Throughout its history, Mekorot has maintained fiscal stability while conducting its operations.
In 2006, Mekorot’s turnover was over $700 million, shareholders’ equity was $500 million and total assets were in excess of $2.8 billion.
In addition to supplying water, Mekorot engages in developing water sources and improving water quality through substantial investment in wastewater treatment and its delivery, desalination of seawater and brackish water, and water security.
In 2006, Mekorot invested over $240 million in developing water facilities, including a new central filtration plant, compared with $180 million in investments in 2005.
For a number of years Mekorot’s fundraising instruments (primarily, bond offerings) have been awarded the highest AAA rating by the Ma’alot credit rating agency based on the following factors:
- The company’s dominant position in the sector
- The company’s cumulative knowledge, experience and infrastructure
- The nature of demand for water characterized by stable growth and little flexibility by most sectors (with the exception of the agricultural sector), together with a continuing shortage of supply
- Regulatory support and positive government intervention expressed by established water tariffs and agreements establishing pricing and government support for established prices increases
- Government ownership
Ma’alot’s high ratings are a positive reflection of the company’s strength. They have also allowed the company to widen its sources of financing and issue debt instruments.
These financings, in turn, have enabled Mekorot to repay government and bank obligations and finance its development activities.
Since 1993, the company has operated in accordance with agreements it has entered into with the Government of Israel covering Mekorot’s normative costs of production, transport and supply of water. The first and second agreements ended in 1998 and 2006, respectively.
In August 2007, the company and the government entered into a new agreement which will remain in effect until December 31, 2008, with a possible one-year extension.
In accordance with the agreement, Mekorot is authorized to continue its activities based on economic and business principals.
The agreement provides for compensation to Mekorot because tariffs established by the government are low and do not cover Mekorot’s operating costs.
The new agreement also establishes changes in Mekorot’s corporate structure, including the establishment of two subsidiaries.
The parent company, “Mekorot Water”, will continue to produce, transport and supply water. One of its subsidiaries, “Mekorot Initiative and Development”, will concentrate, among other things, on the desalination of seawater (according to a government decision, it will build a desalination facility in Ashdod that is planned to desalinate 100 million m3 of water a year),
wastewater treatment, projects for the municipal sector and projects abroad. Another subsidiary will focus on building and maintaining water infrastructures, primarily for the parent company.
Proper economic management that meets current needs will further strengthen Mekorot’s leadership and fiscal stability, while supporting its efforts to expand its range of activities and market share.
Mekorot is a unique company with numerous competitive strengths, including major technological advantages. The structural changes currently being implemented by the company, together with its new global perspective, are meant to enable Mekorot to meet the significant challenges that the future will inevitably bring.
The company is confident that achieving its strategic goals will assure its ability to thrive and flourish economically over the long term – even in the face of a continually changing business environment.
Consolidated Balance Sheet
Income Statement