CIA. DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO - SABESP
Rui de Britto Álvares Affonso
Chief Financial Officer and Investor Relations Officer
Mario Azevedo de Arruda Sampaio
Head of Capital Markets and Investor Relations

SABESP announces 1Q10 Results
São Paulo, May 14th , 2010 - Companhia de Saneamento Básico do Estado de São Paulo - SABESP (BM&FBovespa: SBSP3; NYSE: SBS), one of the largest water and sewage services providers in the world based on the number of customers, announces today its results for the first quarter 2010 (1Q10). The Company’s operating and financial information, except when indicated otherwise, is presented in Brazilian Reais, in accordance with the Brazilian Corporate Law. All comparisons in this release, unless otherwise stated, refer to the same period of 2009.	SBSP3: R$ R$ 33.65/ share SBS: US$ 37.99 (ADR=2 shares) Total shares: 227,836,623 Market Value: R$ 7.7 billion Closing price: 05/14/2010

1. Financial Highlights

(*) Earnings before interest and taxes
(**) Earnings before interest, taxes, depreciation and amortization

In 1Q10, net operating revenue reached R$ 1.8 billion, 6.0% grew compared to 1Q09. Costs and expenses in the amount of R$ 1.0 billion decreased 13.3% versus 1Q09. EBITDA was R$ 862.4 million in 1Q10 and R$ 623.6 million in 1Q09, an increase of 38.3%.

EBIT grew 55.5%, from R$ 462.0 million in 1Q09 to R$ 718.5 million in 1Q10.

The 1Q09 results was particularly impacted by the accounting of a non-recurring expense of R$ 146.6 million, corresponding to the amounts payable to retiring employees under the Conduct Adjustment Term (TAC) between 2009 and 2011. Excluding the effect of TAC in 1Q09, EBITDA would be R$ 770.2 million from R$ 623.6 million with margins from 37.7% to 46.6%. Even excluding this effect, 1Q10 EBITDA margin surpassed the 1Q09 margin.

2. Gross operating revenue

In 1Q10, gross operating revenue grew from R$ 1.8 billion in 1Q09 to R$ 1.9 billion in 1Q10, an increase of R$ 106.2 million or 6.0%, with the main factors being the 4.43% tariff adjustment as of September 2009 and 3.8% billed volume growth, of which 3.3% represents water variation and 4.6% of sewage.

3. Billed volume

The following tables show the billed water and sewage volume per customer category and region in 1Q09 and 1Q10.

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BILLED WATER AND SEWAGE VOLUME ⁽¹⁾ PER CUSTOMER CATEGORY - million m³

BILLED WATER AND SEWAGE VOLUME ⁽¹⁾ PER REGION - million m³

(1) Unaudited
(2) Including coastal and countryside

4. Costs, administrative and selling expenses

In 1Q10, costs of products and services, administrative and selling expenses decreased 13.3% (R$ 158.0 million). As a percentage of net revenue, costs and expenses declined from 72.1% in 1Q09 to 59.0% in 1Q10. Excluding the effect of TAC of R$ 146.6 million, these expenses still would be an R$ 11.4 million lower than 1Q09.

R$ million

4.1. Payroll and Benefits

In 1Q10 Payroll and benefits decreased by R$ 165.8 million or 34.0%, from R$ 488.0 million to R$ 322.2 million, due to the following:

• Decrease of R$ 163.1 million, by the TAC in 1Q09 (non-recurring), consisting of paid period of notice, FGTS penalty and benefits; and

• R$ 5.0 million decrease in wages, relating to the lay-offs in 1Q09.

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4.2. Treatment supplies

Expenses with Supplies decreased by R$ 2.7 million or 7.0%, from R$ 38.8 million in 1Q09 to R$ 36.1 million in 1Q10. The main factors were the lower consumption of iron sulphate replaced by iron chloride and a reduction in consumption of aluminum polychloride in the production systems of Cantareira, Alto Tietê Rio Claro and Alto Cotia due to the better quality of water.

4.3. Services

In 1Q10 this item increased R$ 33.7 million or 18.5%, from R$ 181.7 million to R$ 215.4 million. The main factors were:

• Expenses related to the Taiaçupeba Public-Private Partnership (PPP) in the amount of R$ 10.1 million;

• Hiring of consultancy, advisory and specialized services for diverse purposes in the amount of R$ 6.3 million covering Sabesp's organizational restructuring, implementation of value added management, Contact Center R, in the municipalities belonging to the Regional Systems, hiring of auditing services, structuring and implementation of the environmental management system, among others;

• Maintenance of water and sewage networks and connections in the amount of R$ 5.8 million, due to the increase in demand and the contractual amounts based on the Global Sourcing contracts at the municipalities of the Regional Systems and the increase in the volume of maintenance services in the São Paulo Metropolitan Region, in addition to intensified initiatives to improve the sanitary sewage systems of the Baixada Santista;

• Expenses of R$ 2.7 million with the implementation of the Program for the Rational Use of Water at municipal schools as a result of the agreement between Sabesp and the São Paulo Municipal Government;

• Advertising campaigns focused on socio-environmental initiatives, such as Onda Limpa, Córrego Limpo, Projeto Verão 2010, Jornal SPTV, a television news program, among others, in the amount of R$ 2.5 million; and

• Hydrometer reading and bill delivery expenses in the amount of R$ 2.3 million, as a result of increased number of connections and usage of new technologies that allow greater security and agility in the bill issue and reading system.

