TEASER. Privatization of Turkey s Electricity Distribution Industry

TEASER Privatization of Turkey s Electricity Distribution Industry

Legal Disclaimer Regarding the Teaser Any estimates and projections contained in the present Teaser (the Teaser ) involve significant elements of subjective judgment and analysis, which may or may not be correct. None of the PA, TEDAS or any of its distribution companies, Lazard or any of their affiliates, their advisors or any of their direct or indirect shareholders or any of their respective members, public servants, employees or agents provides any guarantee or warranty (express or implied) or assumes any responsibility with respect to the authenticity, validity, accuracy or completeness of the information and data contained in the Teaser, or assumes any obligation for damages, losses or costs (including, without limitation, any direct or consequential losses) resulting from any errors, incompleteness or omissions contained in the Teaser. The economic valuations contained in the Teaser are necessarily based on the current market conditions, which may change significantly over a short period of time. Changes and events occurring after the date hereof may, therefore, affect the validity of the conclusions of the Teaser. None of the PA, TEDAS and its distribution companies or Lazard assumes no obligation to update and/or revise the Teaser or the information and data upon which it has been based. The Teaser does not constitute an offer or the solicitation of an offer for the sale or purchase of any assets or shares of TEDAS and its distribution companies. Neither this Teaser nor the information contained herein shall form the basis of, or constitute, any contract or binding offer. It is essential for the Participants to examine TEDAS and its distribution companies and the current condition of these companies prior to the final bidding date. Accordingly, it is accepted that the Participants had full knowledge about TEDAS and its distribution companies and the current actual condition of these companies during all phases of the tender and while signing the Share Sale Agreement and that they have placed their bid with such knowledge and signed the Share Sale Agreement. The Participants and, the Purchaser after the sale procedure, accept, declare and guarantee that acting as a prudent merchant, it has made/have somebody make all kinds of technical, legal, financial, tax related and other examinations and facility visits it deemed necessary regarding TEDAS and its distribution companies; and that the shares were taken over and received knowing the current and physical condition of these companies as of the Share Sale Agreement date; that it will not claim that the information declaration and /or explanations in the Teaser and/or other documents are not correct and/or erroneous or any similar claims, and that based on such it will not make any claims from the PA or any other public institution under the scope of warranty for defect provisions or other provisions within the legislation after the shares are transferred.

Contents 1. TEDAS PRIVATIZATION OVERVIEW 1 2. KEY ASPECTS OF THE INTENDED PRIVATIZATION 3 A. TSS MODEL 3 B. ELECTRICITY TARIFFS 3 C. ENERGY SALES AGREEMENTS 5 D. INVESTMENT OBLIGATIONS 6 3. INVESTMENT CONSIDERATIONS 8 4. TURKISH ELECTRICITY MARKET OVERVIEW 10 5. APPENDIX 15

