ELECTRA LTD. CONSOLIDATED FINANCIAL INFORMATION AS OF … · 2019. 11. 27. · ELECTRA LTD....

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ELECTRA LTD.

CONSOLIDATED FINANCIAL INFORMATION

AS OF SEPTEMBER 30, 2019

(UNAUDITED)

(CONVENIENCE TRANSLATION INTO U.S. DOLLARS)

2

ELECTRA LTD. Consolidated Financial Information

As of September 30, 2019

INDEX

Page

Report of the Board of Directors for the Nine Months Ended September 30, 2019 3 – 12

Auditors' Review Report 13

Consolidated Information on Financial Position 14 – 15

Consolidated Information on Profit or Loss 16

Consolidated Information on Comprehensive Income 17

Consolidated Information on Changes in Equity 18 – 22

Consolidated Information on Cash Flows 23 – 25

Notes to the Consolidated Financial information 26 – 42

Report of the Board of Directors on the State of the Entity's Affairs

For the Nine Months Ended September 30, 2019 ELECTRA LTD.

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THE BOARD OF DIRECTORS OF ELECTRA LTD.

HEREBY PRESENTS THE REPORT ON THE STATE OF THE AFFAIRS

OF THE COMPANY AND ITS CONSOLIDATED COMPANIES ("THE GROUP")

FOR THE PERIODS OF NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2019

1. Description of the corporation and its business environment

As of the time of this report, the Group operates in Israel and abroad in five principal segments: the

construction and infrastructure projects in Israel segment; the construction and infrastructure projects

abroad segment; the services and maintenance segment; the development and construction of

entrepreneurial real estate segment and the concessions segment.

The Group's activity is carried out through the Company and its investee companies. See the section 1

of the report on the description of the entity's business as at December 31, 8201 .

2. Financial position

The following are the main figures that appear in the sections of the information of financial position

(in US$ thousands)

30.09.2019 31.12.2018

Total % Total % %

Current assets 995,203 59.9 1,010,009 68.3 (1.5)

Non-current assets 665,682 40.1 468,657 31.7 42.0

Current liabilities 763,872 46.0 780,037 52.8 (2.1)

Non-current liabilities 590,134 35.5 407,067 27.5 45.0

Equity 306,879 18.5 291,562 19.7 5.3

Total of the statement of financial

position 1,660,885 100.0 1,478,666 100.0 12.3

The Group's assets in the consolidated information of financial position at the end of the period

amounted to approximately US$ 1,661 million, compared to approximately US$ 1,479 million as of

December 31, 2018.

The surplus of the current assets over the current liabilities amounted to approximately US$ 231

million, compared with approximately US$ 230 million as of December 31, 2018 and the current ratio

is 1.30, compared to 1.29 as of December 31, 2018.

3. Equity

As of the reporting date, the equity amounts to approximately US$ 306.9 million, compared with

approximately US$ 291.6 million as of December 31, 2018. The change in equity in the reporting

period derives primarily from the net income for the period in an amount of approximately US$ 58.9

million, less the other comprehensive loss of approximately US$ 17.1 million in the period and a

dividend of approximately US$ 20.1 million to the shareholders in the Company and a dividend of

approximately US$ 7.5 million to the non-controlling interests. See the consolidated statements of

changes in equity in the interim consolidated financial information as of September 30, 2019 for

additional details.



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4. Operating results

The following table summarizes the business results by quarter (U.S. Dollars in thousands):

Q 7-9/19 Q 4-6/19 ***) Q 1-3/19 ***) Q 10-12/18***) Q 7-9/18 ***)

Revenues from the performance

of works and the provision of

services 510,223 492,739 473,197 446,684 411,606

Cost of works and services (468,735) (446,922) (435,095) (407,572)*)**) (377,036) *)**)

Gross profit 41,488 45,817 38,102 39,112 34,570

Administrative and general

expenses (18,521) (16,722) (16,971) (13,419) (14,750)

Selling, marketing and other

expenses (3,400) (2,243) (2,041) (3,134) **) (2,379) **)

The Company’s share of profits

(losses) of entities accounted for

at equity, net 1,893 63 2,541 1,480 *) (107) *)

Other income (expenses), net 33,186 90 646 (5,381) *) 1,732

Operating income (EBIT) 54,646 27,005 22,277 18,658 19,066

EBITDA 68,244 40,256 34,792 24,667 24,967

Financing income (expenses), net (5,837) (6,489) (2,854) (2,558) *) (1,947) *)

Income before taxes on income 48,809 20,516 19,423 16,100 17,119

Taxes on income (12,403) (6,035) (5,753) (2,905) (3,535)

Income from continuing operations 36,406 14,481 13,670 13,195 13,584

Operating income (loss) from discontinued operations, net (3,996) (1,004) (669) (855) 45

Net income for the period 32,410 13,477 13,001 12,340 13,629

Attributable to:

Shareholders in the Company 30,830 11,948 11,395 10,818 12,303

Non-controlling interests 1,580 1,529 1,606 1,522 1,326

32,410 13,477 13,001 12,340 13,629

*) Retrospective implementation, see Note 2D to the consolidated financial information.

**) Reclassified.

***) Reclassified, see Note 6Q to the interim consolidated financial information.

5. Revenues from the performance of works and the provision of services

The Group's revenues in the reporting period amounted to approximately US$ 1,476 million, compared

with approximately US$ 1,281 million in the comparative period in the previous year, an increase of

approximately 15%. The increase in the revenues in the reporting period is attributed primarily to the

projects for construction and infrastructure projects abroad segment, the services and maintenance

segment and the Concessions segment. (See the additional details that appear in section 13 below).

The Group's revenues in 2018 amounted to US$ 1,728 million.

The revenues from the performance of works and the provision of services do not include additional

revenues of US$ 81 million (US$ 98 million in the comparative period in the previous year), in respect

of the Group's net share of the revenues of entities, which are accounted for at equity.



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6. Gross profit

The gross profit in the reporting period amounted to approximately US$ 125 million, compared with

approximately US$ 107 million in the comparative period in the previous year, an increase of

approximately 17%. The increase in the gross profit in the reporting period related primarily to the

construction and infrastructure projects abroad segment and to the services and maintenance segment.

The gross profit in 2018 amounted to approximately US$ 146 million.

7. Administrative and general expenses

The administrative and general expenses in the reporting period amounted to approximately US$ 52.2

million, compared with approximately US$ 44.2 million in the comparative period in the previous year,

an increase of approximately 18%. The change derived primarily from companies that were initially

consolidated in the reporting period and which were not included in the comparative period in the

previous year.

8. Selling, marketing and other expenses

The selling, marketing and other expenses in the reporting period amounted to approximately US$ 7.7

million, compared with approximately US$ 6.6 million in the comparative period in the previous year.

The increase in selling, marketing and other expenses derives primarily from an increase in Electra

Residential in the reporting period, and also as a result of the recording of expenses in respect of

initially consolidated companies in the reporting period, which were not recorded in the comparative

period in the previous year.

9. The Company's share of the profits of entities accounted for at equity, net

The Company's share of the profits of entities accounted for at equity, net, amounted to US$ 4.5 million

in the reporting period, as compared to US$ 2.5 million in the comparative period in the previous year.

10. Other income (expenses), net

Other income, net amounted to approximately US$ 33.9 million in the reporting period, as compared

with other income, net of approximately US$ 0.8 million in the comparative period in the previous year.

The considerable increase in other income in the reporting period derived from the recording of a pre-

tax gain of approximately US$ 33.3 million from the sale of a subsidiary company's holdings in Negev

Natural Gas Ltd., Negev Natural Gas South Ltd. and Negev Natural Gas Infrastructure Company A.P.C.

Ltd. See Note 6N to the consolidated financial information.

Other expenses, net amounted to approximately US$ 4.5 million in the year 2018.

11. Financing expenses, net

Financing expenses, net amounted to approximately US$ 15.2 million in the reporting period, as

compared with approximately US$ 5.3 million in the comparative period in the previous year. The

increase in the financing expenses, net derived primarily from an increase in financing expenses in

respect of the adjustment of financial liabilities, the recording of financing expenses in respect of the

initial implementation of international Accounting Standard IFRS 16 in the reporting period and a

decrease in financing income in respect of loans that have been extended to entities accounted for at

equity, compared to comparative period in the previous year.

Financing expenses, net amounted to approximately US$ 7.8 million in the year 2018.

12. Net income

The Group’s net income amounted to approximately US$ 58.9 million in the reporting period, as

compared with approximately US$ 39.9 million in the comparative period in the previous year.



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13. Report in respect of business segments

A. Revenues:

*) Reclassified, see Note 6Q to the consolidated financial information.

1. Construction and infrastructure projects in Israel

The revenues turnover in the reporting period amounted to approximately US$ 760 million

(approximately 49% of revenues) as compared with US$ 798 million (approximately 59% of

revenues) in the comparative period in the previous year, a decrease of approximately 5%,

which derived primarily from progress in the performance of a number of projects in the

comparative period in the previous year, which have come to an end.

2. Construction and infrastructure projects abroad



revenues) in the comparative period in the previous year, an increase of approximately 220%,

which derived primarily from the revenues of companies that were initially consolidated in the

reporting period and which were not included in the comparative period in the previous year.

3. Services and maintenance



revenues) in the comparative period in the previous year, an increase of approximately 13%,

which derived primarily from an increase in facility management operations as well as from

revenues of a company that was initially consolidated in the reporting period and which was

not included in the comparative period in the previous year.

4. Development & construction of entrepreneurial real estate

The revenues turnover amounted to approximately US$ 91 million in the reporting period

(approximately 6% of revenues), as compared with approximately US$ 86 million

(approximately 7% of revenues) in the comparative period in the previous year, an increase of

approximately 5%.

5. Concessions

The revenues turnover amounted to approximately US$ 43 million in the reporting period

(approximately 3% of revenues), as compared with approximately US$ 17 million in the

comparative period in the previous year (approximately 1% of revenues), an increase of

approximately 150%, which derived from revenues that were recognized in a project for the

initiation, construction and operation of the Electra Campus at Bar Ilan University.

