PROJECT FOR REGIONALIZED CONCESSION OF WATER SUPPLY AND SANITATION SERVICES IN THE MUNICIPALITIES OF RIO DE JANEIRO STATE CURRENTLY SERVED BY CEDAE

REFERENCE BUSINESS PLAN

BLOCK 2

STAGE 5 - BUSINESS PLAN

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SUMMARY

1 Presentation ...... 4 2 Introduction ...... 6 2.1 Territorial Characterization and Municipalities Served in the Project - Block 2 .....6 2.2 Executive summary ...... 12 3 Projections and Premises - BLOCK 2 ...... 15 3.1 Revenue ...... 15 3.1.1 Default ...... 17 3.2 Investment ...... 18 3.2.1 Investment Valuation Premises ...... 19 3.2.2 Projection of Investments ...... 20 3.3 Operating Costs ...... 25 3.3.1 Operating Cost Assessment Premises ...... 25 3.3.2 Cost Projection ...... 28 3.4 Working Capital ...... 29 3.5 Taxation ...... 29 3.5.1 Tax Immunity ...... 29 3.5.2 Taxation on Revenue ...... 30 3.5.3 Taxation on Profit ...... 31 3.6 Financing Structure ...... 32 3.6.1 Bridge Financing ...... 32 3.6.2 Long Term Financing ...... 33 3.6.3 Covenants ...... 34 3.6.4 Tax Shield ...... 34 4 Attachments ...... 36 4.1 Active Water Units Projections ...... 36 4.2 Active Sewage Units Projections ...... 37 4.3 Water Revenue Projection ...... 38 4.4 Sewage Revenue Projection ...... 39 4.5 Default Projection ...... 40 4.6 Water and Sanitation Investment Projection ...... 41

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1. PRESENTATION

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1 PRESENTATION

This document was prepared based on information provided by employees and collaborators from Cedae, BNDES, municipal governments and Rio de Janeiro State Government, in addition to primary and secondary sources of information gathered by the Consortium. Such information was considered truthful, therefore, the Consortium does not undertake any liability for the accuracy of the information from reports and/or other documents provided by the sources consulted.

The figures presented in this report may undergo updates and/or monetary corrections, leading to potential future changes in the information and projections presented herein.

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2. INTRODUCTION

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2 INTRODUCTION

This Report presents the project for the Regionalized Concessions of the water supply 1 and sanitation services 2 of all the municipalities in the state of Rio de Janeiro currently served by CEDAE, and, for municipalities served by large production systems in the Metropolitan Region of Rio de Janeiro, the concession of water supply will only be of the system called “downstream” , which covers the water distribution systems to end users from CEDAE's water macro meters, in addition to the sewage system.

Such delegations will be granted to private companies directly by the State of Rio de Janeiro, through public bidding and from a delegation originally received from the holders of the sanitation service. Water production in the municipalities where the private contractor will operate downstream will continue to be the responsibility of CEDAE. This Company will be responsible for the abstraction and treatment of raw water and the delivery of treated water at appropriate standards and quality levels. The relationship between CEDAE and the concessionaire will be governed by an Interdependence Agreement to be entered into between the parties, which will establish the water purchase price and the governance of the operation.

In all 64 municipalities to be granted, the commercial management of water and sanitation services will be the responsibility of the private contractor, except in those locations where this commercial management is already performed by some other concessionaire.

2.1 Territorial Characterization and Municipalities Served in the Project - Block 2 The study covers the economic and financial assessment of the water supply and sanitation systems of the urban areas of the 64 municipalities in which Cedae operates at least the water supply main system, including the 114 districts of the municipalities, i.e., regardless of the concessionaire operating the system, except for the sanitation systems already under concession for private contractors in the following locations: Macaé, Rio das Ostras, São João do Meriti, Saquarema and the AP5 of the city of Rio de Janeiro, besides the sanitation system of the city of Maricá, which will be operated by its own municipality government. The following results refer to the municipalities and districts of municipalities of Block 2.

1 Consisting of the services, infrastructure and facilities necessary for the public supply of drinking water, from abstraction to household connections and their measurement instruments. 2 Consisting of the services, infrastructure and operational facilities for collection, transportation, treatment and final disposal of sewage, from the household connections to their final disposal into the environment, for a period of 35 (thirty-five) years.

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Table 1 lists the municipalities of the study and includes the current contractor for each type of service and Figure 1 displays the spatial location of each municipality.

It is also worth mentioning that Saquarema's water supply system is restricted to the Jaconé neighbourhood, since the rest of the municipality is also operated by a private concessionaire.

The Business Plan was based on the geographic separation by block, showing greater technical-operational feasibility, given that in some cases the operation of water and sanitation services can sometimes be limited to this geographic area. It is worth mentioning that CEDAE will continue to produce and treat water and sell to the respective concessionaire in the following municipalities: Rio de Janeiro; Nova Iguaçu; Duque de Caxias; São João de Meriti; Belford Roxo; Nilópolis; Mesquita; Itaguaí; Queimados; Seropédica; Japeri; Paracambi and Maricá, until the implementation of the new water production system.

The areas operated by CEDAE were divided into four blocks, with the municipalities in block 2 listed in the table below:

Table 1: List of municipalities in block 2 and list of current providers of Water and Sanitation Systems

Contr GE020 - Where GE019 - Where N Municipalit actor's Type of it provides Contractor it provides o. y acron service sanitation water supply ym services Water and Barra do Piraí City Hall BPCH Both Both Barra do Sanitatio 1 Piraí n Companhia Estadual de CEDAE Water Locations Does not serve Águas e Esgotos Miguel Companhia Estadual de 2 CEDAE Water Both Does not serve Pereira Águas e Esgotos Paraíba do Companhia Estadual de 3 CEDAE Water Both Does not serve Sul Águas e Esgotos Paty do Companhia Estadual de 4 CEDAE Water Both Does not serve Alferes Águas e Esgotos Companhia Estadual de Municipal Main 5 Pinheiral CEDAE Water Does not serve Águas e Esgotos Region Water Municipal Main Rio de Companhia Estadual de and Municipal Main 6 CEDAE Region except Janeiro Águas e Esgotos Sanitatio Region AP5 n Water Companhia Estadual de and Municipal Main 7 Valença CEDAE Both Águas e Esgotos Sanitatio Region n

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Contr GE020 - Where GE019 - Where N Municipalit actor's Type of it provides Contractor it provides o. y acron service sanitation water supply ym services Companhia Estadual de 8 Vassouras CEDAE Water Both Does not serve Águas e Esgotos Source: SNIS, 2016 adapted by the Consortium Shaded: Sanitation Systems granted to private contractors Note: According to the SNIS classification, the service locations are classified into 03 types: (1: Municipal Main Region; 2: Locations; 3: Both): - MUNICIPAL MAIN REGION: when the contractor provides services only to the main region of the municipality and does not provide services to locations other than the main region; - LOCALITIES: when the contractor does not provide services to the municipality's main region, but it provides services to other locations, which do not include the main region; - BOTH: when it serves both the main region and other locations.

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Figure 1: Location of the municipalities and respective operational management of CEDAE

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The city of Rio de Janeiro was divided into Regions, as shown in the table below. Region 2 was included in Block 2:

Table 2: Division of Regions of the City of Rio de Janeiro

Regions Neighbourhoods

Region 1 Botafogo, Catete, Copacabana, Cosme Velho, Flamengo, Gávea, Glória, Humaitá, Ipanema, Jardim Botânico, Lagoa, Laranjeiras, Leblon, Leme, Rocinha, São Conrado, Urca, Vidigal

Region 2 Anil, Barra da Tijuca, Camorim, Cidade de Deus, Curicica, Freguesia (Jacarepaguá), Gardânia Azul, Grumari, Itanhangá, Jacarepaguá, Jardim Sulacap, Joá, Pechincha, Praça Seca (partial), Realengo, Recreio dos Bandeirantes, Tanque, Taquara, Vargem Grande, Vargem Pequena.

