ANNEX F THE FINANCIAL PROPOSAL

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Ethel Chase
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1 ANNEX F THE FINANCIAL PROPOSAL 1. THE FINANCIAL PROPOSAL Each Bidder is required to submit information detailing the Bidder s Business Plan, Letter(s) of Intent to provide finance, and a Detailed Financial Closing Schedule. The purpose of the Financial Proposal is to assess the Bidder s ability to reach Financial Closing in accordance with the submitted Bid. 2. BUSINESS PLAN Each Bidder is required to submit a detailed Business Plan which includes a detailed Financial Plan, and the Financial Model. 2.1 Detailed Financial Closing Schedule Bidders will include in their Bids a detailed schedule for Financial Closing, detailing all activities required in order to ensure the timely completion of the Financial Closing, in accordance with the provisions of the Concession Agreement ("Detailed Financial Closing Schedule") The description of all activities and data included in the Detailed Financial Closing Schedule must be complete and sufficiently detailed and accurate, in order to enable the evaluation of the Detailed Financial Closing Schedule. 2.2 Financial Plan Each Bidder is required to submit a detailed Financial Plan demonstrating the sources of funds throughout the Contract Period. The drawdown schedule, the repayment schedule and the servicing for each funding source must be provided separately, together with the terms under which such source is made available. Page 1 of 8

2 The Financial Proposal shall be based on the Base Interest Rates and Indices published by the Tender Committee. Without derogating from the generality of the foregoing, the Financial Plan should cover, as a minimum, the following: Equity and Subordinated Debt The following details about all Equity and Subordinated debt components must be provided: a. Amounts and sources of funds to be committed, and the timing of subscription; b. Equity / quasi-equity / Subordinated Debt - structure of the Bidder; c. Terms and conditions of shares and of Subordinated Debt including Base Interest Rates and Margins, if applicable; d. Mechanism for the provision of Equity in the event of failure of any of the Shareholders to provide its pro-rated share; e. Shareholder(s) including amounts of shares held, and any plans for transfer of shares to other holders or to third parties; f. Connection of holders of Equity / quasi-equity to other Interested Parties in the Bidder; g. Conditions precedent for Distribution; and h. Currency of each investment Debt Facilities The following details of any debt facility must be provided: a. Type of facility and amount of facility to be available, including any standby element; b. Composition of Senior Debt (long term or short term, as applicable) in accordance with Section 7 (Debt Composition) of Form O (Selected Basket of Indices, Interest Rates Adjustments, Duration of Loans and Determining Date); c. Drawdown schedule; d. Currency; e. Grace period; f. Minimum and Average ADSCR and LLCR for each facility; Page 2 of 8

3 2.2.3 Reference Interest Rates (whether fixed or floating), method of fixing the Reference Interest Rate, Margins (including the changes during the loan period), and assumed cost of funds; Any proposed Hedging Agreements in respect to interest rates and exchange rates assumed during the Construction Phase, the Interim Operation Phase for Partial Operation and Maintenance, and the Commercial Operation Phase; Any relevant fees to Finance Providers, including: commitment fees, arranger fees and other fees if applicable; Repayment schedule and final maturity dates; Security requirements; Reserve funds (including debt service reserve fund (indicating whether such fund will be financed as part of the project costs or from free cash flow) debt service reserve facility and major Maintenance reserve fund); Identity of Finance Providers (financial institutions, Israeli banks, foreign banks, institutional investors, private placement, public placement); a. Purpose of each facility and its intended use; b. Debt to Equity ratio (gearing); c. Required rating of the Project, if applicable; d. Distribution conditions; e. Events of default. The descriptions and data provided herein must be complete and sufficiently detailed and accurate, in order to enable the evaluation of the Financial Plan. 3. FINANCIAL MODEL 3.1 Each Bidder shall submit an Excel file setting out in detail the financial projections of the Project for the entire Contract Period ("Financial Model"). The Financial Model submitted must be compatible with Excel 2007 or above. 3.2 The Financial Model shall be submitted in accordance with the provisions of Section 4.7 (Number of Copies) of the Invitation to Bid. Page 3 of 8

4 3.3 The presentation of the Financial Model shall include all details, assumptions, financial statements, and formula which served in the preparation thereof. The presentation of the Financial Model should enable the Tender Committee to check the accuracy and logic of such formula and to perform sensitivity and optimization analysis of the underlying assumptions of the Financial Model. For removal of doubt, the accounting principles presented of the asset in the model will be in accordance with the pre-ruling of the tax authority of Israel provided by the Tender Committee as part of the Tender Documents. 3.4 The Financial Model shall include the following: i. Key assumptions including time tables according to Form N-3 (Key Assumptions); ii. iii. iv. Detailed capital expenditure assumptions according to Form N-1 (EPC Contractor, Tunneling Expert and the Transportation Infrastructure Expert Construction Cost and Adjustment Mechanism); Operation and Maintenance costs assumptions including the costs of the SPC according to Form N-2 (O&M Contractor Operation and Maintenance Cost and Adjustment Mechanism); Adjustments required to changes in short term and long term Base Interest Rates; v. Revenues forecast including Additional Commercial Activities or Additional Toll Revenue; vi. vii. viii. ix. Service quality mechanism; Detailed financing assumptions (including any Refinance assumptions if assumed. In the event a Refinance is assumed the Bidder shall take into consideration in the Financial Model the mechanism detailed in Section 23.2 (Refinancing) of the Concession Agreement); Taxation depreciation policy and tax allowances; and Macro-economic assumptions. 3.5 The Financial Model should produce the following outputs on a monthly basis during the Construction Phase and during the Interim Operation Phase for Partial Operation and Maintenance and on a quarterly basis during the Commercial Operation Phase: i. Summary of key financial information including, at least, the following financial ratios: Page 4 of 8

