Haci Ömer Sabanci Holding A.S. (SAHOL) Earnings Call Transcript & Summary

Good afternoon. Welcome to Sabanci Holding's 2023 Year-end Earnings Presentation. We have our CEO, Cenk Alper, and our CFO, Orhun Kostem with us. I now would like to hand over to our CEO, Cenk bey, for initial comments. Before doing that, please refer to our disclaimer as it was a standard disclaimer that we have been using. Cenk bey?

Good morning, good afternoon. I would like to start my words by providing an update on our performance against our midterm guidance that covers 2021 to '25, which we have introduced back in November 2020. These targets were provided before the introduction of inflation accounting and, therefore, have now become obsolescence. They will be revised on a new basis. However, in the meantime, we will try to share with you where we are at the end of 2023 against the original plan. I am happy to report that despite the worst number of substantial challenges and volatility, such as pandemic-related issues, post pandemic recovery-related market imbalances, global macroeconomic issues, very challenging macro environment in Turkey, which resulted in hyperinflation, and devastating earthquake in the eastern part of Turkey in which our electricity distribution company has affected and, finally, an election in 2023, we have managed to exceed our targets in terms of revenue and EBITDA growth and in terms of profitability. We are also on the right track to reach share of new economy and FX revenue share targets. Separately, we are also making positive progress in our nonbank CapEx-to-revenue ratio, which is not included in our guidance. But as you know, we have been tracking it as part of our capital allocation framework. As we have repeatedly said, we have been accelerating our investments as percentage of revenue. Our CapEx to revenue was around 7% 2 years ago, now reached to 11%, reached majority of investments to new economy with higher return profile. While we were outperforming our targets, especially on income statement metrics, we kept our focus on cash generation and kept our balance sheet rock-solid. Our new debt -- our net debt to EBITDA at the group level is still way below our midterm targets, which is providing us comfort in further increasing our investments. As we have very high conviction to increase our CapEx further in the midterm, we hope to keep the right balance between investments and dividends. All in all, this is a very impressive picture and put forth the power of Sabanci Holdings complementary portfolio, its management execution skills and decision-making capabilities that played a wider role in achieving such strong results. I would like to take this opportunity to thank all of our employees for their incredible efforts and invaluable contribution to the successful performance. But it is very important for me to repeat once again that the current midterm targets, which have become obsolete with introduction of inflation accounting, will be revised and announced soon. On the next slide, let me continue with specifics events that have shaped us -- shaped up in 2023. In a very proud and joyful year, we celebrate our republic's 100 years' anniversary. We have been devastated by a significant earthquake in February 2023 in the eastern part of Turkey. Thousands of people have lost their lives, and countless others were overwhelmed by their losses. We were on the ground immediately after the disaster, helping people in the region, and we are still on the ground trying to heal the ones. Turkey had general elections in June, and the most significant outcome for the market was a notable shift in economy management and Central Bank's monetary policies towards [ auto-indexing ]. We are happy with that. While the primary concern remains on how to lower the inflation, there is now ground for optimism. In addition to these local developments, the global macroeconomic and geopolitical environments remained volatile throughout the year, although easing pressure in commodity prices and smoothing supply bottlenecks provides some comfort in managing our businesses. Despite all the uncertainty and volatility, 2023 financial performance remained solid at both top line and EBITDA levels while profitability was maintained. Cash generation improved further, and the balance sheet managed well, although we'll talk about our financial supplements more in detail. In another volatile year with many ups and downs, some of our businesses performed well, others get affected from downturns, but once again, having a balanced portfolio played an important role to keep up the good performance. Our bank and financial services businesses have performed well despite macro volatility, and our energy business remained strong despite mechanical figures in natural gas power plants and the adverse effects of the earthquake on the distribution business. Building material companies seized all market opportunities and delivered strong performance. Tire business performance was strong, yet tire reinforcement business, Kordsa, was slow because of the fierce competition environments. However, this was partially offset by strong performance in composites now, which reached 20% of Kordsa's total revenue. Digital and retail businesses also remained solid despite hyperinflationary environment. Kerem will provide more details on our segments. While we have been focusing on improving our financial performance, we continued to implement our strategy at full speed and execute on the new economic investments. In 2023, we initiated our second renewable energy investment in the U.S., consisting of a 232-megawatt solar power plant and a 60-megawatt energy storage investment in Texas. We expect that the plant to be commercially operational in Q2 2025. Together with our first investment, 272-megawatt Cutlass