For the period of nine months ended

For the period of three months ended

For the year

ended September 30 September 30 December 31 2019 2018 *) 2019 2018 *) 2018 *) Unaudited Audited US$ thousands

Construction and infrastructure

projects in Israel

760,043 798,248 252,015 249,468 1,077,518


projects abroad

239,962 74,768 96,765 26,030 107,847

Services and maintenance 413,931 364,824 135,685 121,872 487,903

Development & construction of

entrepreneurial real estate

90,907 86,265 37,020 34,062 114,414

Concessions 43,021 17,210 11,377 5,010 23,179

Consolidation adjustments (71,705) (60,350) (22,639) (24,836) (83,212)

Total 1,476,159 1,280,965 510,223 411,606 1,727,649



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B. Segmental operating income: EBITDA For the period of

nine months ended


For the year

ended September 30 September 30 December 31

2019 2018 **) 2019 2018 **) 2018 **) Unaudited Audited US$ thousands


projects in Israel

31,797 35,613 9,769 10,235 46,556


projects abroad

21,690 4,454 7,799 1,449 6,742




12,777 9,062 *) 4,589 3,252 *) 9,437 *)

Concessions 33,702 400 32,290 1 877

153,188 92,899 71,139 29,368 122,061

Unallocated expenses and

consolidation adjustments

(9,896) (16,528) (2,895) (4,401) (21,023)

Total 143,292 76,371 68,244 24,967 101,038

Operating income (loss) (EBIT) For the period of

nine months ended


For the year

ended September 30 September 30 December 31

2019 2018 **) 2019 2018 **) 2018 **) Unaudited Audited US$ thousands


projects in Israel

14,517 28,937 3,405 7,993 37,780


projects abroad

17,389 3,983 6,342 1,280 6,114




12,775 9,059 *) 4,587 3,251 *) 9,424 *)

Concessions 32,083 (1,337) 31,749 (808) (1,978)

115,401 76,816 58,083 23,697 100,192

Unallocated expenses and

consolidation adjustments

(11,473) (17,159) (3,437) (4,631) (21,877)

Total 103,928 59,657 54,646 19,066 78,315

*) Retrospective implementation, see Note 2D to the consolidated financial information.

**) Reclassified, see Note 6Q to the consolidated financial information.



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1. Construction and infrastructure projects in Israel

The operating income in the reporting period amounted to approximately US$ 14.5 million

(approximately 13% of segmental operating income) as compared with approximately US$ 28.9

million (approximately 38% of segmental operating income) in the comparative period in the

previous year, a decrease of approximately 50%, which derived primarily as a result of the

recording of profit in respect of the progress in the performance of a number of projects in the

comparative period in the previous year, which have come to an end.

2. Construction and infrastructure projects abroad




previous year, an increase of approximately 337%, which derived primarily from the profits of

initially consolidated companies in the reporting period, which were not included in the

comparative period in the previous year.

3. Services and maintenance




previous year, an increase of approximately 7%, which derived primarily from the profits of

initially consolidated company, which was not included in the comparative period in the

previous year, as well as, from an increase in profits in a number of fields of operations in this

segment.

4. Development & construction of entrepreneurial real estate


(approximately 11% of segmental operating income) as compared with operating income of

approximately US$ 9.1 million (approximately 12% of segmental operating income) in the

comparative period in the previous year, an increase of approximately 41%, which derived

primarily from an increase in the company's share of profits of entities accounted for at equity,

compared to comparative period in the previous year.

5. Concessions


(approximately 28% of segmental operating income) as compared with an operating loss of

approximately US$ 1.4 million in the comparative period in the previous year. The considerable

increase in the reporting period derived from the recording of a gain from the sale of a

subsidiary company's holdings in Negev Natural Gas Ltd., Negev Natural Gas South Ltd. and

Negev Natural Gas Infrastructure Company A.P.C. Ltd. See Note 6N to the consolidated

financial information.



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14. Orders backlog

The Group's backlog of orders as of September 30, 2019 amounted to approximately US$ 4,131 million,

compared with approximately US$ 3,368 million at the end of 2018. The backlog as of September 30,

2019 includes the Group's share of entities accounted for at equity, in an amount of approximately US$

186 million (December 31, 2018 – approximately US$ 242 million).

September 30, 2019 December 31, 2018

Construction

and

infrastructure

projects in

Israel segment

Construction

and

infrastructure

projects

abroad

segment

Services and

maintenance

segment (*)

Total

Construction

and

infrastructure

projects in

Israel segment

Construction

and

infrastructure

projects

abroad

segment

Services and

maintenance

segment (*)

Total

(In US$ millions)

The distribution of the

orders backlog by

operating segment

Without affiliated

companies

2,635 456 854 3,945 2,090 186 851 3,127

In respect of affiliated

companies

13 5 168 186 52 14 175 241

Total 2,648 461 1,022 4,131 2,142 200 1,026 3,368

The spreading of the

orders backlog

without the Group's

share of affiliated

companies

For performance in 2019 251 79 126 456

For performance in 2020

and thereafter

2,384 377 728 3,489

Total 2,635 456 854 3,945

*) This orders backlog in this segment is comprised primarily of contracts for commitments, which

are generally arranged as service agreements for renewable periods, where the customer has the

right of ending it at any stage. In addition, the backlog includes a backlog relating to the

operation of a BOT projects for long periods and the operation of waste water treatment

facilities, in an amount of approximately US$ 377 million, of which US$ 28 million will be

performed within 12 months from the reporting date.

**) In the fourth quarter of 2018, notification was received of the winning of a project for the

construction of a store and pump project at Menara in an amount of US$ 316 million. This

project is not included in the orders backlog as the Company is waiting for the financial closure

by the commissioner of the works. After the date of the statement of financial position, the

commissioner of the work received a demand for payment from the Israel Lands Authority and

announced that if the amount of the demand is not reduced it will give consideration to

discontinuing the project.



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15. Liquidity and sources of finance

The Group's liquid means (cash and cash equivalents and marketable securities) amounted to

approximately US$ 92.8 million as of September 30, 2019, as compared with approximately US$ 162.8

million as of December 31, 2018.

The change in the Group's liquid means in the first nine months of the year 2019 derived, inter alia,

from cash of approximately US$ 33.9 million generated by operating activities (including US$ 5 million

in respect of the purchase and investment in land) as compared with cash of approximately US$ 34

million absorbed by operating activities (including US$ 33 million in respect of the purchase and

investment in land) in the comparative period in the previous year.

The net cash absorbed by investment activities amounted to approximately US$ 80 million in the first

nine months of the year 2019, as compared with net cash of approximately US$ 12 million in the

comparative period in the previous year, and included, primarily, investments of approximately US$ 45

million in the acquisition of initially consolidated companies, the change in an intangible asset for a

concession project in an amount of approximately US$ 65 million , investments of US$ 22 million in

the purchase of fixed assets and intangible assets, a net increase of US$ 7 million in investments,

restricted cash and deposit in trust, net less the consideration from the disposal of investments in

companies accounted for at equity in an amount of approximately US$ 38 million.

The cash absorbed by financing activities amounted to approximately US$ 22 million in the first nine

months of the year 2019, as compared with approximately US$ 29 million in the comparative period in

the previous year and included primarily the repayment of bonds in an amount of approximately US$ 36

million, the repayment of short-term credit from banks and others in a net amount of approximately US$

30 million, the repayment of leasing liabilities in an amount of approximately US$ 19 million, the

payment of a dividend to shareholders in the company and to non-controlling interests in an amount of

approximately US$ 18 million and less the receipt of long-term loans in an amount of approximately

US$ 65 million

16. Disclosure in respect of the forecast cash flows for the repayment of the group's liabilities

As of the time of this report, there are no warning signs, as defined in Regulation 10 (B) 14 of the

Securities Regulations (Periodic and Immediate Reports) – 1970, in existence. In the Company's Board

of Directors' assessment, as at the reporting date, despite the working capital deficit in the separate

financial information that is attributed to the Company, there is nothing therein that indicates a liquidity

problem for the Company. This assessment is based on forecast cash flows.



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17. Significant events during and after the reporting period

A. See Note 6 to the interim consolidated financial information as of September 30, 2019.

B. In the period from the date of the information of financial position (September 30, 2019) and up to

a time shortly before the publication of the financial information (November 20, 2019), changes

have occurred in the exchange rates of the currencies in which the Group operates as compared

with the Shekel.

The following are details of the devaluation (revaluation), as aforesaid, (from September 30,

2019 to November 18, 2019):

Currency As a %

US Dollar (0.55)

Euro 0.64

Russian Ruble 0.49

Nigerian Naira (0.52)

Polish Zloty 2.64

Since a significant portion of the Company’s revenue are denoted in foreign currency, the

Company is of the opinion that the changes in the exchange rates as of the time of the publication

of this report, are expected to affect the Group's results and its information of financial position

(and this also includes the shareholders' equity). Together with this, the impact of the exchange

rates on the business results in the fourth quarter of 2019 will be determined in accordance with the

exchange rates that will be in effect during the course of and at the end of the quarter (December

31, 2019).

18. Self-purchase plan

For details regarding the Company’s self-purchase plan, see Section 18 of the Report of the Board of

Directors, which was attached to the Company's Hebrew version of the annual consolidated financial

statements as at December 31, 2018.

For details regarding the self-purchase of shares in the Company, see the consolidated statement of

changes in shareholders' equity in the interim consolidated financial information for the quarter.

19. Directors having accounting and financial expertise

No changes have occurred during the reporting period regarding the determination of the minimum

number of directors having accounting and financial expertise that is required in the Company's Board

of Directors. In February 2019, Ms. Michal Gur was appointed to serve as a (third) additional external

director in the Company, who the Board of Directors also views as having accounting and financial

expertise, in addition to which Mr. Avraham Israeli was also appointed to serve as an additional director

in the Company.



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20. Independent directors

As of the reporting date, the Company has not adopted any provisions in its articles of association in

respect of the number of independent directors within the definition of that term in section 1 of the

Companies Law – 1999.

21. Disclosure in respect of the corporation's Internal Auditor

No significant changes have occurred in the reporting period relation to the details in respect of the

Internal Auditor of the Company as detailed in the Company's periodic report for the year 2018.

22. Donations

Since the time of the publication of the Company's financial statements for the year 2018, there has not

been a significant change in relation to the Company's social involvement and contribution to the

community.

The Board wishes to thank the Company's managers and staff for their contribution.

THE BOARD

Itamar Deutscher Michael Salkind

Chief Executive Officer Chairman of the Board of Directors

November 20, 2019 ________________________________________________________________________________

In this Report of the Board of Directors for the period ended September 30, 2019, the figures in US Dollars

are a convenience translation of the amounts originally reported in new Israeli Shekels at the representative

exchange rate of the New Israeli Shekel against US Dollar on September 30, 2019 (US$ 1.- = NIS 3.482).

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Kost Forer Gabbay & Kasierer 144 Menachem Begin Blvd., Building A, Tel-Aviv 6492102, Israel

Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com

To: Electra LTD.

Financial InformationConvenience Translation of Interim Re:

At your request, we have reviewed the accompanying interim consolidated financial information of Electra

Ltd. ("the Company") as of September 30, 2019 and of the nine months and three months in the period ended

on September 30, 2019 ("the Interim Financial Information"). The Interim Financial Information is the

responsibility of the Company's Board of Directors and management. Our responsibility is to express a

conclusion regarding the Interim Financial Information based on our review.

We did not review the interim financial information of certain subsidiaries, whose assets constitute

approximately 3% of the total consolidated assets as of September 30, 2019 and whose revenues constitute

approximately 1% and approximately 2%, of the total consolidated revenue for periods of the nine months

and three months ended on September 30, 2019, respectively. Furthermore, we did not review the interim

financial information of certain companies accounted for at equity, the investment in which amounted to

approximately 10,822 thousand dollars as of September 30, 2019, and the Company's share of their profits

amounted to approximately 2,864 thousand dollars and approximately 333 thousand dollars for the periods of

nine months and of three months ended on September 30, 2019, respectively. The interim financial

information for those companies were reviewed by other auditors, whose reports have been furnished to us,

and our conclusion, insofar as it relates to amounts included for those companies, is based on the reports of

the other auditors.

