poland today business review+ no. 052

No. 052 / 15th September 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Finnish wiring systems maker PKC Group to close down Sos-nowiec plant, sack 500 staff page 2

ENERGY & RESOURCES

Lotos shareholders approve PLN 1bn equity boost page 2 Australian investor begins pre-feasibility study for new coalmine near Lublin page 3

Energy stocks plunge as government mulls news ways to save Poland's coal industry page 4

Gazprom reduces gas deliveries to Poland amid Ukraine row page 5

Polish electrowaste recycler acquires Turkish peer page 6

HOSPITALITY

New Ibis hotel to open near Poznań in 2016 page 6

TRANSPORT & LOGISTICS

Prologis adds 55,400 sq.m in Warsaw to its Polish portfolio page 7

PROPERTY & CONSTRUCTION

HP's shared services unit books 16,400 sq.m at Skanska's new office project in Wrocław page 8 France's Yareal to build 400 apartments in new Warsaw project page 9

RETAIL PROPERTIES

Immofinanz opens third STOP.SHOP. retail park in Poland page 10

Warsaw awaiting new retail developments page 11

POLITICS & ECONOMY

Government data and recruiters confirm upturn in employment page 12

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 13-15

President Bronisław Komorowski accepted Tusk's resignation last week. Photo: M.Smiarowski/KPRM

Poland awaits new cabinet Poland awaits new cabinet Poland awaits new cabinet Poland awaits new cabinet as PMas PMas PMas PM Tusk Tusk Tusk Tusk steps downsteps downsteps downsteps down after after after after sevensevensevenseven years in years in years in years in ppppowerowerowerower Donald Tusk, Poland's longest serving Prime Minister after 1989, resigned last week, paving the way for him to take over as European Council president in December. He is to be succeeded by Ewa Kopacz, the current parliamentary speaker and an un-wavering Tusk ally. Ms. Kopacz, Poland's second ever female PM, is facing a tough challenge of leading the ruling centre-right party PO to victory in next year's general election. page 11

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weekly newsletter # 052 / 15th September 2014 / page 2

MANUFACTURING & PROCESSING

Finnish wiring systems Finnish wiring systems Finnish wiring systems Finnish wiring systems maker PKC Group to maker PKC Group to maker PKC Group to maker PKC Group to close down Sosnowiec close down Sosnowiec close down Sosnowiec close down Sosnowiec plant, sack 500 staffplant, sack 500 staffplant, sack 500 staffplant, sack 500 staff

Finnish wiring harness maker PKC Group will close down its factories in Sosnowiec (Poland) and Haapsalu (Estonia), as part of its development pro-gram in Europe and South America, resulting in 900 redundancies, the company announced. PKC is antici-pating a change in purchasing behavior resulting from consolidation of customers, which, according to the company requires a new production structure and model in the two regions. In Europe, PKC will consolidate production at its sites in Serbia and Lithuania. "The objective is that by the end of 2016, more than half of Europe's production ca-pacity is in these factories," an official communiqué said. The Sosnowiec and Haapsalu units are to be shut down. A similar fate awaites PKC's Itajuba factory in Brazil, which will be closed down by year's end and its 500 staff laid off. The factory closures as well as the planned streamlining of overlapping functions across Europe and South America are to result in EUR 12-14m annual cost savings when completed. "PKC’s development program and the resulting ramp-down of the Sosnowiec factory affects approx. 500 po-sitions within the next five months," Timo Seppä, Vice President of Operations, Europe, tells Poland Today. Besides the Sosnowiec unit, located in the Katowice special economic zone, PKC has a factory in Starachowice.

"At the moment Starachowice is important part of our footprint and we don’t have any other plans for it. A company's responsibility is to take care of competi-tiveness and that's why PKC is always monitoring its factory network to remain competitive in our field. Both factories of PKC Group Poland are located in special economic zones. Any long-term commitments have been fulfilled either prior to the acquisition of these manufacturing units or thru PKC after their ac-quisitions," says Mr. Seppä. PKC Group designs and produces electrical distribu-tion systems, electronics and related architecture components for the commercial vehicle industry and other selected segments. With a global turnover of EUR 884m in 2013, PKC has production facilities in Brazil, China, Estonia, Finland, Germany, Lithuania, Mexico, Poland, Russia, Serbia and the USA.

ENERGY & RESOURCES

Lotos shareholders Lotos shareholders Lotos shareholders Lotos shareholders approve PLN 1bn approve PLN 1bn approve PLN 1bn approve PLN 1bn equity boostequity boostequity boostequity boost

The shareholders of Poland's second-largest oil refiner Grupa Lotos have approved a share issue worth about PLN 1bn, which the company to finance more oil and gas production. "The proceeds will be used to fi-nance the Company’s strategy, which envisages fur-ther investments to increase the Gdańsk refinery's complexity and step up hydrocarbon production," Lotos said. In line with its strategy until 2015, Lotos intends to increase its production to 1.2m tonnes of crude oil per annum. As part of the approved share capital increase, Grupa Lotos will offer PLN 55m new ordinary shares to its

existing shareholders, who will hold pre-emptive rights to acquire the shares. The main shareholder in Lotos in the Treasury Ministry, which controls the company through a 53.2% stake. The Polish state is prepared to buy some of the new shares released by Lotos in the new share issue, Deputy Treasury Minis-ter Rafal Baniak said last week in a statement. Alt-hough Baniak did not specify how many shares the state will acquire, market insiders expect the state to buy enough shares to retain control of Lotos.

Lotos Group's key financials

0

6

1 2

18

24

30

36

2006 2007 2008 2009 2010 2011 2012 2013

-500

-250

0

250

500

750

1,000

Revenues in PLN bn, left axis

Net result in PLNm, right axis

Source: Grupa Lotos

Through its subsidiaries (Lotos Petrobaltic S.A., Lotos Exploration and Production Norge AS, and AB Lotos Geonafta), it also operates in the Baltic Sea, the North Sea and the Norwegian Sea, as well as in Lithuania, where it is involved in exploration for and production of natural gas and crude oil from onshore and offshore fields. Lotos is the second largest producer of hydro-carbons in Poland, and the only Polish operator ex-tracting crude oil and natural gas from offshore depos-its in the Baltic Sea. It is also the largest crude oil pro-ducer in Lithuania. The company produced 146,000 tonnes of oil and 16m cb.m of gas from its Baltic fields last year but now wants to boost output of both over the coming three years. In addition to scaling up production from its ex-


isting facilities, the company plans to launch produc-tion of 250,000 tons of oil a year from the B8 Baltic field by the end of 2015 and begin extracting gas from its B4 and B6 fields by the end of 2017, with produc-tion from both seen at a combined 250m cb.m a year. The B8 field's production potential is estimated at some 3.5m tons of crude oil, while the combined pro-duction potential of the B4 and B6 fields tops approx-imately 4 bn cb.m. The group is also aiming to boost efficiency at its refin-ing business, with a number of new facilities in the pipeline, including a delayed coking unit (DCU) and a hydrocarbon recovery unit (HRU). The DCU would improve the refinery's annual output of motor fuels by 900,000 tons and allow it to increase its refining mar-gin by approximately USD 2/bbl. The unit is scheduled to come on stream in 2017–2018. With the HRU, Lotos would gain an additional 100,000 tons of LPG and 25,000 tons of gasoline annually, which will be placed on the market. The unit is scheduled to be placed in service in autumn 2016. In the retail area, Lotos aims to raise its share in the home retail market, where it competes with state-controlled PKN Orlen, to 10% next year from 9.2% now, through expansion of its gas station network and sales efficiency improvements. In the first half of 2014 the Lotos posted a net loss of PLN 155m on PLN 14.4bn revenues, up from a PLN 273m loss and PLN 13.3bn turnover in January-June 2013. The 1H loss was due to a PLN 545m full write-down on the Yme field off the Norwegian coast, which knocked PLN 191m off the company's profit for the pe-riod. Lotos, which controls 20% of Yme, said the write down was due to lack of new plans for the oil field, in which Canada's Talisman Energy owns 60%, Germa-ny's Wintershall , a unit of chemical giant BASF, has 10%, as does Norske AEDC, a unit of AOC Arabian Oil Company.

