BizPoland Magazine

February 2012 vol. 4 no. 1(25)

Growing pains Tears and tantrums on New Connect stock exchange – but IPOs break new record

Tenants Corner:

FDI Investment:

Car Review:

Events:

How to negotite an office lease

Special Econimc Zones busy in big deals

Lexus hybrid 600h

Shale Gas Awards, Green Week Berlin

(p. 8)

(p. 14–15)

(p. 18–19)

(p. 21–22)

Table of Contents

February 2012

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Stock Exchange 4–7 Growing pains

Published by: BiznesPolska Media sp.z o.o. ul. Długa 44/50, bud. D, lok 704, 00-241 Warszawa tel.: 022 831 7062 General Manager and Editor: Thom Barnhardt (tb@bizpoland.pl) Publisher: Craig Smith (cs@bizpoland.pl) Editorial staff and writers: Leon Paczyński, Monika Tutak Research team coordinator: Magda Adamczyk

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Tenants Corner

8 Tips and advice when negotiating an office lease 9–11 Warsaw office market prices up as demand continues strong

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Taxes 2012 12 Fewer changes to CIT provisions in 2012 increases the level of certainty

Advertising Sales: tel.: 022 831 7062 mobile 508-143-963

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13 World Games in Wrocław in 2017 13 International Sweets Fair attracts 50 Polish exhibitors

Graphic Design: Sławek Parfianowicz sparfianowicz.wordpress.com

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International Trade

FDI News

14 Kram Polska plans to build a factory producing packaging in Ostrowiec Świętokrzyski.

14–15 FDI News in Brief

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Chambers of Commerce News 16 Jerzy Buzek honored by the American Chamber of Commerce in Poland 17 Chambers of Commerce News in Brief

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Corporate Car Review

18–19 Lexus hybrid LS 600H

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Events 20 Oysters and Dom Perignon at Złota 44 topping-out 21 1st annual Shale Gas Awards for Poland 21 Wedding Fair at Palace targets young couples with big plans 22 Green Week Berlin

Distribution Top business hotels:

Details at subs@bizpoland.pl or call +48-22-831-7062

Stock Exchange

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Growing pains Accusations and abuses on New Connect stock exchange – yet 2011 breaks IPO records, despite major losses for investors

logy, Internet and IT, biotech, and renewable energies. These early-stage firms, according to the theory, are too small or too young to have developed sophisticated and rigorous reporting processes – the kind of discipline required by NC’s big brother Warsaw Stock Exchange.

But the idea behind NC has not Despite dismal results for investors in 2011, matched the reality. the new listings on New Connect keep coming. Records were shattered last year, with 169 companies newly-traded on the exchange, bringing the total number to 351.

Yet while the advisers, investors, and companies - the eco-system of New Connect – look forward to a strong 2012, regulators and disappointed investors are demanding higher standards as the lightly-regulated exchange moves into its next stage of development. Down nearly 33% in 2011, the retreat of the New Connect Index left behind bare bodies in its wake. And regulators are taking notice and taking action.

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GoAdvisers, a Katowice-based advisory firm, has been barred from dealings on the exchange, after one of its new listings in July – Avtech - delisted just months later, amid accusations of deceit and misleading of investors leading up to the listing. And bluechip adviser Capital One Advisers is fending off a law-suit brought by disappointed investors in Sevenet, whose share price has plummeted more than 70% since its listing.

The market value of firms on New Connect is nearly 9 billion pln now, up more than 100% in just the last 18 months, due mostly to the number of new listings last year.

The idea behind NewConnect, which is owned by the tightly-regulated Warsaw Stock Exchange, was to attract companies at an early stage of development, particularly from promising new sectors such as techno-

Instead of new-generation social media firms or biotech drug wonders, a slew of service companies and high-risk retail firms

“Two years after the debut of a New Connect stock, the average share price is down 57%, and down 41% from the private placement price.

”

have listed on New Connect. Firms selling cigars in small shops and sushi restaurants have listed successfully (success meaning from the perspective of the business owners; the investors have mostly been direly disappointed). And firms with little or no revenues have also been listed.

Two years after the debut of a New Connect stock, the average share price is down 57%, and down 41% from the private placement price. (The New Connect public market is a bit of a misnomer; companies that are listed will usually sell shares before the listing via a private placement to maximum

99 investors, who must be pre-qualified as “sophisticated” investors, with a listing of these shares on New Connect about 1-3 months afterwards.)

As is the usual case when any market get hits with big losses, the accusations began to fly. When stock markets worldwide began to wobble in summer 2011, then fell precipitously in August, several newly-listed New Connect firms were immediately threatened, since one “listing strategy” is to do a rather small initial listing, then within months go back for a larger, more substantial capital raise. The problem with this strategy, as firms like Avtech Aviation soon discovered, is that it’s much like a game of musical chairs – when the music stopped, there clearly weren’t enough seats left for everyone.

