609% to our current tariffs. This tariff adjustment became effective on May 10, 2023. On April 8, 2024, ARSESP published Resolution No. 1,514, which authorized a total tariff readjustment of 6.4469% to our tariffs, which was in force between May 10, 2024 and July 22, 2024.

From July 23, 2024, with the commencement of Concession Agreement No. 01/2024, the new tariffs published by ARSESP came into effect through Resolution No. 1,539/2024, including discounts on the tariffs in force at the time as authorized by the Government of the State of São Paulo.

Effects of Brazilian Economic Conditions

As a company with all of its operations in Brazil, our results of operations and financial condition are affected by general economic conditions in Brazil, particularly by the economic activity and the inflation rate. For example, the general performance of the Brazilian economy may affect our cost of capital and inflation may affect our costs and margins. The Brazilian economic environment has been characterized by significant variations in economic growth rates. However, as our product is viewed as essential, in normal conditions our sales revenue demonstrates stability.

General Economic Conditions

In 2022, Brazilian GDP increased 2.9% in comparison with 2021. Brazil’s trade surplus in 2022 was US$61.8 billion and at year-end the country had US$324.7 billion in currency reserves. The average unemployment rate in Brazil in 2021 was 9.6%.

In 2023, Brazilian GDP increased 2.9% in comparison with 2022. Brazil’s trade surplus in 2022 was US$98.8 billion and at year-end the country had US$355.0 billion in currency reserves. The average unemployment rate in Brazil in 2022 was 7.8%.

In 2024, Brazilian GDP increased 3.4% in comparison with 2023. Brazil’s trade surplus for the year ended December 31, 2024 was US$74.6 billion and at year-end the country had US$329.7 billion in currency reserves. The average unemployment rate in Brazil for the year ended December 31, 2024 was 6.6%.

Interest Rates

As a political monetary instrument of the federal government, the SELIC rate influences the behavior of other interest rates in the country, including the rates related to indebtedness denominated in local currency. The SELIC rate was 13.75% in the first half of 2023, decreased to 10.50% in August 2024, and increased to 14.25% in March 2025, where it remains as of the date of this annual report.

Inflation

Inflation affects our financial performance by increasing our tariffs, costs of services rendered and operating expenses. Part of our real-denominated debt is directly indexed to take into account the effects of inflation. Additionally, we are exposed to the mismatch between the inflation adjustment indices of our loans and financing and those of our receivables.

Inflation adjustments derive from collections from or payment to third parties, as contractually required by law or court decision, and are recognized on an accrual basis. Inflation adjustments included in these agreements and decisions are not considered embedded derivatives, since they are deemed as inflation adjustments for us. See Notes 3.21, 5.1 and 20 of our 2024 Consolidated Financial Statements for the impacts of inflation adjustments on our financial performance and debt.

Currency Exchange Rates

We had total foreign currency-denominated indebtedness of R$3,356.4 million as of December 31, 2024, of which R$363.1 million relates to the current portion of our long-term foreign currency-denominated obligations. However, as of December 31, 2024, we have fully hedged our currency exposure, including interest payments.

The following table shows the fluctuation of the real against the U.S. dollar, the period-end exchange rates and the average exchange rates as of or for the years indicated:

The following table shows the fluctuation of the real against the Yen, the period-end exchange rates and the average exchange rates as of or for the years indicated:

In the years ended December 31, 2024, 2023 and 2022, we did not enter into any forward exchange transactions.

In December 2024, we entered into derivative instruments (plain vanilla swaps), with expiration dates ranging from July 2025 to March 2048, to fully protect us against a devaluation of the real against the U.S. dollar or the Yen.

For more information on exchange rates, see “Item 3.D. Risk Factors—Risks Relating to Brazil—Exchange rate instability and developments and the perception of risk in other countries, especially in the United States and in emerging market countries, may adversely affect us, our foreign currency denominated debt and the market price of our common shares or ADSs and our ability to service our foreign currency denominated obligations”, “Item 5.B. Liquidity and Capital Resources—Indebtedness Financing—Financial Covenants” and Note 5.1 (d) of our 2024 Consolidated Financial Statements.

Effects of Extreme Weather Events

In February 2023, there were torrential rains on the northern coast of the State of São Paulo, especially in the municipality of São Sebastião, where we operate. Within 24 hours, 683mm of rain fell in the municipality of São Sebastião. As a result, our water treatment plants in the region were damaged, and the water supply was interrupted for a few days, due to the inability to store water immediately, and lack of electricity. If similar incidents, or incidents that involve the interruption of power supplies to our facilities, occur in the future or become more frequent, these events may have a material adverse effect on our results of operations and financial condition.

Extreme events such as heat waves and torrential storms, can interrupt the electricity supply at our water pumping and treatment plants, due to trees falling on the electricity distribution networks, which could prevent the treatment of water and potentially its supply to our consumers. In addition, torrential rain destabilizes the soil and can damage our water distribution networks.

Considering the existing structure, which enables the transfer of treated water between the producing systems of the Integrated Water Supply System of the Metropolitan Region of São Paulo, we are able to implement measures to re-establish and maintain regularity in the distribution of water to serve our consumers. However, if similar incidents occur in the future or become more frequent, these events could have an adverse effect on our operating results and financial situation.

For more information, see “Item 3.D. Risk Factors—Risks Relating to Environmental Matters and Physical and Climate Transition Risks—Droughts, such as the 2014 – 2015 water crisis, can cause a material impact on consumption habits and, consequently, on our business, financial condition or results of operations”.

Critical Accounting Estimates and Judgments

We make estimates and judgments concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgments that have a significant risk of causing material adjustment to the carrying amount of our assets and liabilities within the next financial year are mentioned below.

Allowance for Doubtful Accounts

We establish an allowance for doubtful accounts in an amount that our management considers sufficient to cover expected losses, based on an analysis of trade receivables, in accordance with the accounting policy stated in Note 3.5 to our 2024 Consolidated Financial Statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022. Bad debt expense, net of recoveries, is included in selling expenses, and was R$557.8 million, R$652.9 million and R$782.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The methodology for determining the allowance for doubtful accounts requires significant estimates, considering a number of factors, including historical collection experience, current economic trends, expected future losses, the aging of the trade receivables portfolio, recoveries of previously written off receivables and other factors. Actual results could differ from those estimates.

Intangible Assets Arising from Concession Agreements

As of December 31, 2024, we had intangible assets of R$44,771.1 million and contract assets of R$4,877.7 million.

We recognize intangible assets arising from concession agreements under IFRIC 12. We estimate the fair value of construction and other work on the infrastructure to recognize the cost of the intangible asset, which is recognized when the infrastructure is built and provided that it will generate future economic benefits. The great majority of our contracts for service concession arrangements entered into with each grantor is under service concession agreements in which we have the right to receive, at the end of the contract, a payment equivalent to the asset balance of the concession intangible asset, which, in this case, is amortized over the useful life of the underlying physical assets; thus, at the end of the contract, the remaining value of the intangible would be equal to the residual value of the related physical asset.

