Mekorot National Water Company will invest NIS 1.5 billion in 2020 on connecting Lake Kinneret (Sea of Galilee) to desalination plants, and will undertake for the first time in its history to meet financial targets. Mekorot's board of directors approved the decision last Thursday. This is almost double annual investment of the company, managed by CEO Eli Cohen. Mekorot's annual development budget has averaged NIS 800 million in recent years. Among other things, Mekorot will invest in connecting the new desalination facilities at Sorek and in western Galilee, and in constructing the reverse National Water Carrier for conveying water from the desalination facilities to refill Lake Kinneret.
The government decided in February to substantially expand Mekorot's development plan, in view of the forecasts for little rain in the coming years because of climate change and global warming.
The government sought to reduce in the increase in the water rate for financing the additional budget as much as possible. In order to create alternative sources of revenue, a package of measures was decided, including a merging of the National Water Carrier's assets with Mekorot and the sale of real estate properties, including the company's main headquarters on Lincoln Street.
In order to make sure that Mekorot's financial soundness will not be affected, the government decided to assemble a financial soundness team, headed by Government Companies Authority director Yaakov Quint and Israel Water Authority director general Giora Shaham, with the participation of representatives of the Ministry of National Infrastructure, Energy and Water Resources and the Ministry of Finance. The financial soundness team will assess once a year whether Mekorot is meeting its targets.
As part of yesterday's agreement, it was decided to adopt the financial targets set by in the government's decision (a leverage ratio and an adjusted ratio of cash flow to debt), and to add to them two financial targets derived from the Government Companies Authority's policy: return on equity and the interest coverage ratio.
As reported in "Globes," the Government Companies Authority is promoting soundness and profit targets for government companies in order to improve their efficiency and profit margins. It is therefore especially important for the Water Authority to be committed to a financial targets document set by the Government Companies Authority. The Water Authority also agreed to indemnify Mekorot for collection depreciation on debts created as a result of Amendment 27. This undertaking is to provide indemnification for 85% of the uncollectable debt.
Published by Globes, Israel business news - en.globes.co.il - on December 29, 2019
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