II solar power plant, which will be fully operational by the end of this month, our total renewable portfolio in the U.S. will reach 504 megawatts. We have been utilizing innovative financial instruments such as tax equity in the financing of these investments as part of Inflation Reduction Act. Thus, for Cutlass II, for example, the ratio of external financing provided by the credit institutions and tax equity investors reached 70%. In Turkey, Enerjisa Üretim increased its total installed capacity by 65 megawatt to 3.8 gigawatts and received preliminary license for a total of 500 megawatt of wind power production capacity and 500 megawatts of battery storage capacity in 2023. With the ongoing investments, Enerjisa Üretim total installed capacity will reach more than 5 gigawatts by 2026 with a 60% share of renewals. Our distribution and retail company increased its stake in Esarj to 100%. In 2023, Esarj, by far, the market leader in high-speed DC charging, expanded its charging network to nearly 2,000 points in all 81 cities in Turkey, an increase of over 125% compared to 2022. In material technologies, Çimsa completed its capacity expansion in calcium aluminate cement plant in Mersin in February that doubled its Ca -- calcium aluminate cement capacity and become third largest global producers. Another important progress is on e Sabanci Building Solutions. Çimsa purchased 10.1% stake of SBS from Sabanci Holding, increasing its stake to 50.1% and started to consolidate the global building material investments to manage them with increased efficiency. Also, we established the Sabanci Global Technology Center in Munich to increase our proximity to the customers and invest in future material technologies, particularly in calcium aluminate cement. In digital technologies, we are closely following the developments in cloud computing and AI, both requiring major investments in energy infrastructure for both generation and distribution, as well as a centralized computing infrastructure. We, as a major infrastructure player in energy, there are many new areas of investments we consider which fall under the digital business unit that we are committed to expand its share noticeably in our net asset value. In line with our continuous efforts to create higher shareholder value, improve transparency and crystalize our net asset value, we completed the merger of Exsa at the beginning of 2024. Following the merger, the financial assets of Exsa were transferred to Sabanci Holdings. And finally, we have recently announced a new organizational structure to further strengthen our focus on materials technologies and our leadership in mobility solutions. Under the new structure, our current industrials and building material strategic business units will be replaced by mobility solutions under which Brisa, Temsa Ulasim and Temsa Motorlu Araçlar will operate and material technologies under which Akçansa, Yünsa and Kordsa will operate. So if you move to next slide. As an important part of our midterm guidance, we have also provided several targets on sustainability since it is not only because sustainability is an integral part of our business, but trying to achieve more has also become [ part ] of the team. And I'm extremely honored to say that we met and even beat our targets and relentlessly pushing ourselves to reach even higher goals. I would like to underline our dedication to sustainable business practices, which extends throughout our entire portfolio, and I will share some notable achievements in key areas. In building materials, 85% of our cement is being produced in CSC Gold certificate plants -- certified plants. You will see in the coming years that they will go further in their nature-related actions. 100% percent of our cement companies are committed to align with the Science Based Target initiative in line with 1.5 degrees pathway. In energy, as I mentioned earlier, we continue our focus on clean energy and climate technologies as a growth platform. This is not just with Turkey -- within Turkey but also on a global scale through Sabanci Renewables. Our industrial companies continue to outperform on climate and water. They are all awarded with leadership scores in CDP. 100% of our industrial companies are committed to align with the SBTi in line with 1.5 degrees pathway. And in banking, Akbank made a good progress in sustainable finance as of 2023, reaching TRY 226 billion, and recently announced joining the Net-Zero Banking Association as part of their commitment to decarbonize its loan portfolio. So I'm extremely proud that Sabanci Holding has the most ambitious and comprehensive sustainable agenda across all holding companies in Turkey. For instance, I already mentioned Akbank's progress on sustainable finance, but our bank's commitment is much higher. Akbank is targeting TRY 800 billion in sustainable financing and TRY 15 billion in sustainable mutual funds by 2030. Despite the complexity of decarbonizing the industries we operate in, we will reduce our GHG emissions by 42% in 2030. In line with our renewable energy strategy, we aim for a minimum of 78.5% of our energy -- our electricity to produce from clean sources across our global portfolio by 2030. Our commitment extends to investing $5 billion in SDG-related areas from 2022 to 2027. With all the actions we are doing under our nature framework, I can fairly say that our ambition level is among the highest in Turkey's private sectors. Finally, our strong performance in ESG-related indices and ratings continues with the improvements in our scores and leadership recognition in various indices and ratings. As just one example, our group companies listed in leadership level in CDP tripled in 1 year, including A and A- notes in various CDP programs. Now I'm handing over the word to Orhun for financial details.

