#1AN חברת החשמל Israel Electric Investor Presentation Israel Electric Corp. Business update as of 12/31/2020 April 2021#2Disclaimer חברת החשמל Israel Electric 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#3Agenda 1 Executive Summary 2 Operational Overview 3 Israeli Electricity Sector 4 Financial Overview 5 Sustainability Overview Investor Relations 3 חברת החשמל Israel Electric#4Executive Summary חברת החשמל Israel Electric#5Israel Electric Corp. at a Glance • חברת החשמל Israel Electric Established in 1923, 98 years of operation, the Israel Electric Corporation Limited ("IEC") is the 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 Power Grid IEC had total assets of NIS 86.9 billion and 11,483 employees as of December 31, 2020 • As of December 31, 2020, IEC served 2.9 million residential, commercial, agricultural and industrial customers throughout the State of Israel, including East Jerusalem and the Palestinian Authority (PA) Total electricity sales of 51,991 GWh for the year ended December 31, 2020 Generation (1) 11.6 GW Installed capacity 15 Power stations Transmission (1) 5,715 km High and ultra-high voltage transmission grid 220 (2) Switching stations & sub-stations Distribution (1) 68,344 km Medium and low voltage lines 2.9 mn Customers 2020FY Key Financials Revenues NIS 23.8 billion $7.4 EBITDA NIS 7.5 billion $2.3 Source: IEC Financial Statements for 2020FY 1) As of December 31, 2020 2) 60 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 3.22 as of December 31, 2020. Investor Relations 5 400 kV lines 161 kV lines Steam (dual purpose) Gas turbine (internal combustion) / Combined-cycle (internal combustion and steam) Credit Ratings as of March 11, 2021 State of Israel (3) A1 / AA / A+ Stable/Stable / Stable (Moody's/S&P/Fitch) IEC Global Baa2/ BBB Positive/Stable (Moody's/S&P) IEC Local Aa1 / AA+ Stable / Stable (Midroog / Maalot S&P)#6Israel - a Modern Economy Key Figures 22,072 km² 9.3 million Area Population (February 2021) GDP (2020) GDP per Capita (2020) Avg. GDP Growth (2014-2020) Unemployment (February 2021) NIS 1.3 trillion $407 bn NIS 140,985 $43,784 2.4% 5.1% חברת החשמל Israel Electric Sep 2011 S&P upgrades Israel Rating History (1) Aug 2018 S&P upgrades Israel to AA- Israel to A+ Aa3 / AA- A1 / A+ A2/A Nov 2016 Fitch upgrades Foreign Currency LT Debt Ratings (Moody's / S&P / Fitch) (1) Israel to A+ A1 / AA- / A+ 2011 2014 2017 Moody's S&P 2020 Fitch Israel Public Debt to GDP (2) Inflation Environment (% of GDP) (YoY Inflation %) 0.7% 80 5.0% Average inflation in the last decade 1%-3% Government Inflation Target 73.1 4.0% 75 3.0%- 70 65.8 2.0% 63.7 65 62.1 0.8% 60.5 61.0 60.0 1.0% 0.6% -0.4%- 60 0.0% -0.2% 55 -1.0% -0.2% -0.7% -1.0% 50 -2.0% 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020 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 3.22 as of December 31, 2020. Investor Relations#7Key Investment Highlights חברת החשמל Israel Electric Essential Service Provider Natural Gas Fuel Independence IEC is an essential service provider of electricity in Israel and the sole vertically integrated provider in the electricity chain ⚫ Natural gas from Tamar, Leviathan and other significant natural gas discoveries in Israel have paved the way towards potential fuel independence Owned by the State of Israel Appx. 99.85% owned by the State of Israel (A1/AA-/A+) AN חברת החשמל Israel Electric Rated investment grade by both S&P (BBB) and Moody's (Baa2) IEC total liquidity (1) of NIS 6.5 bn as of December 31, 2020 Robust Growth in Electricity Demand Strong electricity demand growth in the Israeli market • Tariff is based on costs and return on equity ⚫ Set by the Electricity Authority Fully Regulated Across all Segments Continuous improvement of efficiency & reliability ⚫IEC has over 98 years of experience in developing and managing the electricity sector in Israel Financial Robustness 1) Source: IEC Financial Statements for 2020FY. IEC defines "Liquidity" as cash and equivalents, short term investments and available credit facilities. Investor Relations 7 Efficiency and Reliability#8Key Strategic Targets Investor Relations Israel's Electricity Supplier Continuing to guarantee reliability of the electricity supply and maintaining adequate electricity reserves 1515 חברת החשמל Israel Electric Diversified Fuel Mix Using a diverse mix of fuel while reducing costs and reducing environmental impact Targeting natural gas as main fuel source Financial Robustness Maintaining the financial robustness of IEC through meeting key financial targets Maintaining an adequate