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17. Borrowings and financing | 12 Months Ended
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Dec. 31, 2018
Borrowings And Financing |
Borrowings and financing |
Borrowings and financing outstanding balance | December 31, 2018 | December 31, 2017
Financial institution | Current | Noncurrent | Total | Current | Noncurrent | Total
Local currency |  |  |  |  |  |
10th issue debentures | 42,493 | 40,194 | 82,687 | 41,702 | 80,953 | 122,655
12th issue debentures | 45,450 | 249,249 | 294,699 | 45,450 | 294,702 | 340,152
14th issue debentures | 41,270 | 103,005 | 144,275 | 40,503 | 141,351 | 181,854
15th issue debentures | 359,394 | - | 359,394 | 346,414 | 345,788 | 692,202
17th issue debentures | 279,100 | 532,691 | 811,791 | 144,391 | 781,922 | 926,313
18th issue debentures | 33,469 | 165,267 | 198,736 | 33,020 | 194,872 | 227,892
20th issue debentures | 248,334 | - | 248,334 | 250,000 | 246,890 | 496,890
21th issue debentures | - | 499,604 | 499,604 | - | 499,628 | 499,628
22th issue debentures | - | 756,040 | 756,040 | - | - | -
Brazilian Federal Savings Bank | 75,223 | 1,266,592 | 1,341,815 | 78,487 | 1,154,599 | 1,233,086
Brazilian Development Bank - BNDES BAIXADA SANTISTA | 16,899 | - | 16,899 | 16,782 | 16,782 | 33,564
Brazilian Development Bank - BNDES PAC | 11,227 | 39,169 | 50,396 | 11,143 | 50,028 | 61,171
Brazilian Development Bank - BNDES PAC II 9751 | 4,364 | 18,811 | 23,175 | 4,334 | 22,991 | 27,325
Brazilian Development Bank - BNDES PAC II 9752 | 3,186 | 23,100 | 26,286 | 2,367 | 19,526 | 21,893
Brazilian Development Bank - BNDES ONDA LIMPA | 23,632 | 123,875 | 147,507 | 23,469 | 146,461 | 169,930
Brazilian Development Bank - BNDES TIETÊ III | 30,589 | 252,197 | 282,786 | 30,378 | 280,825 | 311,203
Brazilian Development Bank - BNDES 2015 | 31,615 | 490,729 | 522,344 | 10,050 | 397,922 | 407,972
Leases | 19,077 | 549,589 | 568,666 | 17,573 | 544,044 | 561,617
Other | 1,380 | 8,163 | 9,543 | 1,466 | 9,477 | 10,943
Interest and charges | 98,410 | - | 98,410 | 101,855 | - | 101,855
Total in local currency | 1,365,112 | 5,118,275 | 6,483,387 | 1,199,384 | 5,228,761 | 6,428,145
Borrowings and financing outstanding balance | December 31, 2018 | December 31, 2017
Financial institution | Current | Noncurrent | Total | Current | Noncurrent | Total
Foreign currency |  |  |  |  |  |
Inter-American Development Bank - BID 1212 – US$71,947 thousand (US$92,503 thousand in December 2017) | 39,826 | 238,954 | 278,780 | 34,000 | 238,000 | 272,000
Inter-American Development Bank - BID 2202 – US$544,457 thousand (US$438,071 thousand in December 2017) | 124,098 | 1,969,565 | 2,093,663 | 81,757 | 1,375,358 | 1,457,115
International Bank of Reconstruction and Development -BIRD – US$91,286 thousand (US$79,946 thousand in December 2017) | 11,779 | 341,646 | 353,425 | - | 301,665 | 301,665
Deutsche Bank – US$75,000 (US$150,000 thousand in December 2017) | 288,479 | - | 288,479 | 248,100 | 242,343 | 490,443
Eurobonds – US$350,000 thousand (US$350,000 thousand in December 2017) | - | 1,354,532 | 1,354,532 | - | 1,155,331 | 1,155,331
JICA 15 – ¥12,676,730 thousand (¥13,829,160 thousand in December 2017) | 40,646 | 406,462 | 447,108 | 33,881 | 372,696 | 406,577
JICA 18 – ¥11,397,760 thousand (¥12,433,920 thousand in December 2017) | 36,545 | 365,230 | 401,775 | 30,463 | 334,849 | 365,312
JICA 17 – ¥1,826,957 thousand (¥1,534,959 thousand in December 2017) | 11,835 | 51,786 | 63,621 | 2,507 | 41,835 | 44,342
JICA 19 – ¥31.561.726 thousand (¥29,777,232 thousand in December 2017) | 64,028 | 1,047,081 | 1,111,109 | - | 873,383 | 873,383
BID 1983AB – US$58,462 thousand (US$82,404 thousand in December 2017) | 68,554 | 155,653 | 224,207 | 79,201 | 189,990 | 269,191
Interest and charges | 52,710 | - | 52,710 | 37,462 | - | 37,462
Total in foreign currency | 738,500 | 5,930,909 | 6,669,409 | 547,371 | 5,125,450 | 5,672,821
Total borrowings and financing | 2,103,612 | 11,049,184 | 13,152,796 | 1,746,755 | 10,354,211 | 12,100,966
Exchange rate as of December 31, 2018: US$3.8748; ¥0.03527 (as of December 31, 2017: US$3.3080; ¥0.02940). As of December 31, 2018, the Company did not have balances of borrowings and financing, raised during the year, to mature within 12 months.
