Professional Documents
Culture Documents
2Q21
Rio Manso System - Brumadinho
1
Contents
1. Highlights...................................................................................................................................................... 3
1.1. Investment Program .................................................................................................................................... 3
1.2. Regulatory Environment ............................................................................................................................. 4
1.3. Coronavirus ................................................................................................................................................. 5
1.4. Shareholder Compensation ......................................................................................................................... 5
1. Highlights
The table below shows the investments made in the first half of 2021 (1H21):
expansion of the production capacity of the Water Supply Systems in the municipalities of Barroso,
Camanducaia, Frei Lagonegro, Lagoa Santa, Mato Verde, Montes Claros, Nova Serrana and Patos de Minas;
expansion of the Water Supply Systems in the municipalities of Extrema, Ipatinga, Montes Claros, Nazareno,
Nova Resende, Poço Fundo and São Gotardo;
improvements to and optimization of the Water Supply Systems in the municipalities of Belo Oriente, Betim,
Conceição do Mato Dentro, Lavras, Medina, Paracatu, Pote, Pouso Alegre, Resplendor and Timóteo;
implementation of the Waste Treatment Unit of the Water Treatment Stations in the municipalities of Araxá,
Betim, Caratinga, Divinópolis, Itajubá, Lavras, and Varginha;
acquisition of water micrometers, aiming at the efficiency of water level measurement and the reduction of
losses;
acquisition of operational equipment for renovation and optimization of the Water Supply Systems in several
operated municipalities; and
implementation of distribution networks and water connections in buildings in several municipalities in the
Minas Gerais State.
expansion of the Sewage Systems in the municipalities of Diamantina, Estrela do Sul, Fronteira, Ibirité,
Ipatinga, Medina, Pouso Alegre, Ribeirão das Neves and Sabará;
implementation of the Sewage System in the municipalities of Caratinga, Divino, Espinosa, Ijaci, Inhapim,
Patis, Santana do Paraíso, São João Nepomuceno, Ubá and Visconde do Rio Branco;
execution of sewage treatment works in the municipalities of Bom Despacho, Cataguases, Mateus Leme,
Minas Novas, Patos de Minas, São Gotardo and Serra da Saudade;
acquisition of operational equipment for renovation and optimization of the Sewage Systems in several
operated municipalities; and
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2Q21 Earnings Release
implementation of sewage collection networks and connections in buildings in several municipalities in the
Minas Gerais state.
renovation of the computing infrastructure, with implementation (in progress) of the SAP S/4 Hana system,
aiming at improving and streamlining customer service and internal processes; and
implementation of tools to ensure data and information protection, in compliance with the General Data
Protection Law (LGPD).
The projected amounts of the Multi-Year Investment Program for the Parent Company (COPASA MG) for the
period between 2022 and 2025, based on the Board of Directors’ approval, are as follows:
According to the Material Fact disclosed on June 29, 2021, the Minas Gerais State Water and Sewage Regulatory
Agency - Arsae MG, disclosed on June 29, 2021, Arsae-MG Resolution 154/2021, with the result of COPASA
MG’s second Tariff Revision.
According to the aforementioned Resolution, the average tariff effect applied on the current tariffs as of August
1, 2021, is -1,52% (one point fifty-two percent negative).
Below are the links to the main final documents referring to COPASA MG’s Second Tariff Revision, whose
tariff cycle comprises the period between August 2021 and July 2025 (Portuguese only):
Arsae-MG Resolution 154, of June 28, 2021: Second Periodic Tariff Revision;
Technical Note CRE 14/2021: Result of the Second Periodic Tariff Revision - After CP 23;
Calculation of the Regulatory Asset Base (BRE and BRA) – After CP23;
Technical Note CRE 01/2021 - After CP 23/2021: Methodology to Restructure the Tariff Revenue, Tariff
Adjustment Index, and Average Tariff Effect.
Technical Note CRE 03/2021 - After CP 23/2021: Methodology - Efficient Operating Costs and X Factor.
Technical Note CRE 08/2021 – After CP 23: Methodology – Copanor Subsidy; and
Technical Note CRE 10/2021 – After CP 23: Methodology - Investment Planning and Execution.
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2Q21 Earnings Release
According to the Notice to the Market disclosed on July 14, 2021, COPASA MG filed an Administrative Appeal
with Arsae-MG, addressing, within the scope of the Review, the application of Hybrid Regulatory
Methodologies, Regulatory WACC, Regulatory Asset Base, X Factor, Municipal Sanitation Funds and Sewage
Tariff.