Region 3 Bangu, Barra de Guaratiba, Campo dos Afonsos, Campo Grande, Cosmos, Deodoro, Gericinó, Guaratiba, Inhoaíba, Jardim Sulacap, Magalhães Bastos, Paciência, Padre Miguel, Pedra de Guaratiba, Realengo, Santa Cruz, Santíssimo, Senador Camará, Senador Vasconcelos, Sepetiba, Vila Kennedy, Vila Militar

Region 4 Abolition, Acari, Água Santa, Alto da Boa Vista, Anchieta, Andaraí, Bancários, Barros Filho, Benfica, Bento Ribeiro, Bonsucesso, Brás de Pina, Cachambi, Cacuia, Caju, Campinho, Cascadura, Catumbi, Cavalcanti, Centro, Cidade Nova, Cidade Universitária, Cocotá, Coelho Neto, Colégio, Complexo do Alemão, Cordovil, Costa Barros, Del Castilho, Enchanted, Engenheiro Leal, Engenho da Rainha, Engenho de Dentro, Engenho Novo, Estácio, Freguesia (Island),

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Regions Neighbourhoods Galeão, Gamboa, Grajaú, Guadalupe, Higienópolis, Honório Gurgel, Inhaúma, Irajá, Jacaré, Jacarezinho, Jardim América, Jardim Carioca, Jardim Guanabara, Lapa, Lins de Vasconcelos, Madureira, Mangueira, Manguinhos, Maracanã, Marechal Hermes, Maria da Graça, Méier, Moneró, Olaria, Osvaldo Cruz, Paquetá, Parada de Lucas, Parque Anchieta, Parque Colúmbia, Pavuna, Penha, Penha Circular, Piedade, Pilares, Pitangueiras, Portuguesa, Praça da Bandeira, Praça Seca (partial), Praia da Bandeira, Quintino Bocaiúva, Ramos, Riachuelo, Ribeira, Ricardo de Albuquerque, Rio Comprido, Rocha, Rocha Miranda, Sampaio, Santa Teresa, Santo Cristo, São Cristóvão, São Francisco Xavier, Saúde, Tauá, Tijuca, Todos os Santos, Tomás Coelho, Turiaçú, Vasco da Gama, Vaz Lobo, Vicente de Carvalho, Vigário Geral, Vila da Penha, Vila Isabel, Vila Kosmos, Vila Valqueire, Vista Alegre, Zumbi, Ilha do Governador

The following is information on the geographical characterization, which includes information on territorial extension and population (total, served with the water service and served with the sanitation service).

Table 3: Territorial Extension and Population Served

Geographic Characterization Block 2 - 2019 Territorial size (km2) 37,310,084 Total Population (inhab.) 1,344,983 Population served WSS (inhab.) 1,270,565 Population served SSS (inhab.) 786,658

Source: GIS and Cedae The table below presents the main water courses of each municipality, which serve the water supply system, not including any anomalies in the supply, as long as the criteria for

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water loss reduction and per capita water consumption are met and they are able to receive treated sewage.

Table 4: Water Catchments and Rivers

Município Bacias Hidrográficas Rios RH II - Guandu Rio Guandu Vassouras RH III - Médio Paraíba do Sul Rio Paraíba do Sul Valença RH III - Médio Paraíba do Sul Rio Bonito, Rio das Flores, Rio São Fernando, Rio Indalá, Córrego Ponte Funda, Ribeirão Sant'Ana RH II - Guandu Barra do Pirai Rio Paraíba do Sul, Rio Ipiabas, Rio das Flores, Rio Turvo RH III - Médio Paraíba do Sul RH II - Guandu Rio Santana Miguel Pereira RH III - Médio Paraíba do Sul Córrego do Saco RH IV - Piabanha Rio Pardo, Rio Fagundes Paraíba do Sul RH III - Médio Paraíba do Sul Rio Paraíba do Sul, Ribeirão Grande, Rio Matozinhos, Ribeirão Santo Antônio, Córrego Santa Isabel RH IV - Piabanha Rio Pardo Paty do Alferes RH III - Médio Paraíba do Sul Rio Ubá, Ribeirão do Secretário, Córrego do Sertão Pinheiral RH III - Médio Paraíba do Sul Rio Paraíba do Sul, Córrego Pau d'alho, Córrego Maria-preta RH II - Guandu Rio Piraí, Rio Cacaria Piraí RH III - Médio Paraíba do Sul Córrego Pau d'alho, Ribeirão do João-Congo Rio de Janeiro Lote III RH V - Baia de Guanabara Rio Paineiras, Rio Grande, Rio Marangá, Lagoa de Jacarepaguá

2.2 Executive summary

The Business Plan presented herein is a reference, not binding on the future concession. Potential bidders should carry out their own studies and estimates in order to participate in the bidding process and may not claim that the estimates contained herein have not been achieved as a basis for contract rebalancing claims.

This document contains the following topics:

Opening of (i) Revenue, including Default, (ii) Investment; (iii) Operating Costs; (iv) Taxation; (v) Financing Structure.

Table5 : Units

The number of water and sewage units projected for the end of the plans is presented below: Water + Sewage Unit (End Municipalities Water Unit (End of Plan) Sewage Unit (End of Plan) of Plan) Barra do Piraí 40.833 36.749 77.582 Miguel Pereira 10.907 9.816 20.723 Paraíba do Sul 20.867 18.780 39.647 Paty do Alferes 11.864 10.677 22.541 Pinheiral 12.776 11.498 24.274 Valença 33.518 29.437 62.955 Vassouras 14.785 13.307 28.093 Rio de Janeiro B3 346.607 263.659 610.256

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Table 6: Main Results

The main indicators and financial figures of the Block are presented below:

R$ thousand except when indicated Block 2 otherwise Investments 3.285.480 Water and Sanitation 45.301.148 Revenue EBITDA 19.884.069 Water sale price by 1,40 CEDAE (R$/m³)

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3. PROJECTIONS AND ASSUMPTIONS - BLOCK 2

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3 PROJECTIONS AND ASSUMPTIONS - BLOCK 2

3.1 Revenue The revenues generated from the provision of water supply and sewage collection and treatment services were taken into account.

In order to assess the sanitation service revenue, the same water tariff table was applied on the volume of sewage to be served.

The current average tariff in each municipality for each type of consumption (social, residential, industrial, commercial and public tariff) and the per capita consumption, hydrometration and served population values were taken into account in order to calculate the tariff revenue. For sanitation, an accession rate of 80% was employed.

Based on the studies carried out by the technical team, it was considered that the private partner would achieve a hydrometric index of 100% by the 5th year of Concession.

Table 7: Average Water and Sanitation Tariffs by Typology

Water (R$/m³) Municipality Social Tariff Residential Commercial Industrial Public Barra do Piraí n.a. 4,36 13,67 18,11 7,48 Miguel Pereira n.a. 9,55 10,97 18,21 7,43 Paraíba do Sul n.a. 4,81 12,94 20,38 9,04 Paty do Alferes n.a. 4,47 11,44 18,83 8,00 Pinheiral n.a. 4,17 12,63 18,96 8,14 Valença n.a. 3,32 10,44 15,86 4,97 Vassouras n.a. 4,21 12,08 18,70 8,92 Rio de Janeiro - Region 2 3,03 4,81 15,17 21,52 10,99

The engineering team has adopted the assumption of per capita water consumption of 200 l/inhab/day in Rio de Janeiro (capital), 150 l/inhab/day in the other municipalities, 260 l/inhab/day in the irregular areas of the municipality of Rio de Janeiro. It is worth mentioning that the analysis was based on the current per capita informed by CEDAE and within 10 years the project per capita of the presented assumption will be achieved. These estimates were considered for the following reasons: projected loss reduction, greater commercial control, alignment with the per capita already used by CEDAE in its projections, among others.

The target for the total water loss index in distribution is 25%, to be achieved in 10 years.

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The following is a table with information on the current per capita consumption and loss index in the municipalities of Block 2, which should be linearly reduced to the mentioned project values.

Table 8: Current per capita and loss index

Current per capita Municipality Current Losses (L/inhab.d) Barra do Piraí 186 40% Miguel Pereira 240 60% Paraíba do Sul 220 30% Paty do Alferes 240 50% Pinheiral 167 50% Valença 220 30% Vassouras 270 30% Rio de Janeiro B3 317 35%

Table 9: Water and sewage revenue - Block 2

Among the main levers for revenue growth in the first ten years, the main driver is the increase in the supply index.

