Companhia de Saneamento do Paraná - SANEPAR (SAPR11.SA) Q3 FY2025 Earnings Call Transcript & Summary

Thank you for joining us at the conference announcing the results of the third quarter 2025 and the public meeting 2025 for Saneamento do Parana. [Operator Instructions]. Please note that this video conference is being recorded and will be made available on the company's Investor Relations website, [email protected], where the full earnings release and presentation materials are accessible. You can download the presentation directly from the chat available in English. [Operator Instructions].   Please be aware that the information provided during this presentation, including any forward-looking statements regarding Sanepar's business outlook, projections, and financial targets, reflects management's current beliefs and assumptions as well as information available at the time.   These statements are subject to risks, uncertainties, and changes in circumstances that could cause actual results to differ materially. Investors should consider general economic conditions, market factors, and other variables that could impact the company's performance and cause actual results to differ from those expressed in forward-looking statements.   So now I'll hand it over to our Chief Financial and Investor Relations Officer, Abel Demetrio.

Thank you, Rodrigo. Good morning, everyone. Thank you for taking part in this event. I have with me our Directors, Investor Director, Julio Gonchorosky, and our specialist of innovation specialist, Gustavo.   So today, we will discuss the earnings results of the third quarter of 2025 and the public meeting of 2025. So, this is our organization's structure. So, of course, the general assembly at the top, also the fiscal council, Board of Directors, eligibility Committee, Statutory Audit Committee, office of the President, Technical Committee, internal audit, communication and marketing department, governance, risk and compliance department, and the other Boards that are part of the Executive Board of the company.   In the next slide, we can see that in the ordinary, we have the state representing 60.8% of the ordinary shares. The working capital of the company is then the foreign shareholders, 27.42, and municipalities in the ordinary participation. Concerning the total, the state has 20.3% the municipal 0.37% national shareholders 52.18% and the foreign shareholders 27.42%.   Before starting to present the earnings results of the third quarter 2025, I would like to clarify that our President is representing the governor at an event. So that's why he is absent today from this presentation.   So the next page, I'd like to discuss the highlights of the third quarter '25 related to investments. We will talk in more detail later. We invested BRL 765 million, with an increase of 52% compared to the same period of last year. The default until September is accumulated at 0.5% below our provision. So in the last 3 years, we can say 2024, 2023, we had a very benign default.   So it is a, let's say, it's quite a healthy default, very much under control due to the actions the company has implemented more recently. I would like to pay homage to all the people in the company. The company received the transparency award once again, granted by ANEFAC. And for the third consecutive year, it was a highlight in its net revenue, its results. So congratulations to everyone for this accomplishment for the company.   Next page, I would like to talk a little bit about the operational result. We had measured volume and invoice volume increasing by 1.1% and 0.9%. Obviously, we expected a higher increase. But this year, we had the climate issues related to a prolonged winter, with fewer days of rain. So these days, it was reported that in 26 years, we have had the coldest days in the state of Paraná with a reasonable amount of rain. This ends up impacting the volumes measured and invoiced volume.   Related to sewage, the increase was 2.6% in collected volume. And in the invoiced volume, it also reflects the expansion towards universization, and the increase was robust. We are universal. So, the sewage, we are moving very steadily towards universalization.   On the right side of the screen, let's talk about the connections that accumulated until September was 34,571, which is a 1.3% increase. In terms of economies, it represents a 1.6% increase, reaching 12 months, 67,144 new economies of water.   About sewage, we have 2.9% in the period of 1 year, 2939 new sewage connections in terms of economies, it's 106,473 new economies. So very significant for the company. The next slide, the volume of the reservoir levels. In September, it was the winter period. And obviously, we use the reservoirs to make up for the lower level of rain. Still, the volumes of the four reservoirs in this region were quite consistent, with 70% [Pason] 91% [Piracora], 78%.   Now I think in the next months, with spring and summer, we should recover these levels of the reservoirs. We have to remember that we are under the decree that determines, but in our region, we managed to go through this period with this drought, in better off than we expected.   In terms of the next year, we have a fifth reservoir that will bring forth more water supply for the region due to the beginning of filling up in the next few months. Our service indexes, the objective is very strong universalization, the deadline, as we saw in the last 99%, is the goal, and Sanepar already has 100% for water for the population, sewage, the goal is 90%.   In September, we reached 81.9%. And the objective of the company is to reach this framework, bringing it closer to the goal. So all the effort has been towards CapEx, exactly to get this 8% that is missing for the universalization of the municipality serviced by the cost.   Now, the next slide talks about the main financial indicators, as I said previously, in 2023, our default until September was quite benign, the 3.4%. So we recovered past credits 2023, '24, we had 0.8% and this year, 0.5% of default. So this default is measured in one day. So any late bill is considered in the losses per connection; we kept 223, which is the same level as 2024, a little higher than 2022, which was 221 liters per connection per day of losses.  Our EBITDA margin at the end of September it's 41.5%OIC, 18.6% OIC annualized, both 13.1%. Now, the quarter results, we had our net revenue reaching BRL 1.80 billion, an increase of 5.5% compared to the same period of last year. Our EBITDA was BRL 56 million, a reduction of 26.8% compared to the same period of last year. We will see the reasons why and which reflect in the net profit, which was BRL 246 million, a decrease of 34.7% in cost and expenses, an increase of 31%, BRL 1.249 billion margin EBITDA, and a liquid margin of 13.7%.   Next slide, we talk about the accumulated results. We have a net revenue increase of 4.8%, reaching BRL 5.3 billion. EBITDA increases 1.4%, reaching [indiscernible]. Net profit increases 51.7%, reaching BRL 18 cost and expenses and EBITDA increased 7.3%, reaching BRL 3.107 billion. Margin 41.5% [indiscernible] in addition to 1.4% compared to the same period last year, and the net margin reached 32.3%, an increase of 10% compared to the same period last year.   Now, the quarter results, our revenue increased 5.5%. The personnel cost was over BRL 4 million, a reduction of 2.1% compared to some compensation, labor compensation, and voluntary dismissals. We have to remember that this plan of voluntary dismissal, the company made a provision in this year of BRL 174 million.   