On July 26, 2021, a Material Fact was disclosed informing that, regarding the disclosure by Arsae-MG that
“Copasa will have to return R$ 246 million to residents of Belo Horizonte” (link: http://www.arsae.mg.gov.br/
2021/07/23/copasa-tera-que-devolver-r-246-milhoes-a-moradores-de-belo-horizonte/), COPASA MG would
appeal the decision. The amount informed by the Regulatory Agency, which refer to the charge for sewage
collection and treatment services to approximately 69 thousand customers in the municipality of Belo Horizonte,
from January 2012 to December 2018, are not recognized and accepted by the Company. COPASA's current
Executive Board is committed to solving the issue in a transparent manner with the population and will exercise
its right to legal defense.
1.3. Coronavirus
Since March 2020, COPASA MG has been implementing several initiatives based on the recommendations of
the Ministry of Health and the World Health Organization to preserve the integrity and health of its employees
and adopting commercial aid measures and other preventive actions to minimize the effects of the pandemic to
customers.
Overcoming the most critical moment of the pandemic in Minas Gerais, when, in March 2021, the State
Government decided to include all the areas of the Minas Awareness (Minas Consciente) plan in the Purple
Wave, and with the progress of vaccination, employees have been gradually returning to working on site.
The Company continues to act and closely monitor the situation of the pandemic in the various municipalities
where it operates, to adopt, whenever necessary, appropriate measures for the safety of its employees, customers,
and suppliers.
To reduce the circulation of people, COPASA MG is acting together with the municipalities, adopting on-site
assistance to customers with previous appointments, prohibiting those without a previous appointment to enter
the Company’ Service Agencies.
COPASA MG has also adopted measures to help customers, especially those in the social residential category.
For these customers, who account for 6% of the Company’s revenue, the collection has been suspended.
Furthermore, until July 2021, customers have the option to pay late bills in installments with no down payment
and no interest or fines, in up to 36 months.
1.4.1. Dividend Policy (Revised by the Extraordinary Shareholders’ Meeting of May 7, 2018)
The Board of Directors shall define, by March 31 of each year, the percentage of Adjusted Net Income to be
distributed, observing the statutory minimum of 25% and the limit of 50%. This declaration must occur every
quarter with payment up to 60 days from the approval date, except for the amounts referring to the fourth quarter,
which will be defined at the Annual General Meetings (AGM).
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2Q21 Earnings Release
In conjunction with the disclosure of the Annual Financial Statements (DFs) and the Interim Financial
Information (ITR) for the second quarter of each year, and in accordance with the Company's Dividend Policy
Management shall proceed and disclose the “Calculation of the Regulatory Framework”, already considering the
payment of Regular Dividends, in order to evaluate if it is within the margin considered efficient (Efficient
Regulatory Leverage Range), and if this index is:
a) Above the margin: the Board of Directors will define that the percentage of the Adjusted Net Income to be
distributed will be the minimum mandatory amount.
b) Within the margin: payout will be based on the criteria and limits defined for the distribution of Regular
Dividends.
c) Below the margin: the Board of Directors may declare Extraordinary Dividends up to three (3) months after
the disclosure of the DFs and the ITR of the second quarter of each year, which will consist of an additional
remuneration that is sufficient so that the lower level of such margin is reached. This amount will be declared
after the conclusion of studies that indicate that any payment of Extraordinary Dividends will not jeopardize the
Company’s financial health, its Investment Plan or current liquidity.
The calculation of the Regulatory Framework for the current regulatory cycle corresponds to the Net
Debt/EBITDA ratio (Net Debt divided by the accumulated EBITDA of the 12 months prior to the calculation
period), which should reach 2.10x, with a margin of 0.10x up or down.
The Board of Directors' Meeting held on February 25, 2021 approved that the distribution of dividends for 2021
will correspond to 25% of the Adjusted Net Income, paid as Interest on Equity (IOE) and/or dividends.
In accordance with the Dividend Policy, the Company declared 2 (two) Interest on Equity for 2021, details in the
table below:
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2Q21 Earnings Release
2. Operational Data
The table below shows the Company’s ten largest concessions, which together accounted for approximately
51% of the Company’s net revenue from water supply and sewage services (June/2021), as well as their
respective expiration years:
Municipality Expiration
Belo Horizonte 2034
Contagem 2073
Betim 2042
Montes Claros 2048
Ribeirão das Neves 2034
Ipatinga 2022
Divinópolis 2041
Pouso Alegre 2046
Santa Luzia 2050
Varginha 2047
In June 2021, 78% of the Company’s revenue from water supply and sewage services came from concessions
whose maturities occur after January 2034. On the same date, concessions with 69 municipalities, accounting
for approximately 3.2% of revenue from water supply and sewage services, were expired. In accordance with
the principle of continuity for the provision of essential public services, these municipalities continue to be
operated and billed by the Company.