Thank you, Cenk. Good morning, good afternoon, everyone. First of all, apologies, my voice is far from ideal today. And it's quite unfortunate because between inflation accounting and everything we need to discuss in the next hour, you would need to bear while my voice scratch your ears a little bit. With that, firstly, I would like to give you the micro backgrounds in 2023. Of course, following the pandemic and then a surge in energy prices back in 2022, we now see the commodity and energy prices coming down or normalizing as we've touched base earlier in older quarters as well. The inflation in Turkey is high after 64% in 2022. Again, there was a 65% inflation in 2023. Of course, one of the important impact comes as the wage increases between the minimum wage, payroll increases or the collective bargaining increases, of course, on a year-on-year basis, the rate of increase is quite high, which I'm sure you must see across all businesses and industries in Turkey. And the effects, the devaluation has somewhat slowed compared to last year. But it's important to note that in 2023, Turkish lira, in general, was more valuable than the FX basket. So with that, I'll come to talk about the top line numbers as Cenk has mentioned. On a nominal basis, we've grown revenues by 57% -- combined revenues by 57%, our combined EBITDA by 23% and our consolidated net income by 20%. Now on the banking side, again, 2023 -- 2022 was, of course, an interesting year and inflation was going up and interest rates were quite low. So therefore, there was a profit surge in -- across the banking sector. 2022 is more a normalization year. And moreover, of course, between the interest rate increases and the cap on loan portfolio growth, of course, net income margin across the banking sector is coming back. So therefore, it's quite important, and I'm sure you must have listened to our colleagues in Akbank, that the fundamental performance of the banks become quite important, which suggests, in our case, a best-in-class cost/income ratio, a very strong customer acquisition through digital that yields an important growth in the commissions and fees basically. And hopefully, when the environment normalizes and the banks can compete with -- as earlier with limited regulatory restrictions, then, of course, these fundamental differences will become more important. Outside of the bank, we've seen a 39% revenue growth on the -- combined revenue growth on the nonbank side, 55% combined EBITDA growth and a 48% net income growth. Here are few things to underline. These are all noninflation-adjusted figures, by the way, just a follow-up on our 9-month results to tie into 2023 and, therefore, tie into our midterm guidance. On the revenue side, Cenk has mentioned Kordsa. Kordsa's contribution to our top line and bottom line in 2023 was limited, so to say. In addition to that, the -- as the natural gas power plants in Enerjisa Üretim were down, especially in the third quarter of 2023, the impact on the revenue was that our revenue growth was somewhat slow, which is normalized when you come to the profitability because the renewable -- the renewable side of the business performed very, very well, including the hydros. And I think that's an important competitive advantage of Enerjisa Üretim as we supply with a complementary fleet of technologies. Actually, we can make up whatever is behind in terms of a certain technology. So the margins in the business and the profitability is intact, but the revenue growth has been slow which impacts our top line growth for 2023. And for the net income, I think it's also important to note that, again, if you listen to our friends at Enerjisa Enerji, the CapEx in 2023 have significantly accelerated after 2022 when excess to liquidity was limited. I think the company has made up a significant progress to increase its regulated asset base, which grew actually by about 73% through a CapEx program that almost tripled on a year-on-year in Turkish lira basis. However, that also increased the net debt portfolio by 137% and, of course, together with the increased interest rates, had a negative impact on the bottom line. The ones who follow, as you know, the business model of Enerjisa Enerji is where the more regulated asset base we can generate, the more returns we should expect at the end of the tariff period, which by 2025. So this was mostly a conscious choice to accelerate the investments to normalize after a slow year of 2022, basically, which, at the end of the day, will generate better returns in our bottom line. But within a fiscal year, obviously, these changes tends to occur. If you remember last year, we were also talking about how the price equalization mechanism was postponed, which impacted our results for 2022, and that was made up within 2023. So for the nominal results that's more or less a recap where -- Kerem is going to walk you through segment by segment in more detail. On the next page, you see the differences on the very top line results between nominal and inflation accounting, where you see a top line growth of 6% in real terms on a combined revenue basis, whereas combined EBITDA and consolidated net income is decreasing. Again, the banks -- as you know, the banks are not entitled to or they're not allowed to report in inflation accounting yet. So as we need to consolidate the bank in inflation accounting and make up a big part of our financial statements there, you see the bank's results. And there, in addition to what we discussed in terms of normalization, I will need to add the fact that the banks, as they don't have to report under inflation accounting, they also report their dividends under normal or nominal numbers and also pay taxes in nominal basis as well. So therefore, I think from a comparison point of view, it's quite hard to judge from this the banks' -- in general, the banking sectors' real performance. If you look at the nonbank side, we're looking at a slight contraction of 5% in real terms