Delek Group — Capital/Financing Update 2020

Oct 25, 2020

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA

("The Company")

October 25, 2020

Attn. Israel Securities Authority 22 Kanfei Nesharim Street Jerusalem 9546434

Attn. The Tel-Aviv Stock Exchange Ltd 2 Achuzat Bayit Street, Tel-Aviv 6525216

Dear Sir and Madam,

Re: Offering of Bonds Secured by Royalties from the Leviathan Project in an Amount of USD 180 million

Further to the Report dated October 8, 2020 (ref. no. 2020-01-109698) concerning a possible offering of bonds ("Issuance" and "Bonds", respectively) to foreign and Israeli qualified investors by Delek Overriding Royalty Leviathan Ltd (the "Issuer"), a special purpose subsidiary of Delek Energy Systems Ltd ("Delek Energy"), which will be secured by a pledge on the rights to receive overriding royalties from the Leviathan Project that will be transferred to the ownership of the Issuer ("Leviathan Overriding Royalties"), and the report dated October 19, 2020 concerning rating of the Bonds (ref. no. 2020-01-113586), the Company provides an update as follows:

• 1. During the evening of October 22, 2020 the pricing process of the Issuance ended, following which at that time an agreement was signed between the Issuer and Goldman Sachs International on their behalf and in the name of Leader & Co. Finance (2001) Ltd ("the Purchasers" and "the Underwriting Agreement", as applicable), whereby the Purchasers undertook to purchase from the Issuer at the Issue Date, which has been set for October 28, 2020 ("the Issue Date"), Bonds in an overall amount of USD 180 million, subject to the terms of the Underwriting Agreement.
• 2. Bonds will be offered in a single series in a total amount of par value USD 180 million. The repayment date of the Bonds is December 30, 2023 (in a single payment), and they bear dollar-based fixed annual interest of 7.494%. Interest on the Bonds will be paid twice a year, on June 30 and December 30.
• 3. According to the transaction outline, the rights of the Company (25%) and of Delek Energy (75%) in the Leviathan Overriding Royalties and the rights associated with the royalties will be transferred on the date of completion of the transaction (the "Completion Date") to the ownership of the Issuer and will be pledged in favor of the trustee of the Bonds ("the

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA

Issuance Trustee"), to secure repayment of the Bonds, in accordance with the terms of the Bonds and the other documents upon which the Bonds will be offered ("the Offering Documents"). In addition, the Issuer will pledge in favor of the Issuance Trustee the rights associated with the royalty interest and the rights to certain bank accounts and under insurance policies ("the Pledges").

• 4. The full proceeds of the Offering, less a reserve fund of approximately USD 21 million to secure payments of interest, which will be held in an account pledged in favor of the Issuance Trustee, and net of issuance and underwriting costs estimated at USD 8 million¹ , are intended to be deposited at the Completion Date in the account of the trustees of the Company's bond holders and will be used for upcoming payments to the bond holders, in accordance with the provisions of section 6.1.5 of the Amendment to the Deed of Trust of the company's bonds valid since June 17, 2020.
• 5. The expected rating of the Bonds is B+(EXP) on the international rating scale of the Fitch rating agency. The final rating report is expected to be published close to the Completion Date.
• 6. On October 22, 2020 approval was received from the Petroleum Commissioner to transfer the Leviathan Overriding Royalties to the Issuer and to pledge the royalties' interest in favor of the Issuance Trustee.
• 7. On October 20, 2020 the Issuer received the approval of the Tel-Aviv Stock Exchange Ltd ("TASE") to list the Bonds for trading on the TASE's trading system for institutional investors ("TACT Institutional System") subject inter alia to the approvals required in law and completion of the Issuance.
• 8. On October 15, 2020 the Issuer received a tax ruling from the Tax Authority in respect of the Bonds Issuance, confirming that the Bonds to be listed for trading at the TASE on the TACT Institutional System will be deemed bonds traded on the Israel Stock Exchange in respect of sections 9(15d) and 97(B2) of the Income Tax Ordinance, subject to certain conditions that are detailed in the decision.
• 9. As is usual in financing transactions of this sort, the Offering Documents included conditions, limitations, undertakings (covenants) and reasons to put the Bonds up for immediate repayment and exercise of the Pledges.