Local currency | Guarantees | Maturity | Annual interest rates | Inflation adjustment
10th issue debentures | Own funds | 2020 | TJLP +1.92% (Series 1 and 3) and 9.53% (Series 2) | IPCA (Series 2)
12th issue debentures | Own funds | 2025 | TR + 9.5% |
14th issue debentures | Own funds | 2022 | TJLP +1.92% (Series 1 and 3) and 9.19% (Series 2) | IPCA (Series 2)
15th issue debentures | Own funds | 2019 | CDI + 0.99% (Series 1) and 6.2% (Series 2) | IPCA (Series 2)
17th issue debentures | Own funds | 2023 | CDI +0.75 (Series 1) and 4.5% (Series 2) and4.75% (Series 3) | IPCA (Series 2 and 3)
18th issue debentures | Own funds | 2024 | TJLP 1.92 % (Series 1 and 3) and 8.25% (Series 2) | IPCA (Series 2)
20th issue debentures | Own funds | 2019 | CDI + 3.80% |
21th issue debentures | Own funds | 2022 | CDI + 0.60% e CDI+ 0.90% |
22th issue debentures | Own funds | 2025 | CDI +0.58 (Series 1) and CDI + 0.90% (Series 2) and 6.0% (Series 3) | IPCA (Series 3)
Brazilian Federal Savings Bank | Own funds | 2019/2039 | 5% to 9.5% | TR
Brazilian Development Bank - BNDES BAIXADA SANTISTA | Own funds | 2019 | TJLP+2.5% |
Brazilian Development Bank - BNDES PAC | Own funds | 2023 | TJLP+2.15% |
Brazilian Development Bank - BNDES PAC II 9751 | Own funds | 2027 | TJLP+1.72% |
Brazilian Development Bank - BNDES PAC II 9752 | Own funds | 2027 | TJLP+1.72% |
Brazilian Development Bank - BNDES ONDA LIMPA | Own funds | 2025 | TJLP+1.92% |
Brazilian Development Bank - BNDES TIETÊ III | Own funds | 2028 | TJLP+1.66% |
Brazilian Development Bank - BNDES 2015 | Own funds | 2035 | TJLP+2.5% |
Leases |  | 2035 | 7.73% to 10.12% | IPC
Other | Own funds | 2025 | 12% (Presidente Prudente) and TJLP + 1.5% (FINEP) | TR
Foreign currency | Guarantees | Maturity | Annual interest rates | Exchange rate changes
Inter-American Development Bank - BID 1212 - US$71,947 thousand | Government | 2025 | 3.31% (*) | US$
Inter-American Development Bank - BID 2202 - US$544,457 thousand | Government | 2035 | 3.42% (*) | US$
International Bank for Reconstruction and Development - BIRD US$91,286 thousand | Government | 2034 | 2.85% (*) | US$
Deutsche Bank US$75,000 thousand | - | 2019 | 4.50%(*) | US$
Eurobonds – US$350,000 thousand | - | 2020 | 6.25% | US$
JICA 15 – ¥12,676,730 thousand | Government | 2029 | 1.8% and 2.5% | Yen
JICA 18 – ¥11,397,760 thousand | Government | 2029 | 1.8% and 2.5% | Yen
JICA 17– ¥1,826,957 thousand | Government | 2035 | 1.2% and 0.01% | Yen
JICA 19– ¥31,561,726 thousand | Government | 2037 | 1.7% and 0.01% | Yen
BID 1983AB – US$58,462 thousand | - | 2023 | 2.08% to 2.38% (*) | US$
(*)Rates comprising LIBOR + contractually defined spread. (i) Payment schedule – accounting balances as of December 31, 2018
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 to 2039 | TOTAL
LOCAL CURRENCY |  |  |  |  |  |  |  |
Debentures | 1,049,510 | 589,190 | 479,995 | 559,184 | 362,555 | 204,832 | 150,294 | 3,395,560
Brazilian Federal Savings Bank | 75,223 | 78,072 | 82,169 | 86,589 | 79,037 | 77,369 | 863,356 | 1,341,815
BNDES | 121,512 | 103,260 | 102,809 | 102,809 | 97,069 | 91,581 | 450,353 | 1,069,393