or into the revenue impact that I have spoken about, a real 3% growth of EBITDA and a contraction in consolidated net income. Now let me summarize this a little bit further to you or detail this a little bit further to you in the next page. You see on a year-on-year on the non-bank side, we see the EBITDA margin growing by -- from 12.5% to 14%. And if you visit the appendices of this presentation, you'll see on a business line basis, the performance where you're going to see, both in EBITDA and net income side, the margins of all business units have increased with the exception of industrial, that's owing to the performance of Kordsa, and a slight decrease in digital from a net income point of view, which is actually not a big part of the business yet. If you look at net income, again, all of the business units net income margin have increased on a nominal basis. But if you look at -- on an inflation-adjusted basis, there has been a 330 basis points contraction. Now in addition to what's impacting the business on a nominal basis, there are 2 things I would like to draw your attention to because there are 2, especially, business units where you're going to notice there is contraction in net income margin under inflation accounting. One of them is the energy sector. And that's actually also owing to the fact that Enerjisa Enerji, due to the IFRIC model, doesn't own assets, and the assets are more like treated as a receivable with a monetary asset value, which, under inflation accounting, generates a monetary loss, which flows to the bottom line. And secondly, you're going to notice building materials, although having a great year in terms of growth and margin, both absolute and percentage, has seen contraction under inflation accounting in its net income margins. And that's driven by a very successful Akçansa, well, its balance sheet, it has a net cash position, but the cash, under inflation accounting, generates a monetary loss, which obviously flows also to the bottom line. Except for these 2 segments, the financial services segment, which are the insurance business, of course, just like banking, they don't have to report inflation accounting, and they carry monetary assets. Therefore, they're looking at monetary losses flowing into their bottom line. Other than that, the industrial margins are flat under inflation accounting, and digital, again, is positive, although there is a slight contraction. And quite small but interesting detail, Carrefoursa, which was our loss-making business for a very long time, you remember, has become net -- a net profit contributor starting from 2023 under inflation accounting, because unlike some of our other businesses, the debt in Carrefoursa, through the indexation, generates monetary gain, which also flows positively to the bottom line. Again, we provided you with many details in the appendices so you could compare nominal and inflation accounting on a year-on-year basis, but this is, in a nutshell, what it looks like. If you go into the next page and look at our return on equity numbers, of course, again, leaving the bank side, you see the nonbank piece, the return on equity on the nonbank side contracting from 24.7% to 11.2%. Now given the past 2 years had serious inflation, I believe it's more reasonable to compare this series between 2019 to 2021 and then our inflation-adjusted numbers in 2022 and 2023, which are, in 2023 monetary terms. Then we're going to see on the nonbank side, a constant improvement in -- on return on equity, which accelerated throughout 2021 and 2022, on one hand, of course, due to lower interest rates and, in the aftermath, increased mobility in the aftermath of the pandemic and, of course, in 2022, very high energy prices environment. So therefore, our return on equity, given in the net income -- driven by the net income basis is normalizing on the nonbank side. But on a long-term basis, I think it's reasonable that on the nonbank side, we should look at mid to high teens return on equities. And overall, on Sabanci, of course, we will still be generating double-digit return on equity. Our cash flow remains to grow strong. That shows again the health of the business. Our net cash position has also grown. That's on the next page. And our net debt to EBITDA remains at 0.8x. So basically, we continue from where we left. So we have room, basically, to be able to execute, that Cenk was alluding to, in terms of our strategic investments. Slightly on reformed net asset value, the net asset value of our portfolio has been growing between the end of 2023 to end of March 2024, the growth was in dollar terms, 10%, which is great. But of course, it increases the discount, basically, and that's the catch up we will need to continue doing -- delivering on Sabanci Holdings' market capitalization. And there, you see the contributors to NAV growth, as we discussed in the last quarter of 2023, was mostly our energy business. It's stabilized now. And then basically with the new macro environment, I think the banking piece started to grow and contribute to the net asset value quite considerably at the start of 2023. If you look at the composition of our NAV on the next page, now on the left-hand side, as always, you see the book value for our non-listed assets. This time, of course, the book value is inflation-adjusted. So these are indexed in monetary terms to the end of 2023. And on the right-hand side, you see, especially for Enerjisa Üretim, the value that's driven by the independent valuation of last year, which values the company at $3.9 billion. So the gap is narrowing, and the net asset value is getting more balanced between especially today's bank and energy and climate technologies businesses. And we will need to, going forward, grow the value or net asset value contribution of material and mobility side of our business as well as digital technology side of our business. With that, I will hand over to Kerem to walk us through the details of the segments.