We conducted our review in accordance with Review Standard 1 of the Institute of Certified Public

Accountants in Israel, "Review of Interim Financial Information Performed by the Independent Auditor of

the Entity". A review of interim financial information consists of making inquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review procedures. A

review is substantially less in scope than an audit conducted in accordance with generally accepted auditing

standards in Israel and consequently does not enable us to obtain assurance that we would become aware of

all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The accompanying Interim Financial Information in US Dollars are a convenience translation of the interim

consolidated financial statements as prepared in New Israeli Shekels as the rate of exchange of the Shekel

into US Dollars prevailing on September 30, 2019, as described in note 2F of the Interim Financial

Information.

Based on our review and the reports of the other auditors, we concluded an unqualified conclusion on the

Company's consolidated interim financial statements in our report dated November 20, 2019.

Based on our review and the reports of other auditors, nothing has come to our attention that causes us to

believe that the accompanying Interim Financial Information is not present fairly, in all material respects, the

information contained in it.

Tel-Aviv, Israel KOST FORER GABBAY & KASIERER

November 20, 2019 A Member of Ernst & Young Global

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ELECTRA LIMITED

CONSOLIDATED INFORMATION ON FINANCIAL POSITION

CONVENIENCE TRANSLATION INTO US DOLLARS

September 30 December 31

2019 2018 2018

Unaudited Audited

U.S. Dollars in thousands

Current assets

Cash and cash equivalents 82,590 52,066 152,534

Investments, restricted cash and deposit in trust 47,985 49,591 41,453

Trade receivables 323,989 279,411 286,925

Other receivables 73,210 51,914 45,719

Income receivable from works under construction contracts 317,829 248,670 271,675

Inventory 32,738 28,202 31,831

Inventory of real estate and rights in real estate 116,862 152,788 *) 146,536 *)

Asset held for sale - - 33,336

995,203 862,642 1,010,009

Non-current assets

Investments in entities accounted for at equity 142,367 167,558 *) 133,245 *)

Other long-term receivables 5,822 4,921 4,345

Fixed assets, net 162,438 68,948 70,724

Goodwill and other intangible assets, net 239,705 172,163 171,673

Intangible asset for a concession project 64,501 29,735 35,347

Receivables for concession arrangement for the provision of

services

21,670 24,340

25,438

Long-term inventories of real estate 18,121 19,226 19,245

Deferred taxes 11,058 5,323 8,640

665,682 492,214 468,657

1,660,885 1,354,856 1,478,666

*( Retrospective implementation, see Note 2D.

The accompanying notes form an integral part of the Interim Consolidated Financial information.

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ELECTRA LIMITED

CONSOLIDATED INFORMATION ON FINANCIAL POSITION


September 30 December 31

2019 2018 2018

Unaudited Audited

U.S. Dollars in thousands Current liabilities

Credit from banking entities and others 23,691 23,161 8,251

Loans to finance entrepreneurial real estate 39,044 63,527 67,536

Loan to finance a concession project 3,217 3,217 3,217

Current maturities of bonds 37,109 37,006 37,023

Current maturities of leasing liabilities 22,184 - -

Trade payables 320,055 277,083 350,221

Other payables 186,769 191,899 192,358

Dividend payable to shareholders in the company 9,807 9,503 -

Liabilities in respect of works under construction contracts 121,996 122,785 121,431 763,872 728,181 780,037

Non-current liabilities Liabilities to banking entities 26,362 28,918 26,018

Loan to finance a concession project 72,112 20,492 23,415

Bonds 195,961 170,191 232,390

Leasing liabilities 67,374 - -

Other long-term liabilities 164,415 74,276 69,040

Employee benefit liabilities, net 11,210 10,711 10,867

Deferred taxes 52,700 43,683 45,337

590,134 348,271 407,067

Equity attributed to shareholders in the company

Share capital 33,779 33,768 33,768

Share premium 94,475 92,811 92,811

Capital reserves on translation differences in investee

companies and other reserves, net (109,026) (93,748) (91,620)

Treasury shares (20,672) (18,930) (19,738)

Retained earnings 299,058 254,213 *) 265,031 *)

297,614 268,114 280,252

Non-controlling interests 9,265 10,290 11,310 Total equity 306,879 278,404 291,562

1,660,885 1,354,856 1,478,666



November 20, 2019

Date of approval of the Michael Salkind Itamar Deutscher Isaac Nissim

financial information

Chairman of the Board of

Directors

Chief Executive Officer

Chief Financial Officer

16

ELECTRA LIMITED

CONSOLIDATED INFORMATION ON PROFIT OR LOSS


Nine months ended Three months ended Year ended September 30 September 30 December 31 2019 2018 ***) 2019 2018 ***) 2018 ***) Unaudited Audited U.S. Dollars in thousands (except per share data)

Revenues from the performance of works and the provision of services

1,476,159 1,280,965 510,223 411,606 1,727,649

Cost of works and services (1,350,752) (1,173,885)*)**) (468,735) (377,036) *)**) (1,581,457)*)**)

Gross profit 125,407 107,080 41,488 34,570 146,192

Administrative and general expenses (52,214) (44,178) (18,521) (14,750) (57,597)

Selling, marketing and other expenses (7,684) (6,575) **) (3,400) (2,379) **) (9,709) **)

Company’s share of the profits(losses) of entities accounted for at equity, net

4,497 2,494 *) 1,893 (107) *) 3,974 *)

Other income (expenses), net 33,922 836 33,186 1,732 (4,545) *)

(21,479) (47,423) 13,158 (15,504) (67,877)

Operating income 103,928 59,657 54,646 19,066 78,315

Financing income 8,663 6,760 3,552 1,455 11,483

Financing expenses (23,843) (12,036) *) (9,389) (3,402) *) (19,317) *)

Financing expenses, net (15,180) (5,276) (5,837) (1,947) (7,834)

Income before taxes on income 88,748 54,381 48,809 17,119 70,481

Taxes on income (24,191) (14,523) (12,403) (3,535) (17,428)

Income from continuing operations 64,557 39,858 36,406 13,584 53,053

Income (loss) from discontinued operations, net

(5,669) 56 (3,996) 45 (799)

Net income 58,888 39,914 32,410 13,629 52,254

Net income attributable to:

Shareholders in the Company 54,173 35,633 30,830 12,303 46,451

Non-controlling interests 4,715 4,281 1,580 1,326 5,803

58,888 39,914 32,410 13,629 52,254

Net earnings (loss) per share attributable to shareholders in the Company (in U.S. Dollars) *)

Basic - Earnings (loss)

From continuing operations 16.53 9.86 9.59 3.40 13.08

From discontinued operations (1.56) 0.01 (1.10) 0.01 (0.22)

Basic net earnings per share 14.97 9.87 8.49 3.41 12.86

Fully diluted - Earnings (loss)

From continuing operations 16.53 9.86 9.40 3.39 13.08

From discontinued operations (1.56) 0.01 (1.05) 0.01 (0.22)

Diluted net earnings per share 14.97 9.87 8.35 3.40 12.86


**) Reclassified.

***) Reclassified, see note 6Q.


17

ELECTRA LIMITED

CONSOLIDATED INFORMATION ON COMPREHENSIVE INCOME


Nine months ended Three months ended Year ended

September 30 September 30 December 31

2019 2018 2019 2018 2018

Unaudited Audited


Net income 58,888 39,914 32,410 13,629 52,254

Other comprehensive income (loss)

- (after tax effects)

Amounts that will never be

reclassified to profit or loss:

Gain from the re-measurement of

defined benefit plans, net

- - - - 541

Amounts that will be classified or

reclassified to profit or loss, when

specific conditions are met:

Adjustments deriving from the

translation of the financial

statements of foreign operations,

net

(14,570) (1,786) (7,923) (2,621) (963)

Gain (loss) on hedging transactions,

net

(2,481) 27 (1,295) (259) 526

Other comprehensive income (loss)

(17,051) (1,759) (9,218) (2,880) 104

Total comprehensive income 41,837 38,155 23,192 10,749 52,358

Comprehensive income attributable

to:

Shareholders in the Company

37,205 33,884 21,665 9,426 46,564

Non-controlling interests

4,632 4,271 1,527 1,323 5,794

41,837 38,155 23,192 10,749 52,358


18

ELECTRA LIMITED

CONSOLIDATED INFORMATION ON CHANGES IN EQUITY


Attributable to shareholders in the Company

Share capital

Share premium

Retained earnings

Capital reserve for share-based

payment transactions

Capital reserve for

hedging transactions

Capital reserve

on the re- measurement

of defined benefit plans


translation of foreign operations

Treasury shares Total

Non-controlling

interests Total equity

Unaudited


Balance as of January 1, 2019 (Audited) 33,768 92,811 265,031 *) 2,604 616 414 (95,254) (19,738) 280,252 11,310 291,562

Net income - - 54,173 - - - - - 54,173 4,715 58,888

Other comprehensive income (loss):

Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (14,487) - (14,487) (83) (14,570)

Loss on hedging transactions, net - - - - (2,481) - - - (2,481) - (2,481)

Total other comprehensive loss - - - - (2,481) - (14,487) - (16,968) (83) (17,051)

Total comprehensive income (loss) - - 54,173 - (2,481) - (14,487) - 37,205 4,632 41,837

Exercise of option warrants into shares 11 1,664 - (1,664) - - - - 11 - 11

Purchase of treasury shares, net - - - - - - - (934) (934) - (934)

Dividend to non-controlling interests - - - - - - - - - (7,473) (7,473)

Purchase of non-controlling interests - - - - - - - - - 796 796

Cost of share-based payments - - - 1,226 - - - - 1,226 - 1,226

Dividend to shareholders in the Company - - (20,146) - - - - - (20,146) - (20,146)

Balance as of September 30, 2019 33,779 94,475 299,058 2,166 (1,865) 414 (109,741) (20,672) 297,614 9,265 306,879


The accompanying notes form an integral part of the interim consolidated financial information.

