2014 ANNUAL REPORT OUR ENERGY IS FOR ALL OF US

Transcription

1 2014 ANNUAL REPORT OUR ENERGY IS FOR ALL OF US

2 CONTENTS INTRODUCTION 2 MAJOR OPERATIONAL AND FINANCIAL HIGHLIGHTS 6 HIGHLIGHTS FROM CHAIRMAN S MESSAGE 12 BOARD OF DIRECTORS 16 MESSAGE FROM THE GENERAL MANAGER 20 SENIOR MANAGEMENT 22 ZORLU ENERJİ IN BRIEF 26 ZORLU ENERJİ S INSTALLED CAPACITY AND INVESTMENTS 32 ZORLU GROUP REVIEW OF THE YEAR OUTLOOK FOR THE GLOBAL ENERGY MARKET HIGHLIGHTS FROM THE TURKISH ENERGY SECTOR 41 ZORLU ENERJI S KEY STRENGTHS 44 ZORLU ENERJİ IN 2014 SUSTAINABILITY 54 SUSTAINABILITY FINANCIAL INFORMATION AND REPORTS 64 RISKS AND ASSESSMENT OF THE BOARD OF DIRECTORS 68 INTERNAL AUDIT DEPARTMENT AND ITS OPERATIONS 69 STATEMENT OF RESPONSIBILITY 70 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 89 DIVIDEND DISTRIBUTION PROPOSAL 90 STATEMENT OF INDEPENDENCE BY THE INDEPENDENT BOARD MEMBER CANDIDATES 92 CONCLUSION OF THE AFFILIATION REPORT PREPARED PURSUANT TO ARTICLE 199 OF THE TURKISH COMMERCIAL CODE 93 INDEPENDENT AUDITOR S REPORT 168 INVESTOR INFORMATION

3 1 AS ONE OF THE MAJOR INTEGRATED ENERGY COMPANIES, WE ARE COMMITTED TO MANAGING OUR OPERATIONS AND INVESTMENTS ON A GLOBAL SCALE WITH AN AWARENESS AND RESPONSIBILITY FOR THE FUTURE. WE PURSUE OUR GROWTH STRATEGY ON THE AXES OF SECURE AND COMPETITIVE ENERGY SUPPLY AND EFFICIENT AND SUSTAINABLE USE OF NATURAL RESOURCES. BECAUSE THIS WORLD IS OURS, AND ITS ENERGY IS FOR ALL OF US 1,011 MW ZORLU ENERJİ HAS A TOTAL INSTALLED CAPACITY OF 1,011 MW.

4 2 ZORLU ENERJİ 2014 ANNUAL REPORT MAJOR OPERATIONAL AND FINANCIAL HIGHLIGHTS NET SALES (TL MILLION) GROSS PROFIT MARGIN (%) 2% 10% 807 IN 2014 CONSOLIDATED NET SALES INCREASED BY 29% TO TL807 MILLION EBITDA (TL MILLION) EBITDA MARGIN (%) 65% EBITDA GREW BY 65% TO TL203 MILLION IN 2014 WITH EBITDA MARGIN RISING FROM 20% TO 25% % %

5 3 SUMMARY BALANCE SHEET (BASED ON CMB FINANCIALS) ( 000 TL) CURRENT ASSETS 634, ,013 NON-CURRENT ASSETS 4,324,640 5,767,605 TOTAL ASSETS 4,959,329 6,301,618 CURRENT LIABILITIES 1,928,296 1,662,868 NON-CURRENT LIABILITIES 2,501,324 3,867,825 EQUITY 529, ,925 TOTAL LIABILITIES 4,959,329 6,301,618 GROSS FINANCIAL DEBT 3,214,657 3,868,136 NET FINANCIAL DEBT 3,100,539 3,654,303 SUMMARY INCOME STATEMENT (BASED ON CMB FINANCIALS) ( 000 TL) REVENUES 806, ,008 OPERATING INCOME/(LOSS)* 63,911 (1,129) EBITDA* 203, ,617 NET INCOME/(LOSS) FOR THE YEAR ** (224,240) (309,171) GROSS PROFIT MARGIN 10.2% 2.3% EBITDA MARGIN 25.2% 19.8% *Includes other income and expenses from operations, the share in profit/(loss) of associates and income and expenses from investment activities. **Net income/(loss) attributable to equity holders of the parent.

6 4 ZORLU ENERJİ 2014 ANNUAL REPORT MAJOR OPERATIONAL AND FINANCIAL HIGHLIGHTS ZORLU ENERJİ ELEKTRİK ÜRETİM AŞ (ZORLU ENERJİ) SHAREHOLDING STRUCTURE 4.8% SHAREHOLDING AMOUNT OF SHARES ( 000 TL) SHARE (%) ZORLU HOLDİNG AŞ 228, % 45.7% KORTEKS MENSUCAT SAN. VE TİC. AŞ 87, PUBLICLY HELD 159, OTHER 23, % ZORLU HOLDİNG AŞ KORTEKS MENSUCAT SANAYİ VE TİCARET AŞ PUBLICLY HELD OTHER TOTAL 500, GENERATION ELECTRICITY (kwh)* 2,497,980,456 2,283,593,323 39% OF ZORLU ENERJİ S PORTFOLIO IS COMPRISED OF RENEWABLE RESOURCES. STEAM (tons) 538, ,946 *119,335,642 kwh of the total electricity generated was used internally as of ( : 59,139,886 kwh) SALES ELECTRICITY (Generation) (kwh) ELECTRICITY (Commercial) (kwh) 2,320,374,107 2,165,441,547 1,897,981,143 1,218,571,147 STEAM (tons) 538, ,946 UTILITY AND COOLING WATER, CO₂ (m 3 ) 30,823 4,628,303

7 5 ZORLU ENERJİ IS THE FIRST ENERGY COMPANY TO OFFER ITS SHARES TO THE PUBLIC IN TURKEY, AND IS ALSO THE ONLY PUBLICLY LISTED COMPANY WITHIN THE ZORLU ENERGY GROUP. ZORLU ENERJİ SHARES 20% of Zorlu Enerji s shares were offered to public in 2000, and 32% of its shares are traded on the Borsa İstanbul under the ZOREN ticker. Zorlu Enerji has been the first energy company to offer its shares to the public in Turkey, and is also Zorlu Energy Group s only publicly listed company. As of the end of 2014, Zorlu Enerji s Market Capitalization stood at TL1,185 million. ZORLU ENERJİ SHARE PRICE PERFORMANCE (TL) SHARE PRICE SUMMARY (TL) 2014 Total Number of Shares 50,000,000,000 Number of Shares (Free Float) 15,990,581,400 Yearly High 3.28 Yearly Low 0.92 Year-End Price 2.37 Market Capitalization* (Million) 1,185 * As of Daily Trading Volume (TL Million) Share Price (TL) /12/13 21/1/14 11/2/14 4/3/14 25/3/14 15/4/14 6/5/14 25/5/14 17/6/14 8/7/14 29/7/14 19/8/14 9/9/14 30/9/14 21/10/14 11/11/14 12/12/14 23/12/14 ZORLU ENERJİ RELATIVE PERFORMANCE BIST 100 ZOREN: 128% BIST 100: 26% Relative: 80% ZOREN

8 6 ZORLU ENERJİ 2014 ANNUAL REPORT HIGHLIGHTS FROM 2014 THE DORAD POWER PLANT, DEVELOPED BY ZORLU ENERJI WITH A 25% PARTNERSHIP IN ISRAEL, COMMENCED COMMERCIAL OPERATIONS IN ZORLU ENERJI S DORAD COMBINED-CYCLE NATURAL GAS POWER PLANT IN ISRAEL COMMENCED COMMERCIAL OPERATIONS. The Dorad Combined-Cycle Natural Gas Power Plant, developed by Zorlu Enerji Elektrik Üretim AŞ with a 25% partnership in Israel, commenced its commercial operations in May by obtaining a generation and supply license. The 840 MW Dorad Power Plant, established jointly by Zorlu Enerji and its Israeli partners with a USD1.2 billion investment in the Ashkelon region of Israel, will on its own meet approximately 6% of Israel s total electricity demand. Dorad is the largest power plant built by the private sector in Israel, and is also supported by the Israeli Energy and Water Infrastructure Ministry due to its environmentally friendly and low cost generation structure. PROJECT FINANCE FOR ROTOR II WIND FARM. Project finance was obtained for the Rotor II Wind Power Plant, which will have an installed capacity of 80.3 MW and will be located in the Sarıtepe and Demirciler regions of the Bahçe district in Osmaniye. Rotor II will be built by Zorlu Rüzgar Enerjisi Elektrik Üretimi AŞ, which is 100% owned by Zorlu Enerji. In this context, credit agreements totaling EUR81.3 million were signed on November 24, 2014, EUR40 million of which was financed by Türkiye Sınai Kalkınma Bankası (TSKB) (Turkey Industrial Development Bank) and EUR41.3 million by Bayerische Landesbank, supported by the German Export Finance Agency, Euler Hermes within the scope of ECA financing. THE 840 MW DORAD POWER PLANT MEETS APPROXIMATELY 6% OF ISRAEL S TOTAL ELECTRICITY DEMAND. BANK LOANS RELATED WITH THE RUSSIAN INVESTMENTS, WHICH WERE TRANSFERRED TO ZORLU HOLDING AT THE END OF 2012, WERE PAID BACK IN 2014, THUS STRENGTHENING ZORLU ENERJI S FINANCIAL STRUCTURE. The USD411,435,528 syndication loan related with the Russian investments, which were transferred to Zorlu Holding at the end of 2012, was paid back with the same amount of financing provided by the parent, Zorlu Holding, on August 4, Hence, Zorlu Enerji s financial debt was reduced and financial structure was strengthened. Also, the debts owed to Zorlu Enerji by Rosmiks International BV and Rosmiks Netherlands BV regarding their investments in Russia were assumed by Zorlu Holding. Followed by a netting off of the debts owed to Zorlu Holding with the receivables from Zorlu Holding, related party debt/receivables were reduced, resulting in a more simplified and easier to understand balance sheet for the Company.

9 7 ZORLU ENERJİ WON THE CARBON DISCLOSURE LEADERSHIP AWARD ONE MORE TIME WITH ITS VOLUNTARY REPORTING. ZORLU ENERJİ RECEIVED CARBON DISCLOSURE LEADERSHIP AWARD FOR THE FOURTH TIME. The Carbon Disclosure Project (CDP) 2014 was once again awarded to Zorlu Enerji in the Carbon Disclosure Leadership category, in recognition of its being the first energy company to share transparently with the public the details of its greenhouse gas emissions, its related risks regarding climate change and its management strategies in this respect. In 2014, Zorlu Enerji ranked among the five companies in the top 10 percentile in the Carbon Disclosure Leadership Index by publicly disclosing its strategies regarding climate change through the CDP Platform. Zorlu Enerji was the only energy company to have voluntarily reported under the CDP Project, and won the Carbon Disclosure Leadership Award with its high ranking in the CDP. The CDP examines the role of the market mechanisms in tackling the climate change and is the only reporting platform on a global scale. Zorlu Enerji demonstrated its success in this area by winning at least one award each year since the implementation of the CDP Project in Turkey from TWO AWARDS FOR ZORLU ENERJİ FROM ICCI Zorlu Energy Group won two awards in the ICCI International Energy and Environment Fair and Conference 2014 Energy Awards. Energy Awards are given to support the growth and development of the energy sector and to highlight the services and contributions made within the sector. Candidate power plants and projects were determined by a jury consisting of prominent and competent members of the sector according to a scoring system based on the previously established measurable criteria. Projects were evaluated on the criteria of energy efficiency, social responsibility and the use of domestic components. KIZILDERE II BECAME A FINALIST IN THE INNOVATION AWARDS THANKS TO ITS INTEGRATED PLANT APPROACH. Kızıldere II, Turkey s largest geothermal power plant, received international success with its technological and integrated infrastructure. The plant became one of the finalists in the European Geothermal Innovation Awards 2014 as a result of the evaluation conducted by the European Geothermal Energy Council based on the criteria of innovation, safety, original design, low carbon emissions and improved structure at energy outlets. GOLDEN VOLTAGE AWARD FOR ZORLU ENERJİ Zorlu Enerji won the Golden Voltage Award in the 5 th Turkey Energy Summit, which brought together the sector s leading players, with its corporate social responsibility performance. The companies competing with social responsibility projects were awarded in the summit, which gathered a high number of national and international companies from the electricity, natural gas, petrol and LPG sectors. Zorlu Enerji considers respect for the environment and people as one of the fundamental values of its business operations. Zorlu Enerji won the Golden Voltage Award in recognition of its success in reflecting the sustainability policy, which it implements with high determination, to its corporate social responsibility projects. ZORLU ENERJİ S 2013 ANNUAL REPORT WON GOLDEN VISION AWARD IN LACP VISION AWARDS. Zorlu Enerji s 2013 Annual Report won the Golden Vision Award - one of the most prestigious international awards in the Annual Reports field - in the Annual Reports Vision Awards Competition organized by the League of American Communications Professionals (LACP). A total of 1,000 companies from more than 20 countries were evaluated in the competition. Zorlu Enerji s Annual Report received great acclaim due to its rich content, its simple and impressive expressions, creative design and its clear and transparent messages. The award winning Annual Report was prepared based on the concept of Accountable Energy for the Future. The report was prepared with an emphasis on the concept of reliable, high quality and sustainable energy, which is derived from domestic and renewable resources and which is in harmony with the environment and human life.

10 8 ZORLU ENERJİ 2014 ANNUAL REPORT CHAIRMAN S MESSAGE THE FALL IN OIL PRICES HAS SHAPED A BRIGHTER PICTURE FOR TURKEY S MACRO-ECONOMIC BALANCES. Zeki Zorlu Chairman

11 9 IN ORDER TO MEET GROWING ENERGY DEMAND IN TURKEY, IT IS ESSENTIAL TO DEVELOP AND IMPLEMENT LONG-TERM POLICIES TO REDUCE THE COUNTRY S HIGH RELIANCE ON ENERGY IMPORTS. Turkey is in a buffer zone between the Middle East, Caucasus and Europe. Turkey s strategic and socioeconomic importance in energy markets, both regionally and internationally, is increasing day by day. The world economy witnessed unprecedented changes in While the dramatic fall in oil prices shifted the balances between the oil importers and oil exporters, positive signals from the US economy, the European based deflation risk and Japan s continued monetary expansion stood out as the key issues affecting the financial and capital markets during the year. One of the main items of the global macro-economic agenda in 2014 was the expectation of the FED tapering of its quantitative easing program and start hiking interest rates. The FED did indeed cut its monthly asset purchases, triggering a sharp loss in the value of many currencies, including the TL, against the USD. The stagnation in the European economy, which is Turkey s most important trading partner, and the geopolitical developments experienced at our borders were the other remarkable events of the year. Economic policy and its implementation exhibit changes in accordance with the dynamics in global markets. Rising risk aversion in global markets, coupled with the increasing political uncertainty in Turkey, have caused serious volatility in exchange rates during The fall in oil prices presented a positive picture for Turkey s macro-economic balances. The other important items in Turkey s economic agenda were the slow-down in growth rate, the efforts to tackle inflation, the Central Bank s decisions, the level of interest rates and debt financing, which in turn depends on the developments in international financial markets. Turkey s economic growth and progress are dependent on a reliable and sustainable energy supply. The sustainable development of the Turkish economy depends on long-term strategies, structural reforms and the policies that can be put into implementation in line with these models. The economic and political instability experienced on a global and regional scale compel Turkey, along with many other countries, to seek a new and comprehensive growth model that will enhance its competitive power and sustain economic growth. The decisions taken today in our country - that has one of the world s most dynamic energy markets - will certainly form the fundamentals of sustainable development with their economic, environmental and social effects. Therefore in order to meet the growing energy demand it is essential to develop and implement long term policies to reduce Turkey s high reliance on energy imports.

12 10 ZORLU ENERJİ 2014 ANNUAL REPORT CHAIRMAN S MESSAGE OUR STARTING POINT IS TO REALIZE THE APPROPRIATE INVESTMENTS IN ACCORDANCE WITH NEEDS BY BALANCING EFFICIENCY AND PROFITABILITY WITH CONCERNS REGARDING THE ENVIRONMENT AND CLIMATE CHANGE. As one of the major players in the Turkish energy sector, Zorlu Enerji is assuming an inspiring role in the field of renewable energy. We develop exemplary projects for the sector and command the highest market share in the generation of energy from geothermal resources in Turkey, which possesses one of the richest and untapped geothermal resources in the world. Our team is the sector s most experienced one in all areas from project development to construction, from plant operation to maintenance and electricity trading in Turkey. We trust the state-of-the-art technology and our human resources in the generation of secure and sustainable energy. Zorlu Enerji undertakes investments that support the concept of reliable and sustainable energy with its high capacity generation power, qualified human resources, a balanced investment portfolio, resource diversity and competency in creating innovative solutions. Backed by the most competent project development team in Turkey, Zorlu Energy Group creates optimum solutions in every phase of its projects with the construction, operation and maintenance services provided by its subsidiaries. The Group s human resources are highly specialized in the unique operation and maintenance requirements of the thermal, hydroelectric, wind and geothermal power plants and have sophisticated knowledge of every stage in the processes. The availability rates of Zorlu Enerji plants, which exceed 96%, stand as a clear indicator of the effectiveness of our equipment and our teams. We delicately plan our investments on the axes of the energy need/demand, efficiency/profitability, the environment and climate change and create a balanced portfolio that diversifies risks. Zorlu Enerji has a total 1,011 MW of installed capacity in Turkey and abroad. The Company also has new investments and projects focused mainly on renewable energy, 300 MW of which is under construction and 381 MW in project phase. The Dorad Combined-Cycle Natural Gas Power Plant in Israel, which commenced commercial operations in 2014, is the largest power plant built by the private sector in Israel, and by itself can meet nearly 6% of the electricity need of Israel, which has a total installed capacity of around 13,000 MW. It is a source of great pride for us that Zorlu Enerji is behind this important success... Once we commission the Ashdod and Ramat Negev power plants -other projects in Israel that we develop under a partnership- which have a combined installed capacity of 175 MW, our total generation capacity in Israel will reach 1,015 MW. Step by step, we are approaching our goal of being a regional power by capitalizing on the opportunities in the energy sector. In line with our goal of implementing projects based on energy diversity, we will continue to develop collaborations, both regionally and internationally by being in contact and in cooperation with the international players operating in every field of energy.

13 11 WE ARE COMMITTED TO DEVELOPING AND IMPLEMENTING PROJECTS WHICH CREATE PRACTICAL AND LONG TERM BENEFITS BY TAKING INTO ACCOUNT THE ENERGY-HUMAN-ENVIRONMENT INTERACTION. To provide sustainable, affordable and cost effective electricity, we need to undertake the right investments by balancing the efficiency and profitability requirements with the concerns regarding the environment and climate change. How Turkey can meet its electricity demand requires adequate and detailed analyses with regard to the foreign trade balance and greenhouse gas emissions. We reflect our sustainability approach to our operations from every aspect. We implement our energy policy, which is an indispensable element of sustainable development with its economic, environmental and social dimensions, in an integrated approach with our corporate responsibility. In this context, we unwaveringly pursue our goal of developing and implementing projects that are compatible with the energy-human-environment interaction and which create long lasting and practical benefits. Zorlu Enerji carries out its operations holistically by taking into consideration their economic, social and environmental impacts. This approach brought Zorlu Enerji national and international successes in With our electricity generation based on high technology and resource diversity, we continue to invest in projects that support sustainability in tackling the climate change and ensure energy supply security. We won the CDP 2014, Turkey Climate Disclosure Leadership Award with our disclosure policies regarding the management of greenhouse gases, which are produced as a natural result of our electricity generation activities. Zorlu Enerji was one of the five companies in the top 10 percentile in the Carbon Disclosure Leadership Index, an accolade we achieved by publicly disclosing our strategies regarding climate change through the CDP Platform. Zorlu Enerji has proved its credibility in this field with at least one award each year since the start of the implementation of the Leadership Index in Turkey. One of the most valuable developments among the sustainability activities of 2014 was the publication of Zorlu Enerji s third Sustainability Report. The report, which contains Zorlu Enerji s sustainability performance for the period, received A practice level endorsement, which shows the most transparent level, from Global Reporting Initiative, which is a worldwide recognized reporting standard institute. Zorlu Energy Group won two significant awards in the renewable energy categories in the International Energy and Environment Fair and Conference (ICCI) 2014 Energy Awards organized for the fourth time in We won two important awards in the Renewable Energy category; with the Kızıldere II Geothermal Power Plant in the Geothermal sub-category and with the Gökçedağ Wind Farm in the Wind sub-category. In the coming period, we will continue to successfully carry out our practices and investment commitments in line with our sustainability strategy and raise our performance even further. We believe in Turkey s energy and work unstintingly to convert our country s resources to wealth and to bring that wealth to our people. I would like to extend my gratitude to all of our stakeholders, especially our employees who have made this process sustainable with their efforts and our shareholders, who have never faltered in their support for us. Zeki Zorlu Chairman

14 12 ZORLU ENERJİ 2014 ANNUAL REPORT BOARD OF DIRECTORS Zeki ZORLU Chairman Ali Akın TARI Vice Chairman Olgun ZORLU Board Member Selen ZORLU MELİK Board Member ( Denizli) Zeki Zorlu began his professional career in a family owned textile company in Babadağ, Denizli and opened his first textile store in Trabzon, where he established Korteks Mensucat Sanayi ve Ticaret AŞ in In addition to his textile sector investments, Zorlu Group entered the energy sector in 1993, the electronics and white goods sector with the Group s acquisition of Vestel in 1994, and the real estate sector in Today, Zorlu Group has 25,000 employees and 60 companies under its roof. Mr. Zorlu serves as the Co-Chairman of the Board of Directors at Zorlu Holding and as the Chairman of the Group companies operating in the textile and energy sectors, besides serving as the Chairman of the Board of Directors at Zorlu Enerji. ( Koruköy) After graduating from the Istanbul Law Faculty, Ali Akın Tarı served as a Tax Inspector and as a Chief Tax Inspector at the Ministry of Finance between 1972 and He was appointed as the Vice-President of the Tax Inspectors Board in 1986 and Group Head of the Istanbul Tax Inspectors Board in 1989, and he continued to serve in this position until his appointment as a Board Member of the Banking Regulation and Supervision Agency in He was also elected as a Board Member of the Saving Deposits Insurance Fund in the same year. He left the Banking Regulation and Supervision Agency when his period of duty expired in 2004, and was appointed as a Consultant for the Ministry of Finance. Mr. Tarı served in this position until 2007, when he left his position in the public sector voluntarily to work in different areas in the private sector. Mr. Tarı became a member of the Board of Directors and the Audit Committee of Dilerbank in 2008; in addition to this position, he was appointed as a member of the Board of Directors of Diler Holding in Ali Akın Tarı serves as the Vice Chairman of the Board of Directors of Zorlu Enerji Elektrik Üretim AŞ, in addition to his positions as a Board Member at Vestel Elektronik and Vestel Beyaz Eşya. He still serves in these positions, while at the same time holding the titles of Certified Public Accountant and Independent Auditor. ( Trabzon) After completing his higher education in the United Kingdom, Olgun Zorlu began his professional career in 1986, gaining managerial experience in the textiles companies of the Zorlu Group. Mr. Zorlu was appointed as a Board Member at Zorlu Holding in In addition to his current responsibilities as a Board Member at Zorlu Enerji Elektrik Üretim AŞ, Mr. Zorlu also serves as a Board Member at Zorlu Holding and its subsidiaries. ( Trabzon) Selen Zorlu Melik graduated from the Faculty of Economics and Administrative Sciences, Department of Business Administration at Uludağ University. She began her professional career at Denizbank in Following her internship at the Bursa Branch of Denizbank, she joined the Management Trainee Program at the same bank in After working in a number of positions at the Denizbank head office, Mrs. Zorlu Melik attended a Marketing Certificate Program at the University of California, Berkeley, USA in She subsequently started working at Korteks Yarn Plant in 2002, and became a Board Member at the same company in She has been serving as the Deputy President of Zorlu Energy Group and as a Board Member at Zorlu Enerji Elektrik Üretim AŞ, as well as a Board Member at several Zorlu Group companies since Since April 2012, Mrs. Zorlu Melik has been acting as the Deputy President of the Zorlu Energy Group.

15 13 Bekir Cem KÖKSAL Board Member ( Ankara) Bekir Cem Köksal graduated from the Department of Mechanical Engineering at Boğaziçi University in 1988, and obtained a master s degree from Bilkent University in He subsequently worked in the banking industry between 1990 and In 1997, he was appointed as the Assistant General Manager at Denizbank, and in 2002 he joined Vestel as a Chief Financial Officer. Mr. Köksal currently serves as an Executive Board Member in charge of Finance at Vestel Group of Companies and also serves as the Financial Coordinator at Zorlu Holding AŞ. Cem Köksal was appointed as the Board Member of Zorlu Enerji Elektrik Üretim AŞ during the 2011 AGM held on May 31, 2012, and has been serving in this position since then. Hacı Ahmet KILIÇOĞLU Board Member ( Giresun) Hacı Ahmet Kılıçoğlu graduated with a Bachelor s degree in Economics in 1977 and Master s degree in Economics in 1978 from the University of Essex. He started his professional career at the Ministry of Industry and Technology in In 1980 he became an Assistant Specialist at Türkiye İş Bankası and after working in the private sector for a couple of years, Mr. Kılıçoğlu held administrative positions at the United Nations Development Program (UNDP) and the F-16 project. He then took office at Türk Eximbank in 1987, where he worked in various positions. He later served as the CEO of the bank and as a Board Member between 1998 and He also served as a Board Member at the Banks Association of Turkey between 1998 and 2010 and was elected as the President of the World EximBanks Union (The Berne Union) in Mr. Kılıçoğlu also served as a Consultant to the President at the Islamic Development Bank between 2008 and 2009 and as a Vice Chairman at Denizbank in Mr. Kılıçoğlu is currently a Board Member at Beşiktaş Futbol Yatırımları Sanayi ve Ticaret AŞ and Şeker Mortgage Finansman AŞ in addition to his board memberships at Vestel Elektronik Sanayi ve Ticaret AŞ, Vestel Beyaz Eşya Sanayi ve Ticaret AŞ and Zorlu Enerji Elektrik Üretim AŞ. Burak İsmail OKAY Board Member ( Ankara) Burak İsmail Okay graduated from the Faculty of Law at Ankara University in After completing an International Law Certificate Program in New York, he embarked on his professional career at Türkiye İş Bankası, in the Department of Legal Advisory. He later worked at Garanti Bankası, MNG Bank and Nortel Networks Netaş, respectively, before joining Bener Law Firm as an executive. Mr. Okay joined Zorlu Group in 2006 and played an active role in the structuring of the legal department that serves all the Group companies. He has been serving as the President of the Law Group at Zorlu Group and has been a Board Member at Zorlu Enerji Elektrik Üretim AŞ since 2007.

16 14 ZORLU ENERJİ 2014 ANNUAL REPORT KIZILDERE II IS ONE OF THE WORLD S LEADING GEOTHERMAL POWER PLANTS, AND THE LARGEST GEOTHERMAL POWER PLANT IN TURKEY, WITH AN INSTALLED CAPACITY OF 80 MW. 95 MW ZORLU ENERJİ OWNS 2 GEOTHERMAL POWER PLANTS WITH A TOTAL INSTALLED CAPACITY OF 95 MW. 23% ZORLU ENERJİ ALONE ACCOUNTS FOR 23% OF TURKEY S TOTAL INSTALLED GEOTHERMAL CAPACITY.

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18 16 ZORLU ENERJİ 2014 ANNUAL REPORT MESSAGE FROM THE GENERAL MANAGER ZORLU ENERJİ S INVESTMENTS ARE BASED ON POLICIES, TECHNOLOGY AND PRACTICES THAT WILL BRING SIGNIFICANT COMPETITIVE ADVANTAGES AND CONTRIBUTE TO ENERGY SUPPLY SECURITY. İbrahim Sinan Ak General Manager

19 17 WE BELIEVE THAT THE PROCUREMENT OF NATURAL GAS FROM ALTERNATIVE SOURCES, IN ACCORDANCE WITH THE DECLINE IN GLOBAL OIL PRICES, WILL CONTRIBUTE POSITIVELY TO THE LIBERALIZATION OF THE ELECTRICITY MARKET AND ELECTRICITY PRICES. Energy sector is one of the most important building blocks of economic growth and social welfare. Resource and risk diversification and efficiency improvements are becoming ever more important in meeting the growing energy demand adequately, at low costs and in an environmentally friendly manner. The main objective of our country s energy policies is to meet the demand for energy, which is increasing in line with the economic growth, and to achieve this target by reducing dependence on imported fuels and therefore, achieve energy supply security. Given our projection that the volatility in global energy prices will continue, it is imperative that we evaluate new options before us, to be able to meet Turkey s energy demand adequately, with a high level of quality, uninterrupted and at reasonable prices. Also in 2014, while unconventional new resources have rapidly emerged in the global energy market with the support of new technologies, there were dramatic movements in energy prices, especially in oil prices. While the last year s plunge in oil prices had a positive impact on the current account deficits of oil and gas importing economies like Turkey, it started to put pressure on energy exporters, especially Russia. However, we think that, in parallel with the sharp fall in global oil prices, the decline in natural gas prices will give rise to new opportunities in natural gas supply and investments for Turkey. We believe that the natural gas that will be sourced from different countries such as Iran, Azerbaijan and Israel as an alternative to Russia will mark a positive development in the liberalization of the Turkish electricity market and electricity prices. Electricity demand increases each year, creating need for new resources. Electricity consumption, which forms the basis of energy policy, is expected to rise by 2.5 times from current levels, and reach 620 TWh by Turkey s existing installed capacity should be raised by 40,000 MW to 110,000 MW by 2023 to achieve the economic growth targets for the next decade. In recent years, domestic and imported coal, nuclear energy and renewable energy resources have all gained prominence in Turkey s energy policy in order to meet electricity demand. However, a holistic analysis of the potential impacts of these resources on capital and operational costs, the balance of foreign trade and greenhouse gas emissions is required at this juncture. Zorlu Enerji s investments encompass policies, technology and practices that will bring significant competitive advantages and contribute to energy supply security.

20 18 ZORLU ENERJİ 2014 ANNUAL REPORT MESSAGE FROM THE GENERAL MANAGER Liberalization of the Energy Market and Energy Supply Security The prerequisite for ensuring energy supply security and a competitive structure in the energy sector is to put in place the necessary regulations that foster competition in the sector and create a functioning market structure. Ensuring the supply security for energy, which is the most important input for almost all the industries, is of crucial importance in maintaining sustainable economic growth. The world s energy consumption is forecast to increase by 50% over the next 25 years. The supply of reliable, competitive and sustainable energy is of importance for all the countries. We support attempts to strengthen the dialogue between the private and public sector, thereby minimizing the technical and administrative setbacks faced by the investments in the energy sector. Moving forward with our investments with confidence and determination. Zorlu Enerji s total installed capacity in Turkey and abroad reached 1,011 MW, comprising 5 natural gas power plants with a combined capacity of 612 MW, seven hydroelectric power plants with 113 MW, two geothermal power plants with 95 MW and two wind farms with 191 MW. One of the most important developments in 2014 was the commissioning of the Dorad Combined-Cycle Natural Gas Power Plant in Israel, in which we have a 25% stake. The Dorad Combined-Cycle Natural Gas Power Plant, which has an installed capacity of 840 MW, was built by Zorlu Enerji and its Israeli partners with a USD1.2 billion investment in the Ashkelon region of Israel. The power plant commenced commercial operations in May after obtaining a generation and supply license. Dorad is the largest power plant investment ever undertaken by the private sector in Israel and could alone meet nearly 6% of Israel s total electricity needs. We also aim to complete the construction of the Ashdod and Ramat Negev power plants, which will have a combined installed capacity of 175 MW, in the coming period. We set ourselves apart by effectively managing risks and opportunities in the energy sector. Renewable energy resources accounted for 46% of our domestic installed capacity as of the end of We define sustainable energy as a concept that encompasses the generation of energy through clean, efficient technologies, using waste energy generated from one cycle as an input in another cycle and integrating these with economic growth. We exercise great care to ensure that we utilize resources with the highest level of efficiency and in an environmentally friendly manner at our power plants, which carry out their operations in line with sustainable development targets.

21 19 AT ZORLU ENERJİ, WE WILL CONTINUE TO DEVELOP AND IMPLEMENT SUSTAINABLE PROJECTS WITH RESOURCE DIVERSITY, CREATE ADDED VALUE AND SUPPORT EMPLOYMENT. USD1.2 BILLION THE DORAD COMBINED-CYCLE NATURAL GAS POWER PLANT, DEVELOPED BY ZORLU ENERJİ UNDER A 25% PARTNERSHIP WITH A USD1.2 BILLION INVESTMENT IN ISRAEL, COMMENCED COMMERCIAL OPERATIONS. We will strengthen our economic performance and improve our operating profitability. We do not limit the concept of sustainable energy to environmental protection; we also add finance and security elements to this definition. At the heart of our business methods are policy, technology and practices that enable continuous supply of energy with the least environmental and social costs and with the most suitable financing. In this context, as a company able to improve its efficiency and operational profitability, we are increasingly strengthening our place among the top 100 companies on Borsa Istanbul. The 80 MW Kızıldere II geothermal power plant, which entered into operation in 2013 and is the biggest geothermal power plant in Turkey, and the 56.4 MW Wind Farm in Pakistan - the only wind farm in Pakistan - had their first full year of operations in 2014 and made a considerable contribution to our operating profitability during the year. Backed by the contribution from these new power plants, Zorlu Enerji s revenues reached TL807 million in 2014, with an increase of 29% YoY. The Company s EBITDA also grew by 65% to TL204 million with the EBITDA margin improving by 5.4 pp to 25.2%. Another positive development during 2014, was the repayment of the syndication loan related with the Russian investments and the resulting re-structuring of our related party debt/receivables, which helped lower our total financial debt and simplify our balance sheet. We will continue to prove to our investors and all our stakeholders that we are a credible, self-sufficient and a steadily growing company through our financing actions we will take such as debt restructuring and project re-financing. As Zorlu Enerji, we will continue to press ahead with unwavering determination in implementing sustainable projects which emphasize resource diversity, create added value and support employment. Zorlu Enerji stands out in the energy sector, which is defined as one of the basic inputs of economic growth and social welfare, with its specialization, competitive power and credibility. Hence, I would like to take this opportunity to extend my gratitude to our employees who have carried Zorlu Enerji to where it is today and the members of our Board, our shareholders and to all of our stakeholders. İbrahim Sinan Ak General Manager

22 20 ZORLU ENERJİ 2014 ANNUAL REPORT SENIOR MANAGEMENT İbrahim Sinan AK General Manager Hüseyin MORKOYUN Financial Affairs Director Ali KINDAP Assistant General Manager Ahmet Yağmur ÖZDEMİR Assistant General Manager ( Ankara) Sinan Ak graduated from the Department of Management Engineering at Istanbul Technical University in He began his professional career as an investment specialist at Evgin Yatırım Menkul Değerler AŞ. He later completed an MBA at Old Dominion University in the USA. After working as a Finance Supervisor at Vestel Communications between 2000 and 2002, and as a Finance Manager at Vestel Beyaz Eşya between 2002 and 2006, Mr. Ak joined Zorlu Energy Group in He worked as the Assistant General Manager responsible for Financial Affairs at Zorlu Enerji Elektrik Üretim AŞ until 2012, and has been serving as the General Manager of Zorlu Enerji Elektrik Üretim AŞ since January ( Istanbul) Hüseyin Morkoyun began his professional career in the Finance Department of Halis Toprak Holding. Between 1987 and 1996, he assumed various positions in the Finance Department at Hürriyet Ofset Gazetecilik ve Matbaa AŞ and was subsequently promoted to the position of Accounting Manager at the same company. Mr. Morkoyun served as a Finance Manager at Vestel Pazarlama AŞ between 1996 and 2006, and has been working as the Assistant General Manager responsible for Financial Affairs at the Zorlu Energy Natural Gas Group since On March 15, 2012, he was appointed as the Director of Finance at Zorlu Enerji Elektrik Üretim AŞ. ( Çankırı) Ali Kındap graduated from the Department of Mechanical Engineering at the Middle East Technical University in He began his professional career at Gama and later worked at Meteksan AŞ and Güriş İnşaat ve Mühendislik AŞ. He joined Zorlu Energy Group as an Assistant General Manager of Zorlu Endüstriyel ve Enerji Tesisleri İnşaat Ticaret AŞ in Mr. Kındap has been working as the Assistant General Manager responsible for Thermal Power Plant investments at Zorlu Enerji Elektrik Üretim AŞ since ( Ankara) A. Yağmur Özdemir graduated from the Department of Economics at the Eastern Mediterranean University in He then went on to complete a master s degree in Business Law from Bilgi University and completed an Executive MBA and British Law post-graduate programs at the University of Karachi. Mr. Özdemir began his professional career as an Auditor at Arthur Andersen in He worked at Ernst&Young between 2002 and 2004 and he served as Financial Controller at Vestel Elektronik between 2004 and He joined Zorlu Enerji Elektrik Üretim AŞ in 2007 as a Project Finance Manager. In 2012, he was promoted to the position of Manager of Investments and Project Finance at the same company. Mr. Özdemir has been serving as the Assistant General Manager responsible for Investments (for hydroelectric and wind power plants) and Project Finance at Zorlu Enerji Elektrik Üretim AŞ since October 2012.