Leasing | 19,077 | 36,903 | 38,700 | 40,654 | 43,416 | 45,153 | 344,763 | 568,666
Other | 1,380 | 1,380 | 1,380 | 1,380 | 1,380 | 1,380 | 1,263 | 9,543
Interest and charges | 98,410 | - | - | - | - | - | - | 98,410
TOTAL IN LOCAL CURRENCY | 1,365,112 | 808,805 | 705,053 | 790,616 | 583,457 | 420,315 | 1,810,029 | 6,483,387
FOREIGN CURRENCY |  |  |  |  |  |  |  |
BID | 163,923 | 163,923 | 163,923 | 163,923 | 163,923 | 163,923 | 1,388,905 | 2,372,443
BIRD | 11,779 | 23,557 | 23,557 | 23,557 | 23,557 | 23,557 | 223,861 | 353,425
Deutsche Bank | 288,479 | - | - | - | - | - | - | 288,479
Eurobonds | - | 1,354,532 | - | - | - | - | - | 1,354,532
JICA | 153,055 | 140,431 | 140,431 | 140,431 | 140,431 | 140,431 | 1,168,403 | 2,023,613
BID 1983AB | 68,554 | 67,786 | 29,806 | 29,806 | 28,255 | - | - | 224,207
Interest and charges | 52,710 | - | - | - | - | - | - | 52,710
TOTAL IN FOREIGN CURRENCY | 738,500 | 1,750,229 | 357,717 | 357,717 | 356,166 | 327,911 | 2,781,169 | 6,669,409
Overall Total | 2,103,612 | 2,559,034 | 1,062,770 | 1,148,333 | 939,623 | 748,226 | 4,591,198 | 13,152,796
(ii) Changes
| December 31, 2017 | Funding | Borrowings costs | Monetary variation and exchange rate changes | Inflation adjustment / update incorporated interest - Capitalized | Interest and fees paid | Amortization | Accrued interest | Interest and fees - Capitalized (*) | Borrowings costs - expenses | December 31, 2018
LOCAL CURRENCY |  |  |  |  |  |  |  |  |  |  |
Debentures | 3,576,842 | 750,000 | (3,021) | 62,676 | - | (259,175) | (905,080) | 226,810 | 34,409 | 3,400 | 3,486,861
Brazilian Federal Savings Bank | 1,236,674 | 194,244 | - | - | - | (102,772) | (85,515) | 75,668 | 27,385 | - | 1,345,684
BNDES | 1,042,036 | 131,000 | - | 3,438 | 4,001 | (90,397) | (102,314) | 28,909 | 55,725 | 207 | 1,072,605
Leasing | 561,616 | - | - | - | 6,366 | (38,196) | (17,427) | 40,290 | 16,017 | - | 568,666
Other | 10,977 | - | - | 69 | - | (772) | (1,470) | 763 | 4 | - | 9,571
TOTAL IN LOCAL CURRENCY | 6,428,145 | 1,075,244 | (3,021) | 66,183 | 10,367 | (491,312) | (1,111,806) | 372,440 | 133,540 | 3,607 | 6,483,387
FOREIGN CURRENCY |  |  |  |  |  |  |  |  |  |  |
BID | 1,743,257 | 484,690 | (2,365) | 237,433 | 53,208 | (55,391) | (130,520) | 26,910 | 41,878 | 885 | 2,399,985
BIRD | 303,278 | - | - | 48,279 | 3,462 | (7,607) | - | 6,945 | 2,044 | 19 | 356,420
Deutsche Bank | 496,726 | - | - | 62,918 | - | (35,207) | (268,508) | 28,862 | 4,454 | 3,627 | 292,872
Eurobonds | 1,158,642 | - | - | 198,380 | - | (97,952) | - | 85,072 | 13,448 | 822 | 1,358,412
JICA | 1,700,448 | 80,196 | (191) | 329,638 | 6,787 | (33,519) | (82,608) | 33,992 | 1,209 | 176 | 2,036,128
BID 1983AB | 270,470 | - | - | 39,241 | - | (11,060) | (85,306) | 9,681 | 1,488 | 1,078 | 225,592
TOTAL IN FOREIGN CURRENCY | 5,672,821 | 564,886 | (2,556) | 915,889 | 63,457 | (240,736) | (566,942) | 191,462 | 64,521 | 6,607 | 6,669,409
Overall Total | 12,100,966 | 1,640,130 | (5,577) | 982,072 | 73,824 | (732,048) | (1,678,748) | 563,902 | 198,061 | 10,214 | 13,152,796
(*) amount related to accrued interest which as part of the contract asset.