19

ELECTRA LIMITED




Share capital

Share premium

Retained earnings *)



Capital reserve for


Capital reserve






Non-controlling


Unaudited

U.S. Dollars in thousands Balance as of January 1, 2018

(Audited) 33,754 90,365 241,188 3,725 90 (127) (94,300) (7,682) 267,013 11,461 278,474

Changes following the initial implementation of IFRS 9 (see Note 2B) - - (1,423) - - - - - (1,423) - (1,423)

Balance as of January 1, 2018 following the initial implementation of IFRS 9 33,754 90,365 239,765 3,725 90 (127) (94,300) (7,682) 265,590 11,461 277,051

Net income - - 35,633 - - - - - 35,633 4,281 39,914



Gain on hedging transactions, net - - - - 27 - - - 27 - 27

Total other comprehensive income (loss) - - - - 27 - (1,776) - (1,749) (10) (1,759)

Total comprehensive income (loss) - - 35,633 - 27 - (1,776) - 33,884 4,271 38,155


Purchase of treasury shares, net - - - - - - - (11,248) (11,248) - (11,248)

Purchase of non-controlling interest - - (202) - - - - - (202) 296 94


Cost of share-based payments - - - 1,059 - - - - 1,059 - 1,059

Dividend to shareholders in the company - - (20,983) - - - - - (20,983) - (20,983)

Balance as of September 30, 2018 33,768 92,811 254,213 2,338 117 (127) (96,076) (18,930) 268,114 10,290 278,404


The accompanying notes form an integral part of the interim consolidated financial statements.

20

ELECTRA LIMITED




Share capital

Share premium

Retained earnings



Capital reserve for


Capital reserve






Non-controlling


Unaudited


Balance as of July 1, 2019 33,768 92,811 278,036 3,039 (570) 414 (101,871) (19,952) 285,675 10,699 296,374

Net income - - 30,830 - - - - - 30,830 1,580 32,410



Loss on hedging transactions, net - - - - (1,295) - - - (1,295) - (1,295)

Total other comprehensive loss - - - - (1,295) - (7,870) - (9,165) (53) (9,218)

Total comprehensive income (loss) - - 30,830 - (1,295) - (7,870) - 21,665 1,527 23,192


Purchase of treasury shares, net - - - - - - - (720) (720) - (720)


Cost of share-based payments - - - 791 - - - - 791 - 791


Balance as of September 30, 2019 33,779 94,475 299,058 2,166 (1,865) 414 (109,741) (20,672) 297,614 9,265 306,879


21

ELECTRA LIMITED




Share capital

Share premium




Capital reserve for


Capital reserve






Non-controlling


Unaudited

U.S. Dollars in thousands Balance as of July 1, 2018 33,754 90,365 251,615 4,463 376 (127) (93,458) (9,775) 277,213 8,671 285,884

Net income - - 12,303 - - - - - 12,303 1,326 13,629



Loss on hedging transactions, net - - - - (259) - - - (259) - (259)

Total other comprehensive income (loss) - - - - (259) - (2,618) - (2,877) (3) (2,880)

Total comprehensive income (loss) - - 12,303 - (259) - (2,618) - 9,426 1,323 10,749


Purchase of treasury shares, net - - - - - - - (9,155) (9,155) - (9,155)

Purchase of non-controlling interest - - (202) - - - - - (202) 296 94

Cost of share-based payments - - - 321 - - - - 321 - 321


Balance as of September 30, 2018 33,768 92,811 254,213 2,338 117 (127) (96,076) (18,930) 268,114 10,290 278,404


The accompanying notes form an integral part of the interim consolidated financial statements.

22

ELECTRA LIMITED




Share capital

Share premium




Capital reserve for


Capital reserve on

the remeasure-

ment of defined

benefit plans


translation of financial statements of foreign operations


Non-controlling


Audited U.S. Dollars in thousands

Balance as of January 1, 2018 33,754 90,365 241,188 3,725 90 (127) (94,300) (7,682) 267,013 11,461 278,474

Changes following the initial implementation of IFRS 9 - - (1,423) - - - - - (1,423) - (1,423)

Balance as of January 1, 2018 following the initial implementation of IFRS 9 33,754 90,365 239,765 3,725 90 (127) (94,300) (7,682) 265,590 11,461 277,051

Net income - - 46,451 - - - - - 46,451 5,803 52,254


Gain on the re-measurement of defined benefit plans, net - - - - - 541 - - 541 - 541

Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (954) - (954) (9) (963)

Gain on hedging transactions, net - - - - 526 - - - 526 - 526

Total other comprehensive income (loss) - - - - 526 541 (954) - 113 (9) 104

Total comprehensive income (loss) - - 46,451 - 526 541 (954) - 46,564 5,794 52,358


Acquisition of treasury shares - - - - - - - (12,056) (12,056) - (12,056)

Purchase of non-controlling interests - - (202) - - - - - (202) 296 94

Cost of share-based payment - - - 1,325 - - - - 1,325 - 1,325



Balance at December 31, 2018 33,768 92,811 265,031 2,604 616 414 (95,254) (19,738) 280,252 11,310 291,562

*) Retrospective implementation, see Note 2D.


23

ELECTRA LIMITED

CONSOLIDATED INFORMATION ON CASH FLOWS


Nine months ended Three months ended Year ended September 30 September 30 December 31 2019 2018****) 2019 2018****) 2018****) Unaudited Audited U.S. Dollars in thousands Cash flows from operating activities: Net income 58,888 39,914 32,410 13,629 52,254

Adjustments to reconcile net income to cash flows from operating activities:

Adjustments to profit and loss items: The Group's share of losses (profits) of

companies accounted for at equity, net

(4,497) (2,494) *) (1,893) 107 *) (3,974) *) Dividend received from companies

accounted for at equity

3,798 2,580 430 - 6,146 Depreciation and amortization 39,364 16,714 13,598 5,901 22,723 Increase (decrease) in employee benefit

liabilities, net

520 516 (32) 59 1,344 Adjustment for discontinued operations 5,669 (56) 3,996 (45) 799 Gain on the disposal of fixed assets and

investments, net

(33,235) (2,215) (32,692) (1,650) (2,339) Decrease (increase) in the value of

marketable securities, net

(576) (73) 41 10 98 Cost of share-based payment 1,226 1,059 791 321 1,325 Deferred taxes, net 4,492 2,123 2,191 601 568 Erosion (revaluation) of long-term

receivables and payables, long-term loans and bonds, net

8,682 1,082 4,193 (336) 806 Gain on the acquisition of a company at an opportunity price

(543) - - - -

Other expenses - 2,161 - - 3,239 *)

Changes in asset and liability items: Increase in trade receivables (9,544) (40,445) (4,578) (25,350) (48,485) Decrease (increase) in other receivables

and in respect of a concession arrangement for the provision of services

(575) (2,856) ***) 8,334 (1,958) ***) (1,236) Decrease (increase) in income receivable

from work under construction contracts

383 (7,578) 16,705 (16,565) (30,356) Decrease (increase) in inventory (1,190) 616 (2,649) 2,943 (2,966) Decrease in inventory of real estate and

rights in real estate **)

31,672 17,481 *) 16,413 7,845 *) 22,075 *) Decrease in trade payables (49,377) (92,235) (7,395) (20,978) (21,197) Decrease in other payables (6,304) (11,795) (13,270) (10,387) (10,703) Increase (decrease) in liabilities in

respect of works under construction contracts

(5,694) 43,924 4,634 25,491 41,331

(15,729) (71,491) 8,817 (33,991) (20,802) Net cash generated (absorbed) by

continuing operating activities (before acquisition of and investment in land)

43,159 (31,577) 41,227 (20,362) 31,452 Acquisition of and investment in land **) (5,001) (33,234) (1,394) (1,000) (33,554)

Net cash generated (absorbed) by continuing operating activities

38,158 (64,811) 39,833 (21,362) (2,102) Net cash absorbed by discontinued

operating activities

(4,295) (1,432) (1,578) (127) (2,937)

Net cash generated (absorbed) by operating activities

33,863 (66,243) 38,255 (21,489) (5,039)

*( Retrospective implementation, see Note 2D. **) The acquisition of and investment in land are presented under inventories of real estate and rights in real estate. ***) Reclassified. ****) Reclassified, see Note 6Q.


24

ELECTRA LIMITED



Nine months ended Three months ended Year ended September 30 September 30 December 31

2019 2018 2019 2018 2018

Unaudited Audited


Cash flows from investment activities: Investment in investee companies, net (1,270) (4,265) (3,658) (2,314) (1,824) Decrease (increase) in investments,

restricted cash and deposit in trust, net (6,770) 3,901 2,938 9,705 5,249 Purchase of fixed assets (17,896) (10,030) (5,601) (4,212) (14,710) Purchase of intangible assets (3,825) (1,307) (369) (482) (2,585) Change in intangible asset for a

concession project (44,069) (8,790) (14,275) (3,105) (12,772) Acquisition of operations and initially

consolidated companies (A) (44,956) 682 (912) - 682 Proceeds from the sale of fixed assets 1,954 4,726 614 3,373 5,658 Investment in marketable securities,

net (18) 4,051 3,699 7,917 11,019 Increase in long-term receivables, net (1,122) (588) (77) (2) (955) Consideration from the disposal of

investments in companies accounted for at equity 38,340 - 38,340 - -

Net cash generated (absorbed) by continuing investment activities (79,632) (11,620) 20,699 10,880 (10,238)

Net cash absorbed by discontinued investment activities (282) (20) (252) (5) (44)

Net cash generated (absorbed) by investment activities (79,914) (11,640) 20,447 10,875 (10,282)

Cash flows from financing activities: Issuance of share capital 11 14 11 14 14 Payments of dividends to non-

controlling interests, to shareholders in the company and others (17,812) (19,540) (2,961) - (29,546)

Acquisition of treasury shares, net (935) (11,248) (720) (9,155) (12,056) Issuance of bonds, net - - - - 62,314 Receipt of long term loans 81,986 7,724 15,776 297 10,609 Repayment of loans and other long-

term liabilities (740) (5,120) (325) (1,846) (5,148) Repayment of bonds (36,134) (35,896) - (18,920) (35,896) Short-term credit from banking entities

and others and for the financing of entrepreneurial real estate, net (29,898) 34,982 (49,435) 13,529 17,956

Repayment of leasing liabilities (18,683) - (5,035) - -

Net cash generated (absorbed) by continuing financing activities (22,205) (29,084) (42,689) (16,081) 8,247

Net cash generated by discontinued financing activities 550 72 550 (181) 72

Net cash generated (absorbed) by financing activities (21,655) (29,012) (42,139) (16,262) 8,319

Exchange differences in respect of cash

and cash equivalents (2,238) (323) (1,229) (551) 252

Increase (decrease) in cash and cash equivalents (69,944) (107,218) 15,334 (27,427) (6,750)

Cash and cash equivalents at the beginning of the period 152,534 159,284 67,256 79,493 159,284

Cash and cash equivalents at the end of

the period 82,590 52,066 82,590 52,066 152,534


25

ELECTRA LIMITED



Nine months ended Three months ended Year ended

September 30 September 30 December 31

2019 2018 2019 2018 2018

Unaudited Audited


(A)

Acquisition of initially

consolidated companies

The consolidated company's

assets and liabilities at date of

acquisition:

Working capital, net (excluding

cash and cash equivalents)

(25,966) 9 - - 9

Fixed assets, net (5,742) (40) - - (40)

Intangible assets, net (14,951) (3,673) - - (3,921)

Goodwill (62,802) (4,213) - - (4,610)

Non- current assets (188) - - - -

Deferred taxes 343 997 - - 1,054

Liability for put option and future

dividends for non-controlling

interests

52,042 4,288 - - 4,876

Non- current liabilities 11,366 205 - - 205

Non-controlling interests 796 - - - -

Collection of income receivable

(payment) for cash flows in an

interim period

146 3,109 (912) - 3,109

(44,956) 682 (912) - 682

(B) Additional cash flow

information:*)

Cash paid during the period for:

Interest 9,748 8,026 2,085 4,103 12,622

Taxes on income 16,120 13,711 4,350 2,860 19,233

Cash received during the period

for:

Interest 2,412 4,033 1,023 679 7,161

Taxes on income 2,572 4,121 771 78 4,150

(C) Significant activities, not

involving cash flows:

Dividend payable to shareholders

in the Company

9,807 9,503 9,807 9,503 -

*) Including cash in respect of discontinued operations.