23 21 Aydın AKAT Assistant General Manager Gülten YILMAZ Assistant General Manager İnanç SALMAN Assistant General Manager Servet BAHADIR Public Relations Director Öniz SAYIT Director, Human Resources ( Erzincan) Aydın Akat graduated with an undergraduate degree from the Construction Department at the Middle East Technical University in 1990, and graduated from the Department of Civil Engineering at Istanbul University in He began his professional career at Cevahirler İnşaat in 1990, before working in a number of projects undertaken by Tekfen İnşaat between 1996 and Mr. Akat joined Zorlu Energy Group in 2005 and worked as the Project Manager at Zorlu Endüstriyel ve Enerji Tesisleri İnşaat Ticaret AŞ; between 2008 and 2011, he held the position of Engineering Manager at the same company. Mr. Akat has been serving as the Assistant General Manager responsible for Projects at Zorlu Enerji Elektrik Üretim AŞ since October ( Eskişehir) Gülten Yılmaz graduated from the Department of Mechanical Engineering at İstanbul Technical University in She began her professional career at Eskişehir Air Supply Maintenance Centre Command as a Turbo Fan Engine System Engineer. Gülten Yılmaz joined Zorlu Energy Group in 2007 and first served as the O&M Technical Services Head and from 2008 as the Marketing and Customer Relations Manager. Gülten Yılmaz has been serving as the Assistant General Manager responsible for Business Support Services at Zorlu Energy Group since October ( İstanbul) İnanç Salman graduated from the Faculty of Business Administration at İstanbul Technical University and holds a PhD in Industrial Engineering from the same university. Having joined Zorlu Group in 2004, Mr. Salman worked at the Human Resources Department of Zorlu Holding between 2004 and Joining Zorlu Energy Group in 2007, he served as the Project Engineer and Organizational Development Manager. İnanç Salman has been serving as Assistant General Manager responsible for Energy Trade and Planning at Zorlu Energy Group since October ( Nevşehir) Servet Bahadır graduated from the Department of Electrical Engineering at Kiel University in After completing his bachelor s degree, he began his professional career as an Electrical Engineer at Türkiye Elektrik Kurumu in He then assumed various positions at TEAŞ and TETAŞ. Servet Bahadır joined Zorlu Energy Group in 2008 and served as the Electricity Sales Manager between 2008 and He was appointed as the Director of Public Relations at the Zorlu Energy Group in October ( İzmir) Öniz Sayıt graduated from the Faculty of Communication at the İstanbul University in 2001 before going on to complete a Human Resources Certificate Program at the Boğaziçi University and obtaining an MBA degree from the Yıldız Technical University. She worked at the Human Resources Departments at the Akkök Group between 2000 and 2005 and at Tofaş Türk Otomobil Fabrikası AŞ from 2005 to Joining Zorlu Energy Group in 2007, Öniz Sayıt has been serving as the Director of Human Resources since October 2013.

24 22 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ IN BRIEF ZORLU ENERJİ CARRIES OUT ITS ACTIVITIES BASED ON THE PRINCIPLE OF UNDERTAKING PROJECTS THAT CONTRIBUTE TO SUSTAINABILITY FROM EVERY ANGLE. 46% 46% OF ZORLU ENERJİ S INSTALLED CAPACITY IS IN TURKEY AND 39% OF ITS GENERATION PORTFOLIO IS BASED ON RENEWABLE ENERGY RESOURCES. As the first company of the Zorlu Energy Group, Zorlu Enerji is one of the leading players in the sector with its balanced portfolio of power plants in Turkey and abroad and its experience and strong position in the market. It is also one of Turkey s pioneering independent power producers. As of the end of 2014, the installed capacity of Zorlu Enerji s power plants in operation totaled 1,011 MW. Zorlu Enerji s generation portfolio is comprised of seven hydroelectric power plants, one wind farm, two geothermal power plants and four natural gas power plants in Turkey, and one wind farm in Pakistan and one natural gas power plant in Israel. Zorlu Enerji carries out its activities based on the principle of implementing projects that contribute to sustainability from every angle. Zorlu Enerji aims to branch out into different areas of renewable energy, especially geothermal and wind energy, and raise the share of the renewables in its overall portfolio. The Company commands a total installed capacity of 95 MW at its geothermal power plants and 191 MW at its wind farms. 46% of Zorlu Enerji s installed capacity is based in Turkey and 39% of its total portfolio consists of power plants operating on renewable energy resources. ZORLU ENERJİ PLANS TO INVEST IN DIFFERENT AREAS OF RENEWABLE ENERGY, ESPECIALLY IN GEOTHERMAL AND WIND ENERGY, AND RAISE THE SHARE OF RENEWABLES IN ITS OVERALL PORTFOLIO. Zorlu Enerji pursues its international investments with a view to capitalize on the growth opportunities in the Asian and the Middle Eastern markets, where demand for energy is rising rapidly and the liberalization process is still continuing.

25 23 ZORLU ENERJİ IS THE ONLY ENERGY COMPANY IN TURKEY TO HOLD THE ISO GREENHOUSE GAS EMISSION STANDARD CERTIFICATE. The 56.4 MW wind farm, established by Zorlu Enerji Pakistan Ltd. (100% owned by Zorlu Enerji) in the Jhimpir region of Pakistan, is the country s first wind farm to be set up with foreign investment. Zorlu Enerji is one of the few foreign private sector energy companies to operate in Israel, where it currently has three power plant investments. The Dorad Combined-Cycle Natural Gas Power Plant, which has an installed capacity of 840 MW and established by Zorlu Enerji Elektrik Üretim AŞ under a 25% partnership in Israel, was commissioned in Setting itself apart with its approach to supply security and sustainability Zorlu Enerji is a responsible corporate citizen which is determined to provide an increasing contribution to the world s future, and it directs its investments according to this approach. Differentiating itself with its approach to supply security and sustainability, Zorlu Enerji; Zorlu Enerji carries out all the necessary investments at its power plants to prevent emissions from exceeding the limits set by the national and international standards; thereby generating power in an environmentally friendly manner. Zorlu Enerji is the first private electricity generation company to have obtained quality certificates in Turkey. It holds the TE /EN ISO , OHSAS and ISO Certificates and carries out its operations within the scope of Integrated Management System. Zorlu Enerji is the only energy company to hold the ISO Greenhouse Gas Emission Standard Certificate in Turkey and hence, sets itself apart from the competition. Zorlu Enerji published the first sustainability report in the energy sector in Turkey. It continues its reporting activities within this scope at regular intervals and discloses its sustainability performance transparently to its stakeholders. Develops its portfolio based on secure energy supply, Complies with legislation and international standards in all of its investments by acting responsibly on a global scale, Aims to minimize the adverse impacts of its operations on human life and the environment.

26 24 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERGY GROUP S AREAS OF OPERATION IN ADDITION TO THE ELECTRICITY AND STEAM GENERATION AND SALES ACTIVITIES CARRIED OUT BY ZORLU ENERJİ ELEKTRİK ÜRETİM AŞ, THE GROUP S ONLY LISTED COMPANY, ZORLU ENERGY GROUP IS ALSO ACTIVE IN OTHER AREAS OF THE ENERGY SECTOR, THUS PROVIDING AN INTEGRATED SERVICE MIX. ZORLU ENERGY GROUP COMPLEMENTS ITS ENGINEERING, PROCUREMENT AND CONSTRUCTION SERVICES WITH MAINTENANCE, REPAIR AND OPERATION SERVICES, THUS BRINGING A COMPETITIVE ADVANTAGE TO THE GROUP. ELECTRICITY SALES AND TRADING ZORLU ELEKTRİK ENERJİSİ İTHALAT İHRACAT VE TOPTAN TİCARET AŞ (ZORLU ELEKTRİK): DEMAND AND PRICE FORECASTS, GENERATION PLANNING, PRICING, SALES, RISK AND PORTFOLIO MANAGEMENT AND RECONCILIATION AND INVOICING OPERATIONS, DIRECT ELECTRICITY SALES TO ELIGIBLE CONSUMERS.

27 25 NATURAL GAS DISTRIBUTION CONSTRUCTION OF POWER PLANTS ZORLU ENDÜSTRİYEL VE ENERJİ TESİSLERİ İNŞAAT TİCARET AŞ (ZORLU ENDÜSTRİYEL): PROJECT DEVELOPMENT AND IMPLEMENTATION FOR INDUSTRIAL AND POWER PLANTS. ZORLU ENDÜSTRİYEL CARRIES OUT FEASIBILITY, ENGINEERING, TURN-KEY CONSTRUCTION AND ASSEMBLY WORKS FOR ZORLU ENERGY GROUP S POWER PLANTS IN TURKEY AND ABROAD. TRAKYA BÖLGESİ DOĞAL GAZ DAĞITIM AŞ AND GAZDAŞ GAZİANTEP DOĞAL GAZ DAĞITIM AŞ: NATURAL GAS DISTRIBUTION AND SALES IN TRAKYA AND GAZIANTEP REGIONS UNDER TWO NATURAL GAS DISTRIBUTION LICENCES FOR A PERIOD OF 30 YEARS. NATURAL GAS TRADING MAINTENANCE, REPAIR AND OPERATION SERVICES ZORLU O&M ENERJİ TESİSLERİ İŞLETME VE BAKIM HİZMETLERİ AŞ (ZORLU O&M): LONG TERM OPERATION, MAINTENANCE AND REPAIR SERVICES FOR GROUP AND NON-GROUP COMPANIES. ZORLU O&M OPERATES THE WIND FARM IN PAKISTAN WHILE ALSO PROVIDING SERVICES TO OPERATORS IN GREECE, INDIA AND KUWAIT. ZORLU DOĞAL GAZ İTHALAT, İHRACAT VE TOPTAN TİCARET AŞ: PROCUREMENT OF NATURAL GAS, COMPRESSED NATURAL GAS AND LIQUID NATURAL GAS FROM THE DOMESTIC MARKET AND ABROAD AND THE SALE OF THESE BOTH DOMESTICALLY AND THROUGH EXPORTS.

28 26 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ S INSTALLED CAPACITY AND INVESTMENTS ZORLU ENERJI S GENERATION PORTFOLIO AND INSTALLED CAPACITY IN TURKEY POWER PLANT LOCATION TYPE ELECTRICITY GENERATION CAPACITY (MW) STEAM GENERATION CAPACITY (TON/H) ZORLU ENERJİ S STAKE (%) NATURAL GAS LÜLEBURGAZ BURSA KAYSERİ* YALOVA ANKARA** LÜLEBURGAZ, KIRKLARELİ BURSA ORGANIZED INDUSTRIAL ZONE KAYSERİ ORGANIZED INDUSTRIAL ZONE ALTINOVA-YALOVA ANKARA ORGANIZED INDUSTRIAL ZONE NATURAL GAS CO-GENERATION POWER PLANT COMBINED-CYCLE NATURAL GAS POWER PLANT COMBINED-CYCLE NATURAL GAS POWER PLANT NATURAL GAS CO-GENERATION POWER PLANT COMBINED-CYCLE NATURAL GAS POWER PLANT WIND 135 GÖKÇEDAĞ OSMANİYE WIND HYDROELECTRIC 113 TERCAN ERZİNCAN HYDROELECTRIC KUZGUN ERZURUM HYDROELECTRIC ATAKÖY TOKAT HYDROELECTRIC MERCAN TUNCELİ HYDROELECTRIC ÇILDIR KARS HYDROELECTRIC İKİZDERE*** RİZE HYDROELECTRIC BEYKÖY ESKİŞEHİR HYDROELECTRIC GEOTHERMAL 95 KIZILDERE I DENİZLİ GEOTHERMAL KIZILDERE II DENİZLİ GEOTHERMAL TOTAL * The installed capacity of the generation license pertaining to the Kayseri CCNG power plant, numbered EU/364-9/476 and dated September 7, 2004, was reduced from MW to 163 MW. ** The installed capacity of the generation license pertaining to the 50.3 MW Ankara CCNG power plant, numbered EU/364-6/473, was terminated as of September 30, 2014 in accordance with the Energy Market Regulatory Authority s (EMRA) decision numbered 5214/15 and dated September 15, *** The application to amend the generation license of the İkizdere Regulator and HEPP was approved by EMRA and works to increase the plant s installed capacity from the 18.6 MW indicated in the license to MW are still ongoing.

29 27 ZORLU ENERJİ HAS A TOTAL 745 MW OF INSTALLED CAPACITY IN TURKEY. PROJECTS IN CONSTRUCTION AND FINANCING STAGE PROJECT LOCATION TYPE ELECTRICITY GENERATION CAPACITY (MW) ZORLU ENERJİ S STAKE (%) UNDER CONSTRUCTION ALAŞEHİR I MANİSA GEOTHERMAL ROTOR II* OSMANİYE-BAHÇE WIND TOTAL 125 IN PROJECT FINANCING STAGE SAMİ SOYDAM SANDALCIK DAM & HEPP DENİZLİ HYDROELECTRIC * The generation license for the project was amended by EMRA and the completion date for the plant as set forth in the license was extended until September 8, Financing for the project was closed on November 24, PRE-LICENSES AND PERMITS PROJECT LOCATION TYPE ELECTRICITY GENERATION CAPACITY (MW) ZORLU ENERJİ S STAKE (%) PRE-LICENSES ALAŞEHİR II MANİSA GEOTHERMAL KIZILDERE III DENİZLİ GEOTHERMAL GEOTHERMAL EXPLORATION AND OPERATING PERMITS BİTLİS TATVAN-BİTLİS GEOTHERMAL - 75 PRE-LICENSE APPLICATIONS PROJECT LOCATION TYPE ELECTRICITY GENERATION CAPACITY (MW) ZORLU ENERJİ S STAKE (%) GEOTHERMAL POWER PLANT ALAŞEHİR III MANİSA GEOTHERMAL KIZILDERE IV DENİZLİ GEOTHERMAL COAL POWER PLANT AKÇAKOCA DÜZCE IMPORTED COAL 1, SOLAR POWER PLANT NİĞDE NİĞDE PV MERSİN MERSİN PV KARAMAN KONYA PV KONYA* KONYA PV * Zorlu Enerji won the tender for a solar power plant with 18 MW of installed capacity, which was held by TEİAŞ for the Konya Zone-1 on January 30, 2015 by offering a bid of TL1,756,055 per MW of capacity.

30 28 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ S INSTALLED CAPACITY AND INVESTMENTS ZORLU ENERJİ INVESTS IN PROJECTS THAT SUPPORT RESOURCE DIVERSITY AND ENERGY SUPPLY SECURITY AND SUSTAINABILITY. LÜLEBURGAZ ESKİŞEHİR BURSA YALOVA 745 MW INSTALLED CAPACITY IN TURKEY 125 MW DENİZLİ ONGOING INVESTMENTS IN TURKEY

31 29 RİZE KARS TOKAT ERZİNCAN ERZURUM KAYSERİ TUNCELİ OSMANİYE HYDROELECTRIC NATURAL GAS GEOTHERMAL WIND

32 30 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ S INSTALLED CAPACITY AND INVESTMENTS ZORLU ENERJİ CONTINUES ITS INTERNATIONAL INVESTMENTS WITH A VIEW TO CAPITALIZE ON THE GROWTH OPPORTUNITIES IN THE ASIAN AND MIDDLE EASTERN MARKETS. ZORLU ENERJİ S INTERNATIONAL GENERATION PORTFOLIO AND INSTALLED CAPACITY POWER PLANT LOCATION TYPE WIND ELECTRICITY GENERATION CAPACITY (MW) ZORLU ENERJİ S STAKE (%) JHIMPIR PAKİSTAN WIND NATURAL GAS DORAD ISRAEL COMBINED-CYCLE NATURAL GAS POWER PLANT TOTAL* 266 *Total installed capacity is calculated by adjusting for Zorlu Enerji s respective stakes in the power plants. ZORLU ENERJİ S PROJECTS UNDER CONSTRUCTION AND PLANNED INVESTMENTS ABROAD PROJECT LOCATION TYPE UNDER CONSTRUCTION ASHDOD RAMAT NEGEV ISRAEL ISRAEL NATURAL GAS CO-GENERATION POWER PLANT NATURAL GAS CO-GENERATION POWER PLANT ELECTRICITY GENERATION CAPACITY (MW) STEAM GENERATION CAPACITY (TON/H) ZORLU ENERJİ S STAKE (%) PLANNED SOLAD ISRAEL NATURAL GAS CO-GENERATION POWER PLANT

33 MW ISRAEL INSTALLED CAPACITY ABROAD THE DORAD NATURAL GAS POWER PLANT SUPPLIES APPROXIMATELY 6% OF ISRAEL S ENERGY NEED. PAKISTAN THE WIND FARM LOCATED IN THE JHIMPIR REGION OF PAKISTAN, ONE OF THE WORLD S BEST WIND CORRIDORS, HAS AN INSTALLED CAPACITY OF 56.4 MW.

34 32 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU GROUP HOME TEXTILES KORTEKS ZORLUTEKS ELECTRONIC PRODUCTS, IT AND CONSUMER DURABLES VESTEL ENERGY ZORLU ENERGY GROUP Turkey s biggest integrated producer and exporter of polyester yarn Europe s leading home textiles company One of the leading ODM providers of TVs, white goods and digital products for the European market One of the leading players in Europe s LCD TV market One of the biggest players in Turkey s LCD TV and white goods markets through its well-known Vestel brand A rising player in Turkey with 745 MW of installed capacity A wind farm with 56.4 MW of installed capacity in Pakistan and a 25% stake in a natural gas power plant in Israel with 840 MW of installed capacity, in addition to operations in Turkey Competence in providing integrated services, including generation, sales and trade of electricity, turnkey construction of power plants, including the project development process, long term operation and maintenance services and sales, trade and distribution of natural gas

35 33 WITH ITS PIONEERING AND STRONG COMPANIES IN DIFFERENT SECTORS, ZORLU GROUP IS FOCUSED ON CREATING A HIGHER AND SUSTAINABLE VALUE FOR TURKEY. REAL ESTATE ZORLU REAL ESTATE DEVELOPMENT AND INVESTMENT MINING - METALLURGY META NICKEL COBALT FACTORING ZORLU FAKTORİNG Established in 2006 to develop, sell, lease and operate quality housing, office, business centers, shopping malls, hospitals, hotels or mixeduse real estate projects in prime locations in Turkey and abroad. Zorlu Center, that attracts attention as Turkey s first mixed use project with five functions, includes a shopping mall, hotel, offices, Performing Arts Center and residences. Zorlu Center commenced full operation with all of its functions with the opening of the Raffles Hotel in The Group s Levent 199 project on Büyükdere Avenue was completed in the third quarter of The whole project was planned as an office and has 70,000 m² of gross leasable area. The project comprises A+ offices. Specialized in the development of nickel cobalt resources Aims to be a regional supplier of nickel and cobalt Nickel cobalt investment projects in Gördes, Eskişehir and Uşak The Gördes project: - 300,000 tons of proven nickel reserves - The first stage of the project is a hydro-metallurgy plant with 10,000 tons of annual nickel production capacity and undertaken with an investment of USD400 million. Commissioning works of the plant commenced in September 2014 with trial production commenced in December The plant will start commercial operations in Its capacity is planned to be doubled in the coming period. Established in 2012 to provide factoring services in Turkey and abroad. Aims to extend its factoring products and services throughout Turkey by focusing on leading companies with a wide supplier and dealer network, in addition to mid and large scale companies.

36 34 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJI CARRIES OUT ALL THE NECESSARY INVESTMENTS AT ITS POWER PLANTS TO PREVENT EMISSIONS FROM EXCEEDING THE LIMITS SET BY THE NATIONAL AND INTERNATIONAL STANDARDS; THEREBY, GENERATING POWER IN AN ENVIRONMENTALLY FRIENDLY MANNER.

37 MW ZORLU ENERJİ HAS 5 NATURAL GAS POWER PLANTS WITH A TOTAL INSTALLED CAPACITY OF 612 MW. 25% THE DORAD POWER PLANT, 25% OWNED BY ZORLU ENERJİ, IS ONE OF THE LARGEST PRIVATE SECTOR POWER PLANTS IN ISRAEL.

38 36 ZORLU ENERJİ 2014 ANNUAL REPORT OUTLOOK FOR THE GLOBAL ENERGY MARKET THE GROWTH IN GLOBAL ENERGY DEMAND IS MAINLY DRIVEN BY CHINA, INDIA, THE MIDDLE EAST AND SOUTH ASIA. Rapid change in the energy sector is drawing attention. Forecasts for 2035 prepared by the prominent institutions in the energy sector demonstrate that this change will continue. Global primary energy consumption increased by 2.3% in 2013, exceeding the 1.8% growth rate recorded in However, it remained below its 10-year average growth rate of 2.5%. Both generation and consumption increased in all fuel types with the exception of nuclear energy. All regions outside North America saw growth rates below the average. Fossil fuels currently account for 82% of global energy resources (the same as 25 years ago). As of the end of 2013, oil remained the world s leading fuel, with a 32.9% share in global energy consumption, whereas natural gas had a 23.7% share. The share of renewable energy resources in total energy consumption continues to grow. It is estimated that the use of renewable energy resources in global energy consumption had increased by 19.8% between 2013 and Wind has the highest share in renewable energy generation, followed by hydro-electrical energy and solar energy. The share of renewable energy resources in global energy distribution is expected to grow further. Although the growth rate in emerging economies has remained below its long term average, with 3.1%, these countries represent 80% of the global increase in energy consumption. Consumption in OECD increased by 1.2%, with an above average growth rate. The strong 2.9% growth in the US fully met the net increase in the OECD, whereas consumption declined by 0.3% in the EU and 0.6% in Japan. THIS TREND IS EXPECTED TO CONTINUE UNTIL 2020, WITH INDIA EXPECTED TO BECOME THE MAIN DRIVER OF REGIONAL DEMAND BEYOND China, India, the Middle East and South Asia accounted for most of the increase in global energy demand. This trend is expected to continue until 2020 and beyond 2020, India is expected to become the major driver of demand growth, by reaching China s current level of consumption.

39 37 THE SHALE GAS REVOLUTION HAS SIGNIFICANT IMPLICATIONS FOR THE COMPETITION BETWEEN COUNTRIES. The shale gas revolution has important effects on the level of competition between countries. This mega trend is set to continue. Oil prices fell by more than 40% in 2014 to their lowest levels in the last 5 1/2 years. One of the most important factors behind the slump in oil prices has been the boom in shale gas production in the US. If oil prices remain near USD60-70/bbl levels, this may cause a weakening in shale gas investments. Unconventional oil such as light tight oil (LTO) will emerge in the next 10 years, but is unlikely to command the same effect and power in the long term. Given the fact that the fall in oil prices will lead to an increase in oil demand, slowing oil production in the US may again create an upward pressure on oil prices. Russia, which has rich resources of oil, natural gas and uranium, maintains its position as one of the world s most important energy producers. However, the sanctions faced by Russia as a result of the political confrontations with Europe as well as with other Western countries pose an important challenge in financing the energy investments in this country. At the same time, the fall in oil prices has dealt a critical blow to the Russian economy. Gas resources in the Middle East may present a serious alternative for the European governments in securing gas supply security in addition to decreasing dependence on Russia, given expectations of a doubling of Europe s natural gas imports. The US is changing its status from being a net importer to a net exporter of oil, and moving rapidly towards becoming the world s biggest oil exporter and leading energy producer. The US will triple its oil production in 2015 with the contribution of its recent off-shore oil exploration. Major Highlights From BP s Energy Outlook 2035 Report: Despite a weakening in global energy markets, the economic growth in Asia - led by China and India - will be the major driving force behind the increase in global energy demand over the next 20 years. Global energy demand is forecast to grow at an average rate of 1.4% per annum between 2013 and 2035, with a cumulative growth of 37%. Natural gas is expected to see the most rapid growth among the fossil fuels until Demand for natural gas will increase by 1.9% per year with the support of rising consumption in Asia. Half of this increase will be met by conventional gas extraction in Russia and the Middle East, with the other half expected to be supplied by shale gas. By 2035, North America - which commands almost all of the world s shale gas supply - will still be producing three quarters of the total. Coal has been the fastest growing fossil fuel over the last 10 years due to increasing demand in China. In the coming 20 years, however, coal is expected to see the slowest growth among fossil fuels, with an average growth rate of 0.8% per annum. Demand for oil is projected to grow by 0.8% per year until 2035 with demand coming from the non-oecd countries. On the other hand, demand for oil in OECD countries will decline to unprecedented levels in China is expected to overtake the US as the world s biggest oil consumer by In 2014, shale oil increased oil production in the US to approximately 1.5 million bbl/day. However, the growth in shale gas production is expected to slow down over time, with the production from the Middle East countries rising again. By 2030, the US is expected to be self-sufficient in terms of oil production. References: World Economic Outlook , 2014 BP World Energy Statistics Report, BP Energy Outlook 2035 Report

40 38 ZORLU ENERJİ 2014 ANNUAL REPORT 2014 HIGHLIGHTS FROM THE TURKISH ENERGY SECTOR 2014 WITNESSED THE COMMENCEMENT OF THE FIRST UNLICENCED ELECTRICITY GENERATION AND THE COMMISSIONING OF THE FIRST SOLAR POWER PLANT WITHIN THIS SCOPE. 3.7% DEMAND FOR ELECTRICITY GREW BY 3.7% YoY TO 255,490 GWh IN After the limited 1.6% growth in 2013, electricity demand grew by 3.7% to 255,490 GWh in 2014 driven by the higher than normal temperatures during the summer season and the effect of a low base. The share of hydroelectric power plants in total electricity generation fell from 25% to 16% as a result of the severe drought experienced due to low rainfall during the spring months, while the shares of gas and coal fired power plants rose from a respective 44% and 26% to 48% and 29%, in Despite a mild winter, spot market prices increased on a YoY basis in the first quarter of 2014 due to problems encountered in natural gas supply in the first two weeks of February and the decrease in hydroelectric power generation on the back of low rainfall. Spot market prices maintained their high levels in the second quarter of the year due to continuing drought and the rising share of the more costly thermal power plants in electricity generation. The trend observed in the first half has extended into the third quarter, in line with the rising electricity demand during the summer months. In the last quarter of the year, however, the increase in electricity prices remained more subdued than in the previous quarters despite a 9% hike in natural gas tariffs in October, owing to the high base effect caused by the natural gas shortage in December As a result, average spot prices increased by 9% YoY in AS OF THE END OF 2014, UNLICENCED ELECTRICITY GENERATION CAPACITY REACHED APPROXIMATELY 53 MW, WITH SOLAR POWER ACCOUNTING FOR 40 MW OF THIS TOTAL. With the commissioning of 217 new power plants during the year, Turkey s installed capacity reached 69,517 MW by the end of 2014, with an increase of 5,510 MW. The efficient imported coal-fired power plants accounted for the highest share in the capacity increase with 2,150 MW.

41 39 IN WIND POWER, 870 MW OF NEW CAPACITY WAS COMMISSIONED THIS YEAR, DENOTING A RECORD HIGH. Also, 870 MW of new capacity was commissioned in wind power this year, representing a record high. Compared to an 8.6% YoY increase in supply, demand increased by a mere 3.7%, signaling a supply surplus in the sector. Given that the newly commissioned plants are highly efficient with relatively low generation costs, it would be reasonable to assume that the unproductive and high cost power plants will have to be closed down in the medium term was a year of firsts, with the commencement of the first unlicensed electricity production and the commissioning of the first solar power plant within this scope. By the end of 2014, unlicensed electricity generation capacity totaled approximately 53 MW, of which 40 MW consisted of solar power plants. The most important issue regarding the supply security in the energy sector and the future of the system is the realization of the generation investments and increasing the share of the domestic and renewable resources in those investments. To encourage electricity generation based on renewable resources, the Law on the Amendment of the Law on the Utilization of Renewable Energy Resources for the Purpose of Generating Electricity was enacted on 4 January, The Law grants a 10-year price guarantee to license holders benefiting from the renewable energy resources (YEK) support mechanism and also aims to encourage the use of domestic components in renewable energy systems. In line with the efforts aimed at increasing the share of local resources in electricity generation, domestic coal and lignite fired power plants were also brought under the incentive scope with a Cabinet Decree published in the Official Gazette dated February 15, Additionally, incentives to be provided to renewable energy investments were extended until the end of 2020 from the former 2015-end with a Cabinet Decree dated December 5, A new Strategic Plan for the period was prepared by the Ministry of Energy and Natural Resources with the aim of maximizing the utilization of Turkey s extensive natural resources in the mid to long term in accordance with the sustainability principles. Announced on December 4, 2014, the Strategic Plan aims to supply consumers with continuous, sustainable and quality energy in an environmentally friendly, secure and less costly way; to exploit domestic and renewable energy resources to the maximum, to support efforts to decrease energy density, to employ nuclear technology in electricity generation, to minimize waste and environmental impacts of energy and to achieve an energy system that reinforces Turkey s strategic position in international energy trade based on the principle of resource diversity in energy supply. The plan targets to achieve the following in the area of electricity generation during the period; To increase the amount of electricity generation based on domestic coal to 60 billion kwh p.a. by the end of the period, Within the scope of increasing the share of renewable energy resources in primary energy and electrical energy supply, increase the installed capacities to 32,000 MW in hydro energy, 10,000 MW in wind energy, 700 MW in geothermal energy, 3,000 MW in solar energy and to 700 MW in biomass energy, To introduce nuclear energy in electricity generation, To decrease the share of electricity generated from natural gas in total generation to 38% by the end of the Plan period, To decrease the state s share in total electricity generation to 20% by the end of the period, by completing the privatization of thermal power plants until the end of Establishing a competitive environment in the energy sector, formation of financially strong, transparent and reliable energy markets and effective regulation and supervision of these markets are highly important for the development of the energy sector and for enhancing the sector s competitiveness on a global scale. Within this scope, the following developments have taken place on the privatization side; In the generation segment, the privatization of the power plants belonging to the state owned Electricity Generation Corporation (EÜAŞ), which started in 2009, is still in progress. Within this scope, 52 small run-of-the-river hydroelectric plants were tendered out in the first stage, and the tenders and transfer works for 28 of these plants were completed in In addition, the transfer of the 17 small HEPPs to the private sector, which were tendered in 10 groups in 2012, has been completed as of June 2013.

42 40 ZORLU ENERJİ 2014 ANNUAL REPORT 2014 HIGHLIGHTS FROM THE TURKISH ENERGY SECTOR 4,000 kwh THE ELIGIBLE CONSUMER LIMIT FOR 2015 WAS REDUCED TO 4,000 kwh IN LINE WITH THE DECISION TAKEN IN EMRA S MEETING HELD ON JANUARY 15, Furthermore, the privatization process for a total of 46 power plants (comprising 28 hydro and 18 thermal power plants) owned by EÜAŞ with a total installed capacity of approximately 16,200 MW was initiated. Within this scope, the privatization of the Seyitömer, Kangal and Hamitabat power plants and their transfer procedures were completed in The privatization of thermal power plants gained further momentum in 2014 with the state initiating tenders for thermal power plants with a total installed capacity of 3,545 MW. The privatization and transfer procedures for the Kemerköy, Yeniköy, Yatağan and Çatalağzı thermal power plants, owned by EÜAŞ with a total installed capacity of 1,980 MW, were completed in The privatization tenders for the Orhaneli and Tunçbilek thermal power plants, with a combined installed capacity of 575 MW, were also finalized during the year. In addition, the prequalification bids in the privatization tender of Soma B thermal power plant, which has an installed capacity of 990 MW, were received in Besides thermal power plants, final bids were received for the privatization of five small run-of-the-river type hydroelectric power plants under the transfer of operating rights model and for 5 other small hydro-electric power plants based on the asset sale method, which belonged to EÜAŞ. The transfer procedures for two of these power plants were completed during the year, while the process is still ongoing for the remaining plants. Power plants using imported natural gas, coal and LNG accounted for 60% of the total electricity generation in Despite the ongoing privatization process, 50% of total generation is still supplied by plants which are either publicly owned or operating under the Build-Operate, Build-Operate-Transfer and Transfer of Operating Rights schemes, which have long term sales contract with the state. Although this creates a market risk at present, less risky and more reliable conditions will emerge for the sector participants when the privatization process is completed and long term power purchase agreements come to end and full transparency is achieved in the sector. In the distribution segment, all of Turkey s 21 electricity distribution regions have been privatized. Regarding the privatization of the distribution grids, it was stated in the Medium Term Program ( ) prepared by the Undersecretariat of the State Planning Organization and published in the Official Gazette dated September 16, 2009, that in order to increase the degree of market openness on the consumption side, the eligible consumer limit would be steadily reduced and all consumers would become eligible by the end of The eligible consumer limit for 2015 was reduced to 4,000 kwh in line with the decision taken in the EMRA meeting held on January 15, As a result of the regular reductions in the eligible consumer limit on a yearly basis, the theoretical degree of market openness reached 90%. However, according to data in the Competition Authority s Sector Survey, the actual degree of market openness is around 40%. This means that the actual market openness is well below the theoretical level and despite the continuous cuts in the eligible consumer limit, consumers do not exercise their eligible consumer rights, and effective competition could not be established at the retail sales level.

43 41 ZORLU ENERJI S KEY STRENGTHS CORPORATE DEVELOPMENT Market reputation, Long standing experience and corporate values. OPERATIONAL POWER High production capacity, Qualified human resources, Balanced portfolio, Resource diversity and Capability to develop innovative solutions. AN INTEGRATED SUSTAINABILITY APPROACH Environmental protection, Ensuring stakeholder participation, Responsible business conduct, Contribution to social and cultural life, Well-functioning corporate governance, Integrated sustainability approach based on qualified human resources. DOMESTIC AND RENEWABLE ENERGY INVESTMENTS Increasing share of domestic and renewable energy resources in total installed capacity through the acquisition of power plants via privatizations and new greenfield investments. DERIVING STRENGTH FROM ITS CORPORATE, FINANCIAL AND OPERATIONAL COMPETENCIES, ZORLU ENERJI HAS ADOPTED AN INTEGRATED SUSTAINABILITY APPROACH.