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2Q21 Earnings Release
2Q21 2Q20
COPASA MG (Parent Company) 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
Water
Connections (1,000 units) 4,445 4,340 2.4% 4,264 1.8%
Units (1,000 units) 5,376 5,253 2.4% 5,165 1.7%
Population Served (1,000 inhabitants) 11,580 11,449 1.1% 11,380 0.6%
Distributed Volume (1,000 m³) 263,449 250,151 5.3% 249,674 0.2%
Measured Volume (1,000 m³) 154,437 146,496 5.4% 144,336 1.5%
Network Extension ² (km) 59,473 54,302 9.5% 53,198 2.1%
Water Metering Index (%) 99.9 99.8 +0.1p.p 99.7 +0.1p.p
Loss Index ¹ (%) 40.1 40.3 -0.2p.p 40.6 -0.3p.p
Sewage
Connections (1,000 units) 2,978 2,901 2.7% 2,847 1.9%
Units (1,000 units) 3,754 3,660 2.6% 3,594 1.8%
Population Served (1,000 inhabitants) 8,277 8,157 1.5% 8,085 0.9%
Measured Volume (1,000 m³) 105,586 100,347 5.2% 99,227 1.1%
Treated Volume (1,000 m³) 83,626 76,952 8.7% 75,872 1.4%
Network Extension ² (km) 30,385 27,303 11.3% 26,231 4.1%
Water and Sewage
Consumption Days (quarter) 91.4 92.1 -0.8% 90.9 1.3%
Consumption Days (monthly average) 30.5 30.7 -0.8% 30.3 1.3%
1) Difference between the distributed volume and the measured volume, divided by the distributed volume in the last twelve months.
2) CopaGIS, a corporate GIS platform developed for the Company's operational management, started to include, as of 2021, 100% of
the Company's water distribution network and sewage collection network. The system consists of a set of tools, images and data
necessary for the management of water networks, sewage networks, urban mapping, water projects, sewage projects, control of
interruptions in supply, georeferencing of service orders and advanced spatial analysis. In this way, obtaining the data referring to the
network of water and sewage network of the georeferenced platform will allow a better management of this important asset to serve
users with treated water and sewage collection.
Presented in the table below are the main operating data of the Subsidiary (COPANOR) for 2Q21, 2Q20 and
2Q19:
2Q21 2Q20
COPANOR (Subsidiary) 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
Water
Connections (1,000 units) 108 104 4.3% 101 2.4%
Units (1,000 units) 112 107 4.2% 105 2.2%
Population Served (1,000 inhabitants) 219 214 2.2% 209 2.7%
Distributed Volume (1,000 m³) 3,667 3,801 -3.5% 3,934 -3.4%
Measured Volume (1,000 m³) 2,369 2,150 10.2% 2,151 -0.1%
Network Extension (km) 2,663 2,155 23.6% 2,137 0.8%
Sewage
Connections (1,000 units) 51 49 5.4% 46 6.4%
Units (1,000 units) 53 51 5.3% 48 6.2%
Population Served (1,000 inhabitants) 104 100 4.6% 95 4.4%
Measured Volume (1,000 m³) 1,105 959 15.2% 933 2.8%
Network Extension (km) 1,513 1,464 3.4% 1,428 2.5%
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2Q21 Earnings Release
Presented in the table below are the main consolidated operating data (COPASA + COPANOR) for 2Q21, 2Q20
and 2Q19:
2Q21 2Q20
Consolidated Data
2Q21 2Q20 vs. 2Q19 vs.
(COPASA MG + COPANOR)
2Q20 2Q19
Water
Connections (1,000 units) 4,554 4,444 2.5% 4,365 1.8%
Units (1,000 units) 5,488 5,360 2.4% 5,270 1.7%
Population Served (1,000 inhabitants) 11,799 11,663 1.2% 11,589 0.6%
Distributed Volume (1,000 m³) 267,116 253,952 5.2% 253,608 0.1%
Measured Volume (1,000 m³) 156,806 148,645 5.5% 146,487 1.5%
Network Extension (km) 62,136 56,457 10.1% 55,335 2.0%
Sewage
Connections (1,000 units) 3,030 2,950 2.7% 2,893 2.0%
Units (1,000 units) 3,808 3,711 2.6% 3,642 1.9%
Population Served (1,000 inhabitants) 8,381 8,256 1.5% 8,180 0.9%
Measured Volume (1,000 m³) 106,691 101,306 5.3% 100,160 1.1%
Network Extension (km) 31,898 28,767 10.9% 27,659 4.0%
Presented in the table below are the number of employees and the indicator of employees per thousand
connections of water and sewage:
2Q21 2T20
Employees and Employees per Connection 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2T19
COPASA MG
Employees 11,276 11,454 -1.6% 11,558 -0.9%
Employees / Connections ¹ 1.52 1.58 -4.0% 1.63 -2.7%
COPANOR
Employees 476 462 3.0% 459 0.7%
Employees / Connections ¹ 2.98 3.03 -1.6% 3.12 -2.9%
COPASA MG + COPANOR
Employees 11,752 11,916 -1.4% 12,017 -0.8%
Employees / Connections¹ 1.55 1.61 -3.8% 1.66 -2.7%
1) Number of employees / 1,000 connections of water and sewage.
