Four and a half months after Mekorot National Water Company announced that Siemens AG (NYSE:SI; XETRA:SIE) would collaborate in developing water technologies, the two companies signed a strategic cooperation agreement last Thursday.
Under the agreement, Mekorot’s WaTech water technology incubator will effectively become Siemen’s water development center. WaTech will sponsor joint water development projects between Siemens and Israeli entrepreneurs.
In September 2004, Siemens Water Technologies division acquired USFilter Group of Companies for over $1 billion, as part of a strategic plan to become a leading global company for water solutions. Siemens has subsequently acquired a number of small water technology companies, and it is still doing so. General Electric Co. (NYSE:GE) is Siemens’s largest competitor in the water technologies industry.
Mekorot will be Siemens’s source for water technology solutions. Mekorot will also run pilot programs for water technologies that Siemens buys or studies around the world. In other words, Mekorot will be the first customer, on the basis of what Mekorot chairman Baruch Oren called “Mekorot’s global reputation for excellence.”
Basically Siemens wants to export water technologies developed and/or tested in Israel. “Israel will become the Silicon Valley of water technologies,” said Oren.
Mekorot and Israel gain a two-fold profit from the collaboration with Siemens. Financially, Mekorot will earn royalties of a few percent from the sale of water technologies developed in Israel with the help of local R&D personnel. In this context, it should be noted that Siemens posted almost $2 billion in water technology sales in 2005, mostly through USFilter. Siemens aims to double water technology sales to $4 billion a year within three years. Mekorot will earn a few percent a year from these sales; the potential revenue amounts to tens of millions of dollars a year.
In addition, Siemens will expose Mekorot to new technology ideas from around the world. Those ideas that Siemens considers worth investing in will be developed by Israeli entrepreneurs, with the assistance of Israeli academic research institutes and in close cooperation with Siemens.
The agreement was signed at Siemens Water Technologies offices in New York between Siemens SVP R&D and CTO Joseph Zuback, Siemens Water Technologies president and CEO Dr. Roger Radke, Siemens Israel managing director Oren Ahronson, and Mekorot chairman Oren and CEO Ronen Wolfman.
Published by Globes [online], Israel business news - www.globes.co.il - on June 18, 2006
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