ENERGY & RESOURCES

Australian investor Australian investor Australian investor Australian investor begins prebegins prebegins prebegins pre----feasibility feasibility feasibility feasibility study for new coalmine study for new coalmine study for new coalmine study for new coalmine near Lublinnear Lublinnear Lublinnear Lublin

Poland's most profitable coalmine Bogdanka may soon face foreign competition right at its doorstep. Australia's Prairie Mining Limited, which holds four exploration concessions in the Lublin Coal Basin, ad-jacent to the Bogdanka mine, has just commenced work on a pre-feasibility study for a large-scale coal project in the area. In April 2014 Prairie published the results of a scoping study for its Lublin Coal Project which confirmed the potential for a world class high margin semi-soft cok-ing and premium thermal coal. The study assumed an-nual operating costs at USD 37 per ton which would place the project on the lowest position on the global cost curve for coal delivered into Europe, Prairie said. The project's current coal resource estimate of 1.6bn tons is based on the review and modeling of historic data over the said four concessions, including the logs from 200 cored boreholes. Moreover, according to Prairie, its Lublin project is lo-cated close to well established regional rail and port infrastructure with underutilized bulk cargo capacity for low transportation costs within Poland, to regional European markets by rail, and to the seaborne export market through ports in the north of Poland. Prairie’s pre-feasibility study is expected to be com-pleted during the first half of 2015. The Australian in-vestor has appointed a joint team of consultants from

Golder Associates (UK) Ltd and Royal Haskoning DHV (Haskoning UK Ltd) to complete the study, which is designed to support detailed technical and fi-nancial due diligence by strategic equity partners, offtakers, financial institutions and to promote a seam-less transition to the Bankable Feasibility Study stage. The two consultancies were chosen due to their ex-tensive and recent track record of successful involve-ment in the international coal sector, and in particular European projects, Prairie said.

Prairie Mining holds four expoloration concessions that cover an area directly adjacent to the Bogdanka mine (blue lines indicate concession boundaries and yellow dots are exploration drill holes. Image: Prairie Mining

"We are looking forward to rapidly progressing the PFS for the Lublin Coal Project and have assembled a strong team of study consultants with skills and expe-rience in deep underground coal mining that I am con-fident will deliver the first study of its type in accord-ance with international standards within the entire Lublin Coal Basin. In addition, we will continue to up-grade the existing coal resource through targeted drill-ing and will initiate discussions with European steel mills and coal power plants who we believe will place strategic value on a significant new independent pro-duction source from within the heartland of industrial Europe," commented Prairie’s CEO Ben Stoikovich. The Bogdanka coal mine, which has been in commer-cial production since 1982, has recently expanded its


production levels to over 8m tons per annum (target-ing production of 11.5m tons per annum by 2015) of thermal coal. Since debuting on the Warsaw Stock Ex-change in 2009, Bogdanka has more than doubled in value as profits rose every year but one. It has done so even as the price of coal more than halved since 2008, when the global financial crisis took hold, pushing Po-land's largest coalminer Kompania Weglowa to the brink of collapse. According to Prairie, Bogdanka has successfully been able to demonstrate that the Lublin Coal Basin has the potential to host a new generation of large scale coal projects as it offers ideal geological and mining condi-tions for high productivity longwall plow operations with world record production rates. As a result, the Boganka mine is currently the lowest operating cost hard coal mine in Europe. Bogdanka employs about 5,000 and posted a net income of PLN 188m on PLN 879m turnover in 1H 2014, making it the most profita-ble of seven Polish coal producers. Kompania Węglowa has 56,000 miners, the biggest employer af-ter the postal service and railroad. It lost about PLN 329m after six months with the coal price below the cost to mine it. Bogdanka is not particularly happy to watch the Aus-tralians get comfortable in concession areas that seem like a natural expansion grounds for the Polish miner. It has applied for a mining concession over Prairie's K-6-7 exploration concession (see map), which is part of their Lublin Coal Project. The Polish Ministry of Envi-ronment officially rejected Bogdanka's application on August 28, as under the Polish Geological and Mining Law, a clear pathway exists to progress from an Explo-ration Concession to a Mining Concession. "Granting a concession for the production of black coal from a deposit for which an appraisal concession has been previously granted undermines the geological sense of further appraisal of the mineral in this area,

makes the granted appraisal concession void and may violate the right to use the rock mass set forth in the agreement on establishing mining usufruct concluded with PD Co Sp. z o.o. [Prairie's 100% owned Polish subsidiary; ed.]. Such a decision would be contrary to public interest, and the concession authority may not make decisions that abuse the trust of entities in the authority, as well as in the fundamental principles laid down in the Constitution of the Republic of Poland, i.e. the principle of citizen's trust in the state and the prin-ciple of protection of the interests in progress," the Ministry said. The competition between established local players and newcomers can get nasty. Following a recent conces-sion row between Polish copper mining giant KGHM and Canadian-owned Miedzi Copper Corp. (see BR+ No. 047) the latter's has suspended exploration work in Poland in protest against the government's decision to revoke a strategically important license the compa-ny had obtained a few months ago. The Canadians had plans for a brand new PLN 12bn-15bn copper mine in Western Poland near existing facilities operated by KGHM.

ENERGY & RESOURCES

Energy stocks plunge Energy stocks plunge Energy stocks plunge Energy stocks plunge as government as government as government as government mulls mulls mulls mulls newsnewsnewsnews ways to save ways to save ways to save ways to save Poland's Poland's Poland's Poland's coal industrycoal industrycoal industrycoal industry

Polish energy stocks took a beating last week after comments from government officials regarding the possible consolidation of the ailing state-owned coal group Kompania Węglowa (KW) with other enti-ties, ine a move to strengthen its competitive position.

The idea was first brought up by Poland's outgoing Prime Minister Donald Tusk and last week confirmed by deputy Economy Minister Tomasz Tomczykiewicz, who listed top utilities Enea, PGE, and Tauron as likely partners for some of KW's mines. Shares in the three energy firms dropped by up to 4% on Tomczykiewicz's announcement. Dark clouds have been looming over Poland's coalmin-ing sector for years but recently the situation has got-ten so serious, the government has no choice but to seek solutions. In the first half of the year Polish coalmining compa-nies posted a net loss of PLN 772.3m, compared to a ti-ny profit of PLN 15.6m in the corresponding period of 2013. With a net loss of PLN 329m, KW was responsi-ble for a major portion of the sector's losses. The situa-tion looked even worse when taking into consideration only the sector's core business: coal sales. Here, the loss exceeds PLN 1bn vs. a PLN 64m profit in January-June 2013. Polish coalmines extracted slightly more than 34m tons of coal in the first six months of the year (down by 2.8m tons y/y) with sales reaching 31.8m tons (down by 4.3m). Exports (mainly to Germany and the Czech Republic) totaled 4m tons. Meanwhile, stockpiles of unsold coal amounted to 8.3m tons as of end of June. The key problem for Polish coalmines are high pro-duction costs, which at PLN 311 (slightly below USD 100) per ton in 1H 2014, make Polish coal way too ex-pensive, against global prices that oscillate around USD 70 per ton. In Poland, coal prices dropped 8% y/y in 1H, down to PLN 280. Clearly, in order to sell any-thing, Polish mines have to sell below production costs. With approximately 104,000 employees (including some 80,000 miners) and powerful trade unions, Po-


