Investor Presentation Israel Electric Corp

Investor Presentation Israel Electric Corp.

Business update as of 03/31/2020

June 2020 Disclaimer

The Company is a public company, with all it entails, and this information provided to you, all or part of it, may constitute “Inside Information” in accordance with Israel’s Securities Law, 1968 (hereinafter: “Securities Law”), and making use of this information (including, but not only, by way of carrying out a transaction in a security of IEC, and/or delivering this information, or an opinion regarding a security of IEC, to any third party who may use this information for purposes of such transaction) may constitute a criminal offence pursuant to Securities Law.

Please treat this information as CONFIDENTIAL and do not disclose, publish or deliver all or any part of this information, directly or indirectly, to any third party, except for your employees, officers and any person acting for you or on your behalf, strictly on a “need to know” basis, and only after you have notified the person receiving any of this information that the information is confidential and that making use of this information may constitute a criminal offence as specified above

This Presentation does not constitute or form part of and should not be construed as an offer to sell or issue, or the solicitation of an offer to buy or acquire, securities of the Company. This Presentation is solely for informational purposes. The information contained in this presentation regarding the Company's operations is concise and presented for convenience purposes only. To get a complete picture of the Company's operations, please refer to the immediate and timely reports of the Company to the Israeli Securities authority and the Tel-Aviv Stock Exchange.

This presentation includes forward-looking information, as per its definition in the Securities Law, including forecasts and other information whose realization is uncertain and depends on factors that are not under the control of the Company. These factors are based, among other things, on data that is in the possession of the Company as of this date, internal estimates and expectations of the Company regarding trends in the Company's fields of activity and regarding the implementation of the company's plans. The Company's forecast and expectations included in this presentation may not be realized, in whole or in part, or may be realized in a different manner than expected, inter alia due to factors that some of them are not under the control of the Company, including changes in the market conditions and the Company's business environment, regulatory changes, or the realization of any of the risk factors of the Company.

The information contained in this presentation is provided as of the date of this presentation. The Company is not under any obligation to update the information in this presentation or to update the forward-looking statements contained in it.

Investor Relations 2 Executive Summary

3 Israel Electric Corp. at a Glance

 Established in 1923, 97 years of operation, the Israel Electric Corporation Limited (“IEC”) is the IEC Power Grid sole vertically integrated electric utility company in Israel and generates, transmits, distributes and supplies the majority of the electricity used in Israel  IEC is appx. 99.85% owned by the State of Israel  IEC had total assets of NIS 87.0 billion and 11,461 employees as of March 31, 2020  As of December 31, 2019, IEC serves 2.9 million residential, commercial, agricultural and industrial customers throughout the State of Israel, including East Jerusalem and the Palestinian Authority  Total electricity sales of 12,774 GWh for the period ended March 31, 2020 400 kV lines Generation (1) Transmission (1) Distribution (1) 161 kV lines

Steam (dual 12.8 GW 5,661 km 66,670 km purpose) High and ultra-high voltage Medium and low Installed capacity Gas turbine (internal transmission grid voltage lines combustion) / Combined-cycle (2) 16 215 (internal combustion 2.9 mn and steam) Power stations Switching stations & sub-stations Customers

3M-2020 Key Financials Credit Ratings as of March 31, 2020

Revenues EBITDA State of Israel (3) IEC Global IEC Local NIS 6.4 billion NIS 1.9 billion A1 / AA- / A+ Baa2 / BBB Aa2 / AA+ Stable / Stable / Stable Positive / Stable Positive / Stable $1.8 $0.5 (Moody’s / S&P / Fitch) (Moody’s / S&P) (Midroog / Maalot S&P)

Source: IEC Financial Statements for 2019FY and for 3M-2020 1) As of December 31, 2019. 2) 57 substations are privately owned. 3) A State of Israel guarantee for the existing loans of IEC are negligible compared to the company’s overall financial debt. Denotes USD figures USD/NIS exchange rate of 3.57 as of March 31, 2020.