For the sake of caution and due to the difficulty in establishing a driver to project accessory revenues, the same were not taken into account.

Rio de Janeiro is the municipality that is the most relevant in terms of revenue throughout all blocks.

Revenues (R$) 1 2 3 4 5 10 20 30 35 Water 681,609,766 723,205,541 762,321,057 798,846,206 832,660,209 766,802,849 760,208,486 752,243,272 739,968,725 Sewage 479,366,225 503,010,524 529,163,271 519,115,092 508,559,492 485,778,350 554,946,693 549,328,535 540,427,946 Total 1,160,975,992 1,226,216,065 1,291,484,328 1,317,961,298 1,341,219,701 1,252,581,198 1,315,155,179 1,301,571,807 1,280,396,672

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The graph below presents the annual water and sewage tariff revenue 3:

Graph 1: Revenue - Block 2

1,600,000

1,400,000 Thousands

1,200,000

1,000,000

800,000

600,000

400,000

200,000

- Ano 1 Ano 2 Ano 3 Ano 4 Ano 5 Ano 6 Ano 7 Ano 8 Ano 9 Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Water Sewage

3.1.1 Default The initial projected default value considered the history of CEDAE in each municipality, and was incorporated into the model to differentiate between invoiced and collected revenue.

Since practice demonstrates that the private partner has better ability to mitigate default, due to more effective commercial management, the economic and financial modeling considered a reduction of default to 10% by the 15th year of the Concession, established jointly with BNDES on the basis of peers' default 4.

The default values in 2018, per municipality of Block 2 are presented below:

3 Irregular areas are present only in the municipality of Rio de Janeiro 4 Analyzing the default of state-owned companies (SABESP, COPASA, SANUPAR) and the main private sanitation companies (GS Inima, BRK, Águas do Brasil, AEGEA), as well as the historical difficulty of billing for sanitation in the downtown area, the assumption of 10% was adopted.

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Table 10: Default

Municipality Default Barra do Piraí 35,2% Miguel Pereira 69,5% Paraíba do Sul 50,4% Paty do Alferes 33,8% Pinheiral 26.4% Valença 59,0% Vassouras 24,2% Rio de Janeiro 23,4% Implied Average 25,3%

Below is a graph with the expected curve of default reduction of the block, until it reaches 10% in year 15:

Graph 2: Evolution of Default

30%

25%

20%

15%

10%

5%

0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

3.2 Investment The investments needed to achieve the universalization targets of water supply and sanitation services were estimated as presented in the tables below, whose evolution is linear. It is worth mentioning that the municipalities of Miguel Pereira and Vassouras, located in the Guandu River catchment, have the target of reaching the universalization of water supply and sanitation in only 5 years, in order to ensure the quality of the water from the main source of water supply of the region. These projections and the methodology used in the investment estimates are detailed below.

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Table 11: Service Targets - Water (%)

Municipality Year 5 Year 8 Year 10 Year 12 Year 14

Angra dos Reis 94,9 97,9 99

Barra do Piraí 97,6 98,6 98,9 99

Miguel Pereira 99

Paraíba do Sul 96,7 98,1 98,9 99

Paty do Alferes 79 86 90,7 95,3 99

Pinheiral 93,5 96,3 98,1 99

Rio de Janeiro Region 2 98,1 99

Valença 92,8 95,9 97,9 99

Vassouras 99

Table 12: Service Targets - Sewage (%)

Municipality Year 5 Year 10 Year 15 Year 18 Year 20

Angra dos Reis 30 50 70 82 90

Barra do Piraí 84,7 87,3 90

Miguel Pereira 90

Paraíba do Sul 22,5 45 67,5 81 90

Paty do Alferes 39,8 56,5 73,3 83,3 90

Pinheiral 22,5 45 67,5 81 90

Rio de Janeiro Region 2 70 80 90

Valença 56,3 67,5 78,8 85,5 90

Vassouras 90

3.2.1 Investment Valuation Premises

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3.2.1.1 Calculation Basis The following reference spreadsheets were adopted to calculate the costs of engineering works and services:

• Bulletin EMOP - Empresa de Obras Públicas do Estado do Rio de Janeiro, base December/2018; • SINAPI-RJ - Dec/18, exceptionally in the absence of any EMOP unit cost;

• CEDAE benchmark quotes.

For the Indirect Benefits and Expenses (IBE), the value of 24% was used, an average value admitted by the Federal Audit Court - TCU for basic sanitation works.

3.2.1.2 Parametric Costs and Cost Curves Two methodologies were used for the preparation of the Capex: parametric cost calculation and cost curve elaboration.

The parametric costs were used for the following works: water distribution networks and sewerage, water and sewage connections, internal household connections, replacement of hydrometers, deep wells, pipelines and discharge lines and operation in irregular areas.

Cost curves were drawn up for the following works: raw water abstraction, water and sewage treatment plants, water and sewage pumping stations and for water tanks.

3.2.1.3 Reinvestment For reinvestment, which represents the disbursement with replacement of capital already invested, the following percentages were adopted in relation to assets, whether existing or to be built, which were established jointly with CEDAE:

Equipment : 5% a year

Telemetry and automation: 5% a year

3.2.1.4 Other Investments For automation and telemetry, it was considered the cost equivalent to 5% of the CAPEX of civil works and related equipment (abstractions, treatment stations and lifting stations and reservoirs) and for studies and designs the value equivalent to 5% of the total cost of the work, which includes geotechnics and topographic registration services.

For expropriations, the unit cost of the land was obtained through internet research.

3.2.2 Projection of Investments

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The Tables Table 13: Investment Water - Block 2 and Table 14: Investment Sanitation - Block 2 present the investment projections for the 35 (thirty-five) years of concession of Block 2, with the opening of the projections by investment sector (water, sanitation and production systems) and details of each structure for the highlighted sectors.

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Table 13: Investment Water - Block 2

YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Abstraction (K R$) 1,181 2,087 2,099 2,112 2,125 2,138 1,832 1,841 1,850 738 738 392 392 392 392 392 76 76 Water Lifts (K R$) 0 5,259 5,070 5,070 3,639 3,639 0 0 0 0 0 0 0 0 0 0 0 0 Water Pipelines (K R$) 0 18 11,652 23,520 41,995 30,361 20,902 2,409 2,409 0 0 0 0 0 0 0 0 0 WTP (K R$) 0 2,417 2,461 2,461 2,461 2,417 0 0 0 0 0 0 0 0 0 0 0 0 Reservoir (K R$) 0 3,122 6,504 8,720 11,352 13,025 12,402 9,677 7,401 4,567 2,466 67 400 618 581 521 461 290 Distribution Networks (K R$) 19,887 26,785 27,042 27,299 27,556 27,813 22,199 22,406 22,614 19,426 19,581 14,822 11,214 11,244 10,200 10,200 5,811 5,811 Water Connections (K R$) 949 1,205 1,218 1,232 1,245 1,259 1,080 1,091 1,102 916 924 696 532 533 473 473 267 267 Hydrometers (K R$) 4,822 4,822 4,915 4,841 4,835 5,263 5,387 5,381 5,387 5,399 5,834 5,869 5,893 5,904 5,813 6,257 6,188 6,130 Systems, Designs, Customer Service (K R$) 994 2,037 2,695 3,523 4,618 4,257 3,332 2,148 1,931 1,425 1,223 745 595 612 556 556 337 317 Environmental (K R$) 0 871 1,072 1,101 1,094 1,088 162 139 113 115 116 96 67 68 61 61 39 38 Reinvestments (K R$) 0 0 0 0 0 0 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 Total Water (K R$) 27,833 48,623 64,731 79,879 100,920 91,260 70,936 48,733 46,447 36,226 34,521 26,328 22,733 23,012 21,716 22,100 16,819 16,569 YEAR 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Abstraction (K R$) 7676760 0 0 0 0 0 0 0 0 0 0 0 0 0 Water Lifts (K R$) 00000000000000000 Water Pipelines (K R$) 00000000000000000 WTP (K R$) 00000000000000000 Reservoir (K R$) 133 133 103 140 37 37 37 37 0 0 0 0 0 0 0 0 0 Distribution Networks (K R$) 5,811 5,811 4,555 2,393 2,393 2,393 2,393 2,393 698 698 698 698 698 66 66 66 66 Water Connections (K R$) 267 267 267 108 108 108 108 108 40 40 40 40 40 6 6 6 6 Hydrometers (K R$) 6,136 6,029 6,474 6,316 6,246 6,258 6,151 6,596 6,359 6,295 6,307 6,201 6,646 6,378 6,314 6,326 6,219 Systems, Designs, Customer Service (K R$) 301 301 238 134 123 123 123 123 35 35 35 35 35 3 3 3 3 Environmental (K R$) 37 37 37 20 18 18 18 18 4 4 4 4 4 0 0 0 0 Reinvestments (K R$) 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 3,641 Total Water (K R$) 16,401 16,294 15,389 12,750 12,566 12,578 12,471 12,916 10,778 10,714 10,726 10,619 11,064 10,094 10,030 10,042 9,936

