CEO Interview with Capital Magazine / Jan 2017

WE WILL FOCUS ON DOMESTIC AND RENEWABLE GENERATION
Enerjisa which is one of the pioneering companies in energy industry, established their plans for 2017 on growth. The company, which dominates the electricity market, plans to take this growth over alternative channels such as the wind and the sun. In the new period, sales and distribution investments are set among the priorities. Enerjisa CEO KIVANÇ ZAİMLER said, "We will invest TL 1.5 billion in this area," and he adds: "We attach importance to the usage of domestic, renewable and national resources, and for the next five years we have more openings for domestic generation in line with the developments on wind and solar energy. We will focus on these areas. "

Enerjisa is one of the leading players in Turkey's emerging electricity market with its generation, distribution investments and competitive sales strategies based on efficiency and technology. The company, with 20 years background, manages a large portfolio that develops in the natural gas field, in addition to four main business lines of electricity generation, distribution, trading and sales. Enerjisa CEO Kivanc Zaimler told us that 2016 has been a good year despite all the currency risks and regional crises and says "We will definitely continue to grow" for 2017. Zaimler said that today they will add sun to their generation composition of natural gas, hydroelectric, lignite and wind and the company's future growth will be shaped around the sun and the wind. We realized an interview with Kivanc Zaimler on new term plans of Enerjisa.

CONSUMERS WILL BE OUR NEW COMPETITORS
2017 AGENDA We will definitely invest TL 1.2 billion on the development of the distribution network. We initiated a campaign as of the first week of December on one of the most important issues in Turkey energy saving. In order to raise awareness in this regard, we have launched a movement, called "Protect Your Energy". According to our research, 50 percent of Turkish people have a sense of saving.

NEW CHANNELS However, as a developing country, we need more. We will offer new products in order to use electricity economically, we plan our investments on this issue. It will also take some time before we can realize it in 2017, but we focus on investments on more renewable resources such as sun and wind.

NATIONAL RESOURCES To a large extend, we have completed our investments in areas such as natural gas and lignite, which we call conventional generation. We have the largest generation portfolio of Turkey. We care about the use of domestic, renewable and national resources. for the next five years we have more openings for domestic generation in line with the developments on wind and solar energy. We will focus on these areas.

CUSTOMER-FOCUSED SOLUTIONS Another topic is the customer-focused solutions. We would like to have our customers who consume the product we are selling now, to be a competition to us and to generate their own electricity. It may be an industrial enterprise or a household. Current legislation allows it. So consumers will be our comptetion in the coming period. We are entering a term that we will involve them into the play. Obviously our preparations are for even more customer-focused.

Could you make an assessment about the energy industry in Turkey considering the recent developments?
When you look in the final energy consumption in Turkey, 21% of it derives from electricity energy. The increase in generation capacity had been below the increase in demand in the early 2000's. With the investments allocated to generation particularly within the last years by the the realization of several projects, a growth of 8% in capacity has been reached. Today, the electricity sector is on its way to liberalization. I would like to consider electricity energy industry in 4 dimensions.

What are these 4 dimensions?
First one is sustainability. This one has financial, supply security, human and environment dimensions. Investment on generation has grown by 7% and an incremental capacity of 5400 MW has been obtained. Concentration on domestic and renewable generation has increased. Mechanisms such as the support of renewable energy, natural resources such as lignite, natural gas power plants which will be useful for capacity have been developed in order to sustain these investments financially. The satisfaction of the final consumer, ie the customers, was taken to the point of the business. Of course, all these growths came with employment.

Second dimension is liberalization... Because By the law in 2001, the liberalization of the electricity sector is now under way. Last year, private sector shares in this area increased from 59% to 62%. This is a good rate but still insufficient. Half of the electricity generated in Turkey today is "buy and sell". In other words, it operates within the market. In developed countries, however, this is made up of 7- 8 times more "buy and sell"s than generation. Natural gas, which is still one of the most important electricity generation fuels, does not have a market, this needs to develop. There is a limit on the free consumer limit, which the customers receive electricity from the supplier they want. Last year, a customer who used an average of TL 130 a month was free to choose his electricity supplier. This figure has decreased down to TL 125, but it needs to be reset.

Third dimension is predictability, because in an electricity industry which is regulated to a large extend, the predictability of regulations is very important. This means the rules should not be changed in the middle of the game. The determination of a 5-years tariff for electricity distribution was a very positive step for the sake of view of the future.

Fourth dimension is technology. Although we are a lot dependent to external sources in terms of electricity generation, we may at least decrease our dependence concerning equipment for generation and technology.

