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CIA. DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO - SABESP
Rui de Britto Álvares Affonso
Chief Financial Officer and Investor Relations Officer
Mario Azevedo de Arruda Sampaio
Head of Capital Markets and Investor Relations

SABESP announces 3Q09 results
São Paulo, November 16, 2009 - Companhia de Saneamento Básico do Estado de São Paulo – SABESP (BM&FBovespa: SBSP3; NYSE: SBS), one of the largest water and sewage services providers in the world based on the number of customers, announces today its results for the third quarter of 2009 (3Q09). The Company’s operating and financial information, except when indicated otherwise, is presented in Brazilian Reais, in accordance with the Brazilian Corporate Law. All comparisons in this release, unless otherwise stated, refer to the same period of 2008.		SBSP3: R$ 35.15 / share  SBS US$ 41.18 (ADR=2 shares) Total shares: 227,836,623  Market value: R$ 8.0 billion  Closing price: November 16, 2009

1. Financial Highlights

In 3Q09, net operating revenue totaled R$ 1.6 billion, a 2.3% increase compared to 3Q08. Costs and expenses stood at R$ 1.2 billion, 11.1% higher than in 3Q08. EBITDA dropped 11.5%, from R$ 697.4 million in 3Q08 to R$ 617.1 million in 3Q09.

Earnings before financial expenses (EBIT) decreased 30.2%, from R$ 662.5 million in 3Q08 to R$ 462.6 million in 3Q09.

2. Gross operating revenue

In 3Q09, gross operating revenue grew R$ 31.9 million, or 1.9%, from R$ 1.72 billion in 3Q08 to R$ 1.75 billion in 3Q09. The main reasons for this increase were the 0.2% tariff adjustment as of September 2009 and the 0.7% growth in total billed volume.

This performance was influenced by the following factors: i) the lower average temperature in the period; ii) the lower billing in the industrial segment in ranges above 500 m³/month due to the signing of firm demand contracts and the closures and/or production cutbacks at certain industrial units; iii) the lower volume in the non-residential segment due to actions under the Rational Water Use Program (PURA) at properties owned by the São Paulo State Government and the São Paulo Municipal Government.

3. Billed volume

The following tables show billed water and sewage volume per customer category and region in 3Q08, 3Q09, 9M08 and 9M09.

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BILLED WATER AND SEWAGE VOLUME ⁽¹⁾ PER CUSTOMER CATEGORY - million m³

BILLED WATER AND SEWAGE VOLUME ⁽¹⁾ PER REGION - million m³

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4. Costs, administrative and selling expenses

In 3Q09, costs of products and services, as well as administrative and selling expenses increased R$ 117.5 million, or 11.1% . Costs and expenses as a percentage of net revenue grew from 66.3% in 3Q08 to 72.0% in 3Q09.

4.1. Payroll and benefits

In 3Q09, payroll and benefits grew R$ 15.6 million or 4.6%, from R$ 339.0 million to R$ 354.6 million, due to the 6.69% increase in wages as of May 2009 and the R$ 1.5 million increase in provisions for pension fund obligations as a result of actuarial calculation in 2009.

4.2. Supplies

In 3Q09, supplies grew R$ 2.1 million, or 5.6%, when compared to the previous year, from R$ 37.4 million to R$ 39.5 million. The main factors explaining this increase were data processing expenses in the amount of R$ 0.7 million, due to the replacement and modernization of IT equipment, and maintenance of buildings and installations in the amount of R$ 1.1 million.

4.3. Treatment supplies

In 3Q09, expenses with chemical products grew by R$ 1.3 million, or 4.0%, from R$ 32.1 million in 3Q08 to R$ 33.4 million in 3Q09. There was an increase of R$ 5.9 million due to the increase in iron chloride and aluminum polychloride consumption, enabling a more efficient water treatment process, replacing iron sulphate, which causes environmental damage.