liquidity cushion 8 חברת החשמל Israel Electric#9IEC's COVID-19 Implications Investments חברת החשמל Israel Electric Supply Chain Security The fuel supply to IEC was not affected by the COVID-19 restrictions There were no significant delays in the investments in the transmission and distribution segments, nor to the investment in the combined cycle at Orot Rabin site CXVID-19 Continuity of service & operations IEC was prepared in advance, in accordance with the requirements of the Israeli law, for business continuity during the crisis period and entered this challenging period with pre-defined work processes, in order to protect employees as well as ensuring energy supply and maintenance activities Cash Management & Finance Maintaining sufficient liquidity above the BoD's goals ("safety cushion") including a Long- term fundraising in May 2020 In cooperation with the State authorities, several steps have been taken to provide reliefs for the electricity consumers such as the possibility of delaying the payment of electricity bills and support was provided to some vendors Executive Branch of the State Source IEC 's Financial Statements for 2020FY Investor Relations 6#1010 חברת החשמל Israel Electric Operational Overview#11Historical Performance Comparison of Key Metrics IEC Revenues חברת החשמל Israel Electric NIS % bn 12/31/2010 12/31/2020 Change $7.1 $5.9 $6.7 $6.3 $7.4 24.7 Population (mn) (2) 7.7 9.3 20.8% 23.4 23.6 23.8 22.7 Number of 20 2.5 2.9 16.0% 20 Customers (mn) Electricity Sales 51,977 51,991 0% (GWh) 10 National Peak Demand (MW) 11,530 14,620 26.8% IEC Installed Capacity (MW) 12,987 11,615 (10.6%) 0 2016 2017 2018 2019 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-2020FY, IEC Statistical Report for 2010FY. 2) The Israeli Central Bureau of Statistics. Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46 & 3.22 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY & 2020FY, respectively. Investor Relations 11#12Israel Generation Capacity and Demand חברת החשמל Israel Electric Israel Generation Capacity and Demand (MW) 20,000 19,711 18,923 17,762 17,972 2,335 2,023 946 1,303 17,000 3,199 3,334 4,148 14,620 14,000 13,568 12,746 12,921 5,761 11,000 13,617 13,335 12,752 8,000 11,615 5,000 2017 IEC's Installed Generating Capacity Source: IEC's Financial Statements (2016FY-2020FY) 1) Installed Generation Capacity of Independent Power Producers ("IPPS") Investor Relations 2018 2019 2020 (1) (1) Gas Fired IPPS Renewable Energy IPPS National Peak Demand 12#13Demand for Electricity (MW) חברת החשמל Israel Electric National Electricity Peak Demand & Total Electricity Produced in the Entire Sector (TWh) Trends 14,000 12,000 3.1% Average Annual Growth Rate 75 The demand for electricity in 70 10,000 7.6% Average Annual Growth Rate 8,000 6,000 4,000 2,000 1990 1992 Israel is growing at a fast and steady pace 65 ■Demand is driven by both 60 population growth and the 73 73 increase in electricity 65 67 68 70 55 64 58 60 62 61 ■ IEC's 50 -Multiplied by 3.8 in 30 years - 54_54_53 45 consumption per household demand which is used for long term planning of the generation segment, anticipates an forecast, 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Total Electricity Produced in the Sector National Electricity Peak Demand Seasonality in Electricity Demand - Average Consumption of Households 40 average annual increase of 3.0% in peak demand in the years 2021 to 2050 (kWh) 1,000 800 600 400 200 0 Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- 2015 2015 2015 2015 2016 2016 2016 2016 2017 Q2- 2017 2017 2017 2018 2018 ■ Base ■Heating Cooling Q3- Q4- Q1- Q2- Q3- 2018 Q4- Q1- Q2- Q3- Q4- 2018 2019 2019 2019 2019 Q1- Q2- Q3- Q4- 2020 2020 2020 2020 Source: IEC's Annual Financial Statements (1990FY-2020FY), IEC's Statistical data. Investor Relations 13#14The IEC Electricity Chain Generation 52 Generation Units in 15 Power Stations Transmission 11 Switching Stations 5,715 km Ultra-High & High Voltage lines 209 Substations (1) Source: IEC Financial Statements for 2020FY Notes 1) 60 substations are privately owned. Investor Relations 14 חברת החשמל Israel Electric 29,223 km Medium Voltage Lines Distribution 39,121 km Low Voltage Lines 2.9 Million Customers L#15The IEC Generation Segment 15 Power stations sites Electricity Generation Sites (1) Eshkol 7 units 1,693 MW Rutenberg 11,615 Megawatts of generation Orot Rabin (2) 7 units 2,605 MW חברת החשמל Israel Electric Fuel Mix by Electricity Generated (4) January 1 - December 31, 2020 Steam (dual purpose) - January 1 December 31, 2019 Gas