44 42 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ METICULOUSLY IMPLEMENTS ENVIRONMENTAL AND SOCIAL IMPACT (ESIA) ASSESSMENTS IN ITS PROJECT SITES.

45 MW ZORLU ENERJİ COMMANDS A TOTAL 113 MW OF INSTALLED CAPACITY IN HYDROELECTRIC POWER THROUGH ITS 7 HEPPs IN TURKEY. 124 MW REGULATORY PROCESSES AND NEGOTIATIONS WITH BANKS FOR PROJECT FINANCE ARE STILL ONGOING FOR THE 124 MW SAMI SOYDAM DAM AND HEPP PROJECT.

46 44 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ IN 2014 ZORLU ENERJİ GENERATED 2,498 MILLION kwh OF GROSS ELECTRICITY IN 2014, WITH AN INCREASE OF 9% YoY. 56% COMMERCIAL ELECTRICITY SALES INCREASED BY 56% YoY TO 1,898 MILLION kwh IN 2014 MAINLY DUE TO THE GROWTH IN ELECTRICITY SALES TO ORGANIZED INDUSTRIAL ZONES, ESPECIALLY IN THE FIRST HALF OF THE YEAR. Electricity Generation and Sales Zorlu Enerji s installed capacity in Turkey has reached 745 MW by the end of 2014; including its international investments, the Company s total installed capacity amounts to 1,011 MW. The share of domestic and renewable resources in installed capacity stands at 46% in Turkey, while this ratio is 39% for the whole portfolio. GENERATION ELECTRICITY (kwh)* 2,497,980,456 2,283,593,323 STEAM (tons) 538, ,946 *119,335,642 kwh of the total electricity generated was used internally as of ( : 59,139,886 kwh). SALES ELECTRICITY SALES FROM GENERATION GREW BY 7% YoY TO 2,320 MILLION kwh. ELECTRICITY (Generation) (kwh) ELECTRICITY (Commercial) (kwh) 2,320,374,107 2,165,441,547 1,897,981,143 1,218,571,147 STEAM (tons) 538, ,946 UTILITY and COOLING WATER, CO₂ (m 3 ) 30,823 4,628,303

47 45 ZORLU ENERJİ S CAPEX AMOUNTED TO TL186 MILLION IN Despite the declining generation from the gas fired and hydroelectric power plants due to the high natural gas costs and low levels of rainfall during the year, Zorlu Enerji s gross electricity generation reached 2,498 million kwh in 2014 with a YoY increase of 9%, thanks to the contribution from the Kızıldere II power plant and the wind farm in Pakistan, which had their first full year of operations in Similarly, electricity sales from generation grew by 7% YoY to 2,320 million kwh in Commercial electricity sales amounted to 1,898 million kwh, notching up a significant growth in 2014 due to the increasing electricity sales to organized industrial zones, especially in the first half of the year. However, when compared with the first half, the growth in commercial sales slowed down in the second half of the year owing to the restructuring of the customer portfolio. The Company s gross electricity generation in 2014 was in line with its target of 2,544 million kwh, which was disclosed to the public through a material event disclosure dated April 30, Total electricity sales amounted to 4,218 million kwh, exceeding the 3,860 million kwh target owing to the higher than expected growth in commercial electricity sales. In line with the higher than predicted growth in sales volumes, the Company s sales revenues reached TL807 million, exceeding the TL720 million target. EBITDA, on the other hand, amounted to TL203 million, which was within the targeted range of TL million. Capital Spending Zorlu Enerji s capex amounted to TL186 million in 2014, with the Kızıldere III and Alaşehir geothermal power plant investments accounting for the lion s share. Capital spending per project are shown in the table below. Project Type Installed Capacity (MW) Capital Spending (million TL) Project Owner Kızıldere III Geothermal Zorlu Doğal Elektrik Üretim AŞ Alaşehir Geothermal Zorlu Jeotermal Enerji Elektrik Üretimi AŞ Sarıtepe - Demirciler (Rotor II) Wind Zorlu Rüzgar Enerjisi Elektrik Üretimi AŞ Sami Soydam Hydroelectric Zorlu Hidroelektrik Enerji Üretim AŞ

48 46 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ IN MW ZORLU ENERJI AIMS TO REACH 320 MW OF INSTALLED CAPACITY IN GEOTHERMAL ENERGY IN THE MID TERM BY REALIZING ALL OF ITS GEOTHERMAL INVESTMENT PROJECTS. Zorlu Enerji s Investments in Turkey Geothermal Energy Continued expansion in geothermal energy Zorlu Enerji considers the use of Turkey s rich geothermal resources to be at the heart of its growth, and continues its works in the potentially most productive fields of the Aegean Region, which accounts for 87% of Turkey s total geothermal resources. Zorlu Enerji alone accounts for 23% of Turkey s total installed capacity in geothermal energy and is the leading investor in this field with the best know how and infrastructure. Zorlu Enerji sets its investment plans with the target of utilizing 50% of the country s geothermal potential. The high capacity factor in geothermal energy and a 10-year power purchase guarantee by the state a price of USc10.5/kWh offer important incentives for giving priority to this strategically important field. Zorlu Enerji aims to reach 320 MW of installed capacity in geothermal energy in the medium term by realizing all of its geothermal investment projects. Turkey s biggest investment in geothermal energy: Kızıldere Geothermal Power Plant Kızıldere I Geothermal Power Plant, which has 15 MW of installed capacity, is Turkey s first geothermal power plant. Zorlu Enerji took over the operating rights of this plant for 30 years through the ADÜAŞ privatization tender in Kızıldere geothermal field is Turkey s first discovered geothermal field which is suitable for electricity generation and possesses the highest potential. Zorlu Enerji s total installed capacity in geothermal energy reached 95 MW with the commissioning of the Kızıldere II Geothermal Power Plant with 80 MW of installed capacity in 2013, which was built with a USD250 million investment. With its 80 MW of installed capacity, Kızıldere II Power Plant is Turkey s largest and one of the world s leading geothermal power plants. Kızıldere II is an environmentally friendly and sustainable power plant in the truest sense of the word. It invests not only in the latest technology, but also in the environment and the social structure in the region. In order to maintain the sustainability of the geothermal energy resource, various improvement activities have been carried out at the plant; a re-injection pumping system was installed and re-injection capacity was increased from 15% to 99%. At the Kızıldere II Power Plant, all the remaining hot water left over at the end of the energy generation process is channeled underground through re-injection, thereby ensuring the sustainability of the resource. With the integrated use of geothermal energy, Kızıldere plant is the first of its kind in Turkey; besides generating electricity, it provides heating to 2,500 homes in Kızıldere, Sarayköy province, where there is no natural gas line. It also provides carbon dioxide gas to industrial gas plants in the region that serve the beverage sector, geothermal water to geothermal hotels and heating for greenhouses.

49 47 GÖKÇEDAĞ WIND POWER PLANT IS ONE OF TURKEY S LARGEST WIND POWER PLANTS WITH ITS 135 MW OF INSTALLED CAPACITY. 500 decares of greenhouses is heated by the Kızıldere Power Plant. The Kızıldere II Power Plant was selected to be a finalist in the European Geothermal Innovation Awards 2014 following an evaluation conducted by the European Geothermal Energy Council based on the criteria of innovation, safety, original design, low carbon emissions and improved structure in energy outlets. The Kızıldere II Plant will sell its output at a guaranteed price of USc10.5 per kwh over the next 10 years within the scope of YEKDEM. The plant started to sell its electricity in the YEKDEM market in 2014, and continues to do so in Other geothermal energy investments Zorlu Joetermal, which is 100% owned by Zorlu Enerji, is carrying out the construction works for the 45 MW Alaşehir I Geothermal Power Plant in the Alaşehir geothermal field in Manisa, which holds a generation license valid until The plant, for which USD113 million of project finance was obtained at the end of 2013, is planned to be brought online in the last quarter of In order to exploit the additional geothermal potential in the existing fields, a pre-license was obtained from EMRA for the Kızıldere III (planned capacity of 100 MW) and Alaşehir II power plants (planned capacity of 24.9 MW) during The exploration and drilling activities for the Kızıldere III plant started at the beginning of 2014 and the environmental impact assessment process started in August Additionally, pre-license applications were submitted to EMRA in 2014 for the Kızıldere IV geothermal plant (planned capacity of 24.9 MW) which is planned to be installed as the 4 th phase in the Kızıldere geothermal field, and the Alaşehir III geothermal plant with a 30 MW of capacity, which planned to be realized as the 3 rd phase in Alaşehir, Manisa. Wind Energy Gökçedağ Wind Farm is one of Turkey s biggest wind farms in terms of installed capacity. Gökçedağ Wind Farm, which is Zorlu Enerji s only wind farm in Turkey; is one of Turkey s four largest wind power plants with an installed capacity of 135 MW. Gökçedağ Wind Farm was awarded the Gold Standard thanks to its low greenhouse gas emissions and contribution to sustainable development. It was also deemed worthy of Sustainability Prize in the Environmental and Social Performance category by the European Bank for Reconstruction and Development (EBRD) in 2013 for its environmental and social performance. Rotor II Wind Power Plant Project Zorlu Rüzgar, 100% owned by Zorlu Enerji, plans to develop the Rotor II Wind Power Plant Project in Bahçe Town of Osmaniye within the scope of its existing generation licenses totaling 110 MW of installed capacity. The completion date for the wind farm was extended to September 2015 during The Rotor II Plant is planned to have a total installed capacity of 80.3 MW. The selection of the equipment and the project finance for the plant were completed during Regarding the project finance, loan agreements totaling EUR81.3 million were signed on November 24, 2014, EUR40 million of which was provided by Türkiye Sınai Kalkınma Bankası (TSKB) (Turkey Industrial Development Bank) and EUR41.3 million by Bayerische Landesbank with the support of the German Export Finance Agency, Euler Hermes, within the scope of ECA financing. The term of the loan obtained from TSKB is 12 years with a 2-year grace period. The term of the loan obtained from Bayerische Landesbank is 15.5 years, with a grace period of 1.5 years.

50 48 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ IN 2014 Hydroelectric Energy Zorlu Enerji owns 7 hydroelectric power plants in Turkey with a total installed capacity of 113 MW. The water levels in dams remained 50% below the long term averages in 2014 due to the severe drought experienced in Turkey. Electricity generated by HEPPs in 2014 was 32% lower than 2013, despite the addition of 1,352 MW of new hydro capacity during the year. Zorlu Enerji s HEPPs were also affected by this drought, but not to the same extent, with their output declining by 20% compared to the previous year. However, hydroelectric generation is expected to post a recovery in 2015 given the significant amount of rainfall in the first few months of İkizdere Regulator and HEPP Works to raise the plant s installed capacity from 18.6 MW to 26 MW through the rehabilitation of the existing structures, without building new structures, are underway at the İkizdere HEPP. Regulatory process for the planned investment and the Environmental Impact Assessment process are still ongoing. The application to amend the installed capacity embedded in the generation license to MW was approved by EMRA in Sami Soydam-Sandalcık Dam and HEPP Project Regulatory processes and negotiations with banks for the financing of the Sami Soydam HEPP project, which will be constructed over the Dalaman Brook in Denizli by Zorlu Hidroelektrik Enerji Üretim AŞ with an installed capacity of 124 MW, are still ongoing. Sami Soydam HEPP will have a reservoir that can store water up to 6 months. This reservoir will provide the plant with the flexibility to operate at times of peak demand and high electricity prices. Besides, the water usage right fees that will be paid to the State Hydraulic Works within the scope of the project will be lower than in other hydroelectric projects. The EIA process and social impact studies related to the project are still ongoing. Zorlu Enerji s Investments Abroad Pakistan Wind Farm The Pakistan Wind Farm, which was built by Zorlu Enerji s 100% owned subsidiary, Zorlu Enerji Pakistan with an installed capacity of 56.4 MW and a USD151 million investment in the Jhimpir region of Pakistan, commenced operations in Zorlu Enerji has the option to increase the installed capacity of the plant up to 300 MW. Pakistan is home to the second best wind corridor in the world. The plant is situated in the Gharo-Kheti Bandar- Hyderabad wind corridor, benefiting from strong winds for

51 49 ZORLU ENERJİ HAS THE OPTION TO INCREASE THE INSTALLED CAPACITY OF THE PAKİSTAN WIND POWER PLANT UP TO 300 MW. 840 MW DORAD COMBINED-CYCLE NATURAL GAS POWER PLANT, WHICH HAS 840 MW OF INSTALLED CAPACITY, WAS BUILT WITH A USD1.2 BILLION INVESTMENT AND COMMISSIONED IN months of the year, in what is one of the region s most efficient corridors. Studies found that there is potential for 60,000 MW of wind power generation in this region. Zorlu Enerji secured a 20-year electricity sales guarantee under the agreements it entered into with the relevant authorities. Besides, Zorlu Enerji obtained a state guarantee from Pakistan against the risks that could impact power generation such as legislative changes or possible changes in wind speed. The plant was deemed worthy of the Middle East s Best Renewable Energy Finance Award by Project Finance Magazine in Projects in Israel Zorlu Enerji is one of the first private sector companies to enter the Israeli electricity market. Zorlu Enerji is in a position to become one of leading players in Israel s electricity market with the plants it has developed and is constructing with its partners. Zorlu Enerji has three natural gas power plant investments in Israel. The largest of Zorlu Enerji s investments in Israel is the Dorad Combined Cycle Natural Gas Power Plant with an installed capacity of 840 MW, which was built jointly by Zorlu Enerji and its Israeli partners with a USD1.2 billion investment in the Ashkelon region of Israel, and was commissioned in The Dorad Combined-Cycle Natural Gas Power Plant, developed by Zorlu Enerji under a 25% partnership, is Israel s biggest private sector power plant, and is expected to meet nearly 6% of Israel s total energy demand. The plant is also supported by the Israel s Ministry of Energy and Water Infrastructure in view of its environmentally friendly structure and low generation costs. The plant s output is sold to both official and private institutions and the country s key customers in Israel. Some of the major customers of the Dorad Combined Cycle Natural Gas Power Plant include the Defense Ministry, the Israeli Space Industry, Fattal Hotels, Keter Plastic, Isrotel, Strauss, Osem, Tamares Hotels, the Cargal Group, Seven Stars Mall, Bank Leumi and Tnuva. Meanwhile, construction works continue for the Ashdod and Ramat Negev co-generation power plants, which are planned to have a combined installed capacity of 175 MW. Works on these power plants started in September 2012 and they are planned to be brought on stream in the second half of Natural gas supply agreements were signed with the Delek Group and Noble Energy for the Dorad, Ashdod and Ramat Negev plants. Financing and feasibility works for the Solad co-generation power plant, which is planned to be realized as the fourth project in Israel, are still ongoing.

52 50 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ IN 2014 Human Resources Human resources and the workplace environment at Zorlu Enerji Zorlu Enerji s corporate goal and priority is to maintain a modern and participatory work environment which fully complies with the principles of human rights. While a participatory work environment promotes the personal development of its employees, it also helps unlock the value created by the social and cultural diversity of Zorlu Enerji s human resources. Zorlu Enerji aims to sustain a safe workplace environment which rewards success and promotes personal development and initiative taking. Zorlu Enerji resolutely maintains its progress towards its sustainability targets together with its employees, who have broad visions, who are cited as models in the market with their vocational specialization and who are open to development. The Company s employees differentiate themselves from those of the peers in the sector with the quality of their education, their specialization and their loyalty to the Company. Zorlu Enerji believes its biggest resource in reaching its targets is its human resources. In developing its human resources policy, Zorlu Enerji primarily aims to be responsible for its companies, responsive to its employees and respectful to all of its stakeholders which the Company interacts with. The Human Resources Policy was prepared in a written form which sets out the policies on hiring, promotion and horizontal advancement, job termination and performance evaluation. Job descriptions and their distribution as well as the performance and rewarding criteria are communicated to employees through the Human Resources Policy. All details concerning the hiring process are written in the Hiring Procedure. Each candidate involved in the hiring process is hired under the same method. The career and promotion system includes Succession Plans. In the event of managers leaving their positions, eligible candidates are selected internally and appointed accordingly. The representation of employees in the management is achieved by the two independent Directors on the Board. Training activities are structured to support employees professional and personal development. Employees have the opportunity to select training programs which are in line with their needs via the Training Cards. A training portal, prepared to monitor all training activities in accordance with the career planning objectives, is available for all the employees of the Company. An employee pay policy is determined on an updated scale, considering the averages of the domestic and international companies. Up-to-date job descriptions for company employees are available in a personnel database, which is accessible to employees. All decisions and developments related to employees are shared over the corporate portal, internal informative s and meetings. Employees are treated equally and are not subjected to any discrimination in training, career development or promotion. No complaints were received from employees regarding discrimination. Zorlu Energy Group employed a total of 896 personnel as of the end of ZORLU ENERGY GROUP S MAIN HR INDICATORS (ACCORDING TO 2014 YEAR-END DATA) Number of Personnel Persons Total 896 Female % Male % Average Seniority 6.19 years Breakdown of Senior Management Based on Gender Female Male General Managers 2 Deputy General Managers (including Directors) 2 9 Mid-Level Management (Managers) 6 30 Breakdown of Personnel Based on Education Level Female Male PhD 2 Master's degree University graduate Vocational high school graduate High school graduate Others (Secondary school-elementary school) 2 29 Total

53 51 ZORLU ENERGY GROUP EMPLOYED 896 PERSONNEL AS OF THE END OF ZORLU ENERGY GROUP S HR TRAINING INDICATORS 2014 Number of Personnel by Category Total Training Hours by Category Average Training Hour per Employee Senior Management Other Employees (Excluding Administrative Personnel) Total training hours (Senior Management) Total training hours (Other Employees) Average training time per Senior Manager (hours) Average training time per other employee (hours) , Zorlu Enerji Performance Management System Zorlu Enerji s competency and target based Performance Management System is comprised of the following processes: defining and rating of competencies, dissemination of corporate targets to employees, one-on-one interviews, preparation of personal development plans. The performance evaluation system focused on employee competency is carried out annually for all personnel who have completed their sixth month of employment at the Company. The results of the performance evaluation are reflected in employees salaries and are also used to map out career plans and development activities. Priority is given to the internal training of managers who will hold positions of responsibility at Zorlu Enerji. Accordingly, employees are trained in technical and behavioral areas in career development through management training at different levels. Occupational Health and Safety Zorlu Energy Group adopts the principle that the improvement of occupational health and safety activities is the mutual responsibility of all employees, and complies with all the legal and other liabilities regarding occupational health and safety. The Group adopts a proactive approach to occupational safety in all of its operations. Zorlu Energy Group aims to ensure the highest standard of occupational health and safety in its workplaces. Employees are expected to follow the rules and instructions placed for this purpose and take the necessary precautions. Employees are not permitted to keep any articles or substances that are either illegal or pose a danger to the workplace and/or workers. Employees are not permitted to keep, use or work under the influence of any substances or drugs that cause addiction, or that inhibit or completely remove their mental and physical faculties, except those which are used under a prescription by a doctor, in the workplace or within the scope of work. A target of sustaining a zero accident rate in the workplace Zorlu Enerji aims to sustain a zero accident rate at the workplace. Operating within the framework of the ISO Occupational Safety and Employee Health System, Zorlu Enerji works with consultants and service providers who are specialized in their fields to ensure the highest levels of health and safety at the workplace. One of the Company s key principles is to start work only when the necessary occupational safety precautions have been taken. All field workers are informed of occupational health and safety guidelines before they commence work.

54 52 ZORLU ENERJİ 2014 ANNUAL REPORT PROJECTS UNDER CONSTRUCTION - MOST OF WHICH ARE RENEWABLE ENERGY PROJECTS - HAVE A COMBINED INSTALLED CAPACITY OF 300 MW.

55 MW ZORLU ENERJİ HAS TWO WIND FARMS WITH TOTAL INSTALLED CAPACITY OF 191 MW IN TURKEY AND PAKISTAN MW THE ROTOR II WIND FARM WITH 80.3 MW OF INSTALLED CAPACITY IS UNDER CONSTRUCTION IN THE BAHÇE TOWN OF OSMANIYE.

56 54 ZORLU ENERJİ 2014 ANNUAL REPORT SUSTAINABILITY ZORLU ENERJİ DEEMS SUSTAINABLE ENERGY TO BE CRUCIAL FOR SUSTAINABLE DEVELOPMENT. GRI A ZORLU ENERJİ PRESENTED ITS THIRD SUSTAINABILITY REPORT TO ITS STAKEHOLDERS IN COMPLIANCE WITH THE GRI A RATING IN Zorlu Enerji will continue to invest in projects that support energy supply security and sustainability with its high capacity generation power, qualified human resources, balanced portfolio, resource diversity and capability to create innovative solutions. Zorlu Enerji and Sustainability While moving towards its target of meeting Turkey s ever increasing demand for energy, in what is one of the world s most dynamic energy markets, Zorlu Enerji conscientiously monitors the economic, environmental and social impacts of its operations with a holistic approach. Zorlu Enerji deems sustainable energy as an important factor in ensuring sustainable development. Zorlu Enerji carries out its operations within the framework of its energy generation policy that is based on efficient and reliable resources. Zorlu Enerji places the utmost importance on vital issues such as climate change, the diminishing supply of natural resources and energy supply security when determining the fields which it will manage related to sustainability. ZORLU ENERJİ CARRIES OUT ITS OPERATIONS WITHIN THE FRAME OF ITS ENERGY GENERATION POLICY THAT IS BASED ON EFFICIENT AND RELIABLE RESOURCES. As one of the Group s focal points in investments, renewable energy presents a unique opportunity to bring about the necessary transformation in tackling the climate change as well as in ensuring energy supply security to meet the world s growing energy demand. With climate change creating an increasingly adverse impact on human life and the environment, sustainability approach and renewable energy investments gain more importance.

57 55 ZORLU ENERJI AIMS TO SUPPORT OUR COUNTRY S TRANSITION TO A LOW CARBON ECONOMY. Acting with this sensitivity, Zorlu Enerji carries out its investments with determination, patience, confidence and experience. While reducing emissions and the measures to be taken against climate change stand out as matters of high priority in terms of sustainability, energy efficiency - which is another facet in solving this problem - stands out as one of the foremost strategic work areas. Zorlu Enerji undertakes investments that will minimize the negative effects brought about by the climate change and protect the environment. Zorlu Enerji operates with a determination of performing its duties in building a sustainable future. Supporting a low carbon economy is one of the fundamental priorities of Zorlu Enerji s sustainability strategy. Zorlu Enerji works with business partners with whom it shares its target of contributing to Turkey s sustainable economic development. The Company works interactively with its stakeholders, principally its business partners and suppliers. Moreover, it targets and encourages value creation for society in addition to managing the regulatory, environmental and social risks in the most appropriate manner. Zorlu Enerji sets its priorities on the following axes: the environment and nature, secure and sustainable energy supply, ensuring stakeholder participation, responsible business conduct, corporate governance and compliance, qualified human resources, social contribution. The Company believes these priorities will help pave the way for the sector to gain a real understanding of sustainability. Zorlu Enerji formulates its sustainability strategies in parallel with the following targets: supporting Turkey s sustainable development model, playing a full part in tackling the climate change, contributing to our country s transition to a low carbon economy. Zorlu Enerji defines the sustainability concept that it integrates into all of its management processes and all phases of its operations as a guide in terms of managing the economic, environmental and social factors and the risks in these areas to create long term value. On one hand, the Company ensures a secure and sustainable energy supply; on the other, it works to ensure that natural resources and cultural values are passed onto the future. Zorlu Enerji shares its economic, social and environmental performance and its targets in these areas with its stakeholders through its Sustainability Reports. Zorlu Energy Group published its third Sustainability Report, that conveys its Corporate Responsibility activities focused on optimizing the relationship between energy, the environment and economy along with its subsidiaries environmental, economic and social impacts, in November After having published the Turkey s first sustainability report in the energy sector in 2011, the Company published a second report in The Company was ranked among the world s top 24 energy companies with this report, which was prepared to GRI A level. Zorlu Enerji was also among the three Turkish companies and was the first energy company in Turkey to prepare the report at this level. Zorlu Enerji presented its third sustainability report covering the period to its stakeholders in The report was prepared based on G3.1 criteria in accordance with the GRI A level and was endorsed. Zorlu Enerji aims to provide its key stakeholders with the opportunity to evaluate measurement, monitoring and improvement steps regarding sustainability through this report. The report is targeted as being one of the most important means of communication in which the Company s priorities regarding sustainability can be

58 56 ZORLU ENERJİ 2014 ANNUAL REPORT SUSTAINABILITY examined by the stakeholders and the best practices regarding the solutions can be shared. The Sustainability Report is available on the website in both Turkish and English. Climate change, environmental protection and sustainability Climate change is the biggest threat facing our planet. Zorlu Enerji is focused on ensuring a secure and sustainable energy supply as well as generating electricity through domestic and renewable resources. The Company s investments are concentrated on these areas. Zorlu Enerji takes the different problems, including both local and global threats, into account when considering the environmental impacts of its activities. Habitat management and biodiversity, water and waste management, emissions reduction and protecting the climate stand out as the primary sustainability headlines. Energy efficiency is also one of the top strategic issues. Zorlu Enerji takes initiatives and carries out extensive projects to systematically reduce its direct and indirect impacts on the environment. The Group will continue to introduce domestic and renewable energy resources to the economy and energy sector, and will continue to be a leading, responsible and responsive company in its field with these projects. We are building our future; our target is 2023 Zorlu Enerji shares the vision of its parent, Zorlu Holding, to provide a higher quality of life for the future generations by investing in sustainable development, which can be summed up in the motto of We are building our future, our target is Zorlu Enerji s approach to sustainability is guided by the principles of engaging in responsible business conduct in compliance with corporate governance principles, ensuring the satisfaction, health and safety of its employees, protecting the environment and natural resources and contributing to social and cultural life by maintaining open and regular communication with its stakeholders. Zorlu Enerji works for sustainable future by using the resources efficiently in the six regions that comprise 85% Turkey s geographical area. Domestic and renewable energy projects had a 46% share in Zorlu Enerji s domestic generation portfolio as of the end of Investments are planned to continue in the fields of geothermal, hydroelectric, wind and solar energy. The Global Compact and Zorlu Energy Group In all of its activities and operations, Zorlu Energy Group takes into consideration the principles stated in the United Nations Global Compact, which was signed by Zorlu Holding and binds all the Group companies.

59 57 IN ALL PROJECTS, GREENHOUSE EMISSIONS ARE MONITORED AND MANAGED IN ORDER TO MINIMIZE THE EFFECTS OF CLIMATE CHANGE. 34,290 ZORLU ENERJİ HAD PLANTED 34,290 SAPLINGS AS OF THE END OF Environmental Protection and Zorlu Enerji Zorlu Enerji views the environment as a trust which will be transferred to future generations. As a requirement of its social responsibility, the Company operates within the scope of the Environmental Management System, which is based on raising environmental awareness and protecting natural resources to create a better world. In line with this approach, Zorlu Enerji meets the following criteria in all of its activities, selecting materials and technology which minimize the adverse impacts on the environment, ensuring the most efficient use of energy and natural resources, developing systems that will prevent pollution at its source before it manifests itself, controlling wastes (solid, liquid or gas) and disposing them without harming the environment, complying with national and international law, legislation and regulations regarding the environment, training employees and subcontractors in order to raise their environmental awareness, conducting impact analysis which also takes environment into consideration in new investments, monitoring and managing greenhouse gas emissions in order to reduce the impacts of global climate change. In its investments, Zorlu Enerji aims to develop projects which will contribute to production, provide employment, ensure continuity of energy supply and respect the environment. Zorlu Enerji has been calculating the carbon footprints of its activities since 2010 within the scope of its environmental protection projects. On the other hand, the Company measures its carbon footprints resulting from its participation in fairs, conventions and summits, and to compensate for its carbon footprints, it plants trees within the framework of the Zero Carbon Footprint Forests Project. Within this scope, the Company has planted 34,290 saplings as of the end of In all of its investments, Zorlu Enerji undertakes an analysis of the environmental impacts, reduces the potential adverse effects and even develops environmental management and investment plans and programs, and implements them to a level which goes beyond legal and administrative requirements. Zorlu Enerji prepares landscape improvement plans and carries out habitat restoration for the investments under construction. In particular, special care is taken to carry out environmental and nature preservation studies, detailed biodiversity studies, regular ornithology monitoring and ecosystem assessments as well as environmental impact analysis for its hydroelectric power and wind farm investments that are either located or planned to be located in susceptible areas. With these studies, the existing situation is determined, monitoring and intervention plans are prepared and active measures are taken to tackle habitat fragmentation. As a responsible corporate citizen which strives unwaveringly to ensure the sustainability of the environment and energy resources, Zorlu Enerji will continue to carry out its role model projects in the future with its energy efficiency projects as well as through its efforts to reduce carbon emissions.

60 58 ZORLU ENERJİ 2014 ANNUAL REPORT SUSTAINABILITY CDP ZORLU ENERJI WON THE TURKEY CARBON DISCLOSURE LEADERSHIP AWARD IN 2011, 2012 AND 2014 AS PART OF THE CDP. A grade for the Sustainability Report from GRI Zorlu Energy Group published its third Sustainability Report, that conveys its corporate responsibility activities centered on the optimization of the relationship between energy, the environment and the economy along with its subsidiaries environmental, economic and social impacts, in Zorlu Enerji s sustainability report covering its sustainability performance for the period received an A practice level endorsement - the most transparent level - from the Global Reporting Initiative, which is a worldwide recognized reporting standard institute. Zorlu Energy Group aims to undertake investments that are respectful to the environment and every aspect of human life while attaching priority to preserving the environment, in addition to ensuring the generation of energy - which is one of Turkey s most important needs - in line with its sustainable energy policy. 31% of Zorlu Energy Group s social investments consists of support for sports and culture, with 26% comprising support for the local administrations to increase the quality of life, and with 43% consisting of support for the education, scholarship and research. The Group defines sustainable energy as the generation and use of energy without causing irreversible environmental damage or destroying the ecological balance, and in accordance with the principle of fairness between generations. Zorlu Energy Group also adhered to the International Finance Corporation s (IFC) Social Sustainability Performance Standards required by the Equator Principles formed to manage social and environmental risks in project financing in its report. The report was also prepared based on GRI G3.1 Sustainability Reporting Guidance and GRI Electric Utilities Sector Supplement (EUSS). Carbon Disclosure Project and Turkey Carbon Disclosure Leadership Award The Carbon Disclosure Project (CDP) once again rewarded Zorlu Enerji in the Carbon Disclosure Leadership category in 2014, in recognition of its being the first energy company to transparently share with the public the details of its greenhouse gas emissions, its risks regarding climate change and the management strategies taken within this respect. Maintaining its efforts to determine its carbon footprints, Zorlu Enerji is the only energy company to hold the ISO Greenhouse Gas Emission Standard Certificate and to take part in the Carbon Disclosure Project in its sector. Zorlu Enerji won the Turkey Carbon Disclosure Leadership Award in 2011, 2012 and 2014 as part of the CDP program. Zorlu Enerji also received the highest performance score among the four energy companies included in the BIST-100 index, which carried out reporting in 2013.

61 59 ZORLU ENERJI IS FOCUSED ON ADDING VALUE TO SOCIETY IN THE REGIONS WHERE IT OPERATES, IN LINE WITH ITS SENSE OF RESPONSIBILITY TO LOCAL PEOPLE AND THE ENVIRONMENT. Zorlu Enerji s care for the environment and responsibly passing it on to the next generations was once again awarded. Zorlu Enerji Elektrik Üretim AŞ, the Group s first publicly held company, received the CDP 2014 Turkey Climate Disclosure Leadership Award in recognition of its transparent policies for managing the greenhouse emissions resulting from its energy generation activities. Zorlu Enerji was one of the five companies in the top 10 percentile in the Carbon Disclosure Leadership Index in 2014, an achievement it realized by publicly disclosing its strategies regarding climate change through the CDP platform. Zorlu Energy Group has time and time again earned trust in this platform by winning at least one award each year since the implementation of the CDP program in Turkey, which examines the role of market mechanisms in relation to tackling climate change, and is the only reporting platform on a global scale. ICCI - International Energy and Environment Fair and Conference Awards Zorlu Energy Group won two significant awards in the ICCI Energy Awards organized in the aftermath of the International Energy and Environment Fair and Conference (ICCI) with its Kızıldere II Geothermal Power Plant in the Geothermal sub-category and its Gökçedağ Wind Farm in the Wind sub-category under the Renewable Energy category. A total of 24 companies submitted applications with 29 projects under 3 category headings this year. All projects were evaluated by a jury consisting of prominent names in the sector. Energy Awards are given to support the energy sector s growth and development and to highlight the services and contributions made in the sector. Applicant power plants and projects were evaluated according to a scoring system based on previously determined measurable criteria, and the power plants and projects with the highest scores in each category were identified. Projects were evaluated based on the criteria of energy efficiency, sustainability, social responsibility and the usage of domestic components. Corporate Social Responsibility As a responsible world citizen, Zorlu Enerji has taken its place in today s globalizing world by setting fundamental principles in the four main areas; human rights, business life, the environment and the fight against corruption. The Company implements projects that add value to society, the environment and, in particular, to children with its social responsibility projects. Zorlu Enerji ensures stakeholder participation in order to add value to the regions where it operates. Zorlu Enerji analyses the potential social and economic impacts of its prospective investments in detail, and identifies risks and opportunities in all of the investment regions before investing. Zorlu Enerji is focused on adding value to the regions and the people living there, as a result of its sense of responsibility for the local people and the environment in the regions it operates. Zorlu Enerji attaches importance to the assessments of the environmental and social impacts of its operations by those living in the areas where the Company has power plants, or in new investment regions, always striving to establish a warm dialogue with the local people. In line with this, the Company organizes stakeholder participation activities to allow local people to share their opinions and suggestions. Informative visits and meetings are conducted for the local people before projects are initiated, and contributions to educational activities which brings a vision to local people are given priority. Also, support is provided to the regions in terms of basic infrastructure services such as roads, water supplies and improvements in mutually utilized areas in rural areas in order to improve social and economic life. With regard to education, solutions are devised towards different needs and improvements to school buildings are made in particular.

62 60 ZORLU ENERJİ 2014 ANNUAL REPORT SUSTAINABILITY 180,000 THE OUR ENERGY IS FOR CHILDREN PROJECT, WHICH IS TURKEY S FIRST NATIONAL EDUCATION PROJECT IN ENERGY TO BE CONDUCTED BY AN ENERGY COMPANY, REACHED 180,000 CHILDREN OVER A PERIOD OF 5 YEARS. The best example of this was seen in the Gökçedağ Wind Farm project. An informative meeting which attracted wide participation was held before the construction works on the project started, where detailed information concerning the wind farm was provided and the local community s views and expectations were identified. In the Bahçe and Hasanbeyli districts, where the plant is located, and in the 21 villages near the plant, the community s socio-economic situation was examined in detail under the Social Case Research and Manpower Research study and the results were shared with the community. Non-recourse scholarships were provided to 181 university students residing in the region. Additionally, research studies are being carried out to determine the local community s social and economic situation and the impacts of the projects on the environment and social life in the projects investment stage. Examples of these practices include the İkizdere Stakeholder Participation Plan and the Alaşehir Rapid Social Impact Evaluation. Communicating with our children Zorlu Enerji believes that today s children, who will be equipped with proper information concerning the environment and energy, will be in a position to solve many of the problems regarding our planet in the future. In line with this belief, Zorlu Enerji conducts systematic projects aimed at enhancing children s knowledge and awareness of energy. Our Energy Is For Children In 2014, Zorlu Enerji continued its education project organized to raise awareness of the importance of renewable energy and the economic use of energy among children, who will protect and manage natural resources in the future. The Our Energy is For Children Project, which is Turkey s first national education project in energy to be conducted by an energy company, reached 180,000 children over a period of 5 years. Zorlu Enerji regularly monitors the potential impacts of the construction activities and operations related to its plants on the environment and the health of the local community. The Company cooperates with national and international institutions in its projects and prepares systematic reporting in the areas of soil conservation, noise, dust and vibration, water quality, solid waste management, visual impact, occupational safety, interaction with wildlife, and the natural habitat.

