Ladies and gentlemen, welcome to Enerjisa Enerji first quarter 2026 earnings call. I will now pass the line to Martin Jäger, Head of Investor Relations. Please go ahead, sir.
Good afternoon, and welcome to Enerjisa Enerji's first quarter 2026 earnings call. Today, we are hosting the call in Adana, from where we are managing our distribution activities in the Toroslar region. I am joined here by our CFO, Philipp, and by Cem, our Investor Relations Director. Both will take you today through our financial and operation performance for the first quarter, and also will provide an update on our expectations for the remainder of the year. Let me hand over to Philipp.
Thank you, Martin, and a warm welcome to all of you from my side. I am pleased to present our first quarter 2026 results today. As you can see, major KPIs in Q1 developed as expected. Operational earnings grew by 5% year-on-year, and underlying net income even around 80%, based on the step-up effect from the suspension of statutory inflation accounting. Investments and net debt also evolved in line with expectations. We will provide further details throughout the presentation. Before moving into the operational details of Q1, let me briefly comment on the current geopolitical situation and what it means for Enerjisa. As you all know, tensions in the Middle East have increased uncertainty across the region. Naturally, this is something we are monitoring very closely, both from an operational and a financial market perspective.
Based on what we see today, we do expect some implications for our KPIs, but not to an extent that would require a revision of our guidance at this stage. We therefore remain comfortable with our full year targets, and also fully commit to our investment program, despite more expensive financing than initially expected for 2026. At the same time, we want to be clear that this remains a fragile situation, and further escalation could also affect the Turkish energy sector, and with that, the broader operating environment for our business. That is why we continue to manage the year with caution and close oversight, and we will update the market if our assessment changes. The reason we can give this level of comfort today is the nature of our business model. Enerjisa is a regulated downstream-focused company.
Compared to the other parts of the energy value chain, this means we have only limited exposure to oil, gas, and wholesale power price volatility. This does not mean that we are unaffected. Potential pressure points are mainly indirect in nature. Higher Turkish lira interest rates, tighter liquidity, ongoing inflationary pressure on input costs, and possible execution timing effects. These are all areas we actively monitor and manage. At the same time, we would also expect the regulator to remain responsive if market conditions were to deteriorate more materially, both in distribution and in retail. This is an important element of the overall resilience of our business model. Especially when it comes to our own commodity consumption and price increases of investments, we count on the regulator to reflect these in the OpEx ceilings and in the CapEx unit prices.
Beyond that, our regulatory framework and operational setup provide relative strength in this environment. Tariff mechanisms for cash management, the regulated earnings structure, and the clear OpEx allowances, plus the continuity of demand, all support earnings visibility, cash flow resilience, and our operational stability. Overall, while we are vigilant, our message today is straightforward. The external environment has become more volatile, but Enerjisa remains relatively resilient, financially disciplined, and on track with its 2026 guidance. Let me now continue with our operational earnings performance in the first quarter of 2026. Overall, group operational earnings increased by 5% in real terms year-on-year to TRY 17.9 billion . In a quarter marked by a more volatile macro and geopolitical backdrop, this is a solid result. Starting with Distribution. Operational earnings in this segment increased by around TRY 1.7 billion compared to the first quarter of last year.
The main positive drivers here were higher financial income and higher CapEx reimbursements, driven by our increased regulated asset base. This is supported by higher inflation index expectations compared to 2025 and the weight increase in the new regulatory framework. At the same time, we recorded an increased OpEx due to higher personnel and sourcing expenses driven by higher inflation, which weighed on our quarterly development. Even this is currently not yet the case, we remain committed to managing our operations within the granted cost allowance. An important element in this context will be the ongoing negotiations on the collective labor agreement for the next two years. Our approach remains balanced. Our employees are a key strength of the company, but any outcome must also remain comfortable with the regulatory cost allowance.
Efficiency and quality-related earnings stand below the prior year quarter, mainly due to regulatory changes, partially mitigated by a better theft and loss rate performance. On the other hand, the higher quality bonus under the new tariff structure and operational performance provided additional support. Moving to Retail. In the regulated business, gross profit declined, mainly due to increasing subsidy levels and lower APS costs, which for some time now have prevented margins from growing in line with inflation. In the liberalized business, however, gross profits increased, driven by a higher margin mass market sales due to last resort tariff limit decrease, leading to higher sales volumes and improved profitability. This shows that our active portfolio and margin management are helping to offset half of the broader regulatory pressure in the market environment.