We are still in a phase of dismissals, and we do not see the reflection of the people who were dismissed in September, the people who left at the end of October, and there is another step in November for the people who will leave the company through this program. So, this number, we expect that in the next few months will have an impact on the payroll. Of course, the company rehired some employees for some jobs, but the account of personnel will have some positive results reflected in the management.  PPR is directly related to the issue of a net profit, a reduction of 4.7% in the quarter. Materials, there was an increase of 10.5%. It was not driven by material, basically because material increased over 3%, but its material related to maintenance of networks, laboratories, and the issue of electromechanical issues. Electricity, Gustavo, in his presentation, will speak about it with more details about three markets, but the reflection in the quarter was a reduction of 13.2% with an expense of electricity of BRL 107 million in the period. Services of third parties with an increased of 25.4%.   Here, we have the reflection of the PPP payment to the services for sewage, which were enforced in the two new micro regions. An increase in some other accounts of services of third parties, like surveillance, has been impacting the results of the company, the registry, and billing services. This is above our forecast. We are working strongly on this commercial issue. So these are the main items, especially related to clients. We also have the issue related to maintenance of networks is quite relevant, and it has been bringing an impact on the issue of service of third parties.   And it's reflected in this item in the general cost, and the fiscal was 22.7% judicial provisions and regulations. We have a provision of BRL 166 million, which was the main impact in the quarter. We have to remember that the negative percentage of 230 million is due to the because we had a reversion of provision of million this year in the quarter, BRL 166 million. So what happens, we had a relevant provision for the municipality of BRL 87 million, which impacted the results of this quarter. It's an event. It's not a recurrent event. For 9 months, besides this, we had the issue of Itaústruction, which had a relevant impact of BRL 54 million of provision.   Besides Pontagrosa, we had BRL 15 million, some actions impacting the results this year, especially in this quarter, provision for health care and social provision were costs and expenses. We had a reversion last year in the sense that last year, we had an expense of BRL 48.8240. And this year, the revenue was higher than the expenses of BRL 48.8380ion, reflecting positively in the results. And other costs and expenses, a reduction of 3.4% in the period.   Next page is the [indiscernible]. We will speak a little bit when we speak generally, the revenue increased 4.8% personnel increased 20.4%. I want to highlight that we are working and hues of the processes, including all issues related to where we had some lawsuits that were reversed. And so they left some provisions, and they entered in the personnel account PPL 40%, material 5%.   In 9 months, it's in line with inflation, electricity in 9 months, there was a drop of 22% services of third parties, a 35.2% increase. General and fiscal, a drop of 8.6% judicial provisions, a provision of BRL 1 billion was impacted due to payment. The provisions for health care follow the same percentage, 13% and financial expenses and other costs and expenses due to payment, a reversion of BRL 1.5 billion.   About profit, I spoke at the beginning about the increase. And in 9 months, the increase was 35.6%, reaching BRL 8.864 billion, a significant increase compared to last year. And these investments are divided into 30% investments in water, 58% in sewage, and 12% other investments. The origin of the resource is 57% of its own capital, 43% third-party capital. Now, net debt and leverage in the short term are a debt of BRL 945 million, and long term, BRL 6.31 billion. Total debt, BRL 7.256 billion.   So here, we have an impact on cash flow relevant to the receivables of the judicial receivables. So we had over BRL 5 billion in cash flow, which makes our net debt BRL 1 billion, a reduction of 71.2% and a leverage of 0.5x EBITDA. So in September 2024, this leverage was 1.7x. Obviously, with the future definitions of management related to the destination of this payment and the destination of the resources, the cash flow will go back to lower levels, more normal levels, let's say, but this should take some time to take place.   The generation of flow with the receivable of payments, we have BRL 6.4 billion, an increase of BRL 210.8 million compared to last year, and BRL 290 million is the conversion of EBITDA into cash flow. The cost of capital increased by 1.4%, reaching 11.9% and maintenance of CD 15% throughout the year of 2025. It brings accumulated higher cost for the company, that reflected in the total cost of our debt, which was 10.5% in this period was 10.5%.   Still, our debt is very well distributed in terms of indicators, 33% represented by financial 31% connected to deposits of interbanks, 27%, PAI, 27%PPPs represent 4%, so we have variation. We do not have revenue in foreign money, and the other 3% for CCM, 2%. So this is the graph, the debt breakdown.   About the covenant, the covenants suffered a positive impact from the receivable of resources. So it's the EBITDA debt is equal to or less than 3% EBITDA, and for service of debt is 2.8% in line with previous years. Other debts include labor, the fiscal, and electricity, among others. So we are at the limit of 1.4x and other debts, with social security and health care. The contracts with CAIXA, we have EBITDA adjusted, which has to be higher or bigger than 1.5. We had the impact of payment, causing the levels to be above the necessary contracts with CAIXA, with the debt adjusted 0.3x. So we are doing very well. Other debt onerous adjusted is 0.3. In Banco do Brasil, which is the new operation that the company made to launch our debt. So the debt service coverage ratio is 8.1x, still comfortable. Adjusted EBITDA net financial expense, 0.3, is quite comfortable, and we are meeting all the covenants.   The issues of debentures 9 to 14 initials, we have 2 covenants, which are the debt to EBITDA adjusted by financial expenses, reached all comfortable numbers. Contract KFW, we have the lab also, so we are doing well and quite comfortable in all these covenants. And now speaking in the next slide about the balance sheet. We had the issue of net debt, an increase in the financial investments, which reduced the net debt, so from BRL 1.700 billion, we moved to over BRL 5 billion at the end of '25. The turnover is benign. We have some receivables. We had a reduction of 5%.   The increase in supplies from BRL 33 billion to over BRL 400 million in salaries, we have an increase of 77.7%, causing our turnover to be quite good in 24 days. In other words, we have an increase in the volume of investments, increasing 24%, reaching BRL 3.464 billion. We have BRL 12 billion as our investment. Our turnover has operational activities, with an increase quite significant. So once again, the payment was over BRL 6 billion. And the investment, BRL 1.8 billion, an increase of significant increase in the finance investment, an increase of 63%. And we had an increase of BRL 4.079 billion from BRL 1.800 billion to BRL 5.880 billion at the end of September 2025.   So continuing our presentation, I hand over to our Director of Investment, Leura Lucia Conte de Oliveira.

