TURKEY’S LEADING ENERGY COMPANY 2012 ANNUAL REPORT Since 1960 we at Kazancı Holding have been striving to deliver superior-quality products and dependable services. Every company that is a member of the Kazancı Group works on the basis of this shared awareness and constantly renews and develops itself with a focus on achieving unconditional customer satisfaction. The enduring confidence that those customers who choose our products and services have in the Aksa name is our greatest motivation as we continue to raise the standards, by which our efforts are judged, to even higher levels. This motivating force is also the source of inspiration for the investments we undertake as a team and which further reinforce our market leadership. Ali Metin Kazancı Kazancı Holding Chairman Contents 2 Corporate Profile 4 Financial and Operational Indicators 6 Kazancı Group 8 Aksa Energy’s Sustainable Growth Strategy 14 Chairman’s Message 16 CEO’s Assessment of 2012 18 Aksa Energy’s Production Capacity 28 Aksa Energy Board of Directors 29 Aksa Energy Management Team 30 Economic and Sectoral Outlook 38 Assessment of Activities in 2012 45 Human Resources at Aksa Energy 47 Health and Safety at Aksa Energy 48 Corporate Governance Principles Compliance Report 59 Summary of Auditor’s Report 60 Financial Statements and Independent Audit’s Report Aksa Energy is a member of. 2 AKSA ENERJİ 2012 FAALİYET RAPORU In today’s energy sector, power generation and distribution companies need to provide high-quality services in an environment of perfect competition. Privatization and liberalization have radically changed the outlook of the electricity sector. A redefinition in the sectoral realities which have come hand sector, offers unique potential for both the national private in hand with the rapid growth in energy needs have rendered capital and international capital. power generation, transmission and distribution as diverse functions, entailing specialization in each of these areas. Aksa Energy continues to lead the sector as a respected participant, set trends in the sector and generate added As one of the most rapidly growing economic powers of value for its stakeholders with its installed capacity, efficiency, the world and in the region, Turkey also stands out with the capacity utilization and ambitious growth strategy. rapid growth in its demand for electricity. Our country, which is undergoing the final stage of liberalization in its electricity AKSA ENERGY 2012 ANNUAL REPORT 1 Corporate Profile Aksa Energy is Turkey’s leading energy company. Founded in 1997, Aksa Energy is Turkey’s leading independent power producer with 2,048 MW of installed capacity as of the end of 2012. A diverse and wide production portfolio Operating in line with its mission of supplying high quality, continuous power to its customers, Aksa Energy carries out production at a total of 15 power plants. Aksa Energy’s production portfolio comprises of plants that generate power by using a range of energy resources, including natural gas, fuel oil (combined cycle thermal resources), the wind and hydroelectric energy. Accounting for 10% of the total installed capacity of independent producers in Turkey, Aksa Energy commands a 13% share of the total electricity generated by independent producers. With its power plant in the Turkish Republic of Northern Cyprus (TRNC), Aksa Energy also helps Cyprus meet its electricity needs. A producer that offers all the advantages of the energy value chain Aksa Energy’s field of expertise is the production and sale of energy. With the synergy of the vertical and horizontal integration that it has built with the other companies of its parent, Kazancı Group, Aksa Energy operates in each and every ring of the energy value chain from production to distribution. The Company holistically meets all required services and solutions in-house during the installation and operational cycles of the power plants that are included in its production portfolio. This strengthens Aksa Energy’s position and competitive edge in the sector in terms of efficiency, effectiveness and productivity. Involved in energy in all of Turkey’s regions Having recently attached special importance on its investments in domestic and renewable resources, Aksa Energy, with its 4 wind farms and one hydroelectric power plant in its portfolio, has one of the largest renewable energy capacities of any company in Turkey. With five projects still under construction, three projects that await EMRA (Energy Market Regulatory Authority) approval and 16 licensed and pre-licensed projects in its portfolio, in addition to the 15 power plants in its production portfolio, Aksa Energy is involved in energy in all of Turkey’s regions, with a focus on sustainable growth. Targeting around 4,000 MW in installed capacity by 2017 Making a difference in its sector with its robust technical equipment, infrastructure and competent human resources, Aksa Energy aims to raise its installed capacity to 4,000 MW by 2017. The shares in Aksa Energy, a subsidiary of Kazancı Holding, are traded in the ISE National Market under the AKSEN ticker. At the end of 2012, the Company’s total turnover and EBITDA had reached TL 1,841 billion and TL 323 million, respectively. 