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Sabesp Says Brazil’s Lack of Rain May Force ‘Drastic’ Measures

March 29 (Bloomberg) -- Cia. de Saneamento Basico do Estado de Sao Paulo, Brazil’s biggest water utility, said it may have to take “drastic” measures if reservoir levels don’t recover amid a drought dating back to 2012.

Sales at Sabesp, as the company is known, rose 5.4 percent to 11.3 billion reais ($5 billion) in 2013, the company said yesterday in a statement. Earnings before interest, tax, depreciation and amortization rose 11 percent to 4 billion reais. Revenue from water supply may fall this year due to the lack of rain, the company said.

Water levels in the Cantareira basin, which supplies almost half of the 20 million residents of metropolitan Sao Paulo, this month fell to the lowest level since data began in 1982, according to the National Water Agency’s website.

“Despite efforts in 2013 and early 2014, we could not avoid exposure of our operations to the effects of the severe water shortage,” Sabesp said in its annual report. “If the rains do not return to adequate levels and the reservoirs aren’t topped up, we may be forced to take more drastic measures,” including rotating access to water.

Parts of southeastern Brazil, especially south of Minas Gerais, where the water used in the Cantareira basin comes from, and the Northern Metropolitan Region of Sao Paulo suffered below-average rains in 2012, according to Sabesp. The drought worsened last year and early this year, it said.

Sabesp has already cut its use of water from the Cantareira basin by 15 percent, the company said. It’s also introduced discounts of 30 percent to customers who reduce their consumption by a fifth, it said.

“The volume of water we charge for may drop during 2014, and our costs may increase due to additional investments needed to mitigate the effects of the drought,” Sabesp said. “While a drop in our revenues is expected, we cannot estimate exactly the impact on our revenues, nor can we guarantee that any continued drought in the future will not adversely affect our water supply system and consequently our business and results.”

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net Chris Reiter, Alastair Reed

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