In order to keep the Retail segment overall in a healthy condition, also regulated returns need to be significantly improved by EMRA, following now several years of only nominally stable margins despite continuously high inflation. In Customer Solutions, operational earnings were lower year-on-year, overall, as already indicated. Here, energy efficiency gross profit declined due to the absence of new projects in this quarter. While solar gross profit increased, supported by the new projects commissioned. This once again shows the volatility that is typical for this business and confirms why we continue to manage Customer Solutions with a selective and opportunity-driven approach. Overall, this page supports the message from our highlights. The quarter was more demanding, but the business continued to deliver in a relatively resilient manner. Let us now move to UNI.
In the first quarter of 2026, underlying net income increased significantly to TRY 3.1 billion, compared to TRY 1.17 billion in the same period last year. This corresponds to an increase of around 80%. At the same time, part of this development is quarter-specific and should also be viewed in the context of the volatile macro and interest environment. The key drivers here were lower net financing costs and higher tax income, mainly resulting from the application of asset revaluation. Let me walk you through the bridge in a bit more detail. Net loan and bond interest expenses supported the underlying net income development by around TRY 1.3 billion year-on-year. This mainly reflects lower average interest rates compared to the first quarter of 2025.
However, we would caution against extrapolating this year-on-year development unchanged into the coming quarters given the ongoing inflationary pressure and specific drivers that Cem will communicate on later in this presentation. Other financial income was lower by around TRY 0.6 billion, mainly due to lower tariff receivable interest as a result of the lower average tariff burden. As we have said before, this is economically neutral to a large extent, as the tariff burden would otherwise also need to be financed. While inflation levels were coming down in the first quarter compared to the same period last year, the associated monetary loss has also declined, contributing positively to the year-on-year net income increase. Finally, Taxes made a clearly positive contribution of around TRY 4.7 billion year-on-year.
This is again, mainly linked to the higher deferred tax income resulting from the shift from inflation accounting to asset revaluation of depreciable fixed assets in statutory and tax accounting. Overall, even though the operation bridge was softer year-on-year, lower financing costs and the favorable tax effect more than compensated for this and resulted in a very strong underlying net income growth in the first quarter. With that, let us move on to the next page and on operational developments. Over to you, Cem.
Thank you, Philipp. Let me now take you through the main operational developments across our business lines, starting with distribution. In distribution, first quarter investments increased to around TRY 1 billion . Despite this year-on-year increase, we are approaching capital allocation with greater caution in the current environment. As in 2025, we retain flexibility in the phasing of our investments over the course of the year, while remaining committed to the overall program. As a result of the full-year revaluation applied by the regulator in Q1 of every year based on expected June to June inflation, our regulated asset base grew by 42% year-on-year to TRY 105 billion , and for the first time broke through the TRY 100 billion mark. That remains one of the most important value drivers in our business, as its growth is the basis for future regulated earnings.
Efficiency and quality related earnings came in lower at TRY 1.5 billion . Compared to the very strong base in the prior year quarter, this mainly reflects higher personnel and material costs, reflecting the inflation-driven pressure on the distribution cost base that we highlighted earlier. Moving to Retail and Customer Solutions. In the regulated Retail segment, volumes declined by 8% year-on-year to 7.8 TWh . This was mainly driven by the continued shift of customers from the regulated segment into the liberalized market, following the lowering of the eligibility threshold to 4,000 kWh annual consumption for B2C customers. The decline in sales volumes compared to the previous year quarter was offset by strong measures taken to improve margins within Enerjisa's portfolio, and gross margin increased to 15.7% under the regulated earnings structure.
That said, regulated Retail segment remains a challenging business and the regulated margin is not sufficient to offset inflationary pressures. In the liberalized segment, volumes increased by 10% to 4.4 TWh , mainly supported by the ongoing customer migration from regulated tariffs to market-based contracts. Gross margin almost doubled year-on-year to 7.8%, reflecting our selective customer approach and active portfolio management. In Customer Solutions, gross profit increased by 6% year-on-year in real terms to TRY 2.15 billion . Installed solar power capacity reached 146.4 MW peak at the end of the quarter, up 3% compared to year-end 2025. The number of EV charging points stood at 2,275. The year-on-year decline reflects a more selective rollout approach and focus on increasing the utilization of our locations. Overall, distribution remains the core and growth resilience in the portfolio. While retail requires continued close management in the current environment.
