Bazan Capital Market Presentation

2018

March 13, 2019

www.orl.co.il

Disclaimer

2

This is a translation of the Hebrew Presentation for convenience purposes only.

The information contained in the presentation and any other information that is provided while the giving thepresentation (such information or any part thereof - the “Information”) is presented for the sake of convenience only.The Information does not constitute a basis for investment decision, or replace the need for carrying out independentcollection and analysis of the Information and does not purport to be a recommendation or opinion or substitute forthe independent judgment of any potential investor.

The Company does not warrant the completeness or accuracy of the Information and will not bear any responsibilityfor any damages and/or losses whatsoever resulting from the use of the Information.

In the event of contradiction or discrepancy between the Information and information recorded in the Company'sbooks and/or appearing in official publications, such information will prevail.

The Information may contain forward-looking statements based on current data and expectations. Actual operations,results and other data may differ materially due to various uncertainties and risks, including the risk factors discussedin the Company's financial statements and Board of Directors’ Report as published by the Company.

The Company does not assume any obligation to update the data and expectations or any other part of theInformation.

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Carmel OlefinsManufactures two key products: Polyethylene and PolypropyleneSold to manufacturers of plastic products

Synergy with the petrochemical industry enables optimization

of product mix, increasing aggregate

margins and reducing volatility

Ducor Petrochemicals BV

Manufactures Polypropylene Sold to manufacturers of plastic products

Gadiv Petrochemical IndustriesManufactures raw materials for the plastics and chemicals industries

Company ProfileBazan Group -the Largest Oil and Petrochemical Refinery in Israel

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100%Bazan

100%Carmel Olefins

100%Bazan

Haifa Oil Refinery One of the largest complex oil refineries in the Eastern Mediterranean Basin (refining capacity of 197,000 barrels of crude oil per day) High refining complexity (Nelson Complexity > 9, refining and cracking capacity)

Proximity to diverse crude oil sources and attractive product markets

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Bazan Groupeverywhere in our day-to-day life

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Value of bonds tradedNIS 4.6 billionin 6 Series - NIS and USD linked(March 2019)

Market ValueNIS 6.2 billion

(March 2019)

Listed on TASETA-35, TA-125

Bonds traded on TASETelbond Index

OwnershipStructure(March 2019)

33.0%Israel Corp. Ltd.

51.5%Public

15.5%Petrochemical Enterprises

Bazan in the Capital Market

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Strengths7

SynergyHighly complex oil refinery - downstream facilities enabling the production of high added value distillates

Complex refining with petrochemicals constituting the downstream industry

Cross-sector operational and administrative synergy -single premises

Optimization of Group profitability

Petrochemical profitability - stable foot in the Group's results, which moderates the volatility in refining margins

Key player in the local market and strategically located

A key player in the local market

Strategic position in the Eastern Mediterranean -close to crude oil sources and product markets

Long-standing reputation in the industry

Bazan generates 13 thousand jobs, mainly in the Haifa Bay and North, and dozens of thousands of additional jobs in downstream industries

Bazan’s contribution to the GNP is NIS 7 billion per year

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Strengths

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Efficiency and FlexibilityProducing more raw materials for cracking facilities and petrochemical industry

Quick adaptation of product mix to changing market and broad range processing capacity for various crude oil and interim products

Improving availability of facilities

Improving scope due to process modifications

Fleet of tankers to achieve commercial flexibility

Growth and InnovationElectricity generation - new product with stable income

Innovative and cutting-edge plastic products

Technological incubator

New low-price gas purchase agreement for production energy, as a raw material and for electricity

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Advantages9

Bazan Products - economic enginesOutstanding products for day to day use and continuing to be necessary in the future

New petrochemical and transportation developments will increase demand for the Group’s products

Reliable production, highest quality of products worldwide and strong stable long-standing customer relations

TechnologiesState of the art optimization systems integrated in the Group’s plants

Advanced control systems

Technologies for early malfunction detection

Information systems supporting process control and expenditure management

Professional experienced engineering staff

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Advantages

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Environmental commitmentContinual environmental improvement and product quality with focus on transportation fuels

In 2018 started the production and marketing of the cleanest gasoline worldwide (benzene content 50% lower than the standard)

Compliance with the most stringent safety and environmental standards

Environmental and community commitment and responsibility

Further substantial investments in the environment

Freshwater savings (more recycling and on premises brackish water production)

Robust financial structureFully merged financals - flexible and effective management of financing sources

Effective and stable debt structure and diverse financing sources (banks, capital market, working capital)

Consistent decrease in financing costs and improved leverage

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New Fuel Oil Standard in 2020 (IMO 2020)

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At the beginning of 2020, a new standard

will take effect for marine fuel sulfur

content

Expected effect on Bazan’s margin

* Note: These charts are part of a presentation published by the Company on July 2, 2018. To see the full analysis, please refer to the full presentation as published