| December 31, 2016 | Funding | Borrowings costs | Lease | Monetary variation and exchange rate changes | Inflation adjustment / update incorporated interest - Capitalized | Interest and fees paid | Amortization | Accrued interest | Interest and fees - Capitalized (*) | Borrowings costs - expenses | December 31, 2017
LOCAL CURRENCY |  |  |  |  |  |  |  |  |  |  |  |
Debentures | 3,641,912 | 500,000 | (1,157) | - | 51,768 | - | (301,493) | (597,794) | 176,780 | 103,215 | 3,611 | 3,576,842
Brazilian Federal Savings Bank | 1,150,691 | 144,654 | - | - | 5,495 | 1,415 | (95,854) | (65,836) | 78,283 | 17,826 | - | 1,236,674
BNDES | 946,984 | 171,153 | - | - | 5,405 | 2,512 | (78,466) | (87,993) | 33,938 | 48,294 | 209 | 1,042,036
Leasing | 552,516 | - | - | 24,693 | - | - | - | (15,593) | - | - | - | 561,616
Other | 11,677 | - | - | - | 116 | - | (876) | (750) | 779 | 31 | - | 10,977
TOTAL IN LOCAL CURRENCY | 6,303,780 | 815,807 | (1,157) | 24,693 | 62,784 | 3,927 | (476,689) | (767,966) | 289,780 | 169,366 | 3,820 | 6,428,145
FOREIGN CURRENCY |  |  |  |  |  |  |  |  |  |  |  |
BID | 1,811,664 | 96,889 | (2,497) | - | (15,193) | 40,228 | (38,654) | (189,280) | 22,547 | 16,803 | 750 | 1,743,257
BIRD | 261,337 | 35,710 | - | - | 2,874 | 2,837 | (4,049) | - | 3,662 | 888 | 19 | 303,278
Deutsche Bank | 485,090 | - | (720) | - | 7,335 | - | (31,774) | - | 21,286 | 11,925 | 3,584 | 496,726
Eurobonds | 1,141,469 | - | - | - | 17,115 | - | (85,338) | - | 55,046 | 29,529 | 821 | 1,158,642
JICA | 1,617,215 | 63,909 | (287) | - | 82,563 | 2,525 | (28,652) | (65,702) | 27,602 | 1,115 | 160 | 1,700,448
BID 1983AB | 343,588 | - | (82) | - | 1,609 | - | (10,931) | (75,610) | 6,858 | 3,715 | 1,323 | 270,470
TOTAL IN FOREIGN CURRENCY | 5,660,363 | 196,508 | (3,586) | - | 96,303 | 45,590 | (199,398) | (330,592) | 137,001 | 63,975 | 6,657 | 5,672,821
Overall Total | 11,964,143 | 1,012,315 | (4,743) | 24,693 | 159,087 | 49,517 | (676,087) | (1,098,558) | 426,781 | 233,341 | 10,477 | 12,100,966
(*) amount related to accrued interest which as part of the contract asset.
| December 31, 2015 | Funding | Borrowings costs | Lease | Monetary variation and exchange rate changes | Inflation adjustment / update incorporated interest - Capitalized | Interest and fees paid | Amortization | Accrued interest | Interest and fees - Capitalized (*) | Borrowings costs - expenses | December 31, 2016
LOCAL CURRENCY |  |  |  |  |  |  |  |  |  |  |  |
Debentures | 4,203,127 | - | (1,241) | - | 105,385 | - | (375,027) | (663,468) | 214,245 | 154,814 | 4,077 | 3,641,912
Brazilian Federal Savings Bank | 1,067,464 | 113,310 | - | - | 15,619 | 6,405 | (89,896) | (52,315) | 63,813 | 26,291 | - | 1,150,691
BNDES | 696,329 | 313,072 | (2,242) | - | - | - | (55,806) | (76,469) | 38,172 | 33,768 | 160 | 946,984
Leasing | 534,894 | - |  | 32,111 | - | - | - | (14,489) | - | - | - | 552,516
Other | 1,962 | 10,014 | - | - | 31 | - | (905) | (655) | 1,149 | 81 | - | 11,677
TOTAL IN LOCAL CURRENCY | 6,503,776 | 436,396 | (3,483) | 32,111 | 121,035 | 6,405 | (521,634) | (807,396) | 317,379 | 214,954 | 4,237 | 6,303,780
FOREIGN CURRENCY |  |  |  |  |  |  |  |  |  |  |  |
BID | 2,194,353 | 113,543 | (3,819) | - | (396,817) | 37,412 | (42,429) | (133,063) | 21,792 | 20,100 | 592 | 1,811,664
BIRD | 238,940 | 59,983 | - | - | (40,213) | 1,971 | (1,876) | - | 1,916 | 597 | 19 | 261,337
Deutsche Bank | - | 469,020 | (9,167) | - | 19,845 | - | - | - | 2,042 | 2,804 | 546 | 485,090
Eurobonds | 1,922,256 | - | - | - | (334,915) | - | (128,283) | (437,752) | 69,002 | 50,239 | 922 | 1,141,469
JICA | 1,756,969 | 188,755 | (468) | - | (259,455) | 5,771 | (33,799) | (73,854) | 30,791 | 2,362 | 143 | 1,617,215
BID 1983AB | 505,306 | - | (236) | - | (78,910) | - | (11,923) | (83,247) | 6,548 | 4,772 | 1,278 | 343,588
TOTAL IN FOREIGN CURRENCY | 6,617,824 | 831,301 | (13,690) | - | (1,090,465) | 45,154 | (218,310) | (727,916) | 132,091 | 80,874 | 3,500 | 5,660,363
Overall Total | 13,121,600 | 1,267,697 | (17,173) | 32,111 | (969,430) | 51,559 | (739,944) | (1,535,312) | 449,470 | 295,828 | 7,737 | 11,964,143
(*) amount related to accrued interest which as part of the contract asset. (a) Debentures Balance as of December 31, 2018 is stated net of borrowings costs in the amount of R$5,590 (R$6,223 as of December 31, 2017), which will be amortized during the same maturity period of each contract. (i) Main events Amortizations
| Amount | Maturity | Interest rates
17th issue - series 1 | R$ 144,391 | January 15, 2018 | CDI
17th issue - series 2 | R$ 348,434 | February 15, 2018 | IPCA
20th issue | R$ 250,000 | December 20, 2018 | CDI
10th issue | R$ 42,438 | 2018 (*) | TJLP/IPCA
12th issue | R$ 45,450 | 2018 (*) | TR
14th issue | R$ 40,726 | 2018 (*) | TJLP/IPCA
18th issue | R$ 33,641 | 2018 (*) | TJLP/IPCA
(*) Amounts paid during the year. Funding As of February 19, 2018, the Company held the 22nd issue of unsecured debentures, not convertible into shares, totaling R$ 750 million, in up to three series, for public distribution, with restricted placement efforts, pursuant to CVM Instruction 476/09, distributed as follows:
