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PRIVILEGED

COMPASS
LEXECON

Omega Engineering LLC and Mr. Oscar Rivera v.
Republic of Panama

Pablo D. López Zadicoff
Direct Presentation

February 28, 2020

[Page 2]

CONTENTS

1. Valuation Purpose
2. Claimants’ Losses on New Contracts
3. Claimants’ Losses on Existing Contracts
4. Conclusions

[Page 3]

I. Valuation Purpose

[Page 4]

Full Compensation Requires Valuing all Investments

Source: Letter of Instructions to Compass Lexecon (C-0228); CL First Report, Section IV and Table VI

[Page 5]

Valuation Standard to Compute Losses

Source: CL First Report, Section III.1; Dr. Flores’ Second Report, ¶¶ 39-43; CL Second Report, ¶ 89

[Page 6]

II. Losses on New Contracts

[Page 7]

New Contracts: Assumptions and Valuation Results

Note: [*] The combined impact of all Dr. Flores' assumptions is US$ 41.4 million, and not the sum of each standalone impact
Source: CL Second Report, ¶¶ 6, 95; Dr. Flores Second Report, Figure 14; slide 25 (Target Market); slide 29 (standalone impact)

[Page 8]

The value of Omega Consortium extends beyond 2019

Omega Consortium Intangibles are Valuable and not Easily Replicable

Figure 4
A Willing Buyer's View Assuming No Cash Flows for Five Years⁵⁹

Source: Compass Lexecon based on Dr. Flores Second Report, Figure 4; CL Second Report, ¶¶ 88-92

[Page 9]

Omega Consortium was Profitable before 2014

Source: [1] CL First Report, Table VI; [2] CL First Report, ¶ 60; [3] CL Second Report, Table III; [4] CL Second Report, Table IV; [5] slide 24 (Total Net Income in Awarded Projects)

[Page 10]

2015-16 Target Market more than doubled our estimate

Our Target Market is limited to public works. Figures expressed in US$ million

[CHART]

Y-Axis: Market Size for the Omega Consortium (US$ million) (from 0 to 800)

X-Axis: 2010, 2011, 2012, 2013, 2014, 2015, 2016

Data Points (approximate values from bars):

• 2010: 101
• 2011: 133
• 2012: 166
• 2013: 184
• 2014: 193
• 2015: 155 (Dr. Flores), 209 (Compass Lexecon), 517 (Target public works tenders)
• 2016: 160 (Dr. Flores), 230 (Compass Lexecon), 674 (Target public works tenders)

Legend:

• Compass Lexecon
• Dr. Flores
• Target public works tenders 2015-16
• 5% of central Government Capex

Source: slide 25 and slide 26

[Page 11]

A 25% Success Rate is adequate

Bidding participation follows a strategic behavior

Omegas' Bid History in Panama

[CHART]

Data Points (Number of Bids):

• 2009*: 0
• 2010: 14 (Won 0)
• 2011: 21 (Won 6)
• 2012: 3 (Won 3)
• 2013: 4 (Won 1)
• 2014: 0

Legend: Number of Bids

Text Box: Public Sector Success Rate = 23.8% (10/42) (21.4% if measured by value)

[+] Awarded value includes new contracts and change orders on existing contracts
Source: CL First Report, Table VI; McKinnon First Report, Annex 1; Omega Engineering, Inc. Financial Statements and Supplementary Information as of 31 December 2013 and 2012 and Independent Auditors' Report, p. 18 (C-0136)

[Page 12]

A 13% Profitability is reasonable

Consistent with available evidence

1. McKinnon Analysis

Expected profitability when bidding (w/o change orders): 21%
Expected profitability at completion: 13.2%

2. Sectoral evidence

Evidence of the construction sector reports gross margins of 16%-20% for construction companies (Damodaran)

3. Tocumen Airport

The Omega Consortium had already achieved a 15% profitability in “Aeropuerto Tocumen” project

Source: (1) McKinnon First Report, Annex 3 and Annex 2, Table 1 (see also CL First Report, Table VIII); (2) CL Second Report, ¶ 122; (3) slide 28 (Tocumen Airport profitability)

[Page 13]

A 11.65% Cost of Equity is reasonable

Panama is recognized as having one of the lowest financing costs

[CHART]

Title: Reduction due to Panama's Country Risk

Y-Axis: Losses on New Contracts (US$ million) (from 0 to 60)

Data Points (Bars):

• U.S. based Construction Company (CoE 9.76%): $ 54.17
• With CL Country Risk (CoE 11.65%): $ 42.53 (Annotation: -21%, 1.89% Country Risk)
• With Dr. Flores Country Risk (CoE 20.84%): $ 19.59 (Annotation: -64%, 4.52% Country Risk + 5.78% US based Size Premium)

Text Box:

Hausmann (C-0390, p.29)
"The cost of credit in Panama not only is among the lowest in the region, but also displays a decreasing trend over the previous 15 years."