ELECTRA LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION


26

Note 1 - General

The accompanying Financial Information, is derived from the Hebrew version of the interim

consolidated financial statement as at September 30, 2019 and for the nine months and three month

ended on that date and the accompanying notes thereto (hereinafter - The interim consolidate

financial statement).

These financial information have been prepared in a condensed format as at September 30, 2019 and

for the period of three months ended on that date (hereinafter – The interim consolidated financial

information).

The interim consolidated financial information should be read together with the Company’s Hebrew

version of the annual consolidated financial statement as at December 31, 2018 and for the year

ended on that date and the accompanying notes thereto (hereinafter – The Annual Consolidated

Financial Statement).

Note 2 - Significant accounting policies

A. The format for the preparation of the interim consolidated financial information

The interim consolidated financial information is a translation which is based on The Interim

Consolidated Financial Statements, which have been prepared in accordance with

International Financial Reporting Standard IAS 34 "Financial Reporting for Interim

Periods", and also in accordance with the disclosure requirements in accordance with section

D of the Securities Regulations (Periodic and Immediate Reports) - 1970.

The accounting policies that have been implemented in the preparation of the interim

consolidated financial statements are consistent with those that were implemented in the

preparation of the annual consolidated financial information, except as stated in Notes 2B

and 2C below.

B. Leases

As detailed in Note 2C(1) of the annual consolidated financial statements, regarding the

initial implementation of International Financial Reporting Standard Number 16 – Leases

(hereinafter: "The Standard"), the Group has elected to implement the provisions of the

Standard by way of partial retrospective implementation (without restating the comparative

figures).

The accounting policy that has been implemented as from January 1, 2019 in respect of

leases is as follows:

The Company is treating the contract as a leasing contract where pursuant to the terms of the

contract, the right to control an identified asset is transferred for a period of time for

consideration.

1. The Group as lessee:

For transaction in which the Group is a lessee, it recognizes a right to use asset at the

time of the beginning of the lease against a liability for leasing, which is except for

leasing transactions in which the base asset has a low value, in which the Group has

elected to recognize the leasing payments as an expense in profit or loss on a straight-

line basis over the course of the period of the lease. Within the framework of the

measurement of the liability in respect of leasing, the Group has elected not to

implement the relief that has been provided in the Standard and it has made a

segregation between the leasing component and the non-leasing components, such as

management services, maintenance services and etcetera, which are included in the

same transaction.

In transactions in which an employee is entitled to a vehicle from the Group as part of

their terms of employment, the Group treats the transactions as an employee benefit

pursuant to the provisions of IAS 19 and not as a sub-leasing transaction.

At the time of the beginning of the lease, the liability in respect of a lease includes all

of the leasing payments that have not yet been paid, discounted using the interest rate

that is inherent in the lease, where it can be determined readily or at the Group's

additional interest rate. After the beginning of the lease, the Group measures the

liability in respect of the lease using the effective interest method.

ELECTRA LIMITED



27

Note 2 – Significant accounting policies (Continued)

B. Leases (Continued)


leases is as follows (Continued):

1. The Group as lessee: (Continued)

A right to use asset at the time of the beginning of the lease is recognized at the level

of the liability in respect of the lease with the addition of the leasing payments that

have been paid at the time of the beginning of the lease or before them and with the

addition of the transaction costs that have been incurred.

The right to use asset is measured under the cost model and amortized over the shorter

of its useful lifetime, or the period of the lease. Where signs of impairment in value

exist, the Group tests for impairment in the right to use asset in accordance with the

provisions of IAS 36.

2. The Group as lessor

The tests for the classification of a lease as finance or as operating is based on the

substance of the agreement and the testing is performed at the time of the commitment

in accordance with the principles that were determined in the Standard:

a. Finance leasing

A leasing transaction in which substantially all of the risks and the benefits that

are connected to the ownership of the leased asset are transferred to the lessee is

classified as a finance lease

Leasing transactions in which the Group is a lessor other than a manufacturer or a

trader

At the time of the beginning of the lease, the leased asset is de-recognized against

which a "receivables for finance leases" asset is recognized in an amount that is

equivalent to the present value of the leasing receipts, discounted at the interest

rate that is inherent in the lease. Any difference whatsoever between the balance

of the leased asset before de-recognition and the balance of the receivables for the

finance lease is recognized in profit or loss.

b. Operating leasing

A leasing transaction in which substantially all of the risks and the benefits that

are connected to the ownership of the leased asset are not transferred is classified

as an operating lease. Leasing receipts are recognized as revenue in profit or loss

on a straight-line over the length of the period of the lease.

3. Index-linked lease payments

At the beginning of the lease, the Group uses the index that exists at the beginning of

the lease for the purpose of calculating the future leasing payments.

In transactions in which the Group is a lessee, changes in the level of the future

leasing payments as a result of a change in the index are capitalized (without changing

the discounting rate that applies to the liability for the lease) to the balance of the right

to use asset and are only reflected as an adjustment of the balance of the liability for

the lease where a change has occurred in the cash flows, which derives from a change

in the index (i.e. from the time at which the adjustment of the leasing payments enters

force).

ELECTRA LIMITED



28


B. Leases (Continued)


leases is as follows (Continued):

4. Options for the extension and the cancellation of the period of the lease

A lease period that cannot be cancelled also include periods that are covered by an

option to extend the lease where it is reasonably certain that the option to extend will

be exercised and also periods that are covered by an option to cancel the lease, where

it is reasonably certain that the option to cancel will not be exercised.

In a case in which a change has occurred in the expectation regarding the exercise of

the option to extend or the non-exercise of the cancellation option, the Group re-

measures the balance of the liability for the lease in accordance with the updated

period of the lease, in accordance with the updated discount rate on the day on which

the change in the expectation occurs, where the amount of the change is reflected

against the balance of the right to use asset until it is zeroed, beyond which it is

reflected in profit or loss. 5. Amendments to a lease

Where an amendment is made to the terms of a lease, which does not reduce the extent of the lease and which is not treated as a separate leasing transaction, the Group re-measures the balance of the liability for the lease in accordance with the updated terms of the lease, in accordance with the updated discount rate on the day on which the amendment is made, where the amount of the change in the balance of the liability is reflected against the balance of the right to use asset.

Where an amendment is made to the terms of the lease, which leads to a reduction in the extent of the lease, the Group recognizes a gain or a loss deriving from the full or partial de-recognition of the balance of the right to use asset and the liability for the lease. Afterwards, the Group re-measures the balance of the liability for the lease in accordance with the amended terms of the lease, in accordance with the updated discount rate at the time of the amendment and it reflects the amount of the change in the balance of the liability for the lease against the balance of the right to use asset.

C. The initial implementation of new Financial Reporting Standards and Revisions to existing

Accounting Standards

1. Initial implementation of IFRS 16 - Leases:

In January 2016, the IASB published International Financial Reporting Standard 16 – Leases (hereinafter – "The Standard"). The Standard replaces International Accounting Standard 17 (hereinafter - "The old standard"), Interpretation Number 4 of the Interpretations Committee and Interpretation Number 15 of the Standing Interpretations Committee. Pursuant to the Standard, leasing is defined as a contract, or part of a contract, which transfers the right to use an asset for a period of time in consideration for payment.

The following are the main impacts of the Standard:

The Standard requires lessors to recognize all leases in the statement of financial position (apart from certain exceptions, see below). Lessees are to recognize a liability for lease payments against which they are to recognize a right of use asset, in a similar manner to the accounting treatment of a finance lease pursuant to the standard that was cancelled – IAS 17 – Leases. Furthermore, lessees are to recognize interest expenses and depreciation expenses separately.

ELECTRA LIMITED



29



Accounting Standards (Continued)

1. Initial implementation of IFRS 16 – Leases (Continued):

Variable lease payments, which are not dependent on an index or an interest rate, which are based on performance or usage, are to be recognized as an expense on the part of a lessee or as income on the part of lessors at the time that they arise.

In the event of a change in variable lease payments, which are index-linked, the lessee is to reassess the liability for the lease, where the impact of the change is to be reflected against the right of use asset.

The standard includes two exceptions in which lessees are entitled to treat leases in accordance with the existing accounting treatment in respect of operating leases, in the case of the leasing of assets with a low monetary value or in the case of leases with a period of up to one year.

The accounting treatment on the part of the lessor remains significantly unchanged as compared with the old standard, i.e. classification as a finance lease or as an operating lease.

The Standard is being initially implemented in these financial statements. As is

permitted under the Standard the Group has elected to adopt the Standard in

accordance with the partial retrospective implementation approach, where:

The balance of the right of use assets are stated at the level of the liability for leasing.

Pursuant to this approach, there is no requirement to restate the comparative figures.

The balance of the liability at the time of the initial implementation of the Standard is

calculated using the Group's additional interest rate as exists as at the time of the

initial implementation.

See Note 2B above for details regarding the accounting policy that is being

implemented as from the time of the initial implementation of the Standard.

The main impact of the initial implementation of the Standard is in relation to existing

lease contracts in which the Group is the lessee. Pursuant to the Standard, as stated in

Note 2B above, except for exceptions, the Group recognizes a balance of a liability

against a balance of a right to use asset in respect of each lease contract in which it is

the lessee, which is different from the policy that it implemented under the provisions

of the old standard, pursuant to which in a lease contract in which substantially all of

the risks and the benefits that are inherent in the ownership of the leases asset are not

transferred, the leasing payments were recognized as an expense in profit or loss on a

straight line over the period of the lease.

The following are data in relation to the initial implementation of the Standard as at

January 1, 2019 in respect of leasing contracts, which were in force at the time of the

initial implementation:

a. The impact of the initial implementation of the new Standard as at January 1, 2019, was to lead to an increase of US$ 1,691 thousand in other receivable and other long-term receivable, an increase of US$ 94,506 thousand in fixed assets, an increase of US$ 71,584 thousand in long-term leasing liabilities and an increase of US$ 24,613 thousand in current maturities for leading liabilities, without any change in the balance of the Group's shareholders' equity.

b. The Group is assisted by an external appraiser for the purpose of determining the nominal interest rate that is appropriate for discounting the leasing contracts, which is in accordance with the companies' financing risks in accordance with the average lifetimes to maturity of the lease contracts and also in accordance with other economic variables. The weighted average additional interest rate that has been used for discounting the future leasing payments in the calculation of the balance of the liability for leasing at the time of the initial implementation of the Standard was 2.94%.

