October 2011 Republic of Turkey Privatization Administration

Privatization of Electricity Generation Sector in Turkey October 2011 Republic of Turkey Privatization Administration

Agenda Overview of Electricity Turkish Electricity Generation Generation Company Sector Privatization Portfolio -Priority Power Generation Plants -Plants with Capasity Expansion Potential -Design of Portfolio Groups -Portfolio Groups Important Issues Conclusion

EÜAŞ produced 46% of the electricity consumed in 2010 Distribution of the installed capacity in 2010 Distribution of electric energy produced in 2010 100% = 49,5 GW 100% = 211.208 GWh Built Operate Transfer Auto Producers 5% Built Own Operate 6% 12% Mobile 1% EÜAŞ 49% Built Operate Transfer 6% Auto Producers 6% Built Own Operate 21% EÜAŞ 46% 57,4% Generation Companies+TOR 27% Generation Companies+TOR 21% Source: EÜAŞ

EÜAŞ has generated 57% of its output from thermal power plants which constitute 52% of its installed capacity Percent, 2010 Breakdown of installed capacity by fuel type Breakdown of energy production by fuel type 100% = 24,2 GW 100% = 95.532 GWh Natural Gas 17% Hard Coal 1% Liquid Fuels 3% Hydraulic 48% Natural Gas 22% Liquid Fuels 0% Hard Coal 2% 40% Hydraulic 43% Lignite 31% Lignite 33% 27% Thermal power plants represent 52% of EÜAŞ installed capacity Thermal power plants represent 57% of EÜAŞ generation SOURCE: EÜAŞ

Total installed capacity of the plants that will be privatized, is over 16 GW Going to be privatized Number of Plants Minimum ins.capacity MW Maksimum ins.capacity MW Installed Capacity MW 12,524 Thermal 18 50 1,440 Large Plants 3,687 Hydro 27 26.2 702.6 142 River Small Plants 53 <0.1 51.2 16,359 Total of plants that will be privatized 98 <0.1 1,440 7,627 Not considered for privatization 21 6 2,405 23,976 32% 68% EÜAŞ Total 119 <0.1 2,405 Total of plants that are going to be privatized, makes up the 68% of EÜAŞ installed capacity and 39% of total installed capacity in Turkey Plants that are not planned to be privatized: Name Atatürk Karakaya Keban Berke Borçka Sır Batman Muratlı Dicle Torul Kralkızı Kadıncık 1 Seyhan 1 Kadıncık 2 Ş.Urfa Manavgat Karacaören 2 Kepez 1 Seyhan 2 Kepez 2 Yüreğir Installed Cap. MW 2,405.0 1,800.0 1,330.0 510.0 300.0 283.5 198.0 115.0 110.0 103.2 94.5 70.0 60.0 56.0 51.0 48.0 46.4 26.4 7.5 6.0 6.0 Source: EÜAŞ, Privatization Administration

Agenda Overview of Electricity Generation Company ion Assets Privatization Process Privatization Portfolio -Priority Power Plants -Plants with Capasity Expansion Potential -Design of Portfolio Groups -Portfolio Groups Important Issues Conclusion

12 hydroelectric power plants out of 27 have installed capacity over 100 MW Installed Capacity MW 100 MW + 703 500 278 26 27 32 32 38 48 54 56 62 69 69 75 76 85 90 120 124 128 138 159 160 169 170 189 2010 Gross Generation GWh 300 434 261 480 488 658 274 763 366 497 650 461 505 1.722 122 117 139 149 128 122 150 129 138 171 189 53 Altınkaya Hasan Uğurlu Gökçekaya Karkamış Özlüce Çatalan Sarıyar Gezende Aslantaş Hirfanlı Menzelet Kılıçkaya Köklüce Kürtün Kesikköprü Doğankent Suat Uğurlu Demirköprü Adıgüzel Derbent kapulukaya Kemer Yenice Karacaören-1 Çamlıgöze Almuş Tortum Source: EÜAŞ -2010

High-capacity hydro plants are concentrated in central and eastern regions of Turkey Yenice 37.8 MW Sarıyar 160 MW Gökçekaya 278.4 MW Kapulukaya 54 MW Kesikköprü 76 MW Derbent 56.4 MW Altınkaya 702.5 MW Hasan Uğurlu 500 MW Suat Uğurlu 69 MW Almus 27 MW Köklüce 90 MW Çamlıgöze 32 MW Kılıçkaya 120 MW Doğankent 74.5 MW 0-100 MW 100-200 MW 200 MW + Kürtün 85 MW Tortum 26.2 MW Sakarya Kızılırmak Harşit çayı Gediz Yeşilırmak Peri çayı Demirköprü 69 MW B. Menderes Aksu Seyhan Ceyhan Fırat Kemer 48 MW Adıgüzel 62 MW Karacaören-1 32 MW Göksu- Ermenek Hirfanlı 128 MW Gezende 159.3 MW Özlüce 170 MW Karkamış 189 MW Menzelet 124 MW Aslantaş138 MW Çatalan 168.9 MW Source: EÜAŞ

