September 2013

COMPANY PROFILE OF

BackgroundChange is Opportunity.

The bigger the change – the bigger the opportunity.Penetrating new markets/fields becomes easier during change.

The change induced by Yam – Tethys off-shore NG discovery has generated an opportunity for private power generation.

Sigma Epsilon was established to take advantage of this opportunity and to play a key role in a privatized Israeli power generation market by:

First: became a player through IPP and Co-Generation projects.Then: use the position gained for winning part of IEC during the privatization process joining forces with a strong strategic partner like: E-On, Suez, EDF. Sigma’s STRATEGIC GOAL IS A KEY ROLE IN A PRIVATIZED ISRAELI POWER GENERATION MARKET, DALIA project is just an interim goal, MEANS TO THIS END.

The change induced by TAMAR and LEVIATHAN MEGA DISCOVERIES have generated opportunities related to Natural Gas utilization and export.

Sigma Epsilon has an agency agreement with Linde for NG technologies.Sigma and Linde promote jointly:

Decentralized strategic/operational LNG storages.LNG in Eilat (EAPC – INGL).Small LG plant for industry and transportation.

Strengths Sigma Epsilon is a PROFESSIONAL – ENTREPRENEURIAL company, a rare combinations enabling:

Creative entrepreneurship Superior projects based on innovative solutions and calculated risk.

Sigma epsilon represents a combination of secured future cash flow based on mature projects and very high growth potential through promising new initiatives.

Sigma Epsilon LTDSigma Epsilon Power Engineering Ltd. was founded about 9 years ago, by Dr. Eli Barnea (former CEO of Bateman Engineering), Moshe Lasry (former Deputy CEO and chief engineer of IEC) & Yigal Porat (former head of R&D division of IEC), with the intention to seize business opportunities arising out of the then pronounced Government of Israel (GOI) privatization policy of the power energy industry, and availability of Natural Gas in Israel.

Dr. Eli BarneaA Chemical Engineer. CEO of Bateman Engineering during 1991-2002. under his direction the company specialized in projects of NG treatment and compression and executed three such projects totaling about - $200 M each in Russia, Turkmenistan, and Uzbekistan. The projects were carried out on the basis of EPC - LSTK including organization of ECA funding with much innovation e.g. First co-finance of USEXIM with Czech EGAP and Israel’s Basasach.

Moshe Lasry Mechanical Engineer with 28 years of experience in IEC , reached the position of No. 2 in the Company (chief engineer). Among his activities in IEC he was involved and responsible for the design of the most power plants in Israel: coal, gas turbines and combined cycles. After retiring from the IEC he managed for Delek Infrastructures the construction of the first IPP project in Israel based on gas turbines operated on natural gas: 87 MW – IPP Delek Ashkelon.

Yigal PoratAn electrical engineer with 32 years experience in the IEC , was the Head of Research and Development Division. He was responsible for long-term planning and development of the generation and transmission systems of IEC including examination of new technologies such as nuclear power ,pumped storage, renewable energy such as solar and wind energies. After retiring from IEC he consulted for several years to the public Utility Authority – Electricity, to the Ministry of Environmental Protection and to the Ministry of National Infrastructures on various topics including long term planning and development of the generation and transmission systems pumped storage, renewables and innovative technologies such as IGCC.

Samir KhouryA Mechanical Engineer, Entrepreneur, and Businessman with 36 years experience of management, designing, and construction projects in process production industrial projects in Israel and abroad. He is owner and CEO of SK Engineering & projects, SK Energy, and SK Watertech. Samir has established the first own company SK Engineering & Projects in 1994. See website:- www.sk-engpeo.com. Head of Engineering Department of Urdan Company during 1986-1993, Mechanical Designner in Bateman Company during 1982-1985.

The Project Project details Established Current holdings (concatenated)

Project value (in million USD)

Dalia Power Engineering

Group

870 MW (2×435 MW) combined cycle gas turbine power plant

at Zafit North

2005 16.4%Through Hiram Epsilon

SE. Int.Energ Group~1,000

IPP Delek R.Gavriel

70MW cogeneration power plant at Nilit,

Migdal Haemek

2008 22.4%Through Sigma Epsilon

Gavriel Tavor~100

IPP Delek Alon Tavor

70MW cogeneration power plant at Tnuva,

Alon Tavor

2009 22.4%Through Sigma Epsilon

Gavriel Tavor~100

Alon Energy Centers

70MW cogeneration power plant at Sugat,

KiryatGat

2012 28%Through Sigma - Massad

Kiryat-Gat~80

Mature Projects Overview

Since its foundation Sigma Epsilon has initiated 4 projects that has matured and evolved to become independent companies.