02468

101214161820

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Base case - No VGO-SRFO Med Composite Hydrocracking (40% Azeri 60% Urals)

Med Sour Hydrocracking/Coking (Urals) Med Sweet Hydroskimming (Azeri Lt)

Pre IMO years: Bazan margin USD 7/bbl

IMO years: Bazan margin USD 11/bbl

Post IMO years: Bazan margin USD 10/bbl Outside of the IMO years Bazan margin is higher than IHSM Med Sour Hydrocracking/Coking yardstick, however the comparison is not a like for like *

In October 2018 was approved the enforcement of the Standard , as of March 1, 2020

Bazan is prepared for the change in the Standard and can benefit from improvement in market conditions, if any

Adapting refining operations to market conditions and needs, without further investments

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Bazan secures natural gas supply to its plants

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Bazan signed an agreement with Energien for the purchase of natural gas from the Tanin and Karish gas reservoirs. • The deal includes supply of 17

BCM over 15 years• The cost of gas will decrease

significulty as a result of this agreement

Karish will be the first exploration to be developed using a FPSO facility, the only facility of this type in the Eastern Mediterranean basin.

Energian announced in November 2018 that all the contingent terms of the agreement had been met.

Exploration drilling at Karish and Taninbegan in March 2019.

Business Environment

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54.9 51.9

47.4

57.2

66.567.3

77.983.7

50.2

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18

Brent Price

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Brent, USD/Bbl

The decline is due to the easing of sanctions on Iran and the negative trend in the world economy at the end of 2018

Most of the decline in the fourth quarter follows an increase during the year

The price of crude oil declined fromUSD 67 to USD 50 /barrel

Brent Price Volatility 2018

Shortly before approval of the Report, the crude oil price rose to USD 64 /barrel

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0

2

4

6

8

10

12

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18

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Ural Refining MarginsUral Med Margin, USD/Bbl - Reuters

2017 AverageUSD 5.3 /barrel

2018 AverageUSD 4.6 /barrel

Ural Med Margin, USD/Bbl - Bloomberg

0

2

4

6

8

10

12

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18

2017 AverageUSD 6.0 /barrel

2018 AverageUSD 5.8 /barrel

The refining margin remained high due to a decline in output of the refineries as a result of planned and unplanned shutdowns and an increase in demand for distillates

The Ural margin was volatile and remained high in 2018

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Distillate vs Brent margins

Gasoline Source: REUTERSDiesel Fuel Oil 3.5%

-20

-10

0

10

20

30

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18

Products margin (CIF Med) vs Brent, USD/Bbl

2018The diesel fuel margin increased to highs of USD 18-19 per barrel

The gasoline margin declined sharply at the end of 2018 due to surplus production and drop in demand

High diesel fuel marginIn 2018

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Polymer marginsPolymer prices above Naphtha prices, USD/Ton

Polypropylene prices above Propylene prices, USD/Ton

Polyethylene Polypropylene

300

500

700

900

1,100

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/180

200

400

600

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18

Polymer marginsabove Naphtha

Ducor margins

In 2018 the average margin for Polypropylene was USD 772 per ton and Polyethylene was USD 678 per ton The Polyethylene margin is declining with an increase in supply of less costly raw materials

Polymer margins remained high in 2018

In 2018 the average margin for Polypropylene above Propylene was USD 221 per ton

Source: ICIS, PLATTS

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Aromatic margins

Source: ICIS, PLATTS

12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/18

Paraxylene prices above Xylene prices, USD/Ton

2018 Margin Average margin of Paraxylene over Xylene was USD 207 per ton Increasing compared to the previous period

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Domestic Consumption of Fuel Products

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Domestic consumption of distillates remained unchanged in 2018 and in the fourth quarter

Transportation fuel consumption decreased by 1% in 2018 and increased by 2% in the fourth quarter

Domestic transportation fuels consumption

Source: Ministry of National Infrastructure201820172016

3254 3169

974

3274 3234

1087

3236 3239

1149

סולר תחבורה בנזין ל"דס

0% - 1%+ 5% 0%

+ 12% + 6%

(Thousands of tons)

(*)Diesel Fuel for Transportation Gasoline Jet Fuel

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Domestic Consumption of Other Products

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Domestic consumption of other products

286

459

615

312

498

634

311

513

581

ביטומן מזוט מ"גפ

+ 9% 0%

+ 8% + 3%

+ 3% - 8%Domestic consumption of distillates remained unchanged in 2018 and in the fourth quarter

Transportation fuel consumptiondecreased by 1% in 2018 and increased by 2% in the fourth quarter

Source: Ministry of National Infrastructure201820172016

(Thousands of tons)