Investor Relations 4 Israel - a Modern Economy

Key Figures Israel Rating History(1) 2 Area 22,072 km Sep 2011 Aug 2018 S&P upgrade S&P upgrade Population (March 2020) 9.2 million Israel to A+ Israel to AA- Aa3 / AA- GDP (2019) NIS 1.3 trillion $376 bn 3

A1 / A+ GDP per Capita (2019) NIS 147,078 $42,508 Avg. GDP Growth (2012-2019) 3.6% A2 / 2A Unemployment (April 2020) 3.3% Nov 2016 Fitch upgrade Israel to A+ Foreign Currency LT Debt Ratings 1 (1) A1 / AA- / A+ (Moody’s / S&P / Fitch) 2011 2013 2015 2017 2019 Moody's S&P Fitch Israel Public Debt to GDP(2) Inflation Environment (% of GDP) (YoY Inflation %) 1%-3% 1.1% Government 80 5.0% Average inflation in Inflation Target the last decade 75 4.0% 68.5 3.0% 70 67.1 65.8 1.6% 1.8% 63.7 2.0% 65 62.1 0.8% 60.5 61.0 0.6% 60.0 1.0% 0.4% 60 0.0% 55 -0.2% -1.0% -0.2% -1.0% 50 -2.0% 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019

Source: The Israeli Central Bureau of Statistics, Bank of Israel. 1) Credit rating refers to long-term foreign currency debt only. A State of Israel guarantee for the existing securities of IEC are negligible compared to the company’s overall Financial debt 2) The Israeli Ministry of Finance and Bank of Israel. Denotes USD figures USD/NIS exchange rate of 3.46 as of December 31, 2019.

Investor Relations 5 Key Investment Highlights

Owned by the State of Israel

Essential  Appx. 99.85% owned Robust Growth in Service Provider by the State of Israel Electricity Demand (A1/AA-/A+)  IEC is an essential service  Strong electricity demand provider of electricity in Israel growth in the Israeli market and the sole vertically integrated provider in the electricity chain

 Natural gas from Tamar, Natural Gas Leviathan and other significant  Tariff is based on costs and Fully Regulated natural gas discoveries in Fuel return on equity Across all Segments Israel have paved the way  Set by the Electricity Authority Independence towards potential fuel independence

 Rated investment grade by both  Continuous improvement of S&P (BBB) and Moody’s (Baa2) efficiency & reliability  IEC total liquidity(1) of NIS 5.6 bn  IEC has over 97 years of experience in as of December 31, 2019 developing and managing the electricity sector in Israel

Financial Efficiency and Robustness Reliability

1) Source: IEC Financial Statements for 2019FY. IEC defines “Liquidity” as cash and equivalents, short term investments and available credit facilities.

Investor Relations 6 Key Strategic Targets

Israel's Electricity Supplier Continuing to guarantee reliability of the • electricity supply and maintaining adequate electricity reserves

Investor Relations 7 Operational Overview

8 Historical Performance

Comparison of Key Metrics IEC Revenues NIS bn % $7.1 12/31/2009 12/31/2019 Change $5.9 $6.7 $6.3 24.7 23.4 23.6 22.7 Population (mn) (2) 7.6 9.1 19.7%

20 Number of 2.5 2.9 16.0% Customers (mn)

Electricity Sales 48,947 53,119 8.5% (GWh) 10 $1.7 $1.8

National Peak 6.0 6.4 10,280 13,568 32.0% Demand (MW)

IEC Installed 11,824 12,752 7.8% Capacity (MW) 0 2016 2017 2018 2019 3M-2019 3M-2020

IEC continues to provide most of Israel’s energy requirements as the sole vertically integrated electric utility in Israel

Source: 1) IEC Financial Statements for 2016FY-2019FY and for 3M-2020, IEC Statistical Report for 2009FY. 2) The Israeli Central Bureau of Statistics. Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46, 3.63 & 3.57 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY, 3M-2019 & 3M-2020, respectively.

Investor Relations 9 Israel Generation Capacity and Demand

Israel Generation Capacity and Demand

(MW) 20,000 18,923 17,972 17,588 17,762 2,023 17,000 911 946 1,303

3,060 3,199 3,334 4,148 14,000 13,568 12,921 12,624 12,746

11,000

13,617 13,617 13,335 12,752 8,000

5,000 2016 2017 2018 2019 (1) (1) IEC's Installed Generating Capacity Gas Fired IPPs Renewable Energy IPPs National Peak Demand

Source: IEC’s Financial Statements (2016FY-2019FY) 1) Installed Generation Capacity of Independent Power Producers (“IPPs”)

Investor Relations 10 Demand for Electricity

National Electricity Peak Demand & Total Electricity Produced in the Entire Sector (MW) (TWh) Trends 14,000 75 The demand for electricity in 12,000 70 Israel is growing at a fast and steady pace 65 10,000  Demand is driven by both 60 population growth and the 8,000 increase in electricity 73 consumption per household 68 70 55 65 67 6,000 64  IEC’s demand forecast, 62 61 58 60 50 which is used for long term Multiplied by 3.6 in 29 years 54 54 53 planning of the generation 4,000 45 segment, anticipates an average annual increase of 2,000 40 3.0% in peak demand in the 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 years 2020 to 2050 Total Electricity Produced in the Sector National Electricity Peak Demand

Seasonality in Electricity Demand - Average Consumption of Households

(KWh) 1,000 800 600 400 200 0 Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 Base Heating Cooling

Source: IEC’s Annual Financial Statements (1990FY-2019FY), IEC’s Statistical data.

