AnnuAl RepoRt 2009 Seeing the future… Contents 04 Key indicators 10 HigHligHts 14 2009: a year in wHicH tHe future is being built on a strong foundation 20 cHairman’s message 24 board of directors 28 MESSAGE FROM tHe general MANAGER 32 senıor management 36 Production 54 distribution 58 marine transPort 60 r&d Policies and Practices 62 investment 70 Human, Public and environmental HealtH 78 Human resources Policy and tüPraş emPloyees 80 corPorate social resPonsibility 84 risK management 88 investor relations 92 statement of comPliance witH corPorate governance PrinciPles 103 agenda 104 statement on tHe Profit distribution for 2009 106 amendments of tHe articles of association 110 REPORT of AUDITORs Only a far-reaching vision will engender the right decisions. Tüpraş, Turkey’s only producer in the refining sector and its largest industrial corporation, joined the Koç Group of Companies in 2006. With its production facilities and partnerships, Tüpraş provides products and services in refining and distribution to meet approximately 70% of Turkey’s fuel demand. At Tüpraş, we are keenly aware of the fact that our growth is dependent on that of Turkey and we understand the responsibility of the vital role we play in meeting our nation’s energy demand. In line with our Investment Plans, we continually upgrade and improve our technologies in order to maintain our sustainable growth and enhance our competitive edge. Under the challenging and constantly changing market conditions, we capitalize on our experience and capacity to formulate efficient solutions to manage our risks with proactive strategies - always assured of the driving force of the Koç Group behind us. tüpraş At A glAnCe İzmİt RefıneRy Capacity 11.0 million tons/year Nelson Complexity 7.78 gİResun opet teRmınAl mARmara opet teRmınAl Storage Capacity 44,000 m3 Storage Capacity 723,000 m3 köRfez opet teRmınAl Storage Capacity kıRıkkAle 37,500 m3 RefıneRy Capacity 5.0 million tons/year Nelson Complexity 6.32 dİtAş Tüpraş’ Shares 79.98% Crude oil tanker 165 kDWT Product tanker 10.98 kDWT İzmİR RefıneRy Two New Product Tankers Capacity 11.0 million tons/year Nelson Complexity 7.66 bAtmAn RefıneRy Capacity 1.1 million tons/year Nelson Complexity 1.83 AlİAğA opet teRmınAl Storage Capacity 3 AntAlyA opet 64,000 m teRmınAl meRsİn opet teRmınAl Storage Capacity 20,000 m3 Storage Capacity 240,000 m3 tüpraş tüRkİye petRol RAfİneRİleRİ A.ş. CompAny pRofIle Date of Establishment Issued Capital Crude Oil Processing Capacity November 16, 1983 TRY 250.4 million 28.1 million ton/year Headquarters Profits in 2009 Crude Oil Storage Capacity Körfez/Kocaeli (After Taxes) 2.0 million m3 (Gross) TRY 811.3 million Registered Capital Product and Product Storage Capacity TRY 500 million Public share 2.7 million m3 (Gross) 49% İzmİt RefıneRy Capacity 11.0 million tons/year Nelson Complexity 7.78 gİResun opet teRmınAl mARmara opet teRmınAl Storage Capacity 44,000 m3 Storage Capacity 723,000 m3 köRfez opet teRmınAl Storage Capacity kıRıkkAle 37,500 m3 RefıneRy Capacity 5.0 million tons/year Nelson Complexity 6.32 dİtAş Tüpraş’ Shares 79.98% Crude oil tanker 165 kDWT Product tanker 10.98 kDWT İzmİR RefıneRy Two New Product Tankers Capacity 11.0 million tons/year Nelson Complexity 7.66 bAtmAn RefıneRy Capacity 1.1 million tons/year Nelson Complexity 1.83 AlİAğA opet teRmınAl Storage Capacity 3 AntAlyA opet 64,000 m teRmınAl meRsİn opet teRmınAl Storage Capacity 20,000 m3 Storage Capacity 240,000 m3 79.98% 40% opet dİtAş Tüpraş owns 40% of Opet Tüpraş owns 79.98% of Ditaş 1,324 Filling stations Crude Oil Tanker 165 kDWT 1,128.5 thousand m3 of storage Product Tanker 10.98 kDWT Operations in commerce, Two new product tankers mineral oil and bunker fuel The pieces come together… In a period of crisis, while world trade shrinks, market conditions toughen and risks increase, we proceed with a strategic foresight to focus on investments that will enhance our profitability and efficiency. In 2009, we invested a total of USD 188 million in our refineries, completed our environmental responsibility related projects and established an R&D Department that is rapidly engaging in collaborations with universities. ˜ INTRODUCTIon ˜ Key IndIcators Key IndIcators oPeratIonal IndIcators thousand tons 2005 2006 2007 2008 2009 ProceSSeD cruDe oil 25,495 26,192 25,590 24,208 16,975 refininG ProDuction 23,889 24,591 23,994 22,780 15,968 SaleS 24,965 26,137 26,328 25,957 21,521 ProDuct exPortS 4,609 6,242 6,391 6,112 3,308 ProDuct imPortS 1,052 1,823 2,279 2,931 5,828 ProfIt Per share TRY 2005 2006 2007 2008 2009 Profit Per Share 2.72 3.28 5.18 1.73 3.24 GroSS DiviDenD Per Share 1.94 2.63 4.19 2.31 2.50 net DiviDenD Per Share 1.75 2.24 3.56 1.97 2.14 net sales oPeratIonal ProfIt (uSD million) (uSD million) 05 05 20 20 06 06 20 20 11,080 615 14,056 585 07 17,324 07 988 20 23,353 20 984 13,118 654 08 08 20 20 09 09 20 20 In 2009, due to the drop in oil and product Despite the fall in refinery profit margins prices, net sales stood at USD 13,118 million. due to the global crisis, Tüpraş implemented apt strategies and has reached the highest profitability level in the sector in 2009. 