Renaissance Capital:  Turkish Utilities

We initiate coverage of two Turkish generating companies – Aksa Energy (HOLD; TP TRY14.6); Akenerji (SELL; TP TRY1.37) – and one grid company – EnerjiSA (BUY; TP TRY15.0)

We believe EnerjiSA provides exposure to growth with a 28.5% profit CAGR over 2021-2025E, and we expect dividends to increase from TRY1.1bn for FY20 to TRY2.3bn for FY25, implying an average dividend yield of 12.4%.

Aksa should also demonstrate strong growth (38% profit CAGR over 2021-2025E) and could start paying dividends in the medium term with the yield rising from 10.9% for FY23 to c. 18.8% for FY25, on our estimates. However, we believe the growth scenarios are priced in due to the recent rally in the stock. We think Akenerji is likely to remain loss-making given the expiration of its YEKDEM tariffs (Turkey’s renewable energy feed-in tariff scheme) in FY23, and the high level of its currency-denominated debt, which could pressure net income, limit growth and prevent the company from deleveraging.


Stable regulatory framework supporting investments, governance and quality…

Turkey’s electricity market has grown significantly over the past 15 years (installed capacity increased from 40.6 GW in 2006 to c. 95.9 GW in 2020), driven by attractive market regulation and liberalisation, support for domestic sources of generation, and promotion of renewable technologies (renewable non-hydro capacity grew from almost zero in 2006 to 8.8 GW in wind, 6.7 GW in solar and 1.6 GW in geothermal capacities in 2020). Turkey’s electricity distribution sector was fully privatised over 2008-2013, which resulted in competition, efficiency improvements and greater investments in the distribution network. Regulation of the segment is based on a well-established, incentive-based regulated asset base (RAB) framework, providing investors with a guaranteed return on invested capital, which could be further enhanced by regulation incentives.



…with utility stocks strongly outperforming the market in FY19 & FY20 but demonstrating a mixed performance YtD


Aksa, Akenerji and EnerjiSA strongly outperformed the market in FY19 and FY20, with Aksa’s stock rising 42% and 96% respectively, Akenerji’s share price increasing 73% and 103%, and EnerjiSA’s stock rising 45% and 69% vs a 25% and 29% increase for the Borsa Istanbul 100 Index, respectively. YtD the performance has been mixed, with Aksa rallying 65%, Akenerji’s share price declining 23% and EnerjiSA falling 2% YtD vs the 4% decline in the general market index.


Initiate with a BUY, HOLD and a SELL


We initiate coverage of EnerjiSA with a BUY as we believe that the strong performance in the share price in FY19 and FY20, and flat performance YtD, does not fully account for what we consider to be strong exposure to growth, which along with continued deleveraging, should result in an attractive dividend yield (an average of 12.4% for FY21- 25, on our estimates).

We initiate coverage of Aksa with a HOLD as we believe the market has already priced in the expected strong rise in profit, deleveraging and possible medium-term dividends.

The relatively strong performance in Akenerji’s share price in FY19 and FY20 is not justified, in our view, as we expect EBITDA to decline and losses to continue in the medium term. We initiate coverage with a SELL rating.



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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.