turbine (internal 4 units/828 MW Haifa combustion) / Combined-cycle and steam) (internal combustion Natural gas & LNG 53.1% Natural gas Coal 45.8% & LNG 56.9% Coal 42.7% 6 units 2,290 MW Hagit 4 units 1,394 MW Gezer 6 units 1,336 MW IEC Generation Facilities Mainly powered by coal - Mainly powered by gas Diesel oil & Fuel oil 1.1% Diesel oil & Fuel oil 0.4% No. of units Installed 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) 9 914 Gas turbine (internal combustion) (jet engine) Combined cycle (internal combustion and steam) Total 16 504 11 52 4,017 11,615 Source: IEC's Financial Statements for 2020FY 1) As of December 31, 2020 2) 3) 4) Units 1-4 at the Orot Rabin Power Station will be transferred to preservation by June 1, 2022. Please see the decision of the Minister of Energy relative to the preservation of units 1-4 of February 8, 2021 published on the EA website 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. As of December 31, 2020, 22.1% of IEC revenues are associated with IEC's coal fired units located in 2 sites. Investor Relations 15#16The IEC Transmission and Distribution Segments (1) חברת החשמל Israel Electric Transmission Transformation System 11 Switching stations 149 Substations 60 Total Electricity Consumption by Customer Type Distribution (kWh) Power Lines Water pumping 4% Agriculture 2% 778 km 400 kV lines 4,896 km 161 kV line (includes underground lines) 42 km Private substations 115 kV lines 68,344 km Medium and low voltage lines 52,050 Distribution Transformers 2.9 mn Customers Public, commercial, East-Jerusalem & Palestinaian Authority 37% Residential 41% Industrial 16% Diversified Customer Base Source: IEC's Financial Statements for 2020FY Notes 1) As of December 31, 2020 Investor Relations 16#17IEC's Human Capital IEC's employees' 13,000 12,754 12,500 12,000 11,500 12,371 Streamlining of IEC's Workforce A decrease of 1,271 employees (appx. 10%) of IEC's workforce 11,908 11,902 חברת החשמל Israel Electric 11,476 11,483 11,391 11,000 2014 2015 2016 2017 2018 2019 2020 As part of the reform in the electricity sector, an efficiency program is resuming for the years 2021-2025 Source: IEC's Financial Statements for 2014FY-2020FY Investor Relations 17#18The Sector Reform Main points of the reform (1) חברת החשמל Israel Electric Organizational change, efficiency plan and administrative flexibility Essential service provider in the transmission and distribution segments Opening the supply segment market to competition from other entities Transfer of the system Management and additional units to a separate Government company Sale of generation sites and increased competition in the generation segment Value added services, installation of smart meters, construction and operation of storage facilities Source IEC 's Financial Statements for 2020FY 2 Strengthening the financial stability of IEC Compliance with financial targets Assets arrangement Construction & operation of two combined cycle gas turbines at the 'Orot Rabin' site (2) Notes: 1. 2. 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. Except of the above, IEC or its generation subsidiary will not construct, replace, operate, plan, strengthen or engage in development of power stations in Israel, whether by itself or as a contractor for a third party, nor will it engage in electricity generation, including in the framework of micro-generation or renewable energies in Israel, during the years of the reform and afterwards. IEC has undertaken to the State of Israel not to act to obtain new generation licenses or to construct new electricity generation stations and replace existing stations, and not to act to obtain permits for the operation of power stations for other parties in Israel. Investor Relations 18#19חברת החשמל Israel Electric Possession transferring under an agreement to be signed The Sector Reform Timeline (1) Done Prepared for vacant possession Gov' Decision on Reform Sale of 'Alon Tavor' site Sale of the land of 'project D' (2) Separation of the System T=57 T=60 06/03/23 Gradual assessments and opening of the supply segment for competition 12/03/21 07/31/21 06/03/21 In Process Management & PDT which was completed on 12/03/2020 (3) Done Submitting a plan in Reading site before depositing for two new CCGT Done Sale of 'Ramat Hovav' site In Process In Process In Process In Process Sale of 'Reading' site (4) Construction of the first combined cycle H (unit 70) at Orot Rabin' site Construction of the second combined cycle H (unit 80) at Orot Rabin' site Sale of 'Hagit' site(5) Sale of "Eshkol" site In Process In Process Re-examination of the supply segment T=0 T=18 T=22 T=30 T=36 T=38 T=42 12/03/20 T=48 06/03/22 03/03/23 Changes in the schedules set in the electricity market reform agreement 12/03/19 03/31/20 12/03/24 Source IEC 's Financial Statements for 2020FY Notes: 1. 