Good morning, everyone. Concerning our investment plan in the cycle 2025-2029, we always work with some premises. So the main goal is to ensure water supply and quality, and the need to comply with environmental and water use permit requirements, environmental compliance, including demands established under the judicial agreement, and conditions and targets related to permits and environmental licenses. Also, we meet universalization targets as defined in the agreement under the MRAs and within program and concessions contracts and other obligations with the 345 municipalities operated by Sanepar comply considering the standardized deadline of June 2048.   Also, we comply with formal agreements entered into with the public prosecutor's office. We adhere to the financial limits projected in the business plan, and we always try to operate and maintain systems efficiently and sustainably. Our plan of investments we work with guidelines that involve all the areas of the company. So in the commercial areas, we meet the goals and also support the municipalities because SANEPAR has the knowledge, so we have to support the municipalities so that they have plans that align with feasible plans, so that we meet the mission of the company.   In terms of financial investment based on cash available, debt level, and cost of debt, seeking financial opportunities, regulatory investments -- So investments based on cash availability, debt level, and cost of debt, seeking financial opportunities, regulatory investments must be remunerated through tariffs in order to ensure the company's financial sustainability, eligibility related to the provision of water and wastewater services, and usefulness and prudence planned and executed under sound technical and cost efficiency assumptions.   Environmental and water resources priority should be given to investments that ensure environmental compliance and maintenance, and operations. Here, we have the nature of each one of the CapEx. We have BRL 1 billion, practically BRL 1.4 billion in maintenance. We have 38% of our investments in water systems,56.1% in sewage, and 5.6% this increase a little due to all the needs of infrastructure that we have, which increases the systems. 5.6% in infrastructure and solid residues. This cycle increased the service of water, seeking to guarantee service for the population. Concerning CapEx, when we break down, we have BRL 1.4 billion investments in maintenance in expansion of the market, which is BRL 7.8 billion. Environmental compliance is a significant amount, practically BRL 2 billion, and infrastructure, BRL 658 million. As you can see, with the issue of expansion of the market, we still have room to grow, and our investments are strongly focused on that. The total CapEx of our period is BRL 11.8 billion, and in 2025, BRL 2.361 billion. Right now, we are setting, but these are the consolidated numbers we have. Here, we are looking at the state of Parana concerning the coverage of service. Today, the company has 68% of the population serviced by Sanepar, with levels quite significant. We have above 80% of sewage service. We have to remember that in the state of Parana, all our system of collection goes through treatment. We do not have any situation where we implement a wastewater treatment without having the treatment of the sewage of this wastewater. It's a lot of people, 7.5 million people out of the 11 people serviced by Parana by Sanepar. We have here our level today is 81.92%, close to 82%, as Abel mentioned. We still have 8% left. We are seeking alternatives to have as partners the PPPs and so that we can support so that we can reach universalization before 2033. That's where our efforts are focused. We have a population, a small population, but for us, it means a lot. We have been working in a very consistent way to meet the 6.9% of the population served by Sanepar that still do not receive treatment, over 700,000 people. I want to show a little bit of the scenario of Brazil. As you can see, we have in the north of our country, and it makes us sad, but we know that there are areas that are poorly populated. The arrival of universalization will actually take time, take longer. In the Northeast, 42.9% of the population has access to treatment. We are talking about a collection. We're not even talking about treatment. In the Western center, 73.1% of the population has access to service, and Southeast is the best level, 85.4% with the state of Sao Paulo with big numbers. In the South, 59.3%, where in the graph on the left, the graph Sanepar really pulls the number up. Unfortunately, our other 2 states, the neighbors, Curitiba and Santa Catarina, have levels that are not so significant, do not deserve so much praise, but they show that Parana really sought the right path, the path for universalization, and this causes us to be able to advance. As you can see, this rate is from 2024, and we are in 2025. We are at 81.93% already. But in 2024 that Brazil with 67.5% and Parana had 81.2%. Here, it's a general overview of where we place our investments in the state. As you can see, we have 5 regions divided into Southeast, Southwest, Northeast, Northwest, and the Curitiba and Metropolitan region, which we call CETE Curitiba. This management, this general city, we have all the municipalities, which are in pink. We will have in 2025, 182 works or projects implemented in the cycle 2025/29, which will be 567 projects. It's quite a significant project of water, sewage, maintenance service, and investments for operational improvements, where we cover all this number of projects to reach and maintain, and guarantee universalization that many municipalities in the region have reached universalization. Here, we have the Southeast region with 89 projects in the cycle, 207 projects in all this region, the yellow region. Southwest region, we have 177 projects in 2025 and 526 projects during the cycle. As we see, we have small municipalities, and Sanepar tried hard to give access to all municipalities. Here we have the Northwest region with 114 projects and 454 projects in the cycle. Also in the Northeast region, we have 101 projects for 2025, a lot of them concluded and in the cycle, 556. These points in white are the municipalities that are not operated by the company. So this volume of work on projects causes us to make sure that we will reach universalization. In the cycle, we will have 2,373 projects executed, concluded in all our part of municipalities. In 2025, 663 projects are our challenge. It's a big challenge, but we are involved. We are committed to reaching it. These are just an illustration, some works that have been concluded. These are 2 beautiful reservoirs that help us serve the region. And we have, of course, not only the reservoir, but the works involve more activity. So here, we have a bar reservoir.   