ENERGY From refinery to distribution, and from power generation to mining, as Turkey s leading energy group, we are the key! As Tüpraş, we are Turkey s sole producer in the refining industry. As Opet, we maintain our leadership in terms of customer satisfaction. As Aygaz, we are the leader and most recognized LPG brand in the country. 56 / 57 KOÇ HOLDİNG Annual RePORt 2012
Hikmet Kurucu Tüpraş koç GROUP
ENERGy Paralleling economic growth, Turkey s consumption of electricity increased 5.1% to 241 TWh. Developments in the petroleum sector in 2012 Turkey s GDP growth rate is expected to fall to about 3% in the face of the global economic slowdown and policies taken to address the country s current account deficit. Oil price was $106.5/barrel at the beginning of 2012, and it fluctuated throughout the year in response to economic and political developments. The year closed with oil at $110/barrel. The global economic growth rate of 3.2% had a positive impact on the world s oil demand with average daily consumption rising by 1.1% to 89.84 million barrels. Consolidation in refinery industry accelerated in 2012 due to the decline in consumption created by European countries conservation measures and pressures brought on by the increasing price differential between WTI and Brent crude oil. As a result, refineries with 1.49 million/day total capacity either ceased operations or were transformed into commercial terminals, as they became unable to sustain profitability. While this had a favorable impact on Mediterranean refinery margins, sanctions on Iranian oil had an unfavorable impact. Competition in the domestic oil distribution sector intensified in 2012, affecting quality and product and service diversity positively. The measures taken against illegal fuels began to pay off. Dynamism in the sector continued as new players attempted to enter it while those unsuccessful ones left. Another significant development in the oil distribution sector was the increase in the special consumption tax (ÖTV) after a three year hiatus. Additional measures were taken to eliminate the adverse effect on the sector of substandard or contraband products. For instance, the Ministry of Finance took action to prevent use of the no. 10 oil as fuel, the most common form of illegal fuel, which is also a major environmental threat, and source of tax losses. After having imposed ÖTV on lubricants on 14 September 2011, the ministry implemented a taxreturn policy on the ÖTV on base oils on 11 October 2012. It is expected that the measures taken will be effective in preventing such illegal practices. Demand for diesel fuel consumption continued to rise. According to the Energy Market Regulatory Authority (EPDK), total diesel fuel consumption rose 6.1% to 15.6 million tons in 2012. Total white products consumption (gasoline and diesel fuel) grew by 4.6%, while that of black products (fuel oil and heating oil) declined by 12.6% in 2012. The decline in gasoline demand continued as a result of increasing autogas usage, dieselization and uneven taxation. Gasoline consumption decreased by 6.6% to 1.85 million tons. According to a government communiqué published in 2011, minimum 2% bioethanol is being added to gasoline since 1 January 2013. As of 1 January 2014, diesel fuel will have to contain at least 1% biodiesel, with the proportion gradually rising in subsequent years to 3%. However a change in the regulation, reducing the ratio to 0.3% as of 2014, is currently being discussed. While the necessary domestic crops and production capacity exist for bioethanol, over 70% of the vegetable oils, the main input for biodiesel production, 58 / 59 KOÇ HOLDİNG Annual RePORt 2012
koç GROUP Bülent Küçük Aygaz are imported and this figure is increasing. Therefore, biodiesel production in Turkey will likely result in a further increase in vegetable oil imports. Turkey s LPG sector in 2012 LPG consumption in Turkey, Europe s second largest LPG market, was 3.7 million tons in 2012, of which 73% was for use as autogas and 24% as cylinder gas in nearly 10 million households and businesses. Autogas consumption in Turkey, the second largest autogas market in the world and the largest in Europe, grew by 2% in 2012 to 2.7 million tons. The Turkish market makes up 11% of the total world autogas market. On 22 September 2012, ÖTV on autogas was increased, while ÖTV on cylinder gas did not change. The exemption of cylinder gas from ÖTV increases, is an important development for the sector. Electricity sector developments in 2012 The world economy has been adversely affected by the uncertainties created by the world economic crisis. Most importantly, the situation of some countries in the European Union has shaken all markets. The continuation of the crisis caused the rapidly growing interest in renewable energy to decline. Paralleling economic growth, Turkey s consumption of electricity increased 5.1% to 241 TWh. The free eligible customer limit, which gives electricity consumers the right to choose providers, was set at 25,000 kwh/year in 2012. Privatization of distribution assets continued and tenders previously canceled were reopened. Privatization of the Electricity Generation Company s (EÜAŞ) assets began with the Seyitömer and Kangal thermal power plants and it is expected to continue in 2013. There were two major developments in the electricity market that may have a direct impact on consumer prices: BOTAŞ imposed price hikes in April and October on natural gas sold to natural gas conversion electric power stations, totaling 32%. The EPDK raised the profit margins of electricity distribution companies from 2.33% to 3.49%. Koç Holding Energy Group Tüpraş, flagship company of Koç Group, Turkey s energy sector leader, maintained its customer-focused strategy in 2012 and achieved a higher than sector average growth in diesel sales, raising its market share from 51.5% to 53.1%. Tüpraş also increased its gasoline market share from 91.5% to 96.4% through its competitive strength founded on its storage and terminal infrastructure. Paralleling developments in the air transportation sector, the domestic sales of civilian jet fuel rose by 499,000 tons. The continued rapid growth of the Turkish air transportation sector enabled Tüpraş to increase sales of jet fuel by 20%. Aygaz maintained its clear lead in the LPG sector with a market share of 29%, according to the EPDK data. The total market share of the Aygaz group in cylinder LPG was 43%. It also remained market leader in autogas with a 23% market share.