The fair value of construction and other work on the infrastructure is recognized as revenue, at its fair value, when the infrastructure is built, provided that this work is expected to generate future economic benefits. The accounting policy for the recognition of construction revenue is described in Note 3.4 (Operating Revenue) to our 2024 Consolidated Financial Statements.

Intangible assets related to concession agreements, when there is no right to receive the residual value of the assets at the end of the contract, are amortized on a straight-line basis over the period of the contract or the useful life of the underlying asset, whichever is shorter.

The recognition of fair value for the intangible assets arising on concession agreements is subject to assumptions and estimates, and the use of different assumptions could affect the carrying amounts of these assets. The amortization of intangible assets and estimated useful lives of the underlying assets also requires significant assumptions and estimates could affect amortization of intangible assets and remaining useful lives of the underlying assets and can have a significant impact on the results of operations.

Accruals and Contingent Liabilities

We are a party to a number of legal proceedings involving significant monetary claims. These legal proceedings include, among other types, disputes with customers and suppliers and tax, labor, civil, environmental and other proceedings. For a more detailed discussion of these legal proceedings, see Note 22 to our 2024 Consolidated Financial Statements included in this annual report. We recognize provisions for legal proceedings in which our company has a present obligation as a result of past events (either due to an explicit agreement or duty, known as a legal obligation; or due to our past actions, known as a constructive obligation), it is probable that an outflow of resources embodying economic benefits will be necessary to settle the obligation and the amount of obligation can be estimated reliably. Therefore, we are required to make judgments regarding future events for which we often seek the advice of legal counsel. As a result of the significant judgment required in assessing and estimating these provisions, actual losses realized in future periods could differ significantly from our estimates and could exceed the amounts which we have provisioned.

As of December 31, 2024, we were party to judicial and administrative proceedings, relating to civil, environmental and tax matters, amounting to R$2.4 billion (after deducting court escrow deposits in the amount of R$28.5 million) with respect to which we recognized provisions based on the criteria described above, as shown in Note 3.16 to our 2024 Consolidated Financial Statements included in this annual report. As of December 31, 2024, claims classified as contingent liabilities amounted to R$22.2 billion, of which R$9.6 billion relate to claims where we classified the risk of loss as possible and R$12.6 billion relate to claims where we classified the risk of loss as remote. In our financial statements, we only disclose information about contingent liabilities we classified as possible loss and do not record or disclose information related to remote contingencies. For further information, see “Item 3.D. Key Information—Risk Factors—Risks Relating to our Business—Any substantial monetary judgment against us or any of our directors and officers in legal proceedings may have a material adverse effect on our reputation, business or operating or financial condition and/or results.”

Pension Benefits

The present value of pension obligations depends on several factors that are determined on an actuarial basis using a few assumptions. Besides the number of employees, the assumptions used in determining the net cost (income) for pensions include a discount rate and a mortality table. Any changes in these assumptions will impact the carrying amount of pension obligations.

We determine the appropriate discount rates at the end of each year, which is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. The discount rate increased from 5.37% for the year ended December 31, 2023 to 7.37% for the year ended December 31, 2024 under Plan G0 and was increased from 5.47% for the year ended December 31, 2023 to 7.40% for the year ended December 31, 2024 under Plan G1 in order to follow the volatility in the rates applicable to the Brazilian government NTN – B, long term notes, which term is similar to the duration of the pension benefits, as described in Notes 3.20(a) and 24 to our 2024 Consolidated Financial Statements included in this annual report. The discount rate was decreased from 6.15% in 2022 to 5.37% in 2023 under Plan G0 and was increased from 6.19% in 2022 to 5.47% in 2023 under Plan G1 in order to follow the volatility in the rates applicable to the Brazilian government NTN – B, long term notes, which term is similar to the duration of the pension benefits, as described in Notes 3.20(a) and 22 to our 2024 Consolidated Financial Statements.

Other key assumptions for pension obligations are based in part on current market conditions. Additional information on the pension plans under Plan G0 and G1 is disclosed in Note 22 to our 2024 Consolidated Financial Statements included in this annual report.

Deferred income tax and social contribution

We recognize and settle taxes on income based on the results of operations verified according to the Brazilian Corporate Law, taking into consideration the provisions of the tax laws. We recognize deferred tax assets and liabilities based on the differences between the accounting balances and the tax bases of assets and liabilities.

We regularly review the recoverability of deferred tax assets and do not recognize deferred tax assets if it is probable that these assets will not be realized, based on historic taxable income, the projection of future taxable income and the estimated period to reverse temporary differences. This process requires the use of estimates and assumptions. The use of different estimates and assumptions could result in the non-recognition of a significant amount of deferred tax assets.

As of December 31, 2024, we recognized R$2,661.9 million as deferred income tax liabilities, and as of December 31, 2023, we recognized R$98.1 million as deferred income tax assets, net of the deferred tax assets and liabilities, as disclosed in Note 21 to our 2024 Consolidated Financial Statements included in this annual report. The deferred income tax liability related to the bifurcated financial asset arises from the recognition of the financial asset due to the contractual right to receive cash for investments made and not recovered by the end of the concession.

Unbilled revenue

We recognize unbilled revenue which corresponds to services rendered for which readings have not been made yet. They are recognized based on monthly estimates calculated according to average billings. Additional information on revenue and accounts receivable are described in Notes 3.4, 3.5 and 10 to our 2024 Consolidated Financial Statements included in this annual report.

Certain Transactions with our previous Controlling Shareholder

Reimbursement due from the State

Reimbursement due from the State of São Paulo for pensions paid represents supplementary pensions (Plan G0) that we pay, on behalf of the State of São Paulo, to former employees of state-owned companies which merged to form our company. These amounts must be reimbursed to us by the State of São Paulo, as the primary obligor.

In November 2008, we entered into the third amendment to the agreement with the State of São Paulo relating to payments of pension benefits made by us on its behalf. The State of São Paulo acknowledged that it owed us an outstanding balance of R$915.3 million as of September 30, 2008, relating to payments of pension benefits made by us on its behalf. We provisionally accepted, but it is not recognized in our books, the reservoirs in the Alto Tietê production system as partial payment in the amount of R$696.3 million, subject to the transfer of the property rights of these reservoirs to us. See Note 11 to our 2024 Consolidated Financial Statements included in this annual report and “Item 7. Major Shareholders and Related Party Transactions.”

On March 18, 2015, we, the State of São Paulo and DAEE, with the intervention of the Department of Sanitation and Water Resources, executed an agreement for R$1,012.3 million, consisting of R$696.3 million in principal amount and R$316.0 million in monetary adjustment of the principal through February 2015. For details about this agreement, see Note 11(a)(vi) to our 2024 Consolidated Financial Statements included in this annual report.

