OUR ENERGY SOURCES

1. OUR ENERGY SOURCES

2. Turkey is locatedbetween 36 – 42 north latitude and 26 – 45 east longitude, bordering the Mediterranean, Aegean and Black Seas, Turkey is blessed with renewable resources. Among the European Union, it has the highest hydropower, wind and geothermal energy potentials (GENI 2011).

3. As of 2011, Turkey is the sixth biggest economy in Europe with its more than $376 billion foreign trade volume and exports its goods to more than 200 countries two thirds of them being advanced economies (EPDK 2012).

4. Energy consumption in Turkey is low when compared with Western European countries. However, the large, young and increasingly urban population together with expected industrial development potential in Turkey represents a significant growth potential. Currently, Turkey is a major energy importer, as the increase in its energy consumption has outpaced domestic production. Substantial investment in the energy sector will berequired in near future in order to meet the increasing demand in Turkey (REPUBLIC OF TURKEY P.M. 2010)

5. The energy production (kt of oil equivalent) in Turkey was last reported at 30286.84 in 2010, according to a World Bank report published in 2012. Energy production refers to forms of primary energy--petroleum (crude oil, natural gas liquids, and oil from nonconventional sources), natural gas, solid fuels (coal, lignite, and other derived fuels), and combustible renewables and waste--and primary electricity, all converted into oil equivalents. * Energy in the form that it is first accounted for in a statistical energy balance, before any transformation to secondary or tertiary forms of energy. For example, coal can be converted to synthetic gas, which can be converted to electricity; in this example, coal is primary energy, synthetic gas is secondary energy, and electricity is tertiary energy.

6. Turkey is the 22nd country in the world that has the highestenergyconsumption with 114.3billion TEP (BP Statistical World Review of Energy, June 2011). Primary Energy Consumption of Turkey (2000-2011)

7. Based on the reference scenario, our primary energy consumption is expected to increase by 4% annually by 2020. • Primary energy consumption rates of Turkey is given below;

8. In order to boost the use of renewable energy, in May 2005 the Turkishgovernment published the first Renewable Energy Law, which introduced tariffsupport for electricity produced by renewable sources. After the reformation of 2010;

9. OurRenewable Energy Sources • Hydroelectricity The goal is to use theall existingpotential in Turkey.

10. OurRenewable Energy Sources • Wind Power In terms of the growth of wind energy, our country is one of Europe's leading 10 countries. Expected to invest more wind power plant in the future.

11. OurRenewable Energy Sources • Geothermal Energy Turkey is rich in geothermal energy. Turkey is one of the top5 countries in heat and thermal applicationsin the world.

12. OurRenewable Energy Sources • Solar Energy Our country is the world's leading countries in the use of solar energy water heating systems.However, Turkey is not as successful as inproducingelectricity from the sun yet.

13. OurRenewable Energy Sources • BiomassEnergy Our country is the world's leading countries in the use of solar energy water heating systems.However, Turkey is not as successful as inproducingelectricity from the sun yet.

14. OurRenewable Energy Sources • Wave Energy • Wave energy has the highest energy renewability.Turkey has a huge potential for wave energydue to surrounded by water on three sides. • Black Sea Coastal sites, • Marmara Sea Coastal sites, • Aegean Sea Coastal sites, • Mediterranean Sea Coastal sites

15. * Source: BP

16. * Source: BP

17. * Source: BP

18. Turkey’s ambitious vision of 2023, the centennial foundation of the Republic, envisages grandiose targets for the energy sector in Turkey. These targets include: • 125,000 MW of installed power (up from 54,423 MW in 2010) • Increasing the share of renewables to 30 percent • 60,717 km of transmission lines (up from 49,104 km in 2010) • 158,460 MVA of power distribution unit capacity (up from 98,996 MVA in 2010) • Decreasing electricity loss-theft to 5 percent and extending the use of smart grids • 5 billion m3 of natural gas storage capacity (up from 2.6 billion m3 in 2010) • Establishing an energy stock exchange • 8 nuclear reactors with a capacity of 10,000 MW will be active • Construction of 4 nuclear reactors with a capacity of 5,000 MW • Construction of power plants with a capacity of 18,500 MW in the coal basins • Full utilization of hydropower • Increasing wind power to 20,000 MW (up from 1,694 MW in 2010) • Power plants with 600 MW geothermal, 3,000 MW solar energy