Avtech Aviation & Engineering, a UKbased aircraft maintenance, leasing and design firm, had plans to expand its operations in central Europe, using a low-cost base of operations in Lodz. The execution of its strategy hinged on raising enough capital to set up the Lodz operations. In the first quarter of 2011, the firm raised about 2.4 million pln from less than 40 investors for its initial investment needs, with plans to raise more funds via a secondary capital raise after the New Connect listing. The firm was listed in July, on the cusp of a mini-crash in the stock markets. In December, clearly unable to raise new funds, the firm filed for liquidation and delisted.

Despite clearly stating the risk in the prospectus (here is direct text: “Further development of the AAE activities will require substantial amounts of capital to fund operating activities and capital expenditures. For this reason, failure to secure adequate levels of external financing might jeopardize implementation of the bu-

Statistics of Returns on New Connect: Number of Companies Listed: Number of Debuts/IPOs: Capitalization (mln pln): Volume (mln pln): Number of Transactions (000s): NC Index (percentage return):

2008

2009

2010

2011

84 61 1397 826 247 -73.50%

107 26 2457 1079 323 30.10%

185 86 4971 3506 878 27.80%

351 172 8384 1858 1082 -34.40%

February 2012

Stock Exchange

www.bizpoland.pl The reality is “different from

Warsaw Stock Exchange in numbers – 2011

the theory, but nevertheless NewConnect can be seen positively. We must face the fact that a substantial number of these new businesses will fail to achieve their business plans, and will eventually disappear from the market. The same is true for many foreign alternative stock markets.

”

Sebastian Buczek, chairman and principal shareholder of Quercus TFI

Companies with the highest returns in 2011: (monthly returns) Month

GPW Main

NewConnect

January

Polrest 69%

Eskimos 58%

February

Groclin 46%

Directes 128%

Prima Moda 42%

Forever Energy 1313%

March April

Pepees 75%

Price 162%

May

Krezus 78%

Urlopy.pl 1292%

June

PTI 35%

Positive Energy 85%

July

Igroup 96%

Fresh24 118%

August

Octava 24%

Westreal 51%

Best 44%

Biomax 165%

September October

Igroup 157%

ZOC 171%

November

Atlantis 100%

M Development 239%

December

Intakus 90%

Opennet 195%

siness strategy.”), the stock exchange regulators responded swiftly. GoAdvisers, the authorized adviser to Avtech, was suspended from further advisory listing activities. Adding salt to the wounds, GoAdvisers had invested 420,000pln in the firm.

February 2012

Further acrimony surrounds the case of Sevenet, when in March 2011 about 21 private investors subscribed to the private offering, which was arranged by Capital One Advisers. Shares in Sevenet, a provider of telecommunications solutions for busines-

The WIG20 lost 22% in 2011, and the broader mWIG80 was down 30%. The average Polish investment fund (TFI) was down 23%, and the worst was down 46%.

The best fund, Allianz Akcji, managed by Cezary Markiewicz, was down just 14.2%, which earned him title “Manager of the Year”. At the opposite end of the spectrum was Pioneer Małych i Średnich Spółek Rynku Polskiego, which lost 46 %.

The main WIG index lost 13.2% year on year and gained 8.9% in January 2012.

The NCIndex lost 32.6% year on year and 0.7% in January 2012.

According to the latest quarterly PwC IPO Watch Europe report, which presents the number and value of initial public offerings (IPO) on European securities exchanges, 47 percent of all IPOs in 2011 took place in Warsaw. In total, 203 companies were newly-listed on the two stock markets operated by the WSE (the regulated and the alternative market) in 2011.

In terms of IPO value, the Warsaw Stock Exchange ranked third in Europe with IPO value of EUR 2.2 billion, following the London Stock Exchange and the Madrid Stock Exchange.

Among life-insurance funds (UFK), about 25% were up (304 of 1214). The average return was -11.7%. Over the last three years, the average life-insurance fund is up 27.1% (8.3%/year). But returns over the last five years have not been great: the average fund lost 1.1%.

Asset allocation was the main driver of returns in 2011: the best funds combined low-risk bond investments with gold and commodity plays. Ergo Hestia db Gwarancja – Złota Era was up 30.4%, mainly due to its heavy exposure to gold and long bonds. Five more Ergo Hestia funds did well, with bets on commodities. In the top 10 was PZU’s Energia Medycyna Ekologia fund, up 25%, with allocations to energy and medical sectors, as well as debt instruments. The weakest performer was the fund Europa Strategia Libra II (by TU Europa), which lost 73.7% - its performance was tied to equities of emerging markets.

ses and institutions, were priced at 3.55 pln.