As of December 31, 2024 and 2023, the amounts not recognized related to pension benefits paid by us on behalf of the State of São Paulo totaled R$1,685.5 million and R$1,583.4 million, respectively. As a result, we also recognized the obligation related to pension benefits, maintained with the beneficiaries and pensioners of Plan G0. As of December 31, 2024 and 2023, the pension benefit obligations of Plan G0 totaled R$1,931.1 million and R$2,098.6 million, respectively. For detailed information on the pension benefit obligations refer to Note 24 to our 2024 Consolidated Financial Statements included in this annual report.

Accounts Receivable from the State of São Paulo for Water and Sewage Services Rendered

Certain of these accounts receivable have been overdue for a long period. We have entered into agreements with the State of São Paulo with respect to these accounts receivable. For more information on these agreements, see Note 11 to our 2024 Consolidated Financial Statements included in this annual report.

Results of Operations

The following table sets forth, for the years indicated, certain items from our income statements of operations, each expressed as a percentage of net operating revenue:

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net operating revenue

Net operating revenue for the year ended December 31, 2024 increased by R$10,573.4 million, or 41.3%, to R$36,145.5 million from R$25,572.1 million in the year ended December 31, 2023.

Net operating revenue, excluding construction revenue and the impact of interest rate adjustments on the bifurcated financial asset using the IPCA index, for the year ended December 31, 2024 increased by R$1,619.0 million, or 8.1%, to R$21,590.8 million from R$19,971.8 million in the year ended December 31, 2023. Construction revenue was R$6,225.9 million for the year ended December 31, 2024 compared to R$5,600.3 million in the year ended December 31, 2023. The main factors that led to the increase were:

Operating costs

Our operating costs for the year ended December 31, 2024 increased by R$551.2 million, or 3.4%, to R$16,603.1 million from R$16,051.9 million in the year ended December 31, 2023. As a percentage of net operating revenue, cost of services decreased to 45.9% for the year ended December 31, 2024 from 62.8% in the year ended December 31, 2023.

The increase in operating cost was mainly due to:

Gross Profit

As a result of the factors discussed above, gross profit for the year ended December 31, 2024 increased by R$10,022.2 million, or 105.3%, to R$19,542.4 million from R$9,520.2 million in the year ended December 31, 2023.  As a percentage of net operating revenue, our gross profit margin increased to 54.1% for the year ended December 31, 2024 from 37.2% in the year ended December 31, 2023, mainly due to the financial asset net revenue of R$8,328.8 million. For further information about our financial asset net revenue, see notes 3.10(b) and 16 to our Consolidated Financial Statements.

Selling Expenses

Selling expenses for the year ended December 31, 2024 decreased by R$66.5 million, or (6.8%), to R$917.6 million from R$984.1 million in the year ended December 31, 2023. As a percentage of net operating revenue, selling expenses were 2.5% for the year ended December 31, 2024 compared to 3.8% for the year ended December 31, 2023. The main reasons for the decrease in selling expenses were:

Allowance for Doubtful Accounts

Our allowance for doubtful accounts for the year ended December 31, 2024 decreased by R$95.1 million, or 14.6%, to R$557.8 million from R$652.9 million in the year ended December 31, 2023, as a result of (i) lower default rates in respect of the settlement agreements we entered into in recent years; (ii) an increase in collections and negotiations with large consumers and municipalities; and (iii) the implementation of a credit card payment scheme.

Administrative Expenses

Administrative expenses for the year ended December 31, 2024 increased by R$713.9 million, or 44.7%, to R$2,311.4 million from R$1,597.5 million in the year ended December 31, 2023. The main reasons for the increase in administrative expenses were:

For more information, see Note 31 to our 2024 Consolidated Financial Statements included in this annual report. 

Other Operating Income (Expenses), Net and Equity in Results of Investments in Affiliates

Other operating income and expenses, net, was the expense of R$245.1 million for the year ended December 31, 2024 compared to income of R$60.3 million in the year ended December 31, 2023, a variation of R$305.4 million. Other operating income consists of gains and losses from sales of property, plant and equipment, sale of contracts awarded in public bids, right to sell electricity, indemnities and reimbursement of expenses, fines and collaterals, property leases, reuse of water, PURA projects and services, net of Cofins and PIS.

Other operating expenses consist mainly of derecognition of concessions assets due to obsolescence, discontinued construction works, unproductive wells, projects considered economically unfeasible, losses on property, plant and equipment and recognition and reversal of estimated losses with asset indemnification. In 2024, the result was impacted by the recognition of a non-recurring estimated loss with certain construction works and projects of R$164.0 million and R$99.6 million in expenses related to our Privatization process.

Financial Result, Net

The financial result, net, for the year ended December, 31 2024 increased by R$275.7 million to an expense of R$1,867.7 million from an expense of R$1,592.0 million in the year ended December 31, 2023. As a percentage of net operating revenues, the financial result amounted to 5.2% for the year ended December, 31 2024 compared to 6.2% in the year ended December 31, 2023. This variation was due to:

Profit before income tax and social contribution

As a result of the factors discussed above, profit before income tax and social contribution for the year ended December 31, 2024 increased by R$8,888.8 million, to R$13,642.8 million from R$4,754.0 million in 2023. As a percentage of net operating revenue, our profit before income tax and social contribution increased to 37.7% for the year ended December 31, 2024 compared to 18.6% in the year ended December 31, 2023.

Income Tax and Social Contribution

Income tax and social contribution expense for the year ended December 31, 2024 increased by R$2,832.7 million, or 230.2% to R$4,063.2 million from R$1,230.5 million in the year ended December 31, 2023, mainly due to the R$8,328.8 million increase in net operating revenue related to financial assets. This increase was mainly offset due to:

Profit for the year

As a result of the factors discussed above, our profit for the year ended December 31, 2024 increased by R$6,056.1 million, to R$9,579.6 million from R$3,523.5 million in the year ended December 31, 2023. As a percentage of net operating revenue, our profit for the year ended December 31, 2024 increased to 26.5%, from 13.8% in the year ended December 31, 2023.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

For a discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, see “Item 5. Operating and Financial Review and Prospects — A. Results of Operations — Year Ended December 31, 2023 Compared to Year Ended December 31, 2022” of our annual report on Form 20-F for the year ended December 31, 2023, filed with the SEC on May 3, 2024.

B. Liquidity and Capital Resources

Capital Sources

In order to satisfy our liquidity and capital requirements, we have primarily relied on cash provided by operating activities, long-term financings from multilateral and development banks and capital markets debts. As of December 31, 2024, we had R$1,682.6 million in cash and cash equivalents. The outstanding current indebtedness was R$3,133.9 million as of December 31, 2024, of which R$363.1 million was denominated in foreign currency. Long-term indebtedness was R$22,124.4 million as of December 31, 2024, of which R$2,993.3 million consisted of foreign currency-denominated obligations.

Management expects that we will have sufficient funds to meet our commitments and not compromise our planned investments, given the works we carried out to improve our water security and to reduce defaults, as well as the cash we generated from operations and the availability of credit lines for investments.