Investor Relations 11 The IEC Electricity Chain

Generation Transmission Distribution

58 Generation 11 5,661 km 204 28,689 km 37,981 km 2.9 Units in 16 Switching Ultra-High & High Substations(1) Medium Low Voltage Million Power Stations Stations Voltage lines Voltage Lines Lines Customers

Source: IEC Financial Statements for 2019FY Notes 1) 57 substations are privately owned.

Investor Relations 12 The IEC Generation Segment

Electricity Generation Sites(1) Fuel Mix by Electricity Generated(4) 16 12,752 Steam (dual purpose) January 1 - December 31, 2019 January 1 - March 31, 2020 Haifa Gas turbine (internal Power stations Megawatts of combustion) / sites generation 4 units / 828 MW Combined-cycle (internal combustion Natural gas Natural gas and steam) & LNG & LNG Eshkol Orot Rabin(2) 53.1% 49.9% Coal 7 units / 1,693 MW 7 units / 2,605 MW 45.8% Coal Rutenberg 49.7% 6 units / 2,290 MW Hagit 4 units / 1,394 MW Diesel oil & Diesel oil & Fuel oil Fuel oil 1.1% 0.4% Gezer 6 units / 1,336 MW - Mainly powered by coal

- Mainly powered by gas IEC Generation Facilities No. of Installed units Capacity (MW)

Steam (dual purpose) (coal and fuel oil) (1;2;3) 10 4,840

Steam (dual-purpose) (natural gas and fuel / diesel oil) 6 1,340

Gas turbine (internal combustion) (industrial gas) 13 1,350

Gas turbine (internal combustion) (jet engine) 16 504

Combined cycle (internal combustion and steam) 13 4,718 Total 58 12,752 Source: IEC’s Financial Statements for 2019FY and for 3M-2020 1) As of December 31, 2019 2) Units 1-4 at the Orot Rabin Power Station will be transferred to preservation by June 1, 2022. 3) In accordance with the Minister of Energy's policy principles, which was published on the Ministry of Energy’s website on November 24,2019, it was decided that units 5-6 at Orot Rabin Power Station and units 1-4 at Rutenberg Power Station will gradually converse using natural gas in order to stop routine coal use until 2025 and no later than 2026. 4) As of December 31, 2019, 24.55% of IEC revenues are associated with IEC's coal fired units located in 2 sites.

Investor Relations 13 The IEC Transmission and Distribution Segments(1)

Transmission Total Electricity Consumption by Customer Type

Transformation Distribution (kWh) Water Power Lines Agriculture System pumping 2% 4% 11 769 km 66,670 km Switching stations 400 kV lines Medium and low Public, commercial, Residential voltage lines East-Jerusalem & 38% Palestinaian Authority 147 4,850 km 51,203 39% Substations 161 kV line (includes Distribution underground lines) Transformers Industrial 57 42 km 2.9 mn 17% Private substations 115 kV lines Customers Diversified Customer Base

Source: IEC’s Financial Statements for 2019FY Notes 1) As of December 31, 2019

Investor Relations 14 IEC’s Human Capital

Streamlining of IEC’s Workforce

IEC’s employees’ 13,000 12,754

12,500 12,371

12,000 11,908 11,902

11,476 11,461 11,500 11,391

11,000 2014 2015 2016 2017 2018 2019 3M-2020

As part of the reform in the electricity sector, an efficiency program is resuming for the years 2020-2025

Source: IEC’s Financial Statements for 2014FY-2019FY and for 3M-2020

Investor Relations 15 The Sector Reform

Main points of the reform)1(

Transfer of the system Essential service Opening the supply Management and Sale of generation sites Organizational change, provider in the segment market to additional units to a and increased efficiency plan and transmission and competition from other separate Government competition in the administrative flexibility distribution segments entities company generation segment

Value added services, Construction & installation of smart operation of two meters, construction combined cycle gas and operation of Strengthening the Compliance with Assets arrangement turbines at the ‘Orot storage facilities financial stability of IEC financial targets Rabin’ site)2(

Source : IEC ‘s Financial Statements for 2019FY and for 3M-2020

Investor Relations 16 The Sector Reform Timeline(1)

