poland today business review+ no. 027

No. 027 / 24th March 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Industrial output accelerates in February page 3

BANKING & FINANCE

mBank teams up with Orange in new mobile banking alliance page 3

PKO BP to finalize merger with Nordea by mid-2015 page 4

ENERGY & RESOURCES

Tauron teams up with PIR to build PLN 1.5bn cogen unit in Silesia page 6

New mining law to speed up development of Poland's shale gas industry page 6

PROPERTY & CONSTRUCTION

Global property giant Invesco opens its 2nd CEE office in Warsaw page 8

France's Yareal announces new office project page 9 Nestle to take up 10,000 sq.m at new Mokotów scheme by Kronos Real Estate page 9

SERVICES & BPO

Dutch Express delivery giant TNT to employ 400 at new Warsaw shared services centre page 11

CONSUMER GOODS & RETAIL

Spanish Neinver to add 6,000 sq.m of GLA to Ursus outlet center in Warsaw page 13

POLITICS & ECONOMY

A recipe for doing business better: Poland Today talks to Xavier Devictor, The World Bank's head for Poland and the Baltic States page 12

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

VW has been making commercial vehicles in Poznań for more than a decade. Photo: VW Poznań

VW to create 2,300 jobs at new factoryVW to create 2,300 jobs at new factoryVW to create 2,300 jobs at new factoryVW to create 2,300 jobs at new factory Germany's top car manufacturer Volkswagen has unveiled details of its new greenfield investment in Poland, which has been the stuff of rumors since autumn last year. The company plans to build a brand new factory in Września, 50km east of Poznań, that will produce the next generation of VW's Crafter delivery van. According to Polish government officials, the project will total EUR 800m and launch in Q4 2016. page 2

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VW VW VW VW unveilsunveilsunveilsunveils details of details of details of details of hugehugehugehuge new greenfield new greenfield new greenfield new greenfield investmentinvestmentinvestmentinvestment in Poland in Poland in Poland in Poland

Although this project has been the stuff of rumors for a couple of months now, Volkswagen has finally pro-vided an official confirmation of its plans to build a brand new factory in Poland. The EUR 800m facility is to create 2,300 new jobs and focus on the production of the Crafter delivery van range. The latter has been made since 2005 at two German Daimler plants under a co-operation accord with VW that is due to expire at the end of 2016. Relocating production to Poland will allow the German group, which already makes the Caddy and T5 commercial vehicles near Poznań, to significantly reduce its production costs.

The next generation of Volkswagen's Crafter van will be made at the new Polish factory in Września. Image: VW

"By taking the decision to produce the Crafter in Po-land, we are setting the course for the strategic rea-lignment of our light commercial vehicles,” said Leif Östling, head of VW's commercial vehicles business. "The Crafter is outstandingly well-suited for all the growth markets of the world and will take Volkswagen Commercial Vehicles a stage forward on its way to be-coming a globally active manufacturer."

The new plant will be located in Września, some 50km to the east of Poznań and will be the second lo-cation of Volkswagen Commercial Vehicles in Poland in addition to the plant at Poznań, where Caddy urban delivery vans have already rolled off the production line for more than a decade. "Our experience with the production of the Caddy in Poland has been excellent. And the region around Września offers ideal econom-ic, infrastructure and labor market policy conditions for us," said Eckhard Scholz, Speaker of the Manage-ment Board of Volkswagen Commercial Vehicles.

The area of the future plant will total some 220 hec-tares and the plant itself will consist of a body shop, paint shop and final assembly unit. Construction is scheduled to start at the end of 2014 with the start of production following in Q4 2016. Poland's Economy Ministry said the investment will total EUR 800m, which would make it one of the priciest automotive investments Europe has seen in years. The Mercedes-Benz factory in Hungary opened two years ago cost EUR 548m, despite its much larger floor size and pro-duction volume. Perhaps the elevated capex has some-thing to do with VW's expectations with regard to public aid, as the Polish government has agreed to in-clude the investment site into the Walbrzych special economic zone.

"Volkswagen did not disclose any investment numbers and will not comment on this topic," Günther Scherelis from VW's commercial vehicles unit in Han-

nover told Poland Today, confirming that the plant's annual production capacity is to reach 88,500 units.

According to the Cologne-based IW economic insti-tute, labor costs in Poland's manufacturing industry came to an hourly EUR 6.65 per worker in 2012, about a sixth of the EUR 36.98 in Germany. Recent large scale-improvements in road infrastructure have only strengthened the country's position as a competitively priced manufacturing hub for German companies. Last year Germany bought more than 30% of Poland's total automotive exports (EUR 5.39bn of EUR 17.91bn). A month ago GM-Opel announced plans to launch production of a new range of diesel engines in Poland at the cost of EUR 250m.

Automotive industry in decline

Passenger & LCV production in Poland and automotive exports

14

1 5

16

17

1 8

19

20

2008 2009 201 0 2011 2012 2013

40 0

50 0

60 0

70 0

80 0

90 0

1,000

Auto motive exp orts in EUR bn, left axis

Vehicle output in '000, right axis

Source: Samar, AutomotiveSuppliers.pl *) exports figure projected

"Due to the current situation in Europe's automotive sector further investments of this scale are unlikely to materialize anytime soon, although a few years from now, when car sales in the EU return to pre-crisis lev-els, other carmarkers may follow in VW's footsteps," says Rafał Orłowski, market expert from AutomotiveSuppliers.pl. In the short-term, however, one may expect some of VW's suppliers and subcon-


tractors to relocate to Poland, and its 70 or so partners who are located in Poland, may count on new orders. "We hope the launch of production in Września will stimulate cooperation with local suppliers of parts and components of which there are approximately 1,000 in Poland, more than a half of whom hold the ISO/TS 16949 certificate – a crucial quality badge in the auto-motive sector. Assuming that one new job at the VW factory creates another 2-3 with its partners, by early 2017 the project may result in creation of some 6-8,000 new automotive jobs in Poland," Orłowski says.

VW is Poland's No. 2 car manufacturer Car production in Poland by maker in '000 units

0 100 200 300 400 500 600

Opel

VW

Fiat

2009

2010

2011

2012

2013

Source: Samar

Despite a slight improvement in automobile sales, Po-land-based car manufacturers turned out 575,117 pas-senger cars and light commercial vehicles last year, marking a 9.6% drop from 2012, according to market researcher Samar. Although Fiat Auto Poland re-tained its position as the country's number one car-maker, its share in the total vehicle output dropped by 3.4 pps, down to 51.4%. The Poznań-based Volkswagen plant came second with a 29.7% share (+4.2 pps), whereas Opel Polska's factory in Gliwice saw its share shrink by less than 1 pps, reaching 18.9%.

Poland's automotive exports totaled EUR 17.9bn in 2013, 1% up on the prior year, and in 2014 the figure is likely to reach EUR 19bn, according to estimates by AutomotiveSuppliers.pl. The largest products group were parts and components, representing more than 38.8% of the total figure (EUR 6.95bn; +5% y/y), fol-lowed by passenger cars and LCVs with 30% (EUR 5.13bn; -3.8% y/y) and Diesel engines with 12.3% (EUR 2.2bn; +4.8% y/y).


