poland today business review+ no. 025

No. 025 / 3rd March 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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HEALTHCARE British firm McKinlay Development open their first Polish retail park page 11

MANUFACTURING & PROCESSING

ArcelorMittal finalizes strategic investment in Dąbrowa Górnicza page 3 UK's Robinson PLC to acquire Polish plastic packaging firm Madrox page 4

BANKING & FINANCE

PKO BP gets green light to buy Nordea insurance business; no news on Nordea bank page 4

PROPERTY & CONSTRUCTION UK's Palmer Capital opens office in Warsaw, eyes Polish properties page 5

SERVICES & BPO

Norwegian software company Powel launches delivery centre in Gdańsk page 7

TRANSPORT & LOGISTICS PolskiBus.com to carry 3m passengers in 2013, CEO tells Poland Today page 8

CONSUMER GOODS & RETAIL

Empik Media & Fashion to drop the "fashion" part of its CEE retail empire page 9 January retail sales beat expectations page 9

TECHNOLOGY

State R&D institution teams up with venture capitalists to form USD 70m technology fund page 10

COMMUNICATIONS Advertising giant WPP acquires Polish digital agency Lemon Sky page 11

IT & TELECOM Play boosts profits & revenues in 2014, proclaims 'end of feature phone' page 12

POLITICS & ECONOMY

Poland will be EU's fastest growing large economy in 2014, says Brussels page 14

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 15-17

Stora Enso's Polish wood & paper business has more than 1,700 employees. Photo: Stora Enso

Stora Enso to expand Polish sawmill Stora Enso to expand Polish sawmill Stora Enso to expand Polish sawmill Stora Enso to expand Polish sawmill Finnish paper and forestry giant Stora Enso will boost the capacity of its Polish sawmill in Murów near Opole from 70,000 cb.m to 400,000 cb.m per annum. The EUR 28m investment will create 150 jobs, company representatives told PT. page 2

Poland fears escalation of Ukraine rowPoland fears escalation of Ukraine rowPoland fears escalation of Ukraine rowPoland fears escalation of Ukraine row Poland's prime minister Donald Tusk, warned on Sunday the "world stands on the brink of conflict" over Ukraine and urged global powers to take decisive action against Moscow. page 13

Single ticket price: 1,150 PLNEarly bird registration: 950 PLN (till end-February)

Content: tel. +48 694 922 [email protected] Sponsorship: tel. +48 602 223 [email protected] Registration: tel. +48 602 224 [email protected]

Conference: Primetime Warsaw 2 Developing a sustainable European metropolis3 April 2014, Conference Center Muranów, The Museum of the History of Polish Jews

LEAD SPEAkErS:

• Keynote: Mrs Elżbieta Bieńkowska, Deputy Prime Minister & Minister of Infrastructure and Development

• Professor Hanna Gronkiewicz-Waltz, Mayor of the City of Warsaw

• Professor Sven Bienert, MrICS, Professor of Sustainable real Estate at the University of regensburg and ULI Sustainability Fellow (Europe’s leading expert in the financial implications of sustainable development)

ToPICS:

• Infrastructural and Social Challenges for Warsaw within the new European Funds Perspective 2014-2020

• Wola & Praga: two of Warsaw’s most dynamic districts, soon to be joined by the 2nd metro line

• Cutting away the ‘green’ Pr fluff: what are the financial results and implications of sustainable development?

• Can Warsaw come up with a comprehensive ‘high street retail’ plan?

• Trends & issues in the office and retail sectors

• The art of Placemaking: creating attractive public spaces in and around commercial properties

Building on the success of our first conference about Poland's capital, we bring you all the major issues and opportunities, in Central Europe's pre-eminent city.

Patrons Partnersorganizing Partner

weekly newsletter # 025 / 3rd March 2014 / page 2


Stora Enso to spend Stora Enso to spend Stora Enso to spend Stora Enso to spend EUR 28m on expansion EUR 28m on expansion EUR 28m on expansion EUR 28m on expansion of Polish sawmill, of Polish sawmill, of Polish sawmill, of Polish sawmill, create 150 new jobscreate 150 new jobscreate 150 new jobscreate 150 new jobs

Finnish forestry giant Stora Enso seeks to upgrade and expand its Polish sawmill in Murów (20km north of Opole) at the cost of EUR 28m, in a move to boost its capacity and competitiveness, the company an-nounced. Stora Enso will also utilize the platform in Poland to support growth in selected overseas mar-kets, as part of its ongoing transformation into a re-newable materials company, it said in an official statement. The investment in Murów Sawmill will de-velop Stora Enso's wood product offering in the grow-ing Central and Eastern European markets. "Stora Enso already has a well-established position in wood markets and is seen as a reliable partner. This investment in a strong growth market will enable us to serve existing and new customers even better in the future," says Karl-Henrik Sundström, Executive Vice President, Stora Enso Printing and Living. Substantial capacity boost The Murów plant was established in 1952 and since the very beginning it has been one of Poland's the larg-est sawmills. The site currently includes two saw lines, drying chambers as well as additional planning and processing equipment. The Murów site produces around 70,000 cb.m of sawn pine and spruce timber per year. Located close to the A4 highway, halfway be-tween Wrocław and Katowice, the sawmill has very good infrastructure and logistic connections and ac-cording to Stora Enso the area offers good raw materi-

al supply with high quality sawlogs. The new invest-ment in Murów will considerably increase Stora En-so's consumption of Polish saw logs, as the mill's pro-duction capacity is to rise from the current 35,000 cb.m to 140,000 cb.m/shift/year. "Over the next five years, Stora Enso plans to increase the sawmill's output gradually to 400,000 cb.m per year. The startup of the new mill is planned for the summer of 2015. During 2018 the site should reach its full capacity and 2019 will be the first year when the mill utilizes its full capacity over an entire year," Ulri-ka Lilja, Senior Vice President Communications at Stora Enso Printing and Living, tells Poland Today. "Currently we have around 175 employees in Murów. Once the expanded mill is fully operational, we expect to have an 150 additional employees at the site."

Stora Enso seeks to expand the annual production capacity of the Murów sawmill from the current 70,000 cb.m to 400,000 cb.m by 2019. Image: Stora Enso

As part of its reorganization in the CEE region, the Finnish firm has decided to close down its Sollenau Sawmill in Austria, whose customers will be served from Stora Enso's other mills in Austria and the Czech Republic. The closure is to be finalized by the end of

Q1 2014, resulting in 125 redundancies. The sawmill has an annual production capacity of 400,000 cb.m. Asked whether the target capacity of Murów (also 400,000 cb.m) is a coincidence in the context of the Sollenau closure, Ms. Lilja replies: "400.000 cb.m is a quite common capacity for the lines that we are planning to use. It is also a good level from a logistical and raw material point of view. We are sourcing timber mainly from the State Forestry around the Murów area. Stora Enso already has a good reputa-tion in Poland and there is a good relationship with the State Forestry. We are also known by our suppliers as a reliable partner." Top containerboard producer Stora Enso is one of Poland's leading producers of pulp and paper. Its core products are: industrial papers, pa-per sacks, corrugated board and boxes, including litho-laminated packaging. Stora Enso Poland's headquar-ters is in Ostrołęka, 120 km to the north-east of War-saw, which is also home to a number of mills produc-ing pulp, paper, corrugated board, boxes and sacks. Last year Stora Enso completed a EUR 285m expan-sion of the Ostrołęka plant, which boosted its contain-erboard production capacity from 270,000 cb.m to 640,000 cb.m. The other production mills are located in Łódź, Tychy and Mosina. Stora Enso Poland's own Sales Offices are in Warsaw, Moscow (Russia) and Opava (Czech Republic). With a workforce of some 1,700 employees (including more than 1,000 in Ostrołęka), Stora Enso Poland posted net earnings of PLN 51m on turnover of PLN 974m in 2012. Globally, Stora Enso employs some 28,000 people, and its 2013 sales amounted to EUR 10.5 billion. Stora Enso's shares are listed on NASDAQ OMX Helsinki and Stockholm.



ArcelorMittal finalizes ArcelorMittal finalizes ArcelorMittal finalizes ArcelorMittal finalizes strategic investment in strategic investment in strategic investment in strategic investment in Dąbrowa GórniczaDąbrowa GórniczaDąbrowa GórniczaDąbrowa Górnicza

Global steel giant ArcelorMittal Poland has officially opened its new long rail installation in Dąbrowa Górnicza (20km northeast of Katowice), one of only three sites in the world capable of producing 120m rails for the railway industry. To date, the rolling mill in ArcelorMittal’s Dąbrowa Górnicza site has been producing 30m rails. With the production of 120m rails, used by high-speed trains, this USD 46m project will contribute to the modernization of railway infra-structure around Europe, the company said. "The production of long rails is a project of significant strategic importance for us, considering the plans for rail investment in many countries, including Poland. We are pleased that the opening of the installation took place just days before the tenth anniversary of our presence in the Polish market. In the past decade, ArcelorMittal has invested more than USD 1.6bn in the modernization of its plants in Poland," said Manfred Van Vlierberghe, CEO of ArcelorMittal Poland. The project was relaunched in July 2012, after it had been put on hold in 2011 due to capital investment lim-itations and difficult economic situation in Europe. A total of EUR 36m has been invested in the rail project, of which EUR 4m was spent on the initial preparations back in 2011. The commissioning of the new installation follows the announcement of a major contract, under which ArcelorMittal Europe is to supply 129,000 tons of rails to German railway company Deutsche Bahn in 2014,

together with ArcelorMittal's Gijón site in Spain. Both parties also agreed an option to deliver a further 129,000 tons in 2015. The rails will support Deutsche Bahn's network renewal and expansion programs.