2. 3. 4. 5. 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. Part of the area at the Rutenberg power station (that was designated in the past for Project which did not carry out) will be transferred pursuant to the assets arrangement agreement as defined in Note 1f in the FY2020 Financial Statements. As for now, the stage of evacuation of the infrastructure, fencing and preparing part of the area intended for delivery to the Israel Land Authority (ILA), in accordance with the reform outline, was completed. The remaining area evacuation and its delivery is awaiting the completion of examinations by the ILA regarding the economic potential of the after-sale area and to its decision. Transfer of the area in practice to the State through the ILA has not been carried out, notice that the Ministry of Energy, the EA and the ILA are expected to make decisions regarding how the area will be transferred, notice for the future use intended for the area, and some other ILA's decisions are required on the evacuation of infrastructure facilities from the site and the financing format of evacuation costs eligible for the company. Then, a suitable agreement between the Company and the State will be signed, for the purpose of transferring the area, in accordance with the decisions which been made, as aforesaid. The implementation date of the transfer and separation the system management activity to the responsibility of the System Management Company (SMC), which originally set for December 3, 2019, was postponed by the relevant bodies and regulators until June 3, 2020 and then postponed again to December 3, 2020. On June 17, 2020, the Electricity Authority decided to grant a license to the SMC, which was approved on June 25, 2020 by the Minister of Energy, and in accordance with its terms, the system management activity will enter into force as soon as possible, and no later than December 3, 2020, subject to the approval of the Authority and the Minister of Energy that the SMC is prepared to commence operation of the activity. Due to additional delays, a framework was formulated of transferring the system management activities from the company to the SMC in a graduated manner, so that in the first stage the activities of the Planning Development Technology Division (PDT) and some of the activities of Statistics and Market Research Department will be transferred from the company to SMC, subject to the amendment of the special collective agreement (reform and structural and organizational change), and the receipt of approvals from the Electricity Authority and the Minister of Energy regarding the company's readiness for partial activity. On December 1, 2020 the transfer of the activities of the Planning Development Technology Division and the Statistics and Market Research Department from the Company to SMC has been completed, after given the approval of the Electricity Authority and the Minister of Energy indicating the readiness of SMC for the start of the partial operation, the amendment of SMC's license was approved, accordingly, by the Minister of Energy and a correcting collective agreement was signed. In addition, a decision to postpone the date for the beginning of operation of SMC for an additional six months (i.e. until June 3, 2021). For further details, please see Note 1e to the 2020FY Financial Statements. On January 10, 2021, the Company appealed to the Ministry of Energy and the EA in order to extent of the production licenses on the site of Reading and also applied for the postponement of the site sale. As of this date, the issue of Reading's sale was brought to the attention of the relevant parties in Israel and no decisions have yet been made regarding the future of the site, which include, among other things, the site's promotional format, the creation regulation that supports this process and the various alternatives to ensure a regular power supply to the Tel-Aviv metropolitan area and at the same time, it is necessary to promote the relevant legislation in the context of the issue of asbestos removal and to adjust the operating dates of the power station. In light of the above, there is no certainty regarding the possibility of the sale of the Reading site on time. On February 11, 2021, the Electricity Authority published a hearing of the production units regulation in Hagit site after their future sale by the Company. For further details, see Note 3 in the 2020FY Financial Statements. 