What is the position of Enerjisa with in the industry?
Enerjisa operates in all business lines of the private sector in energy industry. We are the leading company in all these lines. We are the largest private sector player in electricity generation via different resources. When we look at trade which is our second business line, we realize the biggest trade volume on the market. In our distribution business, which is our third business line, we serve 20 million of population in 14 provinces within 3 distribution regions. We are doing a great job in an area larger than the geography and the population of the 180 countries in the world. Our fourth business line is sales, where one of every 4 people in Turkey is an Enerjisa customer. As Enerjisa, we have faith in the future of Turkey, that's why we have already made an investment of USD 11 billion. We continue with these investments without interruption.

Growing up, what particular problems did you encounter and are still encountering?
Firstly, a road map was set as "Turkey will be liberalized and will be a liberal market". The delays in this direction has been one of the issues that held us up as well. The second one is that we are in a regulated industry. The changes that we have not foreseen in the regulations are another of our difficulties. There is also a price issue. The third difficulty we face is that prices are not predictable as we make large investments on foreign exchange basis.

How did you spend the year for Enerjisa in terms of profitability and sales?
We met our targets but 2016 was not an easy year. We have gone through a chaotic year considering the terror and especially the war climate in our southern regions. We started the year with the Russian crisis. In this way, the security of supply and the diversity of resources have become a serious agenda. However, every cloud has a silver lining. Thus, significant steps were taken in terms of providing energy and supply security. There has been fundamental changes in the law. The strategic plan in energy market has been revised. In spite of the fluctuations in the market and in exchange rates, Enerjisa's performance in 2016 was good. As our sales grew by the end of the year, we foresee to fulfill our operational profitability over 40%. By focusing on operational excellence regarding all our work, we started to control our costs.

How was 2016 financially and in terms of investments for your company?
We started to manage our debts and risks more effectively in all areas. Despite the fluctuations in the currencies, we did not experience a significant problem in terms of cash flow. Considering our generation investments; we have commissioned Tufanbeyli power plant, which is an investment realizing generation on domestic resources that will contribute significantly to the energy security of our country and reduce the energy import bill. We have commissioned the second natural gas power plant in Bandırma and our hydroelectric power plant in Yamanlı. Regarding the trade, we have developed new products that will contribute to the depth of the market. We made an investment of 1.2 billion TL for distribution and we continue to grow and renew our grids. We have exported the first CPI indexed bonds of our industry. We increased the capacity of our call centers by 3 times. In our sales activities, we have developed special services and solutions to meet the needs of 9 million customers.

You have been appointed as the CEO 10 months ago. What were your priorities?
I started with a good teammate first. I believe that work with the best professionals in Turkey. I came within Enerjisa. I've been here for 8 years. As I worked in natural gas, trade, distribution and sales business units, it was an advantage to know the dynamics of the company. You may merely manage such a complex structure in a simple way. I decided on 4 priorities. First one was to provide financial sustainability, within this frame to have a healthy balance sheet. Second was to manage and minimize our risks in terms of market, price and foreign exchange. Third one was to identify the business areas we will focus on, particularly the priorities on the areas which are close to the customer such as sales and distribution. The fourth was to dentify the growth areas using technology and innovation

How much did you realize in terms of your targets?
We've enabled our balance sheet to be more healthy. We manage our risks to a very large extent, but we still have risks that we can not manage. We have clearly identified the areas we will focus on, and we have identified areas where we will grow. We still work on how we will take action.

What are your overall expectations about the economy in Turkey and in the world for 2017?
First of all we see that predictability in economic and political circles around the world has declined. Turkey has managed this term well by the contribution of its own factors. Today, we are one of the most growing economies following China. So we are expecting 2017 to be able to get along well with the same positive feelings, but we also predict that it will be more difficult. Despite this, we estimate that the economy will grow at 3-3.5% range. Likewise, we anticipate that the electricity sector will grow likewise.

What is your growth target for the coming term?
We will definitely continue to grow. This growth will change shape from time to time. You have to make plans according to time, circumstances, conjuncture on the way to this vision. Sometimes this grows with your turnover or your sales, sometimes with your profitability. Sometimes you grow up with your number of employees and sometimes with your operational capabilities. Our investments will grow especially in distribution, sales channels. We will provide our customers with solutions in new areas. We will invest around TL 1.2 billion in the field of distribution. We also focus on renewable sources of generation. But our most important investment will be on human again.

As Enerjisa, what will be your growth strategy in the coming term?
Distribution, sales and renewable customer solutions ... We plan to grow in these areas.