1. TEDAS PRIVATIZATION OVERVIEW Republic of Turkey Prime Ministry Privatization Administration ( PA ) has started the privatization of Turkey s electricity distribution utility, Turkiye Elektrik Dagitim Anonim Sirketi ( TEDAS ). Turkiye Elektrik Dagitim A.S. ( TEDAS ) and its distribution companies 1 are Turkish State-owned joint-stock companies engaged in the distribution and retail sale of electricity and provision of retail services to final customers. With approximately 28 million customers, 93 billion kwh of electricity sales and 98% market share in electricity distribution across Turkey in 2005, TEDAS and its distribution companies together form one of the largest organizations in the country. PA has decided to start the privatization process with the simultaneous tender of 3 companies, each operating in respective regions, namely: Region 9: Baskent Elektrik Dagitim A.S. ( BASKENT ) Region 14: Istanbul Anadolu Yakasi Elektrik Dagitim A.S. ( AYEDAS ) Region 15: Sakarya Elektrik Dagitim A.S. ( SEDAS ) Privatization of distribution companies will be executed using a Transfer of Operating Rights ( TOR ) backed Share Sale model ("TSS model"). According to this model, the investor will be the sole owner of the shares of the distribution company which will be the unique licensee for the distribution of electricity in the designated region but which will not have the ownership of distribution network assets and other items that are essential for the operation of distribution assets. The ownership of these distribution assets will remain with TEDAS. The investor, through its shares in the distribution company, however, will be granted the right to operate the distribution assets pursuant to a Transfer of Operating Rights Agreement ("TOR Agreement") with TEDAS. Under the envisaged market structure, privatized electricity distribution companies will operate as regional monopolies with distribution licenses granted by Energy Market Regulatory Authority ( EMRA ). As part of ongoing liberalization efforts in the energy sector, Turkey s distribution network was divided into 21 distribution regions based on geographical proximity, managerial structure, energy demand and other technical/financial factors. After the inclusion of TEDAS in the privatization programme, a separate distribution company was established by the PA in each one of the 20 distribution regions owned by TEDAS. The geographical coverage of the distribution regions are provided in the following map. The only distribution region operated by a partially private company is Kayseri (Region #18), whose operating rights were transferred to KCETAS in 1990. 1 Turkey s electricity distribution network has been divided into 21 distribution regions as announced in the Strategy Paper. TEDAS, which owns 20 of the 21 regions, have been included in the privatization programme, and a separate distribution company has been established in each of these 20 regions. These distribution companies are currently owned by TEDAS. 1

TURKEY S ELECTRICITY DISTRIBUTION COMPANIES Private Çanakkale Kırklareli 13 Edirne Tekirdağ Balıkesir 11 12 Manisa İzmir Aydın Muğla Bartın Boğaziçi. İstanbul And. Yk. Sinop Kastamonu Zonguldak 14 15 Kocaeli Karabük Samsun Düzce Yalova Ordu Sakarya 21 Bolu Çankırı Amasya Tokat Bursa 9 Çorum Bilecik Ankara Kırıkkale Sivas Eskişehir Yozgat 6 Kütahya Kırşehir 17 Uşak Denizli 19 16 Burdur Afyon Konya Isparta Antalya 10 8 Aksaray Mersin Nevşehir Kayseri Niğde Adana Şanlıurfa Karaman Osmaniye Gaziantep 7 18 20 Kilis Hatay Giresun Erzincan Tunceli Malatya Elazığ K.Maraş Adıyaman Trabzon 4 Gümüşhane Bayburt 5 Rize Diyarbakır 1 Artvin Ardahan Erzurum 3 Bingöl Muş 58,04 Bitlis Siirt Batman Şırnak Mardin Kars Iğdır Ağrı 2 Van Hakkari Source: PA 1. Dicle Elektrik Dagitim A.S 2. Vangolu Elektrik Dagitim A.S 3. Aras Elektrik Dagitim A.S 4. Coruk Elektrik Dagitim A.S 5. Firat Elektrik Dagitim A.S 6. Camlibel Elektirk Dagitim A.S 7. Toroslar Elektric Dagitim A.S 8. Meram Elektrik Dagitim A.S 9. Baskent Elektrik Dagitim A.S 10. Akdeniz Elektrik Dagitim A.S 11. Gediz Elektrik A.S 12. Uludag Elektrik Dagitim A.S 13. Trakaya Elektrik Dagitim A.S 14. İstanbul Anadolu Yakasi Elektrik Dagitim A.S 15. Sakarya Elektrik Dagitim A.S 16. Osmangazi Elektrik Dagitim A.S 17. Bogazici Elektrik Dagitim A.S 18. Kayseri ve Civari Elektrik T.A.S 19. Menderes Elektrik Dagitim A.S 20. Goksu Elektrik Dagitim A.S 21. Yesilirmak Elektrik Dagitim A.S 2