land's coalmining industry has effectively resisted any real change, even though only three of the 15 mines that make up the state-owned giant KW showed profit in 1H. While some of the loss-making ones simply fell victim to temporary problems and price fluctuations, a few have been in the red for years, being kept alive to avoid unrest, despite immense costs. The government has been tiptoeing around the issue for months, never failing to emphasize that job cuts at KW were not an option, even though the company produces merely 620 tons of coal per employee (35m tons in total). Globally, the worst-performing compa-nies mine about 1,000 tons per full-time employee. The listed Polish Lublin-based coalminer Bogdanka, which benefits from a much more favorable geology than KW's Silesian mines, but has also undergone in-depth restructuring, aims to produce 11.5m tons this year, or 2,300 tons per worker. Fearing strikes and civil unrest, no government in the past quarter of a century dared to take on the miners, who continue to enjoy wage levels and perks that are unheard of in any other industry. Despite the sector's tragic financial condition, trade unions demand pay increases that had been promised to miners when the situation looked a bit more promising. Proposals to give up some perks including double-than-average pensions, two annual bonuses, discounts for city transport, free coal allowances, or school subsidies for children, are being met with strong resistance on the part of the unions, who believe their members deserve what their fathers and grandfathers got, paying no at-tention to changing market conditions. Little less than a decade ago, the Solidarity union blocked government plans to raise the retirement age for miners after demonstrations turned into street fights. The memory of those scuffles remains vivid among Polish politicians, which partly explains Poland's new-ly discovered love for coal. The country, which relies

on coal for 90% of its electricity, had been trying for years to reduce its dependence on this highly polluting form of fuel, but recently the government has been pushing for stronger ties between the country's energy producers (which are profitable and fully restruc-tured) and coalmines. Even before the recent an-nouncements, Tauron, the country’s second-biggest utility, agreed to pay PLN 310m to buy a stake in one of KW's businesses, while in August JSW SA, the biggest coking coal producer in the EU, paid PLN 1.49bn for another. PGE, the largest utility, revived the PLN 11.6bn coal-fired power plant project and will buy coal from Kompania. All in all, the authorities are getting creative in finding ways to avouid an drastic measures in Silesia, but many observers believe this is approach will merely prolong their agony and increase the end cost to taxpayers.

ENERGY & RESOURCES

Gazprom Gazprom Gazprom Gazprom reduces gas reduces gas reduces gas reduces gas deliveries to Poland deliveries to Poland deliveries to Poland deliveries to Poland amid Ukraine rowamid Ukraine rowamid Ukraine rowamid Ukraine row

Russia’s Gazprom reduced natural gas flows to Po-land last week, seemingly as part of Moscow's pressure on Ukraine, which has not been receiving Russian gas since mid-June in a row over debt and prices. Due to insufficient flows from Russia Poland halted deliveries to Ukraine on Wednesday, according to Ukraine's UkrTransGaz. The latter's CEO Ihor Prokopiv said Russia was reducing flows to the European Union to restrict supply to Ukraine, which previously had been receiving 4m cb.m per day via so-called reverse flows from Poland. Gazprom CEO Alexey Miller said in June the company might limit supplies to gas-metering sta-tions where it observed reverse flows.

Poland's gas company PGNiG said it received 20 to 45% less fuel at the beginning of last week and it was compensating the shortage with supplies from the West. Poland is able to receive 2bn cb.m of gas per year via an interconnector with the Czech Republic and via the Lasow link with Germany. It also can use the Yamal pipeline for reverse flows and import as much as 5.5bn cb.m from the West. PGNiG bought 0.6bn cb.m of gas from Germany and the Czech Re-public in the first half of 2014, compared with 4.5bn cb.m imported from Russia. Shortly after the news of the reduced deliveries from Russia reached the media, Polish gas pipelines opera-tor Gaz-System confirmed the available transmission capacity on links from the Czech Republic and Ger-many was being used in full.

Tampering with gas supplies has been Moscow's fa-vorite way of disciplining its neighbors. Photo: Gaz-System

Poland has lobbied the European Union hard to im-pose tougher sanctions on Moscow, and it is to host el-ements of a new NATO rapid reaction force, created in response to the Russian intervention in Ukraine. Some observers believe that the Kremlin may use a disrup-tion of gas to Europe as a trump card in its confronta-


tion with the west over Ukraine. The row has already brought relations between Moscow and the west to their lowest point since the cold war. Gazprom sup-plies a third of Europe's gas and for many EU coun-tries it is the main source of power for homes and in-dustry. Poland got 9.6bn cb.m of gas from Russia last year, or 64% of its total use, according to BP Plc’s Sta-tistical Review. Poland's PGNiG filled 100% of its available natural gas storage capacity, i.e. some 2.58 bn cb.m as of Septem-ber 4, PGNiG said in a market filing. At the same time, PGNiG is pumping natural gas to natural silos at northern Kosakowo, southwestern Wierzchowice and southeastern Husów silos which are currently being expanded and are not reported as part of the silo sys-tem of PGNiG's storage unit OSM, the firm added. The rise to maximum storage capacity in early September is the first in PGNiG history, the firm said. In the cor-responding period of 2013, PGNiG has 2.1 bcm stored, the firm said.

ENERGY & RESOURCES

Polish electrowaste Polish electrowaste Polish electrowaste Polish electrowaste recycler acquires recycler acquires recycler acquires recycler acquires TuTuTuTurkish peerrkish peerrkish peerrkish peer

Warsaw-listed metals recycling company Elemental Holding has agreed to acquired a 51% stake in Turkish peer Evciler for USD 11m. The transaction, which the Polish company will partially finance with proceeds from a new share issue, is to be sealed by December 15, 2014. Evciler Chemical, Mining and Precious Metals Indus-try and Trade Limited Company has operated in the non-ferrous metals sector since 1982. Since 1996, the

company's core business has been collection, disas-sembly and mediation in the recycling of electronic and electrical equipment (electrowaste) and waste catalytic converters in Turkey, Europe, Africa, the Middle East and Asia. Additionally, together with its partners, Evciler also collects batteries, CRT monitors and lighting equipment, including fluorescent lamps and cables. The company carries out its operations via two facili-ties based in Ankara, but it has been gradually expand-ing the outside Turkey, collecting and recycling electrowaste and catalytic converters in Germany, Af-rica, the Middle East, Asia and in the neighboring countries.

There is big money to be made in recycling old elec-trical appliances. Elemental Holding's earns approxi-mately PLN 25m a year after tax. Photo: Elemental Holding

"We expect this acquisition to boost our annual reve-nues by some PLN 120-150m," Krzysztof Szymański, spokesperson at Elemental Holding, tells Poland To-day. "The Turkish market is attractive due to its size and growth prospects and local regulations follow the EU norms. The fact that Evciler operates across tens of markets in Africa, Middle East and Souther Europe enables us to maintain a large geographical footprint."

With a modern processing plant in Tomaszów Ma-zowiecki in central Poland and a waste obtaining net-work spanning the entire country, Elemental Holding specializes in recycling of integrated circuits and printed circuit boards, processing of electrowaste, as well as recycling, transport and trading in non-ferrous metals and steel. It is one of the leading suppliers of non-ferrous metals to Polish foundries. In March, the Polish company took over a controlling stake in Lithuania's EMP Recycling, which holds a 60% share in Lithuania's electrowaste, catalytic con-verter and non-ferrous metals recycling sector. Ele-mental Holding representatives said their goal is to reach a similar market position in the other two Baltic states, Latvia and Estonia. "We keep looking at potential acquisition targets along the Estonia-Turkey axis, or from southern to northern Europe. In the Baltics, our goal is to expand EMP's op-erations from Lithuania to Estonia and Latvia," Szymański says. Elemental Holding turned over PLN 860m last year (down from PLN 895m in 2012) while its attributable net earnings topped PLN 24.4m (up from PLN 18.4m in 2012). The company has been listed on the Warsaw Stock Exchange since December 2013..