We have 5 kilometers of new networks of distribution to reach new regions of the municipality that have new buildings. And so we have 14 kilometers of service implemented in this system in Londrina. So here, we have an intake of water in Rio in the region of Rio de Janeiro region. Sometimes they look like simple structures, but they give a lot of support and they guarantee the supply of water. Then, here, we have another intake and the treatment station, Tijucas do Sul, a small system, but it was a success. The inauguration was a big success. We had the mayor very happy with this infrastructure, which, sometimes, a small town is really a landmark. The treatment station that we have in the lower picture it's a small station, but it makes all the difference for the municipality. The next station, we have a new wastewater treatment in the investment, there were around BRL 44 million. So we have a station for 100 liters per second, activated sludge, so you have the drying beds there at the back, background of the picture. Next slide.   We have another station, 30 liters per second. We spent 29 million. It sounds simple, but of course, investment is not only in the treatment station, but we also see the treatment station here because this is a localized unit, but we have 54 kilometers of networks that we created in the system with collection and emissaries and a lot of connections, giving access to thousands of families, bringing good health to this population. Here, we have in Cornelio Procopio a treatment station called Tangaraites. On the left side, you can see there is a part that does it plants and all that. This is a sludge treatment that we use a solution using nature is a technology that is very promising for these investments, future investments that we have to make in the small locations. So it might not be useful for a treatment for a large amount of water, but the small stations, we have hundreds of them in municipalities below 10,000 inhabitants. So this fits very well for this population. So this is a case that we are learning, finding solutions, and finding solutions operationally speaking, changing the operational logic, but finding solutions of activated sludge, more technical solutions, and also integrating nature into that.   Here's a station in Maringa, Floriano District. It is 7.5 meters per second, as you can see in the middle of an agricultural area. But it brings solutions for water treatment for a population of 280 connections. It's the beginning of a system, but BRL 11 million we spent, we invested in that to serve this population of the municipality of Floriana. And it was a request from the city hall of Maringa which is very concerned with all the districts of the region. Here, we have an ETA in water intake in Itaipulancha with efforts for us to stop sharing, bringing material into the Itaipu Lake. So here is one of the alternatives we are working on in the municipality of Itaipulancha, with around BRL 18 million invested in this system. Here, we have a post-treatment or water intake station. So this caused us to find this solution.   Next slide, we have a treatment station, a modular one in Toledo, the municipality of Toledo. The environmental parameters are very strict. And so we must have this project ready in 6 months by May 2026. We expect to have the station ready and implemented, serving part of the system of Toledo. As you can see, we have a lot of solutions with tanks, semi-ready, which make things more agile, installation more agile, and give flexibility for the system in case we need to remove to change places to move from one place to another, we can make use of the assets. This is an activated sludge station in Veracruz do Oeste. There were BRL 25 million invested there. It's a very nice station. And here, we have an intake in the water intake in Cascavel in Rio do Salto.   This area is growing in a very promising way. S is always trying to find a solution. It's another intake with 167 liters per second, with that it's a lot of water, and to guarantee the supply in Cascaval. If the piping is 400 with almost 2 kilometers of pipelines. Now we have the reservoir Tatuquara in Curitiba. It will be very, very nice. The walls are higher than the image we have here, but it's the only reservoir that will serve a big area of Curitiba, and it's part of the integrated system of Curitiba and the metropolitan region. The investment here was BRL 40 million. It will also be done in the same structure, which is a pre-molded structure. Here, we have a treatment station with very strict environmental parameters, and BRL 41 million was invested there.   We expect to finish this project in February 2026. I mean, it's more advanced than the picture shows, but we have tanks and reactors and a whole treatment system to reach the environmental parameters or requirements. We will also build a laboratory to make the analysis of the entire region. Here, we have a water treatment plant in Apucaranaim with strict requirements, and we must have this project ready by mid-2026.   Investments of over BRL 60 million have the station. It had 80 meters. It's been expanded to 160 meters per second, and BRL 48 million has been invested. We should have this ready by March 2026.   As you can see, we have an amount of projects very high, over 200 projects ongoing right now, each one of them either starting or intermediary phase or concluding or pre-operation phase today. Our treatment stations, with the moment they have their installation, the physical installations are concluded. We also have a period of assisted operations and pre-operations where our technicians work together with our suppliers so that we can learn and be ready to operate all these treatment stations, which are not simple and are not like ordinary. So they present a lot of challenges.   The next slide is the treatment station. I think I showed it previously [indiscernible]. It is in its final phase. We are almost in the phase of automating it and installing the electrical parts, but we have the decanters on the up left side, they are all in operation and very properly operating. We are meeting the environmental requirements, and we are finishing it. There was over BRL 300 million in investment to guarantee the water supply for the entire region of Curitiba. We have more than 10 municipalities where sewage is taken to the treatment station. The operation is assisted, and by the end, it should be ready mid-2026. Everything should be concluded by then.   And here, we have another treatment station, quite significant, which is C. So this is a big effort focused on this work, BRL 376 million, with all the electrical installation that we need to do here, but it is very unique. It's over 1,068 liters per second treated. So it's a treatment process quite advanced. We will have nature-based solutions for the treatment of sludge. So it's a station that in the next presentation, we will be able to show its evolution, and how it has evolved, but we are very proud of it. So this is the last station.   I want to show you also the work with [indiscernible] and all the region of [indiscernible]. We have BRL 49 million invested. It's a big challenge, ask Gustavo here, because as you can see, it is surrounded by trees. We did not cut down any trees. So we kept our work in a region where we already had some treatment stations, and we just used the same area. So it will be a landmark for the region. It will contribute to us not having the problem of the Itaipu not compromising the Itaipu region. So if Gustavo wants to say some things, I will hand over to Gustavo because this is the end of my presentation. A good day to everyone.