Fuel OilBitumen LPG

Analysis of Results2018

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Strong Operating Results

Periodic maintenance work at Hydrocracker and CDU 3 facilities successfully completed

USD 6.7 per barrelAdjusted refining margin

Another good year for Bazan

Another profitable year during renovation

USD 187 million - net profit

USD 507 millionAdjusted Consolidated EBITDA

USD 188 millionPolymers EBITDA

Financial ActivityRaising rating outlook to A-(positive)

Successful capital raising of bond series

Interest rate decrease with syndication agreement

LIBOR interest exposure reduced

Financial Improvements

1.9xNet financial debt to adjusted EBITDA ratio

USD 968 millionNet financial debt

22

Good performance for operational and financial parameters

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Adjusted Consolidated EBITDA by segment - 2014-2018 USD million

23

421

677

427

552507

2014 2015 2016 2017 2018

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FuelsPolymersCarmel Olefins and Ducor

Other segments

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Adjusted EBITDA by segment per quarter 2017-2018 USD millions

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74

157

182

139

120

151

123114

Q1.17 Q2.17 Q3.17 Q4.17 Q1.18 Q2.18 Q3.18 Q4.18

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FuelsPolymersCarmel Olefins and Ducor

Other segments

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Consolidated net profit 2014-2018 USD million

25

187

262

158

225

-93

20182017201620152014

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4.84

5.34.6

6.4

9.2

6.2

7.56.7

3.7

5.44.5

6.0 5.8

2014 2015 2016 2017 2018

Bazan adjusted refining margin* vs Reuters Ural and Bloomberg Ural margins USD per barrel

Bazan Margin (Adjusted)

*

Reuters Ural Margin

Adjusted Bazan margin as defined in the Company's Board of Directors' Report

Bloomberg Average Ural Margin

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Refinery Utilization

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Utilization Periodic Maintenance Standard

0.90.91

0.93

0.980.97

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

2014 2015 2016 2017 2018

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Results of Polymers Segment *

EBITDANet profit

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(*) Carmel Olefins and Ducor

40

108 108123

105

141

206 203212

188

2014 2015 2016 2017 2018

2014-2018 USD millions

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968

11501193

1437.3831411.4

1935.213351

12.201812.201712.201612.201512.201412.2013

Development of Net Financial Debt *2013-2018 USD millions

* To Financial Institutions and Bondholders

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176 169140

179 179127

67

53 5254

44 35

42

73

229 221194

223 214

169140

2019 2020 2021 2022 2023 2024 2025

הלוואות ח"אג

Projection for Repayment Financial Debt USD millions

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Loans Securities

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12.201812.201712.201612.201512.201412.2013

7.4x

3.4x

2.1x2.8x

2.1x 1.9x

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Net financial debt to EBITDA ratio2013-2018 in USD millions

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• Net financial debt to financial institutions and bondholders• Adjusted EBITDA as defined in the Company's Board of Directors’ Report

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Net interest expenses 2014-2018 USD million

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145

121116

108 111

0.3%0.5%

1.1%

1.4%

2.2%

0

0.01

0.02

0.03

0.04

0.05

0

20

40

60

80

100

120

140

2014 2015 2016 2017 2018

Average LIBOR rate Interest expenses

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2013 2014 2015 2016 2017 2018 2019

Measures adopted for financial stabilization 2013-2018

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Diversifiction of credit resources(2013-2018)

Refinancing of bank funding (2013-2018)

Raising rating A-(positive) (2018)

Completing financial merger (2016)

Exchanging Carmel Olefins bonds for Bazan bonds (2015)

USD 1 billion raised from bonds/extended duration (2013-2018)

Lowering of financing costs (2015-2018)

Cash Flow2018 USD millions

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Note: The property plant and equipment acquisition and interest items include development levies in the amounts of USD 67 and USD 14 million, respectively

Cash Cash Other Dividend Property plant and equipment acquisitions

Repayment of Bonds

Repayment of loans

Interest Issue of Bonds Decrease in working capital

Cash from ongoing operations

Long term credit deposits

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377400185111

-401

12.201812.201712.201612.201512.2014

429402.529

370.769310.251

266.863

12.201812.201712.201612.201512.2014

Key balance sheet parameters

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1,3201,204

1,037874

654

12.201812.201712.201612.201512.2014

Equity (USD million)

35%30%28%

0.249614829

0.176730278

12.201812.201712.201612.201512.2014

Shareholders equity to balance sheet ratio

Working capital (USD million)

Liquid financial assets (USD million)

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ORL shares

Tel Aviv 35 index

Bazan shares vs TA-35 index

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

+ 24%

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0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

12.2016 03.2017 06.2017 09.2017 12.2017 03.2018 06.2018 09.2018 12.2018

%

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Bazan Debentures E vs similar Government Bonds

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