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Contract assets

12 Months Ended

Dec. 31, 2022

14	Contract assets

Schedule of contract assets
	December 31, 2021		Additions (i)		Transfers		Transfers of works to intangible assets (ii)			December 31, 2022 (iii)

Total contract assets		8,550,102		5,240,528		2,702		(5,179,364	)		8,613,968

(i)

The largest additions of the period are located in the municipalities of São Paulo, São Bernardo do Campo and Praia Grande, in the amounts of R$ 2,267 million, R$ 181 million and R$ 134 million, respectively.

(ii)

The largest transfers of the period are located in the municipalities of São Paulo, Praia Grande and São Bernardo do Campo, in the amounts of R$ 2,640 million, R$ 619 million and R$ 324 million, respectively.

(iii)

The largest works are located in the municipalities of São Paulo, Franca and São Bernardo do Campo, in the amounts of R$ 2,830 million, R$ 324 million and R$ 262 million, respectively.

As of December 31, 2022, contract assets include leases recognized before December 31, 2019 in accordance with IAS 17 amounting to R$ 276,893 (R$ 276,893 as of December 31, 2021). The leases are cost of the works, and since June 2020 the complementary works are being carried out by the Company.

	December 31, 2020		Additions		Transfers		Transfers of works to intangible assets			December 31, 2021

Total contract assets		7,969,164		4,759,789		2,412		(4,181,263	)		8,550,102

	December 31, 2019		Additions		Transfers		Transfers of works to intangible assets			December 31, 2020

Total contract assets		7,617,714		3,984,158		55,706		(3,688,414	)		7,969,164

(a) Capitalization of interest and other finance charges

In 2022, the Company capitalized interest and inflation adjustment, including related foreign currency exchange effects in the contract asset, totaling R$ 622,803 (R$ 300,792 in 2021 and R$ 238,330 in 2020) during the construction period.

(b) Construction margin

The Company is primarily responsible for the construction and installation of the concession infrastructure related to the concession, using own efforts or hiring outsourcing services, receiving the risks and benefits. Accordingly, the Company recognizes revenue from construction service corresponding to the cost of construction increased by gross margin.

Generally, the constructions related to the concessions are performed by third parties, in such case, the margin of the Company is lower, normally, to cover eventual administration costs, and the responsibility of the primary risk. In 2022 and 2021 the margin was 2.3%.

Construction margin for 2022, 2021 and 2020 were R$ 109,369, R$ 98,402 and R$ 86,477, respectively.

(c) Expropriations

As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate third-parties' properties, and the owners of these properties will be compensated either amicably or through courts.

The costs of such expropriations are recorded in contract assets during construction. In 2022 and 2021, the total referring to expropriations was R$ 62,599 and R$ 67,714, respectively.