Industrial output Industrial output Industrial output Industrial output accelerates in February accelerates in February accelerates in February accelerates in February

Poland's industrial output increased by 5.3% y/y in February, against a 4.1% growth in January, the Cen-tral Statistical Office (GUS) said on Wednesday. The result was slightly lower than the consensus projec-tions for 6.5%, according to a survey by PAP Polish news agency. The seasonally adjusted figure came in at 5.6% y/y on a 0.9% monthly decrease. Construction output accelerated by 14,4% y/y on a 18.7% monthly increase. "Industrial output growth accelerated in February to 5.3% y/y, which was slightly below forecasts while construction output growth surged 14.4% y/y, clearly above expectations. Taking into account the impact of weather, which influenced both releases, in our opin-ion the data show a continuation of an economic re-vival and support expectations that these trends will be maintained in coming quarters. Producer prices contracted more than anticipated, by 1.4%y/y, con-firming that an economic recovery is unfolding amid low inflation pressure," BZ WBK analysts commented on the data. The construction output reading was the best in two years.

Industrial output & producer prices

-12%-8%-4%0%4%8%

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

Aug

13

Oct

13

Dec

13

F

eb-

14

Industry output, y/y change

Producer Price Index, y/y change

Source: GUS, the central statistical office

According to Finance Ministry analysts, Poland's in-dustrial output, both in q/q terms and the seasonally-adjusted measure, should accelerate in Q1 2014 vs. the final months of 2013. "Despite a slight decline in February, the [seasonally adjusted] output growth remained in a growth trend, which should be continued in the following months," the analysts wrote. "We expect that in Q1 2014, the output growth rate, both q/q and seasonally adjusted, will accelerate slightly vs. Q4 2013, which will be re-flected in the higher y/y growth figure."

BANKING & FINANCE

mBank teams up with mBank teams up with mBank teams up with mBank teams up with Orange in new mobile Orange in new mobile Orange in new mobile Orange in new mobile banking alliancebanking alliancebanking alliancebanking alliance

The Polish unit of France's telecoms giant Orange will work with mBank, a subsidiary of Germany's Commerzbank, to provide mobile financial services, both companies said in a statement last week. The two partners seek to launch a mobile retail bank for


smartphone and tablet users under the Orange brand in the second half of 2014. No financial details of the initiative have been disclosed. The bank's offer will be aimed at individual customers, as well as small and medium-sized enterprises. It will include mobile payments, current accounts, loans, de-posits, and credit and debit cards. Customers will en-joy more benefits thanks to new, attractive packages comprising both financial and telecommunications services, Orange and mBank said.

The new bank will operate under the Orange brand. Image: Orange, mBank

Orange Polska will be responsible for marketing and acquisition of customers to this joint venture, while mBank is going to handle the banking side of the busi-ness. For this purpose, the bank will establish a new branch that will be part of its existing structure. The deal mirrors similar agreements between Alior Bank and the Polish arm of T-Mobile (see PT Business Re-view+ No. 016 page 3) as well as Invest Bank and Polkomtel (see PT Business Review+ No. 015 page 3) and marks a growing trend among mobile operators, who seek new sources of revenue amid deepening re-cession in the traditional telecoms business.

"Bank customers expect maximum facilitation and simplification of funds management, regardless of lo-cation, and the mobile bank will make it happen. It combines the skills of Orange Polska - the operator of the largest high-speed mobile and fixed-line Internet network - and mBank, which has set the trends in modern electronic banking. The experience and po-tential of both companies ensure the highest quality of services. Entry into new markets, including the finan-cial market, is one of the key elements of our strategy" said Bruno Duthoit, the CEO of Orange Polska.

Orange is Poland's No. 2 mobile network

Mobile operators in Poland, market shares as of end of 2013*

Other

1%Play

19%

Plus

25%

T-Mobile

28%

Orange

27%

Source: Telepolis *) based on SIM card numbers

Orange Polska turned over PLN 12.92bn last year, marking a decline by nearly 9% against the prior year. Its EBIDTA shrank 16% and totaled PLN 4.1bn, whereas its net earnings dropped by two thirds, down to PLN 294m. Its mobile arm had more than 15.3m customers as of end of December, including 1.17m broadband subscribers, while its fixed-line unit boast-ed 2.3m users.

The mBank group saw its assets total assets increase from PLN 102bn in 2012 to PLN 104m as of end of 2013. Its attributable net earnings increased only slightly and came to PLN 1.2bn. Following the merger of its mBank and Multibank units, the Warsaw-listed bank has more than 250 branches and over 6,073 em-ployees. "When a truly mobile bank and the biggest Polish tele-communications company join their forces to create a new platform, it has to be considered a clear sign of changes that are taking place on the financial services market. mBank will be consistently developing its mo-bile banking services, both under own brand and through cooperation with Orange Polska" said Cezary Stypułkowski, CEO of mBank.

BANKING & FINANCE

PKO BP to finalize PKO BP to finalize PKO BP to finalize PKO BP to finalize merger with Nordea merger with Nordea merger with Nordea merger with Nordea by midby midby midby mid----2015 2015 2015 2015

Poland's top lender PKO BP plans to complete its merger with the Polish arm of Sweden's Nordea Bank by mid-2015, the bank announced after the fi-nancial watchdog KNF finally gave its blessing for the transaction in March. The deal seals PKO's position as Poland's number one lender, boosting its share in the banking sector's total assets from 15% to 18%. "KNF's decision opens the door to implementing the agreement signed in June last year. After the deal is completed, we will focus on efficient integration pro-cess. We would like to use the potential of the ac-quired assets to strengthen the bank's capital group and to offer new quality on the financial services mar-


ket," said Zbigniew Jagiełło, Chief Operating Officer at PKO Bank Polski.

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. The acquisition of Nordea Bank Polska will take place as a public share-buy tender for 100% of the bank’s shares.

The deal will be closed on 1 April 2014, PKO and Nordea announced. Since then, until the legal merger is completed – which is planned for late September or early October 2014 – Nordea Bank Polska will operate as a separate entity within the PKO BP group. Both banks will maintain their full independence in terms of services provided and available network of branch-es. Following the legal merger – which will involve the acquisition of Nordea Bank Polska’s total assets and operations by PKO Bank Polski – PKO will become a legal successor of Nordea Bank Polska, while the two formerly independent institutions will become one single legal entity. The Nordea logo will be replaced by PKO BP brand within two weeks from the legal mer-ger, whereas the following months will see the two banks become one at the operational level, including processes, systems and IT resources. According to PKO BP, the whole operation in to reach completion in the first half of 2015.