In Customer Solutions, we continue to apply an opportunistic and value-focused approach. Let me now turn to economic net debt and the development of our balance sheet. In the first quarter of 2026, economic net debt increased by TRY 6.4 billion to TRY 84.6 billion . The main drivers behind this increase were increasing costs, which are not yet fully reflected in the tariffs, even following the increases by the beginning of April. Net interest payments and the usual seasonal working capital effects, including the change in customer deposits. The other item almost amount to TRY 3 billion , also includes interest accruals arising from EBRD and IFC loans. Let us spend some more time on the tariff environment. We certainly appreciate the tariff increases announced on April the 2nd. While on the Retail side, driven by the high subsidies, we don't expect a large financing burden.
On the Distribution side, the need for increase prevails. Based on our current assumptions, we expect a tariff burden of approximately TRY 15 billion by year-end for the three regions we are operating in. We therefore see a need for either further tariff support or additional financing facilities to help cover this gap and to ensure that sufficient funding remains available for the investment program. Net interest payments amounted to TRY 3.5 billion in the quarter. This continues to reflect the still elevated financing cost environment in Türkiye, despite our competitive funding profile. At the same time, we now deliberately hold a cash balance of almost TRY 20 billion , which positions ourselves prudently in times of uncertainty. Also, it's important to look at the debt development in the right context.
Our leverage remains at a low and well-controlled level, and we continue to manage the balance sheet with a clear focus on resilience and flexibility. Most importantly, our regulated asset base continues to grow significantly faster than financial net debt. At the end of the first quarter, RAB reached TRY 105.3 billion , up by more than TRY 21 billion since the end of 2025, compared to the TRY 6.4 billion increase in economic net debt. This is driven by the Q1 step-up effect of the yearly inflation adjustment of our asset base, counterbalancing the inflation share of our interest payments, and continues to illustrate the value creation embedded in our regulatory framework. At the same time, this doesn't remove the short-term burden from higher interest payments, which remains an important factor in the current environment.
Looking at the composition, net financial debt increased to TRY 68.9 billion compared to TRY 64.1 billion in the first quarter of last year. This development mainly reflects the continued funding of our growing asset base and our investment program. The key takeaway from this page is straightforward. While debt increased as expected, asset growth remains materially stronger, leverage stayed disciplined, and the balance sheet continues to support our long-term growth ambitions while we remain disciplined given the more demanding financing environment. Let me now turn to free cash flow after interest and tax. This page brings together three main elements: our cash effective investments, the cash impact from tariff-related movements in distribution and retail, and the burden from interest payments.
In the first quarter of 2026, free cash flow after interest and tax came in at TRY - 2.6 billion , compared to TRY - 2.9 billion in the same period last year. Despite the still demanding financing environment and the step-up in cash effective investments, free cash flow improved year on year. Looking at investments first, cash effective investments increased materially to TRY 8.4 billion in the quarter, compared to TRY 3.4 billion in Q1 last year. As expected, the vast majority of this came from distribution and reflects the continued execution of our investment program. As a large fraction of the payments is related to 2025 program, this reflects how we actively optimize the phasing of investments and related payments in a high interest rate environment without compromising RAB growth.
As we have discussed before, this investment-driven cash outflow is a natural consequence of growing the regulated asset base. The related cash flows from CapEx reimbursements and from the back granted by the regulatory framework materialize with a time lag, which is why regulatory responsiveness remains important as procurement and financing costs move higher across the market. On the tariff-related cash impact, the picture remains mixed between Distribution and Retail. In Distribution, tariff-related cash impact improved to TRY -7.1 billion compared to the TRY -9.6 billion in Q1 last year. Also here, this development should not be extrapolated to the year-end. As the current tariff level remains insufficient to cover returns we are entitled to earn. In retail, the tariff-related cash contribution moved from a negative territory to around TRY 65 million positive in Q1 2026.
This mainly reflects the limited positive impact of tariff change in April 2025 and the ongoing EÜAŞ subsidy. With that, let us move to the next page and take a closer look at financing. Despite the still challenging interest rate environment and continued macro volatility in Türkiye, Enerjisa continues to follow a prudent and diversified financing strategy with a particularly cautious approach in the current environment. Our clear focus remains on securing competitive funding, preserving flexibility, and optimizing the timing of our issuances. Since 2025, we have continued to access the market successfully through primarily TL-linked instruments with low spreads. Including the most recent issuances, the total bond volume issued since the beginning of 2025 now stands at almost TRY 30 billion and bonds total to around TRY 33.5 billion. A key strength remains our sustainable financing platform and our ability to raise funding at scale.