On June 17, 2021, COPASA's Board of Directors approved the Regulation of the Incentive Voluntary Retirement
Program - PDVI of COPASA MG, whose adhesion period will be from 08.02 to 08.31.2021.
Employees retired by the INSS by contribution time, age or special retirement, whose retirement has been granted
until November 13, 2019, prior to the effective date of Constitutional Amendment No. 103/2019, may join the
Program.
The employee who comes to benefit from this Program will have his employment contract terminated, in the
form of Waiver on Request and will receive, in addition to the payment of severance pay, in accordance with
current legislation, a financial incentive, as a pecuniary award of indemnity character. This incentive will be
equivalent to 0.8 (eight tenths) of the sum of the nominal salary plus the annual(s), multiplied by the number of
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2Q21 Earnings Release
complete years of effective work in the Company, limited to 30 years. The amount of the financial incentive will
not exceed the amount equivalent to 20 times the sum of the nominal salary plus the annual.
The shutdowns will be scheduled, at COPASA's discretion, to occur within 6 (six) months, as of October 2021.
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2Q21 Earnings Release
3.1.1. Rio Manso, Vargem das Flores and Serra Azul Reservoirs
Present below is the evolution of the reservoirs in the Paraopeba System (Rio Manso, Vargem das Flores and
Serra Azul), which account for 47% of BHMA’s distributed volume. As can be seen, the aggregate volume of
these reservoirs is approximately 83% of the total volume, one the highest volumes measured for the period, in
the historical series.
Water drawn from Rio das Velhas, responsible for approximately 44% of the volume distributed at BHMA, is
collected directly from the stream, thus being greatly influenced by the occurrence of rainfall, given its location
in the upper part of the watershed. The table below shows information on this collection system:
Due to the burst of the Mina Córrego do Feijão dam on January 25, 2019, located in the municipality of
Brumadinho and operated by Vale S.A., the Company took action to identify and mitigate the risks to its
operation. The Company preventively closed the floodgates of the water collection unit in the Paraopeba River
on the same day of the burst, aiming at preserving the water collection facilities, whose assets did not deteriorate,
and, therefore, were not compromised.
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2Q21 Earnings Release
In July 2019, the Prosecution Office of the Minas Gerais State and Vale signed a Term of Commitment (TC),
with COPASA MG as one of the intervening parties, for the construction of a new water collection point on the
Paraopeba River. According to the Notice to the Market disclosed on September 30, 2020, Vale S.A. requested
that the Prosecution Office of the Minas Gerais State (MPMG) extend the term to deliver the construction work
of the new water collection point on the Paraopeba River, previously agreed for September 30, 2020.
A new work schedule was proposed by Vale. However, on December 30, 2020, Vale informed the MPMG that
there had been hindrance and difficulties to meet the schedule previously presented, pointing out facts such as
pandemic restrictions, delays in the delivery of materials due to the increase in demand, rural land issues,
increased absenteeism at the end of the year, and community interference in quarrying, among others.
The hydrostatic testing phase of the pumping stations and water main began in the second half of July 2021.
The new dates to start the initial pumping of 1,000 l/s and 5,000 l/s (total flow of the aforementioned water
collection) up to the Rio Manso WTS have not been formalized, but operations are expected to start in the third
quarter of 2021.
COPASA MG has been regularly requesting that Vale meet the obligations already assumed in the Term of
Commitment, and has been taking the appropriate measures to safeguard the Company’s interests.
Despite the delay in the delivery of the works, water supply in the BHMA is not being affected since the
Paraopeba System, composed of the Rio Manso, Serra Azul, and Vargem das Flores reservoirs, is at nearly 83%
of its capacity (see chart in item 3.1.1 Rio Manso, Vargem das Flores and Serra Azul).