In order to finance the constant investment needs in our infrastructure, we use third party funds to complement our own resources. We believe that we currently have sufficient sources of funds to implement our short- and medium-term strategy.

Cash Flows

Net Cash Generated from Operating Activities

Cash generated from operating activities is the single largest source of our liquidity and capital resources, and we expect that it will continue to be so in the future. Our net cash generated from operating activities was R$7,404.6 million, R$4,854.4 million and R$3,967.6 million for the years ended December 31, 2024, 2023 and 2022, respectively. The main driver of our cash flow from operating activities relates to our cash collections from customers, which is due to the nature of our business and to the fact that we are expanding our infrastructure. There was an increase in net cash generated from operating activities in the year ended December 31, 2024 of 52.5%.

Net Cash Used in Investing Activities

Net cash used in investing activities was R$9,975.6 million, R$4,905.5 million and R$2,878.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. The main driver of our net cash outflow for investing activities relates to purchases of intangible assets, as required under our concession agreements, which is due to the fact that we are expanding our infrastructure and service coverage. There was an increase in net cash used in investing activities for the year ended December 31, 2024 of 103.4%.

Net Cash Generated by (Used in) Financing Activities

Our net cash generated by financing activities was R$3,415.2 million for the year ended December 31, 2024, compared to (i) R$977.8 million in net cash used for the year ended December 31, 2023 and (ii) R$60.3 million in net cash used for the year ended December 31, 2022. The main driver of our cash flows from financing activities relates to the proceeds and repayments of loans generated to finance purchases of intangible assets related to our concession agreements, in order to support the expansion of our services and our payment of interest on capital. For the year ended December 31, 2024, (i) our financings increased by R$4,499.6 million compared to 2023 and (ii) our amortizations increased by R$475.2 million compared to 2023. In addition, payments of interest on capital increased by R$105.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Indebtedness Financing

Indebtedness financing

Our total financial indebtedness increased by 29.3%, from R$19,536.4 million as of December 31, 2023 to R$25,258.3 million as of December 31, 2024. In addition, during the same period, our total indebtedness denominated in foreign currency increased by 22.2%, from R$2,745.9 million as of December 31, 2023 to R$3,356.4 million as of December 31, 2024.

As of December 31, 2024, we had R$22,124.2 million in long-term indebtedness outstanding (excluding the current indebtedness), of which R$2,993.3 million consisted of foreign currency-denominated, long-term debt. We had outstanding current indebtedness of R$3,133.9 million as of December 31, 2024. As of December 31, 2024, R$363.1 million of this current portion of long-term indebtedness was denominated in foreign currency. As of December 31, 2024, our S&P domestic rating was “brAAA” and our S&P global rating was “BB”. Our Moody’s national rating was “AAA.br” as of December 31, 2024, while our Fitch national rating was “AAA(bra)” and our Fitch global ratings were “BB+” (foreign currency) and “BB+” (local currency), as of the same date.

Various contractual agreements that we have entered into, including certain financing agreements with CEF and BNDES, provide for liens over a portion of our cash flows from the payment of water and sewage provision tariffs. In addition, we provide as guarantees a portion of our cash flow generation to transactions related to PPPs.

Pursuant to these agreements, cash received from operations is required to pass through designated accounts. In the event of a default under the relevant agreement, such cash and future cash flows that are required to be deposited in such accounts become restricted and are subject to security interests in favor of the relevant creditor. As of December 31, 2024, a substantial portion of our monthly cash flows from operations was subject to these liens. As of that date, the total amount of our secured debt, including indebtedness benefiting from these liens, was R$5,596.1 million (R$5,489.0 million of principal and R$107.1 million related to interest and charges). For more information, see “—Indebtedness Financing—Financial Covenants—Local currency denominated indebtedness” and Note 18 to our 2024 Consolidated Financial Statements included in this annual report. The following table sets forth information on our indebtedness outstanding as of December 31, 2024:

Debentures:

The following table shows the maturity profile of our debt, as of December 31, 2024, for the period indicated:

As of December 31, 2024, R$1,839.8 million of our foreign currency denominated indebtedness, net of transaction costs, was denominated in U.S. dollars and R$1,484.2 million was denominated in Japanese Yen.

In 2024, we entered into derivative instruments (plain vanilla swaps). The current instruments have expiration dates ranging from July 2025 to March 2048 to fully protect us against a devaluation of the real against the U.S. dollar or the Yen.

For more information regarding foreign currency risk and all derivatives financial instruments, see Notes 5.1(a) and 5.1(d), respectively, to our 2024 Consolidated Financial Statements included in this annual report.

Our borrowings from multilateral institutions and government agencies, such as the IDB, IBRD, and JICA, are federally guaranteed, with a counter-guarantee from the State of São Paulo. For more information on the terms of these loan agreements, see “Item 7.B. Related Party Transactions—Government Guarantees of Financing.”

As of 31 December 2024, our domestic debt totaled R$21,901.9 million, primarily comprising real-denominated loans from federal and state-owned banks like CEF and BNDES, alongside debentures issued between February 2018 and September 2024, and financial leasing.

In addition, in February 2025, we issued our thirty-third debenture series totaling R$3.7 billion, maturing in 2032, 2035, and 2040. The first series (R$1.0 billion) bears interest at CDI + 0.51%, the second (R$1.4 billion) at IPCA + 7.5485%, and the third (R$1.3 billion) at IPCA + 7.3837%. Proceeds from the first series strengthen cash reserves and refinance 2025 commitments, while the second and third support the ETE Barueri expansion project. Additionally, in February 2025, interest rate swap operations were contracted for the second series of our 33^rd debenture, swapping from IPCA + 7.5485% p.a. to CDI - 0.34% p.a., and for the third series, swapping from IPCA + 7.3837% p.a. to CDI - 0.45% p.a.

Financial Covenants

We are subject to financial covenants under the agreements evidencing or governing our outstanding indebtedness.

Indebtedness

Foreign currency denominated indebtedness

With respect to our indebtedness denominated in U.S. dollars, we are subject to financial covenants, including limitations on our ability to incur debt. For example:

The financial covenants in our loan No. 1212 from the IDB require:

This loan agreement contains an early maturity clause in the event of non-compliance on our part of any obligation stipulated therein or in other contracts with the bank relating to the financing of the above-mentioned projects.

We are part to hedging agreements that cover of our debt denominated in foreign currencies. In any case, any significant devaluation of the real will affect the total portion of our debt denominated in foreign currencies when measured in reais. As a result, the net debt in reais will be affected, with consequent impact on the ratio between net debt to adjusted EBITDA, as calculated in accordance with the provisions of our loan agreements.

As of December 31, 2024, and 2023, we had met all the financial covenants of these loans and financing agreements.

Local currency denominated indebtedness

With respect to our outstanding indebtedness denominated in reais, we are subject to financial covenants.

The financial covenants in our loans with IDB Invest and IFC require:

The loan agreements with IDB Invest and IFC contain cross-default and cross-acceleration clauses, and early maturity clauses.

