Material Fact

SAO PAULO, May 13, 2017

(i) To proceed with studies on alternatives for the Capitalization of Sabesp ("Capitalization");

(ii) The hiring, by Sabesp, of the International Finance Corporation ("IFC"), an institution bound to the World Bank; and

(iii) The conclusion of an agreement between Sabesp and the São Paulo State Government, through the Secretariat of Sanitary and Water Resources and the Secretariat of Finance, to delineate the scope of the IFC's hiring and to govern the relationship between the contracting parties, including proportional reimbursement of expenses.

The proposed Capitalization provides the establishment of a new company to exercise Sabesp's direct corporate control after the conference of the totality of share interest owned by the São Paulo State Government into the stock capital of the new company. São Paulo State Government will continue, under any circumstances, to hold sufficient shareholding interest to assure the exercise of Sabesp's majority corporate control, as provided by law. The purpose of the Capitalization is to overcome financial restrictiveness and preserve the expansion of the activities of universalization of basic sanitation services promoted by the Company.

If further studies are implemented, new information will be disclosed regarding the possible Capitalization, which, if continued, may provide for the admission of institutional investors in order to fund the new company's share capital, allowing to strengthen Sabesp's corporate governance and business efficiency in order to preserve the development of its activities of universal sanitation services in the São Paulo State.

During this process the Company will disclose any relevant developments over this subject.