63 61 ZORLU ENERJİ CARRIES OUT SYSTEMATIC ACTIVITIES AIMED AT RAISING THE CHILDREN S AWARENESS AND KNOWLEDGE OF ENERGY. Turkey s first energy drama Zorlu Enerji prepared Turkey s first energy drama in conjunction with the Ministry of National Education and TOÇEV to ensure that energy, which is an abstract concept, is transformed into a tangible world in the minds of children. Blue and Green characters, whose names are taken from the colors of natural life, are included in this play which was fictionalized interactively. As part of the Turkey tour undertaken by Zorlu Enerji, the drama reached 28,150 children in 97 secondary schools in 19 cities, where the Company has investments and the need for clean energy was explained to children. Zorlu Enerji aims to comprehensively inform children about energy, by using all channels to reach them, including the digital media. Children can watch videos of energy resources and important inventions by the inventors who put their signatures under important discoveries in the field of energy at the com website. The web page aims to assist children in their homework and school projects related to energy. The Energy Hunters game in the website teaches children about energy saving in an entertaining and competitive way. Meanwhile, the Green Dragon - a mascot in Zorlu Enerji s training programs - continued to interact with the children on its Facebook page.

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66 64 ZORLU ENERJİ 2014 ANNUAL REPORT RISKS AND ASSESSMENT OF THE BOARD OF DIRECTORS Zorlu Holding s Corporate Risk Management Department started its operations from the first quarter of 2012 in order to early detect the risks that could jeopardize the Energy Group Companies (the Group Companies) existence, development and continuity, to take the necessary measures against these risks, and to engage in a centralized risk management. Within this scope, Zorlu Holding s Corporate Risk Management Framework was prepared and became applicable at all the companies under Zorlu Holding. Zorlu Holding Corporate Risk Management Policy is summarized below: Goal Setting Risk Definition Risk Assessment and Inherent Risk Determining Actions Residual Risk and Action Plan Follow-up Reporting and Sharing the Risks Embedding risk management principles into strategic planning and goal setting processes Aligning the strategy and goals set with the Company s risk appetite Revealing the risks and opportunities that may affect the Company s goals with the participation of the entire organization in a coordinated fashion and within the frame of a shared perception Assessing the probability of risks and their impact on the Company in case of their occurrence Determining the value of risk before the actions taken and control activities, i.e. inherent risk Responding optimally to risks (Accepting the Risk, Transferring the Risk, Treating the Risk, Avoiding the Risk) taking into consideration the risk appetite and cost-andbenefit factors Determining actions in line with the responses identified and managing the risks proactively Determining the value of risk after the actions taken and control activities, i.e. residual risk Monitoring the completion process of the activities specified in action plans Prioritizing the revealed risks and tracking them using the Key Risk Indicators Measuring and reporting the key risk indicators that give warnings and all other risks taking into consideration the control points Sharing all activities transparently and ensuring that risk management process is integrated into the decisionmaking mechanisms upon the establishment of risk awareness and culture in all of the Group s activities

67 65 Based on the Board of Directors decision dated 18 February 2013, the Company s Early Detection of Risk Committee was set up and its Functions and Working Principles were accepted. The Committee works to early diagnose the factors that could jeopardize the existence, development and continuity of the related companies, to take the necessary actions and implement the remedies, and to manage the risk for the purposes of achieving compliance with the Article 378 of the Turkish Commercial Code no and of coordinated risk management. During 2014, 6 risk reports were submitted to the Early Detection of Risk Committee to enable it to adequately supervise the corporate risk management processes, and these reports were presented to the Board of Directors in line with the decisions the Committee made as a result of its scrutiny. The headings of the risk reports submitted to the Committee and the Board of Directors are presented below: 1. Summary of the World Economic Forum Global Risks Report 2014, 2. Losses Sustained in the Electricity Sector, 3. Insurance Solutions for the Energy Group Companies, 4. Fraud Risk Survey, 5. Receivables Risk Early Warning Signals, 6. The Energy Group of Companies OHS Risk Assessment Obligation. The Company s vision is defined as creating sustainable value for all parties involved by securing operational efficiency, growth and regulatory compliance. Below is the summary of four existing and potential risk categories that may have an impact on the attainment of the Company s goals during the course of the activities carried out in line with this vision, and the actions taken in relation thereto. STRATEGIC RISKS Strategic risks mean inadequacy of the Company s strategies, inability to remain competitive and to achieve targets due to the failure to correctly observe the external factors, the employment of an outdated business model, incorrect composition of the business portfolio, inefficient organizational structure, inconsistency of performance measures with the business strategies, insufficient resource allocation, inefficient conveyance of strategic planning process and unreliability of information for following up the industry lifecycle. The strategic risks category includes, among others, various risks in relation to environmental analysis, business model and portfolio, organizational structure, resource allocation and planning. The following actions are taken in relation to these risks: Coordinated feasibility studies, benefit and cost analysis and budgeting performed by the relevant departments in relation to new investment decisions, Diversification of the generation portfolio by investing in different types of energy, Evaluation of legal, political, etc. risks before and after the investment by obtaining consultancy services as and when necessary, Adoption of various management concepts specific to the given investment, Monitoring the return on investments made, Determining innovative strategies with respect to sales and marketing.

68 66 ZORLU ENERJİ 2014 ANNUAL REPORT RISKS AND ASSESSMENT OF THE BOARD OF DIRECTORS FINANCIAL RISKS Financial risks refer to the Company s inadequate finances, presence of currency, interest rate, credit risks and other financial uncertainties and volatilities, their negative impact on the Company, and inability to secure liquidity. The financial risks category includes, among others, risks in relation to interest rate, currency, capital, financial derivatives, costs of energy sources, stock prices, liquidity, cash flow management and receivable collection. The following actions are taken in relation to these risks: Using alternative financing methods, Ensuring a balance between the assets and liabilities on the balance sheet, Making use of various derivatives for hedging purposes, when necessary, Following up the budget targets versus the actual results on a monthly basis and making revisions when necessary, Insuring receivables and obtaining various guarantees. OPERATIONAL RISKS Operational risks refer to inability to secure operational efficiency, effectiveness and continuity in the Company s business model while achieving customer satisfaction and the Company s performance targets in relation to quality, cost and time. The operational risks category includes, among others, risks in relation to operational processes such as supply, capacity, business interruption, customer satisfaction, human resources, environmental health and safety, information capital etc.; authorization, information processing and technology, and decision-making and reporting processes and frauds including contractual obligations, pricing, financial reporting and budgeting. The following actions are taken in relation to these risks: Supervision of all the operational activities by the Internal Audit, Financial Audit and Tax Audit Departments set up under the Holding organization, Oversight by Zorlu Holding Corporate Risk Management of the operational risks deemed significant via the key risk indicators on the IT system, and informing the related business units on risk levels, when necessary, Regularly giving compulsory training programs on occupational health and safety to all Zorlu Holding employees in accordance with the related regulations, Centralized follow-up on recommendations proposed by the insurers to the Group Companies subsequent to risk inspections, Managing the critical aspects in the contracts executed with stakeholders and the risks in relation thereto based on the coordinated communication of all the units across the Group Companies, Following-up the policies and procedures for compliance with legally defined standards in relation to environmental health, stakeholder safety and stakeholder health, Recording and following-up machinery and equipment maintenance and repairs, Making commitments in relation to compliance with various principles such as human rights, environment, society, ethics, and anti-corruption etc. through the United Nations Global Compact, Preparing the Sustainability Report, which was first issued in 2010 and was assigned a GRI rating of A on 5 December 2014, and sharing it with all the stakeholders.

69 67 EXTERNAL RISKS External risks refer to presence of external factors that may affect the continuity of the organization s business model and the core values that drive the overall targets and strategies. The external risks category includes, among others, risks in relation to access to capital, shareholder relations, natural disasters (force majeure risks), competition, customer demands (trends), financial markets, market sensitivity, sectoral risks, legal risks and risks in relation to regulatory compliance, political status and technological innovation. The following actions are taken in relation to these risks: Developing necessary plans for recovering and resuming critical systems, technical infrastructure and facilities in alternative sites in case of a natural disaster or contingency, Regularly reviewing business continuity and contingency plans and organizing necessary drills, Determining a broad insurance coverage across the company, taking into consideration natural disasters and terrorist acts to transfer potential risks to insurance companies, and minimizing the potential tangible effects of such incidents, Managing regulatory changes, legal actions, tax conflicts, intellectual property infringements, unfair competition and the risks in relation thereto through coordinated communication among all the relevant Company units, Carrying out specific short-lived rehabilitations and works to integrate with the new technologies, Taking the proper measures against negative geographical and climate conditions, Maintaining continuous and healthy communication process that is open to all stakeholders through the activities of the Corporate Communications Department. Other than the actions listed under the risk headings above, insurance policies are purchased intensively as a risk transfer mechanism. The primary insurance policies purchased are listed below: 1. Fire, Machinery Breakdown and Loss of Profit 2. Employer s Liability 3. Directors and Officers (D&O) Liability 4. Third Party Liability 5. Credit Insurance 6. Marine 7. Erection All Risk 8. Fidelity 9. Personal Accident

70 68 ZORLU ENERJİ 2014 ANNUAL REPORT INTERNAL AUDIT DEPARTMENT AND ITS OPERATIONS At Zorlu Enerji Elektrik Üretim AŞ and other Zorlu Group companies, the internal audit function is being performed by the Internal Audit Department of Zorlu Holding since The Internal Audit Department conducts its audit activities based on the International Internal Audit Standards in accordance with the audit programs pursuant to legal requirements and approved by the senior management. The Department shares the audit reports prepared after each audit, as well as the annual reports on the audit results for the full year, with the Holding s Board of Directors, and if any, with the Audit Committees of the companies and the Sector Heads. In addition to the Internal Audit Department, the Financial and Tax Audit Department was established in 2011 in order to conduct financial audits across all the Group companies and it started its audit activities in Additionally, in the last quarter of 2013, Internal Audit Department and Financial and Tax Audit Department were gathered under the umbrella of Zorlu Holding General Directorate of Audit and Internal Control. The objective, authority, responsibilities, operating principles and structure of the internal audit function are outlined in the Internal Audit Regulation and Internal Audit Operating Principles documents, which have been approved by the Board of Directors and shared with the individual companies. Under the risk-based annual audit program approved by the Board of Directors, the Audit Committee and the Sector Heads, process audits are conducted to ascertain the efficient and productive use of resources, compliance with the applicable laws, regulations, in-house policies and rules, as well as the accuracy, reliability and security of information. Whenever deemed necessary, at the start of each audit, the Department meets with the Senior Management to make risk assessments, where the companies targets and the risks that could jeopardize these targets are analyzed and positioned in the risk matrix according to their effects and probabilities. During the audit field work, tests are carried out to evaluate the internal controls which manage risks with significant effects and high probabilities. The results of observations are shared with the company management as a draft report; and then a final report, including the opinions of the management, is sent to the Senior Management. As a result, the Department offers consultancy services with a reasonable assurance level, and at the same time capitalizes on group synergy to highlight the best practices. One month after the issue of the final report, the actions taken are shared with the Board of Directors, in line with the 4T approach (Treat, Terminate, Transfer and Tolerate). Audit Committee meetings were held during the year. During these meetings, in the first of which two Board members also participated upon invitation, information was given regarding the audits, which were planned and performed in 2014, and the findings of the audit reports, which were shared with the Board of Directors. Zorlu Group supports and promotes Zorlu Group Internal Audit Team, consisting of 13 people, in the areas of obtaining regular training in order to improve and enhance their existing knowledge, skills and other qualifications, becoming a member of related associations (e.g. The Institute of Internal Auditors, Turkey -TIA) and obtaining international certificates related with their occupation. Internal Audit team includes 2 CIA (Certified Internal Auditor), 2 CPA (Certified Public Accountant), 1 CISA (Certified Information Systems Auditor), 1 CPA (Independent Auditor) and 6 CRMA (Certification in Risk Management Assurance).

71 69 STATEMENT OF RESPONSIBILITY BOARD OF DIRECTORS RESOLUTION ON THE APPROVAL OF FINANCIAL STATEMENTS AND ANNUAL REPORT RESOLUTION DATE: 06/03/2015 RESOLUTION NUMBER: 2015/8 STATEMENT OF RESPONSIBILITY PURSUANT TO THE ARTICLE 9 OF THE SECOND SECTION OF THE CAPITAL MARKETS BOARD S COMMUNIQUÉ ON PRINCIPLES OF FINANCIAL REPORTING IN CAPITAL MARKETS We hereby declare that: a) We have reviewed our Company s consolidated financial statements and annual report for the 12-month fiscal period ended 31 December 2014, which have been prepared in accordance with the Turkish Accounting Standards/Turkish Financial Reporting Standards published by the Public Oversight Accounting and Auditing Standards Authority pursuant to the provisions of the Capital Markets Board s Communiqué on the Principles of Financial Reporting in Capital Markets no. II-14.1 and approved by the Board of Directors decision dated 6 March 2015 and no. 2015/8, b) Based on the information we possess within the scope of our duties and responsibilities in the Company, the consolidated financial statements and the annual report do not contain any incorrect statement or any omission of material facts that may result in misleading conclusion as of the date of issuance, c) Based on the information we possess within the scope of our duties and responsibilities in the Company, the financial statements prepared in accordance with the Communiqué provide an accurate view of the assets, liabilities, financial position and profit (loss) of the Company together with its consolidated subsidiaries and the annual report provides an accurate view of the development and performance of the business and the financial position of the Company along with the principal risks and uncertainties the Company is exposed to. Yours sincerely, Ali Akın TARI Head of the Audit Committee Hacı Ahmet KILIÇOĞLU Member of the Audit Committee Hüseyin MORKOYUN Financial Reporting Manager

72 70 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT CONTENTS PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES PART II - SHAREHOLDERS 2.1. Investor Relations Department 2.2. Shareholders Exercise of Their Right to Obtain Information 2.3. General Assembly Meetings 2.4. Voting and Minority Rights 2.5. Dividend Rights 2.6. Transfer of Shares PART III - PUBLIC DISCLOSURE AND TRANSPARENCY 3.1. Corporate Website and Its Contents 3.2. Annual Report PART IV - STAKEHOLDERS 4.1. Informing Stakeholders 4.2. Participation of Stakeholders in Management 4.3. Human Resources Policy 4.4. Code of Ethics and Corporate Social Responsibility PART V - BOARD OF DIRECTORS 5.1. Structure and Composition of the Board of Directors 5.2. Working Principles of the Board of Directors 5.3. Number, Structure and Independence of the Board Committees 5.4. Risk Management and Internal Control Mechanisms 5.5. Company s Strategic Targets 5.6. Financial Benefits

73 71 PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES Zorlu Enerji Elektrik Üretim AŞ s ( the Company ) Corporate Governance Principles Compliance Report for 2014 has been prepared in accordance with the new format presented in the Capital Markets Board of Turkey s (CMB) Bulletin dated 27 January 2014 and numbered 2014/2. Corporate governance activities at Zorlu Enerji Elektrik Üretim AŞ were initiated in 2005 in accordance with the Corporate Governance Principles. Within the scope of these activities, a number of amendments were made to the Company s Articles of Association in order to offer an equitable, accountable, responsible and transparent structure to shareholders. This first step was followed by the establishment of corporate governance mechanisms at the Company. While the objectivity of the Board of Directors was enhanced through the addition of independent members, the committees set up under the Board of Directors served to improve the effectiveness of management. The Company has adopted the majority of the non-compulsory principles included among the Corporate Governance Principles appended to the CMB s Communiqué on Corporate Governance no. II-17.1, which was in effect during As briefly summarized below, the Company took the following actions in order to further improve its compliance with the Corporate Governance Principles in The Company s Dividend Distribution Policy has been amended in line with the CMB s Communiqué on Dividends no. II-19.1 and then presented for the approval of shareholders at the 2013 Ordinary General Assembly Meeting and for the information of shareholders via the Public Disclosure Platform and the Company website. The Company s Remuneration Policy for the Members of the Board of Directors and Executive Managers has been amended within the framework of the Corporate Governance Principles appended to the CMB s Communiqué on Corporate Governance no. II-17.1, and has been made available for the information of shareholders via the Public Disclosure Platform and the Company website. The Working Principles of the Audit Committee, the Corporate Governance Committee and the Early Detection of Risk Committee have been amended within the scope of the revised capital market legislation, and made available for the information of shareholders via the Public Disclosure Platform and the Company website. In order to achieve alignment with the Article 11 of the CMB s Communiqué on Corporate Governance no. II-17.1, the names and contact information of the Company s Investor Relations Department Manager, who reports to the relevant Board Member, and the member of the said department as well as the election of the Investor Relations Department Manager as a member to the Corporate Governance Committee have been presented for the information of shareholders via the Public Disclosure Platform and the Company website. Under the Article 10 of the CMB s Communiqué on Corporate Governance no. II-17.1 and the Article 5 of the CMB s Communiqué Serial: IV-41 on the Principles to be Adhered to by Joint Stock Companies Governed by the Capital Market Law, the conclusion section of the report on the related party transactions exceeding the stipulated thresholds between the Company and its subsidiaries and their related parties has been made available for the information of shareholders via the Public Disclosure Platform and the Company website. Pursuant to the Article 19 of the Capital Market Law numbered 6362, limit of the donations to be made in 2014, as determined by the Board, was submitted to the approval of the General Assembly and was approved by the General Assembly.

74 72 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT In the implementation of the Corporate Governance Principles, certain principles that do not conform to the Company s structure and that are regarded as potential obstacles to its operations were excluded. These principles and the reasons for opting not to implement these are summarized below: Transfer of shares: Since the Company is engaged in a regulated market, in order to achieve compliance with the obligations imposed by the relevant laws and regulations of the Energy Market Regulatory Authority (EMRA), Article 21 of the Company s Articles of Association stipulates that The Company s shares may be transferred, on condition that the provisions of the Turkish Commercial Code, Capital Market Legislation, EMRA Legislation, and these Articles of Association are reserved., and the Article 6 thereof stipulates as follows, with share transfer transactions carried out on the stock exchange being reserved, Within the term of the preliminary license and until obtaining the generation license, no direct or indirect change in the Company s ownership structure, transfer of the shares and share certificates or transactions that result in a share transfer can be carried out except for inheritance or bankruptcy reasons and exceptional circumstances provided in the 57 th article of the Energy Market License Regulation. After obtaining the generation license, it is required to obtain the approval of the Energy Market Regulatory Authority each time - prior to the realization of the transaction - for the transfer of the shares or share certificates where the control in the Company s ownership structure changes regardless of the ownership changes mentioned above, upon acquisition of the shares representing five percent or more of the Company s capital, directly or indirectly by a real or legal person.. Granting shareholders the right to demand special audit and inclusion of an additional provision in the Company s Articles of Association for the minority rights: Since the existing provisions on the appointment of a special auditor and minority rights in the Turkish Commercial Code are considered adequate, these rights are not separately stipulated by the Company s Articles of Association. Due to the number of the members of the Board of Directors and committee structuring requirements, some Board members serve on more than one committee. Pursuant to the Article of Corporate Governance Principles, remuneration and all other benefits provided to the Board members and executive managers are publicly disclosed in the annual report. However, such disclosure is not made on an individual basis. No model or mechanism has been formulated for the stakeholders participation in management. However, the independent Directors serving on the Board guarantee that not only the Company and the shareholders, but also all the stakeholders are represented in management. Currently, Ms. Selen Zorlu Melik serves as the only female member on the Board of Directors and increasing the ratio of the female members to the amount set forth by the Article no of the Corporate Governance Principles lies among the Company s medium-term targets. A Directors & Officers Liability Policy has been purchased against the losses that the Company may suffer due to the Board members faults in the performance of their duties; however, the sum does not exceed 25% of the Company s share capital. Those principles that remain outside the scope of the currently implemented principles and that are not yet implemented have not led to any conflicts of interest between the stakeholders to date. Acknowledging the contributions of the Corporate Governance Principles to the Company, Zorlu Enerji Elektrik Üretim AŞ s goals are to attain even greater compliance with those principles with the involvement of all its employees and senior executives, and to reach the highest standards in the field of corporate governance. Our Company continues with necessary efforts to achieve compliance with the non-compulsory principles.

75 73 PART II - SHAREHOLDERS 2.1. Investor Relations Department The Investor Relations Department is responsible for managing and maintaining the relations with the existing and potential shareholders, protecting and facilitating the use of the shareholder rights, increasing the investor awareness and market credibility of the Company, and carrying out necessary works for ensuring compliance with the capital market legislation. The Department reports to Board Member, Mr. Bekir Cem Köksal. The Investor Relations Department submits a report on its activities to the Board of Directors at least once a year. The Department submitted its Report on its 2014 Activities to the Board on 8 January The Head of the Investor Relations Department is Başak Dalga, a full-time employee of our Company who holds Capital Market Activities Advanced Level License (No: ) and Corporate Governance Rating Specialist License (No: ). She is also a member of the Corporate Governance Committee. In addition, Hande Hökerek works as a member of the Department. Information for the individuals working in the Investor Relations Department was announced on the Public Disclosure Platform (in Turkish: KAP) on 31 July 2014 and 29 December In 2014, the Investor Relations Department mainly carried out the following tasks: Ensured that the records of correspondences between the investors and the Company, and of other information and documents are kept in a healthy, secure and up-to-date manner; coordinated the transactions related with Merkezi Kayıt Kuruluşu AŞ (the Central Registry Agency) jointly with the Legal Affairs Department, Responded to the written or verbal information requests about the Company, except for confidential information and trade secrets that are not disclosed to the public, in a clear and timely manner and in line with the Company s Disclosure Policy, either face-to-face or via various communication means, In cooperation with the Legal Affairs Department, ensured, that the Ordinary General Assembly Meeting during the reporting period was carried out in accordance with the legislation, Articles of Association, and other internal regulations, Developed ways that would facilitate shareholders participation in the General Assembly Meeting and improve communication during the course of the meeting, prepared the necessary documents that will be utilized by the shareholders during the General Assembly Meeting and kept the Company website up-to-date, thereby enabling shareholders to obtain continuous and latest information about the Company, Monitored and supervised the fulfillment of the obligations arising from the capital market legislation, including all aspects of the corporate governance and public disclosure, coordinated the communication with the public, as well as the public disclosures required by the legislation; held meetings and conference calls with the investors and analysts, and participated in the conferences organized by the brokerage houses Shareholders Exercise of Their Right to Obtain Information During 2014, the Company received information requests from the shareholders on various issues. These queries were responded to via phone, or postal mail, in writing or verbally, further to the demands of the shareholders. The responses to these information requests were coherent, clear, and in detail, in accordance with the Company s Disclosure Policy, and all inquiries except those related to trade secrets were responded to the satisfaction of the shareholders. During 2014, developments that might have an impact on the shareholders exercise of their rights were disclosed to the investors through the material event disclosures made via Public Disclosure Platform (PDP) and the Company s website.

76 74 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT In order to facilitate the exercise of the shareholders right to obtain information, one of the most essential rights of the shareholders, the Company included all the information required by the Corporate Governance Principles on the corporate website. The Investor Relations Department is responsible for updating and monitoring the website. Appointment of a special auditor is not separately stipulated in the Company s Articles of Association taking into consideration that it is a right granted by the applicable laws to the minority. The Company received no requests for the appointment of a special auditor during the reporting period General Assembly Meetings The Company s 2013 Ordinary General Assembly Meeting was held on 30 April 2014 at 14:00 p.m. at the address of Organize Sanayi Bölgesi, Sarı Cadde No: 29, Bursa. Invitation for the meeting, including the meeting date and agenda, was made in due time as set out in the applicable legislation and the Company s Articles of Association, by being published in the Turkish Trade Registry Gazette issue 8544 dated 7 April 2014 and in Bursa Hakimiyet and Dünya newspapers both dated 7 April 2014, and it was also posted on the Public Disclosure Platform, E-General Meeting System of Merkezi Kayıt Kuruluşu AŞ as well as on the Company s website at Out of 50,000,000,000 shares corresponding to the Company s total share capital of TL500,000,000, 45,843,042,179 shares corresponding to TL458,430, in capital were represented in person, and 4,156,957,821 shares corresponding to TL415,695, in capital were represented by proxy in the meeting, and the minimum meeting quorum stipulated by the law and the Company s Articles of Association was thus achieved Extraordinary General Assembly Meeting was held on 27 August 2014 at 14:00 p.m. at the address of Zorlu Plaza Avcılar, İstanbul for obtaining the shareholders approval for the amendments required to be made to the Company s Articles of Association to comply with the energy market legislation. Invitation for the meeting, including the meeting date and agenda, was made in due time as set out in the Law and the Company s Articles of Association, by being published in the Turkish Trade Registry Gazette issue 8624 dated 5 August 2014 and in Milliyet and Dünya newspapers both dated 8 August 2014, and it was also posted on the Public Disclosure Platform, E-General Meeting System of Merkezi Kayıt Kuruluşu AŞ as well as on the Company s website at Out of 50,000,000,000 shares corresponding to the Company s total share capital of TL500,000,000, 45,864,780,108 shares corresponding to TL458,647, in capital were represented in person, and 4,135,219,892 shares corresponding to TL413,521, in capital were represented by proxy in the meeting, and the minimum meeting quorum stipulated by the law and the Company s Articles of Association was thus achieved. With the General Assembly Information Document and the announcement posted on the corporate website, access was given to all sorts of information about the General Assembly Meetings in accordance with the Corporate Governance Principle no , and the relevant documents were also made available in hard copy for the information of shareholders at the Company s headquarters and at the address of Zorlu Plaza Avcılar/İstanbul. Prior to the General Assembly Meetings, the shareholders, Capital Markets Board and/or other relevant public agencies and institutions did not request to add any items to the agenda. In accordance with the Communiqué Regarding the Electronic General Assembly System to be Implemented in the General Assembly Meetings of Joint Stock Companies, published in the Official Gazette dated and numbered 28396, shareholders were granted the right to attend and cast vote at the General Assemblies through an electronic medium.

77 75 The Company s Articles of Association contain no provisions concerning the participation of stakeholders or the media at the General Assembly Meeting. However, participation is possible provided that the Company is informed beforehand. Only shareholders attended the Ordinary and Extraordinary General Assembly Meetings in 2014 while there was no attendance either from the other stakeholders or the media. It was ensured that Board members who were related to the significant agenda items of the General Assembly, other related persons and officers who had responsibility in the preparation of the financial statements as well as the representative of the independent audit company were present at the General Assembly Meetings so that they could provide the necessary information and answer the questions. Shareholders were allowed to express their opinions and pose questions under equal conditions at the General Assembly Meetings. The shareholders did not ask any questions during the meetings. At the General Assembly Meeting, shareholders were informed about the total donations amounting to TL971, made to Mehmet Zorlu Foundation and various institutions during the year Pursuant to the Article 19 of the Capital Market Law no. 6362, the Company s donation limit for 2014 was set as 0.2% of consolidated revenues, provided that it does not exceed TL1,200,000, and this has been submitted for approval at the Ordinary General Assembly. The minutes of the General Assembly Meetings are made available for the examination of shareholders at the Company s headquarters and at the address of Levent 199 Büyükdere Cad. No: Şişli/İstanbul. All announcements, documents, and other materials related to General Assembly Meetings are accessible to shareholders and all other stakeholders on the corporate website Voting and Minority Rights According to the Company s Articles of Association, no group or shareholder is granted privileges with respect to voting. Each share has 1 (one) voting right in the Ordinary and Extraordinary General Assembly Meetings. Minority shareholders and stakeholders are not represented in management. The Company s Articles of Association do not grant minority rights to shareholders representing less than one twentieth of the Company s paid-in capital. However, two independent members were elected to the Board of Directors to represent the interests of all shareholders and stakeholders, especially those of the minority shareholders. There are no cross-ownership relationships in the Company s share capital Dividend Rights There are no privileges concerning the participation in the Company s profits. Each share of stock is entitled to an equal dividend. The Company s Dividend Distribution Policy which has been put in place by the Board of Directors resolution no. 2007/9 dated 7 May 2007 has been amended in line with the CMB Communiqué on Dividends no. II The policy was submitted for the approval of shareholders at the 2013 Ordinary General Assembly Meeting, and was also made available for the information of shareholders on the Public Disclosure Platform and the corporate website. The Company s Dividend Distribution Policy, which has been accepted by the Board of Directors and disclosed on the Public Disclosure Platform, stipulates the ratio of dividend payouts which will be distributed in cash and/or in the form of bonus shares as minimum 25% of the net distributable profit, which will be reviewed by the Board each year depending on national and global economic conditions, and the Company s growth and investment plans and financial position. Information required by the applicable legislation about dividend distribution policy and dividend distribution are provided in the annual report each year.

78 76 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT In line with the Board of Directors dividend distribution proposal dated 3 April 2014 it was decided at the 2013 Ordinary General Assembly meeting that; dividend distribution cannot be made due to the fact that the Company posted TL305,699,000 net loss in 2013 according to the financial statements prepared in accordance with the International Accounting/Financial Reporting Standards pursuant to the CMB legislation and TL111,390,000 of net loss according to the financial statements drawn up in accordance with the provisions of the Turkish Commercial Code and Tax Procedural Law; hence, dividend distribution did not take place Transfer of Shares Since the Company operates in a regulated market, in order to achieve compliance with the obligations imposed by the relevant laws and regulations of the Energy Market Regulatory Authority, the Article 21 of the Articles of Association stipulates The Company s shares may be transferred, on condition that the provisions of the Turkish Commercial Code, Capital Market legislation, EMRA legislation, and these Articles of Association are reserved., and the Article 6 thereof stipulates as follows, with share transfer transactions carried out on the stock exchange being reserved, Within the term of the preliminary license and until obtaining the generation license, no direct or indirect change in the Company s ownership structure, transfer of the shares and share certificates or transactions that result in a share transfer can be carried out except for inheritance or bankruptcy reasons and exceptional circumstances provided in the 57 th article of the Energy Market License Regulation. After obtaining the generation license, it is required to obtain the approval of the Energy Market Regulatory Authority each time - prior to the realization of the transaction - for the transfer of the shares or share certificates where the control in the Company s ownership structure changes regardless of the ownership changes mentioned above, upon acquisition of the shares representing five percent or more of the Company s capital, directly or indirectly by a real or legal person. PART III - PUBLIC DISCLOSURE AND TRANSPARENCY 3.1. Corporate Website and Its Contents The Company has an active and easily accessible website. The website was set up to ensure that the shareholders, stakeholders and the general public are kept informed in an open, clear and simultaneous fashion. Information presented on the website is regularly updated. The address of the Company s website is Furthermore, pursuant to the Regulation on Websites to be Launched by Joint Stock Companies and the 1 st paragraph of the Article 1524 of the Turkish Commercial Code, in accordance with the principles and procedures regarding the launching of a website, allocation of a section of this website to publish the announcements that are required to be made by the Company under the law and to information society services, our Company procures Central Database Service Provider support services from Merkezi Kayıt Kuruluşu AŞ (CRA) and announcements that are required to be made by the Company by law is accessible through e-company Information Portal of the CRA. The website contains the required information stipulated in the CMB s Corporate Governance Principles and in the Turkish Commercial Code. The information posted on the website is also provided in English for the use of foreign investors Annual Report The Company s annual reports are prepared in accordance with the Turkish Commercial Code and associated legislation, the Capital Market legislation, and hence, Corporate Governance Principles.

79 77 Moreover, Board of Directors Annual Report is prepared in accordance with the provisions of the Regulation Regarding the Determination of the Minimum Contents of the Companies Annual Reports, published in the Official Gazette dated and numbered PART IV - STAKEHOLDERS 4.1. Informing Stakeholders The stakeholders are periodically informed about matters that concern them in accordance with the Company s disclosure policy them. The Company has an intranet system to keep employees informed, where Company-related information can be accessed subject to limits of authorization. All types of information related to employees are provided in detail on the intranet. With respect to keeping customers and suppliers informed, the Company organizes informational meetings when it receives such requests. The stakeholders may summit Company s transactions the they deem either unethical or contrary to regulations to the Corporate Governance Committee, the Audit Committee or the Investor Relations Department by accessing them via phone and/or Participation of Stakeholders in Management No model or mechanism has been formulated for the stakeholders participation in management. However, the independent members serving on the Board of Directors guarantee that not only the Company and the shareholders, but also all the stakeholders are represented in management. In making important decisions with regard to the stakeholders, senior executives representing the stakeholders are invited to Board meetings to express their opinions. Moreover, attention is paid to ensure that employees participate in Board of Directors and Executive Committee meetings at certain intervals so that they can provide their opinions firsthand Human Resources Policy The Company s Human Resources Policy is set forth in writing and involves recruitment, appointment, promotion and horizontal promotion, dismissal, training and performance evaluation systems. Employees are kept informed about job descriptions, job distribution as well as performance criteria. No representative has been appointed to manage Company-employee relations. The representation of employees in management is achieved by the presence of two independent members on the Board of Directors. The training activities carried out to support professional and personal development of employees are structured; and Training Cards were prepared which offers employees the opportunity to choose training programs in line with their needs. Designed to monitor all training activities in parallel with career plans, the Training Portal is accessible by all the employees. Employees are treated equally and without any discrimination whatsoever in all matters involving training, career development and promotion. There were no complaints from employees related to discrimination.

80 78 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 4.4. Code of Ethics and Social Responsibility In all of its activities, the Company carefully takes into consideration the principles stated in the United Nations Global Compact, which has been signed by Zorlu Holding and binds all the Group companies. The Company s Code of Ethics has been put into writing and communicated to the employees via the corporate website. Board of Directors takes utmost care to ensure compliance with the Code of Ethics that is formulated for the Company and its employees. The Company s Corporate Code of Conduct is published in both Turkish and English on the corporate website. During 2014, the Company had all the necessary legal inspections carried out concerning the environmental impacts of all its facilities and projects. The environmental and social impacts of all projects are reviewed. According to environmental impact reports, no violations of environmental protection have been detected to date and all of the Company s practices are carried out in compliance with the requirements of domestic environmental policies as well as international agreements, and in line with environmental awareness. The social impact reports assess and monitor our social impacts, and projects are developed, which are aimed at enhancing the quality of life of local residents in the regions where we have investments. For example, at Gökçedağ Wind Power Plant, the project site is regularly monitored with respect to its environmental impact, bird migrations are followed up and the turbines are halted when necessary, depending on the data from the bird tracking radar, and various social responsibility initiatives for local community are undertaken. Educational grants are made available to 150 university students residing in the area, whereas other supports include supply of potable and service water to villages, technology support to schools and sponsorship of local amateur sports clubs. Zorlu Enerji attaches utmost importance to raising awareness for energy among children. Launched in 2010, Our Energy is for the Children project reached 180,000 children all over Turkey in four years. Within the scope of this project, Turkey s First Energy Drama telling the children aged 9-12 about the story of the energy was developed in 2012 in collaboration with TOÇEV (Tuvana Foundation for Children Willing to Study) and the Ministry of National Education. In 2014, the drama reached more than 15,500 students in 50 schools. The Company gives much importance to ensuring that its projects are embedded into the relevant region and are embraced by the locals. To this end, visits and meeting are organized in order to inform in an interactive manner all parties of the project. Within this framework, Stakeholder Participation Meetings were organized for Gökçedağ WPP which is already in operation, Sarıtepe and Demirciler WPPs and Kızıldere III GPP which are in investment phase. Stakeholder visits were made to Sami Soydam (Sandalcık) Dam and HEPP, Alaşehir and Kızıldere GPP, Gökçedağ WPP, Çıldır HEPP and İkizdere HEPP. Moreover, studies are conducted to determine the socio-economic status of the local people and the project s impact on the environment and community life during the investment phase of the projects. Accordingly, Sami Soydam Dam and Hydroelectric Power Plant Environmental and Social Impact Analysis was launched in 2014, while preparatory work was initiated in late 2014 on Alaşehir and Kızıldere Geothermal Power Plants Social Impact Assessment, Social Management and Investment Plan.