According to the Material Fact disclosed on July 14, 2021, on that day COPASA MG received from its
controlling shareholder, the Minas Gerais State, through the Office of the General Counsel for the State (AGE),
an Official Letter informing the approval of Bill No. 2,508/2021 by the State Legislature of Minas Gerais, which,
will authorize that additional budget and capital contribution be made so that the Company can make
interventions and works that will improve water resilience in the Paraopeba and Rio das Velhas Basins, as a
result of the Agreement executed in court between the Minas Gerais State and Vale S.A. As provided in the
Agreement, such investments amount to R$2.05 billion. The government of Minas Gerais sanctioned the Law
on July 28, 2021 (Law No. 23,830/2021).
On July 21, 2021, Bom Jesus de Cardosos (municipality of Urucânia) and Vale Verde de Minas (municipality of
Ipaba), which jointly account for about 1,300 water connections, were rationing water. In the 2Q20 Earnings
Release, two localities, which jointly accounted for less than 1,000 water connections, were rationing water.
Specifically regarding Montes Claros, a municipality with an estimated population of 413,500 people and the
Company’s major concession in the interior of the State, which historically faces drought problems, the Company
started the works for the implementation of the São Francisco System. With a capacity of 500 l/s, the System
consists of the collection of water by water barges in the São Francisco River, in the municipality of Ibiaí,
followed by the transportation of raw water to the Water Treatment Station (WTS), and the transfer of treated
water through a pumping system, composed of four Treated Water Pumping Stations, to the reservoir located in
the Pacuí WTS, approximately 92 km from the collection point.
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2Q21 Earnings Release
This system complements the Pacuí System and, in addition to ensuring water supply to the Montes Claros
headquarters until 2050, also supplies the municipalities of Coração de Jesus and Ibiaí. It is also an alternative
for other locations in the region, potentially benefiting about 430,000 inhabitants. Accordingly, with the
completion of the project, scheduled for May 2022, the lack of water in Montes Claros’ current demand will be
supplied, resulting from the effects of water shortage, denoting a change in the reality of water supply in that
region and the solution to the historic rationing problem.
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2Q21 Earnings Release
4. Quarterly Performance
4.1. Revenues
The table below shows gross revenue, deductions (PIS/COFINS), and net revenue from water, sewage, and solid
waste in the comparative periods:
2Q21 2Q20
Gross Revenue, Deductions, and Net Revenue 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
Gross Revenue - Water 909,609 829,159 9.7% 763,949 8.5%
Gross Revenue - Sewage 526,036 477,122 10.3% 432,629 10.3%
Gross Revenue - Solid Waste 641 581 10.3% 557 4.3%
Gross Revenue – Water, Sewage and Solid Waste 1,436,286 1,306,862 9.9% 1,197,135 9.2%
PIS/COFINS (132,926) (121,040) 9.8% (110,817) 9.2%
Net Revenue – Water, Sewage and Solid Waste 1,303,360 1,185,822 9.9% 1,086,318 9.2%
Net revenue from water, sewage, and solid waste totaled R$1.30 billion in 2Q21, up 9.9% over 2Q20, as shown
in the table below:
2Q21 2Q20
Net Revenue 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
Direct Net Revenue – Water 805,285 737,265 9.2% 670,419 10.0%
Direct Net Revenue – Sewage 474,800 431,587 10.0% 389,027 10.9%
Direct Net Revenue - Water and Sewage 1,280,085 1,168,852 9.5% 1,059,446 10.3%
Indirect Net Revenue – Water 20,141 15,102 33.4% 22,790 -33.7%
Indirect Net Revenue - Sewage 2,571 1,358 89.3% 3,541 -61.6%
Indirect Net Revenue - Water and Sewage 22,712 16,460 38.0% 26,331 -37.5%
Net Revenue – Solid Waste 563 510 10.4% 541 -5.7%
Net Revenue – Water, Sewage, and Solid Waste 1,303,360 1,185,822 9.9% 1,086,318 9.2%
The Company’s comments on the main factors that influenced net revenue from water supply and sewage
services in the comparative periods are as follows:
increase in the number of consumer units of water (2.4%) and sewage (2.6%) in the Parent Company;
growth of 2.7% and 2.4% in the volume per unit of water and sewage, respectively;
increase of R$6.3 million in indirect revenue from water supply and sewage services, mainly because of the
gradual resumption of business activities, which were partially suspended in 2020 to minimize the impacts caused
by the coronavirus pandemic to the population; and
0.8% decrease in the number of consumption days, with 91.4 days in 2Q21 compared to 92.1 days in 2Q20;
and
The table below shows the direct billing of water supply and sewage services in the comparative periods. The
breakdown of billing per consumer category in item 2.4 of this Release:
2Q21 2Q20
Revenue 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
Billing – Water 902,155 840,665 7.3% 751,835 11.8%
Billing – Sewage 550,759 495,376 11.2% 441,646 12.2%
Billing - Water and Sewage 1,452,914 1,336,041 8.7% 1,193,481 11.9%
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2Q21 Earnings Release
The following section presents the Company’s comments on the items that make up selling and service costs,
and selling and administrative expenses (excluding construction costs) with the most significant changes.
