Aksa Enerji Uretim : About Our Credit Rating Note

AKSA ENERJI URETIM A.S.

Ruzgarlibahce Mahallesi, Ozalp Cikmazi No:10 Kavacik, Beykoz Istanbul / Turkiye

T: 0216 681 00 00

F: 0216 681 57 83

[e-mail]

DATE : 14.10.2016 FROM : Aksa Enerji Üretim A.Ş. Investor Relations [phone] [e-mail] SUBJECT : About Our Credit Rating Note Istanbul, 14 October, 2016 - The Long-term National Credit Rating of TR A+ and the Short-term National Credit Rating of TR A2 of Aksa Enerji Üretim A.Ş. (hereinafter Aksa Energy or Company) have been affirmed and the outlook remains stable. Aksa Energy's solid position in the Turkish energy market based on the experienced management team, the geographic distribution of its power plants and the diversification of the plants in terms of energy sources, has remained unchanged. We also maintain our expectations that the completion of its ongoing projects, both in Turkey and overseas, will positively impact the company's cash flows. Balancing these positives, the currency risk stemming from the company's high foreign currency financial liabilities, the shortage in the net working capital and the unstable operating environment continue to constrain the ratings. A Major Player in the Turkish Energy Sector: Aksa Energy maintains its position as one of the leading companies in the Turkish energy sector. In 2015 the company provided 5.3% of total electricity consumption in Turkey and had 9.7% market share among the independent power providers (IPP). Aksa Energy was successful in raising its sales volume to 14 billion kWh in 2015 by achieving 42.8% sales volume increase. Its first investment, the Bursa Biogas Power Plant, became operational in 1998, then the company progressively diversified its investments into becoming the third largest IPP in Turkey with an installed power production capacity of 2,198 MW. The synergy obtained by the vertical and horizontal organizational integrity with the Kazancı Group companies is also supportive of the steady growth process. Management targets to improve capacity utilization ratios and enhance profitability through the amplification of direct sales to eligible customers and electricity distribution companies, as ongoing projects are completed, and the production capacity reaches 2,736 MW by 2017. Diversity of Energy Sources and Geographic Distribution of Power Plants: Aksa Energy currently operates 16 electricity power plants (four fuel, seven wind farms, one hydro, three natural gas powered and one lignite plant) spread across almost the entire country and covering almost all energy sources. The organization and composition of Aksa Energy's installed production capacity enables management to minimize the negative effects of the volatility in natural gas and fuel prices and thereby increase productivity. The growing excess production capacity in Turkey has compelled the company to invest in Africa. A 370 MW fuel oil fired power plant in Ghana will start its operations gradually from the end of 2016 and another 120 MW fuel oil fired power plant in Madagascar will start operating in 2017. Competitive Strengths: The ability to construct and operate its own power plants for many years, provided the company a distinct advantage over its competitors in terms of cost, time and know-how. Also, compared to some of its competitors Aksa Energy is less exposed to spot price volatilities due to its strong sales strategy under bilateral agreements. It is able to sell at higher profit margins by purchasing electricity when spot prices are low. Long-term guaranteed and USD based sales agreements in Ghana and Madagascar will increase the turnover and sales volume in USD terms and contribute with a high EBITDA, offsetting the lack of stability in the operating environment. Aksa Energy can also enhance its portfolio productivity by making use of the idle capacity in Turkey and increase its overall capacity utilization ratio. Remains Sensitive to Foreign Exchange Rates: The Company's foreign currency short position continues. Although short-term net FX liabilities are hedged by using derivative instruments, the company is highly exposed to the volatilities in the exchange rate. In TL terms, the open position of the company as of the end of June 2016 was TL1.7 billion, a factor negatively impacting the credit rating of the company. However, it is expected that the investments in Ghana and Madagascar will generate USD based cash and improve the FX position by providing a natural hedge. The issuance of TL bonds has also brought down the share of FX loans from 65% at year-end 2015 to 59% by mid- year 2016 and contributed to alleviating the burden of FX liabilities in total liabilities. Steady Operational Profitability is Not Reflected on Net Profits: Despite the fairly steady level of operational profitability, Aksa Energy's net profits have not been steady because of the high FX position and the financial expenditures associated with the high level of liabilities. EBITDA continued to increase in 2015. The beginning of Bolu Goynuk Power Plant's operations, the closure of unproductive power plants and profit margins due to the difference between higher price commitments under bilateral contracts and lower market rates, have positively contributed to the increase in EBITDA. High Debt Ratios Remained Unchanged: Aksa Energy's debt ratios have increased due to the rise in financial liabilities and the decrease in equity. The company's liabilities have moved up to 4.1 times its equity by the end of 2015 and to 4.6 times as of June 2016. In the last five years, its financial liabilities have equated to 85% of total liabilities on the average. The rise in the company's financial leverage ratio also constrains its ratings. High Corporate Governance Standards and Strong Shareholder Structure: The positioning of the controlling shareholder Kazancı Holding in the energy sector,its long years of experience and sector know-how, coupled with their ability to support the company if need be, were additional factors supporting the ratings. The current 16.6% stake of Goldman Sachs International who initially invested in 2012 has also been taken into consideration as a positive factor. Aksa Energy Selected Financial Indicators (1000 TL)

2011	2012	2013	2014	2015	2016/6
Current Assets	958,315	1,136,725	520,101	532,937	761,488	805,909
Fixed Assets	1,710,556	1,799,298	2,356,241	2,926,804	3,282,764	3,199,524
Total Assets	2,668,871	2,936,023	2,876,342	3,459,741	4,044,252	4,005,433
Asset Growth (%)	11.9	10.0	-2.0	20.3	16.9	-1.0
Short-term Liabilities	941,487	923,150	630,266	915,924	1,369,967	1,347,972
Long-term Liabilities	1,028,794	896,847	1,261,982	1,521,595	1,901,324	1,941,578
Equity	698,590	1,116,027	984,093	1,022,222	772,961	715,883
Net Sales	1,307,427	1,840,638	1,785,968	1,957,438	2,319,961	1.302,144
Sales Growth (%)*	43.5	40.8	-3.0	9.6	18.5	52.0*
EBITDA***	244,615	310,949	308,121	329,141	433,020	217,316
Net Profit / Loss	-125,951	230,995	-133,293	39,437	-228,420	-10,020
EBITDA Margin (%)	18.7	16.9	17.3	16.8	18.7	16.7
Interest Coverage Ratio (x)	3.2	3.3	3.7	3.2	2.9	2.1
Total Debt/Equity (x)	2.8	1.6	1.9	2.4	4.2	4.6
Total Financial Liabilities/ EBITDA (x)**	6.8	5.1	5.1	6.1	6.4	5.6
Equity / Total Assets (%)	26.2	38.0	34.2	29.5	19.1	17.9

In the event of a discrepancy between the Turkish and the English versions of this disclosure, the Turkish version shall prevail.

We declare that our statement above is according to the principles specified in Capital Markets Board's current Communique on Special Conditions, totally reflects the information thereof, these information are in accordance with our books, records and documentation, we strive to obtain all relevant complete and perfect information, and liable for this disclosure.