Ampal-American Israel — Presentation (August 2012)
29 slides from Ampal-American Israel's investor presentation, Aug 21, 2012
Slide 1: Valuation of the MIRO Project
Ampal-American Israel Corporation December 2011 Valuation of the MIRO Project WWW.HL.com U.S. 800.788.5300 Europe +44.20.7839.3355 Hong Kong +852.3551.2300 Japan +81.3.4577.6000 Los Angeles New York Chicago San Francisco Minneapolis Washington, D.C. Dallas Atlanta London Paris Frankfurt Hong Kong To
Slide 2: Table of Contents
Table of Contents Executive Summary 1 Valuation Analysis 2 2011 vs. 2010 Valuation Comparison A Cash Flow Analysis B Appendices Selected Publicly Traded Brazilian Ethanol Producers A Support for Discount Rate B International CAPM C Limiting Factors and Conditions D
Slide 3: Executive Summary
Executive Summary
Slide 4: Executive Summary: Situation Overview
Executive Summary Situation Overview We understand that Ampal-American Israel Corporation (“Ampal” or the “Company”) and Merhav (M.N.F.) Limited (“Merhav,” and collectively with Ampal, the “Sponsors”) have made financial commitments to a sugarcane ethanol production project (the “Project”) being dev
Slide 5: Executive Summary and Scope of Valuation Analysis
Executive Summary and Scope of valuation analysis We have prepared a valuation of the Equity Net Present Value (“Equity NPV”) of the Project as of December 2011. In connection with our analysis of the Project, we undertook the following steps: Reviewed current financial projections provided by Merha
Slide 6: Valuation Indications
valuation indications Houlihan Lokey’s analysis indicates that the applicable Equity NPV of the Project is reasonably stated in the range of $110.0 million to $240.1 million. Our valuation range as of December 2010 was $95.7 million to $219.1 million. However, we note that the 2010 projections inclu
Slide 7: Valuation Analysis
Valuation Analysis
Slide 8: 2011 vs. 2010 Valuation Comparison
Valuation Analysis 2011 vs. 2010 Valuation Comparison
Slide 9: Project Financing Assumptions: Sources and Uses of Project Capital
2011 vs.2010 Valuation Comparison Project Financing Assumptions Estimated Sources and Uses of Project Capital (Figures in thousands of USD) 2010 2011Sources Debt (1) $253,442 $269,500 Ampal Investment (2) $22,249 $22,249 Other Equity Investments (3) $70,024 $87,044 Total Sources $345,715 $378,793 Us
Slide 10: Ethanol Price Assumptions
2011 vs. 2010 Valuation Comparison Ethanol Price Assumptions Based on discussions with management, we noted that the forecasted prices of ethanol in the 2011 model were not adjusted for inflation. We understand that the 2011 management projections were based on assumptions about the price of ethanol
Slide 11: Projections Comparison: Input Assumptions
2011 vs. 2010 Valuation Comparison Projections Comparison Input Assumptions AGRICULTURALINDUSTRIAL Period of First Planting Plant Capacity (MM Ltrs/Yr) Operational Days/Year 2010 Model 1H 2013 2010 Model 137 2010 Model 300 2011 Model 1H 2014 2011 Model 146 2011 Model 285 Difference 1.0 Years Differe
Slide 12: Projections Comparison: Revenue and Expense Metrics
Projections Comparison (continued) Revenue and Expense Metrics Total Total 2007 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2020 - 2027 2007 - 2027 2014 – 2027 Ethanol Prices (US$/Ltr) (1) 2010 Model 0.73 (2) 0.95 0.78 0.78 0.70 0.72 0.73 0.76 0.7
Slide 13: Projections Comparison: Balance Sheet and Other Metrics
Projections Comparison (continued) Balance sheet & Other Metrics Total Total 2007 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2020 - 2027 2007 - 2027 2014 - 2027Financial expenses (US$ 000s) 2010 Model 0 0 3 1,855 6,842 9,118 8,669 7,872 6,530 5,2
Slide 14: Cash Flow Analysis
Valuation Analysis Cash Flow Analysis Cash Flow Analysis HL Methodology Overview
Slide 15: Discounted Cash Flow Methodology
