OFFICIAL DOCUMENTS LOAN NUMBER 8916-BR Loan Agreement (SABESP - Improving Water Service Access and Security in the Metropolitan Region of São Paulo Project) (Programa de Sustentabilidade e Inclusão aos Serviços de Saneamento e Preservação da Agua para Abastecimento Público na RMSP - Região Metropolitana de São Paulo Programa Saneamento Sustentável e Inclusivo - SABESP) between COMPANHIA DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO - SABESP and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN NUMBER 8916-BR LOAN AGREEMENT AGREEMENT dated as of the Signature Date between COMPANHIA DE SANEAMENTO BASICO DO ESTADO DE SAO PAULO ("Borrower" or "SABESP") and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank"). The Borrower and the Bank hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II - LOAN 2.01. The Bank agrees to lend to the Borrower the amount of two hundred fifty million Dollars ($250,000,000), as such amount may be converted from time to time through a Currency Conversion ("Loan"), to assist in financing the project described in Schedule 1 to this Agreement ("Project"). 2.02. The Borrower may withdraw the proceeds of the Loan in accordance with Section III of Schedule 2 to this Agreement. The Borrower's Representative for purposes of taking any action required or permitted to be taken pursuant to this Section is its Chief Financial Officer and Investor Relations Officer (Diretor Econdmico-Financeiro e de Relaq5es com Investidores) or its Finance Superintendent (Superintendente de Finanqas). 2.03. The Front-end Fee is one quarter of one percent (0.25%) of the Loan amount. 2.04. The Commitment Charge is one quarter of one percent (0.25%) per annum on the Unwithdrawn Loan Balance. 2.05. The interest rate is the Reference Rate plus the Variable Spread or such rate as may apply following a Conversion; subject to Section 3.02(e) of the General Conditions. 2.06. The Payment Dates are March 15 and September 15 in each year. 2.07. The principal amount of the Loan shall be repaid in accordance with Schedule 3 to this Agreement. 2.08. The Borrower may request the Conversions of Loan terms, in each case with the prior no - objection of the Guarantor, through its Secretariat of the National Treasury of tle Guarantor's Ministry of Finance. 2.09. (a) If on any given day, the Total Exposure exceeds the Standard Exposure Limit (as said terms are defined in sub-paragraphs (b)(ii) and (b)(iii) of this Section), the Borrower shall pay to the Bank a surcharge at the rate of one half of one percent (0.5%) per annum of the Allocated Excess Exposure Amount (as defined in sub- paragraph (b)(i) of this Section) for each said day ("Exposure Surcharge"). The Exposure Surcharge (if any) shall be payable semi-annually in arrears on each Payment Date. (b) For purposes of this Section the following terms have the meanings set forth below: (i) "Allocated Excess Exposure Amount" means for each day during which the Total Exposure exceeds the Standard Exposure Limit, the product of: (A) the total amount of said excess; and (B) the ratio of all (or, if the Bank so determines), a portion of the Loan to the aggregate amount of all (or the equivalent portions) of the loans made by the Bank to the Borrower, the Guarantor and to other borrowers guaranteed by the Guarantor that are also subject to an exposure surcharge, as said excess and ratio are reasonably determined from time to time by the Bank. (ii) "Standard Exposure Limit" means the standard limit on the Bank's financial exposure to the Guarantor which, if exceeded, would subject the Loan to the Exposure Surcharge, as determined from time to time by the Bank. (iii) "Total Exposure" means for any given day, the Bank's total financial exposure to the Guarantor, as reasonably determined by the Bank. ARTICLE III - PROJECT 3.01. The Borrower declares its commitment to the objectives of the Project. To this end, the Borrower shall carry out the Project in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement. ARTICLE IV - EFFECTIVENESS; TERMINATION 4.01. The Additional Condition of Effectiveness consists of the following, namely that the Operational Manual has been adopted by the Borrower in a manner and with contents acceptable to the Bank. 4.02. The Effectiveness Deadline is the date ninety (90) days after the Signature Date. ARTICLE V - REPRESENTATIVE; ADDRESSES 5.01. Except as provided in Section 2.02 of this Agreement, the Borrower's Representative is its Chief Financial Officer and Investor Relations Officer (Diretor Econ6mico-Financeiro e de Relaq5es com Investidores). -2- 5.02. For