4.2.1.1. Personnel
Personnel expenses increased by 9.0% in 2Q21 over 2Q20. The most significant changes were:
provisions created for the Collective Bargaining Agreement (reference: May), whose reference index is the
National Consumer Price Index (INPC). It is worth noting that, regarding the 2019 Collective Bargaining
Agreement (reference: May 2019), in July 2021, the 2019 Collective Bargaining Agreement with the
predominant category was under a settlement of the case at the Regional Labor Court of Minas Gerais (TRT-
MG). The Company also clarifies that on December 20, 2019, it signed Collective Bargaining Agreements with
the administrators and accountants categories (single document), covering 133 employees. The Collective
Bargaining Agreement referring to 2020 (reference: May 2020) and 2021 (May 2021) has not been executed
with any category of workers.
increase in the provisions for employees’ profit sharing, of R$14.9 million in 2Q21 (R$9.3 million in 2Q20),
due to the year-over-year profit increase in 2Q21;
increase of R$6.4 million in expenses with the health program, given that the use of medical services was
higher than in 2Q20; and
reduction of 178 employees at the Parent Company (COPASA MG) (-1.6%) in the last 12 months before June
2021. (See table in item 2.3 of this Release).
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2Q21 Earnings Release
increase of R$4.8 million in expenses with advertising and marketing, given the need to invest in advertising
campaigns in 2Q21, especially those related to institutional initiatives created to raise the population’s awareness
of the services provided with the implementation of the Purple Wave, resulting from the worsening of the
pandemic in April and May 2021.
R$2.5 million increase with computing expenses, due to the contracting of a consulting firm aiming at
improving SAP S/4 Hana;
R$1.6 million increase with technical professional services, mainly due to expenses with consulting firms
contracted to support the tariff revision process, as well as to provide support with accounting and tax matters;
R$1.3 million increase with costs related to cuts, suspension, and reconnection of water; and
higher expenses with sundry services, due to contractual adjustments and formalization of new contracts.
4.2.1.3. Materials
This item increased by 13.8%, mainly due to higher expenses with conservation and maintenance materials for
assets and systems, as well as parts, accessories, and components for vehicles.
Year over year, this item fell by 55.4% in 2Q21, due to the improvement, in 2Q20, of the methodology used to
calculate expected losses for PDA, based on studies conducted by the Company to align its expectations as to
expected losses. Such revision increased that provision by R$76.2 million in 2Q20 (see more details in item
4.2.1.4. Impairment of Receivables, page 16 to the 2Q20 Earnings Release).
If this additional amount of R$76.2 million were excluded, the change in the PDA would be in line in the
comparative periods.
The table below shows the net PDA, obtained from the difference between the loss and the recovery of written-
off accounts (recorded under Other Operating Revenues):
2Q21 2Q20
Net Impairment of Receivables (R$ thousand) 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
(+) PDA 60,656 136,093 -55.4% 47,059 189.2%
(-) Recovery of Written-off Accounts 11,574 6,212 86.3% 13,368 -53.5%
(=) PDA, Net 49,082 129,881 -62.2% 33,691 285.5%
The 29.3% year-over-year increase in this item in 2Q21, was due to transfers to 74 new municipal sanitation
funds, as of the tariff adjustment applied on November 1, 2020. Accordingly, transfers now include 134
municipalities. In the 2019 adjustment, applied as of August 1, 2019, the transfers approved by Arsae-MG for
one year totaled R$75.1 million and comprised 60 municipalities. This item was also impacted by the revenue
growth in the period.
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2Q21 Earnings Release
It is worth noting that the estimated annual value, from August 2021 to July 2022, referring to transfers to
municipal sanitation funds, whose values are recognized in the tariff, is R$147.1 million, encompassing 219
qualified municipalities, according to Arsae-MG Technical Note CRE 14/2021.
4.2.2.1. Electricity
The 18.6% increase, comparing 2Q21 vs. 2Q20, was mainly due to the increase in expenses with tariff flags, the
increase in energy consumption, as a result of higher operational demand, and the growth in the average cost of
electricity arising from a reduction in the subsidy.
The year-over-year decrease in treatment chemicals was mainly due to fewer chemicals used in 2Q21, as raw
water turbidity reduced in the main water sources used.
The increase observed in this item mainly reflects increase in fuel prices.
The 6.5% year-over-year increase in Depreciation and Amortization in 2Q21 was due to an upturn in the volume
of works incorporated.