2. KEY ASPECTS OF THE INTENDED PRIVATIZATION A. TSS MODEL The aim of the TSS model is to handover a fully operating distribution company to the investor. Establishment of the distribution company as a separate legal entity, signing of the TOR Agreement, provision of distribution and retail sales licenses and signing of the Energy Sales Agreements have been defined as the necessary pre-requisites for the TSS model implementation. All of these steps have already been completed prior to the privatization tender announcement. In the TSS model, asset ownership of new as well as existing distribution assets belong to TEDAS, while the investor attains the right to operate the distribution network together with the obligation to undertake the necessary investments. In line with the privatization purposes and investor expectations: The ownership of the existing assets and the new assets arising from investments to be carried out by the investor rests with TEDAS. The legal obligations relating to the asset base before the signing of the TOR Agreement (for example, expropriation costs) have been assumed by TEDAS. The investor shall purchase the shares of a company which holds the operating rights of distribution assets and all related assets (e.g., buildings, vehicles, machine park), and the electricity distribution and retail licenses in a given region. All investments shall be realized by the investor and will be recovered through the tariffs. Except for cases of investor misconduct, the part of investments not yet recovered via the tariffs shall be paid by TEDAS to the investor upon the expiry or termination of the contract. B. ELECTRICITY TARIFFS According to the general principles as stated in the Electricity Market Strategy Paper 2, Turkish Electricity Market has gone through a process of vast restructuring in core activities ranging from generation to distribution. Accordingly, a new tariff structure has been developed inline with the new structural requirements in mind. The main purpose of the market liberalization is to achieve lower tariffs by increasing overall system efficiency. Accordingly, the tariffs are calculated as cost-reflective based on predetermined operating and loss/theft improvement targets. The first tariff implementation period (or transition period), set as five years from 2006 to 2010, will serve as the transitory period to a fully cost based tariff structure after 2010. EMRA has already approved the end user tariffs and revenue requirements of each 2 Decision of High Planning Council No. 2004/3 dated 17.03.2004 3

distribution company for the transition period. Revenue requirements cover the projected expenses for providing distribution and retail services and provide an allowance for the target level of technical and non-technical losses. The end-user tariffs for the period after 2010 will be determined by the distribution companies in accordance with the Electricity Market Tariffs Communiqué and the related regulations and will be subject to the Regulator s approval. The first implementation period is designed to have a smooth and gradual transition from existing tariff structure to a lean and simple tariff structure. As of 2010, most customer groups will have cost based tariffs in place and the tariff groups will be simplified to five only, namely residential, industrial, commercial, agricultural irrigation and lightening. According to the Electricity Market Law, the Electricity Market Tariffs Communiqué and other related regulation, the four tariff components 3 ; (a) retail sales, (b) distribution, (c) retail services and (d) transmission; are governed in an unbundled fashion. Retail sales tariff has a price cap which is set as the basket price of the energy purchased by the distribution company. Distribution and retail services have revenue caps which cover operating expenses and investment requirements related to distribution and retail services. Transmission tariff is a complete pass-through of transmission costs as charged by the national transmission company. Customers Residential Commercial Industrial Agricultural irrigation Street lighenting Distribution system usage tariff DECOMPOSITION OF END-USER TARIFF Taxes and other deductions Transmission tariff Retail services tariff TEİAŞ Distribution OPEX component Investments amortization and cost of capital component TOR value component Distr ibution Other charges* Company Lost/theft component Operating margin Pass-through of transmission costs Retail tariff Reference Price (Energ y pric e) TETAŞ Pass-through of energy costs Total end-user electricity tariff * Dual-term tariffs: capacity charge, penalty for overload and reactive energy fee Source: TEDAS As stated in the Strategy Paper, the existing national tariff scheme will be maintained for the first tariff implementation period, rather than implementing regional tariffs so that sudden price fluctuations could be avoided (currently, regional cost based tariffs vary significantly due to wide variation of loss/theft levels and other parameters across the 3 Excluding taxes and other deductions component 4