ELECTRA LIMITED



30



Accounting Standards (Continued)

1. Initial implementation of IFRS 16 – Leases (Continued):

c. The adjustment between the amount of the minimal future leasing liabilities as reported in Note 28B(12) to the annual consolidated financial statements and the balance of the leasing liabilities as at January 1, 2019 derives primarily as a result of the impact of the discounting of the future payments at the Group's incremental interest rate at the time of the initial implementation.

d. The relief, which was implemented at the time of the initial implementation of the Standard – the Group has elected to use a uniform discounting rate for lease contracts containing similar characteristics.

2. IAS 28- Investments in Associates and Joint Ventures

In October 2017, the IASB published a revision to International Accounting Standard

28, investments in associates and joint ventures (hereinafter: "The Revision). The

Revision clarifies that the long term rights (such as loans receivable or investments in

preference shares), which form a part of a net investment in an associated company or

joint venture, will be subject firstly to the provisions of IFRS 9 in full (both regarding

the measurement and also regarding the matter of impairment in value) and, thereafter,

the balances of those rights will be subject to the provisions of IAS 28. In light of the

provisions of the Revision, as aforesaid, the implementation of the "layers method", as

has found expression in the Securities Authority's Enforcement Ruling 11-2 is no

longer relevant

The revision is being initially implemented in these financial information. The Group

is implementing the provisions of the Revision retrospectively, without the

restatement of the comparative figures as it implemented the provisions of IFRS 9.

After having examined the implications of the implementation of the Revision, the

Group has reached the conclusion that its implementation does not have a significant

impact on the Group's financial information.

D. Retrospective implementation of a change in policy

Change in accounting policy on the subject of the capitalization of credit costs

In March 2019, the International Financial Reporting Standards Interpretations Committee

("IFRIC") published an interpretation regarding the accounting treatment of credit costs in

projects in which the recognition of income is over time (hereinafter – "The interpretation").

In accordance with the interpretation, it will not be possible to capitalize credit costs to

project in which the recognition of income is over time, as from the time at which the asset

that is the subject of the transaction, is "ready for sale".

In July 2019, the Securities Authority in Israel validated the IFRIC's decision. As a result,

credit costs for projects in which revenues are recognized over time are accrued to inventory

until the time that the building permit is received.

The impact of the implementation of the interpretation is the recognition of credit costs,

which do not qualify for capitalization, as an expense in the statement of profit or loss at the

time that they are incurred instead of the capitalization of the credit costs to inventory and

the recognition of the credit costs through cost of sales at the time at which the costs are

recognized in respect of the project in the statement of profit or loss pursuant to IFRS 15. In

accordance with the interpretation, its implementation constitutes a change in accounting

policy and is executed retrospectively (Including the correction of the comparative figures).

The Group has loans and other liabilities containing certain financial covenants. The Group,

together with its legal counsel has examined the terms of the loan agreements and the other

liabilities in order to estimate the implications, if any, of the changes in the accounting policy

on the expected compliance with its financial covenants.

The Group has reached the conclusion that the change in the accounting policy has not had

an impact on the compliance with the financial covenants.

ELECTRA LIMITED



31


D. Retrospective implementation of a change in policy (Continued)

The impact of the change in the accounting policy on the Group's financial information is

primarily a decrease in the balance of the inventory of real estate and rights in real estate and

a decrease in the balance of the investment in entities that are accounted for at equity.

Furthermore, as a result of the change in the accounting policy, the balance of the retained

earnings as at January 1, 2018 and as at January 1, 2019 has been reduced by the amounts of

US$ 2,466 thousand and of US$ 2,378 thousand, respectively. The impact of the change in

the policy on the financial information for the year 2018, and for the periods of nine months

and of three months ended on September 30, 2018 and on September 30, 2019, is not

material.

E. Details in respect of the Israeli Consumer Prices Index and the exchange rates of various

currencies that are relevant to the group

September 30 December 31 2019 2018 2018

Israeli Consumer Prices Index (in points) *) 225.12 223.77 224.00 Exchange rates (in NIS):

U.S. Dollar 3.48 3.63 3.75

Euro 3.81 4.22 4.29

100 Russian Ruble 5.41 5.53 5.40

100 Nigerian Naira 0.96 1.00 1.04

Polish Zloty 0.87 0.99 1.00 Nine months ended Three months ended Year ended September 30 September 30 December 31 2019 2018 2019 2018 2018

Rate of change in the period (%):

Israeli Consumer

Prices Index 0.50 1.10 (0.70) 0.20 1.20

U.S. Dollar (7.10) 4.61 (2.36) (0.63) 8.10

Euro (11.34) 1.52 (6.32) (0.93) 3.35

Russian Ruble 0.19 (8.13) (4.39) (4.92) (10.37)

Nigerian Naira (7.94) (4.03) (2.77) (5.05) (0.22)

Polish Zloty (12.83) (0.87) (8.92) 1.16 0.24

*) The known index on an average basis of 1993 = 100.

F. Convenience translation

The Interim Consolidate Financial Information in US Dollars is a translation of the statements

as prepared in New Israeli Shekels ("NIS" or "Shekel") at the rate of exchange of the Shekel

for the US Dollar prevailing on September 30, 2019 (NIS 3.482 = US$ 1).

It should be noted that the New Israeli Shekel amounts, on the basis of which the convenience

translation figures were prepared, do not necessarily represent the current cost amounts of the

various elements in the interim consolidated financial statements and, also, that it should not

be construed from the translation into US Dollar figures that the Israeli currency amounts

actually represent, or could be converted into Dollars. This financial information has been

prepared for the convenience of the reader. In the event of any discrepancy between the

contents of this translation and the Hebrew original, the Hebrew original prevails.

ELECTRA LIMITED



32

Note 3 – Business combinations

A. The Gilston Electrical Contracting Corp, transaction

The Gilston Electrical Contracting Corp. (hereinafter – "Gilston"), is a veteran contracting

company that operates in New York, in the United States, through three divisions: A large

electrical works division (infrastructures and instillations in railway stations, waste water

treatment plants and etcetera), the hospitals division, which provides service works in

hospitals and the public housing buildings division, which provides maintenance and

refurbishment services for buildings used for public housing.

1. The manner of the acquisition

On December 29, 2018, the Company, operating through a wholly owned American

subsidiary company (hereinafter – "The subsidiary company"), signed on a binding

agreement (hereinafter – "The agreement") for the acquisition of 51% of Gilston's share

capital (hereinafter – "The transaction"). The transaction was completed on February 2,

2019 and the consideration was paid, pursuant to the provisions of the agreement.

2. The consideration for the acquisition

In consideration for the shares being sold, the Group paid an amount of approximately

US$ 21.9 million to the sellers in cash at the time of the completion.

3. Option

Within the framework of the commitment, a separation mechanism was set by mean of

a call option that is afforded to the subsidiary company and a put option that is afforded

to the seller of all of the seller's holdings in Gilston (49%), at the end of a period of 5

years after the completion of the transaction, at a price based on an agreed formula.

4. The cost of the acquisition

The Group was assisted by an independent external appraiser for the purpose of

preparing a paper on the allocation of the cost of the acquisition (PPA) for the purpose

of the interim consolidated financial statements. The intangible assets that were

identified in the acquisition are an orders backlog of approximately US$ 5.5 million

(which will be amortized over 4 years), customers contacts of approximately US$ 1.2

million (which will be amortized over 11 years), and goodwill of approximately

US$ 29.7 million. The overall net cost of the acquisition amounted to approximately

US$ 49 million. The allocation of the cost of the acquisition is temporary. The Group

has consolidated Gilston's financial statements since February 2019, and it is presented

under the construction and infrastructures projects abroad segment.

The following is the attribution of the cost of the acquisition at the time of the transfer

of the shares:

Fair value

US$ thousands

Working capital, net 12,042

Fixed assets 1,478

13,520

Long-term liabilities (940)

Identified assets, net 12,580 Goodwill and intangible assets deriving from the acquisition 36,461

Total acquisition cost 49,041

The acquisition cost at the time of the transfer of the shares-

Cash consideration 22,854 Liability for put option and future dividends to non-controlling interests 25,658 Liability for additional acquisition costs 529


ELECTRA LIMITED



33

Note 3 – Business combinations

B. The Hellman Electrical Corp, transaction

The Hellman Electrical Corp. (hereinafter – "Hellman") operates in New York, through three divisions: electrical contracting for heavy construction (transportation, lighting, security, safety and control systems), the datacom division, which provides the planning instillation and maintenance of data transfer infrastructures and the internal division, which includes refurbishments and supplementary works for hospitals, schools, colleges and etcetera.

1. The manner of the acquisition

On December 29, 2018, the Company, operating through a wholly owned American subsidiary company (hereinafter – "The subsidiary company"), signed on a binding agreement for the acquisition of 51% of Hellman's share capital (hereinafter – "The transaction"). The transaction was completed on February 2, 2019 and the consideration was paid, pursuant to the provisions of the agreement.

2. The consideration for the acquisition

In consideration for the shares being sold, the Group paid an amount of approximately US$ 21.4 million to the sellers in cash at the time of the completion.

3. Option

Within the framework of the commitment, a separation mechanism was set by mean of a call option that is afforded to the subsidiary company and a put option that is afforded to the seller of all of the seller's holdings in Hellman (49%), at the end of a period of 5 years after the completion of the transaction, at a price based on an agreed formula.

4. The cost of the acquisition

The Group was assisted by an independent external appraiser for the purpose of preparing a paper on the allocation of the cost of the acquisition (PPA) for the purpose of the interim consolidated financial statements. The intangible assets that were identified in the acquisition are an orders backlog of approximately US$ 2.0 million (which will be amortized over 3 years), customers contacts of approximately US$ 3.0 million (which will be amortized over 11 years), a non-competition agreement of approximately US$ 2.9 million (which will be amortized over 10 years) and goodwill of approximately US$ 32.4 million. The overall net cost of the acquisition amounted to approximately US$ 49.1 million. The allocation of the cost of the acquisition is temporary. The Group has consolidated Hellman's financial statements since February 2019, and it is presented under the construction and infrastructures projects abroad segment and in the services and maintenance segment. The following is the attribution of the cost of the acquisition at the time of the transfer of the shares: Fair value

US$ thousands

Working capital, net *) 14,802

Deferred taxes 325

Fixed assets 4,069

19,196

Long-term liabilities (10,423)

Identified assets, net 8,773

Goodwill and intangible assets deriving from the acquisition 40,320


The acquisition cost at the time of the transfer of the shares

Cash consideration 22,293

Liability for put option and future dividends to non-controlling

interests 26,271

Liability for additional acquisition costs 529


*) Including commitments to departmental managers, some of which derive from a

change in control.