| Amount |  | Maturity |  | Remuneration
Series 1 Series 2 Series 3 | R$ 100,000 R$ 400,000 R$ 250,000 |  | 3 years 5 years 7 years |  | CDI + 0.58% p.a. CDI + 0.90% p.a. IPCA + 6.00% p.a.
The proceeds from the debenture issue a allocated to refinance financial commitments and recompose the Company’s cash. (ii) Covenants For the outstanding contracts, the Company has the following restrictive clauses “covenants”: Applicable to the 10th issue, 14th issue and 18th issue: Financial covenants applicable to the 10th, 14th and 18th issues and the financing agreements entered into with the BNDES, except for agreement no. 08.2.0169.1 (PAC): The financing agreements entered into with the BNDES specify two ranges in which the Company needs to maintain its Adjusted EBITDA / Adjusted Financial Expenses, Adjusted Net Debt / Adjusted EBITDA, and Other Onerous Debt / Adjusted EBITDA ratios. These agreements also specify a guarantee mechanism in which the Company needs to ensure that a portion of the monthly receivables amount is daily recorded in a fiduciary account linked to the BNDES. In this process, every day, after the BNDES notifies the depositary bank that the Company is not in default, this portion of the monthly receivables amount is transferred to a Company current account. The renegotiated/amended covenants are: A. Maintenance of the following ratios, quarterly calculated and related to accrued amounts over the last 12 months, upon the disclosure of reviewed interim financial statements or audited annual financial statements entails the need to record R$225.9 million per month in a fiduciary account linked to the BNDES: · Adjusted EBITDA / Adjusted financial expenses equal to or higher than 3.50; · Adjusted net debt / Adjusted EBITDA equal to or lower than 3.00; · Other onerous debt (*) / Adjusted EBITDA equal to or lower than 1.00. (*)“Other Onerous Debts” correspond to the sum of social security liabilities, health care plan, installment payment of tax debts and installment payment of debts with the Electricity supplier. B. In case of failure to comply with one or more ratios specified in item A, in two or more quarters, consecutive or not, within twelve months, the Company will be failing to comply with the first range of ratios and the portion of the monthly receivables to be recorded in a fiduciary account linked to the BNDES will be automatically increased by 20%, if the ratios are maintained in the following range: · Adjusted EBITDA / Adjusted financial expenses lower than 3.50 and equal to or higher than 2.80; · Adjusted net debt / adjusted EBITDA equal to or lower than 3.80 and higher than 3.00; · Other onerous debt / Adjusted EBITDA equal to or lower than 1.30 and higher than 1.00. C. The failure to achieve one or more than one ratio stipulated in item B, and/or the Company does not comply with the automatic reinforcement of guarantee under the terms of item B, the Company will be failing to comply with the covenant terms and the BNDES may, at its sole discretion: · require the creation of additional guarantees, not below 30 days, within term to be defined by it through notice; · suspend the release of funds; and/or · declare the early maturity of the financing agreements. As of December 31, 2018, the amount of R$242.9 million was guaranteed for the agreements above (excluding the guarantee of agreement no 08.2.0169.1). Financial covenants applicable to financing agreement no. 08.2.0169.1 entered into with the BNDES: · Adjusted EBITDA / adjusted net operating revenue: equal to or higher than 38%; · Adjusted EBITDA /adjusted financial expenses: equal to or higher than 2.35; · Adjusted net debt / adjusted EBITDA: equal to or lower than 3.20. The BNDES will annually verify if the ratios have been complied with by analyzing the annual audited financial statements, which must be presented to the BNDES or published by April 30 of the subsequent year referring to the financial statements. If the Company complies, cumulatively, with the ratios above, the BNDES will reduce the interest stipulated in the agreement from 2.15% p.a. to 1.82% p.a., from June 16 of the year when the analysis is carried out to June 15 of the subsequent year. The agreements also have a cross default clause, e.g., the early maturity of any of the Company’s debts, the amount of which may anyhow compromise the settlement of its obligations provided for in the Indenture deed shall imply the early maturity of such agreement. Applicable to the 12th issue: Calculated every quarter upon the disclosure of interim or annual financial statements: - Adjusted current ratio (current assets divided by current liabilities, excluding from current liabilities the current portion of noncurrent debts incurred by the Company that are recorded in current liabilities) higher than 1.0; - EBITDA to paid financial expenses ratio equal to or higher than 1.5; - Disposal of operating assets, extinguishment of license, loss of concession or loss of Issuer’s capacity to execute and operate the basic sanitation public utilities in areas of the State of São Paulo territory, which considered individually or jointly during the