Do you look for a partner for Enerjisa?
We do not look for a new partner. When we provide financial sustainability, operational excellence, and all steps and transparency that institutionalization requires, which we already did all, we plan to be a company that is ready to be opened to the public. We have already entered a period we of planning IPO. We will also evaluate this according to the conditions.

At what intensity are you going to enter alternative energy channels?
In fact, one of these is that, customers generate their own energy using their renewable or conventional sources at their own sites. These are mostly industrial enterprises or big complexes. A world where they can meet their needs and sell the surplus to the network ... Another channel is demand participation. As you know, electricity consumption changes hourly. There are intervals when it is consumed too much or consumed less. Generation should always be equal to consumption. So when you meet this demand of consumption, there must be an in line ripple in your generation as well. This is not favoured, it means high cost inefficiency. What do you do then? You start to manage the demand. For example, you can do this by shifting the demand to an industrial operation by saying "You do not consume electricity at the following times and run your business at the following times". Well, why should an industrial company does this, you need to offer it a commercial appeal. Such new channels are also developing. So with these alternative channels, it will be possible to achieve both efficiency and profitability for all stakeholders. This is one of the new channels we are trying to develop and concentrate on.

Where will the industry get to within the next 10 years?
First of all, I believe that we will reach a completely liberalized market with all its chains and dynamics covering generation, trade, sales and distribution. Naturally, it is inevitable for new players to enter such a liberalized sector. Especially new players will absolutely be in the fields of generating renewable and domestic resources, production of equipment for that and in developing more innovative customer solutions.

WE WILL BE INTERESTED IN THE PIPELINE LINE PROJECT FROM ISRAEL

SUPPLY SECURITY Enerjisa has the largest capacity for electricity generation from natural gas in the electricity industry of Turkey. So it is a huge natural gas consumer. Therefore, when consuming natural gas, you consider this natural gas consumption as a security of supply. If you buy that much fuel or a commodity, why would not you involve in the previous rings (trade, imports) of the value chain?

TURKEY'S NEED The natural gas sector in Turkey has not been liberalized as fast as it was expected since 2008. Therefore, Turkey needs new natural gas resources for the sake of resource diversity. We also utilize all the opportunities in this process. So natural gas is a priority fuel and input for us. Secondly, it can grow as a new business area. But we are not able to take concrete steps in this sense due to the conjuncture.

“WE OFFER KEY SOLUTIONS FOR OUR CUSTOMERS”
TRENDS One of the most prominent trends in energy is savings. According to our research, we realize that 50% of us are really aware of saving. Others talk about saving, but not really save. We follow a different strategy and say "Consume less of the product we sell." Because it has benefits for the country, for the citizens, and for the whole economy. If Turkey and this sector is well, we will be good as well for the long term.

SAVINGS Let me give a simple example. A household saving of 1 % electricity consumption, provide about saving TL 130 million added value for the economy of Turkey. These are small things that everyone knows. We explain how savings can be introduced into our everyday life through www.enerjinikoru.com. We tell about things that you alrady know but do not apply such as not leaving the oven door open, not opening the refrigerator too often, turning off the lights, using the curtains correctly, and not overheating the houses.

CONSUMPTION Secondly, nowadays everybody thinks about having a solar panel at the to of their houses. We want that our customers do not think about these solutions anymore, but we offer them a solution. Because this should be formulated precisely. If you are making an investment like this, will it pay back or not? We propose a solution for these troubles, efforts, and complex calculations. So in fact we position you as our competition and you consume less.

ENERJISA’S NEW PROFILE AND TARGETS

• Enerjisa operates in all business lines of the private sector in energy industry and isthe leading company in all these lines.
• We are the largest private sector player in electricity generation via different resources.
• When we look at trade which is our second business line, we realize the biggest trade volume on the market.
• In our distribution business, which is our third business line, we serve 20 million of population in 14 provinces within 3 distribution regions.
• One of every 4 people in Turkey is an Enerjisa customer. As Enerjisa we have faith in the future of Turkey.
• We have already made an investment of USD 11 billion and continue with these investments without interruption.
• We made an investment of 1.2 billion TL for distribution and we continue to grow and renew our grids.
• In spite of the fluctuations in the market and in exchange rates, Enerjisa's performance in 2016 was good.
• We met our targets. As our sales grew by the end of the year, we foresee to fulfill our operational profitability over 40%.
• We will definitely continue to grow in 2017. We will focus on investments on renewable generation resources such as sun and wind.
• We do not look for a new partner. We plan to be a company that is ready to be opened to the public.