It is emphasized that the details brought below represent a partial and nonexhaustive summary of the applicable provisions in the Offering Documents, and the Offering Documents stipulate in respect of the various undertakings and reasons, restrictions conditional on occurrence of a Material Adverse Effect

¹ It should be noted that in addition to the said amount, the Company and Delek Energy will pay additional expenses and underwriting costs in the amount of approximately USD 3.6 million.

(MAE), in its meaning in the Offering Documents, on the Issuer as well as exceptions, additional terms or corrective periods that are not detailed in the description below.

• i. The Issuer has undertaken inter alia not to take any financial debt in addition to the Bonds.
• ii. The Issuer has undertaken that it will not carry out a merger or alter its activities in a manner reasonable to expect that will cause a Material Adverse Effect, or that it will enter into liquidation proceedings or other structural changes that have been defined, and will not sell, transfer, pledge or make other disposal of any of the pledged assets, except for transactions that are permitted as defined in the Offering Documents, including full or partial sale of its rights in the Leviathan Overriding Royalties, subject to certain terms that are defined in the Offering Documents.
• iii. Provisions have been prescribed in respect of early redemption of the Bonds, including (1) early redemption at the initiative of the Issuer, subject to payment of a Make Whole Premium, and (2) obligatory early redemption in certain defined cases, including at the time of sale of all or most of the rights in the Leviathan Overriding Royalties.
• iv. Events of Default have been defined whose occurrence, subject to certain corrective periods, restrictions and conditions that have been defined, will put up the unrepaid balance of the Bonds for immediate repayment and the Issuance Trustee will be entitled to act to realize the Pledges, including in cases of (1) non-payment of principal, interest or other payments required under the financing documents; (2) material breach of representations; (3) breach of Covenants or negative Covenants as defined in the Offering Documents; (4) event or entry into insolvency proceedings of a material party to the gas agreement (in its meaning in the financing documents), the operator of the Leviathan Project or Delek Drilling, if it is reasonable to expect that the matter will cause a Material Adverse Effect (in its meaning in the documents); (5) early termination of the JOA agreement, the terms of the Leviathan leases or material gas agreements to which Delek Drilling was a party (in the meaning of the terms in the Offering Documents), if it is reasonable to expect that the matter will cause a Material Adverse Effect; (6) if a party to a material gas agreement (in its meaning in the documents) to which Delek Drilling is a party breached the agreement, if it is reasonable to expect the matter will cause a Materially Adverse Effect; (7) in the event of abandonment or interruption of the Leviathan Project operations for a period that exceeds 15 consecutive days, if it is reasonable to expect that the matter will cause a Material Adverse Effect; (8) if damage is caused to the Leviathan Project (including physical damage, revocation of license or transfer of Delek Drilling's rights in it by a government authority) if it is reasonable to expect that the matter will cause a Material Adverse Effect, and has not been remedied;

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA

(9) in the event of revocation or expiry of a government approval granted in connection with the Leviathan Project, if it is reasonable to expect that the matter will cause a Material Adverse Effect; (10) if any of the financing documents to which the Issuer is a party, or Pledges provided as part of the Offering Documents, whose cumulative value exceeds USD 10 million, will cease to be valid; (11) if a court ruling is handed down against the Issuer for payment of an amount in excess of USD 10 million that has not been paid; (12) the occurrence of an event that is likely to lead to the sale of the pledged assets or part of them, subject to certain terms and restrictions; (13) if an undertaking to carry out an obligatory early redemption is breached; (14) if provisions are breached concerning taking monies out of the Issuer's accounts, and more.

• v. The Issuer has undertaken that all the proceeds from the Leviathan Overriding Royalties will be deposited in Revenue Account which will be pledged in favor of the Issuance Trustee, which is subject to a fund flow, while surpluses, if there remain any on the account, only being used for the purpose of buyback or early redemption of Bonds and cannot be distributed.
• vi. Provisions have been stipulated in respect of maintaining a safety buffer for interest payments, and the Issuer has undertaken to comply with the covenant of an interest coverage ratio, in its meaning in the documents, so that this ratio will not be less than 1:1.2 (at of the date of this report this ratio for the year 2021 is expected to be 2.19).
• 10. In the Offering Documents conditions precedent were set for the execution of the undertaking of the Purchasers to purchase the Bonds at the Completion Date, including receipt of the documents required to remove the Pledges registered at the Registrar of Companies for the Leviathan Overriding Royalties in favor of the trustees of the Company's bond holders (the "Existing Security").