81 79 On the other hand, biodiversity studies that were started in 2013 in line with the Group s environmental policies were completed and reported in Within this framework, İkizdere HEPP, Tirebolu HEPP and Sami Soydam Dam and HEPP biodiversity studies were finalized. As a result of systematic observations carried out for one year in the project site and literature survey, the rare, endemic and endangered species in the areas were identified, and were put under protection employing in-situ and ex-situ methods. Zorlu Enerji makes responsible efforts for determining its carbon footprint, and has become the first energy company to join the CDP (Carbon Disclosure Project) to report on its carbon footprint and transparently share it with the public on a yearly basis. It is also the first energy company to obtain ISO GHG Emission Standard certification. Furthermore, in 2013, Zorlu Enerji was assigned the highest performance score among the four energy companies included in the BIST- 100 index that report under CDP. The Company was awarded the CDP Turkey Carbon Disclosure Leadership Award in 2011, 2013 and Regarding environmental protection, the Company also holds ISO Environmental Management System certification, ISO 9001:2000 Quality Management System certification, and OHSAS Occupational Health and Safety System certification. Zorlu Enerji Group has become the first company in the energy sector reporting on sustainability in With its 2 nd Sustainability Report issued in 2012, earned Level A rating from GRI, a first in the sector. The report was also one of the 24 reports issued by energy companies in the world in GRI Level A. Taking place among the first three companies preparing reports in this level in Turkey and the first to do so in the energy industry, Zorlu Enerji presented its third sustainability report pertaining to the period to the information of its stakeholders in The report was drawn up in GRI Level A based on G3.1 criteria, and received approval. The Sustainability Report is posted in Turkish and English on the website at Another corporate social responsibility initiative of 2012 was Zorlu Energy Group Volunteers, the Company s corporate volunteering organization. In 2013 works on training and organizing all the employees to enable them develop social volunteering projects were completed and activities were commenced. Within this scope, Zorlu Energy Volunteer Employees coordinated donation of winter clothing items to 500 students in the Arpaçay district of the province of Kars under the project Our Energy is for Village Schools. Under the project Our Energy is for the Children, training on energy, renewable energy, clean energy and energy saving was given in schools to more than 2,000 primary school students in Gaziantep and Tekirdağ. In cooperation with Kaçuv (Hope Foundation for Children with Cancer), gifts were distributed to more than 150 children with cancer in amusing events. Through our Project Our Energy is for Children with Autism, volunteers ran in the Intercontinental İstanbul Eurasia Marathon for the benefit of children with autism in cooperation with Tohum Turkey Autism Early Diagnosis and Education Foundation. Volunteering activities also continued also in PART V - BOARD OF DIRECTORS 5.1. Structure and Composition of the Board of Directors At the Company s 2013 Ordinary General Assembly Meeting held on 30 April 2014, it was decided to determine the number of the members of the Board of Directors as 7, and to elect Zeki Zorlu, Olgun Zorlu, Selen Zorlu Melik, Bekir Cem Köksal and Burak İsmail Okay as the Board members and Ali Akın Tarı and Hacı Ahmet Kılıçoğlu as the independent Board members to serve until the 2014 Ordinary General Assembly Meeting. The Company s Board of Directors is composed of seven members in total. Three of the seven Board members are nonexecutive members, two are independent members and two are executive members.

82 80 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Member Duty Term of Office Zeki Zorlu Ali Akın Tarı Olgun Zorlu Selen Zorlu Melik Bekir Cem Köksal Hacı Ahmet Kılıçoğlu Burak İsmail Okay Chairman Vice Chairman Board Member Board Member Board Member Board Member Board Member Until 2014 Ordinary General Assembly Meeting Until 2014 Ordinary General Assembly Meeting Until 2014 Ordinary General Assembly Meeting Until 2014 Ordinary General Assembly Meeting Until 2014 Ordinary General Assembly Meeting Until 2014 Ordinary General Assembly Meeting Until 2014 Ordinary General Assembly Meeting Other Positions Held Within the Group Vice Chairman - Zorlu Holding, Chairman - Zorlu Group Companies Engaged in Textiles and energy Sectors Vice Chairman - Vestel Elektronik, Board Member - Vestel Beyaz Eşya Board Member - Zorlu Holding and Subsidiary Companies Deputy President - Zorlu Energy Group, Board Member - Zorlu Group Companies CFO - Zorlu Holding, Member of the Executive Committee - Vestel Group of Companies Vice Chairman - Vestel Beyaz Eşya, Board Member - Vestel Elektronik President of Law Group at Zorlu Holding Positions Held Outside the Group Status - Non-executive Board Member and Audit Committee Member - Dilerbank; Board Member - Diler Holding Independent - Non-executive - Executive - Executive Board Member - Beşiktaş Futbol Yatırımları, Board Member - Şeker Mortgage Finansman Independent - Non-executive

83 81 Zeki Zorlu Chairman ( Denizli) Zeki Zorlu began his professional career in a family owned textiles company in Babadağ, Denizli. Opened his first textiles store in Trabzon, Zeki Zorlu established Korteks Mensucat Sanayi ve Ticaret AŞ in In addition to its textiles sector investments, Zorlu Group entered the energy sector in 1993; subsequently, the electronics and white goods sector with Vestel, which the Group acquired in 1994; and the real estate sector in Today, Zorlu Group has 25,000 employees and 60 companies under its roof. Mr. Zorlu serves as the Co-Chairman of the Board of Directors at Zorlu Holding as well as the Chairman of the Group companies operating in the textiles and energy sectors. Ali Akın Tarı Vice Chairman ( Koruköy) After his graduation from the Istanbul Law Faculty, Ali Akın Tarı served as a Tax Inspector and as a Chief Tax Inspector at the Ministry of Finance between 1972 and He was appointed as the Vice-President of the Tax Inspectors Board in 1986 and Group Head of the Istanbul Tax Inspectors Board in 1989, and continued to serve in this position until he was appointed as a Board Member of the Banking Regulation and Supervision Agency in He was also elected as a Board Member of the Savings Deposit Insurance Fund in the same year. He left his position at the Banking Regulation and Supervision Agency when his period of duty expired in 2004, and was appointed as a Consultant for the Ministry of Finance. Mr. Tarı served in this position until 2007, when he voluntarily left his position in the public sector to work in different areas in the private sector. Mr. Tarı became a member of the Board of Directors and the Audit Committee of Dilerbank in 2008; in addition to this position, he was appointed as a member of the Board of Directors of Diler Holding in Still serving in these positions, Mr. Tarı holds the titles of Certified Public Accountant and Independent Auditor. Olgun Zorlu Board Member ( Trabzon) After graduating from university in the United Kingdom, Mr. Olgun Zorlu began his professional career in 1986 and gained managerial experience at Zorlu Group s textile companies. He started serving as a Board Member at Zorlu Holding in In addition to serving as a Board Member at Zorlu Enerji Elektrik Üretim AŞ, Mr. Zorlu also continues to serve as a Board Member at Zorlu Holding and Zorlu Group companies. Selen Zorlu Melik Board Member ( Trabzon) Selen Zorlu Melik graduated from the Faculty of Economics and Administrative Sciences, Department of Business Administration at Uludağ University. She began her professional career at Denizbank in Following her internship at the Denizbank Bursa Branch, she joined the Management Trainee Program at the same bank in After working in a number of positions at the Denizbank head office, Mrs. Zorlu Melik attended a Marketing Certificate Program at the University of California, Berkeley, USA in She subsequently started to work at the Korteks Yarn Plant in 2002 and became a Board Member of the same Company in She has been serving as the Deputy President of the Zorlu Energy Group, as a Board Member of Zorlu Enerji Elektrik Üretim AŞ and also as Board Member at several Zorlu Group companies since Since April 2012, Mrs. Zorlu Melik has been acting as the Deputy President of Zorlu Energy Group.

84 82 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Bekir Cem KÖKSAL Board Member ( Ankara) Bekir Cem Köksal graduated from the Department of Mechanical Engineering at Boğaziçi University in 1988, and completed his master s degree at Bilkent University in He subsequently worked in the banking industry between 1990 and In 1997, he was appointed as the Assistant General Manager at Denizbank and he joined Vestel as a Chief Financial Officer in Bekir Cem Köksal was appointed as a member of the Board of Directors at the 2011 Ordinary General Assembly Meeting held on 31 May 2012, and he still serves in this position. Hacı Ahmet Kılıçoğlu Board Member ( Giresun) Hacı Ahmet Kılıçoğlu graduated with a Bachelor s degree and Master s degree in Economics from the University of Essex. He started his professional career in 1979 at the Ministry of Industry and Technology. In 1980 he became an Assistant Specialist at Türkiye İş Bankası, and after completing his military service and working in the private sector for a couple of years, Mr. Kılıçoğlu assumed administrative positions at the United Nations Development Program (UNDP) and the F-16 project. He then took office at Türk Eximbank where he worked in various positions. He later served as the CEO of the bank and as a Board Member between 1998 and Mr. Kılıçoğlu has also served as a Board Member at the Turkish Banks Association during and was elected as the President of the World EximBanks Union (The Berne Union) in He also served as a Consultant to the President at the Islamic Development Bank during and as Vice Chairman at Denizbank in Mr. Kılıçoğlu is currently a Board Member at Beşiktaş Futbol Yatırımları Sanayi ve Ticaret AŞ and Şeker Mortgage Finansman AŞ in addition to his board memberships at Vestel Elektronik Sanayi ve Ticaret AŞ, Vestel Beyaz Eşya Sanayi ve Ticaret AŞ and Zorlu Enerji Elektrik Üretim AŞ. Burak İ. Okay Board Member ( Ankara) Burak İ. Okay graduated from the Faculty of Law at Ankara University in After completing an International Law Certificate Program in New York, he embarked on his professional career at Türkiye İş Bankası, Department of Legal Advisory. He later worked at Garanti Bankası, MNG Bank and Nortel Networks Netaş, respectively, before joining Bener Law Firm as an executive. Mr. Okay joined Zorlu Group in 2006 and played an active role in the structuring of the legal department that serves all Group companies. He continues to work as the Legal Coordinator for Zorlu Group and has been a Board Member at Zorlu Enerji Elektrik Üretim AŞ since İbrahim Sinan AK General Manager ( Ankara) İbrahim Sinan Ak graduated from the Department of Management Engineering at İstanbul Technical University. He started his career as an investment specialist at Evgin Yatırım Menkul Değerler. He then received his MBA from the Old Dominion University in the USA. Having worked as a Finance Chief at Vestel Communications between 2000 and 2002 and as a Finance Manager at Vestel Beyaz Eşya between 2002 and 2006, Mr. Ak joined Zorlu Energy Group in He served as Assistant General Manager in charge of finance until 2012 and became the General Manager in January Mr. Ak still serves in this position. The Chairman of the Board and the Chairman of the Executive Committee are two different individuals. The chairman of the Board of Directors is Zeki Zorlu, and Selen Zorlu Melik is acting as the Deputy Chairperson of the Executive Committee.

85 83 Prior to the 2013 Ordinary General Assembly Meeting, two independent Board member candidates were presented to the Corporate Governance Committee, which also carries out the duties of the Nomination Committee. The report dated 4 April 2014, regarding whether the nominees fulfill the independence criteria, was submitted to the Board of Directors, and as per the Board of Directors resolution numbered 2014/18 and dated 4 April 2014, the Board decided to propose Ali Akın Tarı and Hacı Ahmet Kılıçoğlu, who have presented their statements of independence, to be elected as independent Board members. At the 2013 Ordinary General Assembly Meeting held on 30 April 2014, the shareholders accepted the said motion. Statements of independence of the candidates are provided herein below: I hereby acknowledge, commit and declare that I have read and understood the capital market legislation, the Company s Articles of Association, and the Capital Markets Board s (CMB) Corporate Governance Principles appended to the CMB s Communiqué on Corporate Governance no. II-17.1, and that I meet all of the criteria required of Independent Board Members that are stipulated in Principle no appended hereto within the frame of the applicable legislation. No circumstances occurred during the reporting period to end the independence status of the independent members. No restrictions are imposed on Board Members undertaking one or more duties outside the Company. Currently, one female member serves on the Company s Board of Directors, and it is among the Company s mediumterm targets to reach the minimum 25% ratio set in the Corporate Governance Principles for the ratio of the female Board members. However, a policy has not yet been developed to reach this target Working Principles of the Board of Directors Agendas for Board meetings are set by the Chairman of the Board following his discussions with the other Board members, the General Manager and/or the Chairman of the Executive Committee. Requests coming from the Company management are also taken into account when setting the meeting agendas. During 2014, the Board of Directors held 32 meetings. The meeting attendance rate was 90.47%, and 100% of the decisions were passed with the unanimous votes of the attendants. The Board of Directors convenes as frequently as required by the Company s activities and at the call of either the Chairman or the Vice Chairman, and takes decisions regarding the items on the agenda. Each Board member has one vote at the Board meetings. In line with the Corporate Governance Principles, the Company has set up a secretariat under the Board of Directors. The secretariat is responsible for keeping and archiving the minutes of the Board meetings. The secretariat also keeps Board members informed in a timely and simultaneous manner and delivers the agenda, related information and pertinent reports to Board members at least one week in advance of each meeting. Detailed and plausible justifications for dissenting votes of the Board members relating to differences in opinion that may be voiced at Board meetings are entered into the record. In addition, justifications for dissenting votes cast by independent members due to differences in opinion are disclosed to the public. However, to date, there has never been an instance of differences in opinion voiced by either the independent members or other members. No Board members, including the Chairman, have preferential voting rights or the right to veto Board decisions. Each member, including the Chairman, possesses an equal vote. A Directors & Officers Liability Policy has been purchased against losses which the Company may sustain due to the Board members faults in the performance of their duties. However, the sum does not exceed 25% of the Company s share capital.

86 84 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 5.3. Number, Structure and Independence of the Board Committees The Company established a Corporate Governance Committee, Early Detection of Risk Committee, and Audit Committee in line with the Capital Markets Board s Corporate Governance Principles. The duties assigned to the Nomination Committee and Remuneration Committee are carried out by the Corporate Governance Committee. Committee members Ali Akın Tarı, Hacı Ahmet Kılıçoğlu and Olgun Zorlu serve on more than one committee due to the number of Board Members and the committee structure requirements in accordance with the CMB s Corporate Governance Principles. Committee meetings are held at frequencies stipulated by the legislation, as and when deemed necessary, and upon a request from any member. The Committees activities and working principles are publicly disclosed on the Company website. Audit Committee The Audit Committee was set up pursuant to the Article 3 of the CMB Communiqué Serial X, No: 19 and is responsible for the effective oversight of the Company s financial and operational activities. The objective of the Audit Committee, which reports to the Board of Directors, is to oversee the functioning of the Company s accounting system, the independent audit and public disclosure of the financial data, and the functioning and efficiency of the Company s internal control and internal audit system. Pursuant to the CMB s Communiqué on Corporate Governance Principles no: II-17.1, the Audit Committee Working Principles were revised and approved at the Board of Directors meeting on April 7, The revised version of the working principles was disclosed to shareholders via the Public Disclosure Platform and the corporate website. The Audit Committee is structured in accordance with the Capital Markets Board s Corporate Governance Principles and consists of at least two members. The Head of the Committee was elected from among the independent members of the Board and certain criteria were taken into account in the selection process. The Head of the Audit Committee is ensured to have previously served in a similar position, have the knowledge and experience needed to analyze financial statements, be versed in accounting standards, and be highly qualified. Both Audit Committee members were elected from among the independent Board members. The Head of the Committee is Ali Akın Tarı, and the other member is Hacı Ahmet Kılıçoğlu. The distribution of duty in the Committee is as follows as per the decision taken in the Company s Board meeting held on 30 April 2014: Committee members Duty Status Ali Akın Tarı Head of the Committee Independent Board Member Hacı Ahmet Kılıçoğlu Member of the Committee Independent Board Member In principle, the Audit Committee shall meet at least four times a year, being once in each quarter. The management secretariat is responsible for keeping and archiving the minutes and the resolutions of the Audit Committee meetings. The Committee carries out its activities in line with the working principles put into writing in detail.

87 85 In 2014, the Audit Committee carried out the following functions: Monitor the Company s financial and operational activities, Oversee and approve the accuracy and the conformity of the annual and interim financial statements, which will be disclosed to the public, to the accounting principles employed by the Company, Selection of the independent audit firm, preparation of the independent audit agreement, and initiation of the independent audit process, Follow up of the effectiveness and performance of the independent audit activity, Supervise the operation and efficiency of the internal control and internal audit system, Assess the findings obtained on the internal control system and report these to the Board of Directors, and Review and approve the internal control and internal audit reports. Corporate Governance Committee The Corporate Governance Committee is established to monitor the Company s compliance with the CMB s Communiqué on Corporate Governance Principles, to carry out studies for improvement and to make proposals to the Board of Directors in this regard. Pursuant to the CMB s Communiqué on Corporate Governance Principles no: II-17.1, the Corporate Governance Committee Working Principles were revised and approved at the Board of Directors meeting dated April 7, The revised version of the working principles was disclosed to shareholders via the Public Disclosure Platform and the corporate website. The Corporate Governance Committee is composed of at least three members, two non-executive Board Members and the Investor Relations Department Manager. The Head of the Committee is Ali Akın Tarı, an independent member, and the other members are Olgun Zorlu and Başak Dalga. The distribution of duty in the Committee is as follows as per the decision passed in the Company s Board of Directors meeting held on 30 April 2014: Committee members Duty Status Ali Akın Tarı Head of the Committee Independent Board Member Olgun Zorlu Member of the Committee Non-executive Board Member Başak Dalga Member of the Committee Investor Relations Department Manager In principle, the Committee should hold at least two meetings annually to ensure effective performance of its duties. The activities carried out by the Corporate Governance Committee in 2014, in accordance with its working principles put into writing in detail, are presented below: Propose improvements on corporate governance practices to the Board of Directors in order to achieve compliance with the CMB Communiqué on Corporate Governance no. II-17.1; conduct and supervise the necessary work for alignment with the legislation, Oversee the activities of the Investor Relations Department, Determine and monitor the principles, criteria and practices to be applied in the remuneration of the Board of Directors and executives with administrative responsibility, taking into consideration the Company s long-term targets, Present proposals to the Board of Directors in relation to the remuneration to be provided to the Board members and executives with administrative responsibility taking into consideration the extent of the fulfillment of the remuneration criteria.

88 86 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT Early Detection of Risk Committee The Early Detection of Risk Committee was set up with the Board s decision dated February 19, 2013 in order to identify the risks which could jeopardize the Company s existence, development and continuity and to take the necessary measures to counter and manage these risks in line with the Turkish Commercial Code, Articles of Association and CMB s Communiqué on Corporate Governance Principles. Pursuant to the CMB s Communiqué on Corporate Governance Principles no: II-17.1, the Early Detection of Risk Committee Working Principles were revised and approved at the Board of Directors meeting dated April 7, The revised version of the working principles was disclosed to shareholders via the Public Disclosure Platform and the corporate website. The Early Detection of Risk Committee consists of at least two members of the Board of Directors. If the Committee comprises two members, then both members must be selected from among the Company s non-executive Board members; if it comprises more than two members, then the majority of them must be non-executive Board members. The Head of the Early Detection of Risk Committee is Mr. Hacı Ahmet Kılıçoğlu, who has been elected from among independent members; the other Committee member is Mr. Olgun Zorlu. Essentially, the Early Detection of Risk Committee submits reports to the Board of Directors in every two months. The distribution of duty in the Committee is as follows as per the decision taken in the Company s Board meeting held on 30 April 2014: Committee members Duty Status Hacı Ahmet Kılıçoğlu Head of the Committee Independent Board Member Olgun Zorlu Member of the Committee Non-executive Board Member The Early Detection of Risk Committee held 6 meetings in 2014 and presented the necessary risk reports to the Board of Directors. The activities carried out by the Committee in 2014, in line with the working principles put into writing in detail, are presented below: Process-based risk inventory was prepared and opinions and evaluations of risk owners were obtained. Risks were evaluated in two different ways, namely, with (residual risk) and without (inherent risk) taking into account the efficiency performance of the existing control and precaution activities. Inherent and residual risks contained in risk reports were evaluated based on the 4-tier scale (Acceptable, Acceptable with Control, Undesired, Unacceptable), Sector and company based risks contained in the risk reports were grouped under 9 main risk headings (External Environment, Operational, Authorization, Information Technology and Technology, Honesty/Integrity, Financial, Process/Operational, Reporting and Strategic) according to COSO (The Committee of Sponsoring Organizations of the Treadway Commission) risk taxonomy, As a result of these assessments, it was seen that risks were generally gathered under the main headings of External Environment, Operational, Financial and Strategic, As a result of the risk inventory and risk management analyses, risk reports were prepared and submitted to the Committee in order to ensure early detection of risks that may jeopardize the Company s existence, development and continuity, and the adoption of necessary measures regarding the detected risks and management of risk.

89 87 These reports are as follows: Summary of the World Economic Forum Global Risks 2014 Losses Sustained in the Energy Sector Insurance Solutions for the Energy Group Companies Fraud Risk Survey Receivables Risk Early Warning Signals The Energy Group of Companies OHS Risk Assessment Obligation Work is in progress for determining the key risk indicators Risk Management and Internal Control Mechanism Zorlu Holding Corporate Risk Management Department began its operations in the first quarter of 2012 with the purpose of early diagnosing the risks that may jeopardize the existence, development and continuity of the Company, taking the necessary actions against the identified risks, and centrally managing the risks. Accordingly, Zorlu Holding Risk Policy and Procedure and Corporate Risk Management Framework that will be applicable to all the Zorlu Group companies were prepared and shared with the related units. Zorlu Enerji makes intensive use of information technologies and uses the SAP system to secure internal control. Through the SAP system, all the integrated business processes in the Company are carried out/registered on the information systems, thus granting increased speed and productivity to the business. Efficient use of these systems allows employees and managers to easily access all sorts of information and reports that concern them in line with their authorities. SAP GRC (Governance Risk Compliance) is used as the system that covers and monitors all the risks which the Company is exposed to. The Company s internal control systems are evaluated with a risk-focused approach by taking into account the risks which are identified through the risk management analysis and/or during the internal control activities and by taking into account the related risk reducing actions. During the course of the activities carried out in line with the Company s vision and mission, the Company may become exposed to risks related with strategic goals, financial position, operational activities, legislation, occupational health and safety, and protection of assets and reputation. In order to accurately define and manage these risks, Zorlu Holding Corporate Risk Management philosophy is summarized below: Incorporating risks into the decision-making mechanisms by establishing risk awareness and risk culture in the operations of the Company, Collaborating to reveal the risks and opportunities that may have an impact on the Group s targets based on a shared perception, Defining and evaluating risks according to their impact and probability, Using Key Risk Indicators to follow up the risks that have been identified and prioritized, Measuring and reporting key risk indicators that give warnings and all other risks, taking into consideration the control points, Proactively managing these risks through optimum actions taken in accordance with the risk appetite. Based on the Board of Directors decision dated 19 February 2013, Zorlu Enerji Elektrik Üretim AŞ s Early Detection of Risk Committee was set up and its Functions and Working Principles were accepted. The Committee works to early diagnose the factors that could jeopardize the existence, development and continuity of the related companies, to take

90 88 ZORLU ENERJİ 2014 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT the necessary actions and implement the remedies, and to manage the risk for the purpose of achieving compliance with the Article 378 of the Turkish Commercial Code no and of coordinated risk management. The Internal Audit Department reviews the efficiency and effectiveness of these systems at certain intervals in accordance with the approved annual plans, and reports the results to the Board of Directors for necessary action Company s Strategic Goals The Board of Directors takes special care to obtain the opinions and suggestions of relevant departments while setting the Company s strategic goals. Suggestions relating to strategic goals are reported to the Board of Directors and work is undertaken to implement these goals as soon as possible. The extent to which the Company s goals are attained is measured during the quarterly and year-end reporting periods by monitoring the results on the basis of operations. Once a year, the Board of Directors conducts an annual review of the degree to which the Company has accomplished its objectives, as well as its activities and past performance Financial Benefits The Company s Remuneration Policy for the Members of the Board of Directors and Executive Managers, which has been accepted by the Board of Directors decision dated 9 May 2012 and made available for the information of shareholders on the Company website pursuant to the Corporate Governance Principles, was amended in line with the new Corporate Governance Principles appended to the CMB s Communiqué on Corporate Governance no. II-17.1, and was publicly disclosed on 28 March 2014 via the Public Disclosure Platform and was also made available for the information of shareholders via the Company website. The attendance fees are determined according to the Board Member s status (whether independent or executive), responsibilities, seniority, know-how, skills, level of experience and the amount of time he/she spares for the Company. The Company s Board members were paid a total gross sum of TL95, as an attendance fee in 2014, commensurate with the practices of the peer companies in the sector. The amounts for 2015 will be decided at the 2014 Ordinary General Assembly. No other benefits are provided to Board members. There are no rewarding schemes or profit distribution based on performance measurement for the Board Members. The salaries of the Company s senior executives are determined and approved by the Board of Directors. In addition, senior executives may be entitled to bonus payments at year-end, in line with the Company s financial performance and their respective contribution to this performance. The amounts of such bonus payments are determined by the Board of Directors. In determining the Remuneration Policy for Senior Executives, several factors are taken into consideration, including the structure of the sector the Company operates in, competition, salary surveys, ongoing production and sales activities, extensiveness of operations, international operations, the structure of subsidiaries and their weight in total operations, the level of knowledge required to sustain operations, and the number of employees. The financial benefits provided to the Company s Chairman, Board Members, general manager, general coordinators and assistant general managers are outlined in the footnotes of the financial statements. In this regard, the total salaries and fees paid during the 12 months ending on December 31, 2014 was TL2,262 thousand ( : TL1,367 thousand). During 2014, the Company did not lend money to any Board member or senior executive, nor did it extend any credit via a third party under the name of a personal loan or grant any guarantee such as surety in their favor.

91 89 DIVIDEND DISTRIBUTION PROPOSAL The Board of Directors of Zorlu Enerji Elektrik Üretim Anonim Şirketi convened at the Company headquarters under the chair of Mr. Zeki Zorlu, discussed the topic on the agenda, and passed the following decision. Due to the TL224,448, net loss reported in the consolidated financial statements prepared as per the Capital Market Law and related Communiqués and the TL88,903, net loss realized in the financial statements prepared as per the Turkish Commercial Code and Tax Procedure Law, the Board of Directors of Zorlu Enerji Elektrik Üretim AŞ decided to propose no dividend payment at the 2014 Annual General Assembly Meeting.

92 90 ZORLU ENERJİ 2014 ANNUAL REPORT STATEMENT OF INDEPENDENCE BY THE INDEPENDENT BOARD MEMBER CANDIDATES STATEMENT OF INDEPENDENCE I hereby acknowledge, commit and declare that I have read and understood the capital market legislation, the Company s Articles of Association, and the Capital Markets Board s Corporate Governance Principles appended to the CMB s Communiqué on Corporate Governance no. II-17.1, and that I meet all of the criteria required of Independent Board Members that are stipulated in the Principle no appended hereto within the framework of the applicable legislation. 06 April 2015 Ali Akın TARI PRINCIPLE A member of the Board of Directors who meets all of the following criteria, in addition to not having served as a Board Member at Zorlu Enerji Elektrik Üretim AŞ (and at the group companies of Zorlu Enerji Elektrik Üretim AŞ) for more than six years within the last ten years and to not having served as a member of Executive Board in the aforementioned companies within the last five years, shall be deemed as an independent Board member. a) Absence of an employment relationship between the individual, or his/her spouse or any relative of him/her whether by blood or by marriage unto the second degree, entered into within the most recent five years, in an executive position involving major duties and responsibilities, having not collectively or individually held more than 5% of the capital or voting rights or privileged shares in, or established any commercial interest of a significant nature, with the Company, or with any company in which the Company has management control or material influence (TFRS 10 and TAS 28 should be used as the basis to establish whether control and material influence as mentioned herein exists, respectively) and with any shareholder having management control or material influence over the Company, or with any corporate entity which are controlled by these shareholders (in the event that the companies under this paragraph were inactive for the last 3 fiscal periods, contradiction with the independence criteria shall not arise. Independence will be deemed compromised if the ratio of turnover/profit before tax derived from a commercial relation of a significant nature is equal to 20% or more than the total turnover/profit before tax derived from a business of the same nature for either the independent member candidate or the company). b) Within the last five years, not being a shareholder (5% and more), nor an employee at an executive position with significant duties and responsibilities, nor a member of the Board, particularly in the companies that provide auditing, rating and consulting services for the Company (including tax audit, legal audit, internal audit), and in the companies that the Company purchases or sells significant amount of services or products within the framework of the agreements signed, during the periods in which these services or products were purchased or sold. c) Having the professional education, knowledge and experience necessary to duly carry out the duties that will be assumed as a result of the independent Board membership. d) Not working as a full time employee at any public institution or organization after being elected as a Board member with the exception of working as an academician at a university provided that this is in compliance with the relevant legislation. e) Being a resident in Turkey according to the Income Tax Law dated 31 December 1960 and numbered 193. f) Having strong ethical standards, professional reputation and experience that will allow him/her to contribute positively to the activities of the Company, remain neutral in conflicts of interests between the Company and shareholders and decide independently by taking into consideration the stakeholders rights. g) Being able to dedicate a sufficient amount of time to the affairs of the Company in a manner to follow up the conduct of the company activities and duly perform the duties assumed. h) Having not served as a board member at the Company s Board of Directors for more than 6 years within the last ten years. i) Not serving as an independent board member at more than three of the companies controlled by the shareholders who control the management of the Company and at more than five publicly traded companies in total. j) Having not been registered and announced on behalf and in the name of the legal entity which is selected as a Board member.

93 91 STATEMENT OF INDEPENDENCE I hereby acknowledge, commit and declare that I have read and understood the capital market legislation, the Company s Articles of Association, and the Capital Markets Board s Corporate Governance Principles appended to the CMB s Communiqué on Corporate Governance no. II-17.1, and that I meet all of the criteria required of Independent Board Members that are stipulated in the Principle no appended hereto within the framework of the applicable legislation. 06 April 2015 Hacı Ahmet KILIÇOĞLU PRINCIPLE A member of the Board of Directors who meets all of the following criteria, in addition to not having served as a Board Member at Zorlu Enerji Elektrik Üretim AŞ (and at the group companies of Zorlu Enerji Elektrik Üretim AŞ) for more than six years within the last ten years and to not having served as a member of Executive Board in the aforementioned companies within the last five years, shall be deemed to as an independent Board member. a) Absence of an employment relationship between the individual, or his/her spouse or any relative of him/her whether by blood or by marriage unto the second degree, entered into within the most recent five years, in an executive position involving major duties and responsibilities, having not collectively or individually held more than 5% of the capital or voting rights or privileged shares in, or established any commercial interest of a significant nature, with the Company, or with any company in which the Company has management control or material influence (TFRS 10 and TAS 28 should be used as the basis to establish whether control and material influence as mentioned herein exists, respectively) and with any shareholder having management control or material influence over the Company, or with any corporate entity which are controlled by these shareholders (in the event that the companies under this paragraph were inactive for the last 3 fiscal periods, contradiction with the independence criteria shall not arise. Independence will be deemed compromised if the ratio of turnover/profit before tax derived from a commercial relation of a significant nature is equal to 20% or more than the total turnover/profit before tax derived from a business of the same nature for either the independent member candidate or the company). b) Within the last five years, not being a shareholder (5% and more), nor an employee at an executive position with significant duties and responsibilities, nor a member of the Board, particularly in the companies that provide auditing, rating and consulting services for the Company (including tax audit, legal audit, internal audit), and in the companies that the Company purchases or sells significant amount of services or products within the framework of the agreements signed, during the periods in which these services or products were purchased or sold. c) Having the professional education, knowledge and experience necessary to duly carry out the duties that will be assumed as a result of the independent Board membership. d) Not working as a full time employee at any public institution or organization after being elected as a Board member with the exception of working as an academician at a university provided that this is in compliance with the relevant legislation. e) Being a resident in Turkey according to the Income Tax Law dated 31 December 1960 and numbered 193. f) Having strong ethical standards, professional reputation and experience that will allow him/her to contribute positively to the activities of the Company, remain neutral in conflicts of interests between the Company and shareholders and decide independently by taking into consideration the stakeholders rights. g) Being able to dedicate a sufficient amount of time to the affairs of the Company in a manner to follow up the conduct of the company activities and duly perform the duties assumed. h) Having not served as a board member at the Company s Board of Directors for more than 6 years within the last ten years. i) Not serving as an independent board member at more than three of the companies controlled by the shareholders who control the management of the Company and at more than five publicly traded companies in total. j) Having not been registered and announced on behalf and in the name of the legal entity which is selected as a Board member.

94 92 ZORLU ENERJİ 2014 ANNUAL REPORT CONCLUSION OF THE AFFILIATION REPORT PREPARED PURSUANT TO ARTICLE 199 OF THE TURKISH COMMERCIAL CODE In accordance with the Turkish Commercial Code (TCC) provisions, our Company is an affiliated Company of Zorlu Holding AŞ Group of Companies for the operating year Pursuant to Article 199 of TCC, the Board of Directors of our Company gave the following declaration regarding the Affiliation Report it prepared on its relations with the controlling company or an affiliated company of the controlling company. Within the scope of conditions and circumstances known to us about all the transactions conducted between January 1, 2014 and December 31, 2014, we have evaluated our Company s legal transactions on behalf of the controlling company or its affiliates and all the measures taken or avoided to benefit the controlling company or its affiliates under Zorlu Holding AŞ s direction during the accounting year As a result of this evaluation, we hereby declare that the Company did not suffer any loss due to such transactions in the accounting year 2014, and that there are no measures required to be taken in this regard.