ArcelorMittal's Dąbrowa Górnicza site is one of on-ly three sites in the world capable of producing 120-m rails for the railway industry. Image: ArcelorMittal Poland

"Deutsche Bahn invests extensively in its railway net-work every year. In 2014, we aim to renew more than 3,000km of rails, 2,350 track switches, more than two million railway sleepers and about four million tons of gravel," Dr. Bernd Striegel, head of procurement and sites at DB Netz AG said. Ambitious investment program Also in Dąbrowa Górnicza, ArcelorMittal has recently completed a large-scale revamping of the basic oxygen furnace no. 2, which cost approximately EUR 14m. As for ArcelorMittal's Świętochłowice plant (10km west of Katowice), its hot dip galvanized (HDG) line has been given an electrical overhaul that brought its ca-pacity back to 332,000 kilotons. Prior to the upgrade, the company was losing on average 20,000-25,000 kil-otons per year due to various technical problems. Both the furnace and HDG projects were meant to increase the safety, sustainability and reliability of the installa-

tions. A new sheet pile service center, with an annual capacity of 85,000 tons, has also been established. The capital expenditures on the entire investment program came in excess of EUR 58m, and followed the comple-tion of a new EUR 25m coke gas cleaning installation at ArcelorMittal's Kraków steel works in October 2012, a project that considerably improved the facili-ty's environmental footprint. "We have also built a biological sewage treatment plant at the Kraków site, at the cost of some EUR 5m and renovated one of our blast furnaces in Dąbrowa Górnicza," says Sylwia Winiarek, spokesperson for ArcelorMittal Poland. "Currently, our largest ongoing investment is the modernization of the by-products department at the ZK Zdzieszowice coke plant, esti-mated at some PLN 200m," she tells Poland Today These additional projects have increased the value of ArcelorMittal's Polish investment pipeline (since Sep-tember 2012) to EUR 100m. ArcelorMittal Poland is the country's largest steel pro-ducer, employing more than 11,000 people (14,000 in-cluding its subsidiaries). Its Polish business includes five plants located in Kraków and the Katowice area (Dąbrowa Górnicza, Sosnowiec, Świętochłowice, Chorzów), which represent some 70% of the total production capacity of Poland's steel industry. Their product range encompasses long products such as sec-tions (including sheet piles), rails and railway accesso-ries, and mining supports used respectively in con-struction, railway transport and mining industry, as well as flat products for the automotive, appliance and construction industries. Last year ArcelorMittal Polska produced 4.3m tons of crude steel. The compa-ny also owns the largest coke plant in Europe: ZK Zdzieszowice (30km south of Opole).



UK's RobinsonUK's RobinsonUK's RobinsonUK's Robinson PLCPLCPLCPLC to to to to acquireacquireacquireacquire Polish Polish Polish Polish plastic plastic plastic plastic packaging firm Madroxpackaging firm Madroxpackaging firm Madroxpackaging firm Madrox

Britain's Robinson PLC has revealed its plans to ac-quire Poland based manufacturer of plastic packaging products, Madrox for approximately EUR 16m. Estab-lished in 1993, Madrox is a supplier of plastic packag-ing primarily to major brands and private label busi-nesses operating in the household, toiletries and cos-metics sectors in Central Europe. The company oper-ates from manufacturing premises in Stojad near Mińsk Mazowiecki, just east of Warsaw, employing around 55 people. "We plan to support significant organic growth of the Madrox business through investment in plant and people," Guy Robinson, CFO at Robinson PLC, tells Poland Today. Madrox's accounts for the year ended 31 December 2012 reported profit before tax of EUR2.4m on a turn-over of EUR 11.2m and its revenues have been growing at a rate of over 10% per annum during the last three years. Its production halls are equipped with modern injection moulding machines, blow moulding ma-chines and injection-blow moulding machines. The company designs and produces bottles, canisters, jars, caps and other injection moulded parts and provides individual packaging designs for its customers. In a filing, Robinson PLC informed the London Stock Exchange, "Subject to certain conditions, Robinson will acquire Madrox for an initial consideration of ap-proximately EUR 12.8m in cash with a further consid-eration, estimated at EUR 3.2m, dependent on

Madrox’s performance in 2015. The acquisition is ex-pected to complete in May 2014. If Robinson decide not to proceed with this transaction, a penalty fee of EUR 0.7m is payable."

Madrox supplies a wide range of packaging for household chemicals, cosmetics and foods. Image: Madrox

"The proposed acquisition of Madrox is fully in line with our strategy to expand in Central Europe partly through selective acquisition of local plastic packaging manufacturers. It will allow us to take a more promi-nent position in the growing plastic packaging markets in this region," commented Richard Clothier, Chair-man, Robinson PLC. The London-listed Robinson produces innovative cus-tom moulded plastic and rigid paperboard packaging. Its plastics division is primarily focused in the food & drink and toiletries & cosmetics sectors and has three manufacturing facilities, two in the UK and one in Łódź, Poland. The paperboard rigid box division spe-cializes in luxury packaging for premium products primarily in the confectionery, toiletries and cosmetics industry. Robinson's key customers in the CEE region include Proctor & Gamble, Nestle, Kraft, United Bis-cuits, SC Johnson, Avon and Dr Oetker. The Ches-

terfield-headquartered company said its revenues were anticipated to reach GBP 23.4m in 2013, repre-senting a y/y increase of 11%. "Robinson's existing business in Łódź was established in 2005 and will continue to specialize in injection moulding for the toiletries, cosmetics, food and house-hold markets. Madrox serves adjacent markets but importantly has a significant proportion of its business in blow moulded packaging which will be complimen-tary to the other Robinson businesses. To be clear, there are no plans for rationalization in either of the Polish businesses as a result of the proposed acquisi-tion. Robinson sees Central Europe as an attractive market for long term investments and therefore we are interested in further acquisitions in Poland," says Guy Robinson.

BANKING & FINANCE

PKO BP gets green PKO BP gets green PKO BP gets green PKO BP gets green light to buy Nordea light to buy Nordea light to buy Nordea light to buy Nordea insuranceinsuranceinsuranceinsurance businessbusinessbusinessbusiness;;;; no no no no news on Nordea banknews on Nordea banknews on Nordea banknews on Nordea bank

PKO BP Bank received a regulatory go-ahead for the takeover of life insurer Nordea TUnŻ, while the takeover of Nordea Bank Polska will be discussed during an additional sitting on March 3, 2014, financial watchdog KNF said in a statement last week. PKO BP announced in mid-June 2013 that it would buy 99.21% in Nordea Bank Polska for PLN 2.642bn, 100% in life insurer Nordea TUnŻ for PLN 180m and 100% in leasing and factoring firm Nordea Finance Polska for PLN 8m. PKO BP received the consent for the transaction from anti-monopoly office UOKiK in


October 2013. As the original tender offer placed by PKO BP had since expired, the Polish bank announced a new one in December 2013, maintaining the price unchanged at PLN 47.99 per share. Subscription peri-od in the tender has recently been extended to 1st April, 2014.

Nordea's exit from Poland is taking much longer than expected. Photo: Nordea Shortly after the Nordea deal had been announced KNF said the current level of concentration in Po-land's banking sector was "close to optimal" and there-fore it would carefully scrutinize any takeover transac-tion on that market. "From the point of view of sys-temic risks and of the safety of the financial system it is important that there are no too large banks in Po-land, i.e. such whose potential problems could not be resolved based on domestic instruments of crisis man-agement," the regulator said. According to estimates PKO BP published in June, the acquisition were to help the Polish bank increase its assets by 16%. Its profit per share is expected to rise by 10% and the return on investment should be 13%. PKO BP's network in Poland's largest cities will expand by 25% and its portfolio of wealthy customers will ex-

pand by 8%, the Polish bank said. In short, the deal seals PKO's position as Poland's number one lender, boosting its share in the banking sector's totals assets from 15% to 18%. The number two player, Italian-owned Pekao SA has 11%. PKO's share in retail loans will increase from 17.5% to 20.7%. Last year Nordea Bank posted a PLN 63.5m net profit (down from PLN 144.3m in 2012) on operating reve-nues of PLN 743m (vs. PLN 935.8m in the prior year). Its total assets stood at PLN 32.9bn as of end of 2013. PKO BP saw its consolidated attributable net earnings drop from PLN 3.8bn in 2011 down to PLN 3.75bn in 2012. The full-year 2013 figure was not available at press time.