Source : IEC ‘s Financial Statements for 2019FY and for 3M-2020

Notes: 1. In accordance with the IEC’s undertakings adopted by the IEC's BOD on May 10, 2018, to the extent that the Government resolutions and/or the legislative amendments and/or the administrative decisions and/or the arrangements of the Electricity Authority and/or the aforesaid licenses given by the State of Israel, that will correspond to the (insofar as these are needed according to the State of Israel position), or that the collective agreement IEC and the employees representatives will not be in force, then all IEC’s undertakings, according to the IEC’s undertaking document, will not be in force and the State of Israel will not be able to file claims and/or complain against IEC with respect to those undertakings. On June 3, 2018, the required Government Decision was received, on July 19, 2018 the Knesset approved the Amendment to the Law, and on May 17, 2018, the Principles of the policy of the Minister and the Electricity Authority’s Regulation as aforesaid were published. In addition, on November 4, 2018, the Collective Agreement came into effect after all the contingent conditions detailed therein were fulfilled. For the purpose of implementing the full structural change outline, it will be required the approval of the regulatory agencies, decisions and regulations of the Electricity Authority and granting licenses which, as of this date, have not yet been received and there is no certainty regarding the date of determining the agreements or the granting of such licenses and their final terms. As of this date, IEC is unable to reliable estimate the exact implications of the additional regulations and approvals that have not yet been formulated or received on its financial position and results. 2. Part of the area at the Rutenberg power station (that was designated for Project D) will be transferred pursuant to the arrangement agreements as defined in Note 1f in the FY2019 Financial Statements’, by December 3, 2019. The area has not yet been transferred, and it is noted that the Ministry of Energy, and Electricity Authority, and the Israel Land Authority intend to make decisions concerning the manner of the area’s transfer, while noting its future intended use, clearing various infrastructures from the site, and manner of financing the vacation costs, which the Company is entitled to receive. Following this, an appropriate agreement will be signed between the Company and the State, for the purpose of transferring the area in accordance with the resolutions made, as aforesaid. 3. The Company is working in coordination with relevant government entities to complete all the activities required to separate and remove the system management activity to the responsibility of the System Management Company. At the same time, in discussions held with the relevant parties and regulators, it was decided to postpone the separation implementation date, which was decided originally to December 3, 2019, and therefore, on December 3, 2019 the Electricity Sector Order (Postponement of System Management Licensing Date) - 2019 was published, according to which the date for issuing the system management licensing to the System Management Company was postponed to no later than June 3, 2020. However, due to the complexity of the process and the need for the activities and decisions of many Government Agencies, together with the management of the System Management Company, this date was again postponed and on June 3, 2020, the Electricity Sector Order (Postponement of System Management Licensing Date) (Amendment) - 2020, was published, according to which the date for issuing the system management licensing to the System Management Company was postponed to no later than December 3, 2020. The Company shall be prepared in accordance with the implementation of the said separation at the date set. 4. On March 31, 2020, an Environmental Impact Report was submitted to the Ministry of Environmental Protection and on April 1, 2020, the program documents were submitted to the Planning Administration and to the Ministry of Energy.

Investor Relations 17 Israeli Electricity Sector

18 The Israeli Electricity Sector

IEC’s Main Regulators IEC’s Fuel Suppliers  The Electricity Authority (EA)  Natural Gas - Currently from the Tamar & Leviathan Reservoirs.  Government Companies Authority (GCA)  Antitrust Authority More reservoirs in the Israeli waters have been discovered  Israel Securities Authority  Liquid Natural Gas - Imported from international suppliers  Ministry of Energy  Ministry of Finance  Coal - Imported from international suppliers  Ministry of Interior  Ministry of Environmental Protection (MoEP)  The Concentration Committee  TASE Generation, Transmission and Distribution Generation Transmission Distribution

 As of 12/31/2019, 67% of total generating capacity  Expected to reach 54.7% by the end of 2020  Nearly 100% of the Switching Stations and the Ultra-High & High IPPs  As of 12/31/2019, Voltage lines are owned & operated IEC reached 2.9 million customers 33% of total generating by IEC (as of December 31, 2019) capacity  158 of 204 Substations are owned & operated by IEC  Expected to reach 45.3% by the end of (as of December 31, 2019) 2020

Source : IEC’s Financial Statements for 2019FY

Investor Relations 19 The Electricity Tariff

Tariff Structure

 In accordance with the Electricity Sector Law, the electricity tariff is set by the Electricity Authority (EA) and reformulated from time to time. The outline of the formula is as follows:

Recognized costs per segment (e.g. fuel costs, operational Fair rate of return on equity costs, depreciation costs and financial costs). Some of the per segment recognized costs are also attributed to funding the reform costs +