In the first quarter of 2026, Enerjisa issued a seven-year bond with a face value of TRY 10 billion at a floating rate of TLREF + 1.5%, a milestone in Turkish corporate debt financing in terms of both size and tenure, achieved at a highly competitive pricing. This transaction is an important proof point for our market access and funding credibility, which matters even more in a period where financing conditions have become less supportive. We continued our financing recently, in April. Enerjisa issued a new one-year bond with a face value of TRY 4 billion at a floating rate of TLREF + 0.5%. In parallel, we have also utilized approximately 95% of the six-year club loan amounting to around $340 million equivalent, which we signed in 2025 with IFC, FMO, AIIB, and GGF. This facility continues to support the long-term funding of our investment program.
Certainly, we have hedged all related FX risks. Looking ahead, we also maintain financial flexibility for additional sustainable funding instruments. For 2026, shelf registration amounts of TRY 80 billion for conventional bonds and TRY 20 billion for green bonds have been approved by the Capital Markets Board. In terms of portfolio structure, our debt mix continues to evolve in a balanced way. At the end of the first quarter, loans accounted for 56% of the portfolio and bonds for 44%. This reflects our continued use of the most competitive funding sources available across both capital markets and bank finance. Another important development is the improvement in our financing costs. Our average interest rate declined to 36.5% in the first quarter of 2026, compared to 45.3% in the same period last year.
This reduction reflects the benefit of lower market rates and the utilization of rediscount loans, which makes up roughly 3% of the change. Overall, the key takeaway is that Enerjisa continues to combine market access, diversified funding sources, and disciplined timing of issuances to support the investment program while maintaining a cautious stance on financing in a more volatile environment. With that, I hand over back to Philipp for the closing remarks.
Thank you, Cem. Let me close with our guidance for 2026. Here, the most important message is a very clear one. Based on our assessment today, we clearly see increasing risks affecting our business. Based on our current assessment, these do not require a change to our guidance. As we already highlighted on the geopolitics earlier in the presentation, we are operating in a more volatile external environment, and we are monitoring developments in the regions very closely. Based on what we expect, our business model remains resilient, and our operational delivery in the first quarter fully confirms our expectations. In that context, keeping our guidance unchanged is, in our view, a very strong message. Let me quickly recap our 2026 targets. Operational earnings of TRY 75 billion -TRY 80 billion. Underlying net income of TRY 11 billion -TRY 13 billion.
Investments of TRY 30 billion -TRY 35 billion, and a regulated asset base of TRY 110 billion -TRY 120 billion. As said, the first quarter supports this view. We have started the year with solid earnings delivery, disciplined investment execution, and kept our balance sheet resilience, while remaining very mindful that the broader environment has become more demanding and requires closer short-term steering. Let me also briefly touch on our dividend policy. We maintain the revised commitment of a payout ratio of at least 60% of underlying net income. As we explained before, the suspension of inflation accounting and statutory in textbooks structurally supports Enerjisa Enerji's underlying net income. The updated payout framework provides a smoother and more predictable dividend path while preserving the flexibility to fund growth and maintain balance sheet strength.
To summarize, despite increased geopolitical uncertainty, higher-than-expected inflation and interest, our base case view on 2026 remains solid. We are on track with our guidance, and we are managing the year with caution and close oversight in a more volatile environment. With this, we conclude our presentation, and I hand back to Martin.
Thank you, Philipp. Thank you, Cem. Operator, we can now start the Q and A session. As usual, please raise your hand for verbal questions, or also please hand in your written questions via the platform. We are now waiting a couple of seconds for the first incoming question. Thank you.
Thank you. If you are dialed in via the telephone and have a question, please press star two on your keypad and wait for your name to be called. Our web participants can also request to ask a voice question or send a text question. We will just give a moment or so for the questions to come in. Okay, we received a text question. I will pass the line to Martin to read out the question and management to answer it.
Yes. Thank you. We have the first question from Ata Asset Management. Hello, thank you for the presentation. Could you elaborate high inflation effects on the company? Also, the current growth in RAB involves fourth quarter 2025 and fourth quarter 2026 marks the higher end of the guidance. What is the upside risk over regulated asset base in your opinion?