Thank you, everybody. As Orhun, I'm not so different as far as the voice is concerned, so I'm sorry about that as well. Let me start with Akbank. Akbank has demonstrated exceptional financial performance, solidifying its position as one of the key leaders in the banking industry. Despite the challenging macro and regulatory environments, Akbank ended the year well ahead of full year guidance with 38% return on equity and 4% return on assets, thanks to the bank's customer-centric strategies, agile balance sheet management, which created solid foundation for strong sustainable profitability. Akbank ended at solid 2.3 million net active customers in 2023, which increases the active customer base to 13.1 million, up around 55% over the last 2 years. Strong momentum in the customer acquisition, along with record high and across-the-board market share gains in consumer loans and broad-base TL deposits base, [ in fact ] the commitment for customer-driven revenue growth. Increased cross-sell on top of remarkable customer acquisition resulted in 188% year-on-year growth in fee income. Thanks to its impressive performance, fee income market share in multiprivate banks also increased by an eye-catching 230 bps year-on-year. In addition to this, the bank keeps its leading position in capital with a robust 18.5% capital adequacy ratio, which will continue to provide the bank's significant competitive advantage going forward. Moving on to our large segment, energy. As for the generation business, revenues dropped by 55% compared to last year due to lower natural gas volume because of stoppages in natural gas plants from June to mid-September and lower spot prices compared to last year. Note that all natural gas plants are fully operational since the beginning of last quarter. Despite low natural gas profitability, EBITDA was strong with positive contribution from renewable and lignite assets, thanks to higher wind regime and higher dark spreads. Moreover, favorable asset light contribution on higher trading activities of Enerjisa Commodities remained one of the major drivers of generation's EBITDA growth. In addition to general indexing effect, the transition to inflationary accounting negatively impacted the 2023 revenues by TRY 1.5 billion due to the mark-to-market losses from expired [ Jekdam ] hedge contracts. Net income growth was primarily improved by TRY 12.5 billion deferred tax income, driven by inflation accounting, due to difference between -- the difference in PPI that was used in Turkish comp and compared to CPI that was used in [ TFS.]. In 2023, Enerjisa Enerji showed a strong operational and financial performance in all 3 segments and delivered its targets despite the challenging environment. Operational earnings, not adjusted for inflation accounting, increased by 38% year-on-year. The operational earnings growth is mostly driven by increases in distribution financial income and CapEx reimbursements as well as the gross profits of the retail and customer solutions business. The inflation adjusted operational earnings stand at TRY 27 billion. The additional TRY 6 billion resulted in -- resulted to the inflation indexation of the operational earnings. Distribution business growth reached 38% year-on-year driven by higher financial income on the back of higher financial asset base and the increase in CapEx reimbursements. Retail segment growth reached 21% year-on-year, thanks to 10% sales volume increase from new businesses as well as the increasing demand driven by high temperatures during summer months, especially in Toroslar region. Customer solutions segment's operational earnings was significantly improved year-on-year on the back of growth observed in solar and [indiscernible] businesses. In 2023 investments reached TRY 16 billion, registered a 240% year-on-year growth, exceeding the guidance and ensuring the company's profitability in the future. On the building materials segment, top line increased by 7% year-on-year, thanks to strong domestic demand and favorable sales mix. In addition to strong top line, improvement in energy margins, lower electricity and fuel cost and positive contribution from alternative fuel usage supported EBITDA growth. Consequently, EBITDA margin expansion reached 8 percentage points. Segment's net income performance was strong on the back of solid operating performance. Please note that net income growth would've been -- would've reached 29% year-on-year if profit from disposal of [indiscernible] assets were excluded from 2022 earnings. For the industrials, inflation-adjusted top line for the tire business remained flat amidst higher domestic demand, driven by both OEM and replacement markets. However, tire enforcement business revenues affected from the stiffer competition from China despite the higher contraction -- higher contribution from the composite business. Consequently, inflation-adjusted segment revenue dropped by 13% year-on-year in 2023. EBITDA performance in tire business was also higher than last year, thanks to favorable pricing, operational efficiency and sales mix. Segment EBITDA remained weak on a year-on-year basis, mainly due to weakened gross profit margin in tire enforcement business. Net income declined by 13% in 2023 due to lower operational profitability in addition to higher borrowing costs, driven by tire enforcement business. Financial services segment had a robust performance. Its inflation-adjusted top line growth reached 31% year-on-year, driven by life and nonlife businesses. In the life 0business, despite higher general expenses on minimum wage hikes, EBITDA was strong, thanks to the growth in pension business, strong contribution from increasing volume of high-margin, credit-linked and stand-alone life products. And Agesa became the leader company and ranked as #1 in the Turkish market in terms of private pension assets under management as of January 2024. Agesa also ranked #1 in terms of life and personal accident gross written premium since the beginning of 2024 as well. The discrepancy between inflation-adjusted versus unadjusted EBITDA is mainly related with the valuation impact of deferred acquisition costs and deferred income reserve as monetary -- nonmonetary items. The difference between inflation-adjusted versus unadjusted net income is related with monetary losses because of strong monetary assets and net cash position. In the nonlife business, despite the company's conservative approach in motor third-party liability, company achieved significant revenue growth compared to last year, thanks to favorable trends in nonmotor segments. EBITDA sharply recovered from a loss from last year, which was driven by motor and nonmotor segments, thanks to more stable macro environment and lower loss ratio. The difference between inflation-adjusted versus unadjusted net income is related with the nature of insurance being heavily reliant on monetary assets. Digital segment's inflation-adjusted top line increased 40% on higher contribution from the electronic retail business with omnichannel strength, wide product range, new customers and value-added services. E-commerce sales performance was also remained solid as gross merchandise value is up by 68% year-on-year in real terms to TRY 10 billion. Despite strong top line growth and effective OpEx management in electronic retail business, segment EBITDA declined compared to last year because of higher fixed cost-to-sales ratio due to ongoing integration process in new digital marketing and cybersecurity companies and adverse impact of minimum wage hike. Higher financing cost pressured segment's EBITDA. Our retail segment's top line growth reach -- for retail segment, top line growth reached 22%, thanks to strong like-for-like sales growth and growth in alternative channels. Despite negative impact of minimum wage increase, EBITDA increased by 25%, thanks to the positive impact of gross margin expansion, driven by sales mix. Inflation-adjusted net income increased 4% on positive [indiscernible] of monetary gain resulting from effective balance sheet management in hyperinflationary environment. So this concludes our presentation.