Other Operating Revenues increased by R$1.3 million. The most significant changes were:
Reversal of non-deductible provision: fell by R$10.6 million, given that, in 2Q20, civil and labor lawsuits
were recorded, reclassified, and paid in a dispersed manner in amounts higher than in 2Q21.
Recovery of written-off accounts: increased by R$5.4 million, mainly due to the resumption of collection
(suspension and interruption of water supply), as well as campaigns to negotiate debts under special conditions.
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2Q21 Earnings Release
Other Operating Expenses increased by R$4.7 million in 2Q21. The most significant changes are as follows:
Payment and non-deductible provision: increase of R$7.7 million, due to the creation of provision, monetary
restatement, and dispersed reclassification of risks from lawsuits.
Non-recurring losses: R$5.0 million non-recurring donations were made in 2Q20 to implement measures to
fight Covid-19.
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2Q21 Earnings Release
The upturn in the taxes on income was mainly due to the 47.1% year-over-year increase in the earnings before
taxes on income in 2Q21 (see item 4.7 of this Report).
4.8. EBITDA
EBITDA is a non-accounting measure adopted by COPASA MG, calculated according to CVM Instruction No.
527/2012, consisting, as shown below, of net income plus taxes on income, financial result,
depreciation/amortization, and these same items of the subsidiary COPANOR.
2Q21 2Q20
EBITDA 2Q21 2Q20 vs. 2Q19 vs.
2Q20 2Q19
Net Income for the Period 237,129 146,345 62.0% 119,059 22.9%
(+) Taxes on Income 87,289 52,050 67.7% 47,415 9.8%
(+) Financial Result (3,069) 20,051 n.m. 30,819 -34.9%
(+) Depreciation and Amortization 169,774 159,475 6.5% 148,408 7.5%
(+) Non-Operating Result - Subsidiary 1,247 630 97.9% 446 n.m
(=) EBITDA 492,370 378,551 30.1% 346,147 9.4%
EBITDA Margin 36.7% 31.0% +5.7p.p. 31.0% -
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2Q21 Earnings Release
3.48 3.52
3.32
3.04
2.61
2.40
2.0
1.3 1.3
Indebtedness in foreign currency accounted for 6.4% of gross debt in June 2021 and referred to the debt with the
German bank KfW and the European Investment Bank, whose balances plus short-term interest totaled €27.8
million (equivalent to R$164.8 million in June 2021) and €10.0 million (equivalent to R$59.3 million in June
2021), respectively. No hedge mechanism was contracted for these transactions.
On July 20, 2021, the Company called an Extraordinary General Meeting to be held on August 19, 2021, with
one of the matters on the Agenda being the contracting of a long-term credit operation, through the 16th Issue of
unsecured Debentures, not convertible into shares, under a firm guarantee regime, based on CVM Instruction
No. 476/2009, for public distribution, in the amount of up to R$750.0 million. The funds will be used to
implement part of the Company’s investment program.
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2Q21 Earnings Release
On June 29, 2021, Moody's published a report attributing AAA.br Corporate Rating to COPASA MG, stable
outlook.
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2Q21 Earnings Release
6. Appendix
Income before Financial Result and Taxes 321,349 218,446 47.1% 197,293 10.7%
NET INCOME FOR THE PERIOD 237,129 146,345 62.0% 119,059 22.9%
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2Q21 Earnings Release
CURRENT
NON-CURRENT
LONG-TERM ASSETS
Financing guarantee deposits 63,305 197,758 -68.0% 179,716 10.0%
Restricted investments 75,219 86,499 -13.0% 83,694 3.4%
Financial assets - investment BRK Ambiental -
86,940 85,319 1.9% 79,184 7.7%
Foz Jeceaba
Credit with subsidiary - 2,125 n.m. - n.m.
Deferred income and social contribution taxes 346,469 260,377 33.1% 175,943 48.0%
Financial assets 698,928 571,731 22.2% 651,925 -12.3%
Technical cooperation agreement long term 4,658 27,018 n.m. - n.m.
Sundry receivables 61,798 60,005 3.0% 38,463 56.0%
Contract assets 1,021,579 1,241,937 -17.7% 1,257,643 n.m.
Right of use - commercial leasing 76,208 38,789 96.5% 56,132 n.m.
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2Q21 Earnings Release
CURRENT
NON-CURRENT
LONG-TERM LIABILITIES
Loans and financing 913,961 1,147,999 -20.4% 1,159,346 -1.0%
Debentures 1,859,647 1,814,016 2.5% 1,888,707 -4.0%
Right of use - commercial leasing 51,501 16,818 n.m. 27,192 n.m.