95 INDEPENDENT AUDITOR S REPORT ZORLU ENERJİ 2014 ANNUAL REPORT 93

96 94 ZORLU ENERJİ 2014 ANNUAL REPORT INDEPENDENT AUDITOR S REPORT

97 95 CONTENTS PAGE CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME 98 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 99 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 100 CONSOLIDATED STATEMENTS OF CASH FLOWS 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 ORGANISATION AND NATURE OF OPERATIONS 102 NOTE 2 BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 106 NOTE 3 SEGMENT REPORTING 134 NOTE 4 CASH AND CASH EQUIVALENTS 135 NOTE 5 FINANCIAL LIABILITIES 136 NOTE 6 TRADE RECEIVABLES AND PAYABLES 140 NOTE 7 OTHER RECEIVABLES AND PAYABLES 141 NOTE 8 OTHER ASSETS AND LIABILITIES 142 NOTE 9 FINANCIAL ASSETS 142 NOTE 10 ASSOCIATES 143 NOTE 11 PROPERTY, PLANT AND EQUIPMENT 144 NOTE 12 INTANGIBLE ASSETS 146 NOTE 13 PROVISIONS, COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES 147 NOTE 14 DERIVATIVE FINANCIAL INSTRUMENTS 149 NOTE 15 PROVISIONS FOR EMPLOYMENT BENEFITS 151 NOTE 16 EQUITY 152 NOTE 17 TAXES ON INCOME 153 NOTE 18 REVENUE AND COST OF SALES 157 NOTE 19 EXPENSES BY NATURE 157 NOTE 20 OTHER OPERATING INCOME AND EXPENSE 158 NOTE 21 SHARE OF PROFIT OF ASSOCIATES 158 NOTE 22 FINANCIAL INCOME AND EXPENSES 159 NOTE 23 RELATED PARTY TRANSACTIONS 160 NOTE 24 EARNING/(LOSS) PER SHARE 166 NOTE 25 EVENTS OCCURRING AFTER THE REPORTING PERIOD 166

98 96 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2014 AND 2013 (Amounts expressed in thousands Turkish Lira ( TL ) unless otherwise indicated.) Note 31 December December 2013 ASSETS Current assets: Cash and cash equivalents 4 108, ,421 Financial assets 5,940 49,412 Trade receivables 6 - Other trade receivables 33,910 44,569 - Due from related parties 6, 23 64,352 71,564 Other receivables - Other receivables 7 10,661 4,178 - Due from related parties 7, , ,162 Other current assets 8 91,962 78,707 Total current assets 634, ,013 Non-current assets: Long term other receivables from related parties 7,23 1,020,119 2,566,830 Financial assets ,591 Associates ,999 94,800 Property, plant and equipment 11 3,065,277 2,963,100 Intangible assets 12 15,299 14,634 Goodwill 83,131 83,131 Deferred tax asset 17 21,929 1,241 Other non-current assets 8 14,298 30,583 Total non-current assets 4,332,298 5,762,910 Total assets 4,966,987 6,296,923 The accompanying notes form an integral part of these consolidated financial statements.

99 97 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2014 AND 2013 (Amounts expressed in thousands Turkish Lira ( TL ) unless otherwise indicated.) Note 31 December December 2013 LIABILITIES Current liabilities: Financial liabilities - Borrowings 5 1,703,534 1,460,436 - Finance lease liabilities 5 1,028 3,006 Trade payables - Other trade payables 6 61,921 82,675 - Due to related parties 6, 23 53,473 13,348 Taxes on income Other payables - Other payables to related parties 7, 23 70,620 60,582 Derivative financial instruments 14 35,637 33,864 Provisions Other current liabilities 8 1,405 7,754 Total current liabilities 1,928,296 1,662,868 Non-current liabilities: Financial liabilities - Borrowings 5 1,510,095 2,404,051 - Finance lease liabilities Derivative financial instruments 14 39,295 22,611 Other payables to related parties 7, ,469 1,314,148 Deferred tax liability 17 97, ,512 Provisions for employment benefits ,303 Total non-current liabilities 2,498,510 3,845,268 Total liabilities 4,426,806 5,508,136 EQUITY Share capital , ,948 Revaluation fund 518, ,954 Share premium Hedge reserves (26,973) (6,514) Actuarial gain Currency translation adjustment 31,440 25,370 Accumulated deficit (594,008) (394,895) Equity attributable to equity holders of the parent 540, ,079 Non-controlling interests (232) 6,708 Total equity 540, ,787 Total liabilities and equity 4,966,987 6,296,923 Provisions, contingent assets and liabilities 13 The accompanying notes form an integral part of these consolidated financial statements.

100 98 ZORLU ENERJİ 2014 ANNUAL REPORT ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2014 AND 2013 (Amounts expressed in thousands Turkish Lira ( TL ) unless otherwise indicated.) Notes CONTINUING OPERATIONS Revenue , ,008 Cost of sales (-) 18, 19 (724,815) (621,662) GROSS PROFIT 82,132 3,346 General administrative expenses (-) 19 (34,846) (24,677) Marketing and selling expenses (-) 19 (1,004) (1,608) Other operating income 20 24,146 29,581 Other operating expense (-) 20 (18,882) (31,197) OPERATING INCOME / (LOSS) 51,546 (24,555) Share of loss of associates 21 12,333 (3,128) Financial income , ,371 Financial expenses (-) 22 (700,819) (617,108) LOSS BEFORE INCOME TAX (244,432) (415,420) Current income tax expense 17 (996) (1,235) Deferred tax income 17 20,986 88,276 LOSS FOR THE YEAR (224,442) (328,379) Loss attributable to: Equity holders of the parent (224,234) (330,767) Non-controlling interests (208) 2,388 (224,442) (328,379) Losses per 1,000 shares 24 (0,0045) (0,0066) The accompanying notes form an integral part of these consolidated financial statements.

101 99 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER 2014 AND 2013 (Amounts expressed in thousands Turkish Lira ( TL ) unless otherwise indicated.) Notes Loss for the year (224,442) (328,379) Revaluation fund ,693 Changes in actuarial gains on employment benefit obligations Hedge reserves (25,574) (2,115) Changes in currency translation adjustments 6,070 24,594 Deferred income tax related to other comprehensive income 5,104 (136,353) Other comprehensive (loss) / income (after tax) (14,347) 570,005 Total comprehensive (loss) / income (238,789) 241,626 Total comprehensive (loss) / income attributable to: Equity holders of the parent (238,581) 239,238 Non-controlling interests (208) 2,388 Total comprehensive (loss) / income (238,789) 241,626 The accompanying notes form an integral part of these consolidated financial statements.

102 100 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2014 AND 2013 (Amounts expressed in thousands Turkish Lira ( TL ) unless otherwise indicated.) Attributable to equity holders of the parent Share capital Share premium Hedge reserve Actuarial gains Currency translation adjustment Revaluation fund (**) Accumulated deficit Noncontrolling interests Total equity 1 January , (4,822) - 23,797 - (63,361) 5, ,546 Capital increase-non-controlling interest (1,597) (1,597) Transaction with minority interest (23,788) - (23,788) Total comprehensive loss - - (1,692) , ,954 (330,767) 2, , December , (6,514) , ,954 (417,916) 6, ,787 1 January 2014 (previously reported) 610, (6,514) , ,954 (417,916) 6, ,787 Effect of restatements (*) (23,021) - 23, January , (6,514) , ,954 (394,895) 6, ,787 Change in non-controlling interest ,686 (6,771) (6,732) (9,817) Depreciation transfer (**) (31,892) 31, Total comprehensive loss - - (20,459) 42 6,070 - (224,234) (208) (238,789) 31 December , (26,973) , ,748 (594,008) (232) 540,181 (*) Refer to Note 2.4 (**) The Group has chosen revaluation method among application methods mentioned under IAS 16 for lands, land improvements, buildings, machinery and equipments belonging its powerplants commencing from 31 December As a result of valuation reports, TL683,692 thousand net improvement is determined as of 31 December Goodwill impairment amounted to TL17,537 thousand is determined and accounted to the statement of profit or loss for the year ended 31 December Net book value of revalued assets are converted into revalued amount and TL683,692 thousand additional value has been booked as TL546,954 on revaluation fund by offsetting its deferred tax effect. Difference between depreciation and amortisation expenses based on carrying amount and based on these assets acquisition costs is determined as TL39,865 thousand. After offsetting its deferred tax effect TL31,892 thousand is transferred to accumulated losses from revaluation fund as of 31 December The accompanying notes form an integral part of these consolidated financial statements.

103 101 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2014 AND 2013 (Amounts expressed in thousands Turkish Lira ( TL ) unless otherwise indicated.) Cash flows from operating activities: Note 31 December December 2013 Loss before tax (244,432) (415,420) Depreciation and amortisation , ,823 Interest income 22 (179,276) (217,168) Interest expense , ,502 Unearned credit finance income / (expense) ,937 Unrealized foreign exchange gains / (losses) 69, ,401 Income from financial derivative instruments 22 (4,129) (12,022) Change in provision for employment termination benefits (256) 653 Other provisions (238) 131 Impairment on assets - 17,536 Profit from sale of tangible fixed assets (16) (2,307) Provision released from unconsolidated subsidiaries - (1,597) Share of (gain) / loss of associates 21 (12,333) 3,128 Currency translation differences (22,437) 6,585 Net cash generated from operating activities before changes in operating assets and liabilities 167, ,182 Changes in trade receivables 17,701 (88,375) Changes in other receivables (6,483) 2,280 Changes in other current and non-current assets 3,052 (13,604) Changes in trade payables 19,449 (205,452) Changes in derivative financial instruments 2,127 (2,285) Changes in other liabilities (6,349) (1,057) Taxes paid (813) (765) Termination benefits paid (464) (380) Net cash generated from operating activities 196, ,544 Cash flows from investing activities: Purchase of property plant and equipment and intangible assets (207,622) (363,417) Proceeds from sale of property, plant and equipment and intangible assets 1,231 29,150 Change in associates 10 (12,371) (55,034) Increase in share capital corresponding to minority interest (9,817) (23,788) Net cash used in investing activities (228,579) (413,089) Cash flows from financing activities: Proceeds from bond issue - 356,224 Proceeds from bank borrowings 1,451,089 2,106,163 Repayment of bank borrowings (2,327,537) (2,004,035) Changes in other receivables from related parties 1,626,698 (137,393) Changes in other payables from related parties (581,485) 102,681 Change in financial investments 51,817 3,070 Interest received 35,083 40,200 Interest paid (279,367) (228,275) Net cash (used in)/ generated from financing activities (23,702) 238,635 Net (decrease)/ increase in cash and cash equivalents (56,243) 30,090 Change in restricted cash 4 (25,937) - Cash and cash equivalents at the beginning of the period 4 164, ,331 Cash and cash equivalents at the end of the period 4 82, ,421 The accompanying notes form an integral part of these consolidated financial statements.

104 102 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS Zorlu Enerji Elektrik Üretim A.Ş. ( the Company or Zorlu Enerji ) and its subsidiaries (collectively referred to as the Group ) is engaged in establishing, renting and operating facilities of electrical energy production plant, producing electricity and trading electricity to the customers. The Company was established by Zorlu Holding A.Ş. ( Zorlu Holding ) and Korteks Mensucat Sanayi ve Ticaret A.Ş. ( Korteks ) in The Company is registered in Turkey and its registered address is as follows; Nilüfer Organize Sanayi Bölgesi, Pembe Caddesi, No: 13 Bursa /Turkey The Company is registered to the Capital Markets Board ( CMB ), and its shares are publicly traded in Borsa Istanbul A.Ş. ( BIST ) since As of 31 December 2014, 32% of its shares are open for trading (31 December 2013: 32%). The subsidiaries of the Company, their nature of business and registered addresses are presented as below (Zorlu Enerji and its subsidiaries and associates are called as Group ). Subsidiaries Nature of business Country Rotor Elektrik Üretim A.Ş. ( Rotor ) Electricity production Turkey Zorlu Hidroelektrik Enerji Üretim A.Ş. ( Zorlu Hidroelektrik ) Electricity production Turkey Zorlu Jeotermal Enerji Elektrik Üretimi A.Ş. ( Zorlu Jeotermal ) Electricity production Turkey Zorlu Enerji Pakistan Ltd. ( Zorlu Enerji Pakistan ) Electricity production Pakistan Zorlu Rüzgar Enerjisi Elektrik Üretimi A.Ş. ( Zorlu Rüzgar ) Electricity production Turkey Zorlu Doğal Elektrik Üretimi A.Ş. ( Zorlu Doğal ) Electricity production Turkey Nemrut Jeotermal Elektrik Üretimi A.Ş. ( Nemrut ) Electricity production Turkey In Liquidation Zorlu Kumpınar Enerji Üretim A.Ş. ( Kumpınar ) Electricity production Turkey In Liquidation Zorlu Aliağa Enerji Üretim A.Ş. ( Aliağa ) Electricity production Turkey In Liquidation Zorlu Kıyıköy Enerji Üretim A.Ş. ( Kıyıköy ) Electricity production Turkey In Liquidation Zorlu Soma Enerji Üretim A.Ş. ( Soma ) Electricity production Turkey Associates Nature of business Country Solad Energy Ltd. Electricity production Israel Dorad Energy Ltd. Electricity production Israel Ezotech Ltd. Electricity trading Israel Zorlu Enerji Elektrik Üretim A.Ş. ( Zorlu Enerji ): Zorlu Enerji was established in 1993 by Zorlu Holding and Korteks for the purpose of generating electricity and steam. The total electricity and steam capacity of the Company s four natural gas plant which are located in Bursa, Kayseri, Kırklareli and Yalova, is MW and 269 ton/hour currently. The production license granted for Ankara Natural Gas Fueled Electric Production Plant of 50.3 MW installed capacity was ended as of 30 September 2014.

105 103 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS (Continued) Yozgat Provincial Special Administration gave three Geothermal Sources and Natural Mineral Waters Exploration License to the Company until 10 February 2018 in order to make exploration in 3 different region in Yozgat province, Şefaatli district. Rotor Elektrik Üretim A.Ş. ( Rotor ): Rotor was established for the purpose of building wind power plants in 2007 and was acquired by Zorlu Enerji. As of 19 December 2003, Rotor has obtained Wind Energy Power Plant License from EMRA for the construction of a wind power plant (54 wind turbines) with a capacity of 135 MW in Osmaniye and commenced its construction in July As of 15 October 2010, wind energy power plants of Rotor have started to produce electricity with the full capacity of 135 MW in Osmaniye. Zorlu Doğal Elektrik Üretimi A.Ş. ( Zorlu Doğal ): Zorlu Doğal was established in 2008 to build hydroelectric power plants as well as power stations based on all forms of renewable energy and operate and to sell the electricity produced at these facilities. On 5 March 2008, Zorlu Doğal has won the tender for the operating license of Tercan, Kuzgun, Mercan, İkizdere, Çıldır, Beyköy and Ataköy Hydroelectric power plants, the thermal power plant in Denizli and the fuel oil power plant located in Van for a period of 30 years from Ankara Doğal Elektrik Üretim ve Ticaret A.Ş and started to operate to be valid effective from 1 September The application to EMRA in order to be ended of the production licence of Van fuel oil power plant with 15 MW, was approved as of 5 March Zorlu Doğal has hydroelectric power plants in Tokat, Eskişehir, Kars, Rize, Erzurum, Erzincan, Tunceli and the first geothermal power plant of Turkey in Denizli and also operating rights of the highest geothermal energy potential field in Turkey. Performance and security tests of the first phase of fully constructed Kızıldere II project of Zorlu Doğal with the installed capacity of 60 MW has been successfully completed and after the official acceptance of the Ministry, the power plant has been started to sell commercial electricity as of 31 August 2013, official acceptance of the second and last phase with the capacity of 20 MW has been made on 31 October 2013 and the power plant started being operated with full capacity. Upon the Kızıldere II power plant s put into use full capacity, Zorlu Doğal s total installed capacity in 7 hydroelectric and 2 geothermal power plants has reached to MW. Zorlu Doğal has received a pre-licence from EMRA on 23 December 2014 for Kızıldere III geothermal power plant which is planned to have 100 MW installed capacity and decided to build up an additional geothermal power plant with 24.9 MW installed capacity (Kızıldere IV) in the same region. For this planned investment, Zorlu Doğal has applied for pre-licence to EMRA on 23 June 2014.

106 104 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS (Continued) Zorlu Hidroelektrik Enerji Üretim A.Ş. ( Zorlu Hidroelektrik ): Zorlu Hidroelektrik was established in 2007 for the purpose of building hydroelectric power plants and other power plants based on renewable energy sources. In accordance with the decision of EMRA dated 7 June 2012 and numbered 3870/3, EMRA has cancelled the license of Zorlu Enerji for Sami Soydam Sandalcık Barajı hydroelectric power plant in Denizli which would have MWm / 124 Mwe capacity; in accordance with the Electricity Market Law numbered 4628 and related regulations, aforesaid the license has been transferred to Zorlu Hidroelektrik as of 7 June Zorlu Jeotermal Elektrik Üretimi A.Ş. ( Zorlu Jeotermal ): Zorlu Jeotermal was established in June 2008 to develop projects for energy power plants, especially hydroelectric and thermal power plants based on all forms of renewable energy sources to produce energy, steam and heat. Zorlu Jeotermal has taken over of Zorlu Petrogas Alaşehir Geothermal license on 30 July The capacity increase from 30 MW to 45 MW has been approved by EMRA for the production plant will be located in Manisa Alaşehir by Zorlu Jeotermal and the completion of the projects, expected to be in the second half of Zorlu Jeotermal received pre-license from EMRA for the relevant Alaşehir 2 geothermal power plant project located in Manisa, Alaşehir with the capacity of 24.9 MW as of 8 September Also Zorlu Jeotermal approved to EMRA as of 10 December 2014 for the pre-licence of Alaşehir 3 geothermal power plant with planned 30 MW capacity. Zorlu Rüzgar Enerjisi Elektrik Üretimi A.Ş. ( Zorlu Rüzgar ): Zorlu Rüzgar was established in 2009 to develop projects for energy power plants, based especially on wind power and other forms of renewable energy sources to produce electricity. In accordance with the Board of Directors decision dated 16 November 2009 and numbered 2009/9 Rotor has transferred its license to Zorlu Rüzgar Enerjisi Elektrik Üretim A.Ş. which was obtained for 25 years as of 5 August 2008 for the construction of two wind energy power plants in two different regions of Osmaniye with a capacity of 50 MW and 60 MW. The production license, granted for the 60 MW Demirciler RES and 50 MW Sarıtepe RES projects which are planned to be carried out in Osmaniye by Zorlu Rüzgar which is fully owned by the Company, is amended by EMRA; and the project which shall have 80.3 MW installed power in total is estimated by be completed in the second half of Zorlu Enerji Pakistan Ltd.: Zorlu Enerji Pakistan Ltd. was incorporated on 13 September 2007 to set up a project for electric power generation through wind to generate and sell electric power. The wind farm with the installed capacity of 56.4 MW being constructed in Jhimpir area of Pakistan by the Group s 100% subsidiary Zorlu Enerji Pakistan Ltd. started commercial electric energy sales to Pakistan National Transmission and Distribution Company ( NTDC ) on 26 July 2013.

107 105 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS (Continued) Nemrut Jeotermal Elektrik Üretimi A.Ş. ( Nemrut ): Nemrut which has a total capital of TL50,000 and in which the Group has 75% shareholding and Rarik-Turkison Enerji İnşaat Maden Proje Ltd. Şti. has 25% shareholding, has been incorporated on 2 August Bitlis Special Provincial Administration has given to Nemrut Jeotermal Elektrik Üretimi A.Ş., in which the Company has 75% shareholding, the Geothermal Resources and Natural Mineral Waters Operating License for a period of 30 year and the Geothermal and Natural Resources Exploration Licence until the date of 3 June 2014 to be valid in the boundaries of Tatvan district of Bitlis. Relevant licenses have entered into force on 23 September The application for the time extension of exploration license process has not been approved yet. In Liquidation Zorlu Aliağa Enerji Üretim A.Ş. ( Zorlu Aliağa ): Zorlu Aliağa which has a total capital of TL50,000 and in which our company has 100% shareholding, have been incorporated on 21 November Pursuant to Board of Directors resolution dated 24 June 2014, Zorlu Aliağa has been decided to liquidated. In Liquidation Zorlu Kumpınar Enerji Üretim A.Ş. ( Zorlu Kumpınar ): Zorlu Kumpınar which has a total capital of TL50,000 and in which our company has 100% shareholding, have been incorporated on 21 November Pursuant to Board of Directors resolution dated 24 June 2014, Zorlu Kumpınar has been decided to liquidated. In Liquidation Zorlu Soma Enerji Üretim A.Ş. ( Zorlu Soma ): Zorlu Soma which has a total capital of TL50,000 and in which our company has 100% shareholding, have been incorporated on 21 November Pursuant to Board of Directors resolution dated 24 June 2014, Zorlu Soma has been decided to liquidated. In Liquidation Zorlu Kıyıköy Enerji Üretim A.Ş. ( Zorlu Kıyıköy ): Zorlu Kıyıköy which has a total capital of TL50,000 and in which our company has 100% shareholding, have been incorporated on 21 November Pursuant to Board of Directors resolution dated 24 June 2014, Zorlu Kıyıköy has been decided to liquidated. Ezotech Electric Ltd. ( Ezotech ): Ezotech which is owned by the Company in 42.15% is established in order to hold the whole shares of the companies Ashdod Energy Ltd. ( Ashdod ) and Ramat Negev Energy Ltd. ( Ramat ) in Israel and to pursue electricity trade in accordance with the affiliates operational plan. The remaining shareholder in Ezotech with 57.85% ownership is Edeltech Ltd. which develops and invests in energy power plants in Israel. The capacity of the Ashdod and Ramat power plants which are still in construction phase will be; 55 MW electricity and 40 ton/hour steam and 120 MW electricity and 70 ton/ hour steam, respectively. The power plants are estimated to be put in use in the second half of 2015.

108 106 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 1 - ORGANISATION AND NATURE OF OPERATIONS (Continued) Solad Energy Ltd. ( Solad ): Solad Energy Ltd. which is owned by the Company in 42.15% is established in 2006 for a cogeneration power plant investment with 77 MW electricity and 70 ton/steam capacity, in order to supply energy to soybean oil production facilities in Ashdod and Ashkelon and the nearby operating industrial facilities. Dorad Energy Ltd. ( Dorad ): Zorlu Enerji became a 25% shareholder in Dorad Solad Energy Ltd. for the investment of natural gas combined cycle plant with 840 MW capacity in the Ashkelon city of Israel. Such natural gas combined cycle plant with 840 MW capacity which Dorad constructed in Israel went into operation on 19 May NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS 2.1 Financial Reporting Standards Principles Governing the Preparation of Consolidated Financial Statements These consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ( IFRS ). IFRS comprise accounting standards issued by the International Accounting Standards Board ( IASB ) and interpretations issued by the International Financial Reporting Interpretations Committee ( IFRIC ). The consolidated financial statements are based on the historical cost. The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.6. The Group has also issued the consolidated financial statements prepared in accordance with Communique Serial II, No:14.1, Principles of Financial Reporting in Capital Markets ( the CMB consolidated financial statements ) published in the Official Gazette numbered on 13 June These consolidated financial statements differ from the CMB consolidated financial statements with respect to the accounting method of combination of entities under common control and the presentation differences due to CMB reporting format requirements.

109 107 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.2 Basis of Consolidation a) The consolidated financial statements includes the accounts of the parent company, Zorlu Enerji and its Subsidiaries and associates on the basis set out in sections (b) to (c) below. The financial statements of the companies included in the scope of consolidation have been prepared at the date of the consolidated financial statements and have been prepared in accordance with IFRS by applying uniform accounting policies and presentation. The results of operations of Subsidiaries are included or excluded from their effective dates of acquisition or disposal respectively. b) Subsidiaries are companies in which Zorlu Enerji has the power to control the financial and operating policies for the benefit of itself, either (1) through the power to exercise more than 50% of voting rights related to shares in the companies as a result of shares owned directly and/or indirectly by itself or (2) although not having the power to exercise more than 50% of the voting rights, through the exercise of actual dominant influence over the financial and operating policies. The table below sets out all Subsidiaries and demonstrates the proportion of ownership interest as of 31 December 2014 and 31 December 2013: Direct and indirect ownership interest by the Company and its Subsidiaries (%) Subsidiary 31 December December 2013 Zorlu Hidroelektrik (1) Zorlu Jeotermal (1) Zorlu Enerji Pakistan (1) Zorlu Rüzgar (1) Zorlu Doğal (1) Kumpınar (1) Aliağa (1) Kıyıköy (1) Soma (1) Rotor (1) Yeni Gürsöğüt Enerji Elektrik Üretim A.Ş. (2) Nemrut (1) (1) The financial statements of subsidiaries are consolidated on a line-by-line basis. (2) Yeni Gürsöğüt Enerji Elektrik Üretim A.Ş. has been liquidated as of 29 April Subsidiaries are consolidated from the date on which the control is transferred to the Group and are deconsolidated from the date that the control ceases. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. Carrying values of the subsidiaries shares held by the Company are eliminated against the related equity of subsidiaries. Intercompany transactions and balances between Zorlu Enerji and its subsidiaries are eliminated on consolidation.

110 108 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.2 Basis of Consolidation (Continued) Dividends arising from shares held by the Company in its subsidiaries are eliminated from income for the period and equity, respectively. c) Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. The table below sets out all associates and demonstrates the proportion of ownership interest as of 31 December 2014 and 31 December 2013: Direct and indirect ownership interest by the Company and its associates (%) Associates 31 December December 2013 Solad Energy Ltd. (1) Dorad Energy Ltd. (1) Ezotech Ltd. (1) (1) Financial statements of these entities are consolidated with the method of equity accounting. d) The minority shareholders share in the net assets and results of subsidiaries for the period are separately classified as non-controlling interest in the consolidated balance sheets and statements of comprehensive income. 2.3 Amendments in International Financial Reporting Standards The accounting policies applied during the preparation of these consolidated financial statements are consistent with the accounting policies applied for the financial year between 1 January - 31 December These consolidated financial statements should be read on a comparative basis with annual consolidated financial statements for the period between 1 January - 31 December (a) Standards, amendments and IFRICs effective for annual periods beginning on after 1 January 2014: Amendment to IAS 32, Financial instruments: Presentation, on offsetting financial assets and financial liabilities, is effective for annual periods beginning on or after 1 January The amendment updates the application guidance in IAS 32, Financial instruments: Presentation, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The amendment does not have any impact on the Group s consolidated financial statements. Amendment to IAS 36, Impairment of assets on recoverable amount disclosures, is effective for annual periods beginning on or after 1 January This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

111 109 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Amendments in International Financial Reporting Standards (Continued) (a) Standards, amendments and IFRICs effective for annual periods beginning on after 1 January 2014: (Continued) Amendment to IAS 39, Financial Instruments: Recognition and Measurement - Novation of derivatives is effective for annual periods beginning on or after 1 January This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counterparty meets specified criteria. IFRIC 21, Levies is effective for annual periods beginning on or after 1 January This is an interpretation of IAS 37, Provisions, contingent liabilities and contingent assets. IAS - 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. Amendments to IFRS 10, Consolidated financial statements, IFRS 12 and IAS 27 for investment entities, effective from annual periods beginning on or after 1 January These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit or loss. The amendments give an exception to entities that meet an investment entity definition and which display particular characteristics. Changes have also been made IFRS 12 to introduce disclosures that an investment entity needs to make. Annual improvements 2012, is effective for annual periods beginning on or after 1 July Annual Improvements to IFRSs cycle amend the following 7 standards: IFRS 2, Share-based Payment IFRS 3, Business Combinations IFRS 8, Operating Segments IFRS 13, Fair value measurement IAS 16, Property Plant and Equipment and IAS 38, Intangible Assets IFRS 9, Financial Instruments, IAS 37, Provisions, Contingent Liabilities and Contingent Assets IAS 39, Financial Instruments - Recognition and Measurement Annual improvements 2013, Effective for annual periods beginning on or after 1 July Annual Improvements to IFRSs Cycle amend the following 4 standards: IFRS 1, First-time Adoption of IFRS IFRS 3, Business Combinations IFRS 13, Fair Value Measurement IAS 40, Investment Property IAS 19 (Amendments), Defined benefit plans, is effective for annual periods beginning on or after 1 January These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary.

112 110 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Amendments in International Financial Reporting Standards (Continued) (b) Other new standards, amendments and interpretations issued and effective as of 1 January 2014 have not been presented since they are not relevant to the operations of the Group or have insignificant impact on the consolidated financial statements. (c) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group: IFRS 9 Financial instruments - classification and measurement, is effective for annual periods beginning on or after 1 January This standard on classification and measurement of financial assets and financial liabilities will replace IAS 39, Financial instruments: Recognition and measurement. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements. These include amortised-cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. This change will mainly affect financial institutions. IFRS 9 (Amendments), Financial instruments, regarding general hedge accounting is effective for annual periods beginning on or after 1 January These amendments to IFRS 9, Financial instruments, bring into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements. IFRS 11 (Amendments), Joint Arrangements, is effective for annual periods beginning on or after 1 July This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. Amendments to IAS 16 Property, plant and equipment, and IAS 41, Agriculture, regarding bearer plants, effective from annual periods beginning on or after 1 January These amendments change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms. It has been decided that bearer plants should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41. Amendments to IAS 27, Separate financial statements on the equity method, effective from annual periods beginning on or after 1 January These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

113 111 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.3 Amendments in International Financial Reporting Standards (Continued) (c) Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group: (Continued) Amendments to IFRS 10, Consolidated financial statements and IAS 28, Investments in associates and joint ventures, effective from annual periods beginning on or after 1 January These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. IFRS 14, Regulatory deferral accounts, is effective for annual periods beginning on or after 1 July Regulatory deferral accounts permits first-time adopters to continue to recognise amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. Annual improvements 2014, effective from annual periods beginning on or after 1 January These set of amendments impacts 4 standards: - IFRS 5, Non-current assets held for sale and discontinued operations regarding methods of disposal. - IFRS 7, Financial instruments: Disclosures, (with consequential amendments to IFRS 1) regarding servicing contracts. - IAS 19, Employee benefits regarding discount rates. - IAS 34, Interim financial reporting regarding disclosure of information. The Group will evaluate the effect of the aforementioned changes within its operations and apply changes starting from effective date. It is expected that the application of the standards and interpretations will not have a significant effect on the consolidated financial statements of the Group. 2.4 Comparatives and restatement of prior year financial statements The Group prepares comparative financial statements, to enable readers to determine financial position and performance trends. For the purposes of effective comparison, comparative financial statements can be reclassified when deemed necessary by the Group, where descriptions on significant differences are disclosed. The consolidated balance sheet of the Group at 31 December 2014 has been provided with the comparative balance sheet of 31 December 2013 and the consolidated statements of income and comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year ended 31 December 2014 have been provided with the comparative financial statements, for the year ended 31 December Where necessary, comparative figures are reclassified to conform to changes in presentation in the current period and material differences are disclosed. The Group has performed following reclassifications in the consolidated financial statements as of 31 December 2013 in order to conform to presentation of consolidated financial statements as of 31 December 2014:

114 112 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.4 Comparatives and restatement of prior year financial statements (Continued) i. Currency differences amounting TL23,021 accounted in currency translation adjustment in the consolidated balance sheet as of 31 December 2013 is reclassified under accumulated deficit in accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors. ii. Factoring payables amounting to TL52,301 accounted in other trade payables and TL60,000 accounted in trade payables to related parties in the consolidated balance sheet as of 31 December 2013 are reclassified under other payables to related parties. iii. The restricted cash amounting to TL49,412 accounted under cash and cash equivalents in the consolidated balance sheet as of 31 December 2013 is reclassified under financial investments. iv. The payables to Zorlu O&M Enerji Tesisleri İşletme ve Bakım Hizmetleri A.Ş. amounting to TL52,352 accounted under other payables to related parties in the consolidated balance sheet as of 31 December 2013 is reclassified under other receivables from related parties. v. Derivative liabilities amounting to TL22,611 accounted in short-term derivative financial instruments in the consolidated balance sheet as of 31 December 2013 is reclassified under long-term derivative financial instruments. vi. The internal consumption amounting TL11,229 is reclassified between revenue and cost of sales in the consolidated balance sheet as of 31 December vii. As a result of share acquisition of Zorlu Jeotermal and Zorlu Hidroelektrik, the amount of TL23,788 accounted under other reserves in the consolidated balance sheet as of 31 December 2013 is reclassified under accumulated deficit. 2.5 Summary of significant accounting policies a) Revenue Recognition Revenues are recognized on an accrual basis when the electricity is delivered (risk and rewards are transferred), the amount of the revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group, at the fair value of consideration received or receivable. Net sales represent the invoiced value of electricity delivered less sales returns and commission. Transmission revenue is netted off with its related costs in consolidated financial statements. Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset. b) Trade Receivables and Impairment Trade receivables that are created by the Group by way of providing services (i.e. supplying electricity) directly to a debtor are recognised initially at fair value and subsequently measured using the effective interest method less provision for impairment. Short term receivables with no stated interest rate are measured at original invoice amount unless the effect of imputing interest is significant.

115 113 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) b) Trade Receivables and Impairment (Continued) A credit risk provision for impairment of trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of all cash flows, including amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate of the originated receivables at inception. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to other income. c) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts (Note 4). d) Related parties If one of the below listed criteria exists the party is regarded as related with the Group: a) Directly, or indirectly through one or more intermediaries, the party: i) controls, is controlled by, or is under common control with, the Group (this includes parents, subsidiaries and fellow subsidiaries); ii) has an interest in the Group that gives it significant influence over the Group; or iii) has joint control over the Group; b) The party is an associate of the Group; c) The party is a joint venture in which the Group is a venture; d) The party is member of the key management personnel of the Group or its parent; e) The party is a close member of the family of any individual referred to in (a) or (d); f) The party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to In (d) or (e); or g) The party has a post-employment benefit plan for the benefit of employees of the Group, or of an entity that is a related party of the Group. Related party transactions are transfer of resources or obligations between related parties, regardless of whether a price is charged. A number of transactions are entered into with related parties in the normal course of business (Note 23). e) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in TL, which is the functional currency of Group and the presentation currency of the Group.

116 114 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) e) Functional and presentation currency (Continued) Foreign consolidated subsidiaries are regarded as foreign entities since they are financially, economically and organizationally autonomous. Their reporting currencies are the respective local currencies. Financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to the financial position and at exchange rates at the dates of the transactions with respect to the income statement. All resulting translation differences between the closing balances and opening balances due to the difference in inflation and devaluation are included in currency translation adjustment in equity. f) Property, plant and equipment Property, plant and equipment acquired before 1 January 2005 are carried at restated cost in purchasing power of TL as at 31 December 2004 less accumulated depreciation and impairment losses. Property, plant and equipment acquired after 1 January 2005 are carried at cost less accumulated depreciation and impairment losses (Note 11). Land is not depreciated as it is deemed to have an indefinite life. Depreciation is provided on restated costs of property, plant and equipment using the straight-line method based on the estimated useful lives of the assets. The mentioned asset s useful lives are presented below: Useful life Land improvements Buildings 5-48 Plant and machinery 5-27 Motor vehicles 4-7 Furniture and fixtures 2-27 The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Expenses for the repair of property, plant and equipment are normally charged as expense. They are, however, capitalised if they result in an enlargement or substantial improvement of the respective assets. Gains or losses on disposals of property, plant and equipment which are calculated as the difference between net carrying value and the collections made are included in the related income and expense accounts, as appropriate. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Explanations for revaluation method and fair value measurement Zorlu Enerji has chosen revaluation method among application methods mentioned under IAS 16 for lands, land improvements, buildings, machinery and equipments belonging to its powerplants commencing from 31 December Revaluation studies for domestic subsidiaries of the Group have been performed by Standart Gayrimenkul Değerleme Uygulamaları A.Ş., a CMB accredited professional valuation company. Revaluation study for the Group s powerplant in Pakistan has been carried out by MYK Associates (Pvt.) Ltd. which is located in Pakistan.