*

~38.6%

~2.6%

~2.2%

~40.1%

21%1.5%

Barnea

Rony Omesi

Menahem Sela

4EN

SK Energy+Eliass Khoury

Rubin Energy

SK has an option on additional 6%

Ownership

Largest IPP in Israel – 2 X 435 MW = 870MW.Cornerstone ceremony 3 June 2013 honored by the presence of the President of

the state of Israel and the President of Alstom.Construction and overall project progress – 54% complete. Turbines were

shipped and expected on site October 2013.Gas supply – Agreement with Tamar partnership signed January 8 2012. overall

contract value US$5 Billion over 17 years. First contract signed by Tamar. About 10% of Tamar sales.

EPC, LTSA, O&M turbines supply – Alstom.Finance – Largest senior debt in NIS : ~ NIS 3.4 Billion. Arranger and syndicate

leader – Bank Leumi + NIS 4.0 M preferred share capital (institutional) + NIS 270M regular shareholders capital. Overall investment exceeding NIS 4.0 Billions.

Ranking (by Midrug) A₁ (corresponds with A+) during construction, Aa3 (corresponds with AA-) during operation.

Dalia Power Energies

Integration with the environment – connection to the electricity grid and the gas pipeline

Tsafit

IEC Power Plant

Railway

Wadi Ha’ella

Kefar Menakhem

Haruvit Forest

Gas

9

ARTIST’S IMPRESSION OF THE POWER PLANT

Site’s Air Photo July 2013

Sigma Epsilon holdings in Dalia-After selling Landau shares in Hiram Epsilon

S.E. Int.-Energ. Group

Israel Infrastructure

FundHiram Epsilon

Meshek Energya

Dalia Power Energy

Menachem Sella32%

8%

59%

2.5%

37.28%

25.7% 47.6%

20%

6.7%

Lifshitz Sigma Epsilon

48.75%

Saramieto (Fishman)

Einam Gal (Fishman

Eli Barnea

1%

Mishkey Emeq Izrael

11.47%

Dalia Power Energies - Strengths/Unique AdvantagesThe site has been chosen by a unique process resulting in a best site in Israel.

Selection was made jointly by Dalia and the National Infrastructure Committee.Selection was based on a starting with all eligible sites followed by gradual elimination. Such unique process is expensive as the preliminary studies (architecture, environmental impact etc) must be repeated several times, but results in best location.

Dalia’s site has the following advantages:Only junction in Israel of super high tension lines. Hence, practically unlimited energy dispatch capabilities.Little air pollution. Hence, practically no environmental constrains.far away and close simultaneously: close to Israel’s center of gravity of power consumption (greater Tel Aviv) yet not close to residential area.

Alstom: contractor for main equipment, EPC, LTSA and O&M needs the project strategically. Hence:

All economic parameters superior to the “Normative Costs” approved by the PUA.Potential for accelerated schedule.High motivation to perform to Dalia’s full satisfaction.

Only IPP in Israel with SOVERIGN GUARANTEE for 18 years power purchase.

Dalia Power Energies - Strengths/Unique Advantages (Cont.)A unique site selection process leads to a unique advantage: the possibility of doubling Dalia with additional 870 MW to reach 1700 MW. Against severe constraints of site availability in Israel – this is a strong advantage. Dalia’s twin sister “Ha’Ela” energies is the only site in Israel with:

Land status changed from “agricultural” to “power generation”.Dispatch ability of additional 870 MW.Gas pipeline with sufficient free capacity.Existing switchyard with sufficient capacity.

Ha’Ela has been incorporated September 2013.

DALIA + HA’ELA JOINTLY REPRESENT OVER 12% OF INSTALLED CAPACITY IN ISRAEL. STRONG POSITION FOR FUTURE PRIVATIZATION TENDERS OF IEC, AND BEST SITE IN THE

COUNTRY WITH TOTAL GAS TURBINE CAPACITY (CCGT) OF OVER 3000 MW (DALIA + HA’ELA + ZAFIT + EXPANSION)

Summary of Financial Model ResultsAnnual average of main financial parameters in real terms

2028-2031 2025-2027 2022-2024 2019-2021 2016-2018

1,324 1,314 1,318 1,365 1,325 Revenue

522 518 524 548 550 EBITDA(1)

351 359 440 502 494 Free cash flow for debt service (2)

(208) (213) (260) (297) (288) Senior debt service(3)

143 146 179 205 206 Free cash flow (4)

78 78 78 78 65 Dividends for preferred share

60 70 114 111 107 Dividends for regular share

Senior debt cover

1.69 ADSCR average

1.69 ADSCR min.

Yields (real term)

10.1% Project yield

28.1% Regular shares yield

Energy Centers for Industrial ParksCo-generation vs. conventional IPP.

Co-generation yields additional 15-20% revenue due to income from thermal energy. Very little additional OPEX/CAPEX.Co-generation saves transmission costs (±10%).High quality customers relatively high plant factor.The above mentioned advantages are sufficient to compensate for size deficiency in most cases.