Source: CL First Report, Appendix B; CL Second Report, Appendix B; slide 30 (impact)

[Page 14]

III. Losses on Existing Contracts

[Page 15]

Existing Contracts: Assumptions and Valuation Results

Notes: There is a subsidiary criticism regarding the use of Addenda N°4 for MINSA CAPSI Kuna Yala project
[*] The combined impact of all Dr. Flores' assumptions is US$ 4.92 million, and not the sum of each standalone impact
Source: CL Second Report, Table II; Dr. Flores' Second Report, Figure 16; slide 31 (standalone impact)

[Page 16]

Cash Flows have to be Treated Consistently

Dr. Flores' treatment of cash flows from Existing Contracts is asymmetric

[FLOW CHART]

Source: Compass Lexecon based on CL Second Report, Figure I

[Page 17]

Advance Payments need to reflect timing of cash flows

Dr. Flores' application produces inconsistent results. Figures expressed in US$ million

Source: CL Revised Valuation Model (C-0438), tab “III. Advance Balance”, cells F23:H23 and F39:H39; Dr. Flores' Model (QE-0052), tab “III. Advance Balance”, cells F39:H39

[Page 18]

IV. Conclusions

[Page 19]

CoE is the only rate that recognizes the economic harm to Claimants

Source: CL First Report, ¶¶ 109-112

[Page 20]

Compass Lexecon's Damages Assessment

Figures expressed in US$ million

Source: CL Second Report, Table VI; Compass Lexecon based on CL Revised Valuation Model (C-0438)

[Page 21]

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[Page 22]

Back Up & Demonstratives

[Page 23]

Omega Consortium was Successful Against Competitors

The Omega Consortium had Competitive Advantages

Note: The Omega Consortium participated in 42 public works bids, but was evaluated in 35

Source: Compass Lexecon based on CL Second Report, Table III and Table IV

[Page 24]

Total Net Income in Awarded Projects

Note: G&A Expenses for year 2013 exclude “Gastos de intereses” and “Pérdida de venta de valores”
Sources: [1] McKinnon First Report, Annex 2, Table 1; [2] Omega Engineering, Inc. Financial Statements and Supplementary Information as of 31 December 2013 and 2012 and Independent Auditors' Report, p. 18 (C-0136); [3] Audited Financial Statements of Omega Engineering Inc. as of December 31 2011, p. 8 (C-0311); [4] Omega Engineering, Inc. Financial Statements as of 31 December 2013, p. 7 (C-0135); [5] Omega Engineering, Inc. Interim Balance Sheets for the Year Ended 31 December 2014, tab “EARNINGS”, cell F16 (C-0138)

[Page 25]

Target Market

Sources: [1] Republic of Panama's Fiscal Budgets for the period 2009-2014, pp. 1-4, C-0391; [2] CL First Report, ¶ 90; [3] CL Revised Valuation Model (C-0438), tab “IV. New Contracts”, cells E33:133; [4] Dr. Flores' Model (QE-0052), tab “IV. New Contracts”, cells E33:133

[Page 26]

2015-16 Target Market more than doubled our estimate

Note: Potential projects were selected based on the following criteria: i) belonging to a sector where the Omega Consortium had prior experience; and ii) Bid reference price was within ±15% of the Omega Consortium's historical bid range of US$ 0.8 million - US$ 126.5 million
Source: Compass Lexecon based on CL First Report, Table XIV

[Page 27]

A 25% Success Rate is Adequate

Resources allocation varies by year due to strategic behavior

Dr. Flores' Average: 9.4%

Source: Compass Lexecon based on CL Second Report, Table V; CL First Report, Table VI; Omega Historical Bids (C-0388); CL Revised Valuation Model (C-0438), tab “V. Historical Information”

[Page 28]