117 115 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) f) Property, plant and equipment (Continued) The fair value of lands, land improvements, buildings, machinery and equipments belonging to Ankara, Kayseri, Bursa, Lüleburgaz, Yalova power plants recognised under Zorlu Enerji and Osmaniye wind energy powerplant recognised under Rotor Elektrik Üretim A.Ş. is determined by using market approach in the valuation reports prepared by Standart Gayrimenkul Değerleme Uygulamaları A.Ş. on 6 March The fair value of the lands, land improvements, buildings, machinery and equipments belonging to the powerplants of Zorlu Doğal Elektrik Üretimi A.Ş., of which, the operating rights are obtained for 30 years from privatization tender of Ankara Doğal Elektrik Üretim ve Ticaret A.Ş. ( ADÜAŞ ) on 5 March 2008, is determined by using income approach - discounted cash flow analysis in the valuation reports prepared by Standart Gayrimenkul Değerleme Uygulamaları A.Ş. on 6 March The assumptions used in the discounted cash flow analysis are; discount rate: 9% growth rate: 3% electricity sales price: TL0.153 which has been announced by EMRA for the year As a result of valuation reports, TL683,692 thousand net improvement is determined. Net book value of revalued assets are converted into revalued amount and TL683,692 additional value has been booked as TL546,954 on revaluation fund by offsetting its deferred tax effect (Note 11). Finance lease Assets held under finance leases are recognized as assets of the Company at their fair value at the date of acquisition under property, plant and equipment. Finance costs are charged to the income statement over the term of the relevant lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for each accounting period. g) Intangible assets Intangible assets acquired before 1 January 2005 are carried at restated cost in power of purchase of TL as at 31 December 2004 less accumulated depreciation and impairment losses. Intangible assets acquired after 1 January 2005 are carried at cost less accumulated depreciation and impairment losses. Intangible assets comprise licenses and computer softwares (Note 12). Licenses Licenses are recorded at acquisition cost and amortised on a straight-line basis over their estimated useful lives of years. Where an indication of impairment exists, the carrying amount of any intangible assets is assessed and written down immediately to its recoverable amount.

118 116 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) g) Intangible assets (Continued) Computer softwares Computer softwares are recorded at acquisition cost and amortised on a straight-line basis over their estimated useful lives of 3-15 years. Where an indication of impairment exists, the carrying amount of any intangible assets is assessed and written down immediately to its recoverable amount. h) Impairment of non-financial assets All assets are reviewed for impairment losses including property, plant and equipment and intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset s net selling price and value in use. Impairment losses are recognised in the statement of comprehensive income. Impairment losses on assets can be reversed, to the extent of previously recorded impairment losses, in cases where increases in the recoverable value of the asset can be associated with events that occur subsequent to the period when the impairment loss was recorded. i) Borrowing costs and financial liabilities Borrowings are recognised initially at fair value, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the statement of income over the period of the borrowings. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. The long-term portion of the borrowing of the Group can be included in the short-term liabilities unless the necessary covenants, which cause the recall of the borrowing given by the related financial institute (event of default exercises), are not met about the borrowing taken on and before the balance sheet date. The Group capitalizes borrowing costs as part of the cost of the qualifying asset in the period in which the asset is prepared for its intended use or sale. All other borrowing costs are charged to the statement of comprehensive income when they are incurred. The Group, meets its cash needs by factoring, if it is needed. Factoring liabilities are classified in financial liabilities on enclosed financial statements (Note 5) and factoring based financial liabilities are shown with amortized cost. The Group, issued bond in order to finance its investments. The bonds, which are measured at amortized cost, measured at fair value during the initial recognition. During the initial recognition of the bonds, transaction costs which are directly attributable to issuance of bonds are deducted from their fair value.

119 117 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) j) Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. k) Provisions, contingent liabilities, contingent assets Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Possible assets or obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group are not included in financial tables and are treated as contingent assets or liabilities (Note 13). Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized. A contingent asset is disclosed where an inflow of economic benefit is probable. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. l) Employment termination benefits Under the Turkish Labour Law, the Group is required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, or who is called up for military service, dies or retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Under the Turkish Labour Law, the provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of the employees (Note 15). m) Earnings per share Earnings per share are determined by dividing net gain by the weighted average number of shares that have been outstanding during the related year concerned. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares ( bonus shares ) to existing shareholders from retained earnings and allowable reserves. For the purpose of earnings per share computations, the weighted average number of shares outstanding during the year has been adjusted in respect of bonus shares issues without a corresponding change in resources, by giving them retroactive effect for the year in which they were issued and each earlier year (Note 24).

120 118 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) n) Current and deferred income tax Taxes include current period income taxes and deferred income taxes. Current year tax liability consists tax liability on period income calculated based on currently enacted tax rates as of balance sheet date and according to tax legislation in force and includes adjustments related to previous years tax liabilities. Deferred income tax is provided, using the liability method, for temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Tax bases of assets and liabilities comprise of the amounts that will impact taxable income in future periods based on the tax legislation. Currently enacted tax rates, which are expected to be effective during the periods when the deferred income tax assets will be utilised or deferred income tax liabilities will be settled, are used to determine deferred income tax. Deferred income tax assets and liabilities are recognised to the extent that they will impact taxes to be paid in the periods that temporary differences will disappear. Deferred income tax liabilities are recognised for all taxable temporary differences, where deferred income tax assets resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilised. Carrying value of deferred income tax assets are decreased to the extent necessary, if future taxable profits are not expected to be available to utilize deferred income tax assets partially or fully. Deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation authority are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities (Note 17). o) Reporting of cash flows In the consolidated statement of cash flows, cash flows during the year are classified under operating, investing or financing activities. The cash flows raised from operating activities indicate cash flows due to the Group s operations. The cash flows due to investing activities indicate the Group cash flows that are used for and obtained from investments (investments in property, plant and equipment and financial investments). The cash flows due to financing activities indicate the cash obtained from financial arrangements and used in their repayment. Cash and cash equivalents comprise cash on hand and bank deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash with maturities equal or less than 3 months and which are subject to an insignificant risk of changes in value (Note 4).

121 119 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) p) Subsequent events Subsequent events consist of all events between balance sheet date and date of authorization for validity, even if they have been existed after public explanation of an announcement about profit or other financial information. In the case that events requiring an adjustment to the financial statements occur subsequent to the balance sheet date, the Group makes the necessary corrections on the financial statements (Note 25). r) Capital and dividends Ordinary shares are classified as equity. Dividends on ordinary shares are calculated by reducing retained earnings in the period in which they are declared (Note 16). s) Share premium Share premium represents differences resulting from the sale of the Group s Subsidiaries and Associates shares at a price exceeding the face value of those shares or differences between the face value and the fair value of shares issued for acquired companies (Note 16). t) Derivative financial instruments The derivative financial instruments are firstly recorded at their acquisition costs. But in subsequent periods, they are recorded at their fair values. The derivative financial liabilities of the Group comprise of interest rate swaps and forward foreign exchange contracts. The fair value of over-the-counter forward foreign exchange contracts is determined based on the comparison of the original forward rate with the forward rate calculated in reference to the market interest rates of the related currency for the remaining period of the contract, discounted to 31 December All derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The changes in fair value of the forward foreign exchange contracts are recognized in income statement. The effective portion of changes in the fair value of derivative financial instruments is recognized in other comprehensive income. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the statement of income (Note 14). u) Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

122 120 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) v) Financial assets Financial assets within the scope of IAS 39 Financial instruments: Recognition and measurements are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets on initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end. All regular way purchases and sales of financial assets are recognised on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the market place. Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. y) Going concern assumption The Group has prepared its consolidated financial statements on a going concern basis in a foreseeable future. The Group is at investment stage and majority of its investments are financed through borrowings. The Group has TL594,008 of accumulated deficit, TL51,546 of operating income and TL224,442 of net loss as of and for the year ending 31 December Besides, The Group s short term liabilities exceeds its current assets with TL1,293,607. The Group is expecting an improvement in its current ratio and profitability as soon as the power plants that are under construction are brought into operation in the forthcoming years. These under construction projects are stated below: A combined cycle natural gas power plant having a capacity of 840 MW, which was constructed in Ashkelon, Israel by Dorad Energy Limited Şirketi, in which our company has 25% shareholding; is started its commercial operations as of 19 May The power plants of the Group s subsidiaries Ashdod Energy Limited and Ramat Negev Energy Limited with approximately 55 MW electric generation and 40 tones/h steam capacity and 120 MW electric generation and 70 tones/h steam capacity, respectively, are expected to start commercial operation by the second half of Zorlu Doğal has received a pre-licence from EMRA on 23 December 2014 for Kızıldere III geothermal power plant which is planned to have 100 MW installed capacity and decided to build up an additional geothermal power plant with 24.9 MW installed capacity (Kızıldere IV) in the same region. For this planned investment, Zorlu Doğal has applied for pre-licence to EMRA on 23 June 2014.

123 121 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.5 Summary of significant accounting policies (Continued) y) Going concern assumption (Continued) The production license, granted for the 60 MW Demirciler RES and 50 MW Sarıtepe RES projects which are planned to be carried out in Osmaniye by Zorlu Rüzgar which is fully owned by the Company, is amended by EMRA; and the project which shall have 80.3 MW installed power in total is estimated by be completed in the second half of The capacity increase from 30 MW to 45 MW of geothermal powerplant that will be established in Alaşehir, Manisa by Zorlu Jeotermal Enerji Elektrik Üretimi A.Ş., a wholly owned subsidiary of Zorlu Enerji, is approved by the Energy Market Regulatory Authority (EMRA). The plant is planned to start operation by 2015 year end. Zorlu Jeotermal received prelicense from EMRA for the relevant Alaşehir 2 geothermal power plant project located in Manisa, Alaşehir with the capacity of 24.9 MW as of 8 September Also Zorlu Jeotermal approved to EMRA as of 10 December 2014 for the pre-licence of Alaşehir 3 geothermal power plant with planned 30 MW capacity. The Group forecasts an increase in its profitability through the aforementioned projects and plans to decrease its financial liabilities with the cash generated from such projects which will also improve the Group s current ratio. The Group s operational, investing and financing decisions are taken based on the future positive cash flows and profitability. The Group s ultimate parent company, Zorlu Holding A.Ş. has declared its intend to provide necessary support to the Group to continue on a going concern basis, in the support letter dated 26 January Consequently, the Group management does not foresee any risk regarding going concern and has prepared these consolidated financial statements on the assumption that the Group will continue its operations on a going concern basis in a foreseeable future. 2.6 Critical accounting estimates, assumptions and judgments The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are reviewed periodically, and as adjustments become necessary, they are reported in earnings in the periods in which they become known. The key assumption concerning the future and other key sources of estimation uncertainty at the balance sheet date and the significant judgments are set out below: Deferred tax asset on cumulative tax losses Deferred tax assets are accounted for only where it is likely that related temporary differences and accumulated losses will be recovered through expected future profits. When accounting for deferred tax assets it is necessary to make critical estimations and evaluations with regard to taxable profits in the future periods. As of 31 December 2014, the Group has carry forward tax losses amounting to TL379,970 (31 December 2013: TL356,370) which are expected to be deducted from future profits and did not recognize deferred tax assets for the carry forward tax losses amounting to TL367,177 (31 December 2013: TL238,154) for which the Group believes it will not utilize in the future (Note 17).

124 122 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.6 Critical accounting estimates, assumptions and judgments (Continued) Fair value of interest rate swaps and forward foreign exchange contracts The fair value of forward contracts calculated by calculating forward exchange rate, for remainder of agreement related foreign currency s prevailed market interest rate, and comparing it to reporting date forward exchange rate. All derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The changes in fair value of the forward foreign exchange contracts are recognized in income statement. The effective portion of changes in the fair value of derivative financial instruments such as interest rate swaps, is recognized in other comprehensive income. Explanations for revaluation method and fair value measurement Zorlu Enerji has chosen revaluation method among application methods mentioned under IAS 16 for lands, land improvements, buildings, machinery and equipments belonging its powerplants commencing from 31 December 2013 (Note 2.5). The assumptions used in the discounted cash flow analysis are; discount rate: 9% growth rate: 3% electricity sales price: TL0.153 which has been announced by EMRA for the year Goodwill impairment Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units ( CGUs ), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed (Note 20). An impairment loss is allocated to reduce the carrying amount of assets of the CGUs in an order of; first to reduce the carrying amount of any goodwill allocated to CGU and then, to the other assets of the unit pro rata on the basis of carrying amount of each asset in the unit. As of 31 December 2014, there is not any goodwill impairment. The carrying value of goodwill is compared to the recoverable amount, which is the fair value of the power plants of Zorlu Doğal Elektrik Üretimi A.Ş. determined based on the valuation reports prepared by Standart Gayrimenkul Değerleme Uygulamaları A.Ş. on 6 March 2014 by using income approach - discounted cash flow analysis. Goodwill impairment amounted to TL17,536 is accounted to the statement of profit or loss (Note 20) as of 31 December 2013.

125 123 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management Financial risk management objectives and policies The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain other price risks, which result both from its operating and investing activities. The Group s risk management is coordinated at its headquarters, in close co-operation with the board of directors, and focuses on actively securing the Group s short to medium term cash flows by minimizing the exposure to financial markets. Long term financial investments are managed to generate lasting returns. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed to are described below. (a) Liquidity risk Liquidity risk comprises the risk that the Group becomes unable to find its payment requirements. The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30 day projection. Long-term liquidity needs for a 180 day and 360 day lookout period are identified monthly. The breakdown of liabilities according to their contractual maturity is based on the maturity dates from the date of the financial position is given below: Non derivative financial liabilities (1) (2) : 2014 Book value Total cash out flow Within 3 months 3 to 12 months 1 to 5 years Over 5 years Financial liabilities 3,214,657 3,718, ,612 1,272,480 1,477, ,932 Trade payables 115, , , Other payables and short term liabilities 923, ,494 72, , ,546 4,253,545 4,757, ,127 1,272,480 2,000, , Book value Total cash out flow Within 3 months 3 to 12 months 1 to 5 years Over 5 years Financial liabilities 3,868,136 4,445, ,458 1,006,823 2,162, ,555 Trade payables 96, ,613 52,195 49, Other payables and short term liabilities 1,382,484 1,382,484 8,336 60,000 1,022, ,770 5,346,643 5,929, ,989 1,116,241 3,184,696 1,087,325 (1) Maturity analysis has been applied on financial instruments and this analyse does not include legal liabilities. (2) Amounts above are cash flows which has not been discounted belongs to contracts. Since discounted amounts are on immaterial level, balances with maturity less than 3 months are equivalent to their book value.

126 124 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) (a) Liquidity risk (Continued) Derivative financial liabilities: 2014 Book value Within 3 months 3 to 12 months 1 to 5 years Over 5 years Cash outflow 74,932-35,637 26,140 13, Book value Within 3 months 3 to 12 months 1 to 5 years Over 5 years Cash outflow 56,475-33,864 14,179 8,432 (b) Market risk Interest rate risk Interest rate risk arises because changes in interest rates may affect profitability as disclosed in financial statements. The Group is subject to interest rate risk as a result of differences in balancing off the dates or timing differences related to assets and liabilities maturing or to be subjected to price revision. The Group manages its interest rate risk by applying risk management strategies whereby its strives to balance off the dates of changes in interest rates related to assets and liabilities. The Group s interest rate position is as of 31 December 2014 and 2013 as follows: Fixed interest rate financial instruments Cash and cash equivalents 41,658 41,225 Financial assets 5,940 49,412 Other receivables 1,350,466 2,692,170 Other payables 922,089 1,374,730 Financial liabilities 1,805,707 1,224,773 Derivative financial instruments 74,932 56,475 Variable interest rate financial instruments Financial liabilities 1,408,950 2,643,363 As of 31 December 2014, if the variable interest rates of bank borrowing increased or decreased of +1% and -1% and if all other variables are held constant the result before tax would have been influenced favorably or unfavorably by TL975 (2013: TL2,844) for an increase and for a decrease in value of TL.

127 125 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) Foreign exchange risk The Group is exposed to foreign exchange risks due to foreign currency transactions. Foreign exchange risk results from the commercial activities and foreign currency denominated assets and liabilities. The Group controls that risk in a natural manner through netting off the foreign currency denominated assets and liabilities. The management limits the foreign currency position of the Group through analyzing it. The details of the foreign currency assets and liabilities as of 31 December 2014 and 2013 are as follows: 31 December December 2013 Assets 1,595,588 3,021,129 Liabilities (2,980,968) (4,410,995) Net foreign currency position (1,385,380) (1,389,866) Net position of derivative financial instruments (28,667) (12,453) Foreign currency asset/(liability) position, (net) (1,414,047) (1,402,319)

128 126 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) TL equivalent of assets and liabilities denominated in foreign currency held by the Group at 31 December 2014 and 2013 are as follows: 31 December December 2013 TL Equivalent US Dollar Euro PKR NIS TL Equivalent US Dollar Euro PKR NIS Cash and cash equivalents 64,047 18,779 4, , ,532 71, ,325 - Financial investment 5,940 2, ,412 23, Trade receivables 35,150 13, ,830-30,853 11, ,087 - Due from related parties - short term 464, ,848 46, ,450 81,098-18,077 - Due from related parties - long term 1,025, , ,792 2,563,461 1,167, ,506 Other assets ,421 16,311 1, Total Assets 1,595, ,662 4, , ,792 3,021,129 1,371,615 2, , ,506 Trade payables 60,445 18,510 3, ,471-31,825 11,671 1,676 99,181 - Short term financial liabilities 643, ,797 34, , , ,732 73, ,078 - Due to related parties - short term 506, ,111-30, Due to related parties - long term 358, ,169 8, ,275, , ,042 28,916 - Long term financial liabilities 1,375, , ,071 1,032,673-2,081, , ,527 1,101,497 - Other liabilities 36,526 11,759 3, ,313 19,640 2, Total Liabilities 2,980,968 1,081, ,897 1,587,937-4,410,995 1,563, ,954 1,383,672 - Net Foreign Currency Position (1,385,380) (435,771) (150,480) (1,051,320) 123,792 (1,389,866) (192,329) (353,644) (590,183) 115,506 Net Position of Derivative Financial Instruments (28,667) (12,362) (12,453) (5,835) Net Foreign Currency Position (1,414,047) (448,133) (150,480) (1,051,320) 123,792 (1,402,319) (198,164) (353,644) (590,183) 115,506

129 127 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) The Group is mainly exposed to foreign exchange risk through the impact of rate changes in the translation of USD, EUR and other currencies denominated assets and liabilities to local currency. As of 31 December 2014 and 31 December 2013, had the TL appreciated or depreciated by 10% against USD, EUR and other currencies with all other variables held constant, the effect over current period consolidated net income would be as follows: 31 December 2014 Profit / (Loss) Appreciation of Foreign currency Depreciation of Foreign currency 10% increase / decrease in US Dollar exchange rate (Expense) / Income (103,918) 103,918 US Dollar Net Effect (103,918) 103,918 10% increase / decrease in Euro exchange rate (Expense) / Income (42,446) 42,446 Euro Net Effect (42,446) 42,446 10% increase / decrease in PKR exchange rates (Expense) / Income (2,404) 2,404 PKR Net Effect (2,404) 2,404 10% increase / decrease in NIS exchange rate Income / (Expense) 7,363 (7,363) NIS Net Effect 7,363 (7,363) Total Net Effect (141,405) 141,405

130 128 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) 31 December 2013 Profit / (Loss) Appreciation of Foreign currency Depreciation of Foreign currency 10% increase / decrease in US Dollar exchange rate Income / (Expense) (42,294) 42,294 US Dollar Net Effect (42,294) 42,294 10% increase / decrease in Euro exchange rate Income / (Expense) (103,848) 103,848 Euro Net Effect (103,848) 103,848 10% increase / decrease in PKR exchange rate Income / (expense) (1,186) 1,186 PKR Net Effect (1,186) 1,186 10% increase / decrease in NIS exchange rate Income / (expense) 7,096 (7,096) NIS Net Effect 7,096 (7,096) Total Net Effect (140,232) 140,232 (c) Funding risk The funding risk of the current and future debt requirements is managed through rendering the availability of the qualified lenders. The Group s bank loans are provided by various financially strong financial institutions.

131 129 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) (d) Capital risk management The Group s capital management objectives are: ensure the Group s ability to continue as a going concern; and to provide an adequate return to shareholders, by pricing products and services commensurately with the level of risk The Group monitors capital on the basis of the carrying amount of equity plus its total of current and non current borrowings (net debt) less cash and cash equivalents as presented on the face of the consolidated financial position. The Group sets the amounts of capital in proportion to its overall financing structure i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid the shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. As of 31 December 2014 and 2013, net debt to equity ratio is as follows: Total financial liabilities (Note 5) 3,214,657 3,868,136 Trade payables 115,394 96,023 Other liabilities / (receivables), net (*) 414,897 (986,150) Total liabilities 3,744,948 2,978,009 Less: Cash and cash equivalents (Note 4) (108,178) (164,421) Net debt 3,636,770 2,813,588 Total equity 540, ,787 Net debt to equity ratio 673% 357% (*) Since TL2,360,880 long term other receivable from Rosmiks BV (31 December 2012: TL1,847,075) is considered as a part of funding which is stated in financial liabilities and provided from banks and finance institutions consortium under the leadership of HSBC Bank PLC, it is deducted from total liability amount of TL507,192 relates to long term payable to Zorlu Holding is considered by offsetting from total payable amount as of 31 December 2014.

132 130 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) (e) Credit risk The Group s exposure to credit risk is limited to the carrying amount of financial assets recognized at the financial position date. Credit risk concerns the risk that a loss will be suffered by a party due to the reason that the other party to the transaction is unable to meet its obligations. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group s policy is to deal only with creditworthy counterparties. The Group management considers that all the financial assets shown above under paragraph liquidity risk that are not impaired for each of the reporting dates under review are of good credit quality. In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk for liquid funds and other shortterm financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

133 131 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) (e) Credit risk (Continued) As of 31 December 2014, the Group s exposure to credit risk is as summarised below: 2014 Trade receivables Other receivables Deposits in bank Related Related Related party Other party Other party Other Maximum credit risk as of reporting date 64,352 33,910 1,339,805 10, ,145 - Secured portion of maximum credit risk with collateral Carrying amount of financial assets that are not overdue and not impaired 64,352 33,910 1,339,805 10, ,145 Carrying amount of assets that are overdue but not impaired - Carrying amount secured with collateral Carrying amount of assets that are impaired - Overdue (gross carrying amount) - 4, Impairment (-) - (4,143) Secured portion with collateral

134 132 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) (e) Credit risk (Continued) As of 31 December 2013, the Group s exposure to credit risk is as summarised below: 2013 Trade receivables Other receivables Deposits in bank Related Related Related party Other party Other party Other Maximum credit risk as of reporting date 71,564 44,569 2,687,992 4, ,393 - Secured portion of maximum credit risk with collateral Carrying amount of financial assets that are not overdue and not impaired 71,564 44,569 2,687,992 4, ,393 Carrying amount of assets that are overdue but not impaired - Carrying amount secured with collateral Carrying amount of assets that are impaired - Overdue (gross carrying amount) - 7, Impairment (-) - (7,988) Secured portion with collateral Fair value of financial instruments Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. The estimated fair values of financial instruments have been determined by the Group using available market information, management s judgment and appropriate valuation methodologies. The following disclosure of the estimated fair value of financial instruments is made with the requirements of IAS 32. To the extent relevant and reliable information is available from the financial markets in Turkey; the fair value of the financial instruments of the Group is based on such market data. The fair values of the remaining financial instruments of the Group can only be estimated. The estimates presented herein are not necessarily indicative of the amounts the Group could realize in a current market exchange. The following methods and assumptions were used to estimate the fair value of the Group s financial instruments:

135 133 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) Financial assets Monetary assets for which fair value approximates carrying value: Balances denominated in foreign currencies are translated at year-end exchange rates. The fair value of certain financial assets carried at cost, including cash and due from banks, marketable securities plus the respective accrued interest are considered to approximate their respective carrying values. The carrying value of the trade receivables net of provisions for uncollectible are considered to approximate their fair values. Financial liabilities Monetary liabilities for which fair value approximates carrying value: The fair values of short-term bank loans and other monetary liabilities are considered to approximate their respective carrying values due to their short-term nature. The fair values of long-term bank borrowings which are denominated in foreign currencies and translated at year-end exchange rates are considered to approximate their carrying values. Fair value estimation: Effective from 1 January 2009, the Group adopted the amendment to TFRS 7 for financial instruments that are measured in the balance sheet at fair value; this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: Level 1: Quoted prices in active markets for identical assets or liabilities Level 2: Inputs other than quoted market prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs for the asset or liability that are not based on observable market data. Trade receivables and payables are valued at amortized cost using the effective interest method. Trade receivables and payables are considered to approximate to their fair values (level 2). The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to estimate the fair value an instrument are observable, the instrument is included in level 2.

136 134 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 2 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.7 Financial risk management (Continued) As of 31 December 2014 and 2013, assets and liabilities measured at fair value are as follows: Derivative financial instruments Level Level 2 (74,932) (56,475) Level NOTE 3 - SEGMENT REPORTING (74,932) (56,475) The Group s geographic operating segments are Turkey, Pakistan and Israel. No industrial operating segments have been reported as the Group s product range is the same in all countries. The segment information in country basis is presented below. Earnings before interest, taxes, depreciation and amortization (EBITDA) are considered on evaluation of countries performance. Decision making authority of the Group considers EBITDA as the most appropriate method for comparability with other companies within the same industry. 31 December 2014 Turkey Pakistan Israel Total Revenue from external customers 761,395 45, ,947 Gross profit 53,689 28,443-82,132 EBITDA 168,809 34, ,461 Financial income 384,229 8, ,508 Financial expenses (686,440) (14,379) - (700,819) Amortization and depreciation expenses (127,443) (12,139) - (139,582) Share of gain of associates ,333 12,333 Purchase of tangible and intangible assets 206,034 1, , December 2013 Turkey Pakistan Israel Total Revenue from external customers 610,689 14, ,008 Gross profit 2, ,346 EBITDA 102,517 5,681 (58) 108,140 Financial income 227,572 1, ,371 Financial expenses (602,814) (14,294) - (617,108) Amortization and depreciation expenses (128,328) (7,495) - (135,823) Share of loss of associates - - (3,128) (3,128) Purchase of tangible and intangible assets 317,613 45, ,416

137 135 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 3 - SEGMENT REPORTING (Continued) As of 31 December 2014, the Group has recognized 20% of its sales to Türkiye Elektrik İletim A.Ş. ( TEİAŞ ), 64% to Zorlu Holding A.Ş. companies, 13% to YEKDEM and remaining 3% to third parties. 31 December 2014 Turkey Pakistan Israel Eliminations Total Segment Assets 4,942, ,751 - (421,623) 4,854,988 Associates , ,999 Segment Liabilities 4,615, ,693 - (421,408) 4,426, December 2013 Turkey Pakistan Israel Eliminations Total Segment Assets 6,203, ,404 - (298,164) 6,202,123 Associates 94, ,800 Segment Liabilities 5,580, ,724 - (297,850) 5,508,136 NOTE 4 - CASH AND CASH EQUIVALENTS 31 December December 2013 Cash Banks - demand deposits 66, ,168 - time deposits 41,658 41,225 The redemption schedule of the time deposits of the cash and cash equivalents are below: 108, ,421 Less than 3 months 41,658 41,225 41,658 41,225 The average effective interest rates for time deposits as of 31 December 2014 and 31 December 2013 are as follow: 31 December December 2013 USD PKR TL The details of cash and cash equivalents include the following for the purpose of the statements of cash flows as of 31 December 2014 and 31 December 2013.

138 136 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 4 - CASH AND CASH EQUIVALENTS (Continued) 31 December December 2013 Cash and cash equivalents 108, ,421 Less: Restricted cash (25,937) - 82, ,421 As of 31 December 2014 the Group has restricted cash amounting TL25,937 (31 December 2013: None). This restricted cash amount is related with the loans used by the Group. NOTE 5 - FINANCIAL LIABILITIES The details of financial liabilities of the Group as of 31 December 2014 and 31 December 2013 is as follows: 31 December December 2013 Short-term bank borrowings 273, ,177 Short-term portion of long-term bank borrowings 1,057, ,430 Factoring liabilities 105,888 52,301 Issued bonds 266,316 41,528 Short-term finance lease liabilities 1,028 3,006 Total short-term financial liabilities 1,704,562 1,463,442 Long-term bank borrowings 1,415,629 2,083,443 Issued bonds 94, ,608 Long-term finance lease liabilities Total long-term financial liabilities 1,510,095 2,404,694 Total financial liabilities 3,214,657 3,868,136

139 137 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 5 - FINANCIAL LIABILITIES (Continued) The detail of short-term bank borrowings and factoring liabilities of the Group as of 31 December 2014 and 31 December 2013 is as follows: Original Currency 31 December December 2013 Weighted average effective interest rate per annum (%) 31 December 31 December December 2014 TL equivalent 31 December 2013 USD 21,117 28, ,968 60,501 Euro 1,106 41, , ,569 TL 327, , , , , ,478 As of 31 December 2014 the accrued interest expense on short-term and long-term bank borrowings, factoring liabilities and issued bonds is TL37,570 (31 December 2013: TL45,620). The detail of short-term portion of long-term bank borrowings and issued bonds of the Group as of 31 December 2014 and 31 December 2013 is as follows: Original Currency 31 December December 2013 Weighted average effective interest rate per annum (%) 31 December 31 December December 2014 TL equivalent 31 December 2013 Euro 33,691 32, ,031 95,378 USD 212, , , ,329 TL 733, , , ,153 Other 153, , ,515 3,098 1,324, ,958

140 138 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 5 - FINANCIAL LIABILITIES (Continued) The detail of long-term bank borrowings of the Group as of 31 December 2014 and 31 December 2013 is as follows: Original Currency 31 December December 2013 Weighted average effective interest rate per annum (%) 31 December 31 December December 2014 TL equivalent 31 December 2013 Euro 105, , , ,149 USD 455, , ,055,301 1,622,373 TL 134, , , ,389 Other 1,032,673 1,101, ,617 22,140 1,510,095 2,404,051 Letters of guarantee given, pledges and mortgages related to financial liabilities are explained in Note 6. The redemption schedule of the borrowings as of 31 December 2014 and 31 December 2013 is as follows: 31 December December 2013 Up to 1 year 1,704,562 1,463,442 Up to 1 to 2 years 426, ,770 Up to 2 to 3 years 200, ,159 Up to 3 to 4 years 186, ,670 Up to 4 to 5 years 182, ,032 More than 5 years 514, ,063 3,214,657 3,868,136 The fair value of short-term borrowings equals their carrying amount, as the impact of discounting is not significant. The Group has completed sale transaction of the floating rate bonds, with a due date of 728 days and a nominal value of TL93,000,000 and with a due date of 1,092 days and a nominal value of TL82,000,000 on 23 August Also, pursuant to the material disclosure dated 1 November 2013, issuance of debentures having due date of 728 days with the nominal value of TL156,879,000 and the debentures having due date of 1,092 days with the nominal value of TL24,345,000 has been completed as of 1 November Rotor, one of the subsidiaries of Group, has signed a long term loan agreement with the consortium of a group of financial institutions amounting EUR130 million as of 8 May 2009 related to the 135 MW electricity production powerplant located in Osmaniye.

141 139 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 5 - FINANCIAL LIABILITIES (Continued) As of 2 December 2011, the Group obtained a loan from a syndication led by HSBC Bank Plc amounting USD435 million and EUR70 million, for refinancing its entire syndication loan of USD 500 million obtained on 20 May 2008 led by Standard Bank PLC and for partial refinancing of its other loans. The maturity of the loan is six years with a non-repayable period of two years. With the reference to material disclosure dated 6 August 2014, pursuant to the Board of Directors resolution numbered 44/45 and dated 4 August 2014, the Group s remaining debt related to the syndicated loan is USD337,995,000 and EUR54,712,455. The Group acquits the whole related amount of debt with the funding obtained from Zorlu Holding. As of 26 October 2011, Zorlu Enerji Pakistan Ltd. subsidiary of Zorlu Enerji, signed a long term loan agreement with International Finance Corporation ( IFC ), the Asian Development Bank ( ADB ), Eco Trade and Development Bank ( ECO ) and local consortium leader Habib Bank Limited ( HBL ) amounting USD111,160,000 with a maturity of up to 12 years for financing of its wind energy power plant with a capacity of 56.4 MW in Pakistan/Jhimpir established in Jhimpir, the Sindh region of Pakistan. Zorlu Doğal has purchased the operation rights of Tercan, Kuzgun, Mercan, İkizdere, Çıldır, Beyköy and Ataköy hydro electrical power plants for Engil Gas Turbines and Denizli Geothermal Power Plant from Turkish Privatization Administration for 30 years in auction for as of 5 March As of 31 December 2014, in the extent of this purchase and investment, Zorlu Doğal has obtained USD440.5 million and TL15 million in two parts as, USD220.3 million and TL7.45 million from Akbank T.A.Ş. and USD220.3 million and TL7.45 million from Türkiye Garanti Bankası A.Ş. Zorlu Jeotermal Enerji Elektrik Üretimi A.Ş., 100% owned subsidiary of Zorlu Enerji has been signed a long term loan agreement (14 years) on 25 November 2013 with Yapı Kredi A.Ş which will provide a fund up to USD113,000,000 in order to finance the geothermal powerplant project with the capacity of 45 MW that will be established in Alaşehir, Manisa. In this respect, Zorlu Jeotermal has obtained USD80 million as of 31 December Pursuant to the material disclosure dated 24 November 2014, Zorlu Rüzgar, which is 100% subsidiary of the Company, signed two loan agreements amounting to EUR 40 million with Türkiye Sınai Kalkınma Bankası and EUR 41.3 million with Bayerische Landesbank as a part of ECA financing with German Trade Finance Agency (Euler Hermes) contribution, in order to finance Sarıtepe and Demirciler wind power plant projects which are planned to established in Bahçe/Osmaniye and to have 110 MW installed capacity. Maturity of the loan that has been obtained from Türkiye Sınai Kalkınma Bankası is 12 years, with non-repayable period of 2 years and maturity of the loan that has been obtained from Bayerische Landesbank is 15.5 years, with non-repayable period of 1.5 years. Zorlu Rüzgar has obtained EUR12.8 million as of 31 December 2014.

142 140 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 6 - TRADE RECEIVABLES AND PAYABLES a) Trade Receivables Trade receivables from related parties (Note 23) 64,437 71,716 Less: Unearned interest on receivables (85) (152) 64,352 71,564 Other trade receivables 36,070 50,690 Notes receivables and cheques 1,997 1,908 Less: Allowance for doubtful receivables (4,143) (7,988) Less: Unearned interest on receivables (14) (41) 33,910 44,569 As of 31 December 2014, the average maturity of trade receivables is 15 days and are discounted with an average rate annual interest rate of 7.5% (31 December 2013: 8.6%). Movement for allowance of doubtful receivables is as follows: January 7,988 8,302 Reversal (3,845) (314) Ending balance, 31 December 4,143 7,988 The aging list of receivables that are overdue and impaired is as follows: More than 12 months 4,143 7,988 4,143 7,988 Past experience of the Group at collecting its receivables is considered in providing doubtful receivable provisions. The Group believes that no other trade receivable collection risk is present. The Group has no receivable that is not considered as doubtful receivable and overdue.

143 141 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 6 - TRADE RECEIVABLES AND PAYABLES (Continued) b) Trade payables: Trade payables to related parties (Note 23) 53,507 13,354 Less: Unrecognized credit finance expenses (34) (6) 53,473 13,348 Other trade payables 61,984 82,931 Less: Unrecognized credit finance expenses (63) (256) 61,921 82,675 As of 31 December 2014, the average maturity of trade payables is 30 days and are discounted with an average annual interest rate of 7.5% (31 December 2013: 9.1%). NOTE 7 - OTHER RECEIVABLES AND PAYABLES a) Short term other receivables: Other receivables from related parties (Note 23) 319, ,162 Other short term receivables 10,661 4,178 b) Long term other receivables: 330, , Other receivables from related parties (Note 23) 1,020,119 2,566,830 c) Short term other payables: Other payables to related parties (Note 23) 70,620 60,582 d) Long term other payables: Other payables to related parties (Note 23) 851,469 1,314,148

144 142 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 8 - OTHER ASSETS AND LIABILITIES a) Other current assets: Advances given 43,994 9,571 VAT receivable 38,762 49,086 Prepaid expenses 6,454 16,358 Prepaid tax 2, Other 336 2,927 b) Other non-current assets: 91,962 78, VAT receivable 13,254 6,952 Prepaid expenses 1,044 23,627 Other - 4 c) Other current liabilities: 14,298 30, Income tax and social security premiums payable 1,024 1,549 Deferred income 235 5,928 Provisions for employment benefits NOTE 9 - FINANCIAL ASSETS Short term financial assets 1,405 7, December December 2013 Deposits with 3 months - 1 year 5,940 49,412 5,940 49,412 The maturity of time deposits is less than 1 year and the average effective interest rate for these USD time deposits is 6.25% as of 31 December 2014 (31 December 2013: 6.25% %).