Electricity Tariff

Ongoing Update Annual Update Tariff update as of November 23, 2019

 Actual costs are examined every 2 weeks by Once a year, The current year's  On November 23, 2019, the EA issued a hearing regarding the the EA (at the time of CPI and fuel prices costs are updated based on annual 2020 tariff update. According the EA’s decision, the average changes) household electricity tariff will fall by approximately 4%, as of 1/1/20, forecasts as well as on previous  Discrepancies between forecasted costs and mainly due to: years' reckoning - the gap actual cost are reconciled on the earlier of:  Decline in the coal prices between the previous year's  A difference of 3.5%, provided that 3  Decline of NG price following future entry of Leviathan reservoir months forecast components and the  The sale of Alon Tavor Power Station have passed since the last update actual costs of the previous year  Egyptian Gas Agreement  A difference of 5.5% The above was partially offset by:  The Annual Update  Increased renewable energy consumption  Past cost refunds  Offsetting the excise tax reduction on coal last year

Source: IEC’s Financial Statements for 2019FY, Electricity Authority's decision No. 7 (57207) from meeting no. 572 on November 23, 2019 - Annual Update 2020 electricity tariff to IEC’s consumers

Investor Relations 20 The Electricity Tariff - Cont’d

Tariff vs. Coal Price Development(1) Structure of the Residential Tariff as Divided into Segments(2)

($/t) NIS Transmission 5% 0.60 140

120 0.55 Production Distribution 17% 100 and fuel 0.50 67% 80 0.45 60

40 0.40

Electricity Grid Administrator + returns to IEC customers 12% Coal Average General Tariff Residential Tariff

Source: 1. World Bank Commodity Price Data (Pink Sheet), May 2020; Calculated as average price of Australia and South Africa coal. Russia is not included in World Bank information, even though it is a significant source of coal for IEC. The general and Residential Tariffs do not include VAT. 2. The Electricity Authority - Report on State of Electricity Economy Year of 2018.

Investor Relations 21 Financial Overview

22 Financial Highlights

Revenues EBITDA(1) NIS NIS bn $5.9 $6.7 $6.3 $7.1 bn $2.0 $2.3 $2.1 $2.3 30 12 24.7 22.7 23.4 23.6 9 7.7 8.1 8.0 8.1 20 $1.7 $1.8 6 $0.6 $0.5 10 6.0 6.4 3 2.0 1.9

0 0 2016 2017 2018 2019 3M-2019 3M-2020 2016 2017 2018 2019 3M-2019 3M-2020 Historical Investments by segments (CAPEX) Net Financial Debt/EBITDA(2) NIS bn $0.9 $1.1 $1.0 $1.7 8 7 5.94 6 6 5.3x 5.2x 5 1.8 4.8x 4.8x 3.88 3.73 $0.6 0.2x 4.4x 4.3x 4 3.49 1.1 4 3 1.3 1.3 1.5 2.19 $0.2 5.1x 5.2x 2 0.5 0.7 0.5 2 4.8x 4.4x 4.8x 4.3x 0.9 2.9 0.3 0.72 1 1.7 1.8 1.3 1.4 0 0.3 0 2016 2017 2018 2019 3M-2019 3M-2020 2016 2017 2018 2019 3M-2019 3M-2020 State guaranteed Net Financial Debt / EBITDA without State guarantees Generation Transmission System Manager Distribution Supply

Source: IEC’s Financial Statements for 2016FY-2019FY and for 3M-2020 1. IEC defines “EBITDA” as profit (loss) before income taxes, financial expenses, depreciation and amortization. 2. IEC defines “net financial debt” as credit from banks and other credit providers, total long-term debt (including debentures, long-term liabilities to banks, including hedge transactions, lease liabilities, debentures to the State of Israel and liabilities to the State of Israel), less cash and cash equivalents, short-term investments and other receivables (including receivables for forward contracts and swap transactions, MTM and long-term deposits and regulatory deferral account assets with respect to linkage differentials). 3. In annualized terms, calculation based on LTM EBITDA.

Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46, 3.63 & 3.57 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY, 3M-2019 & 3M-2020, respectively.

