Energy

2022 marked a milestone for Sabancı Group’s energy business unit by investing in climate technologies with an expansion to the United States. Sabancı Climate Technologies, a wholly owned subsidiary of Sabancı Holding, was founded in 2022 to undertake renewable energy investments and strategic investments in various venture capital funds and startups, primarily in the US and Europe. This new entity paves the way to leverage Sabancı Group’s core competencies in the energy business, and access early-stage climate technologies to shape the Group’s future portfolio.

In 2022, Sabancı Group energy companies recorded a strong financial and operational performance despite challenging market conditions. The energy business unit was once again the main contributor to the Group’s non‑bank growth, recording 199% revenue growth and 154% Net Income* growth year-on-year. The Group’s energy segment further reduced its debt ratio this reporting year. In addition to distribution network investments, customer-oriented solutions – such as solar power plants for customer facilities and electric vehicle charging stations – expanded rapidly. In 2022, the generation business in Türkiye primarily drove the Group’s energy segment growth. Sabancı Group’s energy business also benefited from its balanced generation portfolio and the efficiency of its generation fleet along with exceptional operational excellence, and sector know-how.

Protect and Grow the Core

Sabancı Group energy companies operating in Türkiye are striding into the future by maintaining their strong market presence. Türkiye has favorable demographic characteristics: a young population, rapidly increasing urbanization, and low but rapidly growing electricity consumption per capita compared to Europe. In Türkiye, Sabancı Group operates in every aspect of the electricity value chain open to the private sector – from electricity generation to trade, distribution, and retail. The Group’s energy business unit delivers electricity to about 22 million consumers – leading the country’s electricity distribution and retail markets – and has a generation portfolio of 3,727 MW structured by five different technologies. Sabancı Group’s portfolio management strategy in the generation business is designed to maximize economic value created by installed capacity. A technologically diversified energy generation portfolio that outperforms the sector enables the Group to take advantage of all opportunities in the market while effectively mitigating risks.

In line with its sustainability‑focused growth strategy in the energy business, new renewable energy investments were a key item on Sabancı Group’s agenda in 2022. The Group’s generation company acquired a total of 500 MW in two licenses for Muğla and Balıkesir in the Renewable Energy Resource Zone (YEKA) declared by the Ministry of Energy, in addition to its existing 500 MW YEKA licenses for Çanakkale and Aydın. With turbine purchase agreements for 1,000 MW wind capacity in the Aegean region, the company initiated one of the most significant renewable energy investments undertaken in Türkiye, and Europe-wide, this year.

In 2022, Enerjisa Üretim also completed a 65 MW wind power plant project in Kayseri and acquired an operational wind power plant with an installed capacity of 55 MW in Manisa. These two investments boosted the company’s wind energy portfolio to a total installed capacity of 332 MW and five wind power plants. The share of renewable energy in the portfolio reached 45%. Once the above-mentioned investments are completed, Enerjisa Üretim will solidify its position as the leading electricity generator in the Turkish private sector by reaching an installed capacity of about 4.7 GW with a share of 57% renewables.

* Excluding one-offs

Additionally, Enerjisa Üretim integrates hybrid solar power capacity into its existing power plants. 41 MW of the planned investment capacity - 150 MW - was completed, and the remaining portion will be in operation sequentially during 2023 & 2024.

Energy trade is another business line of Sabancı Group’s generation company, which has engaged in energy and related commodities trading for over a decade. In 2022, carbon and green certificates were traded with counterparties from 20 countries in addition to electricity and gas, contributing to Enerjisa Üretim’s strong financial performance while bolstering its market position. The Group’s generation company has also expanded into new geographies by starting to trade in Greece, Bulgaria, Hungary, Serbia, and Germany.

The Group’s electricity distribution and retail company maintained its key position in the fourth tariff period of 2021-2025, which support investments and encourages quality improvements in service levels and better corporate governance. Ongoing grid investments this year provided uninterrupted energy supply to customers and boosted network quality. In 2022, the company’s distribution network CAPEX jumped 59% compared to the previous year, on a TL basis.

The Russia-Ukraine conflict and post-Covid era shaped the energy commodity markets this year, resulting in markedly higher electricity prices in Europe and Türkiye. Despite these and other challenges, the Group’s energy retail business demonstrated operational earnings growth of 174% year-on-year in 2022. In addition, the company’s electricity sales operations recorded a strong performance in fulfilling commitments to customers.

Invest in New Growth Platforms

Sabancı Group’s generation company in Türkiye follows a 4-pillar approach while transforming the generation portfolio to meet the goal of net zero emissions by 2045:

• Committing to 100% zero carbon technologies in new power plant investments
• Transforming the existing portfolio into hybrid solar energy hubs in accordance with license limitations
• Using nature based solutions and offsetting technologies
• Adopting a green hydrogen strategy

A collaboration protocol on green hydrogen production was signed with leading counterparties such as TÜBİTAK MAM, Aspilsan, Etimaden, and GMKA. Enerjisa Üretim realized the first green hydrogen production in Türkiye by the private sector. Green hydrogen produced at Bandırma Energy Base has started to be used in generator cooling. This pilot study was a critical step for Sabancı Group to boost its capabilities for further possible actions on green hydrogen.