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Table 14: Investment Sanitation - Block 2

YEAR 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Dry Weather Collector (K R$) 97,542 104,268 127,813 107,632 100,905 0 0 0 0 0 0 0 0 0 0 0 0 0 Sew age Connection (K R$) 6,228 14,403 14,784 15,179 15,566 12,621 21,500 21,935 22,332 22,756 23,167 21,594 21,880 22,175 22,472 11,831 10,047 10,154 Collection Network (K R$) 4,019 40,075 114,563 40,075 61,963 21,361 24,031 24,031 24,031 24,031 24,031 29,372 29,372 29,372 29,372 29,372 32,042 32,042 Sew age Lifts (K R$) 11,405 13,385 13,385 1,980 1,980 7,803 5,823 5,823 0 0 0 0 0 0 0 0 0 0 Discharge Lines (K R$) 7,642 7,642 0 0 2,017 2,017 2,017 0 0 0 0 0 0 0 0 0 0 0 STP (K R$) 0 0 12,002 55,464 57,849 42,458 23,215 23,410 23,602 23,863 23,989 23,911 24,013 24,117 24,218 24,322 99 100 Systems, Designs, Customer Service (K R$) 1,180 3,082 7,950 7,381 8,499 5,884 1,784 1,784 1,202 1,205 1,202 1,469 1,469 1,469 1,469 1,469 1,602 1,602 Environmental (K R$) 0 1,379 1,617 1,728 1,736 1,589 63 63 64 65 65 69 69 70 71 68 68 68 Reinvestments (K R$) 0 0 0 0 0 0 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 Total Sew age (K R$) 128,016 184,233 292,115 229,439 250,516 93,733 83,024 81,637 75,821 76,511 77,044 81,004 81,393 81,793 82,192 71,652 48,447 48,556

YEAR 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Dry Weather Collector (K R$) 00000000000000000 Sewage Connection (K R$) 10,280 10,393 3,465 1,557 1,558 1,552 1,558 1,550 401 415 397 399 400 51 49 51 46 Collection Network (K R$) 32,042 32,042 32,042 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Sew age Lifts (K R$) 00000000000000000 Discharge Lines (K R$) 00000000000000000 STP (K R$) 10099100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Systems, Designs, Customer Service (K R$) 1,602 1,602 1,602 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Environmental (K R$) 6869484 4 4 4 4 1 1 1 1 1 0 0 0 0 Reinvestments (K R$) 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 4,590 Total Sew age (K R$) 48,682 48,794 41,847 6,152 6,153 6,147 6,152 6,144 4,992 5,006 4,989 4,991 4,992 4,642 4,639 4,641 4,636

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In the following locations it is provided for the construction of dry weather flow collectors, to be implemented within the first 05 years of the concession: Belford Roxo, Duque de Caxias, Mesquita, Nilópolis, Nova Iguaçu, Rio de Janeiro, Itaboraí and São Gonçalo and their respective districts.

For these locations, the proposal is to postpone the extension of the sanitation system (delay ) for 5 years, maintaining only the inertial growth while the dry weather flow collector system is under implementation.

The dry weather flow solution to be adopted shall consider the regional particularities and shall be proposed by the Concessionaire, in order to establish the investments in agreement with the granting authority. A possible solution for the dry weather flow collector is to establish a structure for collecting (or intercepting) sewage in the stormwater galleries and in water courses that receive the sewage in natura, followed by screening of the coarse material and routing to the nearest sewage treatment plant, through existing or to be built sewer mains, pumping stations and discharge lines.

The sewage interception structures are sized to collect water flow in dry weather periods and when it rains any excess follows the normal course of the mains or watercourses.

The implementation of the dry weather flow collector system is planned in order to, in the short term, minimize the pollution of Guanabara Bay and its effluent bodies and to improve the balneability of the beaches.

The site and the most suitable technical solution for the implementation of the dry weather flow collector structures should be the one resulting from the joint analysis of all the available information on the area reserved for this purpose.

The investments planned for the municipalities of Block 2, including the respective districts, for the performance of the dry weather flow collector works, are limited to the following:

Block 2: Rio de Janeiro Region 2: R$ 538,160,240.00

The graphs below present the annual investments in water and sanitation:

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Graph 3: Investment - Block 2

400,000

350,000 Thousands

300,000

250,000

200,000

150,000

100,000

50,000

- Ano 1 Ano 2 Ano 3 Ano 4 Ano 5 Ano 6 Ano 7 Ano 8 Ano 9 Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Civil Works Systems Equipment

3.3 Operating Costs

3.3.1 Operating Cost Assessment Premises Significant operating expenses are human resources, electric power, chemical products and sludge transport and disposal, in addition to others such as maintenance of civil works, equipment and miscellaneous.

3.3.1.1 Chemicals The following consumptions of chemicals were admitted, information received from CEDAE, as summarized in the table below.

Table 15: Water and sewage chemicals

Chemicals - Water

Aluminum Sulfate 40 mg/L

Lime 20 mg/L

Chlorine 3 mg/L

Sludge polymer 5 kg/ton. sludge

Fluosilicic acid 1 mg/L

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Chemicals - Sewage

Chlorine 8 mg/L

Sludge polymer 5 kg/ton. sludge

3.3.1.2 Energy (kW) The following unit tariffs were provided by Cedae, considering that the cost of demand is included in consumption.

LV: 0.514448 R$/kWh (tariff class B3 - up to 2.3 kV)

MV: 0.425795 R$/kWh (tariff class A4 - 2.3 kV to 25 kV)

HV: 0.332477 R$/kWh (tariff class A3 - 69 kV to 138 kV)

The definition of the voltage class for each facility depends on a series of factors, such as network availability in the area, concessionaire electric power standards, installed capacity, among others, so that the following criteria were used to determine the energy cost:

Low voltage: up to 150cv

Medium voltage: from 150 to 3,000 hp

High voltage: Greater than 3,000 hp

• Annual consumption: é 24ℎ 365

3.3.1.3 Human Resources Operational Cost spreadsheets were prepared for the economic model of Concession of sanitation services of CEDAE, except for the Producer System composed by the Guandu, Lajes, Acari and Imunana-Laranjal Systems.

The average unit cost of labor is R$118,000.00 5/employee, regardless of position or type of employment (own or outsourced), to be in force from year 1.

5 SNIS (Copasa and Sanepar)

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As far as productivity is concerned, a rate of 643 units 6/employee was proposed, based on the productivity of the Sanepar (Paraná) and Copasa (Minas Gerais) concessionaires, which have a size compatible with CEDAE, regardless of position or employment link.

3.3.1.4 Sludge transport and disposal The sludge generated in the WTPs and STPs will be transported to the nearest licensed sanitary landfill. The average distance considered for transportation is 40 (forty) kilometers.

The estimated sludge production volume for the water and sewage treatment plant are as follows:

• WTP sludge: ³ . • Activated sludge with drying bed: 95 g/inhab.day; • Centrifuge activated sludge: 127 g/inhab.day • UASB + Filter with drying bed: 27 g/inhab.day; • UASB + Centrifuge filter: 40 g/inhab.day • Lagoon: 20 g/inhab.day.

The unit cost of sludge transport and disposal are as follows: • Transport cost: 3.50 R$/ton*km (EMOP base); • Disposal cost: 68.00 R$/ton. (CEDAE basis)

3.3.1.5 Maintenance of Civil Works and Equipment For the maintenance cost, the parameter of 68.50 R$/connection was used, based on CEDAE's balance sheet.