As for the remaining two Nordea units, Nordea Fi-nance Polska and Nordea Polska TUnŻ, their acquisi-tions will take place as private deals. The insurance company will remain a separate company within PKO BP Group operating under the new brand name. The change of the name will take place within three months after the deal is completed. Nordea Finance

Polska – a leasing and factoring company – will even-tually be merged with PKO Leasing. No details of potential redundancies As of end of 2013 PKO BP had 1,186 branches and a workforce of 24,437 employees. The respective figures for Nordea Bank Polska stood at 135 and 1,985. Poland Today asked PKO BP about the expected impact of the merger on the branch network and staff numbers, but we have not been able to get any figures with regard to the potential employment downsizing. "Our branch network in the largest cities will expand by some 25%, as the attractive locations of Nordea units were of strategic importance for PKO BP as a buyer. We intend to maintain the current level of em-ployment at Nordea's retail and corporate banking network," Monika Floriańczyk of PKO BP's corporate communications department tells Poland Today. "Since the signing of the agreement with Nordea we have been keeping all of Nordea Bank Polska employ-ees regularly informed about the professional devel-opment opportunities available under PKO BP and conditions of their employment following the merger. We carried out a series of meetings with managerial and sales staff- overall with some 500 employees and answered all the crucial queries. We will provide more information following the official merger on 1 April." "The merger with Nordea will contribute to strength-ening PKO BP as the leading universal bank in Poland and the Central and Eastern Europe, confirming its leading position in retail banking and enhancing its position in corporate banking, especially in servicing international customers," PKO said. The acquisition of Nordea Bank boosts PKO BP's assets by 16.5% and its portfolio of wealthy customers will expand by 8%. PKO BP serves more than 8m customers at the mo-ment. The new Nordea headquarters, which is cur-rently being built as part of SwedeCenter's Gdynia Waterfront project will be taken into consideration in

PKO BP's strategic real estate management plan," as explained by Monik Floriańczyk.

The takeover of Nordea Bank Polska significantly boosts PKO BP's position in the largest cities. Image: PKO BP

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 and PLN 3.2bn in 2013, as the historically low market rates seriously dented its interest income. The full-year consolidated income on continued operations exceeded PLN 10.7bn, while net interest income was at PLN 6.7bn. Despite a decline in interchange fees and slower market dynamics, net fee and commission income rose 3.1% y/y, to over PLN 3bn, mainly thanks to higher fees related to fund servicing and insurance products sale. The bank sold PLN 7.5m in consumer loans (+20% y/y) and more than PLN 10bn in home loans (+38% y/y), maintaining its position as the num-ber one mortgage lender with a share of more than 30% in new sales. PKO BP's cost-to-income ratio stood at 43.2% as of end of last year, with ROA and ROE at


1.6% and 13.2% respectively. Its consolidated solvency ratio increased by 0.7 pps in 2013 reaching 13.6%, with total assets at PLN 199.2bn.

ENERGY & RESOURCES

Tauron teams up with Tauron teams up with Tauron teams up with Tauron teams up with PIR to build PIR to build PIR to build PIR to build PLN 1.5bn PLN 1.5bn PLN 1.5bn PLN 1.5bn cogencogencogencogen unit in Silesiaunit in Silesiaunit in Silesiaunit in Silesia

Poland's No.2 energy producer Tauron and the state investment vehicle Polskie Inwestycje Rozwojowe (PIR) have inked an agreement that paves the way for the construction of a new gas-fired 413MW power unit at Tauron's Łagisza station in Będzin. The investment will be worth PLN 1.5bn, of which PIR may contribute up to PLN 750m. "This is a yet another important energy sector project involving state-controlled enterprises that drive for-ward Poland's economic growth. Over the past six years our economy has expanded by an accumulated 20%, which is quite impressive against the backdrop of the European Union's 0.8% contraction during the same period. Over the coming six years the capital ex-penditures on new power stations in Poland will add up to PLN 30bn, translating into 5,000MW of new ca-pacity in brand new units. The Łagisza project, which will go online in four years, will be one of them," Treasury Minister Włodzimierz Karpiński comment-ed in an official communiqué, adding that PIR is cur-rently involved in projects with a combined value of PLN 5bn and analyzing further undertakings that are worth roughly twice that amount. The Łagisza power plant supplies heat and power to the Będzin and Dąbrowa Górnicza parts of Silesia, Po-land's most densely populated region. The new power

unit will have an installed capacity of 413MW (elec-tric) and 260MW (thermal) and following its comple-tion it will provide heat also to Sosnowiec, serving a total population of 0.7m people. Created last year as part of the government's "Polish Investments" program to stimulate economic recovery by investing future privatization proceeds into pro-jects of strategic importance, PIR has recently agreed to inject up to PLN 150m into a public-private heat & power plant project in Olsztyn (see BR+ No. 022 page 4). The fund's other projects included a PLN 120m in-vestment into a PLN 560m fiber optic joint venture with backbone network operator HAWE (see BR+ No. 018 page 12, PLN 563m investment in Lotos Petrobaltic's B8 exploration project in the Baltic Sea (see BR+ No. 007 page 5) and possible participation in a PLN 12bn petrochemical project by Polish refiner Grupa Lotos and chemical company Azoty (see BR+ No. 014 page 2). Led by Mariusz Grendowicz, the for-mer CEO of mBank, PIR mediates in the allocation of low-cost capital for strategic projects that have a hard time raising commercial financing. As for Tauron, the company reported an 11% drop in 2013 net profit, saying it is expecting even weaker re-sults this year. The state-controlled utility, like larger state rival PGE , is struggling with falling energy pric-es and weak demand in Poland because of a sluggish economy. "We hope that 2014 will see the lowest level of energy prices and that they will slowly start to rebound," Chief Executive Dariusz Lubera told reporters at a re-cent press conference. The company has been cutting costs to combat the difficult market conditions and aims to save PLN 900m between 2013 and 2015. Sav-ings last year totaled PLN 320m, Tauron said, helping the company's profits fall less than expected. Net prof-it came in at PLN 1.308bn, above market forecasts for PLN 1.227bn.

Tauron has put on hold a PLN 3.5bn project with Polish copper miner KGHM to build a gas-fired plant at Blachownia in southern Poland because of the ad-verse market conditions and problems with reliable gas deliveries. But the company still hopes to begin construction of a PLN 5.4bn coal-fired Jaworzno plant also in the south of Poland, where Tauron has most of its assets. Tauron plans to sell bonds in the first half of this year to finance the project, already delayed due to some financing difficulties. The group does not rule out increasing a planned PLN 1.5bn bond issue if nec-essary to finance the flagship project.

ENERGY & RESOURCES

New mining law to New mining law to New mining law to New mining law to speed up development speed up development speed up development speed up development of Polaof Polaof Polaof Poland's shale gas nd's shale gas nd's shale gas nd's shale gas industryindustryindustryindustry

The Polish government has adopted crucial amend-ments to the mining law, hoping to speed up work on shale gas extraction. The new regulatory framework was one of the key objectives of Environment Minister Maciej Grabowski, who was appointed late last year with the task of kickstarting Poland's shale gas pro-duction. The issue has gained additional urgency in recent weeks due to the unfolding Russia-Ukraine cri-sis that may introduce additional volatility to deliver-ies from Russia, which supplies two thirds of Poland's gas and almost all of the oil processed by the country's refineries.