contract’s effectiveness, result in a reduction of net sales revenue and/or services revenue of the Issuer exceeding twenty-five percent (25%). The limit established above will be calculated quarterly, taking into account the Issuer’s operating income for the twelve (12) months preceding the end of each quarter and applying the financial information disclosed by the Issuer; and Noncompliance with these obligations only will be characterized when verified in its interim financial statements, during at least, two consecutive quarters, or also two nonconsecutive quarters within a twelve-month period. In case of noncompliance with the covenants, the trustee should call an extraordinary debenture holders' meeting within 48 hours from the acknowledgement of the noncompliance to resolve on the declaration of early maturity of the debentures. This issue has an early maturity clause, in case there is a downgrade, by more than two levels, of the “brAA-” risk rating in national scale originally attributed to this issue’s Debentures by the Rating Agency, always taking into consideration the Standard & Poor’s rating table. As of December 31, 2018, SABESP’s rate was “brAAA”. The agreement also has a cross default clause, i.e. the early maturity of any of the Company’s debts, equal to or exceeding R$50 million, adjusted by IPCA variation as of the issue date, due to contractual default, the amount of which may anyhow compromise the settlement of the Company’s monetary obligations arising from the Issue, shall imply the early maturity of this agreement. Applicable to the 15th issue, 17th issue and 20th issues: Calculated every quarter upon the disclosure of interim or annual financial statements: - Adjusted total Debt/EBITDA: lower than or equal to 3.65; - EBITDA/ paid financial expenses: equal to or higher than 1.5; - Disposal of operating assets, extinguishment of license, loss of concession or loss of Issuer’s capacity to execute and operate the basic sanitation public utilities in areas of the State of São Paulo territory, which considered individually or jointly during the contract’s effectiveness, result in a reduction of net sales revenue and/or services revenue of the Issuer exceeding twenty-five percent (25%). The limit established above will be calculated quarterly, taking into account the Issuer’s operating income for the twelve (12) months preceding the end of each quarter and applying the financial information disclosed by the Issuer; and Non-compliance with the covenant clauses, during, at least, two consecutive quarters, or also two nonconsecutive quarters within a twelve-month period shall result in the early maturity of the agreement. The agreements have a cross acceleration clause, i.e., the early maturity of any of the Company’s debts, equal to or exceeding R$90 million (for the 20th issue, amount equal to or exceeding R$120 million), adjusted by IPCA variation as of the issue date, due to contractual default, the amount of which may compromise the settlement of the Company’s monetary obligations arising from the Issue, will result in the early maturity of these agreements. Applicable to 21st and 22st issues: Calculated every quarter upon the disclosure of interim or annual financial statements: - Net debt/ EBITDA: lower than or equal to 3.65; - EBITDA/ paid financial expenses: equal to or higher than 1.5; - Disposal of operating assets, extinguishment of license, loss of concession or loss of Issuer’s capacity to execute and operate the basic sanitation public utilities in areas of the State of São Paulo territory, which considered individually or jointly during the deed’s effectiveness, result in a reduction of net sales revenue and/or services revenue of the Issuer exceeding twenty-five percent (25%). The limit established above will be calculated quarterly, taking into account the Issuer’s operating income for the twelve (12) months preceding the end of each quarter and applying the financial information disclosed by the Issuer. Non-compliance with the covenant clauses, during, at least, two consecutive quarters, or also two nonconsecutive quarters within a twelve-month period shall result in the early maturity of the agreement. The agreement have a cross acceleration clause, i.e., the early maturity of any of the Company’s debts, equal to or exceeding R$145 million, adjusted by IPCA variation as of the issue date, result in an event of default that result in the early maturity of these agreements. (b) Brazilian Federal Savings Bank - CEF (i) Main events Funding totaled R$194,244 in 2018, mainly related to the agreements in progress of the Growth Acceleration Program (PAC). In 2018, amortizations totaled R$85,515. The guarantee for financing agreements entered into with the Brazilian Federal Savings Bank is the recognition of a portion of tariffs in an account for this purpose with the Brazilian Federal Savings Bank, which should maintain a flow equal to or at least three times the amount of the monthly charges, during the grace period, based on interest, the management fee and the credit risk rate and, during the amortization phase, based on the