The covenant clauses apply to all of our indebtedness with BNDES, which totaled R$1,065.7 million as of December 31, 2024.

In summary, the BNDES financings specify two bands for the ratios of adjusted net debt / adjusted EBITDA, adjusted EBITDA / adjusted financial expenses, and other onerous debt / adjusted EBITDA. The financings also specify a collateral mechanism by which we assign a portion of our tariff payment receivables to BNDES in order to provide a partial guarantee of the amounts due under the financings. Under this mechanism, each month we must ensure that a portion of the tariff payments which we receive are deposited on a daily basis into a blocked collateral account, before being released to a regular movements account later in the day provided that BNDES has not notified the bank that we are in default. If the ratio of adjusted EBITDA / adjusted financial expenses is equal to or higher than 3.50, the ratio of adjusted net debt / adjusted EBITDA equal to or lower than 3.00, and the other onerous debt / adjusted EBITDA equal to or lower than 1.00, the amount that must pass through this blocked collateral account is R$361.7 million per month. If one of the three ratios mentioned above is not met in any two or more quarters, consecutive or not, within a twelve-month period, yet remain within the following band of ratios: adjusted EBITDA / adjusted financial expenses lower than 3.50 but equal to or higher than 2.80, adjusted net debt / adjusted EBITDA equal to or lower than 3.80 but higher than 3.00, and other onerous debt / adjusted EBITDA equal to or lower than 1.30 but higher than 1.00, the amount that must pass through the blocked collateral account is automatically increased by 20%.

The current covenant clauses are:

As of December 31, 2024, the amount that must pass through the blocked collateral account is R$361 million per month.

Additionally, since 2018, we are subject to financial covenants under the new financing agreements executed with CEF. These financial covenants require us to maintain the following financial indexes, calculated for the past 12 months on a quarterly basis:

These agreements provide that disbursements may be suspended if any of these covenants are not being complied with. In the event of non-compliance with the terms of these agreements, CEF may request the anticipated payment of the entire loan.

The agreements with CEF also contain a cross-default clause and an early maturity clause. In the event of non-compliance with the terms of the contract, the CEF can request the anticipated payment of part or all of the loan. See Note 18 to our 2024 Consolidated Financial Statements included in this annual report. The table below shows the more restrictive covenants ratios and our financial covenants ratios as of December 31, 2024.

The twenty-second, twenty-third, twenty-fourth, twenty-sixth, twenty-seventh, twenty-eighth, twenty-ninth, thirtieth, thirty-first, 32^nd and 33^rd debenture issuances require us to maintain an adjusted EBITDA/paid financial expenses ratio equal to or higher than 1.5:1.0 and an adjusted net debt/adjusted EBITDA ratio equal to or lower than 3.50:1.0. These issuances have a cross-acceleration clause.

As of December 31, 2024 and 2023, we complied with all the covenants of our loans and financing agreements.

Capital Requirements

We have, and expect to continue having, substantial liquidity and capital resource requirements. These requirements include debt-service obligations, capital expenditures to maintain, improve and expand our water and sewage systems, and dividend payments and other distributions to our shareholders, including the State of São Paulo.

Capital Expenditures

Historically, we have funded and plan to continue funding our capital expenditures with funds generated by operations and with long-term financing from international and national multilateral agencies and development banks. We generally include in our capital expenditure program for the following year the amount of investment that was not realized in the previous year. For the year ended December 31, 2024, we recorded R$6.9 billion to improve and expand our water and sewage system and to protect our water sources in order to meet the growing demand for water and sewage services in the State of São Paulo. We have budgeted investments in the amount of approximately R$70.0 billion from 2025 through 2029. For more information, see “Item 4.A. History and Development of the Company—Capital Expenditure Program.”

Dividend Distributions

We are required by our bylaws to make dividend distributions, which can be made as payments of interest on shareholders’ equity in an amount equal to or greater than 25% of the amounts available for distribution. In addition, our dividend policy, which was approved at the annual shareholders’ meeting held on July 22, 2024, establishes that this percentage be maintained until 2025. After 2025, it may be increased to 100% in 2030, provided we reach the Universalization Targets. We declared dividends of R$2,549.8 million, R$984.5 million and R$872.2 million in the years ended December 31, 2024, 2023 and 2022, respectively. The Basic Sanitation Law prohibits the distribution of profits and dividends from the Concessionaire that fails to comply with the targets and schedules set out in the respective Contracts. For more information, see “Item 7.B. Related Party Transactions—Dividends” and “Item 3.D. Risks Relating to Our Common Shares and ADSs—We may not always be in a position to pay dividends or interest on shareholders’ equity and ADSs.”

Judicial payment orders (precatório)

As of December 31, 2024, we have judicial payment orders issued in our favor in the inflation adjusted amount of R$2,967.3 million, which are not recognized in our Consolidated Financial Statements because of the difficulty to obtain a reasonable estimate to measure such assets, due to the uncertainties related to the beginning and the end of the payments. Judicial payment orders are recognized upon the beginning of their receipt or when they are traded. For more information on judicial payment orders, see Note 10 to our 2024 Consolidated Financial Statements included in this annual report.

Research and innovation

The advancement of research and technological development is part of our strategic guidelines, and aims to implement innovation in operations, processes and services. Such efforts seek to increase organizational efficiency, reflecting in greater customer satisfaction, improved quality of life, environmental sustainability and competitiveness, with improved productivity and quality of our processes and services.

Our strategic innovation process involves the creation of new business models, new ways of meeting the needs of consumers, new organizational processes, new ways of competing and cooperating in the business environment and improvements to service delivery, while at the same time promoting protection of the environment and public health.

We won the Valor Inovação Brasil 2024 award, winning first place in the “Infrastructure” segment, which also incorporates the sanitation sector. The award is promoted by the newspaper Valor Econômico and Strategy&, which is PwC’s strategic consultancy. The award evaluates the innovative renewal of organizations in four major blocks: planning, execution, results and recognition. Our third place in 2022, second place in 2023 and first place in 2024, shows our role in innovation in the sanitation sector. In addition, considering the general ranking of the 150 most innovative companies in Brazil in all 25 mapped segments, we were ranked 11th in 2024.

We set up a Corporate “Research, Technological Development and Innovation” Program, which allows us to differentiate the financial resources spent specifically for this purpose within our budget structure. For the year ended December 31, 2024, we allocated R$52.1 million to Research, Development and Innovation (“RD&I”) projects. These resources are a differential in our results and indicate our capacity for innovation and pioneering, which can bring fiscal, tariff and financial advantages. We carry out several actions for the implementation of innovative technological solutions systematically throughout our company. These solutions are aimed at improving construction and operational processes for water and wastewater systems, water and wastewater treatment solutions, asset control and management, renewable energy generation processes, energy efficiency, user relationship technologies, circular economy projects, waste reduction, and utilization methods, among others. Some may even represent new business opportunities.