"New regulation will speed up and facilitate conduct-ing exploration and extraction works," the govern-ment press center said in a statement.


Crucially, Poland is hoping to facilitate exploration and extraction of hydrocarbons by introducing a single E&E permit and giving up plans of creating a national energy mineables operator NOKE, according to a draft amendment to the mining law adopted by the cabinet last Tuesday. A single permit for exploration and ex-traction will replace three separate permits required today, which should "encourage entrepreneurs to con-duct exploration works in the broadest scope possi-ble," the statement reads. As a rule, permits will be granted for the period of 10-30 years.

Following the encouraging results of San Leon's hy-draulic fracking in Lewino, the government is hoping for 2014 to be a turning point for the Polish shale. Image: UOS

Last year, investors complained that the previous draft of the legislation ignored many of their demands. The Polish Exploration and Production Industry Organisa-tion (OPPPW), the industry's main lobby group, ac-cused the government of seeking "excessive controls and rights" in shale gas exploration. The short license periods were among the industry's key concerns. So far the ministry of environment has been handing out five-year exploration licenses to companies that could be extended only once, for two years. Many of those original licenses are now beginning to expire. Since

shale gas fields take longer to develop than conven-tional fields, argued the OPWW, they would have in-sufficient time to make discoveries before the dead-line, at which point they either have to apply for a production license or hand it back to the ministry. The lobby also criticized the officials for trying to impose disproportionate penalties on them if they fall behind in their work schedules due to circumstances beyond their control.

Assessing Poland's shale riches Estimated recoverable shale gas reserves in bn cb.m

0

1,0

00

2,0

00

3,0

00

4,0

00

5,0

00

6,0

00

*PIG (2012)

Wood Mackenzie (2010)

EIA (2013)

EIA (2011)

*) Poland's Geological Institute PIG estimates the country's recovera-

ble shale gas reserves at 346-768bn cb.m

Source: Municipalities, PT archives So far works on hydrocarbons bill have been delayed, among others, due to controversies related to creation of NOKE, a new regulatory institution. In the end, the government has decided to abandon the NOKE idea altogether and instead strengthen the oversight pre-rogatives of the existing mining watchdog and envi-ronment protection inspectorate. More favorable taxation on shale The cabinet has also clarified its stance on hydrocar-bons' taxation, by proposing a cap on shale gas taxa-

tion at some 40% of income and introduction of the burden only as of 2020, with budget receipts in 2020-2029 estimated at PLN 10.0-16.1bn. "Taxation for central budget will become a fact only in 2020 - by that time extraction of shale gas will be free from taxes," PM Donald Tusk said during a press con-ference after the cabinet sitting which passed the bill. The total tax burden on shale gas production should not surpass on average 40% of income, which in the government's view "should be encouraging for entre-preneurs." That burden will consist of two elements - a royalty on extraction and a special hydrocarbons gains tax. The royalty on unconventional resources will measure 1.5% of the value of extracted volume in the case of shale gas and 3% in the case of shale oil. In conventional re-sources, the levy will measure 3% in the case of natural gas and 6% in the case of crude oil. The special hydro-carbons tax will be flexible and will measure from 0 to 25%, depending on the level of incurred costs and gen-erated revenues, officials said. "In practice, if the extraction operations bring no prof-it or if the profit isn't significant a company won't pay that tax," the cabinet's statement read. "Shale gas could contribute to helping Poland develop a domestic, affordable and secure energy source. It can also help reduce the country's CO2 emissions. At the moment nearly 90% of Poland’s electricity is generat-ed from coal. However, as a new industry it will need similar financial opportunities which are already being given to other energy resources, such as renewable en-ergy. Through a supportive tax regime, the withdrawal from establishing the National Energy Minerals Oper-ator (NOKE) and the move to a single concession for exploration and extraction of hydrocarbon deposits, the Polish Government has shown its commitment to supporting Europe’s drive to develop a thriving shale


gas industry," commented Marcus Pepperell, spokes-person for Shale Gas Europe, a Brussels-based shale industry lobby. According to a report from the Polish Geological Insti-tute in March 2012, the country has reserves of be-tween 346bn and 768bn cb.m of recoverable shale gas. The new regulatory framework comes less than two months after London-listed San Leon Energy an-nounced that it had made significant progress toward commercial production after vertical drilling in north-ern Poland, "the most encouraging vertical shale well test in Poland to date." Several international explorers have divested or reduced their positions in Polish shale in recent months, including ExxonMobil, Mara-thon Oil and Talisman Energy, which has dented in-vestor confidence although none of the explorers at-tributed their decision directly to exploration results. So far an estimated 55 exploration wells have been completed in Poland, with a further 30 to be drilled this year. According to experts, at least 100 boreholes will be needed to properly assess the potential of Po-land's shale plays.


Global property giant Global property giant Global property giant Global property giant Invesco opens its 2nd Invesco opens its 2nd Invesco opens its 2nd Invesco opens its 2nd CEE office in WarsawCEE office in WarsawCEE office in WarsawCEE office in Warsaw

Although Poland has been the key investment proper-ty market in Central and Eastern Europe for years, many global funds preferred to cover the region from Prague, be it due to the latter's milder climate or its more vibrant expatriate community. Recently, howev-er, it seems like fund managers are beginning to realize that on-the-ground presence may be essential for stay-

ing in touch with Poland's vast and dynamic real estate market. After Palmer Capital, which opened a Warsaw office a few weeks ago, another major international player Invesco Real Estate (IRE) has set up shop in the Polish capital. Invesco appointed former Colliers and AIB PPM executive Anna Duchnowska as Director of Asset Management at the Warsaw office, Invesco's se-cond in Central and Eastern Europe after Prague. "We believe the timing is now right in what, in our view, is a strong real estate market within Europe. This step complements our existing operations in the region, through our team of six specialists in our Pra-gue office, which opened in 2004, said Andy Rofe, Managing Director of IRE-Europe.

Galeria Kazimierz became part of Invesco's CEE portfolio last year. Image: GTC.