PROPERTY & CONSTRUCTION

Palmer Capital opens Palmer Capital opens Palmer Capital opens Palmer Capital opens office in Warsaw, eyes office in Warsaw, eyes office in Warsaw, eyes office in Warsaw, eyes Polish propertiesPolish propertiesPolish propertiesPolish properties

Palmer Capital has augmented its presence in Central Europe with the opening of a new office in Warsaw, the British commercial property fund management company announced last week. The office will be managed by an initial team of two experienced Polish property professionals under the supervision of Ben Maudling, head of Palmer's Central and Eastern Euro-pean operations. Palmer plans to grow its Warsaw staff to six by the end of 2014. The office's function will be to manage Palmer's exist-ing portfolio in Poland and to explore opportunities for enlarging the company’s asset-base with high-yield, mid-market properties in the industrial, com-mercial and office sectors, the company said. Palmer currently has EUR 300m of property assets under

management in the CEE region and pursues an active acquisition strategy. "We announced in March 2013 that we would open a Polish office within 18 months and I am delighted to announce that we have done exactly that, well ahead of schedule. We have recruited two first-class profes-sionals as the hub of our Warsaw team and look for-ward to substantial expansion consistent with Palm-er’s exacting standards for developing its portfolio," commented Ben Maudling. "We are encouraged by the fact that Poland's economy has definitely turned the corner, with 1.6% growth in 2013. The World Bank has even described Poland as entering 'a new golden age' of stability. Palmer's strat-egy focuses on less-expensive, non-central locations, where we foresee increasingly strong demand as ten-ants look for ways to reduce their operating costs," said Guy Barker, Palmer's European Managing Direc-tor. Palmer Capital manages over GBP 1bn of real estate through its nine UK offices, six Continental European offices and two offices in Asia. The company has over 250 properties that it manages on behalf of discretion-ary investors or third party segregated mandates. It al-so employs over 100 people in its business and compa-nies it has invested in. In 2012 the business grew through the acquisition of Middle Europe Investments NV and Invista Real Estate Investment Management Plc. The business model has evolved over the last twenty years, starting in the UK in 1993. In 2007 the Continental European business was established and in 2012 the Asian business was acquired. In some markets, mainly the UK, Palmer Capital car-ried out expansion under its "venture capital" model, whereby it acquires 33% stakes in regional property companies, providing them with support, non-executive guidance and operational assistance. Ac-


cording to the company, these stakesalso allow inves-tors in Palmer Capital funds to not only access real es-tate managed centrally by highly experienced and in-novative managers, but also to benefit from local knowledge, support and access to deal flow.

Poland Today talks to: Ben Maudling, Head of CEE at Palmer Capital

• PT: Poland has long been the largest and most dy-namic CEE property market. Why has Palmer decid-ed to establish presence in Warsaw only now, after targeting Prague first? Ben Maudling: The fact that we established an office in Prague before Warsaw was more personal rather than strategic. I have been based in Prague since 1992 and have had a working relationship with Palmer since 2008. In 2012 we purchased Middle Europe In-vestments, a fund management company with a large Czech and Slovak property portfolio with a main office in Prague. We view ourselves as one of the top proper-ty fund management businesses based in central Eu-rope. To reinforce this, it was always our intention to open an office in Poland soon after getting the Czech and Slovak portfolios established and performing well. • PT: Does Palmer Capital own any properties in Po-land at the moment? BM: We have established the office in Warsaw so that we can start acquiring properties for our investment

funds. However, we have already taken over the man-agement of a very nice office building in Szczecin called the Maris Office Centre. This is located in the centre of the city and has a lettable area of 5,760 sq.m. • PT: What kinds of investments will you be targeting in Poland? BM: Our main focus will be on standing, well let retail properties that are located in regional Polish towns and cities with a value of between EUR 7m and EUR 30m as well as core office properties in Warsaw or the main Polish cities with a value up to EUR 75m. • PT: What is your budget for the Polish invest-ments? BM: We are expecting to purchase property with a value of over EUR 150m in the next two years. • PT: How about your venture capital model – do you intend to acquire stakes in local property companies in Poland as elsewhere? BM: As we have established a full Palmer Capital of-fice in Warsaw, it is unlikely that we will be looking to acquire stakes in local Polish property companies. • PT: The Polish real estate investment market has been very busy lately, with EUR 3.4bn worth of ac-quisitions last year, 94% of which was by foreign funds. What sets Palmer apart from the others? BM: We combine international experience and in-vestment capital with a strong local‚ 'on the ground' presence. Like me, most of our senior team members are based in central Europe and have extensive expe-rience of establishing and running property fund man-agement businesses in the region including Poland. We are coming into the Polish market with EUR 300m of assets already under management in CEE. We think there is considerable potential in the property markets of the regional cities. As we have strong local teams, we are, arguably, better placed than some other for-eign groups to access and work in these markets. I

would also like to mention that our investment capital comes from a number of sources. At the moment, a majority is either private or institutional money from western Europe. However, we have also successfully invested for local Czech investors. Investing and man-aging for Polish investors is a strategy we would also like to pursue.

DATA BOX: COMMERCIAL PROPERTY INVESTMENT IN 2013

According to Jones Lang LaSalle, the volume of trans-

actions concluded on the Polish commercial real es-

tate market increased by 26% y/y in 2013 and exceed-

ed EUR 3.4bn, making the best result since 2006 when

total investment volume amounted to over EUR 5bn.

In 2012 the figure came to EUR 2.73bn).

In terms of particular market segments, Jones Lang

LaSalle’s data indicates that the volume of office

transactions amounted to approximately EUR 1.06bn,

retail - approx. EUR 1.32bn, industrial – ca. EUR 656m,

mixed use projects and multi-segment portfolio deals -

over EUR 280m, and hotels - more than EUR 113m.

Foreign investors accounted for ca. 94% of total vol-

ume in 2013. The majority of them were global inves-

tors (e.g. Blackstone, Atrium, and Allianz-led consorti-

um that purchased Silesia City Center), followed by

German investors (RREEF, Union Investment, Invesco,

IVG, Allianz), British investors (LCP, Tristan Capital

Partners, SEGRO) and US capital (WP Carey, Hines,

Kulczyk Silverstein Properties and Lone Star). Polish

investors accounted for 6% in the total 2013 invest-

ment volume.

Source: Jones Lang LaSalle


SERVICES & BPO

Norwegian software Norwegian software Norwegian software Norwegian software company Powel company Powel company Powel company Powel launcheslauncheslauncheslaunches delivery delivery delivery delivery centre icentre icentre icentre in Gdańskn Gdańskn Gdańskn Gdańsk

Powel AS, a Norwegian provider of software and re-lated services for energy companies, municipalities and contractors has launched a new development fa-cility in the Polish city of Gdańsk. Powel chose Gdańsk as a location for its new innovation hub due to availa-bility of highly qualified technical staff, foreign in-vestment benefits, European Union and Schengen Ar-ea advantages, proximity to its headquarters in Trondheim and cultural similarities, the company said.

Powel's Polish unit is located in the Gdańsk Science & Technology Park. Photo: GPNT According to Powel, the creation of the Gdańsk office will support software development for the company's growing customer base in power generation and dis-tribution, local authorities and contractors. The new

facility is based at the Gdańsk Science & Technology Park, which the local authorities aim to develop into a major ICT hub, creating high skilled jobs for Gdańsk's young and multilingual employee base. "We are delighted to have the new office supporting the development of innovative software in Gdańsk, a city with highly qualified technical expertise." said Tom A. Røtting, Vice President Strategy & Technology at Powel. "We expect the Gdańsk office to contribute greatly to the development of advanced technologies required by European customers." Based in Trondheim, Powel delivers business-critical software solutions and related services specifically de-signed to help energy companies and public utilities improve daily operational processes and service quali-ty. A market leader in the Nordic region, Powel serves more than 1,000 public and private companies includ-ing leading power companies like DONG, E.ON, Fortum, Norsk Hydro and Statkraft, which have chosen Powel as their long-term strategic partner. Founded in 1996, Powel AS is a privately held compa-ny with more than 300 employees. It has offices in Norway, Sweden, Denmark, Switzerland, Turkey and Poland. Poland Today talks to: Tom A. Røtting, Vice President, Strategy & Technology at Powel • PT: What will be the focus of the Gdańsk office and what kind of skills is Powel looking for? Tom A. Røtting: The Gdańsk office will be an new de-velopment center for Powel in addition to Trondheim. We are looking for master-level candidates with a pas-sion and talent for software development. We need various skills within different programming languages as C#, C++, HTML 5 and SQL. We need competence in writing quality code meaning Test Driven Develop-ment (TDD) with a high degree of automatic testing.