06/03/18 Investor Relations 19#20חברת החשמל Israel Electric Israeli Electricity Sector 20 20#21The Israeli Electricity Sector IEC's Main Regulators The Electricity Authority (EA) Government Companies Authority (GCA) • • Antitrust Authority • Israel Securities Authority • Ministry of Energy • Ministry of Finance • Ministry of Interior • Ministry of Environmental Protection (MOEP) • The Concentration Committee TASE Generation חברת החשמל Israel Electric IEC's Fuel Suppliers Natural Gas Currently from the Tamar & Leviathan Reservoirs. More reservoirs in the Israeli waters have been discovered Liquid Natural Gas - Imported from international suppliers Coal Imported from international suppliers - Generation, Transmission and Distribution Transmission Distribution חברת החשמל Israel Electric IPPS OPCROTEM DORAD • ENERGY Dalia Power Energies.com As of 12/31/2020, 59% of total generating capacity Expected to reach 53.6% by the end of 2021 As of 12/31/2020, 41% of total generating capacity Expected to reach 46.4% by the end of 2021 חברת החשמל Israel Electric Nearly 100% of the Switching Stations and the Ultra-High & High Voltage lines are owned & operated by IEC • 149 of 209 Substations are owned & operated by IEC (as of December 31, 2020) IEC reached 2.9 million customers (as of December 31, 2020) Source IEC's Financial Statements for 2020FY Investor Relations 21#22The Electricity Tariff • Tariff Structure חברת החשמל Israel Electric 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 costs, depreciation costs and financial costs). Some of the recognized costs are also attributed to funding the reform costs + Fair rate of return on equity per segment Electricity Tariff Ongoing Update Actual costs are examined every 2 weeks by the EA (at the time of CPI and fuel prices changes) • Discrepancies between forecasted costs and actual cost are reconciled on the earlier of: ■ A difference of 3.5%, provided that 3 months have passed since the last update ■ A difference of 5.5% Annual Update Once a year, The current year's costs are updated based on forecasts as well as on previous years' reckoning - the gap. between the previous year's forecast components and the actual costs of the previous year Tariff update as of December 29, 2020 On December 29, 2020, the EA issued a resolution regarding the annual 2021 tariff update. According to the EA's decision, the average household electricity tariff and the market electricity tariff will fall by approximately 2.3% and 4.9%, respectively, as of 1/1/21, mainly due to: • The sale of Ramat Hovav Power Station • Decline in the NG and coal prices The above was partially offset by: ■The Annual Update • Increased renewable energy consumption • Entry into force of the excise tax on coal in 2021 Source: IEC's Financial Statements for 2020FY, Electricity Authority's decision No. 59609 on December 27, 2020 - Annual Update 2021 electricity tariff to IEC's consumers Investor Relations 22#23Source: 1. 2. The Electricity Tariff - Cont'd ($/t) 140 120 100 80 60 40 Jan-14 Investor Relations Jan-15 Jan-16 Tariff vs. Coal Price Development(1) Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Coal Average General Tariff Residential Tariff NIS 0.60 0.55 0.50 0.45 0.40 חברת החשמל Israel Electric Structure of the Residential Tariff as Divided into Segments (2) Production and fuel 61% Transmissi on 5% Distributio n 17% Supply 6% System Management tariff 11% World Bank Commodity Price Data (Pink Sheet), March 2021; 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. The Electricity Authority Report on State of Electricity Sector Year of 2019. 23#2424 Financial Overview חברת החשמל Israel Electric#25Financial Highlights Revenues EBITDA (1) חברת החשמל Israel Electric NIS NIS $7.1 bn $5.9 $6.7 $6.3 $7.4 bn 30 12 $2.0 $2.3 $2.1 $2.3 22.7 23.4 23.6 24.7 $2.3 23.8 20 9 7.7 8.1 8.0 7.9 7.5 20 10 0 2016 2017 2018 2019 CO 6 3 0 2020 2016 Historical Investments by segments (CAPEX) 2017 2018 2019 Net Financial Debt/EBITDA (3) 2020 NIS (2) $1.7 bn $1.6 8 5.94 $1.1 $1.0 654321 $0.9 5.10 CO 6 5.3x 5.2x 4.8x 1.8 0.2x 4.4x 3.88 3.73 4.0x 3.49 1.5 4 1.1 1.3 1.3 1.5 1.3 5.1x 5.2x 4.8x 4.4x 0.5 0.7 2 4.0x 0.9 2.9 2.2 1.7 1.8 1.3 0 2016 2017 2018 2019 (2) 2020 2016 ■State guaranteed 2017 2018 2019 2020 ■Net Financial Debt/ EBITDA without State guarantees ■Generation ■Transmission ■System Manager ■Distribution ■Supply Source: IEC's Financial Statements for 2016FY-2020FY 1. 