Most of the 18 thermal plants are located in western regions of Turkey 0-500 MW 500-1000 MW Ambarlı F.Oil 630 MW Ambarlı D.Gaz 1351 MW 1000 MW + Hamitabat 1156 MW Orhaneli 210 MW Bursa D.Gaz 1432 MW Çatalağzı 300 MW Kangal 457 MW Hopa 50 MW Çan 320 MW Tunçbilek 365 MW Seyitömer 600 MW Aliağa 180 MW Soma A 44 MW Soma B 990 MW Yeniköy 420 MW Kemerköy 630 MW Yatağan 630 MW A. Elbistan A 1355 MW A. Elbistan B 1440 MW Source: EÜAŞ

The largest thermal power plants are using natural gas. Installed Capacity MW 2009-2010 average generation GWh Lignite Natural Gas A. ELBİSTAN B 1.440 BURSA D.GAZ A. ELBİSTAN A 1.355 HAMİTABAT 1.432 AMBARLI-D.GAZ 1.351 1.120 4.178 6.804 7.769 7.788 8.191 Fueloil Hard Coal SOMA A+B AMBARLI-F.OİL KEMERKÖY YATAĞAN SEYİTÖMER KANGAL YENİKÖY TUNÇBİLEK ÇAN ÇATALAĞZI ORHANELİ ALİAĞA HOPA 50 210 180 365 320 300 457 420 630 630 630 600 1.034 0 518 279 283 2.071 1.543 2.121 1.246 2.278 1.977 3.159 3.525 3.587 4.802 2010 data was used 58.391 GWh Source: EÜAŞ

Generation Assets Privatization Process Explanation Current status 1 ADÜAŞ Generation assets of 141 MW have been privatized for $510 million Completed 2 53 small hydrolic plants 50 run-of-river plants have been tendered in 19 portfolio groups 9 portfolios have transferred to the private sector. Rest of the portfolios are expected to be transferred in the coming months. 3 4 Priority assets privatization Portfolio groups 4 priority power plants (all thermal) are to be privatized before the portfolio groups 12 thermal and 27 hydrolic power plants are to be privatized in 9 portfolios The privatization tender of Hamitabat Combined Cycle Natural Gas Plant with 1,156 MW installed capacity was launched on March 21, 2011. Six potential investors had pre-qualified and the deadline for the bids was September 23, 2011, but the tender is cancelled. For the others; strategy has been determined and final arrangements are in progress. Strategy has been determined and final arrangements are in progress

Priority Power Generation Plants Priority Power Plants which will be privatised in advance are not included in the Portfolio Groups. Plant Fuel Type Location Installed Capacity (MW) 2010 Gross Generation (GWh) Hamitabat Natural Gas Lüleburgaz, Kırklareli 1.156 (1) 5.750 Kangal Lignite Kangal, Sivas Seyitömer Lignite Seyitömer, Kütahya 457 600 2.313 3.623 Soma A-B Lignite Soma, Manisa 1.034 3.897 Total 3.247 15.583 These four power plants represent 29% of gross generation of EÜAŞ thermal plants as of 2010 Source: EÜAŞ. (1) Installed capacity has been incresed from 1,120 MW to 1,156 MW followed by the rehabilitations works between 2007 and 2010. 10

SOURCE: McKinsey Strategy Report Plants With Capacity Expansion Potential Lignite reserves to support additional capacity in Soma, Tunçbilek, Seyitömer and Orhaneli coal mines Plant Name Fuel Type Location Installed Capacity (MW) Feasible Additional Capacity (MW) Soma Lignite Soma, Manisa 1.034 500 Tunçbilek Lignite Tunçbilek, Kütahya 365 400 Seyitömer Lignite Seyitömer, Kütahya 600 150 Orhaneli Lignite Orhaneli, Bursa 210 100 Total 2,209 1,150 A total of 1.150 MW additional capacity is feasible for these 4 thermal plants