However, just before the listing in July, the firm reported a quarterly loss of 3.4 million pln. Surprised and angry investors said that continued on page 6

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Stock Exchange

Growing pains continued from page 5

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the firm and advisory firm should have known about – and informed investors – of the impending financial losses. Shares since that time have plummeted to 1 pln.

In defense, Marcin Duszyński, president of Capital One Advisers, said: “We have done everything possible to clarify the doubts. We asked both the Warsaw Stock Exchange and the KNF regulator to issue an opinion on the matter”. He attributes the case to poor financial management at Sevenet and still-unresolved imperfections of the new lightly-regulated market. The unhappy investors are pursuing legal recourse. � Sebastian Buczek, chairman and principal shareholder of Quercus TFI, which itself listed on New Connect in September 2008 and then moved up to a Warsaw Stock Exchange listing in spring 2011, presents a sober assessment of New Connect: “The reality is dif-

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ferent from the theory, but nevertheless NewConnect can be seen positively. We must face the fact that a substantial number of these new businesses will fail to achieve their business plans, and will eventually disappear from the market. The same is true for many foreign alternative stock markets.”

moved up to a WSE-listing. Quercus was the second best-performer in this group, up 282% since its listing.

So the obvious question about New Connect is why investors continue to invest, despite poor returns. The New Connect Index was down nearly 33% in 2011, and one in

done everything possible to clarify the doubts.

“We have We asked both the Warsaw Stock Exchange and the KNF regulator to issue an opinion on the matter

”

Marcin Duszyński, president of Capital One Advisers

Buczek said that the most successful firms will be those who aspire and strive to a WSElisting, which entails more financial discipline and a substantiated record of operations.

From the 369 firms that had listed on New Connect by year-end 2011, only 16 had

every three NC firms had 50% losses during the year. Indeed, investor volumes are way down: the value of session trading was PLN 70 million in January 2012, as compared to PLN 217 million in January 2011, and the number of session transactions decreased from 117,000 in January 2011 to 56,000 in

February 2012

Stock Exchange

www.bizpoland.pl January 2012. (By comparison, the main WSE market’s January volumes declined just 13%.)

Certainly part of the answer is in that 282% number above. A bit like a lottery, many private investors are hoping for outsized gains to overcome the larger number of losses.

Andrzej Kaczyński, BioMax

It is not my intention to eliminate “competition among advisers, but to raise the quality of advisers

”

Marcin Duszyński, head of the Association of Authorised Advisers

And another factor – bad timing – may account for much of the disappointment. New Connect was launched in August 2007, just before the major bull-market run ended in disaster in 2008. Markets worldwide violently contracted, and small company shares were the worst-performers. So, New Connect’s infancy has been troubled by the two major market corrections of 2008 and summer 2011.

As NC leaves its infancy and enters into adolescence, changes are on the horizon.

While ease of access has been touted as an advantage, some see this increasingly as a disadvantage, as good companies are often lost amid a sea of ordinary companies.

Some firms have tiny revenues and very small scale of operations.

Duszyński, who is also head of the Association of Authorised Advisers, believes that better regulation is needed. He said that the WSE should tighten the requirements to be admitted as an authorised advisers, by demanding not only better understanding of the law, but also better understanding of financial issues. Currently, more than 100 firms are authorised advisers. “It is not my intention to eliminate competition among advisers, but to raise the quality of advisers”, said Duszyński.

Advisers play a key role when a company intends to list on New Connect. The adviser oversees the full process, and guides the company through the necessary disclosure requirements that are demanded, as well as generating investor interest in the company’s shares. While competi-

February 2012

tion among advisers keeps the fee structure low, some advisers will often buy shares in the to-be-listed firm as a way to supplement their fees. Without violating any express principle, the practice does raise conflicts of interest. Lock-up periods imposed by regulators are intended to reduce potential for abuse. But in many cases, the adviser buys shares “pre-private placement” at a discount to the price offered to private investors.

In late 2011, in response to investors’ complaints, the Financial Supervision Commission (KNF) proposed increased disclosure requirements for companies admitted to trading on a regulated market. In order to increase transparency, the KNF proposed more disclosure of confidential information (including the basis for valuation of shares) by the boards of NC-listed companies. So far, however, no changes have been made by the Warsaw Stock Exchange.

But investors are famously fickled and forgetful. While the WSE is off to a strong start in January, up 8.9%, the New Connect Index hardly moved, suggesting an apathy for the smaller, higher-risk firms. A popular saying is that bull markets are built on pessimism. If the adage rings true, then the down-trodden and dismissed New Connect exchange might have a number of positive surprises ahead. n Multiple sources for story: Warsaw Stock Exchange, Forbes, Reuters, Bloomberg.