2. 3. IEC defines "EBITDA" as profit (loss) before income taxes, financial expenses, depreciation and amortization. CAPEX also include non-cash adjustments in 2019 in accordance with IFRS 16 (Leases) in the sum of appx, Nis 1.4 billon. 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). Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46 & 3.22 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY & 2020FY, respectively Investor Relations 25#26Historical Cash Flow NIS bn 12 $1.7 $1.9 $2.0 $1.7 $1.5 8 6.5 6.3 5.7 6.5 6.5 6.5 5.8 5.8 5.6 5.6 4 $0.2 0.6 חברת החשמל Israel Electric 0 (1.3) (2.2) (4) (2.7) (2.7) (3.7) (3.1) (3.3) ($0.4) ($0.6) ($0.8) (4.8) ($0.7) ($0.8) ($1.1) ($0.9) (6.3) (8) ($1.4) ($2.0) (12) 2016 2017 2018 2019 2020 (1) (2) Operating activities Investment activities, net Financing activities - Total Liquidity Generating sufficient cash flow from operations enables IEC to decrease debt Source: IEC's Financial Statements for 2016FY-2020FY Investment activities excluding repayment (or deposits) of bank deposits. Total cash from investment activities figures as reported for 2016FY, 2017FY, 2018FY, 2019FY & 2020 FY are NIS (2.8) bn, NIS (2.2) bn, NIS (3.1) bn, NIS (1.3) bn and NIS 0.7 bn, respectively. 1. 2. IEC defines "liquidity" as cash and cash equivalents, short term investments and available credit facilities. Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46 & 3.22 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY & 2020FY, respectively Investor Relations 26#27Net Financial Debt (1) Over Time Prepared According to Government Companies Regulations IFRS NIS, bn $13.9 51.8 $14.4 50.0 $12.0 48 46.9 $11.6 44.6 $11.3 43.2 43 $12.1 42.1 $10.2 38.3 38 $10.4 36.1 33 חברת החשמל Israel Electric $9.3 30.0 28 (2) 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: IEC's Financial Statements for 2012FY-2020FY 1. 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). As from 01/01/2019, "net financial debt" also includes lease liabilities. Denotes USD figures at USD/NIS exchange rate of 3.85, 3.47, 3.75, 3.46 & 3.22 for the end of period of 2016FY, 2017FY, 2018FY, 2019FY & 2020FY, respectively Investor Relations 27#28Consolidated Debt Breakdown as of December 31, 2020 Annual Debt Maturities (Principal in NIS billions)(1) חברת החשמל Israel Electric Profile of International IEC $ Bonds (2) (NIS bn) 6 17.0 4.9 3.6 Maturity Jun-23 Nov-24 Outstanding Amount ($mn) Coupon 650 6.875% 1,250 5.000% Dec-26 125 7.875% 4 Dec-27 300 7.750% 2.7 16.77 2.2 Aug-28 1,000 4.250% 4.74 Mar-30 40 8.940% 2 3.47 Dec-96 125 8.100% 2.51 2.03 0 016 0.16 0.16 First year Second year Third year 0.16 Forth year ■Loans from local and foreign banks Interest Rate Exposure (1) Floating 2.9% ■Local bonds, private bonds and non-bank loans Type of Instrument(1) (3) Local public bonds 35.3% Foreign bank 0.24 Fifth year and thereafter Debt by Currency (1) Debt by Linkage (1) NIS non- linked USD 38.3% Other 5.6% 10.1% Fixed 97.1% loans 2.9% Source: 1) IEC immediate report on the Corporate Liabilities Status, IEC Financial data. 2) IEC Financial data and Bloomberg.. 3) Type of instrument à Sum is 99.9% (rounding driven) Investor Relations Private Euro bonds and 1.5% NIS CPI non-bank linked loans NIS 54.5% 44.4% 61.8% 28 Foreign currency 45.5%#29Income Statement (NIS millions) (NIS millions) חברת החשמל Israel Electric For the years: 12/31/2018 12/31/2019 12/31/2020 Revenues Cost of operating the electricity system Fuels Purchases of electricity 23,584 24,660 23,778 8,540 8,302 6,220 3,591 4,193 5,269 Operation of the generation system 4,375 4,352 4,143 Operation of the transmission and distribution system and others 3,018 2,524 2,849 Total costs 19,524 19,371 18,481 Profit from operating the electricity system 4,060 5,289 5,297 Other expenses (revenues), net 23 (2,477) (2,816) Sales and marketing expenses 935 869 886 Administrative and general expenses Income from liabilities to pensioners Reform agreement and other agreements results Profit (loss) from current operations Financial expenses, net Income (loss) before income taxes Taxes on income Income (loss) after income taxes Company's share of the loss of asociated companies 734 638 971 (100) (39) (24) 4,249 761 708 (1,781) 5,537 5,572 1,792 1,368 511 (946) 4,169 5,061 (597) 917 1,189 (349) 3,252 3,872 (5) (15) (6) Income (loss) before regulatory deferral accounts (354) 3,237 3,866 Movement in regulatory deferral accounts balances, net of tax 4,424 (1,421) (2,163) Profit for the year 