Investor Relations 23 Historical Cash Flow

NIS bn 12

$1.7 $1.7 $1.5 $1.9 8 6.5 6.3 6.5 5.7 5.8 5.8 5.6 5.6 $0.7 $0.3 4 2.4 1.2

0 (0.7) (1.3) (1.7) (1.3) (2.2) (2.3) (4) (2.7) (2.7) (3.1) ($0.2) (3.7) (3.3) ($0.4) ($0.4) ($0.5) ($0.6) ($0.8) (4.8) ($0.6) ($0.8) ($0.9) ($0.7) ($1.1) (8) ($1.4)

(12) 2016 2017 2018 2019 3M-2019 3M-2020

(2) Operating activities Investment activities, net (1) Financing activities Total Liquidity

Generating sufficient cash flow from operations enables IEC to decrease debt

Source: IEC’s Financial Statements for 2016FY-2019FY and for 3M-2020 1. Investment activities excluding repayment (or deposits) of bank deposits. Total cash from investment activities figures as reported for 2016FY, 2017FY, 2018FY, 2019FY, 3M-2019 & 3M-2020 are NIS (2.8) bn, NIS (2.2) bn, NIS (3.1) bn, NIS (1.3) bn, NIS (0.7) bn and NIS (1.2) bn, respectively. 2. IEC defines “liquidity” as cash and cash equivalents, short term investments and available credit facilities.

D Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46, 3.63 & 3.57 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY, 3M-2019 & 3M-2020, respectively

Investor Relations 24 Net Financial Debt (1) Over Time

Prepared According to Government Companies IFRS Regulations

NIS, bn $13.9 51.8 $14.4 52 50.0

$12.0 46.9 47 $11.6 $11.3 44.6 $12.1 43.2 42.1 42 $10.2

38.3 $10.4

37 36.1 $9.6

34.3

32 (2) 2012 2013 2014 2015 2016 2017 2018 2019 3M-2020

Source: IEC’s Financial Statements for 2012FY-2019FY and for 3M-2020 1. IEC defines “net financial debt” as credit from banks and other credit providers, total long-term debt (including debentures, long-term liabilities to banks, including hedge transactions, lease liabilities, debentures to the State of Israel and liabilities to the State of Israel), less cash and cash equivalents, short-term investments and other receivables (including receivables for forward contracts and swap transactions, MTM and long-term deposits and regulatory deferral account assets with respect to linkage differentials). 2. As from 01/01/2019, “net financial debt” also includes lease liabilities.

D Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46, 3.63 & 3.57 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY, 3M-2019 & 3M-2020, respectively

Investor Relations 25 Consolidated Debt Breakdown as of March 31, 2020

Annual Debt Maturities (Principal in NIS billions)(1) Profile of International IEC $ Bonds(2)

(NIS bn) 21.5 Outstanding Maturity Coupon 6 Amount ($mn) Jun-23 $650 6.875% 4.5 Nov-24 $1,250 5.000%

4 3.6 Dec-26 $125 7.875% Dec-27 $300 7.750% 2.3 21.3 Aug-28 $1,000 4.250% 2.0 2.1 Mar-30 $40 8.940% 2 3.5 Dec-96 $125 8.100% 2.2 1.9 2.0

0 0.1 0.1 0.1 0.2 First year Second year Third year Forth year Fifth year and thereafter Loans from local and foreign banks Local bonds, private bonds and non-bank loans Debt by Currency(3) Type of Instrument(3) Interest Rate Exposure(3) Debt by linkage(3) NIS non- Local public Floating linked bonds 8.8% USD 13.9% Other 30.2% 38.7% 5.4% Foreign bank loans 3.7% Private Foreign currency Euro bonds and 46.0% 2.0% Local bank non-bank loans loans Fixed NIS CPI NIS 4.3% 61.8% 91.2% linked 54.0% 40.1%

Note: The “fifth year and thereafter” blue bar is off the chart. Source: 1) IEC immediate report on the Corporate Liabilities Status. 2) IEC Financial data and Bloomberg. 3) IEC Financial data, IEC immediate report on the Corporate Liabilities.

Investor Relations 26 Income Statement (NIS millions)

(NIS millions) For the period: 12/31/2019 03/31/2019 03/31/2020 Revenues 24,660 6,026 6,353 Cost of operating the electricity system Fuels 8,302 2,277 1,670 Purchases of electricity 4,193 868 1,141 Operation of the generation system 4,352 1,114 1,019 Operation of the transmission and distribution system and others 2,524 651 733 Total costs 19,371 4,910 4,563 Profit from operating the electricity system 5,289 1,116 1,790 Other expenses (revenues), net (2,477) 22 39 Sales and marketing expenses 869 219 226 Administrative and general expenses 638 188 330 Expenses (income) from liabilities to pensioners (39) (15) 2 Reform agreement's results 761 303 28 Profit from current operations 5,537 399 1,165 Financial expenses (income), net 1,368 599 (533) Income (loss) before income taxes 4,169 (200) 1,698 Expenses (income) from taxes on income 917 (43) 393 Income (loss) after income taxes 3,252 (157) 1,305 Company's share of the loss of asociated companies (15) (4) - Income (loss) before regulatory deferral accounts 3,237 (161) 1,305 Movement in regulatory deferral accounts balances, net of tax (1,421) 327 (117)