3.3.1.6 Miscellaneous The main costs considered as miscellaneous are: concession fees, rentals and machinery, equipment and vehicles, real estate rentals, insurance costs, advertising and publicity, communication and data transmission, advertisements and notices, laboratory services, graphic services, bank fees, mobility (vehicles), materials (administrative and cleaning), permits, licensing, etc.

The rate used is 54 R$/connection (CEDAE base).

6 SNIS

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3.3.1.7 Performance Guarantee Costs There are performance guarantee costs that represent the costs associated with hiring construction, operation insurances, System Works and System Operation, Maintenance and Conservation Performance Guarantees.

A cost of 2.0% in relation to the value of the policy, calculated on the basis of practices in similar contracts, was used to measure these values.

3.3.1.8 Water Purchase Costs It is projected that in some municipalities, as specified above, the Concessionaire will purchase treated water that will be produced by CEDAE, at a price of R$1.40/m³.

3.3.1.9 AGENERSA and INEA Fees Expenses with the AGENERSA (Rio de Janeiro State Energy and Basic Sanitation Regulatory Agency) and INEA (State Environment Institute) fees were projected, estimated at 0.5% and 0.25% of revenues, net of PIS and Cofins taxes, respectively.

3.3.2 Cost Projection The estimated annual operating cost figures are presented in Table 16 : Operating Cost , with details of the main items.

Table 16: Operating Cost

Operating Cost (R$) 1 2 3 4 5 10 20 30 35 Treatment Materials 2,194,813 2,917,667 2,986,922 3,586,200 4,928,762 4,708,846 4,981,064 5,055,335 5,045,483 Power 32,304,144 35,419,440 35,156,236 35,048,355 35,633,174 33,322,393 36,636,128 36,591,560 36,123,353 Personnel 82,526,220 84,148,403 85,789,237 87,448,580 89,126,766 99,763,115 112,014,571 112,974,661 113,011,076 Maintenance 30,449,853 31,035,590 31,627,751 32,226,258 32,831,253 36,711,894 41,142,829 41,479,489 41,491,567 Other Operating Costs 17,122,816 17,612,412 18,111,376 18,619,972 19,138,048 22,275,267 26,513,225 26,902,249 26,903,175 AGENERSA and INEA 9,117,921 9,646,523 10,171,620 10,386,324 10,571,396 9,907,885 10,458,414 10,390,743 10,216,550 Water Purchase – CEDAE 261,574,378 256,371,911 251,055,116 245,624,315 240,079,040 206,717,867 201,477,313 198,302,114 194,660,661 Performance Guarantee (1,642,740) (1,642,740) (1,642,740) (1,642,740) (1,642,740) (939,586) (321,554) (78,295) (1,642,740) Total 433,647,406 435,509,205 433,255,519 431,297,265 430,665,699 412,467,680 432,901,991 431,617,856 425,809,127 The graph below shows annual water and sewage costs:

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Graph 4: Operating Cost - Block 2

500,000

450,000 Thousands 400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

- Ano 1 Ano 2 Ano 3 Ano 4 Ano 5 Ano 6 Ano 7 Ano 8 Ano 9 Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano Ano 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 -50,000 Treatment Materials Power Personnel Maintenance Other Operating Costs AGENERSA and INEA Water Purchase – CEDAE Performance Guarantee

3.4 Working Capital The average payment and receipt terms adopted for the project were considered 30 days for costs and revenues as practiced in the water and sewage market.

3.5 Taxation

3.5.1 Tax Immunity In September 2015, CEDAE filed a Civil Action before the Brazilian Supreme Court, claiming recognition of the reciprocal tax immunity provided for in art. 150, item VI, paragraph 'a' of the Federal Constitution, as well as the right to the refund of the amounts paid by way of federal taxes in the five years preceding the action, and also of those paid during the course of the action.

In 2017 the decision was challenged by appeals from the Federal Government and CEDAE. CEDAE saved, since 2018, only on Corporate Income Tax and due to the change from the non-cumulative regime to the cumulative regime of PIS/COFINS taxes, around R$ 476.7 million (R$ 165.9 million of Corporate Income Tax and R$ 310.8 million of PIS/COFINS taxes), considering the amounts paid by the Company in 2017.

Finally, it is clarified that immunity has not been considered in this business plan since a private contractor will not be entitled to such tax benefit.

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3.5.2 Taxation on Revenue The regulatory framework establishes that COFINS (Social Security Financing Contribution), PIS (Social Integration Program) and ISS (Services Tax) taxes are levied on the revenues of the Company or of the Specific Purpose Entity.

According to Supplementary Law No. 7/1970, private legal entities are PIS taxpayers, and the calculation of such contribution is based on the revenues earned in accordance with Law No. 9718/98 and at different rates according to the revenue profile as provided for by Law No. 10673/2002.

COFINS, likewise PIS, is currently governed by Law No. 9718/98, which establishes that all legal entities and their equivalents in relation to income tax legislation are CONFINS taxpayers, and its calculation is based on revenues and differentiated rates, in accordance with the terms of the rule that regulates the tax.

In the case of these projects, the SPE is subject to the payment of PIS and COFINS at the rates of 1.65% and 7.60% respectively, over its revenues.

The ISS, substitute of the ISSQN (Tax on Services of Any Nature), is a competence of the municipalities and Federal District and is levied on the provision of services, having as taxable event the list of services set out in Law No. 11.438/1997, and is governed by Complementary Law 116/2003.

Environmental sanitation services, including purification, treatment, sewerage and similar services, as well as water treatment and purification services are not subject to ISS, as described in Message No. 362 of 31 July 2003, which explains the reasons for the Veto on the application:

The application of the tax on environmental sanitation services, including purification, treatment, sewerage and the like, as well as on water treatment and purification services, does not serve the public interest. Taxation could undermine the government's objective of universal access to such basic services. The disincentive that taxation would bring to the sector would have as a long term consequence an increase in expenses in serving the population affected by the lack of access to basic sanitation and treated water. In addition, Bill no. 161 - Complementary expressly revoked art. 11 of Decree-Law no. 406, of December 31, 1968, as amended by Complementary Law no. 22, of December 9, 1974. Thus, the hydraulic and civil construction works hired by the Federal, States, Federal District, Municipalities Governments, independent agencies and concessionaires, previously exempt from the tax, would be taxed, impacting the Government expenses with investments.

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Therefore, the taxation of these services does not serve public interest, and the veto of items 7.14 and 7.15, included in the List of Services of this Complementary Bill, is recommended. As a result, for reasons of legislative technique, clauses X and XI of art. 3 of the Bill should also be vetoed.

The Concessionaire is subject to payment of ISS on services not related to the activity of water supply and sanitation.

Table 17: Taxation on Revenue

TAXATION ON REVENUE Tax Rate (%) ISS 0,00% COFINS 7,60% PIS 1,65%

3.5.3 Taxation on Profit The SPE shall also pay tax over the Project Profit - Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL).

For the calculation of Corporate Income Tax, the economic-financial modeling used the tax return in the Regime of Real Profit calculated annually, under the terms of the current federal legislation, in compliance with art. 14 of Federal Law No. 9718/1998, which requires legal entities whose total gross revenue, in the previous calendar year, is higher than R$ 78.000,000.00 (seventy-eight million BRL), or R$ 6,500,000.00 (six million five hundred thousand BRL), multiplied by the number of months of activity in the previous calendar year, when less than 12 (twelve) months (limit established by Federal Law no. 10,637/2002) to declare Income Tax on the basis of Real Profit.

On Income before tax (LAIR), Corporate Income Tax is levied at a rate of 15% when the real profit portion is lower than the amount resulting from the multiplication of R$ 20,000.00 (twenty thousand BRL), by the number of months of the respective calculation period. However, when the results of the SPE point to a value higher than this amount, the legislation provides for an additional 10% to be charged on the excess value. However, due to the divergences between real and nominal model projections, which make it impossible to effectively absorb the benefits of differentiating rates according to the minimum level, highlighted by the fact that this level represents little on the annual result of the project, the choice was to mitigate possible inconsistencies by establishing the rate of 25% for Corporate Income Tax.