Now we are open for questions. [Operator Instructions] The first question, thanks for the presentation, I have 2 questions. Do you expect any tariff increase for natural gas and electricity in the remainder of the year? And second one, when do you expect the IPO of Enerjisa Üretim to take place?

First of all, of course, in the remainder of the year, especially on the household side, given the subsidies that are in place, there is a potential of electricity and natural gas tariff increases. Having said that, the rate is -- or any potential rate is difficult to say or the timing is difficult to say because it also ties up to the overall program, midterm program that the economy administration is following. And I'm pretty sure they may want to take a decision, a balanced decision between inflation one way or another. But of course, in 2023, there were none, as we were expecting some, as we discussed. So there is -- there could be scope in 2024. The IPO of Enerjisa Üretim, there is no definite time. Obviously, it has to be an aligned and joint decision between the joint venture partners for Enerjisa Üretim. I think it's safe to say that the value of the business has been growing quite significantly over the past few years. I think for us to be confident about having a successful IPO, which suggests, of course, sizable offering. We would want to make sure that the market, there would be a proper market condition in place with significant demand. There has been a lot of demand in the local market, as you know, for the past 2 years. But I think it was mostly due to the absence of the positive real interest rate and, of course, a very steady FX basket. And now as the interest rates increase, there has to be a transition between the local individual investors, hopefully, to foreign institutional investors. Understand, it may create, of course, a very favorable environment for a sizable offering like Enerjisa Üretim. So these would be the things that, obviously, we will consider as we think about a potential timing for Enerjisa Üretim.