"Invesco Real Estate has an allocation across the commercial sectors of office, retail and logistics in Po-land. We currently have eight properties in Poland with c. USD 570m under management. Unfortunately, we cannot provide details of any potential deals that are in our pipeline. However, we are actively raising

capital for our existing and new funds, and Poland has an allocation role as part of several client mandates. In CEE, it is Poland and the Czech Republic which are our countries of focus right now. The aim is to grow our Polish operations to be our local, on-the-ground operations with specialists in their field. Anna Duchnowska is currently heading up our operations in Poland and we will add additional resources as and when appropriate," Lisa Nell, Associate Director – Marketing, Europe, at Invesco Real Estate, told Poland Today. Invesco Real Estate is a global real estate firm, which has been providing real estate investment and proper-ty asset management services since 1983, first in the US and then expanding into Europe and Asia. Globally, Invesco Real Estate has USD 55.7bn of assets under management and over 366 staff in 18 offices around the world. In Europe, the company has six offices in London, Munich, Madrid, Paris, Prague and Luxem-bourg, and around 112 employees. IRE manages 139 as-sets across 13 European countries and has USD7.3bn of assets under management, including EUR 706m in 18 CEE assets. The company transacted EUR 300m in the region last year including the EUR 180m acquisition of Kraków's Galeria Kazimierz shopping center from GTC, one of the largest retail acquisitions in Poland in 2013. Opened in 2005, Galeria Kazimierz is a 38,300 sq.m modern shopping center constructed on two levels and divided into 140 units and 10 screen multiplex as well as multi-media, sports and household anchor stores. The center benefits from the attractive location and easy access, and its tenants include. Cinema City, Alma, Empik, Zara and H&M.

Partnerzy medialniOrganizatorzy Partnerzy

Środa, 9 Kwietnia 2014, Villa Foksal, ul. Foksal 3/5, Warszawa

8.30 -11.30



France's Yareal France's Yareal France's Yareal France's Yareal announces new office announces new office announces new office announces new office project in Warsaw project in Warsaw project in Warsaw project in Warsaw

Although one might think there is no more free land left in the Służewiec area of Warsaw's Mokotów dis-trict, which reportedly already houses more modern offices than all of Poland's regional cities combined, developers keep proving us wrong. France's Yareal has just announced a large new project on the corner of Cybernetyki and Wynalazek streets, a stone's throw from the Okęcie airport and close to the Galeria Mokotów mall. Yareal's Neopark project will include two buildings with a combined GLA of 24,000 sq.m, separated by a green patio with restaurants, retail outlets and a fit-ness center. The developer will seek BREEAM sus-tainable building certification for the project, hoping to obtain a building permit for Neopark this year. "As far as the launch of this project is concerned, we are not confined by pre-leases," Olga Prokopiak, head of marketing at Yareal, told Poland Today, hinting that the company may be ready to build speculative. Yareal is part of Yareal International, whose share-holders include YAM Invest, a group that brings to-gether a range of European real estate development and investment companies. Yareal's best-known de-velopment to date is the Renaissance Building on War-saw's Zbawiciela Square (4,575 sq.m of offices and 600 sq.m of retail space on the ground floor). Renaissance Building was named the best office development of 2004 and sold two years later to a Spanish investor for a reported EUR 25m.

Subsequently the company delivered the 9,800 sq.m Cristal Park complex in the Aleje Jerozoliskie area and carried out a a total makeover of a modernist office building on Mokotowska street (next to Deloitte House built by Ghelamco), turning it into 9,600 sq.m of class A offices. Yareal's most recent office project has been Oxygen Park, a complex of two six-story buildings with a combined lettable space of 18,300 sq.m, located near the A2 highway intersection with the Aleje Jerozolimskie artery.

Yareal's new project Neopark will be located in Warsaw's office cluster of Słuzewiec. Image: Yareal "Oxygen Park holds a valid occupancy permit and so far we have let out 50% of the available office space in the complex," says Ms. Prokopiak. "Our board is yet to decide about its future. Yareal may choose to keep Ox-ygen Park in its portfolio or sell the property, in case we receive an offer than would be attractive for our shareholders." Besides offices, Yareal has embarked on a number of small upscale residential projects in Warsaw, includ-ing the Hoża 55 project where only a handful of units are still available. Its ongoing residential develop-ments (Brylowska 2, Rezydencja Kosntancińska, and

Londyńska 5) have a combined floor space of 13,500 sq.m.


Nestle to take up Nestle to take up Nestle to take up Nestle to take up 10,000 sq.m at new 10,000 sq.m at new 10,000 sq.m at new 10,000 sq.m at new Mokotów scheme bMokotów scheme bMokotów scheme bMokotów scheme by y y y Kronos Real EstateKronos Real EstateKronos Real EstateKronos Real Estate

Spanish developer Kronos Real Estate has secured key tenants for its new development in Warsaw's Mokotów district: Ocean Business Park. Nestlé Polska and Nestlé Waters Polska, the Polish sub-sidiaries of the world's leading nutrition, health and wellness giant Nestlé will lease over 10,000 sq.m of modern office space in the new development, which is reach completion in Q1 2015 with a total GLA of 17,600 sq.m across eight floors. "Nestlé was searching for modern, functional and flex-ible office space. Besides being a prestigious office worthy of a leading global company, the location had to allow for further development of the company’s structures. Other important factors were location, ac-cess to public transport, easy access by car and close proximity to the airport. The selected complex can boast all of the above," said Julita Spychalska, National Director, Corporate Advisory, at property consultancy JLL, which represented Nestlé. Ocean Business Park is located on Domaniewska Street, in the heart of Warsaw's ever-expanding busi-ness district of Służewiec Przemysłowy. The first sec-tion of the Park was the 15,600 sq.m Ambassador building Kronos completed last year and fully leased to a number of top-class tenants including Electronic


Arts, Aecom, Gras Savoye, DSV, Coty, Ipsos, CBRE Corporate Outsourcing, ACC Advanced Solutions and Yusen Logistics. Designed by AMC – Andrzej M. Choldzynski, the architect behind the landmark War-saw Stock Exchange building, the Ambassador has 11 over ground floors, together with 4 underground lev-els accommodating 298 parking spaces. In addition to other amenities such as restaurants, coffee shops, banks, laundry and fitness club, a 1,800 sq.m green ter-race was designed on the 8th floor.

Nestle will take up more than a half of the total GLA in Ocean Business Park. Image: JLL Phase two of the Ocean Business Park is the Pacific building, which will welcome Nestlé at the beginning of 2016. With a double glass façade and BREEAM cer-tification it will be a yet another class-A development in this popular area. The Pacific Office Building has been designed by the Spanish architecture company Estudio Lamela, which cooperated with Kronos on an office project developed in 2009 in Valladolid, Spain. Kronos Kapital is the daughter of the Spanish compa-ny Cronos Global, with a background of 20 years of

experience in real estate and green energy. Kronos Kapital has been operating in Poland since 2006, fo-cusing on expanding its land bank, small residential development in the outskirts of Warsaw (Ząbki, Chyliczki) and the Domaniewska office project. Back in 2011, when Poland Today's Lech Kaczanowski spoke to Angel Medina, general director at Kronos Re-al Estate, the company's medium-term development pipeline in Warsaw was worth some PLN 300m. Ac-cording to earlier plans, the developments on Domaniewska in Warsaw were to include residential buildings, besides offices.


