In order to facilitate its Multiannual Investment Plan, SABESP held negotiations with several of its financial agents during 2005, some of which are described below:


Transfer of Funds

Union’s General Budget (Non-Payable Resources)
Environmental Clean-up Program in Metropolitan Regions

In 2005, SABESP entered into 4 agreements for transfer of funds from the Union’s General Budget for the execution of sewage public services in the Metropolitan Regions of São Paulo and Campinas. Total investment amounts to R$ 15 million, R$ 10.9 million of which will be transferred by the Union.


National Program of River Basins Clean-up (PRODES) of the National Water Agency

In 2001, SABESP and the Federal Government entered into six agreements, through the National Water Agency (Pindamonhangaba - Araretama, Pindamonhangaba - Moreira César, Itatiba, São José dos Campos, Hortolândia and São Luiz do Paraitinga), for the financial incentive through the payment of treated sewage, in the scope of the PRODES, in the total amount of R$16.2 million.

In 2004, three agreements have been executed related to enterprises in sewage treatment and removal stations in the cities of Cachoeira Paulista, Guararema - Sede and Guararema - Parateí (R$ 1.4 million), totaling approximately R$ 17.6 million (original values) for the nine executed agreements.

The values related to the PRODES Program are deposited and invested in the Caixa Economica’s “Caixa Long-term, Fixed Income Investment Fund for River Basins Clean-Up”; balance as of December 31, 2005 was R$ 31.5 million.


Financing

Service Time Guaranteed Fund (FGTS)

In 2003, SABESP executed 16 water and sewage construction financing agreements with FGTS resources, for which Caixa Econômica Federal is the Financial Agent, indexed annually to the Government’s Benchmark interest rate (TR), plus interest of 8.0% per year for water and 6.5% per year for sewage, with maximum grace period of 36 months and repayment term of 180 months. R$ 324.5 million of funds were contracted for an investment of R$ 361 million, and R$ 36.5 million with the Company’s own funds.

In 2004, four financing agreements have been executed with the Ministry of Cities, through Caixa Econômica Federal, FGTS’ Financial Agent, related to the construction of the Water Supply System, indexed annually to the Government’s Benchmark interest rate (TR), plus interest of 8.0% per year, with grace period of 36 months and repayment term of 180 months. 154.7 million of financed funds have been contracted for an investment of R$ 172 million.

In 2005, SABESP filed letters of consultation requesting financing with the Ministry of Cities, in the Program “Saneamento para Todos” (Sanitation for All), for which the conclusion will occur in 2006.


FEHIDRO - State Hydric Resources Fund

In 2005, resources have been contracted with FEHIDRO for nine enterprises, with total investments of R$ 4.4 million; the financed portion amounts to R$ 1.1 million (reimbursable modality), and Banespa is the Financial Agent (Company’s funds amount to R$ 3.3 million). FEHIDRO’ total disbursement in 2005 amounted to R$ 1.5 million.


Japan Bank for International Cooperation – JBIC

SABESP executed, on August 06, 2004, the financing agreement with JBIC – Japan Bank for International Cooperation in the amount of 21,320 million Japanese Yens, equivalent to approximately R$ 422.8 million as of December 31, 2005, which is intended for the Environmental Recovery Program of Baixada Santista Metropolitan Region, an enterprise worth 39,221 million Japanese Yens, equivalent to approximately R$ 777.8 million; SABESP’s own funds represents 17,901 million Japanese Yens, equivalent to approximately R$ 355.0 million. In May 2005, a five-year agreement has been executed with a Consortium of companies for the program management.


Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico Social – BNDES)

In August 2002, SABESP executed a first financing agreement with BNDES and other four private banks that act as onlending agents of the BNDES system, in the amount of R$ 240.0 million, to partially finance the second stage of the Tietê River Clean-Up Project. Aggregated borrowing until 2005 amount to R$ 203.4 million.


Loans

Issuance of Bonds in the Capital Market

In 2005, SABESP took the following actions for the refinancing of its obligations to the capital securities market:


7^th Issue of Debentures

As part of the First Securities Program, the Company issued, on March 1, 2005, 300,000 debentures in the face value of one thousand Reais, totaling R$ 300 million. The date of the financial settlement of the transaction was March 14, 2005.

The debentures were placed on the market as follows:

	Amount	Interests	Interest Payment	Amortization	Maturity date
1st series	200,000	CDI + 1.50% per year	Semiannual	Bullet payment	March 2009
2nd series	100,000	IGP-M 10.80%	Annual	Bullet payment	March 2010

The raised amount was used principally for the final settlement of the 4th issue (R$ 50 million) and of the 5th issue (R$ 149.5 million) of debentures and for payment of other loan installments.


Renegotiation of two-thirds of the 5^th issue of debentures

On April 1, 2005, the Company renegotiated the financial conditions of 2/3 (two-thirds) of the outstanding debentures of the 1st and 2nd series, corresponding to R$ 298 million, as follows:

	Interest rates before renegotiation	Interest rates after renegotiation	Interest payment
1st series	CDI + 2.00% per year	CDI + 1.10% per year	Semiannual
2nd series	IGP-M 12.70%	IGP-M 10.65%	Annual

On April 1, 2005 the Company repaid 1/3 (one-third) of the current value of the outstanding debentures of the 5th issuance in the total amount of R$ 149.1 million. The repayment of the remaining 2/3 (two-thirds) is expected to occur on April 1, 20006 and March 03, 2007.


8^th Issue of Debentures

In completion to the Securities Distribution Program, the Company issued, on June 1, 2005, 700,000 debentures, in the face value of one thousand Reais, totaling R$ 700 million. The date of the financial settlement of the transaction was June 24, 2005.

The debentures were placed on the market as follows:

	Amount	Interest	Interest Payment	Amortization	Maturity date
1st series	350,000	CDI + 1.50% per year	Semiannual	Bullet payment	June 2009
2nd series	350,000	IGP-M 10.75%	Annual	Bullet payment	June 2011

The raised amount was used for the final settlement of the Eurobond on July 28, 2005, in the amount of US$ 275 million , as well as for the payment of the last interest installment.