5 Project Internal Rate of Return (PIRR); Equity Internal Rate of Return (EIRR); Annual Debt Service Cover Ratio (ADSCR) for each year; Project Life Cover Ratio (PLCR) for each year; Loan Life Cover Ratio (LLCR) for each year; ii. The following financial statements: Cash flow, balance sheet, profit and loss, capital expenditure schedule, revenue statement, operating cost statement, declaration and taxation statement and funding schedule. Summary of the sources and uses of the Project at Construction Completion Date. All financial statements shall be presented in NIS nominal terms and in accordance with accepted accounting principles in Israel. 3.6 The financial model should allow for the following scenarios to be run, while maintaining its stability: i. 5%, 10%, 15% increase in Construction costs; ii. iii. iv. 10%, 15% and 20% increase in Operation costs; 1% and 2% increase in Base Interest Rates; 0.5% and 1% increase in Interest Rate Margin; v. 100% increase in index growth rates; vi. vii. viii. ix. Three (3), six (6) and nine (9) months delay in the Interim Permit to Operate for the Partial Operation and Maintenance of a Section of the Highway; Three (3), six (6) and nine (9) months delay in the Permit to Operate; 25% and 50 % decrease in Toll Revenues; In the event the Bidder has assumed Additional Commercial Activities or Additional Toll revenue: a scenario under which no Additional Commercial Activities or Additional Toll revenue are received; x. In the event the Bidder has assumed a Refinance: a scenario in which no Refinance has occurred; Page 5 of 8

6 The Financial Model should provide the following results (for each scenario): PIRR, EIRR, Min ADSCR, Average ADSCR, Min LLCR, Average LLCR, Min PLCR and Average PLCR. It is hereby clarified that in the event that the Financial Model contains circular references, or will be illegible for any reason, it may receive a score of zero (0) points. 3.7 The Financial Model outputs shall be presented on a monthly basis during the Construction Phase and during the Interim Operation Phase for Partial Operation and Maintenance and on a quarterly basis during the Commercial Operation Phase. 3.8 All statements shall be in accordance with generally accepted accounting principles in Israel (GAAP/IFRS) and for all accounting purposes and taxation reporting methods, the statements shall be based on the financial asset method. 3.9 Assumption Book Each Bidder shall submit an Assumption Book including the following: a. A summary of the methodology for the main assumptions and sheets in the Financial Model; b. Explanations for the main key assumptions; c. An analysis of Operation and Maintenance costs ; d. Explanations of the strategy intended for meeting the demands of the Concession Agreement and preventing, minimizing or reducing events of non-availability throughout the Contract Period; e. Explanations of the forecast of Quality Event; f. A summary of the key cover ratios and their compliance with the Letters of Intent; g. The chosen accounting and tax polices backed by an audit report; and h. A step by step guide detailing how to perform optimization and sensitivity analysis and the logic of each macro command. 4. LETTER OF INTENT TO PROVIDE FINANCE Each Bidder shall submit within its Financial Proposal, Letter(s) of Intent from each Proposed Finance Provider including Subordinated Debt and export credit agencies, if applicable. Each Letter of Intent may refer, inter alia, to the following: 4.1 The Proposed Finance Providers familiarity with the Bidder, its Members and Parent Company/ies (if applicable) and the capabilities thereof; Page 6 of 8

7 4.2 The Proposed Finance Providers familiarity with the main provisions of the Bidder s Business Plan, including the Bidder s designated schedule for the achievement of Financial Closing; 4.3 The Proposed Senior Debt Finance Providers familiarity with the main provisions of the Tender Documents and the Concession Agreement; 4.4 Declaration by the Proposed Finance Providers that they are interested and capable, in principle, to provide the finance for the Project; 4.5 The level of approval granted for the issuance of the Letter of Intent; 4.6 All material terms and the conditions precedent and any other conditions for the validity of the content set out in the Letter of Intent; 4.7 Type of facility and amount of facility to be available and conditions for the first drawdown, including any standby element; 4.8 Min ADSCR and LLCR for each facility; 4.9 Grace and tail periods; 4.10 Repayment schedule and final maturities Reference Interest Rates (whether fixed or floating), methods of fixing the Reference Interest Rates, Margins (dependent on other parameters such as the coverage ratios), cost of funds, and other fees; 4.11 Security requirements; 4.12 Conditions for Distribution and Events of default 4.13 Reserve requirements (including debt service reserve fund, major maintenance reserve fund and all other reserve funds); 4.14 Terms for Refinancing; In the event the Letter of Intent includes a quotation of a credit margin above the lenders' cost of funds (also referred to by certain lenders as the "initial interest rate", "wholesale rate", etc.) (and not a margin above the Base Interest Rate (Government bonds)), the Bidder is required to explain, within the Business Plan, the assumptions underlying the figures attributed to the costs of fund (or the like) within the Financial Model. Page 7 of 8

8 5. CURRENCIES AND PRESENTATION 5.1 All costs terms, figures required to be provided by the Bidders shall be quoted by the Bidder in NIS in nominal terms. 5.2 All sums and values will be quoted in numeric terms. Bidders may also quote sums and values in words, in addition to the numeric quotation (excluding sums and values detailed in the Financial Model, which will be quoted in numeric terms only). However, in the event of a contradiction between words and numeric terms, the words shall prevail. 5.3 All sums quoted will not include VAT. Page 8 of 8

APPENDIX A DEFINITIONS VOLUME

APPENDIX A DEFINITIONS VOLUME 1. All terms capitalized in the Contract Documents, but not defined therein, shall have the meaning set forth in this Definitions Volume. 2. Notwithstanding the above, in