Message from the CEO

Dear Shareholders,

2016 was a challenging year for the energy sector with the impact of a decline in economic growth figures, depreciation in the Turkish Lira, surplus in the electricity market, low prices and developments in the global economy. We predict that the impacts of these developments will continue in 2017.

Akenerji’s fundamental strategy in 2016 was to operate our existing power plants optimally according to market prices, and to develop new projects which will add value to our company.

Despite fateful incidents such as the “July 15 coup attempt” and terror attacks occurring one after another, at Akenerji we continued our activities without pause, to carry our country onward.

The year panned out in line with our expectations for operational profitability, thanks to the precautions we took, the proper trade strategy we adopted, and our product diversification and risk management, in spite of all the turbulence.

As for Akenerji, our earnings before interest, taxes, depreciation and amortization (“EBITDA”) as of 2016 year-end registered at TL 234 million. Despite low market prices, Erzin Natural Gas Combined Cycle Power Plant operated with the low cost advantage made possible by its high efficiency.

We also achieved positive results from our hydroelectric power plants in terms of production and hydrology. Alert to all short and long term liabilities, Akenerji took the necessary steps to sustain its operations in a healthy financial structure, with a proactive approach. Renewable Energy Sources Support Mechanism sales, and the fact that a portion of a dollar-based cash and refinance loan was used in TL, minimized Akenerji’s exposure to exchange rate risk.

In the previous year, we focused on evaluating capacity enhancement opportunities in the power plants that generate with renewable resources. Accordingly, the investment activity to boost the installed power in Ayyıldız to 28.2 MW from 15 MW, growing by 13.2 MW, was almost completed, and the additional investment was finalized in the last days of 2016. The capacity expansion of Ayyıldız power plant corresponds to the electricity requirements of 15,000 homes as per “Gold Standard” criteria, within the scope of reducing Green House Gas Emissions.

Just like in the previous year, we plan to continue virtual power plant tenders, which are among the projects that we pioneer in the sector. We will maintain our projects oriented towards energy efficiency, which is key to added value.

Energy trade is one of the key activity areas adding value to Akenerji without incurring asset based capital expenditure. In 2016, Akenerji power plants generated a total of 3.7 TWh, 24% of which is from renewable resources. Akenerji’s total trade volume grew by 56% over the previous year, to 16.5TWh. In 2016 we participated in RERSM (Renewable Energy Resources Support Mechanism), which we had only partially applied in previous years, with all of our renewable electricity generation resources, and gained 74% supplementary income compared to spot income. In addition to our generation portfolio, Akenerji included the additional resource of 4.0 TWh that we obtained from other market participants into our portfolio, and hence boosted our trade significantly and gained added value.

As an indicator of the value we place on “product diversity”, in 2016 we initiated the “market access services”, the foundations of which were laid in 2015. We provided 1.8 TWh of the market’s energy supply for our customers.

Just as in previous years, we continued our success and awards with our activities in social responsibility and sustainability in 2016. In all of our activities, our fundamental principles were to add value to our country, contribute to the environment and be beneficial for society.

With this principle, “We say that water is vital for us and we continue to do our best to protect water and pass it on to the following generations.” These efforts were appreciated by CDP, the “world’s strongest and most efficient nongovernmental organization, which focuses on the protection of natural resources.” We were the “only electricity company” in the CDP Turkey 2016 Water program, and our performance score rose from C to B.

We reinforced our high-standard environment and society friendly service concept with the Carbon Development Project (CDP), Turkey Climate Change Report, and Water Report, in which we participate voluntarily, informative meetings for locals that we organize in power plant regions, and with our GRI Sustainability Report.

Our pioneer steps in the energy sector were deemed noteworthy this year as well, and Akenerji was once again awarded in the 7th Turkey Energy Summit. The project “Virtual Power Plant Tender”, organized by Akenerji, first in April then in November, and where Akenerji opened the capacity of the Erzin Natural Gas Combined Cycle Power Plant to its stakeholders, won the “Altın Voltaj” (Golden Voltage) award.

For 2017, an environment is expected in which the economy will be more stable compared to the previous year, and exchange rate balance will be achieved. We hope that uncertainties will be eliminated for investors, and a better investment environment will be established with reliable and predictable growth.

A transparent, competitive and predictable market system is vital for the operating power plants to sustain their activities, and for the new investments that will ensure power supply security in the medium and long term.

We are working hard to provide “energy” to Turkey.

Sincerely,

Serhan GENÇER

Chief Executive Officer