Design of Portfolio Groups Portfolios have been designed to accomodate different interests and attract a diverse group of prospective investors Geographical location has been considered in order to preserve operational synergies and economies of scale Certain power plants have to be grouped together due to some characteristics (common personnel, same subsidiary, common mining field, etc.) Hydrolic power plants on the same river have been placed in the same portfolio to allow integrated management and operational efficiencies 9 portfolios, 356 MW to 2.795 MW in size have been formed: 3 portfolios of themal power plants only 2 mixed portfolios of themal and hydrolic plants 4 portfolios of hydrolic power plants only

Geographical distribution of 9 portfolio groups Ambarlı F.Oil 630 MW Ambarlı D.Gaz 1351 MW Orhaneli 210 MW Bursa D.Gaz 1432 MW Tunçbilek 365 MW Demirköprü 69 MW Aliağa 180 MW Kemer 48 MW Yeniköy 420 MW Kemerköy 630 MW Yatağan 630 MW 3 B. Menderes Yenice 38 MW 2 Gediz Aksu Gökçekaya 278 MW Karacaören-1 32 MW Adıgüzel 62 MW Kapulukaya 54 MW Hasan Uğurlu 500 MW Suat Uğurlu 69 MW Sarıyar 160 MW Kesikköprü 76 MW 4 5 Sakarya Çatalağzı 300 MW 3 Göksu - Ermenek Gezende 159 MW Hirfanlı 128 MW Derbent 56 MW Altınkaya 703 MW 6 Kızılırmak Seyhan Ceyhan Yeşilırmak 8 3 Menzelet 124 MW Almus 27 MW Köklüce 90 MW 7 1 Fırat Karkamış 189 MW Çamlıgöze 32 MW Kılıçkaya 120 MW Harşit Çayı 9 Peri Çayı Kangal 457 MW A. Elbistan A 1355 MW A. Elbistan B 1440 MW Doğankent 75 MW Kürtün 85 MW Özlüce 170 MW Tortum 26 MW Harşit 75 MW Çatalan 169 MW Aslantaş 138 MW Termik Santraller Hidroelektrik Portföy Grupları x Portföy Numarası Santraller SOURCE: EÜAŞ.

EÜAŞ Privatisation: Portfolio Groups (1) 1 Plant Fuel Type Location/River A. Elbistan A Lignite Afşin, K.Maraş A. Elbistan B Lignite Afşin, K.Maraş Installed Capacity (MW) 1.355 1.440 2,795 2010 Gross Generation (GWh) 2.042 7.694 9.736 2 Ambarlı D.Gaz Natural Gas Ambarlı, İstanbul Ambarlı F.Oil Fuel-Oil Ambarlı, İstanbul 630 1.351 1,981 62 7.941 8,003 3 Aliağa Natural Gas Aliağa, İzmir Çan Lignite Kangal, Sivas 180 320 865 251 2.141 4.052 4 Tunçbilek Lignite Tunçbilek, Kütahya Bursa D.gaz Natural Gas Ovaakça, Bursa Orhaneli Lignite Orhaneli, Bursa Gökçekaya Hydro Sakarya Sarıyar Hydro Sakarya Yenice Hydro Sakarya 210 278 160 38 1.432 300 365 2,118 1.174 505 366 128 1.659 7.098 9.270 Kemerköy Lignite Milas, Muğla Yatağan Lignite Yatağan, Muğla 630 630 2.720 2.599 Yeniköy Lignite Milas, Muğla 420 1.308 Demirköprü Hydro Gediz 69 138 5 Adıgüzel Hydro Büyük Menderes Kemer Hydro Büyük Menderes Karacaören-1 Hydro Aksu Gezende Hydro Göksu, Ermenek 62 48 32 159 2,050 129 122 149 53 7.218 Source: EÜAŞ. (1) Four priority plants to be privatised in advance and Hopa, which is non-operational since 2003, are not represented in the above portfolios. Additionally, Çatalağzı, which to be privatized separately, is taken out of Portfolio 3. 13

EUAŞ Privatisation: Portfolio Groups (1) (Cont d) Plant Fuel Type Location/River Installed Capacity (MW) 2010 Gross Generation (GWh) Altınkaya Hydro Kızılırmak 703 1.372 Derbent Hydro Kızılırmak 56 300 6 Hirfanlı Hydro Kızılırmak 128 274 Kesikköprü Hydro Kızılırmak Kapulukaya Hydro Kızılırmak 76 54 1,017 171 150 2.267 Hasan Uğurlu Hydro Yeşilırmak 500 1.722 Suat Uğurlu Hydro Yeşilırmak 69 434 7 Almuş Hydro Yeşilırmak Köklüce Hydro Yeşilırmak 27 90 117 480 Kılıçkaya Hydro Yeşilırmak - Kelkit Çamlıgöze Hydro Yeşilırmak - Kelkit 32 120 838 139 488 3.380 Çatalan Hydro Seyhan 169 497 8 Aslantaş Hydro Ceyhan Menzelet Hydro Ceyhan Karkamış Hydro Fırat 138 124 189 620 461 658 763 2.378 Doğankent Hydro Harşit Çayı 75 275 9 Kürtün Hydro Harşit Çayı Tortum Hydro Tortum Gölü Özlüce Hydro Peri Suyu 26 85 170 356 133 189 1.248 650 Source: EÜAŞ. (1) Four priority plants to be privatised in advance and Hopa, which is non-operational since 2003, are not represented in the above portfolios. 14

