Adverse ruling to cost Brazil's SABESP over US$41 million

SAO PAULO, Brazil, Oct. 27, 2004 (BUSINESS WIRE) -- SABESP -- Cia. de Saneamento Basico do Estado de Sao Paulo -- announced that, in accordance with an injuction dated Jan. 3, 2002, and considering the recent publication of news by the media regarding a judicial decision issued by a lower court with respect to a lawsuit involving us, it would like to inform its shareholders and the market in general of a legal decision that could cost the company US$40.95 million.

The public attorney of the municipality of Paraguacu Paulista has brought a civil public action before the Paraguacu Paulista Courts of Law (1^ra Vara de Paraguacu Paulista) which seeks reparation and cessation of environmental damage caused by SABESP dumping raw sewage into the Alegre River, situated in the municipality of Paraguacu Paulista.

The lower court has issued a decision against us, requiring that the utility: 1) cease dumping raw sewage into the Alegre River; 2) invest in a water and sewage treatment facility in the municipality of Paraguacu Paulista; and 3) pay an administrative penalty in the amount of R$116.93 million [US$1 = R$2.86] for damages caused to the environment. The decision has also established the application of a daily penalty in case we do not comply with the first and second points mentioned above.

SABESP (www.sabesp.com.br/english/start/default.htm) is using all judicial means of appeal to reverse the decision described above, especially with respect to the amounts of the penalties established. The company serves about 370 municipalities and nearly 25 million people throughout the state of São Paulo. It's the largest water and wastewater utility in Brazil and the third largest in the Americas. It celebrated its 30th anniversary in 2004. It had 2003 sales of US$1.42 billion.

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