In addition, we have submitted several innovation projects to the Brazilian Ministry of Science and Technology, requesting tax benefits provided for in certain Brazilian laws such as the Lei do Bem. Currently, 96.3% of our claims for approximately R$61.84 million in expenditures have been approved, representing a tax credit of more than R$16.20 million for us. In addition, based on programs already in place in the power and gas sectors, we maintain a portfolio of prioritized projects with ARSESP in its Quadrennial Research and Technological Development Program for Innovation in Basic Sanitation Services (PD&I Program), which requires the application of the 0.05% of revenue to RD&I projects. Accordingly, the first cycle of the program, covering the tariff cycle 2021-2024, is ongoing. ARSESP has extended this first cycle of the program to include 2025. The total financial amount approved in the PD&I Program has surpassed R$56.0 million, to be applied in 16 projects approved by ARSESP to be carried out by the end of 2025, in order to meet the goal of the current cycle, of which approximately R$12.8 million were executed in 2024.

In line with business planning, the structuring of RD&I actions is based on the concept of a circular economy; that is, focused on the intelligence of nature, the circular process opposes the traditional linear production process. As part of this concept, residues are inputs to produce new products and new cycles. We have highlighted below certain RD&I projects that use the concept of a circular economy, which strongly supports resource recovery, as part of the processes for the water and sewage treatment.

The sequential implementation of integrated actions for liquid, solid and gaseous sewage treatment phases at the sewage treatment plant in the municipality of Franca aims to optimize processes and transform the site into a resource recovery plant. Since 2018, a biogas upgrade project in this sewage treatment plant has been producing biomethane for vehicle use. This sewage treatment plant treats an average of 500 liters per second of sewage and produces around 2,500 m³ of biogas per day. The upgrade system can produce biomethane to replace 1,500 liters of common gas daily. The biomethane currently supplies part of our Franca fleet. As a result of the tests carried out, we are studying the replication of the technology in other large-scale sewage treatment plants located in the São Paulo metropolitan region and in the state’s interior.

At the same plant, we developed and are operating a sludge dryer based on solar radiation.

The project also provides for other actions in the planning and contracting phase, such as the use of energy from hydraulic sources, in addition to other beneficial applications of biogas.

At the Barueri sewage treatment plant, we implemented a plasma gasification system for the processing of sludge generated. At the end of the process, this system generates inert vitreous residue with a drastic reduction in its volume, with a potential for reuse as raw material in construction, meaning it does not need to be disposed of in landfills.

In 2024, we initiated the installation of a pilot thermal sludge treatment plant using pyrolysis, concluded in December 2024, with the objective of evaluating the potential of byproducts generated by such treatment, such as biocarbon and pyrolytic oil. A six-month trial period is scheduled to begin in February 2025. In an ongoing project, results of the studies conducted under the Support Program for Research in Partnership for Technological Innovation (PITE-SABESP/FAPESP) in collaboration with UNESP and EMBRAPA were presented. These studies focused on transforming sludge waste from Water Treatment Plants into raw materials for civil engineering and agriculture, adding value to this byproduct.

As a component of our partnership with FAPESP, financial resources are invested equally to subsidize and support the development of basic and applied research projects under the Support Program for Research in Partnership for Technological Innovation for research projects in academic or research institutions, whose themes originated from the demands pointed out by the operational areas. This partnership has already resulted in 17 projects with different universities, such as: USP, Technological Institute of Aeronautics, UNIFESP, National Institute for Space Research and UNESP. The partnership provides for a non-refundable financing of R$50.0 million, divided equally between us and FAPESP. Projects from the first and second collaborative calls led to the filing of seven national patent applications before the INPI, three of which were granted, two international patent applications under the PCT before the World Intellectual Property Organization and two software registration requests. The 12 projects selected in the third call for proposal are currently in the development phase.

Another innovative project that we have implemented is the Pinheiros River Oxygenation System. This project is being developed alongside other sanitation programs in Rio Pinheiros. The project consists of the implementation of an innovative oxygenation technology called SDOx. This technology, unlike conventional aeration technologies, has the potential to transfer a greater amount of oxygen to the water, through a supersaturated solution and its dispersion in the water. The goal of this project is to enhance the natural self-purification process by artificially increasing the oxygen levels of the water and verify the technical-economic feasibility of the technology, with a view to replicating. The project is in its third year of operation, with satisfactory results in terms of the gradual increase in oxygen concentration in the upper channel of the river.

With the water quality data obtained with the project, a study is carried out by CETESB to assess the improvement in air quality around the Pinheiros River has shown a connection between the improvement in air quality and the improvement in the river’s water quality, as a result of the sanitation actions implemented in the Pinheiros River basin.

In 2024, a new department was created with the aim of implementing guidelines and a portfolio of unconventional solutions to meet the targets set in the new concession agreement, encompassing rural areas and informal urban settlements.

Open Innovation

We invest in the development and implementation of initiatives as part of our open innovation concept, a concept embedded in our actions, with no specific program established. This concept generates ideas, thoughts, processes, prospect for solutions, shares needs, and exchanges knowledge and research with the participation of internal and external segments of our company. These contributions span a diverse range of sectors, enabling us to harness innovative solutions and technologies to enhance our processes, products and services. With this, we seek innovative solutions from the productive sectors of the market, including startups, for the development of solutions.

Specifically, we encourage startups to take on challenges and propose validated solutions for a wide array of problems. Their goal is to achieve scalability and acceleration, ultimately creating a positive impact on their new products and businesses. This proactive approach aims to stimulate the sanitation market and potentially lead to the development of solutions that cater to our specific needs.

We also perform tests on innovative solutions that arise in response to market demands, at various stages of development, to evaluate their suitability for application within our operations. These collaborative technological initiatives not only enable us to propose technology-driven enhancements to our processes and services but also afford external companies in the market an opportunity to rigorously trial their solutions in real sanitation environments. This provides a platform for assessing the effectiveness of their solutions and, when necessary, identifying areas for improvement.

In 2024, our internal innovation program was launched, aimed at capturing and developing ideas and projects in a participatory manner. Through this open innovation program, we are laying the groundwork for an innovative ecosystem within the sanitation sector.

Furthermore, we entered into a second agreement with FAPESP, which is focused on providing support for scientific and technological research within micro, small and medium enterprises in the State of São Paulo. This initiative is part of the small enterprises’ innovation program, which aims to accelerate startups dedicated to innovative projects that address the challenges we face. We are currently in negotiations to launch the second public request for proposals for this program in 2025.Another initiative derived from the agreement with FAPESP is being developed with the Institute of Science, Mathematics and Computing of the University of São Paulo - ICMC, São Carlos Campus. The project was approved by FAPESP and consists of the use of Artificial Intelligence applied in the sanitation sector in a broad concept of “smart cities”.

Similarly, we participate in the Technology Approval Group (TAG), coordinated by ISLE Utilities, an innovation consultancy firm, with support from IDB Lab, the innovation and venture capital arm of the IDB. The evaluates technologies specifically aimed at the sanitation sector, which meets periodically to analyze the potential application of innovative technologies presented by startups previously selected for companies in the sector.