purposes of Section 10.01 of the General Conditions: (a) the Borrower's address is: Companhia de Saneamento Bdsico do Estado de Sdo Paulo - SABESP Diretoria Econ6mico-Financeiro e de Rela95es com Investidores Rua Costa Carvalho, no 300 - Pinheiros 05429-900 Sdo Paulo -SP - Brasil and (b) the Borrower's Electronic Address is: E-mail: mrampone@sabesp.com.br raffonso@sabesp.com.br 5.03. For purposes of Section 10.01 of the General Conditions: (a) the Bank's address is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Bank's Electronic Address is: Telex: Facsimile: E-mail: 248423(MCI) or 1-202-477-6391 mraiser@worldbank.org 64145(MCI) AGREED as of the Signature Date. COMPANHIA DE SANEAMENTO BASICO DO ESTADO DE SXO PAULO By Aut torized Represen ve Name.Q Title: -3- Date: barD/- lc -3 - Authoezed Reprentative Name: 04, Title: Q;f4L Date: 1 '0wi ) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Authorized Representative Name: M & Title:__________ Y_ Date: , 9 C) Witnessed by: -4- SCHEDULE1 Project Description The objectives of the Project are to increase access of vulnerable people to water services and to contribute to the reduction of water losses and pollution loads in MRSP. The Project consists of the following parts: Part 1. Expand access to water services, reduce water losses and increase system resilience in MRSP. 1.1 Increasing access to water supply and sanitation services for vulnerable people in peri- urban areas of MRSP by scaling up the Agua Legal Program. 1.2 Rehabilitating and renewing critical water networks to reduce leakages by scaling up the Borrower's replacement program of critical aging water networks, including, inter alia, the replacement of reticulation mains, pipelines and water connections in MRSP. 1.3 Reducing water losses in specific water sectors in low-income areas located in the Guarapiranga Basin and Billings Basin with a comprehensive water loss reduction plan, including, inter alia, district metered areas, infrastructure replacement, pressure control, and active leakage repair. 1.4 Repairing and improving operation and maintenance of assets, lifespan extension of dams supplying water to MRSP, including, inter alia, correction of anomalies and repair of dams and their associated structures; control of eroded material or leaks; and supervision of such activities. Part 2. Reduce pollution loads to scarce water resources in the Guarapiranga Water Basin. 2.1 Expanding sanitation services provision to vulnerable people by reducing the direct discharge of sewage in water bodies upstream of the Guarapiranga reservoir through, inter alia, investments including sewerage networks, collectors, pumping stations and connections to the existing Barueri Wastewater Treatment Plant. 2.2 Reducing pollution loads in rivers by, inter alia, investing in innovative approaches to remove nutrients from the Embu Mirim River. 2.3 Increasing sewerage system reliability through, inter alia: (a) the rehabilitation and modernization of existent sewerage pumping stations in the Guarapiranga Basin; (b) the replacement of the Guavirutuba sewerage main trunk pipeline; and (c) the replacement of the Talamanca discharge pipeline. Part 3. Technical assistance and project management and supervision. 3.1 Exploring innovative approaches, strategic studies, and alternative pilot solutions to allow the Borrower to respond to key sector and institutional challenges by, inter alia, bringing in innovative approaches, implementing alternative pilot solutions, preparing key strategic studie , -5 -9 documenting case studies and best practices, providing training material, promoting knowledge- sharing events, developing impact assessments, and improving the Borrower's technical capacity to deal with regulatory requirements and asset management. 3.2 Supporting the Borrower's Project management and works supervision requirements, including, inter alia, technical assistance to respond to technical, fiduciary and safeguards-related demands, reporting needs, and monitoring and evaluation. 3.3 Supporting the Borrower to develop studies, plans, designs and investigations to renew and extend the lifespan of the dams supplying water to MRSP, including, inter alia, the increase of the Borrower's institutional capacity and the development of key dam safety-related tools to enhance the Borrower's capacity to respond to the dam safety requirements and benchmarks, and the acquisition and installation of monitoring and control systems, as well as electrical and mechanical equipment. Part 4. Contingent Emergency Response Component. Supporting the Borrower, following an Eligible Crisis or Emergency, to respond to emergency situations and reconstruction. -6- SCHEDULE2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements. 