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The payment of Social Contribution on Net Profit-CSLL is regulated by Federal Law No. 7689/1988, which establishes it with the same rules for calculating Corporate Income Tax, having its calculation basis defined in the provisions of Federal Law No. 10684/2003, which determines the application of a rate of 9% on companies using the Real Profit tax return system.

Table 18: Taxation on Profit

TAXATION ON PROFIT Tax Rate (%) IR 25,00% CSLL 9,00% TOTAL 34,00%

3.6 Financing Structure Since the projects have the potential to use Third Party Capital resources, it is necessary to have a financial structure based mainly on loans that match the debt cash flow with the Project cash flow, in order to provide an adequate debt service 7coverage ratio.

Thus, this item includes studies and considerations about the Bridge and Long-Term Financing structure, in which disbursements with investments are financed.

The credit lines taken into account are those usually practiced by financial agents and there is no commitment from these agents to guarantee this credit structure for the concession.

3.6.1 Bridge Financing The Bridge Financing (short-term loan) may be obtained from a private financial institution that should provide the resources to cover part of the investment expenditure.

For the purposes of economic and financial modeling, we considered obtaining Bridge Financing with a term of one year, with a grace period for amortization for the same period.

The amount foreseen for the bridge loan has been estimated at 70% of the value to be invested in the first two years of the Concession. The interest on the short-term loan is charged on the outstanding balance owed to the financial institution, and is established at

7 The Debt Service Coverage Ratio (DSCR) is calculated by dividing operating cash generation by debt service, based on information recorded in the Financial Statements, in a given period.

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the CDI rate + 4%, an amount considered appropriate by the Economics Department of Banco Fator in view of the practice by the banks offering short-term credit, and is paid monthly.

In addition, interest expenses included the payment of Structuring Charges and Commissions in the amount of 0.5% of the amount raised, an amount considered appropriate by the Economics Department of Banco Fator, for projects of this size, and the payment of IOF (Tax on Credit Operations, Foreign Exchange and Insurance) expenses on the amount raised.

The repayment system considered for the short-term loan was the bullet , whose grace period is equal to the term of the loan and settlement occurs via a single tranche, with the first tranche of the long-term loan as funding .

3.6.2 Long Term Financing The Long Term Financing represents the main instrument of funding of the SPE, providing the financial leverage necessary for the bridge financing swap , thus allowing the reduction of financial expenses of the Project, and is obtained from public or private financial institutions.

It was considered obtaining a Long Term Financing from a private institution in the Project Finance modality, with a term of 12 years (as from the start of the financing - second year of Concession).

Together with the financial institution, the Concessionaire shall raise the amount equivalent to 70% of the investments. For the preliminary analysis, the leverage of the investments of the first two years of concession was considered.

The interest on the long term loan is charged on the outstanding balance with the financial institution, and is established at the IPCA rate + 9%, as practiced in the capital market for incentive papers (incentive debentures) with similar risk, according to the Economics Department of Banco Fator, and its payment occurs monthly.

In addition, interest expenses included the payment of Structuring Charges and Commissions in the amount of 0.5% of the amount raised, and the payment of IOF (Tax on Credit Operations, Foreign Exchange and Insurance) expenses on the amount raised. The amortization system used in the financial modeling of the long-term loan was the SAC (Constant Amortization System).

The releveraging aims at exactly aligning the projection with the premise of a capital structure stipulated in 60% of equity and 40% of debt. The premise of raising funds from third parties with public banks (25% with BNDES and 25% with CEF) and market issues (50%) reflects

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a trend already evidenced by private companies in the sector of sanitation of diversification of their debt sources.

3.6.3 Covenants The following covenants were considered for the projected financing:

(i) DSCR (Debt Service Coverage Ratio): is characterized by the ability to pay the Concession debt and is calculated through the generation of operating cash net of taxes divided by the debt service of the company (installments to be amortized for a given period). The benchmark used is that the DSCR could not be less than 1.3;

(ii) NE / Asset: is determined by dividing Net Equity by Assets. The benchmark used was that the percentage shall not be lower than 20%;

(iii) Net Debt / EBITDA: estimated by dividing net debt (calculated by subtracting gross debt from cash and cash equivalents) by EBITDA ( earning before interest taxes depreciation and amortization ). The benchmark used is that net debt should be not greater than three times the EBITDA.

3.6.4 Tax Shield Considering that the Concessionaire's financial expenses are deductible from the Corporate Income Tax and Social Contribution on Net Profit tax bases, the addition of leverage to the Project reduces the expense with Income Tax, generating benefits for the Project.

In the finance, we call this tax benefit Tax Shield , which is calculated as the difference between the Tax on Not Leveraged Project Result (Project) and the Tax on Leveraged Project Result (Leveraged).

The Tax Shield was incorporated into the Project in the preparation of the Financial Statements (Income Statement, Leveraged Cash Flow and Balance Sheet) in order to incorporate the tax benefits of interest expenses into the project, matching the Tax on Not Leveraged Project Result (Project) with the Tax on Leveraged Project Result (Leveraged)e, thus reflecting all aspects arising from the leverage of the Project.

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4. ATTACHMENTS

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4 ATTACHMENTS

4.1 Active Water Units Projections

Economias Ativas - Água 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Barra do Pirai 30,468 31,169 31,875 32,585 33,299 34,019 34,657 35,300 35,946 36,596 37,250 37,761 38,132 38,503 38,875 39,246 39,476 39,707 Miguel Pereira 8,579 8,775 8,972 9,171 9,372 9,575 9,742 9,911 10,081 10,252 10,424 10,554 10,631 10,707 10,783 10,859 10,898 10,937 Paraiba do Sul 13,762 14,167 14,577 14,990 15,406 15,827 16,216 16,609 17,005 17,405 17,807 18,147 18,393 18,640 18,887 19,134 19,309 19,485 Paty do Alferes 5,387 5,774 6,174 6,588 7,015 7,455 7,870 8,295 8,732 9,180 9,638 10,043 10,456 10,876 11,026 11,176 11,267 11,358 Pinheiral 7,751 8,052 8,358 8,669 8,985 9,305 9,602 9,902 10,207 10,516 10,830 11,093 11,245 11,397 11,549 11,701 11,818 11,934 Rio de Janeiro - Bloco II 301,053 306,242 311,468 316,731 322,031 327,368 331,634 335,926 340,244 342,916 345,588 347,140 348,691 350,243 351,795 353,347 353,965 354,584 Valenca 22,166 22,913 23,671 24,440 25,222 26,015 26,746 27,488 28,239 29,000 29,771 30,437 30,764 31,090 31,417 31,743 31,958 32,173 Vassouras 9,248 9,573 9,903 10,237 10,575 10,917 11,238 11,563 11,891 12,223 12,560 12,849 13,032 13,215 13,398 13,582 13,710 13,838 Total 398,414 406,665 414,998 423,411 431,905 440,481 447,705 454,994 462,345 468,088 473,868 478,024 481,344 484,671 487,730 490,788 492,401 494,016 Economias Ativas - Água 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Barra do Pirai 39,937 40,167 40,398 40,511 40,624 40,738 40,851 40,964 40,983 41,002 41,021 41,040 41,059 41,002 40,946 40,889 40,833 Miguel Pereira 10,975 11,014 11,053 11,063 11,072 11,082 11,091 11,100 11,087 11,073 11,060 11,046 11,033 11,001 10,970 10,938 10,907 Paraiba do Sul 19,660 19,836 20,012 20,123 20,234 20,345 20,456 20,567 20,622 20,677 20,731 20,786 20,841 20,847 20,854 20,860 20,867 Paty do Alferes 11,449 11,540 11,631 11,677 11,723 11,769 11,815 11,861 11,872 11,884 11,896 11,908 11,920 11,906 11,892 11,878 11,864 Pinheiral 12,051 12,168 12,285 12,352 12,419 12,487 12,554 12,621 12,652 12,683 12,714 12,744 12,775 12,775 12,775 12,775 12,776 Rio de Janeiro - Bloco II 355,203 355,821 356,440 356,298 356,156 356,015 355,873 355,731 354,949 354,168 353,386 352,605 351,823 350,519 349,215 347,911 346,607 Valenca 32,388 32,603 32,818 32,937 33,057 33,177 33,296 33,416 33,456 33,497 33,537 33,578 33,618 33,593 33,568 33,543 33,518 Vassouras 13,966 14,094 14,222 14,300 14,378 14,456 14,535 14,613 14,648 14,683 14,718 14,753 14,788 14,787 14,787 14,786 14,785 Total 495,629 497,243 498,859 499,261 499,663 500,069 500,471 500,873 500,269 499,667 499,063 498,460 497,857 496,430 495,007 493,580 492,157