As of the date of this report, all required approvals and material conditions have been fulfilled to complete the Issuance on the Issue Date (October 28, 2020), other than the receipt of the documents required for the purpose of removing the Existing Security. If by the Issue Date not all the conditions precedent have been fulfilled, the Bonds will be issued and listed for trading on the TASE on the TACT Institutional System, and all the proceeds of the Issuance will be deposited in a special escrow account (the "Escrow Account") for a period of 30 days, which can be extended under certain conditions (the "Escrow Period"). In such a case, the Completion Date will occur at the end of the Escrow Period, after fulfillment of all the conditions precedent. If by the end of the Escrow Period not all the conditions precedent have been fulfilled, then the monies deposited in the Escrow Account, together with additional monies the Company will deposit in the Escrow Account as per the bonds' interest payments, will be used for full early redemption of the Bonds, and in such a case the transaction will be null and void and the rights in the Leviathan Overriding Royalties will not be transferred to the Issuer.

Warning concerning forward looking information - the information stated in this report above in respect of carrying out an Offering of Bonds and the possibility of completion of the transaction represents forward looking information in its meaning in the Securities Law, 1968. It is emphasized that as of this report date not all the conditions precedent stipulated in the Underwriting Agreement and the other Offering Documents have been fulfilled, and not all the approvals required for completion of the Offering have yet been received. Fulfillment of the terms for completion of the transaction is dependent inter alia on factors that are not under the Company's control, and therefore there is no certainty that those conditions will be fulfilled.

The information in this report does not constitute an offer for the purchase or sale of any bonds or other securities of the Company and/or of the Issuer or of another company, and what is stated herein does not constitute a recommendation or expert opinion.

The information in this report does not constitute an offer for the purchase or sale of any bonds or other securities of the Company and/or of the Issuer or of another company, and what is stated herein does not constitute a recommendation or expert opinion.

Warning of forward looking information - the information stated above in respect of a possible Offering of Bonds, including in respect of its scope, timing, and structure, listing of the Bonds for trading on the TACT Institutional system and the other terms and details in respect of the Offering enumerated above, is forward looking information within the meaning of the Securities Law, 1968, for which there is no certainty that it will take place at all, or might take place in a materially different way from what is stated above, on account of various factors including conditions of the financial markets, on account of the continuation of the COVID-19 crisis and its consequences, and the response of potential investors to the offered Bonds or on account of nonfulfillment of any conditions precedent or for other reasons.

The Bonds to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction and may not be offered or sold, directly or indirectly, in the United States or to or for the account or benefit of U.S. persons, as such term is defined in Regulation S of the Securities Act, absent registration or unless pursuant to an applicable exemption from the registration requirements of the Securities Act and any other applicable securities laws. The Bonds will be offered subject to prevailing market and other conditions, and there is no assurance that the Offering will be completed or, if completed, as to its terms. This report does not constitute an offer to sell or the solicitation of an offer to buy the Bonds, nor shall it constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful.

This report does not constitute and shall not, in any circumstances, constitute a public offering nor an invitation to the public in connection with any offer within the meaning of the Directive 2003/71/EC (the "Prospectus Directive"), as implemented in Member States of the European Economic Area (the "EEA"), and, once fully effective, under Regulation (EU) 2017/1129 (the "Prospectus Regulation"). The offer and sale of the Bonds will be made pursuant to an exemption under the Prospectus Directive and, once fully effective, under the Prospectus Regulation, from the requirement to produce a prospectus for offers of securities.

This report does not constitute an offer of securities to the public in the United Kingdom and is directed solely at persons who (i) are outside the United Kingdom, (ii) are investment professionals, as such term is defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Financial Promotion Order"), (iii) are persons falling within Article 49(2)(a) to (d) of the Financial Promotion Order, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any Bonds may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as "relevant persons"). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents.

Yours sincerely, Delek Group Ltd by

Tamir Poliker - Deputy CEO & CFO

and Leora Pratt Levin, Chief Legal Counsel and Corporate Secretary