IVG adds another IVG adds another IVG adds another IVG adds another building in downtown building in downtown building in downtown building in downtown Warsaw to its portfolio Warsaw to its portfolio Warsaw to its portfolio Warsaw to its portfolio

German property fund IVG has added another proper-ty to its Warsaw portfolio with the acquisition of the Chmielna 25 building, which combines high street re-tail space with, from LHI Ltd. Financial details of the transaction have not been disclosed. Located on some of Warsaw's key pedestrian traffic reas, Chmielna 25 is a LEED Gold-certified, class A nine-storey building of-fering 4,500 sq.m of modern office space located on six floors and 1,800 sq.m of retail space. The property joins seven class A buildings located in the centre of Warsaw IVG has acquired in the recent years, including among others: Royal Trakt Offices (Ujazdowskie Av.), Norway House (in the vicinity of Konstytucji Sq.), Palac Młodziejowskiego (historic part of the Old Town), Le Palais (Grzybowski Sq.) Feniks (Żelazna Street). IVG in Poland is one of the most active investors in Poland, which in the last 3

years completed over 10 transactions worth a total of approximately EUR 350m. "Our strategy focuses on class A office buildings locat-ed in the Warsaw city centre at the best addresses of Śródmieście and the Old Town. We choose properties that lie in the immediate vicinity of leisure areas, ser-vices, shops and restaurants,” says Maciej Zajdel, CEO of IVG Poland.

Chmielna 25's underground garage can fit 25 cars and the building's tenants include the flagship store of kids goods retailer Smyk, as well as the head of-fices of LHI Ltd. and Deutsche Hypothekenbank. Image: LHI Ltd.

According to IVG, Chmielna 25 perfectly complements the Fund's portfolio, which includes a varied selection range of shops and service buildings located along the popular streets or in pedestrian precincts. Nowy Świat, Chmielna, and Marszałkowska and streets are three of the most recognizable high-streets in Warsaw, despite the latter two still waiting to see their better days. Besides fashion boutiques, the area's key magnet are its numerous restaurants and cafes. The central lo-cation provides convenient connection accessible by public transport – subway, bus or tram from the other


parts of the city. Chmielna Street is located exactly be-tween two key subway stations (Centrum metro sta-tion and Nowy Swiat metro station, which is currently under construction). Over the past 18 months IVG Funds have invested more than EUR 1.9bn across Europe, mainly in Ger-many and Warsaw. IVG Institutional Funds belongs to IVG Immobilien AG and offers specialized fund products. With EUR 12.4bn assets under management, IVG Institutional Funds GmbH is one of the leading European fund providers for institutional investors. Interestingly, IVG's shopping spree in Poland come at a time when its German owner is at its historic low. Its shares, that back in 2007 traded at EUR 35 are cur-rently trading at less than EUR 0.02 apiece. In August last year, the parent company IVG Immobilien AG, applied with the Bonn District Court to initiate a pro-ceeding similar to US bankruptcy reorganization and at the end of February 2014 it submitted a plan to cut its debt by EUR 2.2bn and issue new shares. The deal would transfer ownership to IVG’s creditors. IVG has been in talks with its lenders to restructure EUR 3.2bn of debt for more than a year. Following the planned re-structuring, the company will focus on its real estate, institutional funds and caverns-storage businesses and cut its staff to 320 from 400.

SERVICES & BPO

Express delivery giant Express delivery giant Express delivery giant Express delivery giant TNT to employ 400 at TNT to employ 400 at TNT to employ 400 at TNT to employ 400 at new Warsawnew Warsawnew Warsawnew Warsaw centrecentrecentrecentre

Global parcel delivery giant TNT Express has joined the ever-growing group of international businesses that chose to entrust their back office processes to Po-

land's skilled and competitively priced white collar workers. The Dutch company has just announced the launch of its shared services centre (SSC) in Warsaw, which is to create a total of more than 400 jobs by the end of next year. "We chose Warsaw because this is where the Polish HQ is of TNT Express is located, which ensures smooth cooperation between our financial depart-ment, where some of the SSC staff originate from, and the new unit. Moreover, Warsaw gives us access to a pool of highly skilled students and graduates from the entire region," Jolanta Krupowicz, Marketing Manag-er at TNT Express Poland tells Poland Today. "The centre currently employs 100 staff and it is located at our main office on 19 Annopol St. As the unit expands, we will consider different scenarios regarding the necessary office space."

TNT Express has three air hubs in Poland: Warsaw, Gdańsk, and Katowice. Image: TNT With the creation of a shared services centre, TNT seeks to reduce costs and unify processes. The unit is already operational and handles bookkeeping, finan-cial reporting and other related administrative duties for TNT's subsidiaries in Poland and Italy. In the fu-

ture, the Warsaw centre will provide similar services to TNT companies in the UK, Germany, and the Bene-lux. TNT Express is one of the world’s largest express de-livery companies. On a daily basis, TNT Express deliv-ers close to one million consignments ranging from documents and parcels to palletized freight. The com-pany operates road and air transportation networks in Europe, the Middle East and Africa, Asia-Pacific and the Americas. TNT Express made EUR 6.7bn in reve-nue in 2013, down from EUR 7.3bn in 2012. In Poland, the company has 1,000 staff as well as a proprietary fleet of 170 vehicles and cooperates with an estimated 900 contract drivers with delivery vans. Its Polish distribution network is comprised of 26 re-gional offices including three transshipment hubs: in Warsaw (air, road), as well as Gdańsk and Katowice (air). TNT has been operating in Poland for 20 years and in 2013 it carried 8.3m consignments (34,000 par-cels a day). "The last year was very good for TNT Express Poland. Although we continue to focus on international deliv-eries, both express and economy, we are strengthening our position on the domestic market as well. Besides our qualified staff, a dense branch network, and effi-cient transport links, we have a unique asset in the shape of an overnight service, with a separate infra-structure and network," says Jolant Krupowicz. Poland is a European leader in business process out-sourcing, with more than foreign-owned 400 BPO & SSC centers employing in excess of 110,000 skilled workers in the country, according to estimates by in-dustry organization ABSL, which expects the figure to reach 140,000 by the end of this year.


RETAIL PROPERTIES

Neinver to add 6,000 Neinver to add 6,000 Neinver to add 6,000 Neinver to add 6,000 sq.m of GLA to Ursus sq.m of GLA to Ursus sq.m of GLA to Ursus sq.m of GLA to Ursus outlet center in Warsawoutlet center in Warsawoutlet center in Warsawoutlet center in Warsaw

Spanish developer Neinver is embarking on a major extension of its Factory Warszawa Ursus property, which was opened back in 2002 as Poland's first outlet centre. By September next year, the centre's GLA is to increase from 13,700 sq.m to 19,900 sq.m, boosting the number of retail outlets from 80 to 110. Additionally, the investor is to refurbish the existing building and more than double the number of parking spaces to a total of nearly 1,000. The timing of the project is hardly a coincidence, as its completion will follow crucial improvements in the lo-cal road infrastructure. By the time the new extension is commissioned, the newly built Nowolazurowa St. will provide easy access to the centre from two of Warsaw's key arteries: Aleje Jerozolimskie and Połczyńska St. At the moment, the centre houses the factory outlet stores of a number of well-known brands, including Liu Jo, Guess, Adidas, Puma, Nike, Tommy Hilfiger, Tom Tailor, Lacoste, Triumph, Re-served, Levi’s, Diverse, Vero Moda, House, and Calvin Klein Underwear. Neinver is Europe's second largest outlet centre opera-tor with properties in Spain, Portugal, France, Germa-ny, and Italy, and the number one player in Poland where it has five centers: Warszawa Ursus, Warszawa Annopol, Wrocław, Poznań, Kraków with a total GLA of almost 84,000 sq.m and approximately 550 shops. The Kraków center is part of the 44,000 sq.m Futura Park complex, which encompasses also a retail park. Their most recent completion was the 19,700-sq.m

Factory Warszawa Annopol, which opened in 2013 with 120 retail units and 1,400 parking spaces. Last year, Neinver's Polish outlet centers in Poland were visited by 11.8m. According to the company, customer numbers at its Polish centers have been growing at the annual rate of 10%.