Discounted Cash Flow Methodology We valued the Project using the discounted cash flow (DCF) methodology. The DCF methodology estimates thepresent value of the projected cash flows to be generated by the subject company and theoretically available(though not necessarily paid) to the capital providers
Slide 16: Project-Specific Assumptions
Project-Specific Assumptions More specifically, we have made the following assumptions particularly relevant to the context of the Project:Cash Flows and Discount Rate: Valuation is based on equity Project cash flows available for distribution toequity holders, discounted at a cost of equity. We not
Slide 17: Cash Flow Analysis
FYE December 31, (Figures in thousands of USD) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Operating Profit (1) -13,029 -16,603 -25,695 54,056 58,045 56,724 57,398 52,051 58,580 58,258 59,101 60,848 63,094 60,176 64,923 64,601Non Cash Charges 2,139 5,882 10,695 19
Slide 18: Appendices: Selected Publicly Traded Brazilian Ethanol Producers
Appendices Selected Publicly Traded Brazilian Ethanol Producers
Slide 19: Selected Publicly Traded Brazilian Ethanol Producers
Selected Traded Brazilian Ethanol Producers Selected Publicly Traded Brazilian Ethanol Producers
Slide 20: Analysis of Selected Brazilian Ethanol Producers
Analysis of Selected Brazilian Ethanol Producers (Fugures in million of USD) We analyzed publicly traded ethanol producers in Brazil to determine the reasonableness of the Project's assumptions and value.(Figures in millions of USD)Ethanol Ethanol EV/ Current EV/ Current Enterprise Produced Produced
Slide 21: Appendices: Support for Discount Rate
Appendices Support for Discount Rate
Slide 22: Cost of Equity
Cost of Equity: Since there are no publicly traded Colombian ethanol producers, we relied upon the estimated cost ofequity for publicly traded ethanol producers in Brazil, which we believe to be appropriate given thesimilar characteristics of both markets. We also reviewed the cost of equity for Amp
Slide 23: Cost of Equity Calculation
Low -- HighU.S. Risk Free Rate (1) 2.6% -- 2.6%Plus: Credit Spread (2) 2.5% -- 2.5%Plus: Inflation Adjustment (3) (3.7%) -- (3.7%)Company Beta (4) 1.07 -- 1.07World Equity Premium (5) 6.3% -- 6.3% Cost of Equity 8.0% -- 8.0% Project Execution Premium 2.5% -- 6.5% Adjusted Cost of Equity 10.5% -- 14.
Slide 24: International CAPM Methodology
International CAPM Methodology
Slide 25: Standard CAPM Formula
The standard CAPM formula explains that the expected risk premium varies in direct proportion to its beta coefficient. The beta coefficient on the asset, measures the covariance between the return on the asset and the return on the market portfolio. The CAPM is shown below: KE = R F + (β * ERP M ) W
Slide 26: International CAPM
For companies in countries outside of the U.S., we suggest using an International CAPM, which is the same formula, but with country specific inputs. K E = R F, C + β W * ERP WWhere: K E = the cost of equityR F, C = the expected return of the subject country's risk free assetβ W = the subject company
Slide 27: Limiting Factors and Conditions
Limiting Factors and Conditions
Slide 28: Limiting Factors and Conditions
Our analysis is based on our understanding of the facts and circumstances surrounding the Company as of the Valuation Date and the Report is written from the perspective of that date.We have relied upon and assumed, without independent verification, that the financial forecasts and projections provi
Slide 29: Limiting Factors and Conditions (continued)
The professional fee for this engagement is not contingent upon the opinions of value set forth herein.This Report is based on business, general economic, market and other conditions that could be reasonably evaluated by Houlihan Lokey as of the Valuation Date. Subsequent events that could affect th