4,070 1,816 1,703 Profit (loss) with respect to cash flow hedging, net of tax 123 (148) 147 Remeasurement of a defined benefit plan, net of tax (143) (1,939) 486 Movement in balances of regulatory deferral accounts balances, net of tax Other Comprehensive profit (loss) for the year, net of tax 78 (58) (20) (2,009) 575 Comprehensive income (loss) for the period 4,050 (193) 2,278 Source: IEC's Financial Statements for 2020FY Investor Relations 29#30Balance Sheet (NIS millions) חברת החשמל Israel Electric (NIS millions) Assets Current assets 12/31/2019 12/31/2020 Liabilities and Equity 12/31/2019 12/31/2020 Current liabilities Cash and cash equivalents 3,190 4,107 Credit from banks and other credit providers 6,110 3,831 Short term investments 427 358 Trade payables 2,127 2,453 Trade receivables for sales of electricity 4,384 4,600 Other current liabilities 1,157 1,391 Other current assets 702 651 Customer advances, net of work in progress 440 568 Inventory - fuel 671 584 Provisions 658 665 Inventory stores - 151 142 Liabilities of disposal groups classified as held for sale 340 142 Assets of disposal groups classified as held for sale 1,903 111 Total current liabilities 10,832 9,050 Total current assets 11,428 10,553 Non-current liabilities Debentures 28,469 25,817 Non-current assets Liabilities to banks 3,887 3,278 Inventory - fuel 1,753 1,742 Liabilities with respect to other benefits after employment 6,354 6,676 termination Long-term receivables 2,315 1,852 Deferred taxes, net 6,003 6,524 Investment in associates 19 13 Liability to the State of Israel 1,783 1,762 Assets with respect to benefits after employment 4,825 6,552 845 709 Lease liabilities termination Fixed assets, net 57,620 58,028 Other liabilities 588 557 Intangible assets, net 1,241 1,217 Total non current liabilities 47,929 45,323 Total non-current assets 67,773 69,404 Equity 24,650 26,728 Debit balance of regulatory deferral accounts 8,338 6,935 Credit balances of regulatory deferral accounts and deferred taxes with respect to regulatory deferral accounts 4,128 5,791 Total assets and debit balance of regulatory deferral accounts 87,539 86,892 Total liabilities, equity and credit balance of regulatory deferral accounts 87,539 86,892 Source: IEC's Financial Statements for 2020FY Investor Relations 30#3131 חברת החשמל Israel Electric Sustainability Overview#32Environment, sustainability and corporate governance (ESG) (1) Corporate Governance Diversity & Inclusion Implementation of Corporate Governance Code • Effectiveness of the work of the Board of Directors policy Prevention of conflicts of interests, corruption and embezzlement Diversified and humanitarian employment Diversified employees in managerial positions Women in managerial roles Accessibility for people with disabilities Social activity policy Promotion of regular and one-off volunteering by workers and pensioners in the community Ethical Aspects of Business Conduct A published code of ethics adapted to IEC's fields of operations Reference to ethical aspects with stakeholders Internal communications on ethics issues AN חברת החשמל Israel Electric Environmental violations screening Environmental policy & management system Measurement and setting Organizational culture that respects employee rights Promotion of health and ensuring worker safety Retention and development of human resources Work-life balance and fostering an open culture Employee health, Wellbeing and working relations Engagements mainly through public tenders or other competitive procedures. Setting fair rules and providing equal opportunity to suppliers Improving dialogue and deepening cooperation with Israeli industrial enterprises ⚫ Securing subcontracted workers' payment terms and conditions Diversity of suppliers objectives: air, energy, waste, water and sewage חברת החשמל Israel Electric Responsible Supply Chain Employee Volunteering Environment + IEC earned the highest ranking in the Maala (2) 2020 Index: Platinum * (for the sixth consecutive year) 1) Source: IEC's Corporate Sustainability Report for 2018, Maala's rating for IEC for 2020. 