We also need proficiency in User eXperience (UX), to make sure that our user interfaces are easy, intuitive and efficient. We are seeking database competence especially within Oracle and SQL-Server, and we need Geographical Information System skills, especially within ESRI Technology. We are also looking for can-didates who are familiar with different Microsoft Technologies. • PT: How many staff do you have in Gdańsk at the moment and how many do you intend to have in the long-term? TR: Right now we have 12 people, and we will end up this year with 25. And we have plans for further growth next year. The growth in 2015 will depend of access to great talents, our ability and power to start new projects and the experience we have in 2014 with the first 25. • PT: Gdańsk has attracted its share of ICT projects in recent years. Has it been easy finding the right candidates? TR: So far, we are very satisfied with the candidates we have found, and we believe this will continue be-cause Powel is a company that not only seeks the best talents, but also strives to develop these talents from 'good' to 'great'. Our employees hold development conversations with their managers once every three months to discuss their achievements and goals in terms of work, learning, and relationship-building. We focus on their strengths by setting expectations that are right for them. We believe that every human being wants to grow into a 'hero' role. And we want heroes in every role in Powel. This philosophy makes it easy to recruit and to keep talented people in Powel for long time • PT: Poland's energy sector has been modernizing rapidly. Is Powel actively seeking clients here? TR: We will not actively seek clients in this area in the first phase, but this will be a very interesting oppor-


tunity, that we will evaluate little by little. We know that both the Energy sector and Water & Wastewater is under modernization. Also our software for con-struction can be valuable in a country heavily investing in infra-structure. In addition, the increasing green energy wave will challenge today's energy production and network balance, and new thinking and new tools is needed to handle the situation with a lot of instable wind and solar energy into the energy systems all over Europe.

TRANSPORT & LOGISTICS

PolskiBuPolskiBuPolskiBuPolskiBus.com to carry s.com to carry s.com to carry s.com to carry 3m passengers in 2013, 3m passengers in 2013, 3m passengers in 2013, 3m passengers in 2013, CEO tells PCEO tells PCEO tells PCEO tells Poland Todayoland Todayoland Todayoland Today

PolskiBus.com has carried more than 5.5m passen-gers since June 2011, when Scotland's Souter Hold-ings launched the Polish coach operator. In the past four months alone their long-distance buses welcomed 1m passengers, and PolskiBus.com continues to ex-pand its fleet and route network. Since May 2013, when we last spoke to PolskiBus.com, the carrier has added some 30 brand new vehicles to its Polish fleet, which currently includes 98 Van Hool Astromega and Altano coaches. A further 50 buses have already been ordered and will be delivered this year, with a fleet of 200 vehicles being the medium-term target. In merely 2½ years PolskiBus.com, which broke even last year, became a true alternative to the state-run railway company PKP, as the latter keeps losing customers due to low quality of services, and in-efficient timetables. With their clean, modern, punctual and Wi-Fi equipped coaches and a network of connections be-

tween Warsaw and key regional cities, PolskiBus.com has taken Poland by a storm. The carrier has success-fully imported marketing methods developed by low-cost airlines, such as cheap early bookings and an ef-fective online sales platform, although its competitors have accused PolskiBus.com of using dumping prices to strengthen its position, with ticket prices starting at as little as PLN 1. The company operates 16 regular lines, connecting 20 Polish cities and 5 European loca-tions (Berlin, Berlin Schönefeld Airport, Bratislava, Prague and Vienna). It has recently added a second Polish hub in Wrocław in a move to speed up expan-sion.

In little more than two years PolskiBus.com revolu-tionized intercity travel in Poland. Image: PolskiBus.com

Poland Today talks to: Barry Pybis, CEO at PolskiBus.com • PT: When we spoke in May 2013, you confirmed plans by Souter Holdings to invest EUR 30m in PolskiBus.com by the end of 2014. Does that figure remain valid? What else does it cover besides the 75 new vehicles you ordered last year? Barry Pybis: I can confirm that our investment plans remain as previously announced and that in fact we have already started to receive and deployed the new vehicles.

• PT: What did the second PolskiBus.com hub in Wrocław contribute to the business? BP: Our new base and hub in Wroclaw is already mak-ing a significant contribution to the business, enabling us in increase the range of services and destinations we can offer to our customers. The new services have been very well received with high levels of demand which continues to grow. • PT: What is the current headcount at PolskiBus.com and your-end projection? BP: The development of our new services and our hub in Wroclaw created 160 new jobs in Poland. At the present time Polskibus.com provides employment for over 500 people and this number will grow as we de-ploy more of our new vehicles during the course of 2014. • PT: How did last year's impressive passenger num-bers translate into financial results? BP: Polskibus.com moved in to profit in 2013, the company’s full financial results will be published later this year.. • PT: What is your projection for 2014, as far as pas-senger numbers are concerned? BP: The company and its staff will work hard to main-tain our high standards and to provide value for money services to our customers, we would hope this will re-sult in the company carrying more than 3m passengers in 2014. • PT: What is the next step for PolskiBus.com, after having developed a comprehensive network of con-nections between key Polish cities? BP: There remains a high level of demand for the ser-vices of Polskibus.com from many cities within Po-land. We believe there remain many more opportuni-ties for us to develop our network and provided ser-vices to a wider audience.


• PT: Last year Souter Holdings was in talks with Polish bus manufacturers on potential joint projects. What has become of those negotiations? BP: It is true that we did meet with a number of Polish bus manufactures last year concerning the vehicle re-quirements of Polskibus.com. Those discussions are ongoing.


Empik Media & Empik Media & Empik Media & Empik Media & Fashion to drop the Fashion to drop the Fashion to drop the Fashion to drop the "fashion" part of its "fashion" part of its "fashion" part of its "fashion" part of its CEE retail empireCEE retail empireCEE retail empireCEE retail empire

One of Poland's top retailers, the Empik Media & Fashion Group (EMF), has decided to divest the fashion arm of its business that includes the Polish chains of some of the leading global brands: Gap, Riv-er Island, New Look, Aldo, Esprit and River Is-land, after the latter posted a PLN 371m loss last year, following a PLN 110m loss in 2012. The company said it was in talks with the owners of the seven clothing brands it represents in Poland, Russia and Ukraine, as well as other operators who could be interested simply in taking over EMF's locations in some of CEE's most popular shopping malls and high streets. "We wish to finalize the whole operation in 2014 and we are not expecting it to generate substantial reve-nues. The shops we won't be able to find buyers for shall be closed down," EMF's CFO Jacek Bagiński told a press conference. Apart from the huge losses it gen-erated, the company's fashion business has seen its sales shrink rapidly in recent quarters. Last year it contracted by 19% y/y, down to PLN 307m, including a 45% drop in Q4 2013. The restructuring concerns 118

retail outlets, including 61 in Poland (see chart). EMF representatives told Poland Today the company in-tends to keep its cosmetics distribution business as well as retail and wholesale sales of sports footwear (Converse, CAT, Merrell) carried out by its subsidiary Grupa Optimum.

EMF seeks buyers for 118 fashion stores Brand Poland Russia Ukraine TOTAL

Esprit 19 18 5 42

River Island 11 9 2 22

ALDO 16 - - 16

New Look 10 - - 10

GAP 3 - - 3

OVS - 18 3 21

Bodique (HKM) - 2 - 2

Multibrand stores 2 - - 2

TOTAL 61 47 10 118

Source: EMF

Apart from the clothing business, the company said it was generally satisfied with the 2013 results, mainly thanks to its two key chains, the Empik multimedia store and Smyk children's goods outlets, both of which slightly increased sales last year both in their brick & mortar stores as well as online. The Empik group turned over PLN 1.28bn last year (+1% y/y) with an EBITDA of PLN 160m (+21% y/y). Smyk saw its sales grow by 11% and reach PLN 1.24bn (of which PLN 578m in Poland and PLN 435m in Germany), but its EBIDTA halved and reached only PLN 49m. Smyk's business in Germany contracted slightly due to local and online competitors, while the Russian stores were negatively affected by currency exchange and opera-tional problems. As for EMF's Empik/Speak-Up language schools, their combined sales revenues remained almost unchanged from the previous year at PLN 206m, but their

EBITDA dropped by a third and came to merely PLN 32m, largely due to pricing issues in Russia. Overall, EMF turned over PLN 3.037bn last year, marking a 2% increase on the prior year, but its net loss deepened from a mere PLN 6m in 2012 down to PLN 300m in 2013. Their EBITDA on continued oper-ations increased slightly last year and came to PLN 276m.