Okay. On the second question, can you please explain the capacity expansion plans in Enerjisa Generation for 2024 and 2025 and how much EBITDA is targeted? In the meantime, at what level do you expect spot prices to stabilize in 2024? The second part of this question, how much CapEx will be required by Enerjisa Enerji in the earthquake zone in 2024? Could this also limit the earnings recovery in 2024? And third question, how much dividend income do you expect in 2024?

Hanzade, let me see. How much dividend income? I believe at the appendices of our presentation, there has to be a table detailing company by company whatever was announced so far. So from here, I see, if I'm not mistaken, Enerjisa Enerji has announced about TRY 1.3 billion, this is on Page 27. I'm sure you may look at it. Or in total, it's 6 points -- sorry, TRY 9.4 billion. So whichever detail you would like, you can check from that table on Page 27. Second of all, I think the spot prices look normal today, and I think it would be -- it would be fair to assume, throughout 2024, the energy prices or electricity prices compared to last year would be low. And that's not only the general demand for electricity, given the low demand's very, let's say, mild winter season, or et cetera, that's also not only for Turkey, but across Europe, et cetera, as well. But also if you look at the Turkish market, given the program that the economy administration is running, we will expect a slower growth rate for the economy. So these, together, suggests the electricity prices, which are more or less at $60-ish, we assume they may remain that way. For the long term, though, I mean if you take a view of -- if you take a view over the long term for the general, let's say, growth of the Turkish economy, which used to be on average 5% level, I think a sustainable level of pricing should be at $80-ish. Let me remind you, in 2022, especially when the energy prices surged because of the Russian invasion of Ukraine, we've seen energy prices hitting $120 as well. Neither of that is sustainable, that high [indiscernible] price level is sustainable, nor given the potential demand for energy in Turkey going forward, the current level is least sustainable. But for rest of the year, I think we take a more conservative view and assume that to be more in the $60 levels. Now let me see the...