regions). Implementation of national tariffs, however, will result in revenue imbalances since the distribution company revenues will differ from their envisaged revenue caps. In order to remove such imbalances, EMRA will put in place a tariff equalization scheme to transfer revenues across the regions. TRANSITION PERIOD NATIONAL TARIFFS * (Krs/KWh) 2006 2007 2008 2009 2010 Industrial - MV 11.98 11.87 11.75 11.64 11.53 Industrial - LV 11.98 11.98 11.98 11.98 11.98 Commercial 15.20 14.94 14.58 14.29 14.03 Residential 12.78 12.78 13.03 13.28 13.53 Agricultutal Irrigation 11.53 11.53 11.53 11.53 11.53 Lightening 12.33 12.36 12.40 12.43 12.47 * Mono term tariffs valid throughout the day. Excluding VAT and Municipality tax. Excludes any adjustments to be made throughout years (e.g. inflation adjustment) and assumes no change in today s wholesale energy costs Source: TEDAS While the overall tariffs are pre-determined and approved for 2006-2010, the tariff revision process has still not been finalized. The exact nature and details of the process are expected to be announced by the Regulator soon, however some key highlights of the revision process are expected to be as follows: Revenue Cap: The revenue caps are expected to be guaranteed regardless of the consumption levels in the region. Namely, if a distribution company underbills its revenue cap due to lower consumption, tariff adjustment is allowed for the subsequent period under the supervision of EMRA. In addition, the approved revenue caps for 2006-2010 are expected to be revised due to inflation, based on the changes in the Electricity Market Index ( EMI ) as announced by EMRA. Retail Price Cap: The distribution company could reflect any changes in its energy wholesale reference costs to the price cap through a pass-through mechanism under the supervision of the EMRA. Other than the end-user tariffs, customers are also charged a distribution connection fee for the establishment of the initial connection to the distribution network and a disconnection/reconnection fee in case a disconnection or reconnection is required. The full details of the tariff levels and procedures are explained in the regional tariff, tariff methodology and tariff application guideline documents as approved by EMRA. C. ENERGY SALES AGREEMENTS It is stated in the Strategy Paper that during the transition period 2006-2010, distribution companies are to procure 85% of the regional energy demand consumed by non-eligible 4 4 As per the Electricity Market Law, non-eligible customers shall buy their electricity from the distribution company operating in their region, while eligible customers are already free to choose their suppliers. The eligibility threshold is currently fixed by EMRA at 6.0 GWh per annum. 5

customers from TETAS and the portfolio generation companies carved out of EUAS. Accordingly, each distribution company inherited Energy Sales Agreements with TETAS and EUAS portfolio companies, which largely secure the majority of distribution companies energy needs for the transition period. These Energy Sales Agreements have been established based on regulated prices for the transition period. After the transition period, the distribution company will freely source its wholesale energy needs from alternative sources, e.g., bilateral contracts, spot market, vertical integration. The market balancing and settlement mechanism under the national transmission company, which has become operational recently in 2006, will remove daily market imbalances. A certain portion of the guaranteed supply in the EUAS contract is optional, i.e. the distribution company has the option not to buy the optional amount. This flexibility will protect the distribution company from an unexpected drop in regional consumption level and furthermore will provide the distribution company with the option to alternatively source some portion of its energy from lower cost providers. D. INVESTMENT OBLIGATIONS One of the primary objectives of privatization is to finance required distribution system and network improvements and expansions through private sector investments, thereby removing the burden of such investments away from the State budget. Investments are of great importance in ensuring continuity and quality of service in electricity distribution. The annual expansion, replacement and improvement investments that are required in each of the 20 distribution regions during the first tariff implementation period (2006 2010) have been determined during the preparation of the end-user tariffs. For TEDAS as a whole, the investment requirement for the transition period is a total of YTL 2,750 million, distributed equally to each year of the transition period. These investments have been embedded into the first implementation period tariffs approved by the Regulator; hence, they will be recouped by the distribution companies over time. Investment requirements could be updated by EMRA through the revision mechanisms. Investment expenditures consist of three components: Expansion investments and expropriation cost: Investment expenditures for increasing the capacity of the existing network and the associated expropriation and right of way costs Replacement investments: Investment expenditures for the replacement of the economic assets that have completed their economic lives in the existing network Continuing investments: Investment expenditures for the completion of the already contracted projects, most of which are still continuing After 2010, distribution companies will prepare annual investment plans each year by making projections on consumption growth, analyzing network expansion requirements and other technical parameters. They will then present these investment plans to EMRA for approval. 6

7 After receiving EMRA approval, distribution companies are obliged to implement the approved plans. Implementation of these investments (i.e. investment amount and form) will be monitored through investment control and quality measurement mechanisms set up by the Regulator in collaboration with the distribution companies.