January retail sales January retail sales January retail sales January retail sales beat expectationsbeat expectationsbeat expectationsbeat expectations

Polish retail sales rose at an annual rate of 4.8% in January, on a 21.3% monthly fall, Poland's statistical office GUS said. The PAP analyst survey had shown consensus expectations for a 4.3% y/y increase and a 21.9% m/m decline. In real terms, Polish retail sales were up by 5.0% y/y in January after a 5.9% y/y in-crease in December, GUS added. In the whole of 2013 retail sales rose by merely 2.3% from the prior year. "The data show the continuation of recovery of do-mestic demand fuelled by improvement of the situa-tion on the labour market. We expect these positive tendencies to be sustained in months to come. There is still no sign of an inflationary pressure, as deflator of retail prices remains in negative territory," BZ WBK economists wrote in an e-mailed commentary. According to the central bank NBP, Poland may expect a recovery of consumer demand in the near future as suggested by retail sales, but the recovery may be slow. "Most signals coming from high-frequency data point to the possibility of rebuilding consumer demand, alt-


hough this process may have a rather sluggish charac-ter," NBP said. Poland's retail sales growth accelerated to 4.2% in Q4 2013 from 3.9% in Q3, which "indicates the possibility of improving private consumption in the following quarters," NBP reported. In addition, a positive real term wage growth in Q1-Q3 2013 and low inflation are positive signals. On the other hand, the said factors are yet to translate into improvement of the labor market, the bank wrote.

Retail sales in Poland (y/y)

-5%

0%

5%

10%

15%

Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14

Source: GUS

The February reading of the Polish current consumer sentiment seems to be in line with the NBP's com-ments. The indicator improved fractionally from levels seen in January, with all leading measures showing notable improvement from year prior levels, a monthly consumer sentiment survey by the Central Statistical Office (GUS) showed. A synthetic measure of current confidence edged up by 0.1 pts m/m to -20.1 pts in February, while the leading confidence indicator was up by 1.5 pts to -24.2 pts. The job outlook indicator in-creased by 1.1 pts to -36.3 pts, while the major pur-chases indicator edged down by 0.7 pts to -16.0 pts.

TECHNOLOGY

State R&D institution State R&D institution State R&D institution State R&D institution teams up with venture teams up with venture teams up with venture teams up with venture capitalists to form USD capitalists to form USD capitalists to form USD capitalists to form USD 70m technology fund70m technology fund70m technology fund70m technology fund

Poland's National Centre for Research & Development (NCBiR) has teamed up with two venture capital com-panies, Polish INVESTIN and Israel's Pitango Ven-ture Capital to establish the country's largest ad-vanced technology fund Pitango Investin Venture (PI Ventures). The state-run R&D institution, which helps allocate funding for innovation, will contribute a half of PI Ventures' initial capital of PLN 210m (ap-proximately USD 70m). "This is a breakthrough project for R&D financing in Poland. It opens up unprecedented possibilities through engaging both public and private resources and getting investment funds onboard," commented NCBiR's director Krzysztof Jan Kurzydłowski. "The quality of our research teams gives us hope for a Polish venture to hit the NASDAQ in 3-4 years." The project is part of NCBiR's BRIdge VC initiative that seeks to stimulate investments in advanced tech-nology. The idea is to provide public & private funding for commercialization of R&D results with the help of venture capitalists, thus making innovative Polish pro-jects commercially viable. With USD 1.6bn worth of assets under management, Pitango is the largest venture capital group in Israel. Since its founding more than two decades ago Pitango has invested in more than 180 ventures, some of which have since been listed on the NASDAQ or became part

of global corporations, including Microsoft, Cisco, IBM, and Oracle. "The Polish economy has proven its resistance to eco-nomic turmoil by exhibiting growth amid crisis and slowdown in Europe. Polish companies and innovators are creating a growing amount of profitable technolo-gies, which is crucial condition for the development of the venture capital market," sair Rami Kalish, co-founder and managing partner of Pitango. With an investment horizon of 10 years, PI Ventures will be the largest technology fund in Poland and the first one created under the auspices of the govern-ment-sponsored BRIdge VC program. It will provide long-term financing to its portfolio companies as well as support them in product development and building relations with international clients and strategic part-ners. The fund will generate balanced and cross-sectoral deal flow (i.e. software, hardware, communi-cations, media, mobile, new materials, medical devic-es, nano-tech, clean-tech, green-tech, agro-tech) and secure continuous support for successful portfolio ventures along their progress as they mature and be-come larger, global enterprises. "We want PI Ventures to help Polish companies achieve international success, the way the Yozma pro-gram in high tech investments in Israel two decades ago," said Władysław Halbersztadt, general partner at PI Ventures and co-founder of INVESTIN group. "We intend to make investments of up to PLN 1m in seed projects, several million PLN in startups and up to PLN 15m in growth projects. The investment per company shall not exceed USD 10m during the Fund lifetime. Upon exiting a project, we want our owner-ship level to be at the minimum of 20%," Mr. Halbersztadt tells Poland Today. INVESTIN is Polish private investment company fo-cused on high-tech investments with accelerating &


incubating programs for startups stemming from in-dustry and science. Mr. Halbersztadt is himself an en-trepreneur & former CEO with proven 12+ years of experience in business development, seed investments and financial consulting including NewConnect capi-tal market, EU funding and start-up transactions.

Pitango 's Rami Kalish (first from the left) and INVESTIN's Władysłąw Halbersztadt (second from the left) want to transform Polish technology firms into global players. Image: NCBiR

"We will target businesses that have the capacity to evolve into global enterprises and generate a turnover of some USD 50m at the moment of our exit. Of course this is just a rule of thumb as the actual amount will be slightly different in each case, depending on industry, marketplace, and the company itself. We are looking for companies that are being run by commit-ted, professional and competent teams," says Mr. Halbersztadt. More high-tech capital from Israel Although it is certainly the largest, PI Ventures is not the first Polish-Israeli technology fund. Two years ago, one of the oldest Israeli venture capital funds, Giza Venture Capital teamed up with the National Capi-tal Fund, a fund-of-funds set up by the Polish govern-

ment back in 2005 to support innovative projects in the SME sector, to create Giza Polish Ventures I (GPV I). The fund were to invest more than EUR 18m in Poland over a period of three years, injecting be-tween EUR 200,000 and EUR 1m into early stage pro-jects in telecommunications, IT and software, media and the Internet, medical equipment and so called clean technology. "Resources from our first GPV I fund are to be invest-ed until the end of 2015," Ewa Abel, analyst at Giza Polish Ventures told Poland Today's Lech Kaczanowski back in 2011. "Our general approach is to acquire minority stakes in portfolio ventures as a way of motivating their founders. In exceptional cases we may decide to purchase majority ownership as well." Established back in 1992, Giza Venture Capital has in-vested in excess of USD 0.5bn in more than 100 pro-jects to date, resulting in numerous business contacts in the US, EU and Far East. The fund has sold 35 com-panies to such industry majors as Microsoft, Intel, Texas Instruments or successfully exited a number of investments on NASDAQ, Tel Aviv Stock Exchange or Swiss Exchange.

COMMUNICATIONS

Advertising giant WPP Advertising giant WPP Advertising giant WPP Advertising giant WPP acquires Polish digitalacquires Polish digitalacquires Polish digitalacquires Polish digital agency Lemon Skyagency Lemon Skyagency Lemon Skyagency Lemon Sky

The UK-based communications and advertising giant WPP has announced that its wholly owned operating company JWT, the global marketing communications agency, has agreed to acquire Polish creative digital marketing company Lemon Sky.

Founded in 2000 and employing around 70 people in Warsaw and Wroclaw, the agency specializes in pro-ducing a broad range of digital advertising and cam-paign services. Lemon Sky’s unaudited revenues for the year ended 31 December 2013 were EUR 2.7m (approx. USD 3.7m) with gross assets of approximately EUR 2.4m (USD 3.3m) as at the same date. Its clients include Nestle, Orange, Tesco and Leroy Merlin. Following the deal, Lemon Sky will join JWT Warsaw to create one truly integrated communications agency for Poland. This investment continues WPP's strategy of develop-ing its services in important markets and sectors and strengthening its capabilities in digital media, the company said in a statement. WPP digital revenues (including associates) were well over USD 5bn in 2012, representing 33% of the group's total revenues. WPP has set a target of 40-45% of revenue to be derived from digital in the next five years. According to its pre-liminary results, published last week, WPP saw its revenues go up 6.2% y/y in 2013 and come in excess of GBP 11bn (approx. USD 18.3bn). Its profit before tax rose by nearly a fifth and totaled GBP 1.3bn (USD 2.2bn). In Poland, WPP has 33 subsidiaries and associates that generate revenues of around USD 150m and employs over 1,000 people. The best known WPP businesses in the country include the PR firms Burson-Marsteller, Hill+Knowlton Strategies, advertising agencies JWT, Grey, Ogilvy & Mather, and Testardo as well as data investment firms Millward Brown, TNS and Kantar Media. Across the Central and Eastern Euro-pean markets collectively, WPP companies (including associates) generate revenues of around USD 700m and employ over 6,000 people. Modest growth in advertising Poland's advertising market will grow by 1.5% this year, with TV advertising growing in line with the


market and internet advertising exceeding market growth, the head of Polish unit of International Adver-tising Association (IAA) Jacek Olechowski said in a recent interview. "One can see a willingness to inno-vate, change and take risks on the market. These are factors which may positively influence the market this year." Poland's ad market will also be supported by the fact that it is "relatively cheap" compared to other Eu-ropean countries, "especially in the TV segment," Olechowski told the PAP news agency. However, one can expect a continued decline in ads in traditional media such as press, radio and outdoor, he added. The media house Starlink is slightly less optimistic, as according to their recent projection Poland's ad mar-ket is expected to grow by 0.5-0.9% y/yin 2014 after a 4.5% annual decline in 2013. "Despite the signs of growth acceleration in the Polish economy the media market is exiting the slowdown period very slowly, therefore Starlink forecasts the annual growth rate of the advertising market in 2014 in 0.5% - 0.9% range," the company said in a statement. In 2013 the advertis-ing budget declined by PLN 328.5m to an estimated net spending of PLN 6.995bn (USD 2.3bn), the report said.