1. The Borrower shall maintain a Project Implementation Unit (the "PIU") at all times during the implementation of the Project, with sufficient resources, decision making capacity, competent staff in adequate numbers and responsibilities, all acceptable to the Bank and as set forth in the Operational Manual. 2. The Borrower shall, no later than eight (8) months after the Effective Date, hire a Managing Company to support the Borrower in the implementation of the Project, with terms of reference, competence, capacity and staff acceptable to the Bank, as further detailed in the Project Operational Manual. B. Project Operational Manual. 1. The Borrower shall: (i) adopt and carry out the Project in accordance with the Operational Manual acceptable to the Bank, which shall include the rules, methods, guidelines, standard documents and procedures for the carrying out of the Project, including the following: (a) the detailed description of Project implementation activities and the detailed institutional arrangements of the Project; (b) the Project administrative, accounting, auditing, reporting, financial (including cash flow aspects in relation thereto), procurement and disbursement procedures; (c) the monitoring indicators for the Project; (d) the contractual arrangements and missions of the Managing Company; and (e) the ESMF and the RPF; and (ii) not amend, suspend, abrogate, repeal or waive any provision of said Operational Manual without the prior written approval of the Bank. 2. In case of any conflict between the terms of the Operational Manual and this Agreement, the terms of this Agreement shall prevail. C. Implementation Arrangements for Part 4 of the Project. 1. In order to ensure the proper implementation of Part 4 of the Project after the occurrence of an Eligible Crisis or Emergency, and prior to the carrying out of any activities under said Part of the Project, the Borrower shall take the following measures, all under terms and in a manner satisfactory to the Bank: (a) determine or provide evidence that a competent entity has determined that an Eligible Crisis or Emergency has occurred, and the Bank has agreed with said determination; (b) prepare and furnish to the Bank an official request to finance the Eligible Expenditures under Category (2) in order to respond to said Eligible Crisis or Emergency; -7- (c) prepare, consult and disclose all safeguards instruments required for said activities, in accordance with the provisions of Section I.D of this Agreement; and (d) prepare and furnish to the Bank a manual (the CERC Manual), for the implementation of Part 4 of the Project, including: (i) a list of proposed emergency response and reconstruction activities to be carried out; (ii) financial management arrangements; (iii) procurement methods and procedures; (iv) documentation required for withdrawals of Eligible Expenditures under Category (2); (v) safeguard instruments for environmental and social management consistent with the Bank's Safeguard Policies then in force on the matter; and (vi) any other arrangements necessary to ensure proper coordination and implementation of Part 4 of the Project. D. Safeguards. 1. The Borrower shall: (a) implement the Project in accordance with the provisions of the ESMF and the RPF; (b) ensure that all measures for carrying out the recommendations of the ESMF, and the RPF are taken in a timely manner and that all necessary plans prepared in accordance with said ESMF and RPF have received the Bank's written no- objection prior to the start of any works or services; and (c) ensure that the terms of reference of any consultancy in respect to the Project shall be satisfactory to the Bank following its review thereof and, to that end, such terms of reference shall duly incorporate the requirements of the Bank's Safeguard Policies then in force, as applied to the advice conveyed through such consulting services. Section II. Project Monitoring Reporting and Evaluation The Borrower shall furnish to the Bank each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of Loan Proceeds A. General. Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Borrower may withdraw the proceeds of the Loan to: (a) finance Eligible Expenditures; and (b) pay: (i) the Front-end Fee; and (ii) each Interest Rate Cap or Interest Rate Collar premium; in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: -8- Category Amount of the Loan Percentage of Expenditures Allocated to be financed (expressed in USD) (inclusive of Taxes) (1) Goods, works, non- 249,375,000 100% consulting services, consulting services, Training and Operating Costs for Parts 1, 2, and 3 of the Project (2) Goods, works, non- 0 consulting services, consulting services, Training and Operating Costs for Part 4 of the Project (3) Front-end Fee 625,000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (4) Interest Rate Cap or 0 Amount due pursuant to Interest Rate Collar premium Section 4.05 (c) of the General Conditions TOTAL AMOUNT 250,000,000 B. Withdrawal Conditions; Withdrawal Period. 1. Notwithstanding the provisions of Section III A above, no withdrawal shall be made: (a) under Category (1), for payments made prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed $50,000,000 may be made for payments made prior to this date but on or after August 1, 2018 or the date falling twelve months prior to the Signature Date, for Eligible Expenditures; or (b) under Category (2) until the Borrower has: (i) determined or provided evidence that a competent entity has determined that an Eligible Crisis or Emergency has occurred; (ii) prepared, consulted and disclosed all safeguards instruments required; and (iii) prepared and furnished the CERC Manual; all in a manner satisfactory to the Bank. 2. The Closing Date is June 16, 2025. The Bank may grant an extension of the Closing Date only after the Guarantor's Ministry of Finance has informed the Bank that it agrees with such extension. Section IV. Other Undertakings By June 15, 2022, or such other date as the Bank shall agree upon, the Borrower shall: (i) carry out, jointly with the Bank, a mid-term review of the implementation of the Project, which shall cover the progress achieved in the implementation of the Project; and (ii) following such mid-term review, act promptly and diligently to take any corrective action as shall be agreed by the Bank. -9- SCHEDULE 3 The following table sets forth the Principal Payment Dates of the Loan and the percentage of the total principal amount of the Loan payable on each Principal Payment Date ("Installment Share"). Principal Payment Date Installment Share On each March 15 and September 15 Beginning March 15, 2029 through September 15, 2047 2.56% On March 15, 2048 2.72% - 10 - APPENDIX Section I. Definitions 1. "Agua Legal Program" means the Borrower's program aimed at bringing potable water to the vulnerable population in MRSP, as established and operating under the Borrower's pluriannual investment plan. 2. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 3. "Bank's Safeguard Policies" means the Operational Policies (OPs) and Bank Procedures (BPs) of the Bank, namely OP/BP 4.01 (Environmental Assessment), OP/BP 4.03 (Performance Standards for Private Sector Activities), OP/BP 4.04 (Natural Habitats), OP/BP 4.09 (Pest Management), OP/BP 4.10 (Indigenous Peoples), OP/BP 4.11 (Physical Cultural Resources), OP/BP 4.12 (Involuntary Resettlement), OP/BP 4.36 (Forests), OP/BP 4.37 (Safety of Dams), OP/BP 7.50 (International Waterways), and OP/BP 7.60 (Disputed Areas); which can be found at https://policies.worldbank.orp. 4. "Barueri Wastewater Treatment Plant" means the plant established in 1988 and located in the municipality of Barueri that serves most of MRSP. 5. "Billings Basin" means a watershed that drains to the Billings reservoir in the area of MRSP, as defined under the State of Sdo Paulo's Law No. 13.579/2009. 6. "Category" means a category set forth in the table in Section III A of Schedule 2 to this Agreement. 7. "CERC" means Contingent Emergency Response Component. 8. "CERC Manual" means the manual prepared by the Borrower for the implementation of Part 4 of the Project, as referred to in Section I C of Schedule 2 to this Agreement, and as the same may be amended from time to time in a manner and with contents acceptable to the Bank. 9. "Eligible Crisis or Emergency" means an event that has caused, or is likely to imminently cause, a major adverse economic, environmental and/or social impact associated with natural or man-made crises or disasters. 10. "Embu Mirim River" means a river in the Guarapiranga Basin. 