HOSPITALITY

New Ibis hotel to open New Ibis hotel to open New Ibis hotel to open New Ibis hotel to open near Poznań in 2016near Poznań in 2016near Poznań in 2016near Poznań in 2016

Poland's leading hotel operator, the French-owned Orbis Hotel Group has signed a franchise agreement for a brand new property in the Poznań suburb of


Suchy Las. The new hotel, Ibis Poznań Północ, which is being developed by a local company Anwil Transport, will open in Q1 2016 offering 77 rooms. Orbis is part of Accor, Europe's number one hotel op-erator with 3,600 hotels and more than 460,000 rooms across 92 countries. The group entered Poland in 1973 through Novotel franchise with Orbis in which it be-came a majority shareholder 35 years later. The Orbis Hotel Group manages 62 hotels in Poland and five in the Baltics with 11,600 rooms under the ibis, ibis Styles, ibis Budget, Mercure, Novotel, Sofitel and Orbis Hotels brands. In 2010 Orbis adopted an asset-light strategy, which emphasizes the company's role as a hotel operator and prioritizes expansion via manage-ment and franchise agreements. Hence, Orbis has been gradually restructuring its asset portfolio, seeking ways to refinance certain real properties with the help of long-term investors. Most of the group's new hotels are being developed under Mercure and ibis Styles conversion brands, which Orbis sees as best fitting the franchisee market. The French group is tempting potential partners with its dominant market position, booking system that generates close to a half of hotel revenue in Europe, 250-strong global sales force and loyalty program which boasts 8.5m members worldwide including 160,000 in Poland. Orbis has so far signed 19 franchise agreements of which eight in 2013. Earlier this year Orbis signed franchise agreements for new hotels in Grudziądz (ibis Styles), which will open in Q4 2014 offering more than 80 modern rooms, res-taurant and conference facilities, as well as Lithuania's Marijampole (Mercure), which joined the Accor net-work in April with 47 rooms, alongside a new Mercure location in Riga, Latvia. In August last year, Orbis signed a franchise agreement for a new ibis Styles ho-tel in the southern Polish town of Nowy Sącz, to be developed by a local investor. With 57 rooms, the

three-star property will open in Q4 2014 as the first hotel in Nowy Sącz belonging to an international chain. Orbis is also working on a Mercure hotel in Bydgoszcz, which is to open in November with 90 rooms as well as Mercure/ibis Styles combo in Sosno-wiec. Last year saw the opening of a Novotel hotel in Łódź, while in 2012 Orbis launched ibis and ibis Budg-et Reduta in Warsaw as well as a similar double pro-ject in Krakow, alongside an ibis hotel in the Lithuani-an city of Kaunas.

Developed by a local investor, the new Ibis Poznań Północ will open in Q1 2016 with 77 rooms. Photo: Orbis

The Warsaw-listed Orbis turned over PLN 671.5m in 2013 (down from PLN 688m in 2012, in like-for-like terms), while its EBITDA came to PLN 199.1m (vs 204.7m in 2012). Average revenue per room dropped 4.6% last year, down to PLN 124.1, while room occu-pancy rose by three percentage points and topped 58.8%. The company has recently embarked on a PLN 100m investment program, seeking to upgrade some of its key properties by the end of 2014. Some 90% of the total amount is to be spent in Warsaw, where Orbis operates 11 hotels. The combined price tag on the on-going makeovers of Mercure Warszawa Centrum, Novotel Warszawa Centrum, and Sofitel Victoria War-

szawa is PLN 75m. Total capital expenditures in 2013 came to PLN 95m and included also substantial out-lays on IT.

TRANSPORT & LOGISTICS

Prologis adds 55,400 Prologis adds 55,400 Prologis adds 55,400 Prologis adds 55,400 sq.m in Warsaw to its sq.m in Warsaw to its sq.m in Warsaw to its sq.m in Warsaw to its Polish portfolioPolish portfolioPolish portfolioPolish portfolio

US industrial property giant Prologis has further strengthened its position in Central and Eastern Eu-rope with the acquisition of 23 class-A distribution centers in the Czech Republic, Poland and Slovakia. The portfolio, encompassing some 230,000 sq.m, will be included in Prologis European Properties Fund II (PEPF II). In Poland, Prologis has purchased four properties to-taling 55,400 sq.m in Warsaw, Poland. Prologis Park Warsaw-Żeran is located near the Warsaw city center east of the A2 highway, a key regional transport route. The company has also acquired 17 properties totaling 163,000 sq.m in Prague, Czech Republic and two as-sets totaling 11,600 sq.m in Bratislava, Slovakia. A few weeks ago, PEPF II took over two logistics facil-ities in Poland and Hungary from Invesco Real Estate, including a 56,700 sq.m building in Gliwice, in upper Silesia. The facility, renamed Prologis Park Gliwice, is located in the centre of the Silesian agglomeration and one of Poland's core markets – next to the crossroads of two trans-European networks the A1 and A4. Its sole tenant is the British-owned retailer Tesco. In recent months Prologis broke ground on two specu-lative projects (27,000 sq.m and 28,240 sq.m) in the


Wrocław area. Other ongoing projects from Prologis in Poland include a 11,200 sq.m BTS scheme for Dan-ish forwarder Prime Cargo in Prologis Park Szczecin as well as a 27,000 sq.m speculative development in Prologis Park Wrocław V.

Largest warehouse owners in Poland As of 1H 2014, in % of total stock

Other

44%

Panattoni

5%

Blackstone

12%

Prologis

26%SEGRO

13%

Source: JLL

Prologis owned 26% of Poland's entire modern ware-house stock as of mid-2014 according to figures from JLL, the property advisory, followed by SEGRO (13%) and Blackstone (12%). Following the most recent ac-quisitions, Prologis' Polish portfolio includes 103 buildings in 21 industrial parks with a combined space of nearly 2.1m sq.m. The company has three projects under construction (two speculative schems in Wrocłąw and one BTS in Szczecin) with a combined floor space of 56,400 sq.m. In terms of the ownership structure of the Polish in-dustrial market, more than half of existing floor space is in the hands of the three largest market players and their partners. Despite being the most active on the development front, Panattoni owns merely 5% of the existing stock, as the company's strategy is to dispose completed projects.

PEPF II, which was established in August 2007, owned 253 properties, for a total of 5.9m sq.m with a net market value of EUR 3,595.4m as of March 31, 2014. Globally, Prologis owned or had investments in, properties and development projects expected to total approximately 53.3m sq.m in 21 countries including 3.7 sq.m in Central and Eastern Europe as of end of Q1 2014.The company leases modern distribution facili-ties to more than 4,700 customers, including manufac-turers, retailers, transportation companies, third-party logistics providers and other enterprises. Last year alone, the company leased 1.15m sq.m of industrial dis-tribution space in Central and Eastern Europe, includ-ing 595,000 sq.m in renewals and 363,000 sq.m in new leases. Prologis’ occupancy in the CEE was 89.5% as of December 31, 2013.

Prologis Park Warsaw-Żerań is the newest addition to the US giant's Polish portfolio. Photo: Prologis

According to JLL, with 811,000 sq.m of warehouse space under construction in Poland as of mid-2014, the market is showing its best performance since 2008. In the first half of 2014, gross take-up stood at 912,000 sq.m, of which 526,000 sq.m was in new contracts. During the first half of 2014, developers delivered 298,000 sq.m of new supply, marking an 85% increase on 1H 2013.