Good morning, everyone. So we are very proud of this project, engineering projects, and the innovation. Here in this area, we have to change the tyres of the car while the car is in motion. It was very challenging. It was an important articulation across all the institutions that take part in this association, Sanepar, and Itaipu.   Besides the aspects mentioned, we will have biogas energy recovery, which will generate methane and bioenergy. The systems were checked at the end of last month, and they are being mobilized for the plant. So we hope that by March, we will conclude this work.   I am Gustavo [indiscernible]. I'm a specialist in research and innovation at Sanepar. I was recommended by our President, the President is with the government. And so I was asked to share with you the experiences we had, innovations, new businesses, and this is reflected in the ordinary results from the point of view of financial presentation, as presented by Abel, and through new alternatives and new solutions.  They are incorporated ordinarily by our new works, projects, and activities that are core to the company, associated with the processes of water and sewage. In this context, it's very important to remember that innovation is part of the strategic planning of this strategic vision of the company. It drives our mission. And consequently, it is anticipated in the vision of Sanepar to be a protagonist company, a reference company, in any international scenario. And therefore, as we always revisit with over 6,000 employees, it is a value in the company. Our strategic map contemplates innovation as a perspective to ensure the financial balance of our business through constant improvement of our projects and processes, involving, of course, all the company in this journey of innovation. Innovation is everybody's role with discipline in our policy of innovation and new businesses. We are speaking of a contemporary approach, which is innovation for sustainability, where innovation is a tool for the generation of value for society. Within this context, one of the subjects, most current subjects when we think of innovation is connected to digital solutions.   And today, Sanepar, despite being a company of infrastructure engineering, of services of sewage services, and we have several solutions today implemented digitally. In this approach, we find solutions, commercial solutions, a platform of management and support engineering solutions, operational solutions, and other solutions that systematize and bring transparency and agility to our projects. In this approach of different solutions that come up in a context, a more expanded context to the understanding that technology is made by people for people. And inspired by our President Blay, Sanepar starts implementing strategies and projects with a vision for the future towards society 0.0 through sewage services, looking at digitalization as a primary step for the development of its actions with a digitalization that is integrated, and also thinking in a movement of transportation that culminates in a movement of digital transformation. So recently, we were in Spain, where President Blay launched the program Sanepar 5.0, connected to the future with 5 important guidelines, pillars, turning to digital infrastructure and cybersecurity, intelligent and connected operations, sustainable connections, data intelligence, and integrated management involving the client in its experience and with digital services.   So Sanepar 5.0 is ongoing. It's a recent event that involved all the companies, all the employees in the company, where we had to talk in depth about this topic. The perspective of innovation takes place in the company through a committee of innovation committee. This committee is presided by the council, by the Board, involving, besides the Director, the Operations Director, the Director of Investment, our Director of Governance, Risk and Compliance, on a monthly basis, dialogues and checks to follow up on the development of the process. There is a Board inside the company, as we mentioned, Abel, which is the innovation and new business Board department. At the beginning of this week, it contemplated and celebrated 2 years of existence. And I'm very proud to take part in this process since the beginning and with some very interesting results that have been reverberating in important actions of immediate applications in the company and also in future approaches. As mentioned here, innovation is everybody's function. So, over the 6,000 employees that get involved in this journey, we learn to interact with ecosystems of innovation with start-ups, with the academy, universities, suppliers, and other companies that help us understand your perspectives, accelerate the process, and advance with important approaches for the company.   Today, the innovation actions in Sanepar are dealt with through a 3 part: innovation in processes, culture of innovation that involves the professionals, involves the mindset, turn to innovation and entrepreneurship, and new businesses. I would like to share with you a little bit of each one of these approaches. When we talk of innovation and process, we talk about an integrated process across the different departments. And Leura Director she mentioned some technologies that are a result of this process of innovation. They are a result of prospection, new pilot projects, results of scale implementation, and bold scale implementation that generate results. So today, innovations are driven by demands.   In the last [percussion] we collected at least 70 challenges, and the 70 challenges, when they were collected, they are addressed internally or in an interaction with the ecosystem of innovation. And out of that, we have programs like the Sanepar-led project idealized by our present play in partnership with other start-ups that caused Sanepar to create some bids, some call for projects. So there are challenges addressed to mature companies that can be implemented with mature solutions, which can be implemented in the short term. And we have some call for projects that selected some companies, and sometimes it goes to the development of new solutions like a digital solution turn to Sanepar 5.0, which was our second call for project with right now is going through a process of selection of other 5 start-ups, or with other call for projects or bids, which are contemplated in Sanepar-led that can start the higher public hiring for solutions.   