We also publish the DAE Magazine on a bi-monthly basis, which is an engineering journal produced by a dedicated team of opinion leaders that had released over 240 editions since its inaugural edition. This journal was ranked as “B1” category publication in the Qualis/CAPES system in July 2019, a ranking applicable for the period of 2021-2024. Through the dissemination of technical and scientific articles covering topics related to basic and environmental sanitation, DAE Magazine’s objective is to foster and propagate advancements in processes, innovations and technological breakthroughs.

We expect to continue to operate in a competitive and regulated environment which will pose continued risks to our existing businesses, placing the profitability of our assets under pressure. The following list sets out, what we believe to be, the most important trends, uncertainties and events that are reasonably likely to continue to have a material effect on our revenues, income from continuing operations, profitability, liquidity and capital resources, or that may cause reported financial information to be not necessarily indicative of future operating results or financial condition:

In addition to the information set out above, see “Cautionary Statements About Forward-Looking Statements” for further information related to our forward-looking statements, and “Item 3.D. Risk Factors” for a description of certain factors that could affect our industry and our own performance in the future.

We had no off-balance sheet arrangements as of December 31, 2024.

Our debt obligations and other contractual obligations as of December 31, 2024 were:

We believe that we can meet the maturity schedule through a combination of funds generated by operations, the net proceeds of new issuances of debt securities in the Brazilian and international capital markets and additional borrowings from domestic and foreign lenders. Our borrowings are not affected by seasonality. For information concerning the interest rates on our indebtedness outstanding as of December 31, 2024, see Note 18 to our 2024 Consolidated Financial Statements, included elsewhere in this annual report.

Under our bylaws and Brazilian Corporate Law, we are managed by our Board of Directors (Conselho de Administração), which currently consists of nine directors, and a Board of Officers (Diretoria Executiva), which currently consists of up to seven statutory executive officers.

Board of Directors

Our bylaws provide for a total of nine regular members for the Board of Directors, elected and removable by the General Shareholder’s Meeting, serving a unified term of up to two years and such term may be renewed without limitation.

In addition, at least three members of the Board of Directors must be independent, in accordance with our bylaws and the definition of the Novo Mercado Listing Regulation, and the characterization of the nominees to the Board of Directors as independent members must be decided at the General Assembly that elects them.

On September 27, 2024, an Extraordinary General Shareholders’ meeting was held, during which the shareholders voted on the election of members of the Board of Directors to serve until the 2026 Annual Shareholders’ Meeting, the appointment of independent members of the Board of Directors, and the election of members of the Fiscal Council to serve until the 2025 Annual Shareholders’ Meeting. Three of these members were already part of our Board of Directors. The terms of office of the current directors will end after the general shareholders’ meeting to be held in 2026, when the current members will be up for re-election.

Our Board of Directors ordinarily meets once a month or, when necessary for the interests of our company, when called by at least three members or the chairman. Its responsibilities include the establishment of policy and general orientation of our business, and the appointment and supervision of our executive officers.

The following are the names, year of birth, positions, dates of election and brief biographies of the members of our Board of Directors as of the date of this annual report:

Alexandre Gonçalves Silva holds a degree in Mechanical Engineering from the Pontifical Catholic University of Rio de Janeiro. He has been a board member of EMBRAER since 2011 and has served as its Chair since 2012. Mr. Silva was President of GE Brazil (2001-2007), President of GE CELMA (1989-2001), Engineer at CTA (1974-1976), Manager at Motortec (1976-1989), and Engineer at VARIG (1968-1974). The board member is independent, in accordance with Articles 16, 17, and 25 of the Novo Mercado Listing Regulation, and Article 6 of Annex K of CVM Resolution 80. Additionally, he declares that he is not a politically exposed person as defined by applicable regulations and does not hold positions in other companies or third-sector organizations.

Anderson Marcio de Oliveira holds a degree in Law from the Universidade Católica de Pernambuco, a master’s degree in Public Law from the Universidade Federal de Pernambuco, and a master’s degree in Regulatory Law from Fundação Getúlio Vargas, as well as an LLM in State Law and Regulation from Fundação Getúlio Vargas. Additionally, he has training from the Harvard Kennedy School in “Creating Collaborative Solutions: Innovations in Governance” and “Infrastructure in a Market Economy: Public-Private Partnerships in a Changing World.” He was a member of the Fiscal Council of Nuclebrás (2021-2023) and the Santos Port Authority (2022-2023), Program Director at the Ministry of Mines and Energy, coordinating actions in the sectors of electric energy, oil and gas, and mining, including the capitalization of Eletrobras (2019-2023), Program Director of Investment Partnerships at the Presidency of the Republic, overseeing and structuring projects in the electric sector in the segments of generation, transmission, and distribution (2016-2019). Mr. Oliveira also worked as a lawyer at the National Bank for Economic Development (2010-2016). Currently, he is the Executive Secretary at the Secretariat of Environment, Infrastructure, and Logistics of the State of São Paulo and also a member of the Board of Directors of us (since 2023) and the Metropolitan Water and Energy Company (EMAE).

Augusto Miranda da Paz Junior has a sustained career in the multi-utilities sector. Since 2013, he has been the CEO of Grupo Equatorial, a holding company operating in the segments of Energy Distribution, Sanitation, Transmission, Telecom, Services, Distributed Generation, and Renewable Energies. Mr. Miranda is an Electrical Engineer graduated from the Federal University of Bahia, with a specialization in Maintenance Management promoted by Eletrobrás in partnership with PUC/RJ and the Federal School of Engineering of Itajubá/MG, and an MBA in Energy Business Management from FGV/SP. Before joining CEMAR (now Equatorial Maranhão), he held various positions at COELBA in the areas of Electric System Management. He joined the Equatorial group in 2004 as Engineering Director of CEMAR. From 2007, he served as Vice President of Operations until he assumed the Presidency of us in 2010 and became CEO of Grupo Equatorial in 2013. He led the planning, acquisition, and turnaround of companies in various segments. He is focused on results, team building, conflict management, knowledge of the multi-utilities market, and a strong willingness to take risks and handle pressures.

Claudia Polto da Cunha holds a degree in Law from the University of São Paulo, with a master’s degree from the same institution. She is currently a State Attorney and Advisor to the PGE Office, responsible for coordinating state-owned companies. Ms. Claudia Polto da Cunha was Director of Corporate Affairs at Companhia Paulista de Parcerias from 2006 to 2016, Deputy Attorney General of the State (2020-2022), and has served on various boards of directors: at Sabesp (2014-2016 and 2020-2023); as Chair of the Board of Directors of Companhia Paulista de Securitização; Board Member of Metrô and Board Member of EMTU, and is currently on the Board of Directors of EMAE. Ms. Claudia Polto is a certified board member by IBGC and has extensive experience in infrastructure, regulated sectors, corporate governance, and public corporate and business law.