3. INVESTMENT CONSIDERATIONS EMRA approved tariffs do incorporate an allowed level of regulated return on the investments and services to be carried out as part of the electricity sales & distribution activities. In addition to this allowed level of return, the distribution company can create substantial value by beating the pre-approved loss/theft and operational efficiency targets. From the investor s perspective and for the overall development of the electricity sector, the benefits and opportunities of the envisaged system can been summarized as follows: The investor is allowed to retain excess value derived from outperforming the predetermined loss/theft targets approved by the Regulator. Accordingly, as a result of this policy, technical and non-technical losses, which have become an excessive financial burden in Turkey over the years, are expected to be reduced to single digit figures. The investor is allowed to retain the savings achieved if energy is sourced at a lower wholesale cost than the regulated reference price. This policy will pave the way for construction of low-cost electricity production facilities going forward. The investor is allowed to retain excess value derived from outperforming the predetermined operational improvement targets approved by the Regulator. This will trigger efficiency improvements in electricity distribution. Particularly after year 2010, distribution companies will be able to vertically integrate to produce electricity and sell excess production in an open market, thereby increasing their revenues. Vertical integration will be instrumental in the development of an open market in electricity. At each distribution company, substantial operational efficiency improvements are believed to be achievable through optimizing core business processes such as billing and collections, arranging and redesigning work flows, enabling effective coordination between divisions, improving information systems and infrastructure and optimizing personnel productivity. In a broader perspective, Turkey provides a strategic position in the European energy markets with a stable and high-growth electricity industry. Introduction of an effective regulation and a liberal market structure have further enhanced the industry growth prospects for the coming years and enabled value creation opportunities for private players. The Turkish electricity sector has been modeled on EU market structure and a transparent regulatory framework has been set by the independent authority, EMRA. In the following years, further opportunities will arise for the privatized distribution companies from privatization/liberalization in the broader energy sector particularly in the generation area. Today, Turkish economy offers more stable market conditions primarily driven by the wideranging structural reforms undertaken and also as a result of the ongoing EU integration. The GDP grew by 8.9% and by 7.4% in 2004 and 2005, respectively and the inflation rate has fallen to 7.7% in 2005, the lowest figure in the last 35 years. This improved outlook has encouraged international investors to take on more Turkey risk; also taking into account the 8

9 strengthening fiscal and debt positions (yielding a surplus in the central budget in May 2006 for the first time in the last 22 years). Provided that the economic reforms are implemented swiftly, Turkey can expect to benefit disproportionately from the international FDI pool over the next decade.

4. TURKISH ELECTRICITY MARKET OVERVIEW The electricity industry is a large, high-growth sector in the Turkish economy. The industry contributes significantly to the country s GDP and is a USD 12 billion industry at current end-user prices. The sector s share in the Turkish economy has been growing rapidly, given the 8% per annum growth in electricity demand over the past two decades. This rate of demand growth has been higher than the growth rates seen in other major Turkish industries and outstrips growth in the Turkish economy overall. In 2004, the Turkish electricity sector recorded approximately 151 billion kwh of gross consumption (161 billion kwh in 2005) and 121 billion kwh of net consumption (excluding loss/theft and internal consumption). The industrials customer group represent approximately 50% of the total demand, while residential customers consume slightly less than a quarter of the total. Commercials customer group, excluding public institutions, is placed third in terms of consumption with a 13% share. Distribution losses of the system, which amounted to 19.8 billion kwh in 2004, are high compared to international benchmarks. Accordingly, one of the primary objectives of the electricity sector reform has been defined as reducing the loss/theft ratio to OECD levels. Electricity generation, imports & exports, distribution losses and the net consumption of main customer groups in 2004 are summarized in the following chart. GENERATION & NET CONSUMPTION *, 2004 PRODUCTION 150.7 TWh INTERNAL CONSUMPTION 5.6 TWh TOTAL 151.2 TWh GRID LOSS 3.4 TWh DISTRIBUTION LOSS 19.8 TWh IMPORT 0.5 TWh EXPORT 1.1 TWh Industrial Residential Commercial Other CONSUMPTION 59.6 TWh 27.6 TWh 15.7 TWh 18.3 TWh 121.1 TWh * Figures are in TWh; 1 TWh equals 1 billion kwh Source: TEDAS, TEIAS Electricity consumption growth has historically been less volatile than the overall economic growth in Turkey. Between 1980 and 2004, GDP growth displayed a wide variance with a standard deviation of 4.7% around an average growth rate of 4%. Consumption growth in the electricity sector during the same time period displayed a lower standard deviation of 10