Public-private partnership 227,106 273,554 -17.0% 319,552 -14.4%
Provision for litigation 156,732 187,511 -16.4% 171,973 9.0%
Retirement benefit liabilities 231,384 137,821 67.9% 96,268 43.2%
Sundry obligations 86,532 92,575 -6.5% 87,186 6.2%
TOTAL NON-CURRENT LIABILITIES 3,526,863 3,670,294 -3.9% 3,750,224 -2.1%
SHAREHOLDERS' EQUITY
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2Q21 Earnings Release
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2Q21 Earnings Release
6.5. Debt
Outstanding
Fixed Rate Maturity Balance
Debt –Funding Lines Index Issue Date %
(Annual) Date
(R$ million)
In National Currency:
FGTS Funds 1 7.68% TR 2 16-Aug-2042 689,258 19.8%
Finame 4.06% - 28-Mar-2011 15-Jan-2025 26,571 0.8%
BNDES Loan 6.14% TJLP 15-Jan-2008 15-May-2025 161,635 4.7%
BNDES/4th Debenture Issue
1st Series 6.16% TJLP 15-Jul-2010 15-Jul-2022 28,768 0.8%
2nd Series 9.05% IPCA 15-Jul-2010 15-Aug-2022 106,989 3.1%
3rd Series 6.16% TJLP 15-Jul-2010 15-Jul-2022 38,088 1.1%
Caixa/5th Debenture Issue 9.00% TR 20-Sep-2011 01-Sep-2031 180,148 5.2%
BNDES/8th Debenture Issue
1st Series 6.48% TJLP 15-Jun-2015 15-Jun-2028 57,185 1.6%
2nd Series 8.18% IPCA 15-Jun-2015 15-Jun-2028 30,667 0.9%
BNDES/11th Debenture Issue
T8 1st Series 7.23% TJLP 15-Jan-2017 15-Jan-2031 116,544 3.4%
T8 2nd Series 8.85% IPCA 15-Jan-2017 15-Jan-2031 59,495 1.7%
Market Debentures – 12th Issue
T121st Series 5.06% IPCA 08-Feb-2018 15-Jan-2024 223,102 6.4%
T122nd Series 5.27% IPCA 08-Feb-2018 15-Jan-2026 96,067 2.8%
Market Debentures – 13th Issue
T131st Series 4.44% DI 15-Jul-2018 15-Jul-2021 93,782 2.7%
T132nd Series 4.57% DI 15-Jul-2018 15-Jul-2023 547,092 15.7%
T133rd Series 6.50% IPCA 15-Jul-2018 15-Jul-2025 78,790 2.3%
Market Debentures – 14th Issue
T131st Series 4.41% DI 15-Jun-2019 15-Jun-2024 56,603 1.6%
T132nd Series 4.30% IPCA 15-Jun-2019 15-Jun-2026 157,155 4.5%
Market Debentures – 15th Issue
T151st Series 5.97% DI 16-Dec-2020 16-Dec-2025 501,138 14.4%
Other Liabilities:
TLibertas (Private Pension Plan) 5.84% INPC 08-Jan-2001 08-Nov-2021 2,225 0.1%
In Foreign Currency:
KfW 2.07% Euro 29-Nov-2011 20-Dec-2023 164,773 4.7%
BEI 0.01% Euro 13-Dec-2019 20-Sep-2033 59,277 1.7%
Total Short-Term Debt + Long-Term Debt 3,475,350
Issuance Costs of Securities 9,576
Total Short-Term Debt + Long-Term Debt (Accounting) 3.465.774
Cash and Cash Equivalents 853,582
Net Debt 2,612,192
1) FGTS Funds: Caixa Economica Federal.
2) Several Dates.
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2Q21 Earnings Release
About COPASA MG
Companhia de Saneamento de Minas Gerais – COPASA MG is a mixed capital company, controlled by the
Minas Gerais State, whose stock has been traded since February 2006 in Novo Mercado, the highest corporate
governance segment of B3 – Brasil, Bolsa, Balcão, under the ticker CSMG3. The Company’s activities are to
plan, execute, expand, remodel and operate public sanitation services, involving water supply, sewage and solid
waste services. COPASA MG has concessions in about 75% of the municipalities of the Minas Gerais State,
supplying water to approximately 11.8 million people, of which 8.4 million people also are served with sewage
services.
Contact
Any information contained in this document regarding COPASA MG’s business prospects, projections and operational and financial goals
is considered as assumptions and expectations of the Company’s Management, based on information currently available. They involve
risks and uncertainties, as they refer to future events and therefore depend on circumstances that may or may not occur. Changes in
macroeconomic policy, legislation or other operating factors may affect the future performance of COPASA MG and lead to results that
materially differ from those expressed in such considerations.
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