Agenda Overview of Electricity Generation Company Privatization Portfolio -Priority Power Plants -Plants with Capasity Expansion Potential -Design of Portfolio Groups -Portfolio Groups Important Issues Conclusion

Important Issues The Privatisation Administration and Ministry of Energy and Natural Resources are currently working to address the following key considerations. Fuel Supply Natural Gas Lignite / Coal Water Natural gas is supplied by BOTAŞ, It is planned that the power plants will handover with coal areas. Preparatork work ongoing for signing water usage agreements with DSİ. Transaction Structure Share sale of Portfolio Companies to be incorporated Portfolio Companies will have Operating Rights for HPPs and ownership of the Thermal assets Environmental Compliance Investors will have enough time for completion of the environmental investments. 15

Agenda Overview of Turkish Electricity Generation Company Privatization Portfolio -Priority Power Plants -Plants with Capasity Expansion Potential -Design of Portfolio Groups -Portfolio Groups Important Issues Conclusion

Attractive Market Fundamentals Given the size and current growth rate and potential, Turkish electricity market is one of the most attractive electricity markets in Europe, expected to become a top 3 market by size in the next 10-15 years. Significant Market Size (2010) Annual Consumption (TWh) (1) High Growth Potential Consumption Growth Rate (2) From a Low Starting Point (2010) Per Capita Power Consumption (3) Germany 542 Turkey %4.6 Turkey 2.2 France 469 Spain %2.6 Denmark 6.0 Average: 8.8 United Kingdom 334 Poland %1.8 Czech Republic 6.3 Italy Spain 309 281 Expected to overtake UK and become a top 3 market by 2020-2025 Greece Austria %1.7 %1.6 Germany Netherlands 6.6 6.7 Turkey 169 Bulgaria %1.6 France 7.4 Poland 147 Czech Republic %1.2 Austria 7.9 Sweden 134 Romania %1.1 Belgium 8.0 Netherlands 111 Slovakia %0.6 Average: %1,7 Sw eden 14.3 Finland 86 Hungary %0.3 Finland 15.7 Source: EIU. (1) Net consumption for Turkey in 2010 is calculated by using 2009 net consumption figure and 2009-2010 gross consumption growth rate. For other countries EIU forecasts are used. (2) Growtth rates are based on 2006 2010 period. 1 (3) Net consumption for Turkey in 2010 is calculated by using 2009 net consumption figure and 2009-2010 gross consumption growth rate Per capita consumption is calculated by dividing this number by population. For other countries EIU forecasts are used.

Conclusion The Turkish Power Market represents a strong and sizeable growth opportunity for strategic and financial players. Turkey has one of the largest and fastest growing power markets in the CEEMEA * region Electricity demand growth is expected to outpace real GDP growth as a result of population growth, urbanisation, industrialisation and economic growth Turkey, as the sixth largest electricity generating country in Europe, has a per capita power consumption level well below Western European markets As well as enhancing competition and efficiency, the ongoing liberalisation process is also expected to bring the Turkish power market in line with EU market structures Opportunities to create vertically-integrated operations in the sector are expected to increase Share of private players in the market is increasing EÜAŞ privatisation process is of critical importance due to the contribution it will make to mobilise the growth potential of the sector. EÜAŞ generation assets privatisation process reflects a structure which will address the ongoing issues in the energy sector and serve the objectives of the privatisation. As such, EÜAŞ privatisation is an important opportunity for the investors With this perspective, we: Have selected the priority assets of EÜAŞ and formed the portfolio groups, and Have the determined the right strategy to tackle key issues We believe that the privatization process of EÜAŞ assets will be beneficial in ensuring supply security, enhancing efficiency and competition in the Turkish electricity market structure and activities * CEEMEA: Central and Eastern Europe, Middle East, Africa

Thank You Arzu ATİK aatik@oib.gov.tr Tel : + 90 430 45 60