3.2%, around a higher average growth rate of approximately 8%. As can be seen in the next chart, electricity consumption was negative only in a single year over the past 25 years. ELECTRICITY CONSUMPTION VS. GDP GROWTH, 1980-2004 GDP growth (% ) 25 20 15 10 5 0-5 -10 1980 1984 1988 1992 1996 2000 2004 Electricity consumption growth (% ) 25 20 15 10 5 0-5 -10 1980 1984 1988 1992 1996 2000 2004 Average growth = 4.2% Average growth = 7.7% Standard deviation: 4.7% Standard deviation: 3.2% Source: TEDAS, SIS Despite increasing demand, Turkey s per capita gross consumption is still very low at 2,090 kwh compared to the EU average of 6,460 kwh. According to the Ministry of Energy and Natural Resources ( MENR ) 2004-2020 projections that assume a continued cumulative annual growth rate of 7.7% in gross demand, per capita consumption is forecasted to reach 5,700 kwh by 2020. During the 1980s, average consumption growth was the same for all customer groups around 8%. After 1990s, however, consumption growth for residential and commercial customer groups outpaced that of industrial customer group. Nevertheless, the industrials segment still accounts for approximately 50% of electricity consumption in Turkey. The next chart illustrates consumption growth for each customer group over the past two and a half decades. 11

ELECTRICITY CONSUMPTION BY CUSTOMER GROUP, 1980 2004 (TWh) 121.1 TWh CAGR 7.7% 67.4 TWh 98.3 TWh 17% 10% 15% 13% 23% 20.4 TWh 6% 9% 22% 64% 29.7 TWh 5% 10% 19% 66% 46.8 TWh 13% 5% 20% 62% 16% 6% 22% 56% 24% 50% 49% 1980 1985 1990 1995 2000 2004 Industrial/Autoproducers Residential Commercial Other* 0.9 1.7 3.5 5.1 7.7 11.5 ESTIMATED INDUSTRY REVENUES (USD billion) * Electricity used by public institutions, lightening, agricultural irrigation and non profit organizations such as schools and hospitals Sources: TEDAS, TEIAS The forces that fuel growth in the sector are continued economic and industrial development, population growth and improving income levels. According to projections prepared by the national transmission company TEIAS on the growth of supply, there is sufficient generation capacity at least until year 2009. Required investments for more capacity are expected to be covered primarily by private sector investments. Should this not take place, the State will take necessary measures to provide additional capacity, including imports and rehabilitation of existing plants to provide supply assurance, as stated in the Strategy Paper. Turkish electricity sector was dominated by the State-owned vertically integrated company Turkiye Elektrik Kurunu ( TEK ) until the early 1990s. In 1993, in view of market liberalization and privatization, TEK was separated into TEAS (generation, transmission and wholesale) and TEDAS (distribution). Then, with the enactment of the Electricity Market Law in 2001, TEAS was further unbundled into EUAS (generation), TETAS (wholesale) and TEIAS (transmission), each being organized as a separate legal entity. In this context: EUAS was envisaged to take over the ownership and the operation of the State thermal power plants from TEAS and the hydroelectric power plants from the Devlet Su Isleri ( State Water Works ). EUAS was also empowered to build, lease and operate new generation facilities, if deemed necessary, in accordance with the EMRA approved generation capacity projections and taking into consideration the generation investments by the private sector. TETAS was created to conduct wholesale operations and take over the existing energy sale and purchase agreements from TEAS and TEDAS. TETAS was also held 12