IT & TELECOMS

Play boosts profPlay boosts profPlay boosts profPlay boosts profits & its & its & its & revenues in 2014, revenues in 2014, revenues in 2014, revenues in 2014, proclaimsproclaimsproclaimsproclaims "end of "end of "end of "end of feature phone"feature phone"feature phone"feature phone"

P4, operator of Poland’s fourth-largest mobile-phone network Play, posted PLN 707m EBITDA in 2013, up from PLN 562m in 2012, with revenues growing 4% y/y to PLN 3.72bn, P4 representatives said during a

press conference. As the smallest in a four player mar-ket in an emerging economy, Play has proven a nimble competitor and has grown quickly and consistently. The company expects further revenue growth in 2014 after deceleration last year caused by reduction of wholesale Mobile Termination Rates (MTR). The number of clients of the Play network in 2013 rose by 24% y/y to 10.7 million, a 19% market share at end-year, the firm said.

P4 (Play) key figures in PLN bn

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2011 2012 2013

Turnover EBITDA

Source: P4

"We are expecting our revenues to grow by 8-10% this year, but our customer numbers will not increase at that fast a pace," P4's CEO Jorgen Bang-Jensen said at the company's event at last week's World Mobile Con-gress in Barcelona. In his opinion, Poland's mobile market will contract by 0.5% in 2014. The company expects further expansion of its broadband internet business, which had 1.15m users as of end of last year. This growth will be fuelled mainly by the strengthen-ing dominance of smartphones, which represent some 90% of all phones sold by the operator.

P4 has recently carried out a EUR 870m bond issue to refinance existing debt and pay shareholders, seeking to take advantage of record low borrowing costs for high-yield issuers. One of the key objectives of the re-financing is to reduce P4's dependence on China De-velopment Bank as its main creditor, in favor of Eu-rope-based institutions, market insiders said. The Chinese lender supported P4's growth in Poland after the company chose Huawei as its main infrastructure provider. Secondly, P4 raised money to pay a reported PLN 1.3bn dividend to its shareholders, Greek entre-preneur Panos Germanos (who has a majority stake in the operator via his Cypriot venture Tollerton) and Icelandic billionaire Thor Bjorgolfsson (operating via the Novator fund).

P4 announced "the end of feature phones" as smartphones represent 90% of its handset sales, with Samsung Galaxy S2 holding the top spot. Image: Play "Play appears to have developed a consistent and well-communicated brand, seeking to be the mobile num-ber porting destination of choice and has acquired cus-tomers on a relatively evenly balanced basis across the market (ie. without targeting any one particular com-petitor). Management appear conscious of the need not to be seen as a disruptive challenger, which could provoke a destructive price war," ratings agency Fitch said in a recent commentary.


POLITICS & ECONOMY

'World stands on brink 'World stands on brink 'World stands on brink 'World stands on brink of of of of conflict,' warns conflict,' warns conflict,' warns conflict,' warns Polish prime ministerPolish prime ministerPolish prime ministerPolish prime minister

Poland's prime minister Donald Tusk, warned on Sun-day the "world stands on the brink of conflict" over Ukraine, and that "Europe must send a clear signal it will not tolerate any acts of aggression of interven-tion." The statement came in a speech made by Mr. Tusk at a specially-convened press conference and ex-pressed Poland's growing alarm at the situation in its neighbor. Ukraine mobilized for war on Sunday, after Russian President Vladimir Putin declared he had the right to invade, creating the biggest confrontation between Moscow and the West since the Cold War. Putin ob-tained permission from his parliament on Saturday to use military force to protect Russian citizens in Ukraine, spurning Western pleas not to intervene. Ukraine's security council ordered the general staff to immediately put all armed forces on highest alert, and the defense ministry was ordered to conduct a call-up of reserves. Russian forces have since bloodlessly seized Crimea - an isolated Black Sea peninsula where Moscow has a naval base. On Sunday they surrounded several small Ukrainian military outposts there and demanded the Ukrainian troops disarm. Moscow organized military maneuvers with 150,000 troops along Ukraine's land border, but so far they have not crossed. However, pro-Russian demonstrators have marched in the east of the country and have raised Russian flags over gov-ernment buildings in several cities, in what Kiev says

is a move orchestrated by Moscow to justify a wider invasion. "The world stands on the brink of conflict, the conse-quences of which are not foreseen but not everyone in Europe is aware of this situation," said Donald Tusk. “Ukrainians have to find out today that they have real friends,” he continued. In an unusual show of unanim-ity, all Polish political parties condemned Russia's ac-tions in Ukraine and stood behind Mr. Tusk as he de-manded urgent action from the European powers.

"The world stands on the brink of conflict, the con-sequences of which are not foreseen but not every-one in Europe is aware of this situation," said Polish PM Donald Tusk. Photo: KPRM President Bronisław Komorowski has called for the North Atlantic Council to convene in an emergency session saying "we [Poles] can feel threatened by the potential use of Russian armed forces on Ukrainian territory." Foreign minister Radek Sikorski, who played a key role in brokering the agreement that end-ed the deadly conflict in central Kiev, cut short a visit to Iran to deal with the crisis on his country’s borders. According to many commentators, there is little chance for Kiev to regain control of Crimea, but the challenge now is to deter Russia from taking over the Russian-speaking east of the country."

Ukraine has appealed for help to NATO, and directly to Britain and the United States, as co-signatories with Moscow to a 1994 accord guaranteeing Ukraine's secu-rity after the breakup of the Soviet Union. By the time this issue of PT Business Review+ went to the press, the Western response had been largely symbolic. US President Barack Obama and other leaders suspended plans to attend a G8 summit in Sochi, where Putin has just finished staging his USD 50bn winter Olympic games. Some countries recalled ambassadors..

POLITICS & ECONOMY

Poland is EU's fastest Poland is EU's fastest Poland is EU's fastest Poland is EU's fastest growing large economy growing large economy growing large economy growing large economy in 2014, says Brusselsin 2014, says Brusselsin 2014, says Brusselsin 2014, says Brussels

The Polish economy is expected to grow by 2.9% y/y in 2014 and accelerate to 3.1% in 2015, faster than last year's 1.6%,the European Commission said in its win-ter forecast. The 2014 estimate for Poland is the third-fastest in the EU behind Latvia and Lithuania. "The improving economic outlook in the main trading partners and the resulting pick-up in Polish exports are set to invigorate private investment and the labor market, which in turn is expected to support the re-covery of private consumption," the report read. The forecasts are "slightly above current estimates of po-tential output growth." Risks to the EC scenario "are broadly balanced" with a weaker currency further boosting exports and enhanc-ing import substitution on the upside and possible pick-up in inflation, which "might dent real disposable incomes and slow down private consumption growth," the EC expects.


On the fiscal front, in 2014, the general government budget balance is projected to turn into a surplus of 5% of GDP under ESA95 as asset transfers by private pension funds OFE are treated as revenue, while un-der ESA2010 methodology, which will come into force this autumn, Poland would record a deficit of 3.8% as these transfers will no longer count as revenue. "In 2015, due to the one-off nature of the large im-provement in 2014, the general government budget balance is expected to return into the red, posting a deficit of 2.9% of GDP under ESA95," the EC wrote.

GDP growth in Poland (y/y)

0%

1%

2%

3%

4%

5%

6%

7%

2005

2006

2007

2008

2009

2010

2011

2012

2013

*2014

Source: GUS *) projected (Eur. Commission: 2.9%, BZ WBK: 3.5%)

As growth gathers speed and companies add workers, Polish unemployment will fall to 10.1% by 2015 from 10.4% last year (according to the Eurostat-approved Labor Force Survey methodology), bolstering disposa-ble incomes, according to the report. Inflation will be an average 1.4% this year and 2% next, compared with 0.8% in 2013.