HP's shHP's shHP's shHP's shared services ared services ared services ared services unit books 16,400 sq.m unit books 16,400 sq.m unit books 16,400 sq.m unit books 16,400 sq.m at Skanska's new office at Skanska's new office at Skanska's new office at Skanska's new office project in Wrocławproject in Wrocławproject in Wrocławproject in Wrocław

In what the property consultancy CBRE describes as the largest office lease transaction in Polish regional cities since the beginning of this year, HP Global Business Center has secured close to 16,400 sq.m of office space in Skanska Property Poland's latest Wrocław office project: the Dominikański. The con-tract also happens to be the biggest lease agreement the Swedish developer has signed in Central and East-ern Europe to-date. HP GBC, the US IT giant's business services unit, will relocate to Dominikański at the turn of 2015 and 2016 from its current premises at the Grunwaldzki Center (which was delivered also by Skanska, in 2009) and the Globis building. The company will keep its third Wrocław office in the historic Renoma building. HP GBC's offices will be located in both buildings of the Dominikański complex, which will total 40,000 sq.m upon completion. The HP unit will also take 166 of the project's 370 parking spaces. Dominikański is Skanska Property Poland’s fourth, flagship investment in Wrocław. This class A office complex is being developed in one of the city’s prime locations near Dominikański Square and close to the Galeria Dominikańska shopping center and Wrocław's historic Market Square. The complex, which will un-dergo LEED Gold certification, has been 52% leased approximately 10 months before its scheduled comple-tion. The first signed tenant was Deloitte.


Skanska Property Poland is very active in Poland's re-gional cities, with investments also in Poznań, Łódź, Kraków and Katowice, where it has broken ground on its largest Polish office project to-date, the 46,000 sq.m Silesia Business Park. In Wrocław, it has recently delivered its third scheme, Green Day (see BR+ No. 028 page 5). According to Arkadiusz Rudzki, Leasing And Asset Director at Skanska Commercial Develop-ment Europe, the company will begin the construction of one more project outside Warsaw this year.

More than a half of the total office space at Skanska's new Wrocław project "Dominikański" has already been booked. The complex is currently under con-struction. Photo: Skanska Property Poland

In Warsaw, Skanska has recently broken ground on Atrium 2, a 20,000 sq.m office tower in the heart of the city's central business district. The project is a yet another installment of the Atrium complex Skanska has been building on the Western side of the Jana Pawła Avenue since the late 1990s. Its previous phase, the 18,000-sq.m Atrium 1, was completed a few months ago and sold to the German open-ended prop-erty fund Deka Immobilien-Global for EUR 94m (see BR+ No. 011 page 5). Later this year the developer will break ground the first of three buildings that will make up the 80,000-sq.m Generation Park, Skanska's largest

project in Warsaw to-date. Atrium 2 and Generation Park will both be located by the new east-west subway line, only one stop away from each other. The Swedes own at least one more site in this area, the one directly by the ONZ roundabout, where they intend to erect an office sky-scraper in the future. "Warsaw is a market with enormous potential and we have ambitious plans for the city. We have not given up our plans for a high rise next to Atrium 2. There is still space left for a tall building that is currently at the concept design stage. However, we are focusing on other projects at the moment, for instance Atrium 2 and Generation Park, which will also include a high-rise section," Katarzyna Zawodna CEO of Skanska Property Poland, told Poland Today. "We have recently sold four office parks for a com-bined EUR 300m or PLN 1.2bn. Moreover, all those buildings had been sold prior to their completion. We intend to maintain this ambitious pace, with five new projects to be launched in 2014, two in Warsaw and three in regional cities," Arkadiusz Rudzki told Poland Today. Their two new Warsaw projects alone (Gener-ation Park & Atrium 2) will have a combined GLA of some 100,000 sq.m. Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world's leading project development and construction groups, which currently has 57,000 employees in se-lected home markets in Europe, the US and Latin America. Skanska’s revenue in 2013 totaled SEK 136bn (EUR 15.8bn).


France's Yareal to France's Yareal to France's Yareal to France's Yareal to build 400 apartments build 400 apartments build 400 apartments build 400 apartments in new Warsaw projectin new Warsaw projectin new Warsaw projectin new Warsaw project

French developer Yareal is embarking on its largest residential project in Warsaw's southeastern Gocław area. The project will be developed in two phases and, once completed, it will include six six-story buildings with a total of nearly 400 apartments, ranging from 28 to 92 sq.m in size. The company has just launched apartment sales in the Kolorowy Gocław project, with prices starting at PLN 6,800 per sq.m, aiming to begin construction in 1H 2015. Better known for its office developments, Yareal has been involved in a handful of small upscale residential projects in Warsaw, including the award-winning Hoża 55 project. Its ongoing residential schemes (Brylowska 2, Rezydencja Konstancińska, and Londyńska 5) have a combined floor space of 13,500 sq.m. 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.

Kolorowy Gocław will be Yareal's largest residential prokject in Poland to date. Photo: Yareal

Earlier this year Yareal announced a large new project on the corner of Cybernetyki and Wynalazek streets in the Mokotów district, a stone's throw from the Okęcie airport and close to the Galeria Mokotów mall. The Neopark development will include two buildings with a combined GLA of 24,000 sq.m, separated by a green patio with restaurants, retail outlets and a fitness cen-ter. The developer will seek BREEAM sustainable building certification for the project, hoping to obtain a building permit for Neopark this year.

RETAIL PROPERTIES

Immofinanz opens Immofinanz opens Immofinanz opens Immofinanz opens third STOP.SHOP. third STOP.SHOP. third STOP.SHOP. third STOP.SHOP. retail park in Polandretail park in Polandretail park in Polandretail park in Poland

Austrian property firm Immofinanz Group has re-cently opened its third STOP.SHOP.-branded retail park project in Poland. Located in Kętrzyn, near an ex-isting Tesco supermarket, the project encompasses 3,500 sq/.m of retail space and its tenants include Me-dia Expert, Jysk, CCC and Martes Sport. To-date, Immofinanz has delivered 51 STOP.SHOP. parks in a number Central European cities with popu-lations of between 30,000 and 150,000, including Leg-nica and Mława in Poland. Over the coming years the company plans to build a total of 10 projects under the STOP.SHOP. logo in Poland. "The Ketrzyn STOP.SHOP. is not our last opening this year. We are planning to open another, the fourth, re-tail park in Żary in Q4," said Immofinanz's CEO Edu-ard Zehetner. Immofinanz focusing on the construction of its flag-ship retail development in Poland – Tarasy Zamkowe in Lublin. Scheduled to open in Q4 2014, the EUR 95m shopping and entertainment project will comprise up to 38,000 sq.m of rentable space divided into ca. 150 retail units. It has also teamed up with Polish develop-er Rank Progress on a 23,800-sq.m retail project in Piła, which will likewise open in Q4 2014. The compa-ny has recently announced a new retail project in southern town of Stalowa Wola, 60km north of Rzeszów, where they plan to build a shopping center with a GLA of approx. 30,000 sq.m. The investment is

expected to total EUR 50m, with completion being scheduled for the first half of 2015, Immofinanz said. Besides shopping centers, Immofinanz Group's ongo-ing investments in Poland include the Nimbus office building (19,000 sq.m of GLA) in Warsaw, and resi-dential projects Riverpark in Poznań (189 apartments) and Dębowe Tarasy in Katowice (phase three with 317 apartments). Immofinanz has recently decided to pull out of the lo-gistics sector in Poland and the Czech Republic, start-ing with the sale of Bokserska Distribution Park in Warsaw and Westpoint Distribution Park in Prague for a combined EUR 33.2m.