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4.2 Active Sewage Units Projections

Economias Ativas - Esgoto 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Barra do Pirai 26,052 26,733 27,421 28,117 28,819 29,528 30,169 30,817 31,471 32,130 32,796 33,337 33,883 34,433 34,987 35,322 35,529 35,736 Miguel Pereira 4,476 5,497 6,550 7,635 8,752 8,894 9,001 9,109 9,215 9,323 9,430 9,499 9,568 9,636 9,705 9,772 9,808 9,843 Paraiba do Sul - 708 1,448 2,223 3,029 3,868 4,731 5,624 6,546 7,498 8,479 9,456 10,455 11,478 12,525 13,595 14,634 15,691 Paty do Alferes 1,841 2,194 2,565 2,956 3,365 3,792 4,218 4,659 5,115 5,587 6,074 6,534 7,005 7,487 7,979 8,482 8,949 9,421 Pinheiral - 425 872 1,341 1,833 2,347 2,875 3,423 3,990 4,576 5,183 5,780 6,392 7,018 7,659 8,314 8,957 9,610 Rio de Janeiro - Bloco II 178,100 180,338 182,573 184,807 187,038 189,267 197,055 204,953 212,962 221,081 229,311 236,966 244,696 252,500 260,379 261,868 262,744 263,621 Valenca 11,188 12,016 12,867 13,743 14,642 15,566 16,467 17,388 18,329 19,290 20,272 21,192 22,128 23,078 24,043 25,023 25,928 26,842 Vassouras 7,506 8,125 8,765 9,426 10,110 10,346 10,557 10,767 10,978 11,189 11,399 11,564 11,728 11,894 12,058 12,224 12,339 12,454 Total 229,163 236,036 243,061 250,248 257,588 263,608 275,073 286,740 298,606 310,674 322,944 334,328 345,855 357,524 369,335 374,600 378,888 383,218 Economias Ativas - Esgoto 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Barra do Pirai 35,943 36,151 36,358 36,460 36,562 36,664 36,766 36,868 36,885 36,902 36,919 36,936 36,953 36,902 36,851 36,800 36,749 Miguel Pereira 9,877 9,912 9,949 9,956 9,965 9,973 9,982 9,990 9,978 9,965 9,954 9,942 9,930 9,900 9,872 9,844 9,816 Paraiba do Sul 16,763 17,852 18,010 18,111 18,210 18,310 18,410 18,511 18,559 18,609 18,658 18,708 18,756 18,763 18,768 18,774 18,780 Paty do Alferes 9,901 10,386 10,468 10,509 10,551 10,592 10,633 10,674 10,685 10,696 10,706 10,717 10,728 10,715 10,703 10,690 10,677 Pinheiral 10,275 10,951 11,056 11,117 11,177 11,238 11,299 11,359 11,387 11,414 11,442 11,470 11,498 11,498 11,498 11,498 11,498 Rio de Janeiro - Bloco II 264,498 265,376 266,254 266,525 266,795 267,062 267,329 267,595 267,432 267,266 267,095 266,921 266,742 265,978 265,209 264,436 263,659 Valenca 27,765 28,699 28,881 28,981 29,081 29,181 29,281 29,381 29,412 29,443 29,475 29,506 29,537 29,512 29,487 29,462 29,437 Vassouras 12,569 12,685 12,801 12,870 12,940 13,010 13,080 13,151 13,182 13,214 13,247 13,278 13,310 13,309 13,308 13,307 13,307 Total 387,591 392,012 393,777 394,529 395,281 396,030 396,780 397,529 397,520 397,509 397,496 397,478 397,454 396,577 395,696 394,811 393,923

REFERENCE BUSINESS PLAN - BLOCK 2

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4.3 Water Revenue Projection

Receita - Água (R$ mil) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Barra do Pirai 27,477 28,904 30,276 31,591 32,847 34,042 33,511 32,968 32,643 32,299 32,747 33,119 33,369 33,619 33,869 34,118 34,280 34,442 Miguel Pereira 19,724 19,122 18,498 17,855 17,191 16,506 15,745 14,969 14,288 13,583 13,772 13,922 13,999 14,076 14,153 14,231 14,269 14,308 Paraiba do Sul 16,096 15,808 15,500 15,172 14,824 14,454 13,987 13,504 13,099 12,672 12,893 13,089 13,217 13,346 13,475 13,603 13,697 13,791 Paty do Alferes 6,874 6,954 7,008 7,036 7,037 7,009 6,912 6,787 6,680 6,542 6,827 7,082 7,340 7,602 7,675 7,747 7,788 7,830 Pinheiral 5,795 5,985 6,174 6,363 6,551 6,738 6,786 6,830 6,918 7,003 7,177 7,329 7,408 7,486 7,565 7,643 7,707 7,771 Rio de Janeiro - Bloco II 576,182 616,654 654,857 690,685 724,027 754,772 736,033 716,780 692,902 668,803 644,482 645,885 647,287 648,691 650,093 651,496 651,767 652,038 Valenca 16,405 17,045 17,627 18,149 18,606 18,995 18,477 17,930 17,473 16,981 17,354 17,694 17,836 17,978 18,120 18,262 18,356 18,449 Vassouras 13,056 12,734 12,380 11,994 11,577 11,127 10,586 10,019 9,485 8,919 9,128 9,314 9,423 9,532 9,641 9,749 9,824 9,901 Total 681,610 723,206 762,321 798,846 832,660 863,643 842,037 819,787 793,488 766,803 744,381 747,433 749,878 752,328 754,589 756,849 757,689 758,529 Receita - Água (R$ mil) 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Barra do Pirai 34,603 34,765 34,927 35,007 35,087 35,168 35,248 35,328 35,337 35,346 35,355 35,363 35,372 35,320 35,268 35,217 35,165 Miguel Pereira 14,346 14,384 14,423 14,429 14,433 14,439 14,445 14,451 14,429 14,408 14,387 14,366 14,344 14,302 14,259 14,216 14,173 Paraiba do Sul 13,885 13,979 14,073 14,134 14,194 14,254 14,315 14,375 14,403 14,431 14,459 14,487 14,516 14,514 14,513 14,512 14,511 Paty do Alferes 7,872 7,913 7,954 7,972 7,990 8,008 8,026 8,045 8,045 8,045 8,045 8,045 8,045 8,030 8,016 8,001 7,987 Pinheiral 7,835 7,899 7,963 8,000 8,037 8,074 8,111 8,148 8,164 8,181 8,197 8,214 8,230 8,229 8,227 8,225 8,224 Rio de Janeiro - Bloco II 652,310 652,580 652,851 652,099 651,347 650,596 649,844 649,092 647,393 645,694 643,995 642,296 640,597 638,073 635,549 633,025 630,501 Valenca 18,543 18,637 18,731 18,783 18,834 18,886 18,938 18,990 19,003 19,017 19,030 19,043 19,056 19,037 19,017 18,997 18,977 Vassouras 9,976 10,051 10,127 10,172 10,218 10,265 10,310 10,356 10,375 10,393 10,412 10,430 10,448 10,444 10,440 10,435 10,430 Total 759,369 760,208 761,048 760,596 760,142 759,690 759,237 758,785 757,149 755,515 753,879 752,243 750,609 747,950 745,288 742,629 739,969

REFERENCE BUSINESS PLAN - BLOCK 2

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4.4 Sewage Revenue Projection