Opened in 2002 Factory Warszawa Ursus was Po-land's first outlet centre. Image: Neinver Besides outlet centers, Neinver has developed a num-ber of major mixed-use and retail schemes in Poland. A few months ago the company launched its most am-bitious project to-date, the EUR 240m retail-anchored mixed-use development Galeria Katowicka. Located in the southern Polish city of Katowice, the project is part of a large-scale urban revitalization scheme spearheaded by Polish State Railways (PKP), which chose Neinver seven years ago to transform a rundown train station into a modern transportation hub, shop-ping and office complex. Following the completion of brand new rail and bus stations, Neinver has delivered the retail section of the project, which includes more than 220 shops and service points set over four levels and 53,000 sq.m of GLA. Prior to Galeria Katowicka, Neinver's flagship Polish project was Poznań's Galeria

Malta – the largest shopping and entertainment center in Western Poland, 75% of which Neinver sold to US Heitman back in December 2010. "We have laid foundations for a 20,000 sq.m GLA of-fice building across from Galeria Katowicka, on the eastern side of Szewczyka Square and we are waiting to reach a satisfactory level of pre-leases in order to launch construction of the overground section. We hope this will happen this year," Monika Olejnik-Okuniewska, Marketing & PR Senior Manager at Neinver told Poland Today. "Besides the Factory Ursus extension we are also gearing up to expand Galeria Malta in the near future. Although we are al-ways on the lookout for new opportunities, we are fo-cusing on managing our existing portfolio which totals 230,000 sq.m at the moment."

POLITICS & ECONOMY

A recipe for doA recipe for doA recipe for doA recipe for doing ing ing ing business betterbusiness betterbusiness betterbusiness better

The World Bank’s head for Poland and the Baltic States Xavier Devictor tells Poland Today editor Andrew Kureth what Poland needs to change to make a leap in competitiveness • PT: In the 2014 edition of the World Bank’s Doing Business report, Poland rose three places in the rank-ing, to 45. Has Poland made substantial progress rel-ative to other European Union states? Xavier Devictor: This year Poland was basically ranked in the middle of the EU pack, so there has been some relatively rapid improvement. Three years ago Poland was at the bottom of the EU pack. If you look at the period since 2005, Poland has made the most pro-


gress of any EU country toward the best performers under each indicator. We think this does indeed re-flect the reality that the business environment has im-proved. But that Poland is in the middle of the EU pack can be seen as a glass half full – because it has made such progress over a relatively short period of time – or as a glass half empty because 45 is only 45. We think that Poland should continue reforming with the aim of joining the first tier of the EU countries. That is, Scandinavia and the UK. • PT: What are the places that Poland could im-prove? XD: Poland is doing relatively poorly when it comes to the ease of getting electricity and starting a business. It could do much better when it comes to construction permits, insolvency and contract enforcement. So there is a number of areas where Poland can still make progress. We have been working with the prime min-ister’s office and a number of ministries to try to find practical solutions to improve not so much the per-formance, but the situation. This is not about trying to get a better score in the rankings, this is about trying to create a better business environment. We are hopeful that if the government maintains its commitment, it will be able to continue making pro-gress, especially because the type of reforms that we are talking about are administrative by nature. They are not politically loaded reforms. What we are talking about here is strengthening the supervision of electric-ity-distribution firms so as to make sure that when you ask for a new connection you get it in, for example, 30 days instead of say, 60 days. When you talk about con-struction permits, the challenge lies in making sure you get a response from the various offices in a rea-sonable amount of time. So again, these are not politi-cally loaded issues. • PT: If the issues are not politically sensitive, then why hasn’t more progress been made?

EC: It is a matter of progress step by step, and I also think it is a matter of administrative inertia in some areas. These are things that take time to implement. But as I said, we see a strong commitment in the prime minister’s office. Before we issued the report we had an opportunity to have a discussion with the prime minister and with his council of economic advisors. And it was very heartening to see that the prime min-ister took a genuine interest not only in the issue of where Poland was ranked but why it had placed where it did. We also saw interest in finding solutions and how quickly those could be implemented. So that was very positive. And once again, it was not about improv-ing the ranking, it was about using the ranking to diag-nose the areas where a specific effort should be made. • PT: You have called Poland a “regional champion” when it comes to ease of doing business. Why? XD: In these types of rankings, countries typically have ups and downs, but for Poland it has been ups and ups. However – this could still be seen as just short-term improvement. I think what is really inter-esting is that over several years Poland is the EU coun-try that has made the most progress towards the top tier. That differentiates Poland from a number of other countries in Central Europe. I think that is a reflection of how continued commitment by the government and its pragmatism – a practical sense of what can be done and how to do it – is making a difference. • PT: Of the challenges that you mentioned, which ones do you think could be overcome quickly, and which ones will take longer to resolve? XD: You have to look at the question from two differ-ent aspects: You can look at how to improve in the ranking, and there we see the most room for im-provement on getting electricity. That is all about how much time, how many procedures and how much money it costs for a company to obtain a new connec-tion to the grid. So this basically requires a review of the administrative process and figuring out whether

some of the steps could be expedited or carried out more efficiently. In this case, we see huge room for improvement. We also see some room for improve-ment on construction permits where regulations re-main, in our view, overly complicated. But Poland has to think about how to improve the business environment as a whole. And there we are very encouraged by government efforts on deregula-tion of professions. We have also been very encour-aged by efforts to modernize the insolvency law, so that when a company goes bankrupt liquidation isn’t the only viable option. We are talking with the Minis-try of Justice about how to allocate resources across the judiciary to make sure that the courts that have lots of cases have the means to handle them effective-ly. So some of these solutions could yield results rela-tively soon – such as the improvement in insolvency law. But some of them require a change of culture in some ministries, administration or the judiciary, and by their nature take more time. • PT: Poland is an EU laggard when it comes to inno-vation. How important is changing this when it comes to improving the business environment? XD: This is key for Poland because it is 24 out of 27 EU countries in terms of innovativeness [according to an EU ranking]. When we looked at the number of pa-tents per million inhabitants it was actually very small. Poland had 8, whereas the EU average was 97. So it was an order of magnitude of difference. But since Po-land’s GDP is at 65% of the EU average, if Poland wants to continue to grow then innovation is clearly a very important agenda. Obviously, the Vistula River Valley is not going to become Silicon Valley tomorrow, but there are still a few years during which Poland can put in place what it needs to start developing innova-tion so that when it reaches 75 or 80% of the average EU GDP per capita – and therefore per capita costs, more or less – it already has the resources to start in-novating.