Immofinanz wants to open at least 10 STOP.SHOP. properties like the one opened last week in Kętrzyn. Photo: Immofinanz

"In Poland, we currently hold two other logistics properties that are designated for sale over the medi-um-term," said Zehetner. "Our focus for the develop-ment of logistics properties lies on the core markets of Germany, Romania and Russia." The Vienna-listed company, which carried out a sec-ondary listing in Warsaw last year, has recently com-pleted one of the largest ever deals on Poland's proper-ty market with the EUR 412m sale of Silesia City Cen-


ter retail property in Katowice to an international con-sortium of investors led by Allianz. Silesia City Center has about 340 stores with combined floor space of 89,000 sq.m, all of which is occupied. Since its founding in 1990, Immofinanz has compiled a portfolio that now comprises more than 1,600 invest-ment properties with a carrying amount of approx. EUR 7.4bn. The company concentrates on develop-ment management and sale of commercial properties in top locations. Immofinanz Group concentrates its activities in the retail, office, logistics and residential segments of eight regional core markets: Austria, Germany, Czech Republic, Slovakia, Hungary, Roma-nia, Poland and Russia.

RETAIL PROPERTIES

Warsaw awaiting new Warsaw awaiting new Warsaw awaiting new Warsaw awaiting new retail developments retail developments retail developments retail developments

The demand for new retail projects of various scale and formats in the Polish capital remains robust, as Warsaw's shopping center density ratio remains low (at 438 sq.m per 1,000 inhabitants), despite the spend-ing power of its residents being the highest in the country (EUR 9,706 per capita per annum i.e. 165% of the national average in the Warsaw agglomeration, and EUR 10,478 in Warsaw alone), conclude property consultantsJLL in the latest edition of their Warsaw City Report. Although the greater Warsaw area remains the coun-try's largest retail market with a shopping centre stock of 1.1m sq.m, equivalent to 13% of the total supply countywide, the ongoing rapid development of some of the city's residential areas creates ample potential for new development, particularly in the Białołęka,

Wilanów, Wawer, Ursynów and Wola districts. De-spite the perceived attractiveness of the Warsaw mar-ket to retail developers, only one shopping centre - Galeria Legionowo (10,500 sq.m of GLA) in Legionowo, is under construction in the wider metro-politan area of Warsaw, and a further two are being extended i.e. Wola Park (by 17,600 sq.m of GLA) and Factory Ursus (by 6,000 sq.m of GLA). Nearly four out of five shopping centers in Warsaw are older than 10 years. Consequently, modernizations and extensions of existing retail assets remain one of the key trends, JLL said. "The first half of the year was a rather calm period on the retail market in the Warsaw agglomeration. This will, however, change with a wide selection of new re-tail projects planned, including, i.a., Galeria Północna, Galeria Wilanów, Ferio Wawer or Fabryka Wołomin," commented Anna Wysocka, Head of Retail Agency, JLL Poland. "Spectacular changes will soon take place in the wider city centre. The extension and redevel-opment of CEDET on the corner of Krucza Street, Bracka Street and Jerozolimskie Avenue begins. What is more, building permits have been obtained for Cen-trum Marszałkowska on Marszałkowska Street, Hala Koszyki on Koszykowa Street and ArtNorblin on Żelazna Street. Ethos on Plac Trzech Krzyży will also be revamped. The completion of these projects will enhance the retail centre of Warsaw," she adds. There are hardly any unoccupied retail units at War-saw area shopping centres with vacancy rate at a sym-bolic 1.5%. Top regional centers, such as Złote Tarasy, Arkadia or Galeria Mokotów, which often serve as ex-pansion bridgeheads for brands entering Poland, have to put prospective tenants on waiting lists. Due to re-cent re-lettings in prime retail assets in the capital city, prime rents for a 100 sq.m unit for a fashion and acces-sories sector tenant increased by 5% to EUR 105 per sq.m a month. JLL anticipates prime rents to remain stable in the short to mid-term.

POLITICS & ECONOMY

PM Tusk resigns; new PM Tusk resigns; new PM Tusk resigns; new PM Tusk resigns; new government is in the government is in the government is in the government is in the makingmakingmakingmaking

PM Donald Tusk submitted his cabinet's resignation last week as the Polish leader gears up to assume the post of European Council President from December 1. His resignation was accepted by President Bronisław Komorowski on Thursday, September 11. According to the constitution, the President has two weeks (until September 25) to nominate a new PM candidate, who will then have a further two weeks to present a line-up of the new cabinet. The transition is likely to be smooth, as Tusk named Ewa Kopacz, the current speaker of the lower cham-ber of the Polish parliament, as his successor, in line with expectations. Her candidacy has been approved by Tusk's party, the centre-right Civic Platform (PO) and endorsed by the President. Kopacz, who used to serve as health minister in Tusk's cabinet, will be the second woman since the fall of communism to stand at the helm of the Polish government. Kopacz will also take over from Tusk as the PO leader. Besides Mr. Tusk himself, the new cabinet will not in-clude his most senior minister, Elżbieta Bieńkowska, who has been nominated for the new EU commission-er in charge of the internal market. Some sources sug-gested that Radek Sikorski, another top member of the Tusk cabinet may succeed Kopacz as the speaker of the Sejm, but the prestigious yet somewhat boring function seems to be at odds with Sikorski's outspoken personality.


Mr. Tusk was Poland's longest-serving PM since 1989, holding his office for exactly 2,489 days (nearly a full 7 years), the government's press office wrote in a state-ment sent to the press last week. In 2011, he became the first Polish leader in recent history to be re-elected to power. Mr. Tusk's rule brought a cumulative in-crease in gross domestic product of 20% in 2013 versus 2007, although recently the PO has been trailing be-hind the conservative Law and Justice (PiS) party in opinion polls ahead of national elections due to take place in a year's time.

At this crucial moment, the Civic Platform is facing a period of great uncertainty, as following the departure of its charismatic and media-savvy leader, infighting between its various factions is not unlikely. At the moment, the PO-led coalition with agrarian PSL as a junior partner, enjoys a slim majority in the Sejm.

Although Tusk's nomination for the new European Council President his scored his party some extra points, most recent polls have been pointing to PiS and his firebrand leader Jarosław Kaczyński, twin brother of the tragically deceased late Polish president Lech Kaczyński, as a likely winner in next year's general election. Few expect Kaczyński to win a majority in the parliament and since he lacks any political allies the result may be a shaky minority government. A fan of the controversial Hungarian leader Viktor Orban, Kaczyński is pushing a strongly etatist agenda, mixed with deep social conservatism.

"It is too early to say how the changes will affect the Polish political scene. The most recent opinion poll showed a rise in support for the ruling PO party after the news of Tusk’s nomination for the top EU job. It will definitely be an interesting time in Polish politics. We do not see a significant rise in political risk, nor do we expect a major change in economic policy. Howev-er, there are already signs of fiscal policy becoming

more accommodative before the elections," BZ WBK analysts commented in their MACROscope report.

POLITICS & ECONOMY

Government data and Government data and Government data and Government data and recruiters confirm recruiters confirm recruiters confirm recruiters confirm upturn in employmentupturn in employmentupturn in employmentupturn in employment

Poland's registered unemployment rate dropped to 11.7% in August from 11.9% in July, according to esti-mates by the Labor Ministry. With 1.86m people regis-tered as jobless last month, the labor market has re-turned to levels last seen three years ago, when the economy was on the rise and it seemed like crisis was finally becoming a thing of the past. Although other economic indicators have been rather disappointing in recent months, employment figures has seen steady improvement, with some 80,000 new placements on the average hitting Poland's job centers every month since the beginning of the year. Looking back at data from the past three years, the situation appears promising. Since the state-run job centers represent only a frac-tion of the available positions, one has to take a look at other sources for confirmation of the optimistic trend. According to the employers' association Lewiatan, more than 26% of medium-sized businesses (20-50 workers) intend to increase employment this year. Among Poland's small (10-20 staff) and micro-firms (below 10), the result was 19% and 11% respectively. Staffing consultancy Manpower said Polish employ-ers remain "moderately optimistic" about plans for hir-ing in Q4. According to a brand new report Manpower released last week, Poland's seasonally unadjusted net

employment outlook is seen at a positive 6% in Q4 2014, with 13% of employers surveyed planning a headcount increase and 8% predicting a cut. Net em-ployment forecast for Poland after taking into account seasonal corrections has thus come to a positive 6%, representing an improvement by 2pps both y/y and q/q.

