Israel’s national water company, Mekorot, posted solid underlying performance in 2025, but sweeping regulatory changes by the Water Authority pushed the company to report a significant net loss, according to its financial results released Tuesday.
The figures highlight a stark disconnect between Mekorot’s operational strength and its reported bottom line. While the company recorded a 19% rise in adjusted net profit, new economic regulations forced it to recognize a substantial impairment, resulting in a net loss of NIS 741 million for the year, compared with a net profit of NIS 215 million in 2024.
At the heart of the shift is a revised regulatory framework that alters how Mekorot’s revenues and returns are calculated. The changes include a sharp reduction in the allowed return on equity and a decrease in recognized profit—effectively lowering the financial credit the company receives for investments already made and for infrastructure it is required to operate.
Underlying growth remains strong
Excluding the regulatory impact, Mekorot’s financials point to a year of steady growth.
Adjusted net profit rose by about 19% to NIS 267 million, while revenues increased by approximately 8% to NIS 5.77 billion. EBITDA climbed roughly 11% to NIS 1.48 billion.
The company also accelerated its investments in water infrastructure, raising total annual spending to around NIS 1.7 billion, up from NIS 1.5 billion the previous year. The increase was partly aimed at addressing gaps that emerged during the war.
Impairment wipes out gains
Despite these gains, Mekorot recorded a one-time, non-cash impairment of approximately NIS 1.4 billion on its fixed assets, following amendments to water sector regulations.
The accounting adjustment effectively erased the company’s operational achievements for 2025 and offset the impact of the 2024 consolidation of National Water Carrier (MFA"R) assets—an earlier move intended to bolster its financial stability and support its debt-raising capacity.
As a result, Mekorot posted an operating loss of about NIS 1.4 billion, compared with an operating profit of NIS 407 million in 2024. Shareholders’ equity also declined, falling to approximately NIS 5.8 billion from NIS 6.5 billion at the end of last year.
Legal challenge signals deeper concerns
Following months of discussions with the Water Authority that failed to yield changes, Mekorot’s board this week instructed management to file a petition with the High Court of Justice against the regulator and other government bodies.
The company argues that the new regulatory framework could undermine its financial stability and limit its ability to carry out critical long-term infrastructure projects. Mekorot estimates its required annual investment in the water sector at roughly NIS 1.7 billion.
According to the company, the Water Authority has not provided data to address concerns that the revised model could hinder future development of Israel’s water infrastructure.