4.4. Services

In 3Q09, this item grew R$ 63.5 million, or 36.7%, from R$ 172.8 million to R$ 236.3 million. The main factors leading to this increase were:

• Connection and sewage and water network maintenance in the amount of R$ 11.5 million, mainly due to the pent-up demand for this service and the acceleration of the execution of the service contracts at the Santos coastal region. Other factors were: i) greater allocation of resources in the Water Loss Reduction Program; ii) intensification of the operations to meet the demands of the Córrego Limpo Program with the São Paulo Municipal Government; and iii) repair of the sewage collection networks, especially in the municipality of Praia Grande, optimization of the sewage system in the municipality of São Vicente, and intensification of actions to meet the requirements of the Canal Limpo Program in the municipality of Santos;

• Preventive and corrective maintenance at the water treatment systems in the amount of R$ 10.0 million, due to the following factors: i) initiatives regarding urbanization, landscaping, lighting, sports equipment and leisure, construction of community foundations at the Parque da Integração, as part of the agreement with the São Paulo Municipal Government, in the amount of R$ 4.3 million; ii) maintenance and recovery of reservoirs, equipment and municipal operating areas of the regional systems, in the amount of R$ 2.8 million; and iii) maintenance and recovery of reservoirs, decanters, equipment and operating areas in the Water and Sewage Treatment Stations in the São Paulo Metropolitan Region, in the amount of R$ 1.9 million;

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• Expenses of R$ 8.2 million with the implementation of Program for the Rational Use of Water (PURA) at municipal schools, as a result of the partnership established between Sabesp and the São Paulo Municipal Government;

• Accounting reclassification related to the software licenses made in 3Q08, in the amount of R$ 6.3 million, non recurring in the coming quarters;

• Expenses with advertising campaigns focused on social-environmental initiatives, such as Projeto Verão, Várzeas do Tietê, Soluções Ambientais, Vida Nova, PURA, among others, in the amount of R$ 5.3 million, which will be recurring for the coming quarters;

• Provision of R$ 3.3 million for future disbursements, already committed, related to initiatives determined by the partnership between Sabesp and the São Paulo Municipal Government;

• Professional services in the amount of R$ 1.9 million due to the hiring of consultancy and advisory firms, as well as other specialized services focused on several areas, such as: monitoring system, analysis and integration of the information management processes and publicity of the Sabesp brand, specialized professional services on consultancy for corporate restructuring, implementation of Added-Value Management (GVA), among others;

• Hydrometer reading and bill delivery in the amount of R$ 1.9 million, due to the increase in reading services outsourcing, inactive connections survey and the use of new technologies, allowing an increase in security and a more agile system for reading and issuing bills;

• Car rental expenses started in August 2008, due to the replacement of the Company’s own fleet, in the amount of R$ 1.8 million;

• Recruitment of interns in the amount of R$ 1.8 million, started in February 2009. There was no recruitment in 2008; and

• Expenses of R$ 1.7 million with treatment and disposal of sludge related to services provided by the Public-Private Partnership, recurring for the coming quarters.

4.5. Electric power

In 3Q09, electric power expenses grew R$ 7.6 million or 6.7%, from R$ 113.8 million to R$ 121.4 million. There was a 5.16% increase in the free market and the 7.58% increase from the captive market, corresponding to a 6.7% average increase in spending between the markets. The average tariff increase in the free and captive markets was around 10% in the quarter.

4.6. General expenses

In 3Q09, general expenses grew R$ 28.8 million or 24.6%, from R$ 117.0 million to R$ 145.8 million, due to the increase of R$ 30.8 million, mainly in provisions for judicial contingencies.

4.7. Depreciation and Amortization

In 3Q09, depreciation and amortization increased by R$ 1.2 million or 0.7%, from R$ 160.3 million to R$ 161.5 million, due to the higher work transference to permanent assets in operation when compared to same period of previous year.

4.8. Credit write-offs

In 3Q09, credit write-offs grew R$ 10.7 million or 17.6%, from R$ 60.8 million to R$ 71.5 million. From 2Q08, the Company has been making improvements in the accounting provision for losses. Amounts that were being provisioned after 360 days are now registered as provision at the time of the debt appearance. It is a time difference and the methodology, which was being applied in billing the municipalities that are served by the Company in the wholesale, as of 2Q09 is being used also in the billing of individuals. The amount of this complementary provision this quarter was R$ 6.6 million and will be recurring in the coming periods.