When a single plant consumes electrical power and thermal energy sufficient for optimal co-generation plant (~ 70MW,~ 50 ton/h steam) then the simple option is to own it. In case of outsourcing the yield for the co-generation plant owner will be at most moderate (as the industrial plant holds all the cards: site, power consumption, steam consumption) but not necessary low risk due to be dependence on a single client.

Energy Centers for Industrial Parks (cont.)

The energy center enables the benefits of co-generation while avoiding the problematic situation of facing a single strong client.

The initiator locates an industrial park with overall electrical energy consumption and thermal energy consumption sufficient for an optimal plant while no single plant can.The plant will in most cases be located at the yard on the biggest steam consumer.The concept has a “cake increasing” effect. The share of the hosting plant in the bigger cake may not be much smaller compared with owning a smaller cake all alone.Once the contract with the host plant is concluded all other plants in the industrial park represent a captive market.The energy center facilitates the availability of NG in the industrial park.

Energy Centers - Mature ProjectsSigma Epsilon has initiated and promotes 3 energy center projects that will produce positive cash flow as of 2015. in two of these projects Delek is the majority (57%) partner:

IPP Delek Ramat Gabriel (Migdal Ha’Emek) – 70 MW co-generation CCGT at Nilit plant Ramat Gabriel.IPP Delek Alon Tavor (Afula) – 70MW co-generation CCGT at Tnuva dairy plant, Alon Tavor.

Both projects are statutorically very advanced and financial closure is anticipated on December 2013.Delek is at a process of divestment from downstream project to enable focus on upstream, and recently sold its share to Rapac (agents of General Electric gas turbines) jointly with Denham (a large US private equity fund).Two years ago Sigma Epsilon has transferred its 28% in both projects to a subsidiary “Sigma Epsilon – Gabriel Tavor” and allocated 20% of the shares of this company to Gat Energy, owned by Prof. Dan Galai and Rami Ella against an investment of $2.0M (executed) undertaking for additional $4.4M loan on financial closure.

Energy Centers - Mature Projects (cont.)

A contract for a third Energy Center was signed this year with Sugat Sugar Mill at Kiryat Gat. The majority share holder in this project (55%) is Alon Group.The project has two unique features:

Sugat is a major consumer of thermal energy (60 tph steam) but consumes only 7 MW of electrical power. Most of the power (~ 60 MW) will be sold to the electronic industry in Kiryat Gat (Intel, Micron).

Even though the company has been established only this year a positive cash flow is anticipated as of the beginning of 2014 since according to the agreement we are going to take over an existing power plant once NG becomes available on site and the NG transmission and PRMS are already in construction, and due to be completed on November 2013

JV with Dor – Alon and Massad OzAgreement for the establishment of the JV has been concluded on December 2011 between Dor Alon and Sigma – Massad energy Centers.Ownership structure:

Dor Alon – 55%Sigma Massad – 45%

Ownership structure of Sigma - MassadSigma Epsilon – 62.2%Massad – Oz – 37.8%

First project is Alon Gat at Sugat Sugar Mill – Kiryat Gat.The cooperation is strategic and is based on mutual exclusivity in future power generation projects in Israel aimed at achieving 300 MW co-generation capacity within 3 years.Sigma Epsilon is allowed to expand existing project on its own:

Dalia – Ha’ElaRamat GabrielAlon Tavor

Alon Energy Centers declared short term goal is to own ±300MW cogeneration plants within 3 years. Kiryat Gat may be expanded to 120MW, and there are ongoing negotiations for acquiring share in two additional projects.

New venture: Conversion of industrial plants from liquid fuels to natural gas

Change is opportunity• The Change – within the next 10 years essentially complete conversion of the industry

from fuel oil, diesel, LPG into Natural gas is anticipated.• The Opportunity -Significant barriers to entry.

-Return on investment to the customer allows high profitability on the basis of bonus for early completion..

• Background -• State seeks rapid conversion in order to improve the environment and profitability

of enterprises.• Natural gas distribution network is progressing slowly. Plants conversion is the

main limiting factor.• Conversion comprises of:

• In factory piping• Pressure reduction and metering• Dual-fuel burners• Internal modifications of thermal equipment

Conversion of plants to natural gas (cont.)• Barriers:

• Regulation• Skilled manpower for engineering• Skilled manpower for installation

• Advantages:• Involvement in 3 of the few ongoing projects

• Sugat• Nilit• Tnuva

• Marketing model based on low base price & high bonus for early completion.• In house expertise: Moshe, Harel• Recruitment and training of personnel - creating skill• Design / execution by SK creates a potential time savings• Relying on the experience and expertise of IEG

• The Target –• Annual Turnover 5 $ => $ 10 million a year• Annual Profit 1 $ => $ 3 million a year• Creating a significant current income for Sigma Epsilon

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