Likewise, this inspiration comes from Sanepar start-ups, where we interact and select among over 200 proposals, 10 start-ups with whom we talk and accelerate, and some of which are scaled as I will present. The [Hadar Tech] program brought an important thing. We have a program of international surveillance of technological solutions. So the challenges are offered the services of surveillance. And from there, we can identify the best practices, best technological solutions for the challenges we presented. And together with Labtech and the future grid competence, we will dialogue our digital solutions and the convergence of digital solutions and operational solutions can help us drive start-ups that effectively help us in the solutions of our everyday challenges.  Besides innovation and processes, we have been working with the perspective of a culture of innovation, causing Sanepar employees to produce solutions in a program of entrepreneurship.   There is a portal in this department that gives guidelines for innovations. This portal has shown videos like drops of innovations that show some practices implemented by the employees who are encouraged to generate their ideas and register them in a platform called Sanepar. Every year, we have over 1,000 new ideas that are generated and assessed by a decentralized committee and allocated in every department of the company, with autonomy to approve and implement them as they like. Recently, we had a week of innovation, we had a day dedicated to dialogue about innovation with their high Board, with the participation of the President by President or and other important leadership and directors in the company. And in this act, we had an award, the Innova award, which invites the employees to present their ideas.   From the perspective of new businesses, Sanepar organized itself in the past two years, structuring and processing the mechanism to apply, especially their tools for the development of opportunities of business. Several opportunities were identified in the market. And some of them were prioritized so that we can advance. And within this mechanism, all this process was systematized in a document approved by the administration Board and the Executive Board, called the new business master plan. So, how we are going to build and what are the strategies for the future related to these businesses.   So although we have these plans presented and disciplined by regulations, expedited and presented by the administration Board is open to new perspectives, new approaches. And therefore, the address on the website presents, you can access a portal for open prospection, proposing your solutions for new businesses for the company, and of course, for the methodology flow, so we can assess by the criteria, the correct criteria.   So I would like to finish this presentation with some success cases and opportunities. I will start with the free market of energy, which is a new model for the context of Sanepar, following the guidelines of Copel and discipline in the acquisition of energy for its management for units of high tension and medium tension. So we have two phases. Phase 1 consolidated via Bids and Copel, and the second phase through the trader, also through bids. And concerning the first contract, 49 consumer units. We have 100% in the free market. We concluded our migration timeline.   In Phase 2, we have over 90% of the charges migrated. By the end of this year, we should migrate over 50 units, consumer units. So this operation from 2024 to 2028 has an economy anticipated predicted about acquisition of energy in the of BRL 600 million. So what we have observed is that perhaps this economy will exceed its expectations because in the first year, we had an estimate of BRL 51 million of the economy would reach BRL 64 million. So concerning the market, the conventional market, we have 42%, bringing an important repercussion.   In Japan, 75% of the economy is shared in the form of fees with the society, and 25% repercussion is directly with the company. So this approach of energy has unfolded with the optimization of processes. And I give an example here, the optimization of our integrated system of water supply in Curitiba. We started with a pilot with validation of a platform from Portugal that uses the hydraulic molding to build the digital genes of our system of transparency of water across reservoirs to serve over 300,000 people. And with intelligent algorithms that are derived from the data collected from our control operations, they help us to optimize this process, causing us to be able to predict more accurately the consumption of water and have a reduction of cost with electricity from the automatic work of frequency. So we have a reference project, and we are about to implement it after a pilot virtual operator. We will work with our operators to optimize the distribution of water, saving water and energy resources.  Speaking of water, we work in a very structured way with a program of water losses. We adopt the best world practices in what regards the fight against water losses. In this context, to improve new technologies. So we went to Israel, Holland, and we saw in local start-ups that helped us a lot and find solutions that help supply artificial intelligence to detect water losses quickly and implement some measures. So today, utilize satellites. We use intelligent holes that have sensors connected to it inside the tube, especially to identify the main leak points so that we can identify this more effectively and reduce the time to detect and reduce the levels of water losses.   Each technology has a trajectory, and they have been scaled inside the company within the realities, regional realities. We are thinking in an engaged digital engagement with the consumer. In Sanepar Labs, we have advanced solutions of tele to measure for measurement and partnerships with communication-disruptive devices.   So the idea is with knowledge and patience together with the environment of innovation to migrate to bigger and bigger engagement with the consumer, digital engagement. So this is a reality already, the PIX payment, for example, these are things that lead to adaptation, and we expect that with this new technological approach, but with our feet on the ground, we look to offer new functionalities for our clients.   So I spoke a lot about technology application, new solutions, 5.75 5.0, but this is also connected with an approach of critical infrastructure, with the value of products and new destinations. And this sludge is one of these examples we can improve more and more, considering the circular economy approach, and considering the challenges of nonavailability of bars of dumping, so that they could receive these residues as imported raw material.   So we have a strategy nowadays that involves a series of projects that go from strategies of drying of sludge, disposal, and perhaps, if new businesses can come out of this. So we are receiving organic residues in these generators. And today, we are reaching the maximum capacity of 150 tons of these residues, treating residues, bringing new complementary revenue, and generating more energy. With the energy generated per year, we have compensation of 40 units in the company, more than 4.5 million years.   