ENERGy TÜPRAŞ Energy, the key to growth; Tüpraş, the key to energy 26,276 Ahmet Total Revenues (US$ million) Yavuz Tüpraş Domestic Market Position Turkey s sole oil refining company 60% market share in fuel products, excluding industrial products International Market Position Europe s 7 th and the world s 29 th largest refining capacity Share of International Revenues 21.4% Shareholder Structure Enerji Yatırımları A.Ş. 51.00% Free Float 49.00% Turkey s largest industrial company Tüpraş is Turkey s only oil refining company, operating four refineries in Izmit, Izmir, Kırıkkale and Batman, with a total annual crude oil processing capacity of 28.1 million tons; it is the country s largest industrial company by revenues and added value generated. Europe s 7 th largest refining company, Tüpraş is among the most complex refiners in the Mediterranean region, with a Nelson Complexity Index of 7.25. Strategy Aware of ever rising competition within the sector, Tüpraş aspires to the highest level of operational excellence to maximize value for Turkey and the Company s shareholders. To accomplish this, Tüpraş targets ranking within the first quartile of refineries in terms of facility availability, energy index and operating costs. Marine transport: Ditaş Ditaş, a 79.9% owned subsidiary, provides crude oil and petroleum products logistics and transportation services to Tüpraş. It owns a fleet of two crude oil and three product tankers, including the 55 DWT M/T Suna, which entered service in November 2012, and 18 tugboats; the subsidiary also leases additional vessels. In 2012, Ditaş carried 17.9 million tons in total cargo, which included 14.8 million tons of crude oil and 3.1 million tons petroleum products. Operational flexibility, optimized production and effective sales policies In 2012, Tüpraş increased its production and sales volumes by 4.6% and 6.5%, respectively, through operational flexibility, optimized production and effective sales policies. Tüpraş achieved an 83.5% total capacity utilization rate, thanks to the successful implementation of optimum stock-production programs. On the domestic front, Tüpraş s performance paralleled the rise in market demand in 2012. The Company supplied 19.6 million tons of products, an increase of 836 thousand tons over the previous year. 60 / 61 KOÇ HOLDİNG Annual RePORt 2012
www.tupras.com.tr Ahmet Yavuz Tüpraş koç GROUP With the addition of 5.9 million tons in exports, total sales grew to 25.4 million tons, up 6.5% over 2011. Tüpraş s jet fuel sales increased by 20% and diesel sales rose 10% during the year; as a result, the Company achieved its highest sales figures ever. Residuum Upgrade Project 54% complete: the countdown is on to November 14, 2014 The Residuum Upgrade Units are due to come online in November 2014. These units will enable about 4.2 million tons per year of heavy fuel oil products, which has seen demand fall in recent years, to be converted into about 3.5 million tons of more valuable and more environmentally friendly white products, mostly diesel fuel at Euro V standard. The Tecnicas Reunidas consortium and five local subcontractors have construction and assembly underway at the 1.3 million m 2 site of this project, which has garnered two awards for best investment financing. The project was 54% complete at year-end 2012. Total investment in the facility has reached US$ 1.3 billion, of which US$ 1.0 billion originated from the financing package obtained. Strong corporate governance and financial structure Tüpraş raised its rating on the ISE corporate governance index to 9.10 in 2012, up from 7.91 in 2007, when the index was first launched. Fitch Ratings affirmed Tüpraş s long-term foreign and local currency ratings at BBB- on October 10, 2012. To take advantage of increased global liquidity and funds channeled to developing countries, and to diversify its funding sources, Tüpraş issued a US$ 700 million, 5.5-year bond on the London Stock Exchange on November 2, 2012. The issue was priced at a 4.168% annual yield. Tüpraş s achievements and awards in 2012 Ranked 1 st among Turkey s 500 largest companies according to the Istanbul Chamber of Industry. Led Turkey as the export champion with US$ 4.3 billion in exports. Ranked 2 nd by Platts Insight Magazine EMEA (Europe, Middle East and Africa), in the Refining & Marketing category. Awarded 1 st prize for the fifth consecutive year for the Batman Refinery in the Ministry of Energy s SENVER project competition, in the SEVAP-2 category. Ranked in the top tier (2 nd, 4 th and 6 th ) in three out of four categories in the Ministry of Science, Industry and Technology s R&D center assessments.