Registered unemployment in Poland Source: GUS, Labor Minis-

try

11%

12%

13%

14%

Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14

The market is yet to experience the effects of the labor market reform, which was introduced in May. Job centers were given time until September to divide the registered job seekers according to their perceived chances of finding employment, with the toughest cas-es to get special attention from councilors. Shortly af-ter, regional authorities are to invite private staffing firms and NGOs to help the officials match the jobless with open positions. The related tenders will be an-nounced this autumn with all regions showing interest in this new approach. The expectation is that com-mercial contractors will do a better job finding work for the unemployed than state bureaucrats. According to deputy Labor Minister Jacek Męcina, Poland's unemployment will likely reach the lowest point in October, with jobless rate at 11.5-11.6%, and will later rebound to reach 12.1-12.2% at end-year.


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Apr '14 May '14 Jun '14 Jul '14

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

Food & bev +0.3 -0.5 -0.8 -0.4 -0.9 -0.3 -1.7 -1.1

Alcohol, tobacco +3.9 +0.3 +3.9 +0.2 +4.0 +0.1 +4.0 0.0

Clothing, shoes -4.4 +2.8 -4.6 -0.1 -4.7 -0.8 -4.9 -2.8

Housing +1.7 0.0 +1.6 0.0 +1.6 -0.1 +0.6 0.0

Transport -2.1 -0.1 -0.1 -0.4 -0.6 -0.2 -1.0 +0.8

Communications -1.7 -1.5 -1.1 -0.1 +1.3 +2.4 +2.6 +1.2

Gross CPI +0.3 0.0 +0.2 -0.1 +0.3 0.0 -0.2 -0.2

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

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

Ma

r 14

Ma

y 1

4

Ju

l 14

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Mar '14 Apr '14 May '14 Jun '14 Jul '14

m/m (%) +12.5 +2.3 -2.7 -1.1 +4.7

y/y (%) +3.1 +8.4 +3.8 +1.2 +2.1

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-Jul

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 92.2 +18.9

Commenced 142.9 158.1 162.2 141.8 127.4 85.5 +18.9

U. construction 670.3 692.7 723.0 713.1 694.0 701.7 -0.3

Completed 160.0 135.7 131.7 152.5 146.1 78.8 -2.7

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

Q2 2014 +3.3% 413,457 -0.9%

Q1 2014 +3.4% 397,429 -1.0%

Q4 2013 +2.7% 455,528 -1.3%

Q3 2013 +2.0% 405,554 -1.9%

2013 +1.6% 1,635,746 -1.3%

2012 +1.9% 1,596,379 -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 2011 2012 2013 *2014 *2015

GDP change +4.5% +1.9% +1.6% +3.1% +3.1%

Consumer inflation +4.3% +3.7% +0.9% +0.1% +0.9%

Producer inflation +7.6% +3.4% -1.3% -1.0% +1.1%

CA balance, % of GDP -5.0% -3.7% -1.4% -1.3% -2.0%

Nominal gross wage +5.2% +3.7% +3.4% +3.5% +4.0%

Unemployment** 12.5% 13.4% 13.4% 12.2% 11.7%

EUR/PLN 4.12 4.19 4.20 4.17 4.09

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

GGGGross Wagesross Wagesross Wagesross Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q2 2013 Q3 2013 Q4 2013 Q1 2014

A B A B A B A B

Coal mining 6,290 143 6,061 138 8,615 196 6,333 144

Manufacturing 3,560 155 3,625 158 3,690 161 3,663 160

Energy 5,828 177 6,021 183 6,736 205 6,358 193

Construction 3,693 157 3,766 160 3,895 166 3,706 158

Retail & repairs 3,421 146 3,408 145 3,456 147 3,544 151

Transportation 3,547 125 3,589 127 3,913 138 3,666 130

IT, telecoms 6,707 174 6,654 173 6,695 174 6,986 181

Financial sector 6,702 151 6,109 137 6,602 148 6,749 152

National average 3,613 144 3,652 145 3,823 152 3,895 155


Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jan '14 Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

m/m (%) -64.0 +18.7 +24.2 +3.2 +14.0 +16.9 +0.9

y/y (%) -3.9 +14.4 +17.4 +12.2 +10.0 +8.0 +1.1

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

No

v 1

1

Fe

b 1

2

Ma

y 1

2

Au

g 1

2

No

v 1

2

Feb

13

May

13

Au

g 1

3

No

v 1

3

Fe

b 1

4

Ma

y 1

4

Au

g 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 Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14

m/m (%) 0.0 -0.1 -0.2 -0.2 -0.2 -0.1 0.0

y/y (%) -1.0 -1.4 -1.3 -0.7 -1.0 -1.8 -2.0

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 Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14

m/m (%) -0.2 -0.2 -0.1 -0.1 0.0 0.0 0.0

y/y (%) -1.7 -1.6 -1.5 -1.5 -1.4 -1.3 -1.2

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 OutpIndustrial OutpIndustrial OutpIndustrial Outputututut

Month Jan '14 Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

m/m (%) +2.9 -1.8 +9.4 -2.3 -1.7 -0.1 +2.0

y/y (%) +4.1 +5.3 +5.4 +5.4 +4.4 +1.7 +2.3

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

Jan-Jun 2014

y/y (%)

share (%)

2013 share (%)

Jan-Jun 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 36,142 +7.5 10.8 69,304 10.9 24,588 +5.4 7.3 47,906 7.4

Beverages and tobacco 4,613 +12.3 1.3 8,624 1.4 1,994 +4.2 0.6 4,150 0.6

Crude materials except fuels 8,277 +3.1 2.6 15,744 2.5 10,695 -1.4 3.2 21,585 3.3

Fuels etc 14,094 -4.5 4.7 30,013 4.7 37,188 +5.3 11.1 75,539 11.7

Animal and vegetable oils 980 +18.0 0.3 1,864 0.2 1,299 +1.5 0.4 2,646 0.4

Chemical products 30,614 +4.5 9.3 59,103 9.3 50,051 +7.8 14.9 92,917 14.3

Manufactured goods by material 66,704 +3.5 20.6 129,915 20.3 60,007 +8.1 17.9 112,392 17.3

Machinery, transport equip. 128,331 +8.2 37.7 239,434 37.5 110,703 +4.2 33.0 216,608 33.4

Other manufactured articles 44,520 +11.9 12.7 82,816 13.0 31,898 +14.4 9.5 58,210 9.0