19. SWOT ANALYSIS OF TURKEY STRENGTHS • Well-organized and structured legalframework in the energy sector • EPDK operating as an independent market regulator • High growth potential of the Turkish energy sector compared with other European countries • Advantage of Turkey operating as an energy hub between Europe and the Middle East • Electricity • Increase in the share of the private sector through the privatization of state-owned generation assets • Probable horizontal and vertical mergers of electricity, natural gas and water distribution, to allow synergy between regional utility companies • Natural Gas • High gas demand drives growth potential • Favorable gas supply geography and infrastructure • Potential role as a transit corridor and potential for development of trading hubs

20. SWOT ANALYSIS OF TURKEY WEAKNESSES Electricity • Coal is the onlyenergysourcewithsignificantdomesticavailability, leaving the countryincreasinglyimport-dependent Natural Gas • Requirement forgasstorageforsystemsecurityreasons • Dependence on importednaturalgas

21. SWOT ANALYSIS OF TURKEY OPPORTUNITIES Electricity • Privatization of regionaldistributioncompanies (to be finalizedby 2010) willallowfor an independentmerchants’ market • Synergyexpectedto be createdbetweenelectricity, naturalgasandwaterdistributionbusinesses Natural Gas • Tenders for the remainingcities, gasrequirementsto be met by the end of 2011 • Privatization of municipality-ownednaturalgasdistributioncompanies • Restructuring of BOTAS andtransitionto a competitive market structure • Increasinginterestbyforeigninvestors in the naturalgasdistribution market

22. SWOT ANALYSIS OF TURKEY THREATS Natural Gas • No newcontractreleasesareannounced/expected in the shortterm • Shortage of electricitysupplyagainstelectricitydemand

23. Turkey-EU Relations in the Field of Energy As a candidate country, Turkey has aligned her legislation with the EU “acquis communautaire”. As an indication of the importance given to regional energy cooperation, Turkey joined the Energy Community with an observer status. Turkey believes that the opening of the energy chapter will surely pave the way for negotiations with the EU on Turkey’s membership to the Energy Community. As regards electricity networks, after completion of all necessary studies and tests, trial synchronous operation with ENTSO-E (European Network of Transmission System Operators for Electricity) began on 18 September 2010. Studies towards full membership to ENTSO-E will be completed at the end of 2012, which will provide for physical integration of the Turkish electricity market with the EU internal electricity market. Full membership to ENTSO-E will contribute in competitiveness of the electricity sector in the region.

24. Turkey-EU Relations in the Field of Energy Moreover, Minister of EU Affairs and Chief Negotiator Mr. EgemenBağış, Minister of Energy and Natural Resources Mr. Taner Yıldız, Commissioner Mr. Stefan Füle and Comissioner Mr. GüntherOettinger met in Istanbul to strengthen Turkey-EU energy relations within the context of The Positive Agenda on 9 February 2012. As a result of this meeting, a working group was established as a step towards preparing a roadmap, which will contribute to enhance cooperation between the two parties in the energy sector. On 30th of March, the first meeting of the Energy Working Group was held in Brussels. In the meeting held on 19th of April in Istanbul, both parties provided in-depth information on the established agenda items and the draft text prepared thereon was decided to be declared soon by the Minister EgemenBağış, Minister Taner Yıldız, Commissioner Füle and ComissionerOettinger on 14 June 2012 in Stuttgart.