So let me take the first question on Enerjisa Generation. As we explained in the presentation, they want to reach 5 gigawatts by 2026. So that means we are 3.8 gigawatts right now. So we are going to invest continuously, in total of 1.2 gigawatts, until that time. I think EBITDA margins will be similar that you see in 2023. But of course, we'll see how the prices will evolve. On the Enerjisa Enerji earthquake zone, as you know, the business model -- part of the business model is -- in the distribution part, is, by investing, actually, we make profits. But the size of the investment will depend on the development of the cities. So there is one [ temporary ] replacement cost, but also as you see over there, the whole cities will be -- some of the city -- part of the steel will be placed to other regions. So we are in continuous coordination with the Ministry of Energy and also the ministry of city construction, et cetera. So I believe we will increase our investments in the earthquake region comparing to other regions in Ankara and Istanbul, but it will be totally dependent on the city planning.

And, Hanzade, if I may add to this. Just to clarify, the investments that were done there remains, meaning they will continue to be part of our regulated asset base, although physically they may have -- part of that may have perished. As Cenk was explaining, majority of the TRY 13.6 billion CapEx in 2023 has gone to Toroslar region. And if you've listened to Enerjisa Enerji, they expect to add another TRY 8 billion of CapEx in the next 3 years onto that base. So it's not coming back. It's actually -- the regulated asset base is growing. So we shouldn't expect any limitations or negative impact on the earnings -- underlying earnings of the company from that.

Another question, what way is the banking sector plan to have in net asset value, along with investments in new economies?

I think if you looked at our capital allocation plan, it's designed with a view to have a more balanced NAV contribution from our major business units going forward. The weight of the bank is coming from a very high level. Now it's more or less even with the energy piece. And I think going forward, we should expect the 4 elements in the net asset value contribution to be more balanced. I suggest, as I was trying to say earlier, that the contribution from materials and mobility as well as digital should disproportionately improved from where they are today for us to be able to get to that more balanced NAV in the midterm.

Thank you, Orhun bey. [Operator Instructions] It seems there are no further questions. I would like to hand over to Cenk bey for closing remarks.

First of all, thank you very much for participating in our earnings call. As actually, we have highlighted in the introduction slides, I can say that, first of all, we have continued in the midterm plan. We have continued our investments to new economy. So going forward, you will be seeing bolder actions there, either by having larger ticket item acquisitions or scalable businesses like renewables. That's first. Second, actually to improve our governance structure, we have completed a couple of structural changes in the group that -- those are Sabanci Building Solutions -- consolidation of Sabanci Building Solutions under Çimsa, extra mergers, restructuring of materials and mobility solutions. Actually, if you remember, the building solutions and the industrials divisions were -- the concept was quite large. Now we are focusing them into the areas that we want to invest in line with our strategy. Of course, the financials nominal and also with the inflation accounting, I think they're rock-solid balance -- we have a rock-solid balance sheet and cash flow. On the profitability inflation accounting, we have room to improve. On the sustainability side, I think we have a stellar performance in the last 4 years. And we do see this not just from the ESG perspective, but also a business opportunity. So in our responsible investment policy and capital allocation framework, actually, sustainability is a major criteria for new investments. So with the addition of all new investments, actually, we want to further dilute our CO2 footprint. So as you know, we have a committed and high-quality management team, both at the holding level, holding ExCom level, but also at the GM levels. And we are fully dedicated to improve our portfolio with high returns. So thank you very much again for participation. And for those of you living in the Muslim countries, including Turkey, Happy Bayram from this week actually. And for the Christian world, I think Happy Easter, I should say. Thank you very much.

Thank you.

Thank you and bye for now.