Domestic demand picking up Latvia will grow 4.2% this year, the EU’s fastest rate, followed by Lithuania with 3.5%, the commission said. The two Baltic economies will grow 4.3% and 3.9% in 2015. The Czech economy, the second biggest after Po-land in the EU’s east, will grow 1.8 this year and 2.2% next year, while Hungarian expansion will remain at 2.1% flat in 2014 and 2015, the commission said.

On Friday, Poland's central statistical office confirmed its earlier flash GDP growth estimates at 2.7% y/y in Q4 2013 (up from 1.9% GDP in Q3) and published a de-tailed breakdown of the data, which showed a sub-stantial acceleration in private consumption and fixed investment.

"The data confirmed that the economy keeps on accel-erating and that this process - in line with our expecta-tions - is based not only on dynamic expansion of ex-ports, but also increasingly more on recovering domes-tic demand. Private consumption advanced by 2.1% y/y - the fastest pace since Q1 2012," BZ WBK analysts said in an e-mailed commentary. Recovery also con-tinued in investment activity with gross fixed capital formation increasing by 1.3% y/y. Domestic demand contributed 1.2 percentage points to GDP growth while net exports added 1.5pp, prompting experts to conclude that the Polish economy no longer relies on a single engine.

"Domestic demand is still based mostly on private con-sumption, but we are expecting investment to join in a couple of quarters. We are expecting a further acceler-ation of growth in the upcoming quarters, to ca. 4% y/y at the year-end (and to 3.5% on average in the en-tire year), " the bank said, adding that the figures were neutral from the monetary policy point of view.

DATA BOX: UNEMPLOYMENT

Poland's unemployment rate rose to 14% in January

from the prior-month level of 13.4%, according to Cen-

tral Statistical Office (GUS) figures released Monday.

The number of registered jobless at end of January

reached 2.261 million people. This figure is in line with

the Labor Ministry's prior estimate of 14%. January

brought 269,200 new registrations, versus 230,000 in

the previous month and down from 317,900 in January

2013. Employers posted 76,200 new job offers for the

month, up from 46,300 in the previous month and up

from 64,000 in the preceding year.

Source: GUS


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Oct '13 Nov '13 Dec '13 Jan '14

Sector y/y m/m y/y m/m y/y m/m y/y m/m

Food & bev +1.9 -0.1 +1.9 +0.3 +1.5 +0.7 +1.6 +1.4

Alcohol, tobacco +3.6 +0.1 +3.6 +0.1 +3.7 0.0 +4.2 +0.8

Clothing, shoes -4.8 +3.5 -4.9 -0.2 -4.9 -0.6 -5.3 -3.9

Housing +1.8 +0.2 +1.8 +0.1 +1.8 0.0 +2.1 +0.2

Transport -2.3 -1.0 -2.3 -1.2 -0.9 0.4 -1.2 -1.0

Communications -7.2 +2.8 -11.7 -4.9 -11.6 0.0 n/a n/a

Gross CPI +0.8 +0.2 +0.6 -0.2 +0.7 +0.1 +0.7 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Ja

n 1

2

Ma

r 12

Ma

y 1

2

Ju

l 12

Se

p 1

2

No

v 1

2

Ja

n 1

3

Ma

r 13

Ma

y 1

3

Ju

l 13

Se

p 1

3

No

v 1

3

Ja

n 1

4

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

m/m (%) -0.9 +3.6 -5.8 +17.3 -21.3

y/y (%) +3.9 +3.2 +3.8 +5.8 +4.8

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 n/a

y/y (%) +4.3 +5.5 +11.6 +5.6 +2.3

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2009 2010 2011 2012 2013 Jan

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 8.8 +8.5

Commenced 142.9 158.1 162.2 141.8 127.4 6.5 +56.2

U. construction 670.3 692.7 723.0 713.1 694.0 688.2 -2.1

Completed 160.0 135.7 131.7 152.5 146.1 12.2 -12.8

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q4 2013 +2.7% 442,167 n/a

Q3 2013 +1.9% 393,725 -1.9%

Q2 2013 +0.8% 389,244 -2.3%

Q1 2013 +0.5% 370,089 -3.1%

2013 +1.6% 1,631,764 *-1.6%

2012 +1.9% 1,595,225 -3.7%

2011 +4.5% 1,528,127 -5.0%

2010 +3.9% 1,416,585 -5.1%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator 2010 2011 2012 2013 *2014

GDP change +3.9% +4.5% +1.9% +1.6% +3.5%

Consumer inflation +2.6% +4.3% +3.7% +0.9% +1.2%

Producer inflation +2.1% +7.6% +3.4% -1.3% +0.6%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.6% -0.8%

Nominal gross wage +3.9% +5.2% +3.7% +3.4% +4.5%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.8%

EUR/PLN 3.99 4.12 4.19 4.20 4.07

Sources: NBP, BZ WBK, GUS *) projections **) year-end

GrosGrosGrosGross Wagess Wagess Wagess Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q4 2012 Q1 2013 Q2 2013 Q3 2013

A B A B A B A B

Coal mining 8,427 192 6,060 138 6,290 143 6,061 138

Manufacturing 3,522 154 3,491 152 3,560 155 3,625 158

Energy 6,535 198 6,196 188 5,828 177 6,021 183

Construction 3,829 163 3,556 152 3,693 157 3,766 160

Retail & repairs 3,365 143 3,432 146 3,421 146 3,408 145

Transportation 3,816 135 3,439 122 3,547 125 3,589 127

IT, telecoms 6,379 166 6,685 174 6,707 174 6,654 173

Financial sector 6,044 136 6,356 143 6,702 151 6,109 137

National average 3,878 154 3,741 149 3,613 144 3,652 145

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

m/m (%) +7.8 -0.8 +9.4 +14.3 -2.9 +21.5 -64.0

y/y (%) -5.2 -11.1 -4.8 -3.2 -8.9 +5.8 -3.9

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +15.5 +12.1 +5.1 +4.6 +11.8 -0.6 -12.0

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

May

11

Au

g 1

1

No

v 1

1

Feb

12

May

12

Au

g 1

2

No

v 1

2

Feb

13

May

13

Au

g 1

3

No

v 1

3

Fe

b 1

4

60

80

100

120 Co nsumer confid ence (left axis)

Economic sentiment (right axis)

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14

m/m (%) +0.2 -0.3 +0.1 -0.7 -0.3 -0.1 +0.1

y/y (%) -0.8 -1.1 -1.4 -1.4 -1.5 -1.0 -0.9

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +2.0 +2.2 +3.4 +2.1 +7.6 +3.3 -1.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14

m/m (%) -0.1 -0.2 -0.1 -0.1 -0.1 -0.1 -0.2

y/y (%) -1.9 -1.9 -1.8 -1.8 -1.7 -1.7 -1.7

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +7.4 +4.8 +0.2 -0.1 +1.0 +0.2 -1.8

Industrial OutputIndustrial OutputIndustrial OutputIndustrial Output

Month Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

m/m (%) +1.5 -4.5 +9.6 +6.0 -6.2 -9.7 +2.9

y/y (%) +6.3 +2.2 +6.2 +4.4 +2.9 +6.6 +4.1

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +10.7 +3.6 -3.5 +9.8 +7.7 +1.0 +2.2


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

2013 y/y (%)

share (%)

2012 share (%)

2013 y/y (%)

share (%)

2012 share (%)

Food and live animals 69,304 +9.7 10.9 61,694 10.5 47,906 +6.2 7.4 44,287 7.0

Beverages and tobacco 8,624 +7.3 1.4 7,967 1.3 4,150 +4.0 0.6 3,989 0.6

Crude materials except fuels 15,744 +10.5 2.5 14,024 2.4 21,585 -3.7 3.3 22,053 3.5

Fuels etc 30,013 +1.4 4.7 29,389 4.9 75,539 -11.7 11.7 85,280 13.2

Animal and vegetable oils 1,864 +34.2 0.2 1,342 0.2 2,646 -9.2 0.4 2,887 0.5

Chemical products 59,103 +7.7 9.3 54,295 9.1 92,917 +3.1 14.3 89,140 13.9

Manufactured goods by material 129,915 +2.0 20.3 126,161 21.1 112,392 0.0 17.3 110,773 17.4

Machinery, transport equip. 239,434 +6.1 37.5 223,646 37.4 216,608 +4.1 33.4 203,718 32.1

Other manufactured articles 82,816 +8.5 13.0 75,925 12.7 58,210 -1.1 9.0 57,646 9.1

