Last week, Mekorot National Water Company, Israel's water monopoly, completed a NIS 700 million private bond offering to financial institutions. The offering was aimed at financing part of the company's five-year water market development plan. The bonds were offered with a 2.38% index-linked interest and demand exceeded NIS 1 billion. The offering was led by Poalim IBI Underwriting and Investments (TASE: PIU), Discount Underwriting & Issuing Ltd., Leumi Partners Ltd. and Barak Capital Underwriting. This is an expansion of Series 8, which will be payable in 2016-2048. Mekorot's debt is rated AAA with a stable outlook by S&P Maalot analysts, who updated their survey of the company, "Mekorot's status as a monopoly and the state's willingness to support it when necessary are not about to change in the near future."
On the other hand, the company has "high leverage and a low coverage ratio, in addition to its dependence on the capital market for the implementation of its investments program," while having "extensive access to funding sources." Mekorot has a high cash flow from ongoing operations (NIS 605 million in 2015) and reported net profit in the past five years. The funds raised will be used for various projects including the completion of the fifth water pipeline to Jerusalem, costing NIS 2.5 billion, and defined by the cabinet as a national project. The western part of the pipeline, between Rehovot and Beit Shemesh has already been completed and provides water to consumers. The eastern part will end in Motza-Ein Kerem and involve digging a 13 kilometer tunnel beginning in November 2016.
At Mekorot, the capital raising had been led by CEO Shimon Ben-Hamo, VP Finance & Regulation Yochay Shochat and head of the company's financial department, Lina Levy-Dargotski. The process was accompanied by the Gross, Kleinhendler, Hodak, Halevy & Co. law firm.
Published by Globes [online], Israel business news - www.globes-online.com - on September 27, 2016
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