In the energy business, Sabancı Group’s sustainability‑focused growth strategy also encompasses its customers. Providing customers with sustainable energy offerings, including distributed generation, decarbonization and efficiency solutions, Enerjisa Enerji Müşteri Çözümleri developed a sustainable, service-based business model through energy performance contracts (EPC)s. In Türkiye, especially in the industrial segment, energy efficiency is crucial and has the potential to reach levels comparable to Scandinavian countries. Today, the company also has installed a total distributed generation capacity of over 24.1 MW. Enerjisa Enerji’s 4.2 MW solar installation on Ali Sami Yen Sports Complex Nef Football Stadium set a Guinness world record as the largest installed capacity on a stadium rooftop, demonstrating its status as a global trendsetter.

Electric car and charging station markets in Türkiye are poised to gain momentum with the market entry of TOGG and the Paris Agreement. By the end of 2023, more than 50,000 electric vehicles will be on the road in the country. By 2030, this number is projected to jump to 2 million, with over 165,000 charging stations nationwide. The Energy Market Regulatory Authority (EMRA) issued a legal framework on charging services in the first half of 2022 and regulates these services accordingly.

In line with its focus on climate technologies, Sabancı Group’s energy business has included electrification and e-mobility for some years. Enerjisa Enerji, the Group’s energy distribution and retail company – via its subsidiary, Enerjisa Müşteri Çözümleri – has a 94% stake in Eşarj, Türkiye’s first and fastest electric vehicle station network. In 2022, Eşarj won the national charging tender of the Ministry of Industry and Technology for 495 fast charging stations in key regions. Meanwhile, Eşarj increased its charging network to 422 stations at year-end 2022, up more than 60% compared to the previous year.

While strengthening its leading position in the domestic market with Enerjisa brand companies, Sabancı Group aims to take its experience in the energy sector to the global arena. In particular, the Group plans to identify early-stage energy and climate technologies to create new business areas.

To this end, Sabancı Climate Technologies, a wholly owned subsidiary of Sabancı Holding, was established in 2022 to undertake renewable energy power plant investments and strategic investments in various venture capital funds and startups, primarily in the US and Europe. The United States stands out as the leading market of the new global energy ecosystem with significant renewable energy potential supported by nationwide and local incentives and a well-developed startup ecosystem for energy and climate technologies.

Investing in venture capital funds and startups, Sabancı Climate Technologies supports promising technologies by establishing a strong link between emerging and developed markets. This year, Sabancı Climate Technologies directly invested in two of the world’s leading startups originating from Massachusetts Institute of Technology (MIT). Commonwealth Fusion Systems has been developing an innovative magnet technology that aims to fundamentally change the global energy industry through fusion energy. Meanwhile, Quaise Energy has been developing a deep drilling technology to better realize worldwide geothermal energy potential and convert thermal power facilities into geothermal power plants.

Sabancı Renewables was established in the US as a 100% subsidiary of Sabancı Climate Technologies and Sabancı Group to invest in renewable energy. Sabancı Group’s first renewable energy investment is a 272 MW solar power plant project located in Houston, Texas. Construction of the shovel-ready project started in December 2022. The entire capacity is scheduled to be commercially operational by mid-June 2024.

The Way Forward

Sabancı Group is committed to maintaining a healthy balance sheet across its business lines. The Group’s energy business in Türkiye has the strongest balance sheet and lowest debt ratio in the sector. This solid financial position provides a significant opportunity for the energy unit to grow with its own resources while maintaining a substantial and ongoing financial contribution to the Group’s performance. Thanks to this positive performance, Sabancı Group aims to invest further in its energy business in Türkiye and abroad. Through investments in e-mobility, distributed generation and energy efficiency, the Group’s distribution and retail company is well-positioned to remain the trailblazer of the energy sector in Türkiye. Grid modernization is a top priority in the electricity distribution segment of the Group’s energy business, as it pioneers the application of cutting-edge technologies in this key area.

In the US, Sabancı Group closely monitors investment opportunities in renewable energy of varied sizes, locations, and technologies. Sabancı Renewables aims to develop a 1,000 MW well-diversified renewable portfolio consisting of on-shore wind and utility-scale solar projects within the next three to four years. The venture capital arm of Sabancı Climate Technologies plans to invest further in venture capital funds and startups. Sabancı Group aims to identify, support, and transfer new technologies and solutions on their route to commercialization and use them to boost the value of existing energy companies and to create new business opportunities throughout Eurasia.

In Türkiye, Sabancı Group plans to consolidate and bolster its leading position in renewable energy generation. The Group is aiming for a wind fleet of about 1,500 MW in line with an overall target of 5,000 MW+ total installed capacity. A total of 1,000 MW wind capacity will be installed consecutively starting from 2024 H2 to 2026 H1 with an investment of USD 1.2 billion. Expansion into new geographies in energy trading is a core objective of Sabancı Group’s generation company. Efforts and feasibility studies towards trading across the whole of continental Europe are underway. Over the past few years, Sabancı Group has invested in digital solutions for power plant management, predictive maintenance, data services, and business transformation to monitor the power plants from the control room at the İstanbul headquarters, known as Senkron. The Group’s generation company aims to commercialize these digital products, services, and know-how.

Further technology analyses, feasibility studies, and market research are underway for green hydrogen production. Collaborations are planned with local customers for potential on-site generation facilities for green hydrogen. Relationships with European counterparties are ongoing to develop ideal logistics and production solutions. Sabancı Group also plans to explore opportunities for green hydrogen export to Europe.