ELECTRA LIMITED



34

Note 4 - Operating segments

A. General:

As stated in the annual consolidated financial statements as at December 31, 2018, the Group

operates in a number of segments, as follows:

1. The construction and infrastructure projects in Israel.

2. The construction and infrastructure project abroad.

3. Services and maintenance.

4. The development and construction of entrepreneurial real estate.

5. Concessions.

For further information see Note 1 A to The annual consolidated financial statements.

B. The reporting of operating segments:

For the nine months ended September 30, 2019

Construction

and

infrastructure

projects

in Israel

Construction

and

infrastructure

projects

abroad

Services

and

maintenance

Development &

construction of


Concessions Adjustments

Total

Unaudited

U.S. Dollars (in thousands(

Revenues 760,043 239,962 413,931 90,907 43,021 (71,705) 1,476,159

Inter-segmental

revenues (66,075) - (5,630) - - 71,705 -

Total external

revenues 693,968 239,962 408,301 90,907 43,021 - 1,476,159

Segmental income 14,517 17,389 38,637 12,775 32,083 837 116,238

Less – unallocated

expenses:

Administrative and

general expenses (11,668)

Selling and marketing (268)

Others (374)

, netFinancing (15,180)

Income before taxes

on income 88,748

ELECTRA LIMITED



35

Note 4 – Operating segments - (Continued)

B. The reporting of operating segments: - (Continued)

For the nine months ended September 30, 2018 **)

Construction

and

infrastructure

projects

in Israel

Construction

and

infrastructure

projects

abroad

Services

and

maintenance

Development &

construction of



Total

Unaudited


Revenues 798,248 74,768 364,824 86,265 17,210 (60,350) 1,280,965

Inter-segmental revenues (55,268) - (5,082) - - 60,350 -

Total external revenues 742,980 74,768 359,742 86,265 17,210 - 1,280,965

Segmental income (loss) 28,937 3,983 36,174 9,059 *) (1,337) (2,826) 73,990

Less – unallocated expenses:

Administrative and general expenses (12,005)


Others (2,162)

, netFinancing (5,276) *)

Income before taxes on income 54,381


**) Reclassified, see Note 6Q.

For the three months ended September 30, 2019

Construction

and

infrastructure

projects

in Israel

Construction

and

infrastructure

projects

abroad

Services

and

maintenance

Development &

construction of



Total

Unaudited


Revenues 252,015 96,765 135,685 37,020 11,377 (22,639) 510,223

Inter-segmental revenues (21,302) - (1,337) - - 22,639 -

Total external revenues 230,713 96,765 134,348 37,020 11,377 - 510,223

Segmental income 3,405 6,342 12,000 4,587 31,749 526 58,609

Less – unallocated expenses:

Administrative and general expenses (3,861)


, netFinancing (5,837)

Income before taxes on income 48,809

ELECTRA LIMITED



36

Note 4 – Operating segments - (Continued)

B. The reporting of operating segments: - (Continued)

For the three months ended September 30, 2018 **)

Construction

and

infrastructure

projects

in Israel

Construction

and

infrastructure

projects

abroad

Services

and

maintenance

Development &

construction of



Total

Unaudited


Revenues 249,468 26,030 121,872 34,062 5,010 (24,836) 411,606

Inter-segmental

revenues (22,808) - (2,028) - - 24,836 -

Total external

revenues 226,660 26,030 119,844 34,062 5,010 - 411,606

Segmental income

(loss) 7,993 1,280 11,981 3,251 *) (808) (442) 23,255


expenses:

Administrative and



, netFinancing (1,947) *)

Income before taxes

on income 17,119

For the year ended December 31, 2018 **)

Construction

and

infrastructure

projects

in Israel

Construction

and

infrastructure

projects

abroad

Services

and

maintenance

Development &

construction of

entrepreneurial real estate Concessions Adjustments Total

Audited


Revenues 1,077,518 107,847 487,903 114,414 23,179 (83,212) 1,727,649 Inter-segmental revenues (76,991) - (6,221) - - 83,212 -

Total external revenues 1,000,527 107,847 481,682 114,414 23,179 - 1,727,649

Segmental income (loss) 37,780 6,114 48,852 9,424 *) (1,978) (2,074) 98,118


expenses:

Administrative and


Selling and marketing

expenses (219)

Others (4,225)

Financing, net (7,834) *)

Income before taxes on

income 70,481


**) Reclassified, see Note 6Q.

.

ELECTRA LIMITED



37

Note 5 – Financial instruments

The following are the carrying values in the accounting records and the fair values of financial

instruments, which are not presented at their fair value in the financial information:

As of September 30 As of December 31

2019 2018 2018

Carrying

value

Fair value Carrying

value

Fair value Carrying

value

Fair value

Unaudited Audited

U.S. Dollars (in thousands( Loans from banking entities and

others – at fixed interest *)

In NIS – Index linked 202 201 316 325 287 295

In NIS – Unlinked 30,229 30,422 29,132 28,999 28,921 29,514

Bonds **)

Bonds (Series C) –

Index linked 35,251 37,004 52,562 55,973 52,010 54,636

Bonds (Series D and E) –

Unlinked 197,405 216,250 152,789 162,483 214,670 222,245

Total 263,087 283,877 234,799 247,780 295,888 306,690

*) The fair value of the long-term loans that bear fixed rate interest is based on a calculation of

the present value of the cash flows in accordance with the generally accepted interest rate for

similar loans with similar characteristics, excluding the deferred expenses in respect of the

recruitment of loans.

**) The fair value of marketable bonds is based on quoted prices in an active market as of the

date of the statement of financial position.

Note 6 - Significant events in the reporting period and thereafter

A. On January 13, 2019, the Company, operating through a subsidiary company, signed on an

agreement for the establishment of an office campus for Amdocs Israel in Ra'anana, in which

the activity of Amdocs' employees in Israel will be concentrated. The campus will contain 4

office buildings, areas for landscaping and 3 underground levels. The overall consideration

that is expected from the performance of the works amounts to US$ 95 million.

B. On January 22, 2019, Electra Elco C&S Ltd., a wholly owned subsidiary company of the

Company and Electra Infrastructures Ltd., a consolidated company, received notification that

their joint winning of a tender for the performance of civil engineering works, instillation and

running in of equipment, pipelines, electricity, devices and control system within the

framework of the Dan Region Sewage Treatment Works (Stage 3) had been approved. The

overall consideration that is expected from the performance of the works amounts to US$ 174

million.

C. On February 2, 2019, transactions were completed for the acquisition of 51% of the share

capital of Gilson Electrical Contracting Corp. and 51% of the share capital of Hellman Electric

Corp., which are veteran contracting companies in the electrical works field in New York City

in the United States. See Note 3 for additional details.

D. On March 3, 2019, Maalot S&P ratified a rating of AA-/Stable for the Company and for the

bonds (Series D and E). On September 22, 2019 Maalot S&P lowered the rating for the

Company and for the bonds (Series D and E) to a rating of A+/Stable, as a result of an increase

in the leveraging rate.

ELECTRA LIMITED



38

Note 6 - Significant events in the reporting period and thereafter (Continued)

E. On March 13, 2019, within the context of an investigation by the Competition Authority, a

search was conducted in the offices of the Company's elevators division, documents and

computer media were collected from the Company and employees were questioned. To the

best of the Company's knowledge, the investigation deals with suspicions of transgressions of

the Economic Competition Law and additional transgressions under the Penal Code.

F. On March 27, 2019, the Company's Board of Directors approved the distribution of a dividend

in an amount US$ 10.3 million (approximately US$ 2.86 a share), which was paid on April 18,

2019.

G. The Planetograd project

1. The transfer of ownership over an additional parcel

Further to what is stated in Note 13C (1) to the annual consolidated financial statements,

in the reporting period, the ownership of an additional parcel in the first block was

transferred and the purchaser handed over two autonomous bank guarantees to the seller

as collateral for the consideration for an additional parcel in the first block (Parcel 56),

in an overall amount of approximately 811 million Rubles (approximately US$ 12.9

million in terms of 100%). Against the delivery of the said bank guarantees, the

mortgage that had been recorded on that parcel in support of the seller was removed.

The purchaser has begun marketing apartments in the parcel.

2. Legal proceedings

Further to what is stated in Note 13C(1) to the annual consolidated financial statements,

regarding legal proceedings in relation to the validity of Morgal's PPT, in the reporting

period, in accordance with partial information that appears on the Russian courts'

website, the petitioners have submitted an additional petition in the Supreme Court in

Moscow regarding the abovementioned ruling by the Supreme Court in Moscow. In the

reporting period, the Supreme Court dismissed the said petition by the petitioners.

3. In the reporting period, negotiations were held between the purchaser and the seller

(hereinafter: "The parties"), for the making of changed in the agreements between the

parties. This was done both against the background of the delay that was caused for the

project as a result of legal proceedings that have been conducted in the last two years

against the PPT and the building permits that have been given for the project and also

against the background of the change in the legislation in Russia, which restricts the

possibilities for entrepreneurs there to make use of the purchasers of apartments' monies

for the purpose of constructing the project other than by means of trust accounts

(accounts in which monies can only be released upon the completion of the construction

and the receipt of approval for occupation).

The abovementioned negotiation is still being conducted and this includes the

examination of the relevant financing and collateral aspects opposite the banks in

Russia.

However, already in the reporting period, it has been agreed between the parties that

Morgal will purchase approximately 430 apartments that will be built in the project in

parcels 56, 62 and 63. The timing of the payment by Morgal for the abovementioned

apartments has been set at the time of the handing over of the apartments in two and a

half years' time. The purchase agreement includes a unilateral option to cancel, which

has been granted to Morgal, pursuant to which Morgal is entitled to give notification of

the cancellation of the agreements for the purchase of the said apartments and to bind

the sellers to sign on the cancellation agreements at any time, where immediately upon

the notification on Morgal's part of its operation of the cancellation option it will be

exempt from the duty to pay for the said apartments. In the reporting period, Morgal

exercised the abovementioned cancellation option in relation to 250 apartments in

parcel 56 (out of the abovementioned 430 apartments) and the commitment between the

parties in relation to their purchase was cancelled by agreement.

ELECTRA LIMITED



39


G. (Continued)

4. Carrying value in the accounting records

As at the reporting date, Morgal has conducted an examination of the value in use of the

land in Russian, by means of an independent external appraiser. In light of the results of

the said examination, Morgal has reached the conclusion that the value of the land

amounts to approximately 9.02 billion Rubles.

H. Further to what is stated in Note 13D(4) to the annual consolidated financial statements, which

deals with a store and pump project on the Gilboa, in the reporting period there was a fire at

one of the main transformers at the project site. The construction contractor's management

(hereinafter: "The Partnership") and the management of P.S.P. Investments Ltd. (hereinafter:

"The concession holder") estimate that as a result of the fire and the repair of the transformer,

there will be a delay of several months in the timetables that are expected for the completion

and handing over of the project. In the Company's and the management of the Partnership's

assessment, based inter alia on the opinion of the legal advisors, the Partnership and its sub-

contractors (inter alia the Company's wholly owned subsidiary company) have insurance cover

that is virtually certainly expected to provide a full financial response for the additional costs

deriving from this event as from the time at which the insurance event occurred.