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4.9. Tax expenses

In 3Q09, tax expenses dropped R$ 13.3 million or 58.6%, mainly due to payment of the TRCF (Regulation, Control and Oversight Fee) to ARSESP (São Paulo State Sanitation and Energy Regulatory Agency) as of July 2008 in the amount of R$ 14.8 million, relating to the first 9 installments of the 2008 annual amount. In 2009, the appropriation of these values has been monthly.

5. Other operating revenues and expenses

In 3Q09, other operating revenues and expenses dropped R$ 132.3 million or 105.5%, mainly as a result of the fixed asset write-off in 3Q08 due to the settlement of the Third Amendment to the GESP Agreement that establishes the full incorporation of the assets verified at the Alto Tietê System’s equity appraisal report.

6. Financial revenues and expenses

6.1. Financial expenses

In 3Q09, financial expenses increased R$ 92.1 million or 45.3%, as described below:

• Decrease in interest and charges for domestic financing, as a result of a drop in the payable balance due to the settlement held in the amount of R$ 7.7 million;

• Decrease of R$ 3.1 million in interest on foreign financing, as a result of the US dollar depreciation versus the Brazilian Real; and

• Increase in interest on lawsuits in the amount of R$ 102.2 million.

6.2. Financial revenues

Financial revenues dropped R$ 11.9 million mainly due to interest on past due bills and customer installment agreements in 3Q08. The variation was a result of risk contracts for collection at São Paulo Metropolitan Region in the previous period.

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7. Foreign exchange and indexation

7.1. Variation on liabilities

The net effect of the variation on liabilities in 3Q09 was R$ 345.1 million, when compared to 3Q08, due to the:

• R$ 104.7 million profit from the positive variation of R$ 316.9 million as a result of 8.9% US Dollar depreciation in 3Q09 versus 20.3% appreciation in 3Q08, leading to a R$ 212.2 million loss; and

• R$ 29.8 million decrease in monetary variation over loans and financing due to: i) R$ 20.4 million reduction in financing indexed to the IGPM (General Market Price Index) with negative variation of 0.37% in 3Q09, versus 1.55% positive variation in 3Q08; and ii) R$ 9.4 million reduction over financing related to the TR rate which had a lower variation in 3Q09 (0.12%) in comparison to 3Q08 (0.55%) .

7.2. Variation on assets

Variation on assets declined R$ 350.6 million, mainly due to the update of the undisputed amount regarding supplementary retirement and pension remuneration as provided by the Third Amendment to the GESP (São Paulo State Government) made in the previous period.

8. Operating indicators

Thanks to the Water Loss Reduction Program, water losses fell by a substantial 6.4% in the third quarter. In the same period, the volume of water produced declined by 0.7%, while the population served increased by 0.9% .

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9. Loans and financing

In October 2009, the Inter-American Development Bank (IDB) approved a US$ 600 million loan for Sabesp to continue the works on Projeto Tietê, which is in its third stage. The next step will be an agreement in compliance with the procedures for obtaining the Brazilian government’s guarantee. Sabesp’s counterparty in this financing will be US$ 200 million, for which the company will be seeking partial funding.

Also in October, Sabesp signed financing agreement of US$ 100 million with the International Bank for Reconstruction and Development (IBRD) for the Water Source Program. The company will put up US$ 25 million.

In addition, Sabesp Extraordinary Shareholders’ Meeting and the BNDES Executive Board approved a loan for three private issues of secured non-convertible debentures of R$ 275 million each, totaling R$ 826 million, to be subscribed exclusively by the BNDES and BNDESPAR. The first issue will be in 2009 and the subsequent ones in 2010 and 2011. The proceeds will be allocated to several of the Company’s investment programs, especially the Water Loss Reduction Program, as well as to the expansion and improvement of the Rio Grande Water Treatment Station in the São Paulo Metropolitan Region and sewage initiatives on the north coast and various water basins in the state.

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10. Future Events

Statements contained in this press release may contain information that is forward-looking and reflects management's current view and estimates of future economic circumstances, industry conditions, SABESP performance, and financial results. Any statements, expectations, capabilities, plans and assumptions contained in this press release that do not describe historical facts, such as statements regarding the declaration or payment of dividends, the direction of future operations, the implementation of principal operating and financing strategies and capital expenditure plans, the factors or trends affecting financial condition, liquidity or results of operations are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. There is no guarantee that these results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.

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Income Statement

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Balance Sheet

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Cash Flow

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This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.