145 143 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 9 - FINANCIAL ASSETS (Continued) Long term financial assets 31 December December 2013 Long term securities (*) Subsidiaries - 8, ,591 (*) Zorlu Enerji participated with 246,291 shares (share amount: TL246) and in a ratio of 0.4% in the ownership of Enerji Piyasaları İşletme Anonim Şirketi (EPİAŞ) which is established with a capital of TL61,572,770. Ezotech and Solad, which are considered as financial assets in financial statements of 31 December 2013, consolidated with the method of equity accounting as of 31 December 2014 (Note 10). NOTE 10 - ASSOCIATES Movement of associates as of 31 December 2014 and 31 December 2013 is as follows: January 94,800 42,894 Capital increase - 37,067 Share of gain of associates 12,333 (3,128) Change on associates (*) 4,866 17, December 111,999 94,800 (*) Change on associates amounting TL4,866 relates to the currency translation difference as of 31 December The information of associates financial tables is summarized as follows: 31 December 2014 Dorad Energy Ltd. Ezotech Ltd. Solad Energy Ltd. Share (%) Total Assets 3,176, ,533 20,465 Total Liabilities 2,764, ,229 16,703 Total Equity 412,479 17,304 3,762 Net profit for the year 47,308 1, December 2013 Dorad Energy Ltd. Ezotech Ltd. (*) Solad Energy Ltd. (*) Share (%) Total Assets 2,624, Total Liabilities 2,246, Total Equity 377, (*) Financial statements of Ezotech and Solad are consolidated with the method of equity accounting first time as of 31 December 2014.

146 144 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 11 - PROPERTY, PLANT AND EQUIPMENT 1 January 2014 Additions (*) Transfers (**) Disposals Translation Reserve 31 December 2014 Cost: Land 10,767 4, ,577 Land improvements 61, ,892 Buildings 54, ,278 Plant and machinery 3,443,690 9,916 20,995 (291) 37,653 3,511,963 Motor vehicles Furniture and fixtures 10,889 4,716 - (104) 15 15,516 Construction work in progress 69, ,992 (20,995) (821) - 233,333 3,651, ,750 - (1,216) 37,668 3,893,431 Accumulated depreciation: Land improvements 13,112 1, ,197 Buildings 8, ,077 Plant and machinery 660, , , ,566 Motor vehicles Furniture and fixtures 6,197 1,623 - (1) - 7, , ,373 - (1) 1, ,154 Net book value 2,963,100 3,065,277 (*) Construction work in progress of Zorlu Jeotermal, Zorlu Doğal, Zorlu Hidroelektrik, Zorlu Rüzgar and Nemrut Jeotermal amounts to TL86,638, TL88,005, TL5,332, TL4,926 and TL1,091 on 2014 respectively. (**) As of 31 December 2014, construction work in progress belongs to Zorlu Doğal TL20,995 has been transferred to plant and machinery.

147 145 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 11 - PROPERTY, PLANT AND EQUIPMENT (Continued) 1 January 2013 Additions (*) Transfers (**) Disposals Translation Reserve Revaluation fund 31 December 2013 Cost: Land 7,318 3, ,767 Land improvements 26, ,360 61,835 Buildings 42, ,340 54,278 Plant and machinery 2,218,825 2, ,108 (4,924) 3, ,958 3,443,690 Motor vehicles Furniture and fixtures 8,645 1, (19) ,889 Construction work in progress 289, ,457 (588,374) (1,676) 15,058-69,157 Advances given 23, (23,574) ,617, ,379 - (30,193) 18, ,692 3,651,229 Accumulated depreciation: Land improvements 9,985 3, ,112 Buildings 7, ,083 Plant and machinery 534, ,053 - (3,332) ,367 Motor vehicles Furniture and fixtures 5,066 1,145 - (18) 4-6, , ,391 - (3,350) ,129 Net book value 2,061,254 2,963,100 (*) Construction work in progress of Zorlu Hidroelektrik, Zorlu Jeotermal, Zorlu Pakistan and Zorlu Doğal amounts to TL12,089, TL14,778, TL45,798 and TL281,791 on 2013 respectively. (**) As of 31 December 2013, construction work in progress belongs to Zorlu Pakistan and Zorlu Doğal TL243,688 and TL344,686 has been transferred to plant and machinery and furniture and fixtures.

148 146 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 11 - PROPERTY, PLANT AND EQUIPMENT (Continued) As of 31 December 2013 and 2014, the movement for revaluation fund of machinery and equipment is as follows: 1 January Revaluation of lands 300 Revaluation of land improvements 35,360 Revaluation of buildings 11,340 Revaluation of plant, machinery, furnitures and fixtures 636,692 Deferred tax liability on revaluation of machinery and equipment (136,738) 31 December ,954 Change in non-controlling interest 3,686 Depreciation transfer (31,892) 31 December ,748 As of 31 December 2014, borrowing cost in respect of construction in progress amounts to TL16,957 has been classified to the cost of related asset (31 December 2013: TL31,407). There are no commitments and contingencies on property, plant and equipments. Breakdown of depreciation and amortization expenses based on cost of sales and operating expense has been presented on Note 19. NOTE 12 - INTANGIBLE ASSETS 1 January 2014 Additions Translation reserve 31 December 2014 Cost Rights 20, ,954 Licenses 611 1,146-1,757 20,835 1, ,711 Accumulated depreciation Rights 5, ,649 Licenses ,201 1, ,412 Net book value 14,634 15,299

149 147 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 12 - INTANGIBLE ASSETS (Continued) 1 January 2013 Additions Translation reserve 31 December 2013 Cost Rights 18,261 1,963-20,224 Licenses ,797 2,038-20,835 Accumulated depreciation Rights 4,237 1,413-5,650 Licenses ,769 1,432-6,201 Net book value 14,028 14,634 Breakdown of depreciation and amortization expenses based on cost of sales and operating expense has been presented on Note 19. NOTE 13 - PROVISIONS, COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES 13.1 Contingent Liabilities Letters of guarantee given The commitments and contingent liabilities of the Group that are not expected to result in material loss or liability is summarized as follows: Currency 31 December December 2013 Original TL Original TL currency equivalent currency equivalent Letters of guarantees given TL 83,956 83,956 87,843 87,843 Letters of guarantees given Euro 12,662 35,717 13,971 41,026 Letters of guarantees given USD 42,115 97,660 14,068 30, , ,894 Letters of guarantees given generally consist of letters given to government agencies for the electricity transmission and distribution (mainly to EMRA and government agencies providing electricity transmission and distribution) and natural gas suppliers for the procurement of natural gas.

150 148 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 13 - PROVISIONS, COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued) Zorlu Holding is also guarantor for Zorlu Doğal s loan obtained from Akbank T.A.Ş. and Türkiye Garanti Bankası A.Ş. amounting USD440.5 million and TL14.9 million, for Zorlu Jeotermal s loan obtained from Yapı ve Kredi A.Ş. amounting USD80 million, for Rotor s loan obtained from the consortium of several financial institutions amounting EUR130 million and for Zorlu Rüzgar s loan obtained from Türkiye Sınai Kalkınma Bankası and Bayerische Landesbank amounting EUR12.8 million. The Group s guarantees, pledges and mortgage ( GPM ) positions in TL as of 31 December 2014 and 2013 are as follows: Original currency Original TL Original amount amount amount TL amount GPM s given for companies own legal entity USD 3,113 7, EURO 12,312 34,729 13,428 39,431 TL 63,260 63,260 80,053 80,053 Total amount of GPM given for the subsidiaries and associates in the scope of consolidation USD 10,000 23,189 10,000 21,343 TL 18,700 18,700 7,790 7,790 Total amount of GPM given for the purpose of maintaining operating activities USD 29,002 67,252 3,992 8,520 EURO ,595 TL 1,996 1, Total other GPM s given , ,894

151 149 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 13 - PROVISIONS, COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES (Continued) 13.2 Contingent Assets Currency 31 December December 2013 Original TL Original TL amount equivalent amount equivalent Guarantees obtained TL 17,116 17,116 15,452 15,452 Guarantees obtained USD 21,907 50,800 22,136 47,245 Guarantees obtained Euro 2,052 5, ,017 Guarantees obtained JPY 55,163 1,067 3, Cheques received TL 1,205 1,205 1,171 1,171 Cheques received USD Cheques received Euro ,095 66,192 Guarantee letters received consists of the letters, cheques and notes received from customers in relation to the Group s operations. NOTE 14 - DERIVATIVE FINANCIAL INSTRUMENTS 31 December December 2013 Contract amount Fair values Liability Contract amount Fair values Liability Interest rate swap agreements 1,574,032 (12,191) 175,000 (7,317) Interest rate swap agreements held for hedging 747,478 (62,741) 2,043,844 (38,258) Held for trading Foreign currency forward agreements ,852 (10,900) 2,321,510 (74,932) 2,371,696 (56,475) Derivative financial instruments are initially recognised in the consolidated balance sheet at cost and subsequently are re-measured at their fair value. The derivative instruments of the Group consist of interest rate swap and foreign currency forward contracts. On the date a derivative contract is entered into, the Group designates certain derivatives as either a hedge of the fair value of a recognised asset or liability ( fair value hedge ), or a hedge of a forecasted transaction or a firm commitment ( cash flow hedge ).

152 150 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 14 - DERIVATIVE FINANCIAL INSTRUMENTS (Continued) Interest rate swap transactions provide effective economic hedges under the Group risk management position and qualify for hedge accounting under the specific rules and are therefore treated as derivatives held for hedging. Changes in the fair value of derivatives that are designated as being and qualify as cash flow hedges and are highly effective, are recognised in equity as hedge reserves. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, or when a committed or forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated statement of income. Movement of interest rate swap transactions is as follows: January 45,575 70,678 Related to income statement - Financial income/(loss) 3,783 (27,218) Related to comprehensive income - Hedge reserves 25,574 2, December 74,932 45,575 NOTE 15 - PROVISIONS FOR EMPLOYMENT BENEFITS Provision for employment benefits 541 1, ,303

153 151 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 15 - PROVISIONS FOR EMPLOYMENT BENEFITS Movement of provision for employment benefits is as follows: January 1,303 1,179 Service cost Interest cost Reversed provisions (821) - Termination benefits paid (464) (380) Actuarial loss December 541 1,303 Provisions for employment termination benefits are allocated in accordance with the disclosures given below: Under the Turkish Labour Law, companies are required to pay termination benefits to each employee who has completed one year of service and whose employment is terminated without due cause, is called up for military service, dies or who retires after completing 25 years of service (20 years for women) and achieves the retirement age (58 for women and 60 for men). Since the legislation was changed on 23 May 2002, there are certain transitional provisions relating to the length of service prior to retirement. The amount payable consists of one month s salary limited to a maximum of TL3,438 for each year of service as of 31 December 2014 (31 December 2013: TL3,254). Termination benefits liability is not dependent on any funding legally and any funding requirement does not exist. The provision has been calculated by estimating the present value of the future probable obligation of the Group arising from the retirement of employees. IAS 19 requires actuarial valuation methods to be developed to estimate the enterprise s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: Discount rate (%) Probability of retirement (%) The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. The amount payable consists of one month s salary limited to a maximum of TL3,541 for each period of service as of 1 January 2015 (1 January 2014: TL3,438).

154 152 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 16 - EQUITY Share capital Zorlu Enerji adopted the registered capital system applicable to the companies registered on the CMB and defined a limit to its registered capital for shares whose nominal value is Kr1 ( Kuruş ). As of 31 December 2014 and 31 December 2013 the share capital held is as follows: 31 December December 2013 Limit on registered share capital (historical) 500, ,000 Issued capital 500, ,000 The Group s shareholders and shareholding structure as of 31 December 2014 and 31 December 2013 are as follows: Share % 31 December 2014 Share % 31 December 2013 Zorlu Holding , ,666 Korteks , ,737 Publicly held , ,906 Other , , , ,000 Adjustment to share capital 110, ,948 Total paid-in capital 610, ,948 Share Premium Share premiums presented in the consolidated financial statements represent the excess of the amount of shares issued during the capital increases to their nominal values. Retained Earnings and Legal Reserves The legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code ( TCC ). The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of a company s paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can be used only to offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital.

155 153 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 17 - TAXES ON INCOME 31 December December 2013 Corporate and income taxes payable 996 1,235 Less: Prepaid taxes (813) (765) Taxes on Income Deferred tax assets 21,929 1,241 Deferred tax liabilities (97,110) (102,512) Deferred tax liabilities, net (75,181) (101,271) Turkish tax legislation does not allow for the submission of tax returns over consolidated financial statements prepared by the parent company, which include its subsidiaries and affiliates. Accordingly tax considerations reflected in these consolidated financial statements have calculated separately for each of the companies in the scope of the consolidation. In Turkey, corporation tax is payable at a rate of 20% for the years 2014 and Corporations are required to pay advance corporation tax quarterly at the rate of 20% on their corporate income. Advance tax is declared by the 14 th and paid by the 17 th of the second month following each calendar quarter end. Advance tax paid by corporations is credited against the annual corporation tax liability. If, despite offsetting, there remains a paid advance tax amount, it may be refunded or offset against other liabilities to the government. The taxation on income for the Group for the period ended 31 December is summarised as follows: Current period tax expense (996) (1,235) Deferred tax income 20,986 88,276 19,990 87,041

156 154 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 17 - TAXES ON INCOME (Continued) The reconciliation of taxation on income for the year ended 31 December 2014 and 31 December 2013 as follows: Loss before tax (244,432) (415,420) Tax amount (over 20% tax rate) 48,886 83,084 Deductions and exemptions 23,049 10,788 Disallowable expenses (24,802) (11,317) Tax incentive 7,935 7,460 Unrecognized tax losses (33,329) (5,550) Other (1,749) 2,576 Deferred income taxes 19,990 87,041 Deferred Taxes The Group recognizes deferred income tax based on all temporary differences arising between their financial statements as reported for IFRS and its statutory tax financial statements. The currently enacted tax rate for temporary differences is 20% (31 December 2013: 20%). The breakdown of cumulative temporary differences and the resulting deferred income tax assets/ (liabilities) at 31 December 2014 and 31 December 2013 are as follows: Temporary differences Deferred tax assets / (liabilities) Carry forward tax losses (379,970) (356,370) 75,994 71,274 Derivative financial instruments (71,988) (50,521) 14,398 10,104 Investment incentive (39,674) (37,302) 7,935 7,460 Unearned credit finance expense 29,523 10,348 (5,905) (2,070) Provision for employment termination benefit (1,583) (1,299) Property, plant and equipment 262, ,725 (52,468) (45,945) Impairment for property, plant and equipment - (17,536) - 3,507 Revaluation of property, plant and equipment 683, ,692 (136,738) (136,738) Other (106,430) 45,615 21,286 (9,123) Deferred tax liabilities, net (75,181) (101,271)

157 155 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 17 - TAXES ON INCOME (Continued) The movement of deferred tax assets and liabilities as of 31 December 2014 and 2013 is as follows: January (101,271) (51,930) Charged to income statement 20,986 88,276 Charged to comprehensive income statement 5,104 (137,617) 31 January (75,181) (101,271) Analyze of deferred tax assets and liabilities is as follows: Deferred tax assets: - will be used over 12 months 21,929 1,241 - will be used less than 12 months ,929 1, Deferred tax liabilities: - will be used over 12 months (97,110) (102,512) - will be used less than 12 months - - (97,110) (102,512) As of 31 December 2014, The Group has investment incentive exemption amounting to TL308,915. TL39,674 of the exemption can be fully deducted from income and for the remaining amount withholding tax will be collected at utilization.

158 156 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 17 - TAXES ON INCOME (Continued) As of 31 December 2014, the Group has carry forward tax losses amounting to TL379,970 (31 December 2013: TL356,370) to be deducted from future profits and did not recognize deferred tax assets for the carry forward tax losses amounting to TL367,177 (31 December 2012: TL238,154) for which the Group believes it will not utilize in the future. The expiration dates of recognized carry forward tax losses are as follows: Due Date Losses , , , ,521 The expiration dates of unrecognized carry-forward tax losses are as follows: 379,970 Due Date Losses , , , , , ,177

159 157 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 18 - REVENUE AND COST OF SALES Revenue 809, ,778 Sales discount (-) (2,674) (2,770) Net Profit 806, ,008 Cost of sales (-) (724,815) (621,662) Gross profit 82,132 3,346 NOTE 19 - EXPENSES BY NATURE Direct materials and merchandise expenses 514, ,568 Depreciation and amortization (*) 139, ,823 Repair and maintenance expenses 45,718 36,190 Outsourcing expenses 16,112 10,664 Employee and personnel expenses (**) 9,024 7,129 Consultancy expenses 7,177 5,916 Energy expenses 511 1,307 Other 27,615 23,350 (*) Depreciation and amortization expenses for current period has been allocated to accounts of income statement as follows: 760, , December December 2013 Cost of sales 138, ,420 Operating expenses 1, , ,823 (**) TL5,001 and TL4,023 TL of employee and personnel expenses has been recognized under operating expenses and cost of sales, respectively (31 December 2013: TL4,216 and TL2,913 respectively)

160 158 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 20 - OTHER OPERATING INCOME AND EXPENSE a) Other operating income Project commission income (*) 16,005 15,745 Provisions released 4, Inventory count differences 370 1,737 Insurance gain 47 1,511 Profit on sale of property, plant and equipment 16 3,161 Other 2,786 6,652 24,146 29,581 (*) The balance consist of commission income received from foreign subsidiaries due to construction and procurement works. b) Other operating expenses Expense for relocated of turbine 15,294 2,775 Project cost 2,334 4,778 Impairment of goodwill - 17,536 Compensation for project - 4,297 Loss on sale of property, plant and equipment Other 1, NOTE 21 - SHARE OF PROFIT OF ASSOCIATES 18,882 31, Profit/ (loss) share in associates 12,333 (3,128) 12,333 (3,128)

161 159 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 22 - FINANCIAL INCOME AND EXPENSES a) Financial income: 31 December December 2013 Foreign exchange gains 209,025 - Interest income 179, ,168 Profit on derivative instruments 4,129 12,022 Unearned credit finance income b) Financial expense: 392, , December December 2013 Interest expenses 421, ,502 Foreign exchange losses 216, ,736 Unearned credit finance expense 170 8,118 Other 62,920 39, , ,108

162 160 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 23 - RELATED PARTY TRANSACTIONS i) Related party balances: a) Short term trade receivables from related parties 31 December December 2013 Zorlu Holding 31,355 23,753 Zorlu Elektrik Enerjisi İhracat ve Toptan Ticaret A.Ş. ( Zorlu Elektrik Toptan ) (*) 21,859 37,961 Korteks (*) 5,648 5,605 Zorluteks Tekstil Ticaret ve Sanayi A.Ş. ( Zorluteks ) (*) 3,456 3,233 Other 2,119 1,164 Less: Unearned credit finance income (-) (85) (152) (*) The Group sells electricity to Korteks, Zorluteks and Zorlu Elektrik Toptan. 64,352 71,564 Maturity of trade receivables from Zorlu Holding is approximately 1 month (31 December 2013: 1 month). Maturity of trade receivables from other related parties is approximately 21 days (31 December 2013: 20 days). Applied annual interest rate for USD, EURO and TL balances are 7.5%, 7.5% and 12%, respectively (31 December 2013: USD 6.5%, EURO: 6.5%, TL: 10.2%). b) Short term other receivables from the related parties 31 December December 2013 Zorlu Endüstriyel ve Enerji Tesisleri İnşaat Ticaret A.Ş. ( Zorlu Endüstriyel ) (*) 230,198 88,377 Zorlu O&M Enerji Tesisleri İşletme ve Bakım Hizmetleri A.Ş. ( Zorlu O&M ) (**) 76,629 27,498 Edelcom Ltd. ( Edelcom ) (***) 7,424 - Zorlu Enerji İnşaat A.Ş. 1,204 4,853 Other 4, , ,162 (*) The maturity of short term other receivable from Zorlu Endüstriyel for financing purpose is less than 1 year and applied interest rate is 7.5%. (**) Short term other receivable from Zorlu O&M consists of the amount for financing purposes. (***) Receivables from Edelcom consist of advances given for the power plants which have been planned to be constructed in Israel. The maturity of the short term other receivables is less than a year and applied interest rate for TL balances is 12%, USD and EURO balances is 7.5% (31 December 2013:TL balances: 10.2%, USD and EURO balances: 6.5%).

163 161 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 23 - RELATED PARTY TRANSACTIONS (Continued) c) Long-term other receivables from related parties 31 December December 2013 Zorlu Holding (*) 813,005 - Dorad Energy Ltd. ( Dorad ) (**) 75,225 74,329 Ezotech Ltd. (Ezotech ) (**) 64,214 55,083 Edeltech Ltd. ( Edeltech ) (**) 62,375 58,392 Solad Energy Ltd. ( Solad ) (**) 5,300 4,117 Edelcom Ltd. ( Edelcom ) (**) - 14,029 Rosmiks International B.V. (*) - 2,360,880 1,020,119 2,566,830 (*) With the reference to material disclosure dated 6 August 2014, in the context of debt restructuring and simplification of balance sheet within the company group; pursuant to the Board of Directors resolution numbered 44/45 and dated 4 August 2014, related receivable balance has been assigned to Zorlu Holding. (**) Receivables from Dorad, Edeltech, Edelcom, Ezotech and Solad consist of advances given for the power plants which have been planned to be constructed in Israel. d) Short-term trade payables to related parties 31 December December 2013 Zorlu Endüstriyel 17,892 - Zorlu Holding A.Ş. 17,235 8,297 Zorlu O&M 13,438 1,454 Zorlu Elektrik Toptan 3,626 4 Zorlu Doğalgaz İthalat İhracat ve Toptan Ticaret A.Ş. ( Zorlu Doğalgaz ) Other 1,140 3,447 Less: Unrealized credit finance expense (-) (34) (6) Short term trade payables to Zorlu Endüstriyel and Zorlu O&M consist of engineering and repair services. 53,473 13,348 Short term trade payables to Zorlu Holding and other related parties consist of general administrative expenses charged to Zorlu Enerji. Maturity of short term trade payables to Zorlu Endüstriyel is 15 days and to other related parties is 21 days and applied annual interest rate for USD, EURO and TL is 7.5%, 7.5% and 12%, respectively (31 December 2013: For USD and EURO: 6.5%, for TL:10.2%).

164 162 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 23 - RELATED PARTY TRANSACTIONS (Continued) e) Short-term other payables to the related parties 31 December December 2013 Zorlu Faktoring (*) 69,930 60,000 Other (*) Short term other payable to Zorlu Faktoring consists of the factoring transactions made from related parties. 70,620 60,582 f) Long-term other payables to the related parties 31 December December 2013 Zorlu Holding (*) 507, ,044 Z.F.S. Financial Services Ireland ( ZFS ) (**) 328, ,770 Zorlu Endüstriyel (***) - 64,521 Zorlu Elektrik Toptan (***) - 61,372 Other 15,731 14, ,469 1,314,148 (*) As of 31 December 2014, the interest rate of the USD long term payable to Zorlu Holding obtained for financing purposes is 7.5% (31 December 2013: USD and EUR: 6.5%, TL: 10.2%). (**) Due date of the liability which is obtained from Z.F.S. by Zorlu Doğal included in scope of consolidation as of 28 December 2012, is 26 June 2023 and interest rate is 5%. (***) Long term other payables to Zorlu Endüstriyel and Zorlu Elektrik Toptan consist of the payables for financing purposes in USD currency. The interest rate of the payables is 7.5%.

165 163 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 23 - RELATED PARTY TRANSACTIONS (Continued) ii) Transactions carried out with related parties for the period 1 January-31 December 2014 and 2013 are as follows: Sales Purchases Operating expenses Other income/ (expense) Financial income/ (expense) 1 January - 31 December 2014 Zorlu Elektrik Toptan 388,288 26,174 5,307 (406) (2,381) Korteks 56, (94) Zorluteks 31, (78) Zorlu O&M , ,347 Zorlu Holding ,896 4,497 17,880 Rosmiks International BV ,788 ZFS (43,897) Rosmiks Netherlands BV ,757 Zorlu Endüstriyel , ,431 Edeltech ,073 Edelcom ,167 Dorad ,825 Ezotech ,764 Other , (830) 476,732 69,505 14,768 5, ,752

166 164 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 23 - RELATED PARTY TRANSACTIONS (Continued) Sales Purchases Operating expenses Other income/ (expense) Financial income/ (expense) 1 January - 31 December 2013 Zorlu Elektrik Toptan 378,789 29, (13,744) Korteks 53, Zorluteks 31, Zorlu O/M , (178) 12,538 Zorlu Holding ,243 3,494 (192,808) Rosmiks B.V ,861 ZFS (36,885) Zorlu Endüstriyel - 2, ,304 Edeltech ,748 Edelcom ,392 Dorad ,762 Ezotech ,706 Other , ,682 The sales to the related parties consist of electricity sales. 464,284 73,652 5,297 3, ,556

167 165 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 23 - RELATED PARTY TRANSACTIONS (Continued) Purchases of Zorlu O&M are related to cost of repair and maintenance. Net financing income from Zorlu O&M consisted of interest and foreign exchange differences regarding short term other receivables and short term trade payables. Purchases of Zorlu Elektrik are related to the purchase of electricity. Financing income and expenses from/to Zorlu Holding consisted of interest and foreign exchange differences regarding short term trade payables, short term trade receivables, long term other receivables and long term other payables. Financing income and expenses from/to ZFS consisted of interest and foreign exchange differences regarding long term other payables. Financing income and expense from Dorad, Edeltech, Edelcom, and Solad are related to the interest and foreign exchange gains/losses on the advances given regarding the construction in Israel. Net financing income from Rosmiks International BV ve Rosmiks Netherlands BV consists of interest and foreign exchange gains /losses regarding assigned other receivable balances as of 6 August 2014, in the context of debt restructuring and simplification of balance sheet within the Group. iii) Key management compensations for the periods between 1 January - 31 December 2014 and 2013 are as follows: For the purpose of these consolidated financial statements, key management compensation consists of the payments made to Group shareholders and top management (General Manager and Vice General Managers and directors) Salaries 2,262 1,277 NOTE 24 - EARNING/(LOSS) PER SHARE Earnings per share disclosed in the accompanying statement of income are determined by dividing net income by the weighted average number of shares in existence during the year concerned Net period loss for equity holders of the Group (227,672) (330,767) Loss per 1,000 share (0,0045) (0,0066) Nominal value of each of the issued share as of 31 December 2014 and 2013 is 1 Kr.

168 166 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 25 - EVENTS OCCURRING AFTER THE REPORTING PERIOD With regard to our material event disclosure on 5 January 2015, Zorlu Wind Pakistan (Private) Limited is incorporated with a partnership of Zorlu Enerji having a partnership in the ratio of 99.7% which has a capital of TL464 equivalent to PKR10,000 and has a wind energy production activity, and the said company s registration procedures have been completed. With regard to our material event disclosure on 6 January 2015, Energy Market Regulatory Authority has given its confirmation with regard to the issuance of a lease certificate which has been disclosed on 31 December With regard to the material event disclosure on 19 January 2015, as a result of final assessments, the Company released from its investment decisions of imported coal power plant having a capacity of 1,220 MW to be incorporated in Manisa Province, Soma District and natural gas combined cycle plant having a capacity of 1,100 MW to be incorporated in Kırklareli Province, Vize District, Kıyıköy Area which has been already announced on 5 July 2013 and 14 August 2013 as their pre-license applications were made. Applications were made to Energy Market Regulatory Authority with regard to this projects in order to cancel the prelicense applications. With regard to the material event disclosure on 21 January 2015, it has been decided that an application has been made to the Capital Markets Board of Turkey for the issuance of a debt instrument in order to sell to the qualified investors without public offering in one-time or several times, inside of Turkey, without exceeding the limit of TL600,000,000, having a type of Turkish Lira, which has several overdues maximum of an overdue till three years -. An application is made to Capital Markets Board of Turkey and İstanbul Stock Exchange with regard to the issuance of a bond which is announced on 4 February 2015.

169 167 ZORLU ENERJİ ELEKTRİK ÜRETİM A.Ş. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 (Amounts expressed in thousands Turkish Lira ( TL ), unless otherwise indicated.) NOTE 25 - EVENTS OCCURRING AFTER THE REPORTING PERIOD (Continued) With regard to the material event disclosure on 12 February 2015, Yozgat Provincial Special Administration gave three Geothermal Sources and Natural Mineral Waters Exploration License to the Company until 10 February 2018 in order to make exploration in 3 different region in Yozgat Province, Şefaatli District. With regard to the material event disclosure on 13 February 2015, the application with regard to the transfer of electric production license of Sami Soydam-Sandalcık Hydroelectric Power Plant of Zorlu Hidroelektrik to Zorlu Doğal has been accepted. As per the material disclosure dated 20 February 2014, the interest payment rate with a nominal value of TL2,519, of sixth coupon payment of the bond, issued by the Company, with a nominal value of TL82,000,000 numbered TRSZORN81616 ISIN and the interest payment rate with a nominal value of TL2,741, of sixth coupon payment of the bond, issued by the Company, with a nominal value of TL93,000,000 numbered TRSZORN81517 ISIN, have been made respectively. With regard to the material disclosure dated 4 March 2015, our Company signed the Articles of Association of EPİAŞ (Energy Market Operation Joint Stock Company). With regard to the material event disclosure on 17 March 2015, it is decided unanimously in the meeting of the Board of Directors of Zorlu Enerji on 17 March 2015 that; in accordance with the Capital Market Law, the Turkish Commercial Code and the relevant regulation, articles 3, 4, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 of the articles of association of our Company to be amended for alignment with the regulation and simplification, as well as articles 13A, 15A, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30 and Additional Article to be annihilated and the remaining articles to be amended hence by way of succession, and in accordance with the Capital Markets Board Communiqué on Authorized Capital System numbered II-18.1 the upper limit of the authorized capital to be increased from TL500,000,000 to TL1,000,000,000 as it is reached to the existing upper limit of the authorized capital to be valid between which is the valid authorized capital upper limit permit period. With regard to the material disclosure dated 19 March 2015, an application with regard to the amendment of Articles of Association of the Company is made to Capital Markets Board of Turkey in order to get approval and also Energy Market Regulatory Authority in order to give information. With regard to the material disclosure dated 20 March 2015, the application with regard to the lease certificate issuance is approved by Capital Markets Board of Turkey ( CMB ) and this approval is announced in CMB Bulletin numbered 2015/8 on 19 March 2015.

170 168 INVESTOR INFORMATION Independent Auditor Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik AŞ A member of PricewaterhouseCoopers Süleyman Seba Cad. BJK Plaza No: 48 B Blok, Kat: 9 Akaretler Beşiktaş İSTANBUL Phone: +90 (212) Fax: +90 (212) Financial Data and Company Announcements Financial statements, auditor reports, material event disclosures and annual reports of Zorlu Enerji Elektrik Üretim AŞ are available on the Company s website at Additionally, requests for information can be submitted to the Investor Relations Directorate of Zorlu Enerji Elektrik Üretim AŞ via phone and . Investor Relations Başak Dalga Investor Relations Manager Zorlu Enerji Elektrik Üretim AŞ Levent 199 Büyükdere Cad. No: Şişli - İSTANBUL Phone: +90 (212) [email protected] Hande Hökerek Investor Relations Assistant Specialist Zorlu Enerji Elektrik Üretim AŞ Levent 199 Büyükdere Cad. No: Şişli - İSTANBUL [email protected]

171 DIRECTORY ZORLU ENERJİ ELEKTRİK ÜRETİM AŞ İstanbul: Levent 199 Büyükdere Cad. No: Şişli - İstanbul T: +90 (212) F: +90 (212) Bursa (Headquarters): Organize Sanayi Bölgesi, Pembe Cad. No:13, Bursa T: +90 (224) F: +90 (224) Kırklareli: Yenimahelle D100 Karayolu 17\F, Lüleburgaz - Kırklareli T: +90 (288) F: +90 (288) Kayseri: Organize Sanayi Bölgesi 6. Cad. No: 21 Melikgazi - Kayseri T: +90 (352) F: +90 (352) Yalova: İpek Kağıt Fabrikası, Zorlu Enerji Tesisleri, Tokmakköyü Altınova - Yalova T: +90 (226) F: +90 (226) ROTOR ELEKTRİK ÜRETİM AŞ İstanbul: Levent 199 Büyükdere Cad. No: Şişli - İstanbul T: +90 (212) F: +90 (212) Osmaniye (WPP Operation Directorate) Gökçedağ Mevkii 8. Km Yönetim Binası Bahçe - Osmaniye T: +90 (328) F: +90 (328) ZORLU DOĞAL ELEKTRİK ÜRETİMİ AŞ İstanbul: Levent 199 Büyükdere Cad. No: Şişli - İstanbul T: +90 (212) F: +90 (212) Erzincan (Tercan Power Plant): Atatürk Mah. Erzurum Yolu 2. Km Tercan - Erzincan T: +90 (446) F: +90 (446) Rize (İkizdere Power Plant): İkizdere HES İşletme Müdürlüğü İkizdere - Rize T: +90 (464) F: +90 (464) Eskişehir (Beyköy Power Plant): Sarıcakaya İlçesine 16 Km mesafede, Sarıcakaya - Eskişehir T: +90 (222) F: +90 (222) Kars (Çıldır Power Plant): Zorlu O&M Enerji Tesisleri İşletme ve Bakım Hizmetleri AŞ Carcı köyü mevkii, Çıldır HES Arpaçay - Kars T: +90 (474) F: +90 (474) Tokat (Ataköy Power Plant): Almus ilçesine 7 Km mesafede Almus - Tokat T: +90 (356) F: +90 (356) Tunceli (Mercan Power Plant): Ovacık İlçesi ne 13 Km mesafede Ovacık - Tunceli T: +90 (428) Erzurum (Kuzgun Power Plant): İspir Yolu 56. Km Ilıca - Erzurum T: +90 (442) F: +90 (442) ZORLU JEOTERMAL ENERJİ ELEKTRİK ÜRETİMİ AŞ İstanbul: Levent 199 Büyükdere Cad. No: Şişli - İstanbul T: +90 (212) F: +90 (212) ZORLU HİDROELEKTRİK ENERJİ ÜRETİM AŞ İstanbul: Levent 199 Büyükdere Cad. No: Şişli - İstanbul T: +90 (212) F: +90 (212) ZORLU RÜZGAR ENERJİSİ ELEKTRİK ÜRETİMİ AŞ İstanbul: Levent 199 Büyükdere Cad. No: Şişli - İstanbul T: +90 (212) F: +90 (212) ZORLU ENERJİ PAKİSTAN LIMITED Pakistan: House No. C-117, Blok-2 Clifton Kehkashan Scheme Karachi - PAKİSTAN T: F: This report is printed on recycled paper. Denizli (Sarayköy Power Plant): Denizli İzmir Karayoluna 1 Km mesafede Sarayköy - Denizli T: +90 (258) F: +90 (258) Produced by Tayburn Tel: (90 212)

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