Valued Partners,
2019 was undoubtedly a challenging year for our country and the world in general. We have witnessed a proliferation of undue political choices, ongoing wars and tensions and global income inequalities to the extent of reversing the trend of globalisation which is propelling the world economy to a new crossroads. One of the main reasons of these developments is USA’s, the customary flagship of globalisation policies, starting a trade war with the rest of the world and particularly China. This war has played negatively on the Euro Zone as well as developing countries.
2019 became a year of global and national scale deceleration. According to IMF data the growth in the global economy remained at 3% which is the lowest figure on record in the period after 2010. This is why the global economy enters 2020 with considerable commercial and political uncertainties.
IMF data shows that the world economy grew by 2.9% and global trade volume rose by only 1% in 2019. The Fund’s forecast for 2020 stands at 3.3% for global economic growth and 2.9% for trade volume. Yet, OECD paints a bleaker picture for 2020 with forecasts of 2.9% for growth and 1.6% for trade volume.
On the other hand, oil prices slumped by 11.3% in 2019 and is expected fall by another 4.3% in 2020. Such trends will play positively on the current account balances and inflation figures of energy dependent countries such as Turkey. However, we cannot disregard the problems in the Middle East which have the potential of causing significant fluctuations in oil prices during 2020.
Mainly due to an unstable local geography, Turkey has invariably faced costly consequences. The country is feeling the impact of a growing population now in excess of 80 million as well as being host to the world’s largest refugee population of nearly 4 million and regional tensions which have been running high for the last 5 years. Turkey entered 2019 with an exchange rate shock that had been ongoing since August 2018 leading to double figure inflation, surging interest rates followed by a shrinking economy and record unemployment levels. The industry sector suffered gravely from the developments of 2019, adding to another year of loss. Moreover, a discrepancy between production and consumption preferences, increased borrowing, regression in savings ratios, increased foreign resource dependency, informal economy and unfair competition coupled with falling machinery-equipment investments for the last 5 quarters has significantly hindered hopes for the future across the sector. The IMF and OECD forecasted growth rates of 0.2% and 0.3% respectively. The forecast announced in the New Economy Programme (NEP) which covers the years 2020 to 2022 stands at 0.5%. Overall, the economy of Turkey grew 2019 but only very insignificantly.
On the other hand, forecasts for 2020 suggest that inflation will rise by 0.3% to 1.7% in developed countries and fall by 0.5% to 4.6% in developing countries. Comparing this data with current figures in Turkey gives a clear message as to what the priority should be in national economy policies. With the current inflation figures, it is nearly impossible for Turkey to acquire competitive power and adequately attract non-speculative sources of the global economy.
Now for an assessment of the sector;
As of the end of 2019, Turkey’s installed capacity increased to 91,5352 MW. This power was respectively produced by Independent Production Companies like ourselves (67.72%), public sector (EUAS) (21.44%), Custom Model Production Companies (BO, BOT, Operation License Transfer) (3.93%) and unlicensed production companies (6.91%). The distribution of installed power according to resources was hydroelectricity (31.2%), coal fired thermal (52.3%), wind (8.3%), geothermal (1.7%), and solar (6.6%). In other words, the share of renewable production capacity in installed capacity has reached 47.7%.
Economic stagnation over recent years has led to a slower rise in demand. Energy demand at the end of 2019 was 290,447 billion kWh.
In 2019, the distribution of electricity production by source was as follows: 38.87% from coal, 19.22% from natural gas, 30.52% from hydraulic energy, 10.31% from wind, solar and geothermal energy and 1.08% from other sources.
The Renewable Energy Support Mechanism (RESM) remained appealing for independent producers due to electricity sales price and exchange rate volatility, a problem experienced over recent years which persisted during 2019. In 2019, 817 power plants with a total installed capacity of 21 GW applied and qualified to benefit from RESM.
Through its subsidiaries and affiliated partners, Enda Holding operated 10 plants (4 HPP, 1 GPP, 5 WPP) during 2019 with a total installed capacity of 180.18 MW and an annual production capacity of 570 GWh.
Antalya Energy NG Cogeneration Plant terminated operations at the end of 2016. Equipment inside the plant were sold in 2019 and the company was handed over the site following the issue of a site delivery protocol.
Tirenda Energy NG Cogeneration Plant ended operations on 31.05.2017 followed by a cancellation of its production license. An agreement was made for the sales of equipment in 2019 based on a deferred payment method which should be concluded during 2020.
For the past few years we have focused our efforts on institutionalisation and worked relentlessly to establish an effective quality management system at international standards. Our dedication has been rewarded with a qualification to receive the ISO 9001 Quality Management, ISO 14001 Environmental Management, ISO 45001 Occupational Health and Safety, ISO 27001 Information Security Management, ISO 50001 Energy Management, ISO 10002 Customer Satisfaction and ISO 27001 Information Safety Management Systems Quality certificates.
In terms of resource distribution, hydroelectric accounted for 57.76% of energy produced at our plants in 2019, followed by wind at 38.07% and geothermal at 4.16%. In 2019, our annual total energy production reached 569,772 MWh. This is the highest value our group has achieved solely on our renewable energy portfolio, putting Enda’s share in Turkey’s energy industry at 0.2%.
Our 2 hydroelectric plants (Su and Akçay HPP) had been falling behind expectations due to drought in the past years however, production figures in 2019 improved and became the best on record in the last three years. Several steps were taken to increase efficiency and reduce costs at Tuzla Geothermal in recent years. We introduced carbon dioxide instead of outsourced chemicals and opened an additional well which collectively maintained performance. Production figures were the highest in the last 4 years even though acid rinsing and screening has not been carried out since 2015. Last year we broke production records at Eğlence HPP with 212 Million kWh. I am happy to say that we improved on that figure this year by producing 232.7 Million kWh – accounting for 10% rise.
As mentioned previously, the State Hydraulic Works Contribution Fee trial still remains to be concluded at Akçay HPP although our case looks favourable. We have claimed back one of the two instalments we had paid and a new case has been opened to claim the remaining amount due. A stay of execution was concluded before the other 2 instalments were paid.
Overall, 2019 was a good year in terms of production values and financial indicators. Lastly, I would like to take this opportunity to wish our partners and their families a healthy, happy and prosperous year in hope that we will be able to bring you better results for 2020.
Sincerely, Cem Bakioğlu Chairman of The Board