4.4. Electric power

In 1Q10, this item increased R$ 13.1 million or 11.2% from R$ 117.1 million to R$ 130.2 million. The increase was mainly due to the average tariff adjustment of 8.5% in the captive market, which represents 78.0% of the installed capacity, resulting in a weighted average increase of around 8.2% between the captive and free markets.

4.5. General expenses

General expenses increased by R$ 14.7 million or 25.3%, from R$ 58.0 million to R$ 72.7 million, mainly related to the provision for legal contingencies increase.

4.6. Depreciation and Amortization

This item decreased by R$ 17.7 million or 11.0%, from R$ 161.6 million to R$ 143.9 million, mostly due to revision of the estimated useful life of assets.

4.7. Credit write-offs

This item decreased by R$ 35.9 million or 41.1%, from R$ 87.4 million to R$ 51.5 million, due to the increased provision for the overdue debt of the municipalities to which the Company supplies water on wholesale in 1Q09, non-recurring in 1Q10.

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4.8. Tax expenses

In 1Q10 this item increased R$ 3.1 million or 12.9%, due to payment of the Municipal Real Estate Tax (IPTU) in the amount of R$ 3.4 million, to the São Paulo municipality.

5. Other operating revenues and expenses

5.1 Other operating expenses

Other operating revenues/expenses increased by R$ 13.9 million or 677.1%, by the adjustment of provision related to the actuarial commitment with the beneficiaries according the Law nº 4819/58 in the amount of R$ 14.2 million.

6. Financial expenses and revenues

R$ million

6.1. Financial expenses

In 1Q10 financial expenses increased by R$ 88.7 million, or 58.9% related to the lawsuits in the amount of R$ 86.9 million.

6.2. Financial revenues

Financial revenues decreased by R$ 7.6 million mainly as a result of the lower volume of financial investments.

7. Monetary variations on assets and liabilities

R$ million

7.1. Variations on liabilities

The net effect of the variation on liabilities in 1Q10 was R$ 88.4 million higher, compared to 1Q09. Due to:

• Exchange variation on foreign loans and financing generated a negative impact of R$ 57.1 million due to the 2.3% appreciation of the U.S. Dollar in 1Q10 compared to the 1.0% depreciation in 1Q09;

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• Monetary variations on domestic loans and financing increased by R$ 25.8 million, mainly due to:

• R$ 32.0 million increase due to positive variation of the IGPM in 1Q10 of 2.77% compared to a negative impact of 0.92% in 1Q09; and

• R$ 6.2 million decrease due to the lower variation of the TR interest rate in 1Q10 of 0.08% compared to 1Q09, of 0.37%.

• Other monetary variations over indemnification in lawsuits, with an increase of R$ 5.5 million.

7.2. Monetary variations on assets

Monetary variations on assets increased R$ 14.5 million, mainly due to the retention of the JICA payments (formerly JBIC) in December 2008 and January 2009 which were affected by the depreciation of the Yen at the time of the disbursement in February 2009.

8. Operating indicators

Sabesp continues to work strenuously to reduce water loss, with a continuous reduction in loss rates, which reached 25.7% in 1Q10 against 27.2% in 1Q09. In spite of the 3.3% growth in water billed volume in 1Q10, volume of water produced increased only 1.8% due to the Company’s great efforts to fight water loss.

(1) In thousand units at the end of the period
(2) In million inhabitants at the end of the period, not including wholesale
* Not revised by the Independent Auditors

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9. Loans and financing

On February 22^nd, 2010, we filed with ANDIMA (National Association of Financial and Capital Market Institutions) a registration request for a new public offering of debentures in the amount of R$900.0 million, offered in two series. The first series will mature in five and the second in three years, respectively. Bookbuilding occurred on April 15^th.

The overbooking allowed the company to exercise the additional lots such that the final issuance of the 11^th issuance of debentures totaled R$1,215.0 million. The first series in the amount of R$810.0 million and second series in the amount of R$405.0 million. A portion was used to repay the R$900.0 million promissory notes issued in December 2009. The rest was used as cash injection.

The first series will bear interest of the interbank deposit rate (CDI) plus 1.95% per year and will mature within five years after the issuance and repayments on the third, fourth and fifth year after the issuance. The second series will bear interest of interbank deposit rate (CDI) plus 1.4% per year and will mature with two years and repayments in the second and third year after the issuance. The final registration was issued by CVM on April 22^nd and the closing notice was released on May 6^th.

R$ million

*3/31/2010 position does not include additional lots in the net amount of around R$ 312 million.

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10. Future Events

Live webcast at www.sabesp.com.br

For more information, please contact:

Mario Arruda Sampaio
Phone: (55 11) 3388-8664
E-mail: maasampaio@sabesp.com.br

Angela Beatriz Airoldi
Phone: (55 11) 3388-8793
E-mail: abairoldi@sabesp.com.br

Statements contained in this press release may contain information that is forward-looking and reflects management's current view and estimates of future economic circumstances, industry conditions, SABESP performance, and financial results. Any statements, expectations, capabilities, plans and assumptions contained in this press release that do not describe historical facts, such as statements regarding the declaration or payment of dividends, the direction of future operations, the implementation of principal operating and financing strategies and capital expenditure plans, the factors or trends affecting financial condition, liquidity or results of operations are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. There is no guarantee that these results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.

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Income Statement

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Balance Sheet

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Cash Flow

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