Thank you very much for the question. It is Philipp. We are always, when it comes to inflation, looking at two different legs of our business. One is on the OpEx side, where, as we also alluded to, are seeing now the impact of higher inflation in higher expenses. Here our ambition remains to fit on the regulated businesses within the OpEx ceilings that the regulator is granting for us. This is confirmed again, certainly as we also said that, in case inflation is staying higher and going beyond what has been initially expected when these OpEx ceilings were fixed, that we will also turn back to the regulator and make him aware of the situation, and certainly ask for an adaptation of the OpEx ceilings. The second leg is then very much about our investment activity.
Here the next big milestone is the end of June inflation, because this is the one that is then used for the asset revaluation, so the one that we were talking about is a preliminary one. It is also foreseen by regulation. The real update comes with the June-to-June inflation. You might be aware that inflation has been now communicated for April at quite significant amount, especially when it comes to CPI, which is relevant for the regulated asset base. So, this is something where we might see then a higher revaluation of the asset base, which would translate also in higher financial income, higher CapEx reimbursement. On the other hand, the question is certainly to what extent is this accompanied by also higher interest?
Therefore, we see ourselves protected if we have a stability in real interest rates, and we would see some upsides if inflation is increasing faster or decreasing less than interest. So if real interest rates go down and, therefore, it is something where we certainly keep an eye on, but it is too early to judge now. We will really see a much clearer picture on this one with the H1 earnings call.
Okay. Thank you, Philipp. This basically also answers the second question that Ahmed from Garanti Asset Management has handed in for the RAB guidance. We are waiting for further questions to come in.
Maybe just a quick reminder. In the meantime, if you are connected via the telephone and you would like to ask us a voice question, please press star two on your phone keypad and wait for your name to be prompted. Our web participants can also request to ask a voice question or send their question as a text through the interface. We will just give a moment or so for any additional questions to come in.
Okay. Currently, there are no further questions. Let's give it another try, please. We would, of course, appreciate more incoming questions in the next minute. We just wait another time. Thank you. I see we have one raised hand. It's Erman from İş Asset Management. Erman, we would like to give the voice to you.
Hi. Can you hear me right now?
We can hear you, yes. Thank you.
Yeah. Okay. Thank you for the presentation. I had a question about distribution cost that you mentioned in the presentation. You said cost dismiss crypto as inflation increases pressure exclusively on distribution cost base. Can you give a bit more detail about the distribution cost base? Why is it increasing?
Hi, Erman, this is Philipp. Just to get it right, your question is about the pressure on the distribution cost base, right?
Yes.
Basically, if we look at our distribution cost base, we have all kinds of materials, partially also some that we are not capitalizing, and we have cost of personnel, which especially then in the controllable costs or the positions that we are not passing through, are dominating the P&L of the Distribution business. Looking at, once again, also inflation. If you see then also which regions we are operating in, comprising Istanbul and Ankara, we see that private households, and with this also employees, are facing quite important inflation in their cost of living, going beyond even the average numbers in Türkiye. This is where we certainly are continuously facing a pressure to ensure at the same time a fair treatment of our employees. But on the other hand, also that we are keeping our costs under control.
When it comes then to the materials, certainly here, commodities play a role. We are certainly having also, I would say, limited exposure to fuel costs when I look at the fleets that we are operating. This is not the most important topic, but we are also exposed to some materials like copper, aluminum. In the end, these are the indirect effects that we were mentioning, also coming from the geopolitical crisis and the implications on then the cost besides, and this is the part Cem has alluded before, interest and inflation. I hope this answers your question, Erman.
Thank you very much, Philipp.
Thank you for your question, Erman. We still wait for more incoming questions as I currently see no further hands raised.
Maybe just a final reminder. If you are connected via the phone and you would like to ask a voice question, please press star two on your phone keypad and wait for your name to be prompted. Web participants can also request to ask a voice question or send their question as a text.
Okay. Thank you very much. It seems that we do not have further questions coming in. Thank you very much for attending today's Q1 2026 earnings call for Enerjisa Enerji. Of course, the IR team remains for your disposal in the upcoming days. Cem and Philipp will be going to London next week for further investor meetings, so happy to reach out to us. Stay tuned. Thank you very much for today's participation. Goodbye.