Receita - Esgoto (R$ mil) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Barra do Pirai 23,425 24,419 24,321 24,083 23,832 23,567 23,263 22,947 22,780 22,599 22,971 23,294 23,618 23,944 24,273 24,449 24,563 24,677 Miguel Pereira 10,290 11,960 13,463 14,795 15,954 15,213 14,433 13,651 12,961 12,256 12,362 12,431 12,501 12,570 12,639 12,708 12,742 12,776 Paraiba do Sul - 769 1,492 2,166 2,791 3,365 3,886 4,354 4,801 5,197 5,845 6,493 7,154 7,825 8,509 9,204 9,887 10,578 Paty do Alferes 2,349 2,638 2,903 3,142 3,354 3,538 3,676 3,782 3,883 3,951 4,269 4,572 4,880 5,193 5,511 5,834 6,138 6,445 Pinheiral - 309 617 925 1,231 1,535 1,835 2,132 2,442 2,752 3,101 3,448 3,802 4,162 4,529 4,903 5,274 5,650 Rio de Janeiro - Bloco II 424,554 443,587 466,789 454,272 441,608 428,798 428,323 426,882 424,980 422,089 418,197 430,590 443,032 455,525 468,067 469,077 469,273 469,467 Valenca 8,291 8,712 8,859 8,975 9,057 9,105 9,113 9,087 9,086 9,050 9,468 9,871 10,279 10,692 11,111 11,535 11,932 12,333 Vassouras 10,456 10,618 10,719 10,758 10,734 10,182 9,603 9,010 8,457 7,884 8,001 8,095 8,189 8,283 8,377 8,471 8,534 8,597 Total 479,366 503,011 529,163 519,115 508,559 495,303 494,132 491,843 489,389 485,778 484,214 498,794 513,454 528,195 543,017 546,182 548,343 550,523 Receita - Esgoto (R$ mil) 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Barra do Pirai 24,791 24,905 25,019 25,075 25,131 25,187 25,244 25,300 25,305 25,311 25,316 25,322 25,327 25,289 25,252 25,214 25,176 Miguel Pereira 12,811 12,845 12,880 12,884 12,889 12,894 12,899 12,904 12,885 12,866 12,847 12,828 12,809 12,771 12,733 12,694 12,656 Paraiba do Sul 11,277 11,985 12,067 12,119 12,171 12,224 12,277 12,329 12,353 12,377 12,402 12,426 12,450 12,449 12,448 12,447 12,445 Paty do Alferes 6,754 7,067 7,103 7,120 7,136 7,152 7,168 7,184 7,184 7,184 7,184 7,184 7,184 7,171 7,159 7,146 7,133 Pinheiral 6,032 6,418 6,471 6,501 6,531 6,561 6,591 6,621 6,634 6,648 6,661 6,675 6,688 6,687 6,685 6,684 6,683 Rio de Janeiro - Bloco II 469,663 469,858 470,053 469,511 468,970 468,429 467,887 467,346 466,123 464,900 463,676 462,453 461,230 459,413 457,595 455,778 453,961 Valenca 12,738 13,145 13,209 13,243 13,277 13,312 13,346 13,380 13,388 13,395 13,403 13,410 13,418 13,403 13,388 13,372 13,357 Vassouras 8,661 8,724 8,787 8,825 8,863 8,900 8,938 8,975 8,989 9,003 9,016 9,030 9,043 9,037 9,030 9,023 9,017 Total 552,726 554,947 555,588 555,277 554,968 554,659 554,350 554,040 552,862 551,685 550,506 549,329 548,150 546,220 544,289 542,358 540,428

REFERENCE BUSINESS PLAN - BLOCK 2

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4.5 Default Projection

Inadimplência (%) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Barra do Pirai 33% 32% 30% 28% 27% 25% 23% 22% 20% 18% 17% 15% 13% 12% 10% 10% 10% 10% Miguel Pereira 66% 62% 58% 54% 50% 46% 42% 38% 34% 30% 26% 22% 18% 14% 10% 10% 10% 10% Paraiba do Sul 48% 45% 42% 40% 37% 34% 32% 29% 26% 23% 21% 18% 15% 13% 10% 10% 10% 10% Paty do Alferes 32% 31% 29% 27% 26% 24% 23% 21% 20% 18% 16% 15% 13% 12% 10% 10% 10% 10% Pinheiral 25% 24% 23% 22% 21% 20% 19% 18% 17% 15% 14% 13% 12% 11% 10% 10% 10% 10% Rio de Janeiro - Bloco II 23% 22% 21% 20% 19% 18% 17% 16% 15% 14% 14% 13% 12% 11% 10% 10% 10% 10% Valenca 56% 52% 49% 46% 43% 39% 36% 33% 30% 26% 23% 20% 17% 13% 10% 10% 10% 10% Vassouras 23% 22% 21% 20% 19% 19% 18% 17% 16% 15% 14% 13% 12% 11% 10% 10% 10% 10% Inadimplência (%) 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Barra do Pirai 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Miguel Pereira 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Paraiba do Sul 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Paty do Alferes 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Pinheiral 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Rio de Janeiro - Bloco II 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Valenca 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Vassouras 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

REFERENCE BUSINESS PLAN - BLOCK 2

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4.6 Water and Sanitation Investment Projection

Investimento (R$ mil) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Barra do Pirai 9,402 15,008 21,648 34,150 34,956 28,559 12,467 11,345 10,656 10,559 10,567 9,560 8,309 8,319 8,323 8,016 6,811 6,791 Miguel Pereira 4,812 23,305 25,135 24,955 24,754 4,463 2,042 1,987 1,990 1,999 2,018 1,730 1,473 1,467 1,473 1,486 1,226 1,219 Paraiba do Sul 2,968 8,396 9,450 15,654 15,474 14,805 7,551 6,652 6,737 6,824 6,935 7,231 6,990 7,049 7,109 7,204 7,138 7,178 Paty do Alferes 3,360 6,942 8,410 12,144 12,538 10,350 5,728 5,381 5,470 5,568 5,674 5,764 6,084 6,150 5,015 5,035 4,878 4,679 Pinheiral 3,299 7,397 7,085 9,614 10,015 9,823 6,073 6,034 6,125 6,216 6,335 6,327 5,605 5,820 5,863 5,933 5,802 5,825 Rio de Janeiro - Bloco II 117,971 145,395 258,974 173,117 212,706 85,922 82,663 61,457 55,297 46,332 44,449 41,859 41,988 42,109 42,148 31,923 30,502 30,509 Valenca 9,063 14,129 10,837 20,219 21,429 20,355 8,966 8,890 7,764 7,913 8,028 8,027 7,190 7,296 7,284 7,332 7,005 7,030 Vassouras 3,794 10,222 13,233 17,378 17,464 8,603 3,422 3,374 2,779 2,792 2,832 2,530 2,082 2,086 2,084 2,110 1,727 1,718 Total 154,668 230,795 354,771 307,231 349,336 182,880 128,913 105,119 96,817 88,203 86,839 83,029 79,721 80,295 79,298 69,038 65,091 64,950 Investimento (R$ mil) 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Barra do Pirai 6,804 6,801 6,835 3,041 3,036 3,034 3,035 3,071 2,106 2,098 2,095 2,095 2,133 1,986 1,981 1,982 1,979 Miguel Pereira 1,219 1,220 1,238 1,024 1,020 1,020 1,023 1,036 950 945 945 946 961 950 945 945 946 Paraiba do Sul 7,215 7,257 4,990 1,678 1,668 1,664 1,672 1,701 1,380 1,377 1,370 1,375 1,403 1,127 1,114 1,120 1,115 Paty do Alferes 4,702 4,690 3,596 1,056 1,063 1,066 1,041 1,061 836 840 843 818 838 744 747 750 725 Pinheiral 5,727 5,766 3,965 1,309 1,301 1,302 1,299 1,328 961 949 950 951 973 667 652 653 654 Rio de Janeiro - Bloco II 30,513 30,426 29,351 6,952 6,956 6,955 6,869 7,109 6,510 6,513 6,517 6,430 6,674 6,510 6,513 6,517 6,430 Valenca 7,005 7,034 5,344 2,364 2,215 2,225 2,222 2,268 1,870 1,846 1,845 1,844 1,896 1,748 1,721 1,720 1,725 Vassouras 1,722 1,720 1,743 1,476 1,461 1,458 1,462 1,486 1,157 1,151 1,149 1,150 1,176 1,005 996 996 997 Total 64,908 64,914 57,061 18,902 18,719 18,724 18,623 19,060 15,770 15,720 15,714 15,610 16,055 14,736 14,669 14,683 14,572

REFERENCE BUSINESS PLAN - BLOCK 2

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