ENERGy Opet www.opet.com.tr Opet has consistently been the fastest growing player in the market in recent years. 8,221 Total Revenues (US$ million) Domestic Market Position 2 nd in white products with a 18.5% market share 2 nd in black products with a 13.6% market share Share of International Revenues 18% Shareholder Structure Tüpraş 40.00% Other Koç 10.00% Öztürk Group 50.00% Continued market share growth Opet, celebrating its 20 th anniversary and its 10 th year since joining the Koç Group, conducts retail and wholesale operations in the fuel distribution sector. It also produces and markets lubricants, sells jet fuel and engages in the international trade of petroleum products. Opet has consistently been the fastest growing player in the market in recent years while aiming to be the first choice of Turkish consumers. Despite limited growth in the white products market during 2012, Opet expanded its sales volume by 7% over the prior year. Meanwhile, the Company s black product sales volume declined 18%, in parallel to the fall in market demand for black products. New product launches In the second half of 2012, Opet launched EcoForce and UltraForce, two diesel products with different additives thus expanding and diversifying the product range available to customers. These products are in demand by different consumer segments. Highest storage capacity in the fuel oil distribution sector Opet has a total storage capacity of 1.1 million m 3. The Company continues to provide storage services to international companies at its Marmara Ereğlisi Terminal and leased out 276,000 m 3 capacity in 2012. Seven consecutive years as unrivaled leader in customer satisfaction Opet has achieved sustainable leadership in customer satisfaction due to the importance it places on its customers. The Company has been the sector s unrivaled leader in customer satisfaction for seven consecutive years, according to the Turkish Quality Association s Customer Satisfaction Index. Respect for the environment and responsibility toward society Opet conducts all its operations in accordance with the highest ethical standards and a strong sense of responsibility toward its stakeholders. This awareness guides the Company s development and implementation of social responsibility projects. Having embedded social responsibility in its corporate culture, Opet has carried out many successful initiatives, such as Respect for History, Green Path, Model Village, and Clean Toilet. 2013 and beyond The continuous improvement of product and service quality through a customer-focused approach is the foundation of Opet s corporate strategies going forward. The Company s main targets include maintaining benchmark level customer satisfaction and growing market share by expanding the station network. 62 / 63 KOÇ HOLDİNG Annual RePORt 2012
AYGAZ The key to Turkey s LPG market Bülent Küçük Aygaz www.aygaz.com.tr 3,116 Total Revenues (US$ million) Bülent Küçük Aygaz koç GROUP Domestic Market Position Leader in the LPG market since its founding in 1961 43% market share in cylinder LPG 23% market share in autogas 29% market share in the total LPG market International Market Position Europe s 5 th largest LPG distribution company Share of International Revenues 13% Shareholder Structure Koç Holding 40.68% Other Koç 10.53% LPGDC 24.52% Free Float 24.27% The country s first and only publicly traded LPG company, Aygaz ranks 10 th in the Istanbul Chamber of Industry s 2011 list of the largest industrial enterprises in Turkey. Established in 1961 as the first Koç Group company in the energy sector, Aygaz has maintained its market leading position in Turkey while becoming one of Europe s five largest LPG distributors. A new look for small cylinders At year-end 2011, Aygaz, the sector pioneer, added blue sleeves to its 2 kg LPG cylinders. This innovation served to differentiate Aygaz-brand cylinders from other brands in the market, while instilling consumer confidence in the use of these sleeved cylinders in the home with their neat look. The practice have received a very positive reaction from customers. A new brand - Aygaz Otogaz Based on its success at generating consumer appreciation of the distinctive quality of its product and services, Aygaz modified its brand in the autogas segment in 2012 to reflect the brand s specific features more clearly. The new brand, Aygaz Otogaz, is easier for consumers to articulate and recall. Additionally, the Aygaz Otogaz brand logo was redesigned. Raising autogas awareness Aygaz launched an awareness campaign in 2012 to demonstrate to non-autogas users the product s features. The Fuel of the Future: LPG campaign promoted autogas as a high-performance, safe, readily available, environmentally friendly and economical fuel.