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

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

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

Food & bev +1.9 +0.3 +1.5 +0.7 +1.8 +1.6 +1.6 -0.2

Alcohol, tobacco +3.6 +0.1 +3.7 0.0 +3.4 +0.8 +2.2 +1.4

Clothing, shoes -4.9 -0.2 -4.9 -0.6 -5.0 -3.7 -4.7 -1.7

Housing +1.8 +0.1 +1.8 0.0 +1.9 +0.2 +1.9 +0.1

Transport -2.3 -1.2 -0.9 0.4 -1.2 -1.5 -1.1 +0.4

Communications -11.7 -4.9 -11.6 0.0 -7.8 -0.3 -3.2 +0.4

Gross CPI +0.6 -0.2 +0.7 +0.1 +0.5 +0.1 +0.7 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Feb 12

Apr 12

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

Oct 13

Dec 13

Feb 14

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-Feb

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 18.4 +0.8

Commenced 142.9 158.1 162.2 141.8 127.4 16.5 +56.4

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 23.7 -4.9

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 -1.5%

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 -1.5%

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% +1.1%

Producer inflation +2.1% +7.6% +3.4% -1.3% +0.1%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.5% -0.6%

Nominal gross wage +3.9% +5.2% +3.7% +3.4% +4.7%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.6%

EUR/PLN 3.99 4.12 4.19 4.20 4.09

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

GGGGross Wagesross Wagesross Wagesross 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 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14

m/m (%) -0.8 +9.4 +14.3 -2.9 +21.5 -64.0 +18.7

y/y (%) -11.1 -4.8 -3.2 -8.9 +5.8 -3.9 +14.4

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

Aug 11

Nov 11

Feb

12

May 12

Aug 12

Nov 12

Feb

13

May 13

Aug 13

Nov 13

Feb 14

60

80

100

120 Co nsumer confidence (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 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14

m/m (%) -0.3 +0.1 -0.7 -0.3 -0.1 0.0 -0.1

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

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 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14

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

y/y (%) -1.9 -1.8 -1.8 -1.7 -1.7 -1.7 -1.6

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 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14

m/m (%) -4.5 +9.6 +6.0 -6.2 -9.7 +2.9 -1.8

y/y (%) +2.2 +6.2 +4.4 +2.9 +6.6 +4.1 +5.3

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 Jan 2014

share *2013 share No Country Jan 2014

share *2013 share

1 Germany 14,097 26.1% 159,622 25.0% 1 Germany 10,999 20.7% 139,334 21.5%

2 UK 3,488 6.5% 41,503 6.5% 2 Russia 7,852 14.8% 79,601 12.3%

3 Czech Rep. 3,394 6.3% 39,421 6.2% 3 China 5,497 10.3% 60,914 9.4%

4 France 3,313 6.1% 35,745 5.6% 4 Italy 2,357 4.4% 33,703 5.2%

5 Russia 2,140 4.0% 34,058 5.3% 5 Netherlands 1,856 3.5% 25,005 3.9%

6 Italy 2,391 4.4% 27,450 4.3% 6 France 1,971 3.7% 24,533 3.8%

7 Netherlands 2,269 4.2% 25,292 4.0% 7 Czech Rep. 1,869 3.5% 23,778 3.7%

8 Ukraine n/a 2.8% 18,037 2.8% 8 USA 1,209 2.3% 17,350 2.7%

9 Sweden 1,723 3.2% 17,498 2.7% 9 UK 1,295 2.4% 16,861 2.6%

10 Slovakia 1,293 2.4% 16,795 2.6% 10 Belgium 1,309 2.5% 14,913 2.3%

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

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 21 March 2014

100 USD 304.25↓

100 EUR 419.70 ↓

100 GBP 502.24 ↓

100 CHF 344.68 ↓

100 DKK 56.22 ↓

100 SEK 47.43 ↓

100 NOK 50.09 ↓

10,000 JPY 297.66 ↓

100 CZK 15.27 ↓

10,000 HUF 134.48 ↓

100 USD/EUR against PLN

300

350

400

450

5 A

pr 13

17 Jun 13

23 A

ug 13

30 O

ct 13

14 Jan 14

21 Mar 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 21 Mar 2014

Overnight 1 week 1 month 3 months 6 months

2.59%% 2.60% 2.61% 2.71% 2.74%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.59% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 21 Mar '14

Change 14 mar '14

Change end of '13

↑ Asseco Pol. 47.37 +1% +3%

↑ Bogdanka 125 +12% -1%

↑ BZ WBK 403.3 +1% +4%

↑ Eurocash 39.44 +2% -17%

↓ Grupa Lotos 36.3 -1% +2%

↑GTC 7.19 +6% -3%

↑ Handlowy 105.5 +2% 0%

↑ JSW 44.1 +5% -17%

↑ Kernel 28.8 +20% -24%

↓ KGHM 100.45 -1% -15%

↑ mBank 515.05 +6% +3%

↓ Orange Pol. 10.57 -1% +8%

→ Pekao 184.75 0% +3%

↓ PGE 18.45 -1% +13%

↓ PGNiG 4.22 -2% -18%

→ PKN Orlen 40.37 0% -2%

↑ PKO BP 41.05 +36% +4%

↓ PZU 409.3 -1% -9%%

↑ Synthos 5.03 +1% -8%

↑ Tauron 5.25 +8% +20%

Source: Warsaw Stock Exchange

Key indices

as of 21 March 2014

WIG Total index

50505050,,,,555555555555....93939393 Change 1 week +2% ↑

Change end of '13 -1% ↓

WIG-20 blue chip index

2,2,2,2,333365656565....99996666 Change 1 week +1% ↑

Change end of '13 -1% ↓

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

13 D

ec 13

14 Jan 14

5 Feb 14

27 Feb 14

21 Mar 14


Poland Today Sp. z o. o.

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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

Jan 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 2H'13 Retail rents**2H'13

Q3 '13

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 8,146 +3.4% 11.5-25.5 11.75% 80-90 85

Kraków 5,989 -13.1% 13-15 4.90% 35-45 78

Katowice 5,898 +9.0% 13-14 7.30% 35-45 56

Poznań 6,351 -6.7% 14-16 14.20% 35-45 55

Łódź 4,780 -3.8% 12-14 14.40% 35-45 25

Wrocław 5,997 -4.3% 13-15.5 11.75% 35-45 40

Gdańsk 6,398 -1.2% 13-15 11.20% 35-45 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

Feb10

Oct10

Jun11

Feb12

Oct12

Jun13

Feb14

Wage CPI

Index 100 = Jan 2005. Source: GUS

poland today business review+ no. 027

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