11. "ESMF" means the Borrower's environmental and social management framework dated October 1, 2018 acceptable to the Bank, as published and available to the public on www.sabesp.com.br, which contains guidelines for undertaking site-specific environmental and social measures (in relation to environmental assessment, natural habitats, physical cultural resources, safety of dams and international waterways) r - 11- individual investments under the Project, including: (i) guidelines for the identification of existing environmental and social conditions and potential direct and indirect environmental and social impacts and risks resulting from the carrying out of the Project; (ii) guidelines for the carrying out of environmental assessments and the preparation of environmental management plans, when applicable; (iii) recommendation of mitigation measures for each negative impact identified; (iv) measures for enhancing each identified positive impact; and (v) guidelines for the preparation of environmental and social monitoring plans for tracking the application of the mitigation measures, as said framework may be amended from time to time with the Bank's prior approval. 12. "General Conditions" means the "International Bank for Reconstruction and Development General Conditions for IBRD Financing, Investment Project Financing", dated July 14, 2017. 13. "Guarapiranga Basin" means a watershed that drains to a reservoir in the MRSP, as defined under the State of Sdo Paulo's Law No. 12.233/2006. 14. "Managing Company" means the company hired by the Borrower in form and substance satisfactory to the Bank to support the implementation of the Project, as referred to in Section I A 2 of Schedule 2 to this Agreement, or any successor thereto acceptable to the Bank. 15. "MRSP" means the Metropolitan Region of Sdo Paulo, as established and operating under the Guarantor's Law (Lei Complementar) No 14 dated June 8, 1973, and the Borrower's Law (Lei Complementar Estadual) NO 1.139 dated June 6, 2011. 16. "Operational Manual" means the manual referred to in Section I B of Schedule 2 to this Agreement, as the same may be amended from time to time in a manner and with contents acceptable to the Bank. 17. "Operating Costs" means the reasonable incremental operational costs related to the Project technical and administrative management, preparation, monitoring and supervision required under the Project, including, inter alia, office equipment, supplies, travel costs (including accommodations, transportation costs and per diem), bank charges, printing services, communication costs, utilities, maintenance and rental of office equipment and facilities, insurance, vehicle operation and maintenance costs, local contractual staff working on Project, and logistics services, but excluding the Borrower's regular staff. 18. "PIU" means the Project Implementation Unit referred to in Section I A 1 of Schedule 2 to this Agreement. 19. "Procurement Plan" means the Borrower's procurement plan for the Project, dated November 13, 2018, as the same may be updated from time to time in agreement with the Bank. 20. "Procurement Regulations" means, for purposes of paragraph 85 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017 and August 2018. -12- 21. "Resettlement" means the impact of an involuntary taking of land under the Project, which taking causes affected persons to have their: (i) standard of living adversely affected; (ii) right, title or interest in any house, land (including premises, agricultural and grazing land) or any other fixed or movable asset acquired or possessed, adversely affected temporarily or permanently; (iii) access to productive assets adversely affected, temporarily or permanently; or (iv) business, occupation, work or place of residence or habitat adversely affected, temporarily or permanently. 22. "RPF" means the Resettlement Policy Framework prepared by the Borrower dated September 24, 2018, and published and available to the public on www.sabesp.com.br and outlining general implementation procedures, mitigation measures and monitoring procedures for Resettlement under the Project, including the procedures for the preparation and implementation of resettlement action plans, as said framework may be amended from time to time with the Bank's prior approval. 23. "Signature Date" means the later of the two dates on which the Borrower and the Bank signed this Agreement and such definition applies to all references to "the date of the Loan Agreement" in the General Conditions. 24. "Training" means reasonable expenditures (other than those for consulting services) incurred in connection with the carrying out of training, seminars, and workshops, including the reasonable travel costs (e.g. accommodations, transportation costs and per diem) of trainees and trainers (if applicable), catering, rental of training facilities and equipment, logistics and printing services, as well as training materials and equipment required under the Project. - 13 -