This is such an important endeavor; with the expansion of EcoBelin, we have more generations of sludge. And consequently, we are studying the opportunity to expand it in the future to serve the sludge. The drying of sludge is a reality. So we have implemented inubaul a system that can dry 5 tons per hour of humid sludge. It's a rotational circular system that is actually moved to biogas, dry sludge. And so biogas and biomass, which is sludge, dry is converted into heat, and this heat is put in touch with the humid sludge, reducing its volume.   Therefore, we have a reduction of around 80% to 90% of the volume that previously was destined for the burial grounds. And the economy with this sludge handling is around BRL 6 million per year, representing our total cost of around 10%. So it's a very significant approach that can be replicated, and we created a work in Londrina.   The co-processing is also an interesting approach, especially because we can not only follow to processes of interization and cement processing, not only the sludge, but also the sludge coming from the water treatment and residues coming from screening and sand. So we are studying opportunities that we can have to transport the products seen as residue as input, duly treated and conditioned for cement producers.   We're trying to understand the business opportunity, just like a solution based on nature presented by Leura, which is a reality in some sewage treatment stations, but it can represent business opportunities. As we can see, this opportunity is operating in France, and we connected to a company called Fit Restore that works with the concept of biofarms. In other words, allocating organic materials with solutions based on nature and creating aggregated products that can represent an important route in the whole set of alternatives called the sludge route, which has been studied carefully by Sanepar..   So to finish that, I want to show you we have a partnership with a Japanese company  , Qowaoomany, a project assisted by the Japanese government in a very strategic way, especially recently by its cooperation agency, and it is called -- we tested this system, an innovative hyperthermal composting process without adding complementary substances. We promote this organic material generated from the treatment of organic fertilizers. The opportunity for new business is being studied in detail so that we can understand if this technology can actually help us in the company.   So we have also ongoing a interesting project, the first 2 kilometers of network of optic fiber installed in sewage networks were implemented in Azul in Curitiba, showing an opportunity, very interesting opportunity to be exploited. In the 3 cast, we studied in detail with TFC of the World Bank, there's an opportunity of business. And right now, through a call for projects, we are selecting a strategic partner to develop this opportunity and try to understand how the shared infrastructures of the sewage networks and telecommunications can represent an opportunity for these 2 important segments of infrastructure.   We also, as we mentioned, Sanepar has been studying all the opportunities that come up, especially here in Brazil, about new approaches and market expansion. Therefore, when the bids are open, they call for proposals, we can access them and study mechanisms of how we can participate, for example, in some bids for PPPs or sewage and water treatment works. So we want to have partners, and the Spanish AC Spanish company is one of these partners, where we can, through NBM, to guidelines, we can study opportunities that open up in other frontiers beyond the state of Parana. In the same perspective, but with a look of cooperation and institutional strengthening, Sanepar has been looking to a closer territory here in Paraguay. And today, through a diplomatic partnership involving our government and the government of Paraguay through [indiscernible], which is a public company in Paraguay, the German company, we have been developing a program of reduction of water losses for Paraguay. So Sanepar's role and our mentoring and technical mentoring, applying the best practices we have in the context of Paraguay.   So, through Paraguay, if we can understand a little bit the context of South America, it's a similar partnership. But in this case, involving the German government through JC. We have an approach to institutions connected to the government of Honduras, and we are helping them to strengthen their institutions and the Honduran companies and the Natural Resources Secretary, applying the concept of energy efficiency and control of water losses, so that we can have more guidelines turn to resilience in Latin America. So I thank you for your attention for the opportunity and I'm available to be able to help with any doubts and debates. So let's work for innovation, sustainability, with Spark stronger and stronger.[Operator Instructions]

So the first question comes from [indiscernible] and then from and [indiscernible]. Both questions are about the same thing.   What is your understanding of the company for change in the way you understand the sharing of risk of payment? Any updates in the [indiscernible], what's the deadline for the solution of this solution due to TCI monetization. Can you explain the recognition of BRL 106 million related to rates of payment in this quarter?

Thank you, for your questions, Daniel. Well, we had a complaint to the tribunal of accounts by the association of the Consumer Defense, and the tribunal asked us to comment on that. [indiscernible] decided to suspend the item of technical note that spoke of the sharing of 75% in favor of improvement of fees until they assess the team. This issue, like the JA meeting said, it's a complex and generous issue. So they decided to reassess the whole team. And obviously, the company is waiting for the answers which should come from Jepard. Both the company and Jepard, they are working to offer the answers that should be given by the tribunal of accounts. So we have no answer right now to conclude this item. In the third quarter concerning our accounting, we had the maintenance accounts based on our legal advisers saying that although it suspended a new merit decision, the company maintained the same dealings, accountable dealings, which same as done in March and June in the previous quarters.   The company is interested in this subject. It's relevant. It's complex, but we are all involved in an issue, involved in trying to answer properly. And in the right time, this team should be the object of assessments. It's being evaluated right now by the agency, by SEPA, but we still do not have a definition on the team. The construction is being elaborated by the   regulating agency. So both the company and the AGEPAR, which is the tribunal account, are now - this is the status. In the next few days, we will have other updates concerning this topic.

