Mekorot considers halting projects amid conflict with Water Authority

The water company Mekorot concluded the second quarter of 2026 with a 291% jump in net profit to 243 million shekels, against the backdrop of an escalation in its conflict with the Water Authority over changes to accounting rules which, according to the company, harm its financial stability.

According to the reports, as part of the conflict, the board of directors decided to halt new projects in the development plan unless they are approved individually. A significant part of the jump in net profit stems from an accounting effect rather than an improvement in business operations. The company recorded an impairment reversal of 195 million shekels during the quarter, following a decrease in the interest rate environment and the discount rate. In the calculation for the first half, Mekorot remained with a cumulative impairment of 83 million shekels, after recording an impairment of 1.4 billion shekels in 2025.

Mekorot's revenues totaled 1.43 billion shekels in the second quarter, compared to 1.44 billion shekels in the corresponding quarter of 2025. Operating profit surged by 40% to 138 million shekels. However, in the first half of the year, there was a decrease in revenues from water supply by 77 million shekels due to a drop in the quantities of water sold.

The escalation in the crisis between Mekorot and the Water Authority, the regulatory body responsible for the company, continues due to controversial regulation set at the end of 2025 that reached the Supreme Court. Mekorot claims that the current regulation does not recognize all required costs and investments, thereby eroding its financial position and hindering the execution of huge investments in the water sector, which amount to about 1.6 billion shekels annually.

In recent weeks, Mekorot chairman Moshe Shemoni warned that the ongoing crisis would force the company to reduce its development and investment plans to maintain financial stability. Water Authority director Hezi Lifshitz responded by clarifying that a lack of investment by Mekorot would bear far-reaching consequences.

Against the backdrop of the threat of sanctions, the Government Companies Authority joined the quarrel to support the water company. In a letter to Lifshitz, deputy director Yaniv Edri warned that "Mekorot's current financial position requires extra caution and not the creation of a negative incentive for it to promote investments at any cost." A discussion on the petition is expected to be held at the end of March 2027.