2 AKSA ENERGY 2012 ANNUAL REPORT A value chain from production to distribution AKSA ENERGY 2012 ANNUAL REPORT 3 Financial and Operational Indicators Maintaining its organic growth in a reliable manner, Aksa Energy once again demonstrated a successful financial and operational performance in 2012. Consolidated (TL million) 2008 2009 2010 2011 2012 Net sales 425 878 911 1,315 1,841 Net profit for the period 4 83 59 (122) 219 EBITDA 70 227 190 300 323 EBITDA margin (%) 17 26 21 22 18 Total assets 1,379 1,902 2,385 2,832 2,617 Shareholders' equity 374 472 824 796 1,203 Total investments 561 269 417 330 130 Aksa Energy Shareholding Structure (31.12.2012) (June, 2013) Kazancı Holding A.Ş. Kazancı Holding A.Ş. 81.54% 61.91% Goldman Sachs Goldman Sachs International International 13.30% 16.62% Public Float 5.15% Public Float Other 21.46% 0.01% Other 0.01% 4 AKSA ENERGY 2012 ANNUAL REPORT Financial and Operational Indicators A tripling in its capacity in the last 5 years. Aksa Energy undertook more than TL 1.7 billion in investments With its investments, Aksa Energy raised its installed capacity in 2012. from 690 MW in 2008 to 2,048 MW in 2012. In parallel with the increase in its installed capacity over the last 5 years, Aksa Energy has steadily raised its electricity production, which reached 9,784 GWh in 2012. Total Installed Capacity (MW) Electricity Production (GWh) Total Investments (TL million) 2,036 2,048 9,784 561 1,542 417 1,342 6,181 330 269 4,227 690 3,053 130 1,018 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 In order to reach its installed capacity target by Aksa Energy aims to 2017, Aksa Energy plans to buy three power plants (Kapıdağ Wind Farm - 34.85 MW, the Akköy Hydroelectric Farm- increase its installed capacity 13.4 MW and the Siirt fuel oil power plant - 24 MW) and to complete its wind farm projects with new investments in Belen to 4,000 MW (30 MW) and Kıyıköy (27 MW) and a capacity increase in by 2017. Sebenoba (30 MW). Aksa Energy also plans to complete and commission a variety of power plants between 2014 and 2017 428 1,041 134 270 MW of MW of MW of MW of hydroelectric natural gas wind lignite based energy capacity based capacity energy capacity power capacity AKSA ENERGY 2012 ANNUAL REPORT 5 Kazancı Group Production-Distribution-Technical Support/Service in every ring of the energy value chain Kazancı Group is Turkey’s leading integrated energy Aksa Power Generation group. The foundations of Kazancı Holding were As one of the leading players in the global generator market, laid down during the 1960’s. The Group started the Aksa Power Generation is also one of Turkey’s top 200 industrial corporations and exporters. Exporting more than 50% of its production of generators in the 1980’s and completed production, the Company has production plants in Turkey and its integrated organizational structure on schedule China. With 12 offices located in Asia, Europe and Africa, the within the scope of the energy value chain. Company is one of the world’s top 10 companies in this sector. www.aksa.com.tr Engaged in the installation of power plants and power generation since the 1990’s and natural gas distribution activities since Aksa Service & Rental the year 2000, the Holding has progressed to new phases With Turkey’s largest fleet of generators for rent, Aksa Service in its vertical and horizontal restructuring in the energy sector. & Rental meets its domestic and foreign customers’ needs for The Group has evolved into a fully integrated energy holding generators through leasing at its offices in Dubai and Istanbul. by engaging in each and every ring of the energy value chain Providing uninterrupted service throughout Turkey 24 hours a day through its power distribution activities that were launched back in through its service network, Aksa Service & Rental works to resolve 2010. all types of technical problems that its customers may encounter through an experienced staff and modern service vehicles. Kazancı Holding owns four more energy companies in addition to www.aksaservis.com.tr Aksa Energy: Aksa Natural Gas Distribution Regions Çatalca-Hadımköy Zonguldak* Samsun*** Düzce Rize Amasya Ordu Giresun Trabzon Bolu Gümüşhane Çanakkale Bursa** Tokat Bilecik Bayburt Balıkesir**** Sivas Manisa Afyon Malatya Elazığ Van Adana Osmaniye Şanlıurfa Mersin Hatay * Ereğli ** Gemlik, Karacabey, Mustafa Kemal Paşa *** Çarşamba, Terme **** Bandırma, Susurluk Aksa Natural Gas Distribution Regions 6 AKSA ENERGY 2012 ANNUAL REPORT Kazancı Holding-Turkey’s largest energy group-offers unique growth potential.