São Paulo-based Companhia de Saneamento Básico do Estado de São Paulo – SABESP (B3: SBSP3; NYSE: SBS) has implemented a new tariff structure and company bylaws, according to a report filed with the U.S. Securities and Exchange Commission today.

Following the completion of its shares’ secondary public offering and the company’s privatization on Monday, SABESP has established a revised tariff structure effective immediately.

The new tariffs include a 1% reduction in residential tariffs, a substantial 10% cut for social and vulnerable tariffs, and a 0.5% decrease for all other tariffs.

These adjustments apply solely to the first consumption tier, as stipulated in the Concession Agreement dated May 24, 2024, between SABESP and the Regional Unit for Drinking Water Supply and Sewage Services of the Southeastern region, with the São Paulo State Public Services Regulatory Agency’s consent.

In addition to the tariff changes, SABESP’s new bylaws, which were approved in an Extraordinary Shareholders’ Meeting on May 27, 2024, and policies regarding related party transactions, duties and responsibilities, and the allocation of results and dividend distribution, approved by the company’s Board of Directors, have also come into effect. The bylaws were previously submitted to the SEC on June 19, 2024.

The adjustments come as part of the company’s broader strategy to streamline operations and enhance service provision under the new Concession Agreement. SABESP, classified under the Water Supply industry, is headquartered in São Paulo, Brazil, and provides basic sanitation services across the state of São Paulo. The company’s Chief Financial Officer and Investor Relations Officer, Catia Cristina Teixeira Pereira, confirmed the implementation of these changes.

This press release statement serves as the basis for the information provided, which is a reflection of SABESP’s ongoing commitment to its customers and stakeholders in the wake of its privatization.

In other recent news, Brazilian utility company, Companhia de Saneamento Básico do Estado de São Paulo, also known as Sabesp, has successfully finalized a public offering of shares. This included 220,470,000 common shares and the issuance of 1,789,502 American Depositary Shares (ADSs).

The shares were offered globally, including an international segment placed outside Brazil and the United States. The State of São Paulo owned these shares, and the delivery occurred through The Depository Trust Company in New York and the B3 Central Depository in Brazil.

In recent developments, Sabesp’s share price target has been upgraded to R$137.00 from R$97.00 by financial firm Citi due to new regulatory and concession contract models. Citi’s analysis suggests that Sabesp is currently trading with a 14% real Internal Rate of Return (IRR) under the new regulations, lower than other companies in the same sector.

Still, Citi maintains a Buy rating on Sabesp’s stock and selects it as one of its top picks in the industry, indicating a positive outlook for Sabesp’s shares in the new regulatory environment.

The successful settlement of the offering and the upgraded share price target highlight recent key developments for Sabesp, reflecting investor confidence and providing additional capital for its ongoing operations and future initiatives.

InvestingPro Insights

In the wake of SABESP’s recent privatization and tariff restructuring, real-time data from InvestingPro provides a financial perspective on the company’s current market position. With a market capitalization of $10.61 billion and a Price to Earnings (P/E) ratio of 16.51, SABESP appears to be trading at a low P/E ratio relative to its near-term earnings growth. Furthermore, the company’s PEG ratio, which stands at 0.68, suggests that it may be undervalued based on its earnings growth potential.

The company has also shown a commitment to its shareholders, having raised its dividend for 3 consecutive years, and maintained dividend payments for 13 consecutive years. This, coupled with a strong return over the past year of 37.16%, indicates a positive trend for investor returns.

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