ENERGy AYGAZ www.aygaz.com.tr Kutlay Toprak Aygaz Doğalgaz Pürsu Aygaz sells Pürsu bottled water under a bottling agreement with two spring water plants in Sakarya/ Sapanca and Aydın/Nazilli. In 2012, sales of Pürsu made through 523 dealers in 30 provinces in four regions, rose to a daily average of 14,500 units, an increase of 45% against overall market growth of 1.5% during the year. Aygaz investments and merger with Mogaz Aygaz and its subsidiary Mogaz have taken several steps in recent years to enhance operational efficiency through cooperation. In 2004, Mogaz s production facilities were transferred to Aygaz for single point management of all production. Since then, the partnership has expanded and transitioned to include the common management of support functions. With the goal of carrying over the efficiencies achieved in procurement and production to brand management, sales and logistics, the Aygaz Board of Directors resolved on July 16, 2012 to merge with Mogaz. Based on the financial statements dated June 30, 2012, the merger was completed on January 22 2013. Main awards Aygaz received the Consumer Satisfaction Award of the Ministry of Customs and Trade for the second consecutive year. Aygaz further improved its corporate governance rating to 8.96, the 3 rd highest rating for a company in Turkey. Aygaz also placed among the companies with the best rating on the 150-country World Corporate Governance Index. 2013 and beyond Aygaz s main goal is to be the leading energy solutions provider in the LPG and natural gas markets in Turkey and other potential geographic regions. Foremost among Aygaz s short and medium term strategies is increasing the Company s market share in all its segments in order to sustain its market leadership position and raise profitability. Its long-term goal is to expand its energy pool by generating alternative projects that will meet Turkey s growing energy needs. AYGAZ DOĞAL GAZ In addition to selling and transporting liquefied natural gas (LNG), Aygaz Doğal Gaz sells natural gas obtained in the domestic market through pipelines to independent consumers. With the agreements made in 2012, Aygaz Doğal Gaz increased its pipeline gas sales activities and developed its customer portfolio. The Company rose its trade volume to 500 million m 3 at the year-end, with its pipeline gas agreements made in 2012. 64 / 65 KOÇ HOLDİNG Annual RePORt 2012
Onat Başbay Demir Export koç GROUP AES ENTEK AES Entek, Koç Group s power generation company, operates two natural gas combined cycle plants and one gas turbine-based cogeneration facility in Kocaeli, Bursa and Istanbul with a total capacity of 302 MW. The Company also has three hydroelectric power plants, two in Karaman and one in Samsun, which have a combined capacity of 62 MW. With the addition of 4,000 MW in new capacity in 2012, Turkey s total installed capacity grew to 57,060 MW, 22,900 MW of which is located at private power generation companies and auto producer plants operated by the private sector. At year-end 2012, AES Entek held 1.6% of Turkey s private sector installed capacity and accounted for 1.44% of private sector power generation. The Company s consolidated revenues totaled TL 308 million in 2012. New investments, new targets In 2012, AES Entek acquired a 50% stake in Ayas A.Ş. from the Armed Forces Pension Fund (OYAK). Located in Adana, the Company plans to begin generating electricity from imported coal in 2016. In another significant investment, the Company acquired three hydroelectric plants with a combined generation capacity of 62 MW from its partner AES. DEMİR EXPORT Demir Export is one of Turkey s largest and most well established mining companies. The Company extracts and sells coal, iron ore and copper and chrome concentrates from nine mining operations located in the country. In 2012, Demir Export continued work to drill development galleries for underground coal extraction at the Manisa-Soma coalfield. The Company also concluded negotiations to procure fully mechanized mining equipment needed for coal extraction. In addition, it finalized plans to start operations at a gold mine in Bakırtepe, Sivas and at an iron ore mine in Kalkan, Kütahya in 2013. Demir Export continued reserve development projects at prospective gold, copper, silver, zinc and coal deposits at different locations in Turkey, drilling a total of more than 31,000 meters during 2012. The Company also acquired important mining licenses for gold and base metal projects, in particular in Erzurum, Malatya, Giresun and Western Anatolia. Onat Başbay Demir Export AES Entek also continues its investments in a 220 MW natural gas power plant located next to the Kırıkkale- Tüpraş facility. In 2013, AES Entek aims to increase its future market share through investments and acquisitions by focusing on alternative energy sources.