I. On May 20, 2019, the Securities Authority decided to extend the period of validity for the

offering of securities pursuant to the Company's shelf prospectus until May 29, 2020.

J. Further to what is stated in Note 12 to the annual consolidated financial statements as at

December 31, 2018, regarding a commitment by a subsidiary company of the Company

(hereinafter: "The subsidiary company") with a third party, under a memorandum of

understanding that is conditional upon a crucial condition, for the sale of all of its holdings in

Midtown Ltd. (hereinafter: "Midtown") in consideration for an amount of approximately

US$ 17.3 million (which constitutes the balance of the investment in Midtown as at the time

of the signing of the memorandum of understanding), the transaction was completed on June

11, 2019. Upon the completion of the transaction, the subsidiary company does not have any

holdings whatsoever in Midtown.

The consideration is payable in two payments – an amount of US$ 8.6 million with the

addition of VAT (if it applies) will be payable to the subsidiary company no later than at the

end of a period of two years from the time of the signing of the memorandum of

understanding, whereas the balance of the consideration will be payable to the subsidiary

company no later than at the end of a period of three years from the time of the signing of the

memorandum of understanding.

K. In their separate meetings on June 25, 2019, the Company's Remuneration Committee and its

Board of Directors approved a plan for the allocation of 133,0000 non-marketable option

warrants to the Company's CEO (hereinafter – "The option warrants"), pursuant to Section 102

of the Income Tax Ordinance (New Version) - 1961, on the capital gains path with a trustee.

The option warrants will vest in four equal annual tranches as from the end of a period of one

year from the time of the grant and up to the end of a period of four years from the said time,

respectively, and will expire nine months from the time of the start of the exercise of each

tranche, except for the options from the first tranche, which will expire at the end of one year

and nine months from the time that they vest. The exercise price for each option is US$ 308.7.

ELECTRA LIMITED



40


K. (Continued)

In their separate meetings on August 4, 2019, the Company's Remuneration Committee and its

Board of Directors decided to approve the allocation of option warrants and the updating of

the Company's remuneration policy, despite the opposition of the general meeting of the

Company's shareholders to the approval of the allocation of the option warrants and the

updating of the Company's remuneration policy, insofar as relates to the granting of option

warrants to the CEO, which was done in accordance with the provisions of Sections

272(C1)(1)(c) and 267A(c) of the Companies Law – 1999. The economic value of the overall

benefit granted amounts to approximately US$ 5,129 thousand.

L. On September 30, 2019, Midroog ratified a rating of A1/Stables for the bonds (Series C and

D).

M. On July 25, 2019, Electra Infrastructures Ltd, a consolidated company of the Company,

received notification that approval had been given for its winning of a tender for works

relating to the addition of a lane on Road 20 (The Ayalon Highway) within the context of

Section 2 of the Expressways project. The total consideration that is expected in respect of the

performance of the works amounts to approximately US$ 121 million.

N. On August 26, 2019, Electra Elco C&S Ltd. (hereinafter:" The seller"), a wholly owned

subsidiary company of the Company, and Generation Capital Ltd. (hereinafter: "The

purchaser") signed on a binding agreement for the sale of all of the seller's holdings in the

companies Negev Natural Gas Ltd., Natural Gas South Ltd. and Natural Gas Infrastructure

Company – E.P.C. Ltd. (hereinafter: "The companies being sold), which constitute 33.33% of

the issued and paid up share capital in each of the companies being sold.

The sale agreement contains representations and indemnification mechanism for damages that

may be caused as a result of the breach of the representations that are set forth in the sale

agreement, subject to restrictions, grounds, minimum and maximum amounts and the periods

that are set in the sale agreement. Furthermore, within the framework of the sale transaction,

the purchaser replaces the seller in the shareholders' agreements in the companies being sold,

and it takes on the seller's commitments as a shareholder vis-à-vis the financers, including the

guarantees for the loans that the companies being sold have taken up, the extent of which (the

purchaser's share in the guarantees) amounts to approximately US$ 7.3 million, as of the time

of the signing of the binding agreement.

The sale transaction was completed on September 26, 2019. The overall consideration in

respect of the sale of the seller's holdings in the companies being sold amounted to

approximately US$ 38.3 million,

At the time of the completion of the transaction, the Group derived overall cash flows of

approximately US$ 38.3 million and a pre-tax gain of approximately US$ 33.3 million.

O. On August 28, 2019, the Company's Board of Directors approved the distribution of a

dividend in an amount of approximately US$ 9.8 million (approximately US$ 2.69 per share),

which was paid on October 3, 2019.

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P. On August 28, 2019, the Company's Board of Directors decided to approve a private issue of

7,029 non-marketable and non-transferable option warrants, which are exercisable into regular

shares of par value US$ 0.29 each in the Company, without consideration, to an offeree which

is an officer in the Company but who is not a director or the CEO, pursuant to the private

offering regulations and subject to the conditions of the "2016 option warrants allocation plan"

of the company, which was adopted by the Company's Board of Directors on March 28, 2016.

The options were granted to the offeree through a trustee, pursuant to Section 102 of the

Income Tax Ordinance (New Version) – 1961 on the capital gains path with a trustee.

Q. On August 28, 2019, the Board of Directors of a subsidiary company of the Company decided

to discontinue the operations in the cellular and telecommunications field in a subsidiary

company, which had been presented in the construction and infrastructure projects in Israel

segment and in the services and maintenance segment. In light of this, the results of those

operations have been classified as discontinued operations as from the third quarter of 2019,

from which the Group incurred a loss of approximately US$ 5.7 million in the 9 months

ending September 30, 2019 (US$ 4 in the 3 months ending September 30, 2019).

R. In August 2019, an update was signed to the plan for the allocation of option warrants for the

CEO of two subsidiary companies that are wholly owned by the Company (hereinafter: "The

CEO), and this further to the options allocation plan and the updating thereof in 2012, 2014

and 2016, under the following terms: option warrants were allocated in each of the companies

in a quantity constituting 5% of the issued share capital of each company (hereinafter, together

– the option warrants).

The option warrants will be exercisable in three equal annual tranches, as from the end of a

period of one year and nine months from the determining date and up to the end of a period of

three years and nine months from the determining time. Against the exercise of the option

warrants, the CEO will be allocated shares whose value will be equivalent to the amount of the

monetary benefit, which will be calculated in accordance with the difference between "the

future share price" and the exercise price, within the definition of that term (a cashless

transaction mechanism), and this in consideration for the payment of their par value. Despite

the aforesaid, if at the exercise time the subsidiary companies will be private companies (or

alternatively if no event involving a change in control or a private allocation, as defined in the

agreement, has taken place, monetary consideration will be allocated to the CEO, as follows:

(1) For the first subsidiary company – monetary consideration that is equivalent to 5% of

the total increase that occurs in the shareholders' equity between January 1, 2020 and

the time of the exercise (at the end of a period of three years, commencing on January 1,

2020), including the adjustments that will occur in the shareholders' equity of the

subsidiary company, in accordance with the provisions of the plan.

(2) For the second subsidiary company – monetary consideration at the level of the

difference between the value of the subsidiary company at the time of the exercise, in

accordance with an agreed mechanism that is based on the EBITDA multiplied by 5,

calculated on the basis of the subsidiary company's average EBITDA over a period of

three years for the relevant period, divided by the number of option warrants that have

been offered to the offeree with the addition of 2.5% multiplied by the cumulative net

income/ loss for the three years commencing on January 1, 2020 and until the end of a

period of three years from that time and all this in accordance with the relevant

quarterly and/or annual consolidated financial statements.

The grant is subject to the provisions of Section 3I of the Income Tax Ordinance. The

grant is being treated as a liability and revalued to fair value in each period as from the

financial statements for the year 2019. The value of the option amounted to

approximately US$ 2.07 million at the time of the grant.

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R. (Continued)

(2) (Continued)

Furthermore, within the framework of the 2019 update, a ceiling was set for payments

to the CEO to the three relevant years in relation to the generality of the management

services, the annual bonuses and the monetary considerations and/or alternatively the

exercise value of the option warrants, as stated in Sections (1) and (2) above.

S. Arbitration proceedings are being conducted between Mabat Lanegev Construction

(hereinafter: "The construction contractor") and Mabat Lanegev Operations Ltd. (hereinafter:

"The operating contractor"), affiliated companies in which there are holdings of 30% and of

21.5%, respectively, and the State of Israel – the Ministry of Defense (hereinafter: "The

state"), which was started in accordance with the mechanism for the settlement of disputes,

which is set in Appendix L to the concession agreement in relation to the IDF's training

complex in the Negev (hereinafter: "The project"). On June 30, 2019, an arbitration meeting

was held within the context of which the arbitrators gave instructions that all of the statements

of claim were to be submitted as one item and they set timings for the submission of the

statements of claim and evidence and on October 3, 2019, the parties' statements of claim were

submitted to the arbitrators.

The parties have made mutual claims, which include monetary claims in connection with the

construction and operating periods, including prima facie claims of breaches of the terms of

the concession. After the managers of the affiliated companies, with the assistance of their

legal advisors, have examined the array of the parties' claims, the managements' assessment is

that the chances that the State's claims will be accepted are low. Accordingly, no provisions

have been recorded in the financial statements of the construction contractor and of the

operating company.

T. On September 10, 2019, Electra Infrastructures Ltd., a consolidated company of the Company,

received notification that its win in a tender held by Israeli Railways for the execution of

infrastructure, bridging and tunneling works for the 431rail track, had been approved. The

total consideration that is expected in respect of the performance of the works is

approximately US$ 111 million.

U. On October 2, 2019, an additional US$ 43 million par value of bonds (series E) was issued for

overall gross consideration of approximately US$ 48 million. The total par value of the bonds

(Series E) in circulation following the expansion amounts to approximately US$ 106 million

V. On October 28, 2019, Electra Construction Ltd., a wholly owned subsidiary of the Company,

signed on an agreement for the construction of the Landmark project on the Sharona site in

Tel-Aviv, within the framer of which the subsidiary company will build two towers of

approximately 40 stories each, containing two commercial stories and 6 underground levels,

with an overall area of approximately 240,000 Sq.m. The total consideration that is expected

in respect of the performance of the works amounts to approximately US$ 205 million. On

November 12, 2019, the subsidiary company committed itself under a joint project agreement

with Danya Cebus Ltd. (hereinafter: "Danya Cebus"), pursuant to which the subsidiary

company and Danya Cebus will be attributes 50% of the rights and the liabilities, for the

purpose of the performance of the project, and this under "back to back" terms, to the

agreement that was signed between the subsidiary company and the commissioner of the

works.

/ 409 -א 171340,

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