principal, interest, the management fee and the credit risk rate. Additionally, the Company maintains a reserve account, linked to financing agreements, in the Brazilian Federal Savings Bank, which is maintained during the entire term the agreements, where an amount is accrued equivalent to a monthly charge, composed of, during the grace period, interest, the management fee and the credit risk rate and, during the amortization phase, of the principal, interest, the management fee and the credit risk rate. (ii) Sanitation to All Program of the Brazilian Federal Savings Bank (CEF) On December 28, 2018, SABESP entered into seven financing agreements (twenty-one sub-credits) with the Brazilian Federal Savings Bank, totaling R$ 652.2 million. The agreements were selected by the Ministry of Cities – City Progress / Sanitation to All Programs. The funds came from the Guarantee Fund for Length of Service - FGTS and will allocated to sanitation services. Covenants The agreements have a cross default clause, i.e., the early maturity of any of the Company’s debts, due to contractual default, the occurrence of which may anyhow compromise the settlement of its monetary obligations deriving from these contracts shall imply the early maturity. The agreement has the following covenants: Calculated every quarter upon the disclosure of interim financial information based on information included in the financial statements for the last twelve (12) months: Restrict the funding of new debt so that: · Adjusted EBITDA/ adjusted financial expenses equal to or higher than 2.80; · Adjusted net debt/adjusted EBITDA: equal to or higher than 3.80; · Other onerous debt(*) / adjusted EBITDA lower than or equal to 1.30 (*) “Other Onerous Debts” correspond to the sum of social security liabilities, health care plan, installment payment of tax debts and installment payment of debts with the electricity supplier. (c) BNDES Balance as of December 31, 2018 is stated net of borrowings costs in the amount of R$2,584 (R$2,793 on December 31, 2017), which will be amortized during the same maturity period of each contract. (i) Main events In 2018, funding from current contracts totaled R$131,000, mainly referring to the BNDES 2015 agreement, in the amount of R$124,000 and BNDES PAC II 9752, in the amount of R$ 7,000. In 2018, amortizations totaled R$102,314. Loans are collateralized by part of revenues from the provision of water and sewage services, up to the total amount of the outstanding balance. (ii) Covenants The agreements entered into with the BNDES have standardized financial covenants, as described in item (a), (ii), covenants applicable to the 10th issue, 14th issue and 18th issue, of this Note. (d) Leasing The Company has lease agreements signed as Assets Lease. During the construction period, works are capitalized to intangible assets in progress and the lease amount is recorded at the same proportion. Works are estimated to be concluded in 2019. After startup, the lease payment period starts (240 monthly installments), whose amount is periodically restated by contracted price index. (e) Eurobonds Balance as of December 31, 2018 is net of borrowing costs in the amount of R$1,648 (R$2,470 as of December 31, 2017), which will be amortized during the same maturity period of the contract. (i) Covenants The contract has the following restrictive clauses “covenants”: Calculated every quarter upon the disclosure of interim or annual financial statements: Restrict the funding of new debts so that: - Adjusted total debt to EBITDA does not exceed 3.65; - The Company's debt service coverage ratio, determined at the end of each quarter, shall not be lower than 2.35. Non-compliance with covenants will accelerate the maturity of the agreement. The agreement has a cross default clause, i.e., the early maturity of any indebtedness in view of the Company’s loans or any of its Subsidiaries (*) with a total principal amount of US$ 25,000,000.00 or more (or its corresponding amount in other currencies) shall imply this agreement’s early maturity. (*) As per agreement, subsidiary is: “the company, partnership or another entity from which over 50% of its voting shares are directly or indirectly owned or controlled by any Person or one or other Person’s Subsidiaries, or their combination”. (f) Deutsche Bank US$150 million Balance as of December 31, 2018 is net of borrowing costs in the amount of R$2,131 (R$5,757 as of December 31, 2017), which will be amortized during the maturity period of the contract. In 2018, amortizations totaled R$ 268,508. (i) Covenants The agreement has the following restrictive clauses “covenants”: Calculated every quarter upon the disclosure of interim or annual financial statements: - Total debt/adjusted EBITDA: lower than 3.65; - Company's debt service coverage ratio, determined at the end of each quarter, shall not be lower than 2.35. Non-compliance with covenants for two quarters, consecutive or not, will accelerate the maturity of the agreement. The agreement has a “cross acceleration” clause, i.e., in the early maturity of any debt of the Company or any of its