Tocumen Airport had a Profitability of 15%

The Tocumen Airport project was started on February 2012 and completed in 2013
(See C-0006 and C-0007)

Source: Omega Engineering, Inc. Financial Statements and Supplementary Information as of 31 December 2013 and 2012 and Independent Auditors' Report, p. 18 (C-0136)

[Page 29]

Standalone Impacts on New Contracts

See CL Revised Valuation Model (C-0438), tab "Summary"

• Compass Lexecon New Contracts estimate, press button “Run scenario CLEX” (cell P3)
  • See cell M13:N13 = US$ 42.53 MM
• Standalone impact of “Valuation Horizon” assumption, press button “Run scenario CLEX” (cell P3)
  • In cell G33 choose option “QE (2019)". See cell M13:N13 = US$ 11.78 MM (which is US$ 31 MM less than Compass Lexecon)
• Standalone impact of "Major Cash Flows Assumptions", press button “Run scenario CLEX” (cell P3)
  • In cell G38 choose option “QE (5.44%)”; in cell G44 choose option “QE (9.39%)”; in cell G45 choose option “QE (10.71%)”. See cell M13:N13 = US$ 7.29 MM (which is US$ 35 MM less than Compass Lexecon)
• Standalone impact of "Cost of Equity" assumption, press button "Run scenario CLEX” (cell P3)
  • In cell G21 choose option “Cost of Equity QE (Midpoint 20.8%)”. See cell M13:N13 = US$ 19.59 MM (which is US$ 23 MM less than Compass Lexecon)

See Dr. Flores Updated Valuation Model (QE-0052 XLS), tab “Summary"

• Dr. Flores New Contracts estimate, press button “Run scenario QE” (cell Q3)
  • See cell M13:N13 = US$ 1.14 MM
• Standalone impact of "Other Assumptions”, press button “Run scenario CLEX” (cell P3)
  • In cell G51 choose option “QE (Ignores Existing Contracts G&A)"; in cell G57 choose option “30 Months". See cell M13:N13 = US$ 38.00 MM (which is US$ 5 MM less than Compass Lexecon)

[Page 30]

Standalone Impact of Cost of Equity

See CL Revised Valuation Model (C-0438), tab "Summary"

• U.S. based Construction Company (CoE 9.76%):
  • Press button “Run scenario CLEX” (cell P3)
  • In cell G21 choose option “Manual”; in cell H21 write “9.76%”
  • See cell M13:N13 = US$ 54.17 MM
• Compass Lexecon New Contracts estimate:
  • Press button “Run scenario CLEX” (cell P3)
  • See cell M13:N13 = US$ 42.53 MM (which is 21% lower than US$ 54.17 MM)
  • (54.17-42.53)/54.17 * 100 = 21%
• Standalone impact of Dr. Flores' CoE:
  • Press button “Run scenario CLEX” (cell P3)
  • In cell G21 choose option "Cost of Equity QE (Midpoint 20.8%)”
  • See cell M13:N13 = US$ 19.59 MM (which is 64% lower than US$ 54.17 MM)
  • (54.17-19.59)/54.17 * 100 = 64%

[Page 31]

Standalone Impacts on Existing Contracts

See CL Revised Valuation Model (C-0438), tab "Summary"

• Compass Lexecon Existing Contracts estimate:
  • Press button “Run scenario CLEX” (cell P3)
  • See cell M12:N12 = US$ 8.69 MM
• Standalone impact of "Time Value & Risks of Cash Flows" assumptions:
  • Press button “Run scenario CLEX” (cell P3)
  • In cell G21 choose option “Cost of Equity QE (Midpoint 20.8%)”; in cell G23 choose option “No Interest (QE)"; in cell G25 choose option "Lump Sum at DOV (QE)”
  • See cell M12:N12 = US$ 7.07 MM (which is US$ 1.6 MM less than Compass Lexecon)

See Dr. Flores Updated Valuation Model (QE-0052 XLS), tab "Summary"

• Dr. Flores Existing Contracts estimate:
  • Press button “Run scenario QE" (cell Q3)
  • See cell M12:N12 = US$ 3.77 MM
• Standalone impact of "Change Orders" factual assumptions:
  • Press button “Run scenario CLEX” (cell P3)
  • In cell G56 choose option “QE”
  • See cell M12:N12 = US$ 5.45 MM (which is US$ 3.2 MM less than Compass Lexecon)

[Page 32]

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