Profit for the period 1,816 166 1,188

Profit (loss) with respect to cash flow hedging, net of tax (148) (73) 286 Remeasurement of a defined benefit plan, net of tax (1,939) (158) 1,582 Movement in balances of regulatory deferral accounts balances, net of tax 78 72 (173) Other Comprehensive profit (loss) for the period, net of tax (2,009) (159) 1,695

Comprehensive income (loss) for the period (193) 7 2,883

Source: IEC’s Financial Statements for 3M-2020

Investor Relations 27 Balance Sheet (NIS millions)

(NIS millions)

Assets 12/31/2019 03/31/2019 03/31/2020 Liabilities and Equity 12/31/2019 03/31/2019 03/31/2020 Current assets Current liabilities Cash and cash equivalents 3,190 1,607 2,097 Credit from banks and other credit providers 6,110 4,854 5,178 Short term investments 427 386 373 Trade payables 2,127 1,957 1,760 Trade receivables for sales of electricity 4,384 4,678 4,418 Other current liabilities 1,157 1,319 1,189 Other current assets 702 458 914 Customer advances, net of work in progress 440 449 523 Inventory - fuel 671 1,035 521 Provisions 658 691 673 Inventory - stores 151 143 150 Liabillities of disposal groups classified as held for sale 340 364 298 Assets of disposal groups classified as held for sale 1,903 934 1,858 Total current liabilities 10,832 9,634 9,621

Total current assets 11,428 9,241 10,331 Non-current liabilities Debentures 28,469 30,639 27,544 Non-current assets Liabilities to banks 3,887 4,644 2,639 Inventory - fuel 1,753 1,382 1,733 Liabilities with respect to other benefits after employment 6,354 5,693 5,688 termination Long-term receivables 2,315 1,210 2,056 Deferred taxes, net 6,003 5,706 6,897 Investment in associates 19 30 19 Liability to the State of Israel 1,783 1,784 1,776 Assets with respect to benefits after employment 4,825 6,053 6,760 845 758 894 Lease liabilities termination Fixed assets, net 57,620 58,615 57,164 Other liabilities 588 613 547 Intangible assets, net 1,241 1,193 1,206 Total non current liabilities 47,929 49,837 45,985 Total non-current assets 67,773 68,483 68,938 Equity 24,650 24,850 27,533 Credit balances of regulatory deferral accounts and Debit balance of regulatory deferral accounts deferred taxes with respect to regulatory deferral 8,338 8,610 7,766 accounts 4,128 2,013 3,896

Total assets and debit balance of regulatory Total liabilities, equity and credit balance of 87,539 86,334 87,035 87,539 86,334 87,035 deferral accounts regulatory deferral accounts

Source: IEC’s Financial Statements for 3M-2020

Investor Relations 28 Thank you

For questions or additional information, please contact us:

Israel Electric Corp. Investor Relations: [email protected]

29 Appendices

30 IEC has taken significant steps to reduce emissions

Nitrogen Oxides NOX Sulfur Dioxide SO2 Implementing Government policies

 The State of Israel signed the Paris Agreement in 2.0 1.80 -51% 2.0 1.68 -63% 2016 and has significantly limited the usage of coal for electricity generation 1.5 1.5  An emissions reduction project in the larger coal units was executed at a significant cost of NIS 7.1 0.88 1.0 1.0 billion (1) 0.63  Older coal units will be mothballed 0.5 0.5  Newer and larger coal units are expected to be

converted to Natural gas Gram KWh / produced Gram KWh / produced 0.0 0.0 2012 2018 2012 2018  Government target of Israel is to be “coal free” by 2030. Minister of Energy expect target to move forward to 2025 Carbon Dioxide CO2 Particulate Matter PM  IEC is financially protected from change in fuel mix by the electricity tariff -20% 800 754 0.06 0.056 -43% 605 600 0.032 400 0.03

200 Gram KWh / produced 0 Gram KWh / produced 0.00 2012 2018 2012 2018

Source: IEC Environmental report for the years 2017 – 2018 and IEC Financial Statements for 2019FY 1) The emissions reduction cost does not include interest during the construction period

Investor Relations 31 The Reform in the Generation Segment (Selected generation sites)

Hagit: will be sold units with a capacity of 660 megawatts

Steam - dual purpose: coal and fuel oil

Steam - dual purpose: natural gas and fuel / diesel oil

Gas turbine (internal combustion)