Gustavo Rocha Gattass holds a degree in Economics from PUC-Rio. He is currently a Board Member of SABESP, PRIO S.A., Serena Energia S.A., and Canacol Energy LTD. Mr. Gattass served as a Board Member of Copasa S.A. (2017-2023), BR Distribuidora (2015-2016), and as an Alternate Board Member of Petrobras S.A. (2015-2016) and Sanepar (2017). He was the Head of the Corporate Analysis Department at Banco BTG Pactual from 2009 to 2015. He worked as a Corporate Analyst in the Oil and Gas, Energy, and Sanitation sectors at Icatu (1997-1998), UBS (1998-2009), and BTG Pactual (2009-2015).

Karla Bertocco Trindade holds a degree in Public Administration from Fundação Getúlio Vargas and a degree in Law from Pontifícia Universidade Católica de São Paulo, with a postgraduate degree in Administrative Law from the School of Law at Fundação Getúlio Vargas and participation in the Diversity Program in Boards of Directors from the Brazilian Institute of Corporate Governance. She is currently the Chair of the Board of Directors of Sabesp (since 2023) and the Coordinator of the Sustainability and Corporate Responsibility Committee, as well as the Strategy and New Business Committee (since October 2024). She is also a board member at VINCI, a French infrastructure company (since April 2025), a partner at Jive (formerly Mauá Capital) Investimentos (since 2020) and an independent board member and the coordinator of the audit committee at Orizon Valorização de Resíduos (since 2020). Ms. Bertocco served as an advisor to the Presidency of Sabesp (2003-2006), State Sanitation Coordinator (2007), Director of Institutional Relations at the Regulatory Agency for Sanitation and Energy of the State of São Paulo – ARSESP (2008-2010), General Director of the Regulatory Agency for Delegated Public Transport Services of the State of São Paulo – ARTESP (2011 to 2015), Undersecretary of Partnerships and Innovation (2015 to 2018), our CEO (2018), and Director of Government and Infrastructure at BNDES (2019). She also served as a board member and member of the regulatory and operational committee at Equatorial Energia (2022-2023), and as a board member of Companhia Riograndense de Saneamento – CORSAN (2020-2022), where she was also the Coordinator of the Innovation and Sustainability Committee.

Mateus Affonso Bandeira holds a degree in Computer Science from the Catholic University of Pelotas, a postgraduate degree in Finance and Management from Fundação Getúlio Vargas - FGV and Universidade Federal do Rio Grande do Sul - UFRGS, an MBA from The Wharton School – University of Pennsylvania, and completed the OPM – Owner and President Management Program at Harvard Business School. Mr. Bandeira has served as board member at Vibra Energia since 2019, Intelbras since 2022, and CVC Corp as board president and member since 2023. He served as board member of Marcopolo (2022-2025) and Oi S/A (2020-2024), serving also as CEO at Grupo Oi from January to December of 2024. He was CEO and Managing Partner at Falconi, a management consultancy (2011-2017), where he led the implementation of the partnership model and internationalization, opening companies in the USA and Mexico. He was a systems analyst, IT manager, and CIO. He became a public servant for the State in 1993 at the Treasury Department of Rio Grande do Sul. After working at the Ministry of Finance and the Federal Senate, he led the Treasury of the State of Rio Grande do Sul in 2007 and was appointed Secretary of Planning and Management in 2008. In 2010, he assumed the presidency of Banrisul (board member 2008-2011), resigning from this position in 2011.Tiago de Almeida Noel holds a bachelor’s degree in Economics. He is a partner at Opportunity, where he has served on the investment committee since 2020, having previously been a partner at Athena Capital from 2014 to 2020. He has been a board member of Equatorial Energia since 2021, serving as the coordinator of the Strategy and New Business Committee, a member of the Strategy and Innovation Committee, a member of the Operational Committee, and a member of the Statutory Audit Committee. He was a board member of Echoenergia Participações from 2022 to 2024.

Tinn Freire Amado holds a degree in Electrical Engineering from the Federal School of Engineering of Itajubá, with a master’s degree in Regulation Economics and Competition Defense from the University of Brasília. He is currently the Executive Director of Equatorial Energia. Mr. Amado was the CEO of Echoenergia (2022-2024) and Director of Regulation and New Business at Equatorial Energia (2008-2022). He also serves as a board member of various subsidiaries/controlled companies of Equatorial Energia.

Board of Executive Officers

Our Board of Executive Officers may consist of up to seven statutory executive officers, including a Chief Executive Officer, a Chief Financial and Investor Relations Officer, and the others without specific designation, all appointed by our Board of Directors for a two-year term, with permitted re-elections. Our Board of Executive Officers is composed exclusively of professionals with qualifications compatible with their duties and proven experience and capability in their respective areas. Our executive officers are responsible for all matters concerning our day-to-day management and operations. Members of our Board of Executive Officers have individual responsibilities established by our Board of Directors and our bylaws.

As of the date of this annual report, we have three statutory executive officers: the Chief Executive Officer elected on September 24, 2024, by the Board of Directors and, the Chief Financial Officer and Investor Relations Officer and the Chief Engineering Officer elected on October 01, 2024 by the Board of Directors.

The following are the names, year of birth, positions, dates of election, and brief biographies of the members of our statutory executive officers as of the date of this annual report:

Carlos Augusto Leone Piani has over 20 years of experience in investments, mergers, and acquisitions, and has held various executive positions. He served as president of HPX Corp, the first SPAC dedicated to the Brazilian market (2020-2023). He is currently a board member of Hapvida Participações e Investimentos and Modular Data Centers. Previously, he was chairman of the Board of Directors of Equatorial Energia and a board member of Vibra Energia. Additionally, he was the global head of the strategic initiatives and mergers and acquisitions team and president of the Canadian division of Kraft Heinz (2019) and President of Kraft Heinz Canada (2015-2018). He also served as President of PDG Realty (2012-2015) and was a partner and co-head of the Private Equity area at Vinci Partners (2010-2015). He served as President and CFO of Equatorial Energia and its subsidiaries (2004-2010) and as a mergers and acquisitions analyst and partner in the Illiquid Proprietary Investments area at Banco Pactual (1998-2004). Mr. Carlos Piani holds a degree in Business Administration from IBMEC/RJ and in Data Processing from PUC-Rio. He also holds the CFA Charterholder title from the CFA Institute and completed the Owners and President Management (OPM) Program at Harvard Business School.

Daniel Szlak holds a degree in Chemical Engineering from the Polytechnic School of the University of São Paulo, has training in Leadership and People Management from Insper, and participated in executive training programs at Singularity University in Santa Clara, California, and Harvard Business School. Mr. Szlak was the CFO of Combio (2023-2024), the largest thermal energy supplier in Brazil, where he was responsible for the areas of finance, information technology, shared services center, and procurement. At Kraft Heinz, where he worked between 2014 and 2023, he was the CFO for Latin America and Canada and CEO of the company in Venezuela. Mr. Szlak was also a board member of BR Spices (2022-2023). Before that, he was a consultant at IGC Partners and worked at Procter & Gamble Brazil.