4 tüpraş annual report 2009 Investment exPendIture (uSD million) 05 20 06 20 254 274 07 355 20 395 189 08 20 09 20 In the four-year period from 2006 to 2009, Tüpraş engaged investment expenditures of USD 1 billion 212 million. ProfIt after tax ProfIt Per share return on equIty (roe) (uSD million) (trY) (%) 05 05 05 20 20 20 06 06 06 20 20 20 508 2.72 22 575 3.28 25 07 998 07 5.18 07 34 20 331 20 1.73 20 11 522 3.24 22 08 08 08 20 20 20 09 09 09 20 20 20 In a period of floating exchange rates and Profits per share grew 87% over the previous Tüpraş’ return on equity has increased two-fold changing interest rates, Tüpraş’ profit after year, from TRY 1.73 to TRY 3.24. since 2008, reaching 22%. tax grew 38% over the previous year as its efficient cash management strategy allowed for the maintenance of the sound income - expenditure balance. 5 ˜ INTRODUCTIon ˜ Key IndIcators fInancIal IndIcators usd mIllIon 2005 2006 2007 2008 2009 net SaleS 11,080 14,056 17,324 23,353 13,118 oPerational Profit 615 585 988 984 654 Profit before taxeS 680 705 1,240 421 653 Profit after taxeS 508 575 998 331 522 ebitDa 769 712 1,081 1,099 779 net Debt (caSh) (421) 259 (207) 215 (653) return on equitY (%) 22 25 34 11 22 leveraGe rate (%) (18) 10 (6) 8 (36) net WorkinG caPital 997 750 1,105 202 283 inveStment exPenDiture 254 274 355 395 188 safety scores accIdent frequency rate severIty rate (number of inciDentS x 1,000,000 / (Days loSt x 1,000,000 / PerSon x hour) PerSon x hour) 05 05 20 20 06 06 20 20 4.8 116 5.0 111 07 3.4 07 193 20 3.6 20 104 2.5 73 08 08 20 20 09 09 20 20 The 2009 accident frequency rate target was In 2009, the severity rate stood at 73, lower originally set at 3.5; however, due to safety than the initial target of 80. policies in place and measures taken, Tüpraş was able to attain an even lower figure of 2.5. 6 tüpraş annual report 2009 TOTAL sales (thouSanD tonS) 3,308 exports other 1,996 107 petKİM asphalt 1,998 861 lpG coMpanIes MIlItary 691 dIstrIbutors 12,559 sales to the dIstrIbutIon comPanIes (thouSanD tonS) 1,648 opet poaş 4,309 1,307 bp 2,677 other shell 2,618 In 2009, Tüpraş sold a total of 21.52 million tons of produce, of which, 12.56 million tons were to petrol distribution companies and the total domestic sales stood at 18.21 million tons. 7 Enabling innovation by looking towards the future. In order to shape the future, we force the limits of linear thinking - just like a chess master, we take precautions to preempt possible moves and focus on revealing hidden opportunities. Our belief in our highly qualified workforce strengthens us and with our technological infrastructure and ambitious steps in expanding our distribution channels, we are moving towards becoming a prominent player in the global oil industry. ˜ INTRODUCTIon ˜ hIGhlIGhts hIghlIghts Tüpraş is the leader and pioneer corporation in its sector due to its strong operational and financial structure, efficient storage capacity, strong distribution infrastructure, cash structure exceeding the refining sector average and its product diversity. 1955 1982 1991 In Southeastern Anatolia, Turkey’s first The İzmit Refinery’s 2nd Expansion 2.5% of Tüpraş shares were offered to the modern oil refinery, the Batman Refinery, Project was completed, with the crude oil public and began transactions on the ISE. was commissioned. processing capacity rising to 11.5 million ton/year. 1993 1961 The Hydrocracker Complexes were In the İzmit Gulf, the İzmit Refinery, 1983 commissioned at the İzmir and Kırıkkale with a 1 million ton/year capacity, was Tüpraş was established with the aim of refineries. commissioned. uniting all public refineries. 1997 1971 1986 The Hydrocracker and CCR Complexes were İzmit Refinery’s 1st Expansion Project was In Central Anatolia, the 5 million ton/ commissioned at the İzmit Refinery.