responsible for managing the stranded costs associated with the Build Operate ( BO ), Build Operate Transfer ( BOT ) and TOR generation contracts. TEIAS took over all transmission facilities owned by the State and was named responsible for transmission system operations and maintenance, developing transmission investment plans for new facilities and also for operating the market balancing and settlement center. HISTORICAL DEVELOPMENT OF MARKET STRUCTURE Pre 1993 TEK (generation, transmission & distribution) Between 1993-2003 TEAS (generation & transmission) TEDAS (distribution) Today EUAS (generation) TEIAS (transmission) TETAS (wholesale) 21 COMPANIES (distribution) Source: PA Currently, State dominance is still very much prevalent across the electricity value chain. In 2004, EUAS and its subsidiaries held 59% of the total installed generation capacity in Turkey and generated 45% of electricity produced countrywide. In transmission and wholesale, TEIAS and TETAS operate as national monopolies, and at the lower end of the value chain, TEDAS and its distribution companies have 98% market share in distribution covering 20 of the 21 distribution regions and a 71% share in countrywide electricity retail sales. 13

ELECTRICITY SECTOR VALUE CHAIN VALUE CHAIN GENERATION TRANSMISSION DISTRIBUTION RETAIL SALES PUBLIC/PRIVATE OWNERSHIP Still State dominated with private players slowly increasing their share in the past 5 years Totally under State control Still controlled by State in 20 out of 21 distribution regions Eligible customers are able to source energy through channels other than TEDAS Private producers* 39% 16% EUAS and subsidiaries 45 TEIAS 100% KCETAS 2% 98% TEIAS customers and others Auto- 7% producers 21% 1% KCETAS TEDAS 71% Autoproducers TEDAS State-owned companies * Private produces include BO, BOT, TOR and mobile power plants Source: TEIAS, TEDAS 14