subsidiaries, with a total principal or aggregate amount equal to or higher than R$120 million (or its equivalent in another currency), contracted pursuant to the Brazilian law, or with a total principal or aggregate amount equal to or higher than US$50 million (or its equivalent in another currency), in the case of debts governed by the laws of any other jurisdiction other than Brazil, will result in the early maturity of the agreement. (*) Pursuant to the agreement, a subsidiary means any partnership, corporation, company, association or commercial entity in which SABESP or one or more of its subsidiaries directly or indirectly hold more than 50% of the outstanding common shares with voting rights of its respective capital stock. (g) Inter-American Development Bank (BID) Balance as of December 31, 2018 is net of borrowing costs amounting to R$15,999 (R$14,517 as of December 31, 2017), which will be amortized during the same maturity period of the agreement. (i) Main events In 2018, funding referring to BID 2202 agreement totaled R$ 484,690 and amortizations totaled R$ 130,520. (ii) Guarantees Loans obtained from multilateral agencies and from Government Agencies, such as the BID, BIRD and JICA, are guaranteed by the Federal Government, with a counter-guarantee of the São Paulo State government. (iii) Covenants For the outstanding contracts, the Company has the following restrictive clauses “covenants”: Calculated every quarter upon the disclosure of interim or annual financial statements: - Loan agreement 1,212 - Tariffs must: (a) produce revenues sufficient to cover the system's operating expenses, including administrative, operating, maintenance, and depreciation expenses; (b) provide a return on property, plant, and equipment no less than 7%; and (c) during project execution, the balances of current loans must not exceed 8.5% of total equity. These agreements have an early maturity clause, i.e., in the early maturity will occur in the event the Company’s fail failure to comply with any obligation therewith or any agreements signed with the Bank related to Project finance. (h) Japan International Cooperation Agency - JICA (i) Relevant funding Balance as of December 31, 2018 is stated net of borrowing costs amounting to R$3,113 (R$3,100 as of December 31, 2017), which will be amortized during the same maturity period of the contract. (ii) Main events In 2018, the Company raised R$80,196, referring to BZ-P19 (JICA 19) e BZ-P17 (JICA 17) agreements. In 2018, amortizations totaled R$82,608 referring to JICA BZ-15, JICA BZ-17 and JICA BZ-18 agreements. For the guarantees assigned, see item g (ii) of this note. (i) AB Loan (IADB 1983AB) The balance stated as of December 31, 2018 is net of borrowing costs amounting to R$2,322 (R$3,400 as of December 31, 2017), which will be amortized during the same maturity period of the contract. (i) Main events In 2018, amortization totaled R$85,306. (ii) Covenants The Company has the following restrictive clauses “covenants”: Calculated every quarter upon the disclosure of interim or annual financial statements: - The Company’s ratio of debt service coverage, determined on a consolidated basis, must be higher than or equal to 2.35; and - Total adjusted debt over adjusted EBITDA, determined on a consolidated basis, must be lower than 3.65. The agreement has an early maturity clause, i.e., in the event of default, the BID may order the early maturity of the loan or part of it. The agreement also has a “cross default” clause, i.e., in the event of default of any other Company debt with the BID or with third parties (in this case, higher than US$25 million), the BID may order the early maturity of the loan. (j) International Bank for Reconstruction and Development - IBRD Balance as of December 31, 2018 is stated net of borrowing costs amounting to R$290 (R$310 as of December 31, 2017), which will be amortized during the same maturity period of the contract. For the guarantees assigned, see item g (ii) of this Note. (k) Covenants As of December 31, 2018 and 2017, the Company had met the requirements set forth by its borrowings and financing agreements. (l) Exchange rate changes In 2018, the US dollar appreciated 17.1%, from R$ 3.3080 on December 31, 2017 to R$ 3.8748 on December 31, 2018, increasing debt in US dollars by R$ 675,145, and the yen appreciated 20.0%, from R$ 0.02940 on December 31, 2017 to R$ 0.035270 on December 31, 2018, increasing debt in yen by R$ 337,309. (m) Borrowings and financing – Credit Limits
Agent |  | December 31, 2018
|  | (in millions of reais (*))
Brazilian Federal Savings Bank |  | 1,908
Brazilian Development Bank – BNDES |  | 1,455
Japan International Cooperation Agency – JICA |  | 208
Other |  | 38
TOTAL |  | 3,609
(*) Brazilian Central Bank’s exchange rate as of December 30, 2018 ( ¥1.00 = R$0.03527). SABESP in order to comply with its Capex plan relies on a fund-raising plan. Financing resources contracted have specific purposes, which have been released for the execution of their respective investments, according to the progress of the works.

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