Combined cycle (internal combustion and steam) A power station planned to be sold during the reform A power station which was sold during the reform

Source: IEC ‘s Financial Statements for 2019FY and for 3M-2020 Note: 1. In accordance with the IEC’s undertakings adopted by the IEC's BOD on May 10, 2018, to the extent that the Government resolutions and/or the legislative amendments and/or the administrative decisions and/or the arrangements of the Electricity Authority and/or the aforesaid licenses given by the State of Israel, that will correspond to the (insofar as these are needed according to the State of Israel position), or that the collective agreement IEC and the employees representatives will not be in force, then all IEC’s undertakings, according to the IEC’s undertaking document, will not be in force and the State of Israel will not be able to file claims and/or complain against IEC with respect to those undertakings. On June 3, 2018, the required Government Decision was received, on July 19, 2018 the Knesset approved the Amendment to the Law, and on May 17, 2018, the Principles of the policy of the Minister and the Electricity Authority’s Regulation as aforesaid were published. In addition, on November 4, 2018, the Collective Agreement came into effect after all the contingent conditions detailed therein were fulfilled. For the purpose of implementing the full structural change outline, it will be required the approval of the regulatory agencies, decisions and regulations of the Electricity Authority and granting licenses which, as of this date, have not yet been received and there is no certainty regarding the date of determining the agreements or the granting of such licenses and their final terms. As of this date, IEC is unable to reliable estimate the exact implications of the additional regulations and approvals that have not yet been formulated or received on its financial position and results.

Investor Relations 32 Environment, sustainability and corporate governance (ESG) (1)

Ethical Aspects of Business Conduct

 A published code of ethics adapted to IEC’s fields of Employee health, Corporate operations  Organizational culture that Wellbeing and respects employee rights  Implementation of Corporate  Reference to ethical working relations Governance Governance Code aspects with stakeholders  Promotion of health and  Effectiveness of the work of  Internal communications ensuring worker safety the Board of Directors policy on ethics issues  Retention and development  Prevention of conflicts of of human resources interests, corruption and  Work-life balance and embezzlement fostering an open culture

 Diversified and  Engagements mainly through public tenders or humanitarian employment other competitive procedures. Setting fair rules Diversity &  Diversified employees in and providing equal opportunity to suppliers Responsible Inclusion managerial positions  Improving dialogue and deepening cooperation Supply Chain  Women in managerial roles with Israeli industrial enterprises  Accessibility for people with  Securing subcontracted workers' payment terms disabilities and conditions  Diversity of suppliers  Social activity policy  Environmental violations  Promotion of regular and screening one-off volunteering by  Environmental policy & workers and pensioners management system in the community  Measurement and setting objectives: air, energy, waste, water and sewage Employee Environment Volunteering

IEC earned the highest ranking in the Maala(2) 2019 Index: Platinum+ (for the fifth consecutive year)

1) Source: IEC's Corporate Sustainability Report for 2018, Maala's rating for IEC for 2019. 2) Maala is the non-profit CSR standards-setting organization in Israel who serves the needs of some 110 members, comprised of Israel’s large and mid-size companies, committed to excellence in corporate citizenship. The criteria in the rankings are determined by an independent public committee composed of content experts, academics, heads of social environmental organizations and representatives of the business sector.

Investor Relations 33 Sources of Natural Gas in Israeli Waters

As of this date, Tamar & Leviathan reservoirs are the only active sites

Introduction of LNG by a regasification ship

34 Tariff Comparison to European Countries

Average Price per KWh(1)

(€ cents equivalent)

21.3 19.5 20

15.8 15.1 15 14.3 13.6 13.5 13.2 13.2 13.2 12.6 12.6 12.6 12.0 11.9 11.8 11.5 11.4 11.2 10.4 10.3 10.3 10.3 9.7 9.5 10 8.7 8.6 8.4 8.0

Hungary Ireland Belgium Cyprus United Kingdom Italy Netherlands Austria Spain Germany Sweden Norway France Czechia Finland Greece Israel(January 2020) Slovenia Latvia Portugal Denmark Croatia Estonia Romania Slovakia Lithuania Poland Turkey Bulgaria

Source: Eurostat, Electricity prices for domestic consumers – bi-annual data, as of 04/28/2020. Israel rate is based on the last tariff update that does not include VAT (01/01/2020) and converted EUR/NIS exchange rate of 3.79 as of 04/28/2020. 1) Average national price in Euro per kWh without taxes for medium size household consumers (annual consumption between 2,500 and 5,000 kWh).

Investor Relations 35