5. APPENDIX NUMBER OF CUSTOMERS ( 000), 2005 # REGIONS Residential Commercial Public Instutions Industrial Agricultural Irrigation Other TOTAL 1Dicle EDAŞ 755.0 103.8 5.3 4.1 12.7 17.4 898.3 2Vangölü EDAŞ 314.4 34.5 3.8 2.8 0.9 4.3 360.8 3Aras EDAŞ 561.7 73.9 7.9 3.3 0.7 26.0 673.5 4Çoruh EDAŞ 801.3 89.7 7.0 5.6 1.7 21.4 926.7 5Fırat EDAŞ 501.5 63.7 5.4 3.2 20.4 6.3 600.5 6Çamlıbel EDAŞ 589.6 62.0 5.0 7.6 3.2 14.0 681.3 7 Toroslar EDAŞ 2,043.4 316.9 10.9 12.0 52.0 30.8 2,466.1 8Meram EDAŞ 1,140.6 159.3 12.4 12.9 35.1 48.7 1,409.0 9Başkent EDAŞ 2,333.6 324.4 18.1 36.1 8.6 29.6 2,750.4 10 Akdeniz EDAŞ 1,000.8 164.4 7.5 7.5 63.4 30.8 1,274.4 11 Gediz EDAŞ 1,800.7 301.9 9.3 11.7 53.3 35.3 2,212.2 12 Uludağ EDAŞ 1,721.5 254.9 12.5 14.5 14.4 41.0 2,058.8 13 Trakya EDAŞ 598.3 90.1 5.3 6.5 2.0 12.7 714.9 14 AYEDAŞ 1,510.1 319.6 1.7 13.6 0.4 9.4 1,854.8 15 Sakarya EDAŞ 1,060.7 164.4 4.6 9.3 2.3 19.1 1,260.4 16 Osmangazi EDAŞ 964.5 141.0 7.6 11.8 14.2 22.1 1,161.2 17 Boğaziçi EDAŞ 2,786.5 558.2 5.0 84.0 0.2 87.9 3,521.9 19 Menderes EDAŞ 1,081.0 155.3 7.2 30.9 40.5 31.2 1,346.2 20 Göksu EDAŞ 371.3 40.3 3.6 7.3 7.2 7.1 436.8 21 Yeşilırmak EDAŞ 1,149.0 148.9 9.5 4.3 23.4 29.3 1,364.4 TOTAL 23,085.4 3,567.4 149.7 289.1 356.7 524.4 27,972.6 Source: TEDAS NET CONSUMPTION (GWh), 2005 # REGIONS Residential Commercial Public Instutions Industrial Agricultural Irrigation Other TOTAL 1Dicle EDAŞ 1,023 285 274 818 441 1,162 4,003 2Vangölü EDAŞ 291 74 117 83 7 185 757 3Aras EDAŞ 559 143 247 100 12 265 1,326 4Çoruh EDAŞ 710 219 129 441 1 164 1,664 5Fırat EDAŞ 470 145 166 608 92 163 1,644 6Çamlıbel EDAŞ 512 131 90 576 61 191 1,560 7 Toroslar EDAŞ 2,626 1,056 459 4,340 403 1,151 10,034 8Meram EDAŞ 1,144 428 158 1,180 933 477 4,320 9Başkent EDAŞ 2,989 1,427 645 1,901 93 986 8,041 10 Akdeniz EDAŞ 1,209 1,412 379 465 156 414 4,035 11 Gediz EDAŞ 2,810 1,278 385 3,493 403 1,078 9,447 12 Uludağ EDAŞ 1,923 821 260 2,209 101 656 5,970 13 Trakya EDAŞ 695 242 112 1,538 87 366 3,040 14 AYEDAŞ 2,851 1,633 145 1,244 0 442 6,315 15 Sakarya EDAŞ 1,137 626 191 1,646 4 529 4,134 16 Osmangazi EDAŞ 892 348 132 1,573 121 353 3,418 17 Boğaziçi EDAŞ 5,090 4,882 350 3,103 4 645 14,074 19 Menderes EDAŞ 1,223 807 187 1,041 132 662 4,050 20 Göksu EDAŞ 407 159 67 1,461 99 177 2,370 21 Yeşilırmak EDAŞ 1,130 316 129 1,020 39 359 2,994 TOTAL 29,690 16,431 4,623 28,839 3,189 10,423 93,196 Source: TEDAS 15

LOSS AND THEFT, 2005 # REGIONS Purchased Electricity (GWh) Sold Electricity (GWh) Loss and Theft (GWh) Loss and Theft (% ) 1Dicle EDAŞ 11,219 4,003 7,216 64.3% 2Vangölü EDAŞ 1,998 757 1,241 62.1% 3Aras EDAŞ 1,942 1,326 615 31.7% 4Çoruh EDAŞ 1,943 1,664 279 14.4% 5Fırat EDAŞ 1,918 1,644 274 14.3% 6Çamlıbel EDAŞ 1,738 1,560 178 10.3% 7 Toroslar EDAŞ 11,547 10,034 1,513 13.1% 8Meram EDAŞ 4,652 4,320 332 7.1% 9Başkent EDAŞ 9,045 8,041 1,004 11.1% 10 Akdeniz EDAŞ 4,447 4,035 412 9.3% 11 Gediz EDAŞ 10,174 9,447 727 7.1% 12 Uludağ EDAŞ 6,643 5,970 674 10.1% 13 Trakya EDAŞ 3,375 3,040 336 9.9% 14 AYEDAŞ 7,049 6,315 734 10.4% 15 Sakarya EDAŞ 4,712 4,134 578 12.3% 16 Osmangazi EDAŞ 3,670 3,418 252 6.9% 17 Boğaziçi EDAŞ 16,804 14,074 2,730 16.2% 19 Menderes EDAŞ 4,453 4,050 403 9.1% 20 Göksu EDAŞ 2,653 2,370 283 10.7% 21 Yeşilırmak EDAŞ 3,393 2,994 399 11.8% TOTAL 113,376 93,196 20,181 17.8% Source: TEDAS 16