Not classified 1,782 n/a 0.2 2,653 0.5 16,242 n/a 2.6 18,515 2.8

TOTAL 638,599 +5.8 100 597,096 100 648,195 0.0 100 638,288 100

Poland's ten largest trading partners, ranked according to 2013

EXPORTS in PLNbn IMPORTS in PLN bn

No Country *2013 share 2012 Share No Country *2013 share 2012 Share

1 Germany 159,622 25.0% 150,046 25.1% 1 Germany 139,334 21.5% 134,933 21.3%

2 UK 41,503 6.5% 40,184 6.8% 2 Russia 79,601 12.3% 91,033 14.0%

3 Czech Rep. 39,421 6.2% 37,475 6.3% 3 China 60,914 9.4% 57,235 8.9%

4 France 35,745 5.6% 34,862 5.9% 4 Italy 33,703 5.2% 32,782 5.2%

5 Russia 34,058 5.3% 32,290 5.3% 5 Netherlands 25,005 3.9% 24,543 3.9%

6 Italy 27,450 4.3% 29,067 4.9% 6 France 24,533 3.8% 25,303 3.9%

7 Netherlands 25,292 4.0% 26,678 4.5% 7 Czech Rep. 23,778 3.7% 23,327 3.7%

8 Ukraine 18,037 2.8% 17,213 2.8% 8 USA 17,350 2.7% 16,436 2.6%

9 Sweden 17,498 2.7% 15,811 2.7% 9 UK 16,861 2.6% 15,509 2.4%

10 Slovakia 16,795 2.6% 15,288 2.6% 10 Belgium 14,913 2.3% n/a 2.2%

Source: Central Statistical Office (GUS) *) preliminary estimates

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 28 February 2014

100 USD 302.54 ↓

100 EUR 416.02 ↓

100 GBP 506.97 ↑

100 CHF 342.11 ↑

100 DKK 55.75 ↓

100 SEK 46.99 ↑

100 NOK 50.28 ↑

10,000 JPY 297.91 ↑

100 CZK 15.20 →

10,000 HUF 134.09 ↑

100 USD/EUR against PLN

300

350

400

450

14 M

ar 13

24 M

ay 13

1 Aug 13

9 O

ct 13

18 D

ec 13

28 Feb 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Oct '13 Nov '13 Dec '13 Jan '14

Monetary base 154,967 153,672 164,010 161,544

M1 536,237 538,837 555,851 546,487

- Currency outside banks 113,174 113,718 114,401 113,455

M2 935,095 934,713 960,361 947,443

- Time deposits 414,941 412,469 421,160 418,259

M3 955,419 953,446 978,924 962,416

- Net foreign assets 150,517 148,702 143,430 140,617 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Sep '13 Nov '13 Dec '13 Jan '14

Loans to customers 901,288 906,298 903,890 914,189

- to private companies 260,585 262,396 259,061 263,063

- to households 559,965 563,157 562,381 567,984

Total assets of banks 1,612,836 1,627,119 1,601,293 1,628,197

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14

PLN (up to 1 year) 4.6% 4.5% 4.5% 4.5% 4.3% 4.2%

PLN (up to 5 y ) 5.1% 4.9% 4.9% 4.9% 4.9% 4.9%

PLN (over 5 y) 4.9% 4.8% 4.8% 4.8% 4.7% 4.8%

PLN (total) 4.9% 4.8% 4.8% 4.8% 4.7% 4.8

EUR (up to 1m EUR) 1.9% 1.8% 2.0% 1.9% 1.9% 2.0%

EUR (over 1m EUR) 3.5% 3.2% 2.5% 3.0% 2.9% 3.6%

Warsaw Inter Bank Offered Rate (WIBOR) as of 28 Feb 2014

Overnight 1 week 1 month 3 months 6 months

2.58%% 2.59% 2.61% 2.71% 2.74%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 28 Feb '14

Change 21 Feb '14

Change end of '13

↑ Asseco Pol. 49.46 +5% +8%

↑ Bogdanka 126.8 +1% +1%

↑ BZ WBK 419.9 +2% +8%

↓ Eurocash 39.75 -11% -17%

↑ Grupa Lotos 40.96 +4% +16%

↑GTC 7.37 +3% -1%

↑ Handlowy 115 +5% +10%

↓ JSW 51.5 -2% -3%

↓ Kernel 32.1 -10% -16%

↑ KGHM 116.9 +2% -1%

↑ mBank 545 +2% +9%

↓ Orange Pol. 10.11 -2% +3%

↑ Pekao 193 +1% +8%

→ PGE 18.42 0% +13%

↑ PGNiG 5.1 +1% -1%

↑ PKN Orlen 43.7 +1% +7%

↑ PKO BP 44.15 +2% +12%

↑ PZU 440.95 +2% -2%

↑ Synthos 5.35 +3% -2%

→ Tauron 4.82 0% +10%

Source: Warsaw Stock Exchange

Key indices

as of 28 February 2014

WIG Total index

55553333,,,,811811811811....30303030 Change 1 week +1% ↑

Change end of '13 +5% ↑

WIG-20 blue chip index

2,2,2,2,518518518518....53535353 Change 1 week +1% ↑

Change end of '13 +5% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

56,000

22 N

ov 13

16 D

ec 13

15 Jan 14

6 Feb 14

28 Feb 14


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New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan 2014 *

Monthly wages (PLN)

Jan 2014**

Unemploy-ment

Dec 2014

New dwellings Jan 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 98.4 82.9 4,076 3,967 161.2 13.8 1,176 72.3

Kujawsko-Pomorskie (Bydgoszcz) 107.6 138.6 3,321 3,143 156.7 18.8 608 91.0

Lubelskie (Lublin) 104.3 84.6 3,787 2,976 140.4 15.0 346 59.2

Lubuskie (Zielona Góra) 117.8 106.4 3,396 3,030 63.5 16.5 434 82.8

Łódzkie (Łódź) 103.9 100.4 3,735 3,094 158.2 14.5 433 71.2

Małopolskie (Kraków) 97.6 100.3 3,708 3,274 172.4 12.1 1,393 70.1

Mazowieckie (Warszawa) 106.5 86.6 4,380 4,776 295.3 11.4 2,491 90.7

Opolskie (Opole) 103.7 146.9 3,509 3,460 55.0 15.0 147 86.0

Podkarpackie (Rzeszów) 102.7 146.9 3,333 2,998 160.4 16.9 585 101.9

Podlaskie (Białystok) 106.4 98.6 3,209 3,613 74.0 15.7 228 69.9

Pomorskie (Gdańsk-Gdynia) 110.6 93.3 3,892 3,305 119.9 13.9 774 85.4

Śląskie (Katowice) 100.1 95.7 4,270 3,493 218.4 11.7 1,030 102.6

Świętokrzyskie (Kielce) 109.0 55.5 3,356 3,153 94.7 17.1 211 106.0

Warmińsko-Mazurskie (Olsztyn) 102.1 137.1 3,427 2,964 121.2 22.4 452 135.7

Wielkopolskie (Poznań) 108.5 85.8 3,769 3,545 152.3 10.0 1,368 137.8

Zachodniopomorskie (Szczecin) 110.7 93.0 3,474 3,422 117.2 18.7 511 69.9

National average 104.1 93.8 4,076 3,967 2,260.7 14.0 12,187 87.2

*) Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13

in Poland 1,861 1,381 2,886 175 -3,020 -1,794

Polish DI 310 -550 -1,203 957 2,588 -1,529

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 14,832 4,716

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2010 2011 2012 Q1 '13 Q2 '13 Q3 '13

Trade balance -8,893 -10,059 -5,313 -139 1,203 1,017

Services, net 2,334 4,048 4,816 1,274 1,686 1,047

CA balance -18,129 -17,977 -13,332 -2,313 486 -2,027

CA balance vs GDP -5.1% -5.0% -3.7% -3.1% -2.3% -2.0%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q4

10

Q2

11

Q4

11

Q2

12

Q4

12

Q2

13

Q4

13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, Q4 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 563,000 17,000

22.3% 3.6–5.1

Warsaw suburbs 2,063,000 12.5% 2.1–2.8

Central Poland 1,021,000 80,000 15.2% 2.1–3.3

Poznań 1,023,000 215,000 4.4% 2.5–3.15

Upper Silesia 1,431,000 37,000 9.3% 2.4–3.3

Wrocław 780,000 259,000 11.7% 2.6–3.1

Tri-city 184,000 46,000 9.2% 2.8–3.3

Kraków 141,000 0 4.0% 3.3-4.0

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'13 Retail rents**1H'13

Q3 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,146 +3.4% 11.5-25.5 10.5% 85 85

Kraków 5,989 -13.1% 13-15 2.71% 41 78

Katowice 5,898 +9.0% 13-14 8.29% 48 56

Poznań 6,351 -6.7% 14-16 14.66% 44 55

Łódź 4,780 -3.8% 12-14 14.97% 31 26

Wrocław 5,997 -4.3% 13-16 12.37% 38 41

Gdańsk 6,398 -1.2% 13-15 11.24% 39 31

*avg, offer-based ** EUR/sq.m/month; Retail units 100-150 sq.m

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Jan10

Sep11

May11

Jan12

Sep12

May13

Jan14

Wage CPI

Index 100 = Jan 2005. Source: GUS

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