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 32#33Gram / KWh produced IEC has taken significant steps to reduce emissions Gram/KWh produced Nitrogen Oxides NOX 2.0 1.80 -58% 1.5 1.0 0.5 0.75 0.0 2012 2020 Carbon Dioxide CO2 754 -18% 800 615 600 400 200 O 2012 2020 Gram / KWh produced Gram / KWh produced חברת החשמל Israel Electric Sulfur Dioxide SO2 2.0 1.68 -76% 1.5 1.0 0.5 T 0.41 0.0 2012 2020 Particulate Matter PM 0.06 0.056 -46% Implementing Government policies ■The State of Israel signed the Paris Agreement in 2016 and has significantly limited the usage of coal for electricity generation ■ An emissions reduction project in the larger coal units was executed at a significant cost of NIS 7.1 billion (1) ■ Older coal units will be mothballed following the Israeli Energy Minister on 2/8/2021 ■ Newer and larger coal units are expected to be converted to Natural gas ■ Government target of Israel is to be "coal free" by 2030. Minister of Energy expect target to move forward to 2025 ■ IEC is financially protected from change in fuel mix by the electricity tariff 0.03 0.030 0.00 2012 2020 Source: IEC Environmental report for the year 2020 and IEC Financial Statements for 2020FY 1) The emissions reduction cost does not include interest during the construction period Investor Relations 33#34The Israeli Electricity Sector Fuel Mix חברת החשמל Israel Electric (TWH) 100 Electricity Market Fuel Mix (IEC & IPP) 84.9 80 11.3 72.5 73.2 68.3 69.6 65.5 65.7 3.3 5.6 63.4 61.5 1.8 2.0 61.4 59.8 1.3 0.3 58.4 60 0.2 1.5 0.9 0.9 2.6 9.3 50.1 22.8 21.0 27.1 10.8 30.4 34.4 41.1 43.2 46.3 46.1 70.8 40 20 38.7 34.2 35.1 32.1 30.1 29.2 24.2 22.0 20.6 21.9 17.5 2.8 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2025* ■ Coal Natrual Gas Diesel Fuel ■ Other Renewable Energy The Israeli Electricity Sector is expected to be "coal free" by 2030 (target could move forward to 2025) Source: The Electricity Authority - Report on State of Electricity Sector Year of 2019. * The Electricity Authority Forecast Investor Relations 34#35Thank you For questions or additional information, please contact us: Israel Electric Corp. Investor Relations: [email protected] Investor Relations 35 חברת החשמל Israel Electric#3636 Appendices חברת החשמל Israel Electric#37The Reform in the Generation Segment (Selected generation sites) חברת החשמל Israel Electric Eilat 92 Haifa 828 Eshkol 1,693 Orot Rabin 2,605 Reading 428 Gezer 1,336 Alon Tavor 583 Caesarea 130 Hagit 1,394 Rothenberg 2,290 Tzafit 583 Hagit: will be sold units with a capacity of 660 megawatts Ramat Hovav 1,137 The numerical figures are in MW - 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 2020FY 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 37#38The Israeli Electricity Sector Structure 2019 System Administrator Supply Distribution Transmission Generation Capacity System Administrator Supply Distribution Transmission 2025* חברת החשמל Israel Electric Generation Capacity 0% 20% 40% 60% 80% 100% IEC 0% 20% 40% 60% 80% 100% IEC ■IPP ■Historical Distributers IPP Historical Distributers A new government company In light of reform in the electricity market, an independent government company established to manage the system. The share of IEC in the generation segment will be reduced and the supply segment shall be open to competition. IEC will focus its activity in the T & D segments. The transmission activity and most of the distribution activity shall remain in IEC as Essential Service Provider Source: The Electricity Authority - Report on State of Electricity Sector Year of 2019. * The Electricity Authority Forecast Investor Relations 38#39Sources of Natural Gas in Israeli Waters Investor Relations Block 12 (Aphrodite) Introduction of LNG by a regasification ship As of this date, Tamar & Leviathan reservoirs are the only active sites Karish Tanin Leviathan Tamar Ruth Plagik Dolphin Dalit Haifa Neta & Roie Daniel Shimshon El Arish Avia Kerea Tel Aviv Hadera Gezer Hagit Alon Te Noa Mari Ashdod Zafit Jerualem Ashqelon Mary B Egypt 0 10 20 30 40 50 39 Ramat Hovay Rotem Sdom חברת החשמל Israel Electric#40Tariff Comparison to European Countries חברת החשמל Israel Electric (€ cents equivalent) 25 20 20 20.4 18.0 15 10 5 Average Price per KWh (1) 15.3 14.5 13.8 13.7 13.3 12.9 12.8 12.8 12.6 12.1 11.8 11.8 11.4 11.1 11.1 0 Finland Cyprus Spain 10.4 10.3 10.2 10.1 9.7 9.5 9.5 9.3 9.1 Croatia Latvia Sweden Romania Slovakia Israel (January 2021) Portugal Slovenia 8.2 7.9 6.6 Turkey Hungary Bulgaria Denmark Norway Estonial Poland Lithuania Source: Eurostat, Electricity prices for domestic consumers - bi-annual data, as of 04/09/2021. Israel rate is based on the last tariff update that does not include VAT (01/01/2021) and converted EUR/NIS exchange rate of 3.91 as of 04/09/2021. 1) Average national price in Euro per kWh without taxes for medium size household consumers (annual consumption between 2,500 and 5,000 kWh). Greece Czechia France Italy Netherlands Austria Germany United Kingdom Belgium Ireland Investor Relations