Not classified 430 n/a 0.0 1,782 0.2 7,042 n/a 2.1 16,242 2.6

TOTAL 334,705 +6.5 100 638,599 100 335,465 +6.1 100 648,195 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Jul 2014

share 2013 share No Country Jan-Jul 2014

share 2013 share

1 Germany 101,201 25.8% 162,548 25.1% 1 Germany 85,393 21.7% 142,161 21.7%

2 UK 25,021 6.4% 42,138 6.5% 2 Russia 44,274 11.3% 79,578 12.1%

3 Czech Rep. 23,969 6.1% 40,110 6.2% 3 China 38,226 9.7% 61,127 9.3%

4 France 22,469 5.7% 36,367 5.6% 4 Italy 21,433 5.5% 34,940 5.3%

5 Russia 17,355 4.4% 34,069 5.3% 5 Netherlands 14,647 3.7% 25,409 3.9%

6 Italy 18,212 4.6% 27,958 4.3% 6 France 15,374 3.9% 25,041 3.8%

7 Netherlands 15,808 4.0% 25,707 4.0% 7 Czech Rep. 13,558 3.5% 24,054 3.7%

8 Ukraine n/a n/a 18,020 2.8% 8 USA 9,482 2.4% 17,431 2.7%

9 Sweden 11,081 2.8% 17,581 2.7% 9 UK 10,269 2.6% 17,184 2.6%

10 Slovakia 9,795 2.5% 17,099 2.6% 10 Belgium 9,768 2.5% 15,137 2.3%


CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 12 September 2014

100 USD 324.68 ↓

100 EUR 419.57 ↓

100 GBP 527.20 ↓

100 CHF 346.90 ↓

100 DKK 56.37 ↑

100 SEK 45.49 ↓

100 NOK 50.92 ↓

10,000 JPY 302.73 ↓

100 CZK 15.18 →

10,000 HUF 133.15 ↓

100 USD/EUR against PLN

300

350

400

450

27 Sep 13

6 D

ec 13

18 Feb 14

28 A

pr 14

7 Jul 14

12 Sep 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Apr '14 May '14 Jun '14 Jul '14

Monetary base 168,511 162,246 173,096 164,008

M1 548,394 557,651 572,376 570,507

- Currency outside banks 119,261 119,649 120,828 122,209

M2 969,754 975,001 980,090 985,769

- Time deposits 439,137 435,386 426,351 434,256

M3 986,142 991,120 996,171 1,002,137

- Net foreign assets 126,943 142,260 144,033 152,864 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 Apr' 14 May' 14 Jun' 14 Jul' 14

Loans to customers 928,450 930,652 940,703 939,641

- to private companies 270,886 273,360 276,709 274,549

- to households 573,332 574,800 578,639 581,447

Total assets of banks 1,639,359 1,660,583 1,667,783 1,678,129

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

PLN (up to 1 year) 4.5% 4.5% 4.4% 4.4% 4.5% 4.4%

PLN (up to 5 y ) 4.8% 4.9% 4.8% 4.8% 4.8% 4.7%

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

PLN (total) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

EUR (up to 1m EUR) 2.0% 1.9% 2.0% 2.0% 1.9% 1.7%

EUR (over 1m EUR) 3.4% 3.3% 3.0% 2.7% 3.4% 3.1%

Warsaw Inter Bank Offered Rate (WIBOR) as of 12 Sept 2014

Overnight 1 week 1 month 3 months 6 months

2.63% 2.57% 2.54% 2.48% 2.48%

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 12 Sep '14

Change 5 Sep '14

Change end of '13

→ Alior Bank 84.8 0% +4%

→ Asseco Pol. 43.55 0% -5%

↓ Bogdanka 109.3 -8% -13%

↓ BZ WBK 387.6 -4% 0%

↓ Eurocash 35.07 -2% -26%

→ Grupa Lotos 29.9 0% -16%

↓ JSW 30.45 -8% -43%

↓ Kernel 24.9 -4% -35%

↓ KGHM 127.55 -6% +8%

↓ LPP 9,500 -5% +6%

↓ mBank 492 -3% -2%

↑ Orange Pol. 11.4 +6% +16%

↓ Pekao 187.4 -2% +4%

↓ PGE 21.8 -2% +34%

↑ PGNiG 5.1 +1% -1%

→ PKN Orlen 40.68 0% -1%

↓ PKO BP 39.31 -2% 0%

↑ PZU 503 +2% +12%

↓ Synthos 4.64 -1% -15%

↓ Tauron 5.2 -1% 19%

Source: Warsaw Stock Exchange

Key indices

as of 12 September 2014

WIG Total index

55554444,,,,021021021021....81818181 Change 1 week -1% ↓

Change end of '13 +5% ↑

WIG-20 blue chip index

2,2,2,2,497.38497.38497.38497.38 Change 1 week -2% ↓

Change end of '13 +4% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

12 Jun 14

7 Jul 14

29 Jul 14

21 Aug 14

12 Sep 14


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Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Jul 2014 *

Monthly wages (PLN)

Jan-Jul 2014**

Unemploy-ment

Jul 2014

New dwellings Jan-Jul 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 102.6 118.3 4,375 4,200 131.4 11.5 7,600 80.8

Kujawsko-Pomorskie (Bydgoszcz) 105.2 112.5 3,447 3,273 129.6 16.0 3,520 95.9

Lubelskie (Lublin) 104.0 82.7 3,739 3,053 117.3 12.8 2,816 85.6

Lubuskie (Zielona Góra) 115.3 114.0 3,469 3,072 49.5 13.3 1,607 87.9

Łódzkie (Łódź) 101.7 113.1 3,723 3,306 134.5 12.6 3,795 102.0

Małopolskie (Kraków) 101.6 107.8 3,833 3,379 142.5 10.2 8,971 98.3

Mazowieckie (Warszawa) 101.3 113.4 4,647 5,116 259.6 10.2 16,703 106.0

Opolskie (Opole) 106.8 124.6 3,655 3,529 44.5 12.5 1,061 117.5

Podkarpackie (Rzeszów) 104.0 107.7 3,429 3,085 135.8 14.7 3,821 112.9

Podlaskie (Białystok) 107.7 122.8 3,338 3,837 62.0 13.4 2,259 120.7

Pomorskie (Gdańsk-Gdynia) 109.9 124.7 4,035 3,457 97.1 11.5 5,355 80.9

Śląskie (Katowice) 101.1 109.0 4,589 3,538 184.9 10.0 5,867 94.1

Świętokrzyskie (Kielce) 110.4 103.1 3,443 3,287 78.5 14.6 1,675 121.3

Warmińsko-Mazurskie (Olsztyn) 105.9 104.0 3,301 3,134 96.6 18.6 2,455 102.1

Wielkopolskie (Poznań) 108.4 103.2 3,772 3,704 122.6 8.2 7,909 99.2

Zachodniopomorskie (Szczecin) 103.1 106.3 3,551 3,447 92.2 15.3 3,355 100.1

National average 104.2 110.8 4,020 3,822 1,878.5 11.9 78,769 97.3

*) 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 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14

in Poland 2,886 175 -3,020 1,885 -2,899 2,771

Polish DI -1,203 957 2,588 -1,449 1,575 562

Year 2008 2009 2010 2011 2012 2013

in Poland 10,128 9,343 10,507 14,896 4,763 -4,574

Polish DI -3,072 -3,335 5,484 -5,935 -607 3,684

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

Period 2011 2012 2013 Q3 '13 Q4 '13 Q1 '14

Trade balance -10,059 -5,175 2,309 1,094 151 1,159

Services, net 4,048 4,642 5,249 1,032 1,257 1,245

CA balance -18,519 -14,191 -4,984 -2,086 -1,415 -766

CA balance vs GDP -5.0% -3.7% -1.3% -1.9% -1.3% -1.1%

Source: NBP, BZ WBK, PKO BP

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

Q4 13

Q2 14

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

Q1 '14

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 8,005 -0.1% 11.5-25.5 11.75% 80-90 85

Kraków 6,419 +1.8% 13-15 4.90% 35-45 78

Katowice 5,531 0.0% 13-14 7.30% 35-45 56

Poznań 6,666 +4.0% 14-16 14.20% 35-45 55

Łódź 4,808 -1.8% 12-14 14.40% 35-45 25

Wrocław 5,928 -0.2% 13-15.5 11.75% 35-45 40

Gdańsk 6,031 -5.7% 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

Jul10

Mar11

Nov11

Jul12

Mar13

Nov13

Jul14

Wage CPI

Index 100 = Jan 2005. Source: GUS

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