Now next question from Yuri Gular. In third-party services, we had an increase of 60% in the third quarter of 2023 to the third quarter of 2025. For the monopoly nature of the company, it seems very high, seeing that the revenue increased a fraction of that. Could you break down on that? And how can you think of it looking ahead?

Yuri, thanks for your question once again. This issue of the services - third-party services is something the company has been following. In this period, we have to remember that we had by the PPP of the municipalities considered, so some items like electricity personnel that were being, let's say, serviced by the PPPs, we migrated the accounts for the third-party service. We had in 2020, the COVID issue. We have to remember that for 42 months, we did not cut water. And from 2023, as we resumed the cuts, the suspension of services of supply and the measurements that also all the service, commercial services, field services gained a bigger impact than what we had seen previously in the period where we did not cut. So all these connections, reconnections, these are items that in the past few years brought an additional cost to our cost of third parties, but not necessarily due to an increase, but this is a comparative base, which was very low because they were not being practiced. So we can observe that the third-party services need to be refreshed.   We have the maintenance service for networks. We have to remember in this regard, we had a problem in the contract, a relevant problem in the region of Londrina, where many services were stopped from being executed.   And as we resume them, we had to hire a new company at the right price through bidding. The previous price was not feasible. And this all brought to the third-party services, the impact that you mentioned.   And the issue of surveillance services is another point. We had 2, 3 years ago, a series of thefts in our installations in water treatment and sewage treatment plants that compromise the population that affected negatively with complaints on the complaints from our employees, the image of the company was very badly affected.   So we remodeled the surveillance system, and that brought an impact on the cost of third-party services.   On the other hand, through fiscalization and better surveillance, okay, it also brings revenue because we don't stop the supply. So we have the water losses with the test that end up requiring the company to acquire materials and other services. So all of that is mitigated due to a proper surveillance system. So this is a reality.   Sanepar operates in over 600 localities, local, so some are very distant from, let's say, populated regions; they are rural areas. So it is very necessary to have security surveillance, both for the employees and for the protection of the patrimony, the assets. So that also increased the costs.   The company has a plan to plan the cost related to third-party services, that is, an event related to third-party services, which includes the advocacy expenses, the lawyer due to the risk of payments. So this amount is around BRL 129 million, and this impacted third-party services.   In our analysis, which is done recurrently, we identified that most of the items had increased in the third-party accounts.   We have a very per analysis. We have the accounting, which we call analysis, which is expenses, but each nature of accounts, a few of them exceeded what we had anticipated, we had projected. So they are all within our forecast.   One or another can be beyond what we wanted, what we wish to. But we have to remember that in the state of Parana, we have been facing a lack of labor, and there are people coming from other states because, in what concerns civil construction and sewage areas, which is our sector, the price -- the labor price expenses, they have gone up due to lack of labor available personnel.   I hope I have covered all the points, but basically, these are all the points.

Now continuing our next question comes from [indiscernible] He questions whether you can explain the provision of Ana municipality. This is his question.   Thank you, I will hand over to our accountant, for him to answer.

Thank you for your question. Well, Ana is a municipality where Sanepar is not operating. We have a contract of concession until 32, but in '23, the municipality took over the operation of the system.   So this area still rain, this land is very old in the decade of 60, 70, there is a process, a compensation lawsuit.   So Sanepar had considered this as a liability until the second quarter, but there was the process has evolved and they are executing the sentence. So that was the provision we are considering a loss in the third quarter.   So the provision was based on this lawsuit, on this compensation, considering the interest of 6% for this compensation.   Throughout the month of October, there was a deposit because during the process, the lawsuit, there is a demand for compensatory interest of 12%. So, for Sanepar not to have to pay 10% of the fine.   So we decided to pursue this interest. And that's why we kept this amount as a probable loss. So this is the likely loss. So we can appeal to our legal advisers are working on this process.

Thank you. And our next question comes from –[indiscernible]  an investor.    [indiscernible] does Sanepar intend in 2026, seek a concession for sewage for services in other states? And what are the choices to take part in an auction or not?

Thank you, Renaldo, for your question. As previously said in other occasions, the company addressed the universalization of the state of Parana. Water is universalized since 2007, 2008, 100%.   So we exceeded the legal framework, which is the 99% goal. So now the strategy, as mentioned, both the works that Leor showed and the PPTs, they come in the -- to reach the legal framework, the company with proved qualification, operational qualification and with proved capacity to seek financial resources is a company that is open to work in other areas, not only Brazil outside Brazil as well.   And of course, the company seeks partners in the sense that we can participate in businesses that are businesses that make sense to the company. So yes, the company looks to new markets, to opportunities, and possible definitions of participation or not will depend on all the context of legal analysis to see the advantages for the company to participate.   Yes, the company is at a point where it can afford to participate and cooperate with Brazil in this issue of sanitation, seeing its long history of services rendered.

Now we close the Q&A session. The questions that could not be read, they will be answered lately. Now I will hand over the word to Abel Demetrio for the final consideration.

Well, I would like to thank you for participating. And I would like to apologize for our long presentations, but I think they are relevant teams. And I would like to reaffirm what Rodrigo said, if there is any issue that we---[Audio Gap].