New edition

comming for MIPIM 2012

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Tenants Corner

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Tips and advice when negotiating an office lease Mikołaj Kowalski-Barysznikow Office Department, Cushman & Wakefield

Prime asking rents for grade A office space in Warsaw’s Central Business District (CBD) now reach EUR 24-27 sq.m/month while average transaction rents stand at EUR 2025 sq.m/month. In non-central locations, including Służewiec Przemysłowy, the eastern part of Wola, as well as Aleje Jerozolimskie, average asking rents at grade B+/A buildings stand at EUR 14.5-16.5 sq.m/month with average transaction rents of EUR 13-15 sq.m/month. In other largest Polish cities asking rents fall within the range of EUR 1315 sq.m/month, except for Poznań with

tiate all the relevant business issues at the same time. Focusing only on rent may cause misunderstandings if at the close of the negotiations the low rent proves too small to cover the space fit-out costs which will have to be borne by the tenant and cannot be amortised in a short lease term. You should also be well-prepared for negotiations, i.e. you should have a clear picture of your key requirements and criteria. Clearly defined office fit-out requirements and expected key lease terms and conditions will help the developer tailor the offer to your needs. This, however, does not mean that every single requirement will be accepted. A downtown office

fit-out (the most costly items beyond the shell condition include structural cabling, partition walls, extra HVAC units, glass walls etc.) and a financial contribution to be used by the tenant. Such incentives are, however, very limited or excluded in the case of short leases of small modules. The largest tenants may see their logo placed on the building’s rooftop or, in exceptional cases, their name included in the building’s name, e.g. the name of the Harmony Office Park in Warsaw has been changed into Millennium Park. In the case of pre-lets or schemes at an early development phase developers may be quite flexible in negotiations and offer the first tenants a non-standard discount package.

What are standard additional fees to pay?

Mikołaj Kowalski-Barysznikow, Office Department, Cushman & Wakefield

EUR 14-16 sq.m/month for prime office space and Łódź with asking rents of around EUR 12-14 sq.m/month. Similarly to Warsaw, average transaction rents in other major business locations in Poland are up to a dozen or so percent lower than asking rents. The actual discount depends on a scheme’s leasing stage (in new buildings the best lease conditions are most often secured by anchor tenants on a first-come-first-served basis), as well as the size and status of the tenant, the lease term, fit-out costs and other factors. Rents at older or inferior schemes naturally tend to be lower.

How to negotiate?

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It is advisable primarily to adopt a comprehensive strategy to a lease and to nego-

building will not offer an equally attractive rent as a business park on the outskirts and, by contrast, a non-central location may not provide a convenient access to the urban transport system. Therefore, location and budget criteria for a new office should be clearly spelled out at an early stage.

What extras to bargain for?

Depending on the tenant’s size and status, as well as fit-out requirements and the leasing stage of an office building, the tenant may be granted some extra incentives to lower the total lease value. Such incentives may include a rent-free period typically covering the initial lease months, an extra budget for a non-standard office

The rent is increased to include service charges and an add-on factor of around 410% of the space leased. Service charges are fixed individually for every building and tend to reach PLN 16-25 per square metre, depending on the location, size and standard of the building. It is advisable to make sure whether the service charges in the building being considered include the costs of heating and cooling the space leased. Any plan to lease office space should take account of utility charges for water, electricity and rarely gas, as well as a budget for any parking spaces required.

Another major factor in office lease is the fit-out cost which may be borne by the developer or the tenant and varies depending on the building standard, the landlord’s flexibility and the tenant’s requirements. Finally, the tenant who prefers to prepare a fit-out design on his own should reserve a budget for transaction services, including legal, agency or architectural services, as well as technical support in the case of large projects.

Tricks of the trade Before you start negotiations, you should be aware of your fit-out, business and legal requirements and know your top priorities.

With negotiations of large leases it is a good idea to make use of the professional support provided by an experienced lawyer, agent or project manager in order to negotiate the best possible business and technical conditions and a lease which will fully reflect them and be free from unplean sant surprises.

February 2012

Tenants Corner

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Warsaw office market prices up as demand continues strong According to the latest research

by CBRE, total office take-up for Warsaw in 2011 reached a record level of 573,000 sq m. This is the best result in Warsaw ever achieved on an annual basis.

The office market in Warsaw is clearly speeding up - 226,000 sq m was leased in the City Centre and 347,000 sq m in Non-Central locations.

The demand for office space is growing, while vacancy rates remain at a relatively low level of circa 6.7%. However, it needs to be pointed out that the largest, build-to-suit lease transaction by TPSA (43,700 sq m) was officially registered last year along with the start of the construction.

Miasteczko Orange

Mokotow was the most popular area chosen by office tenants (170,000 sq m leased in 2011), followed by City Centre

continued on page 10

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February 2012

Tenants Corner Warsaw office market prices up as demand continues strong continued from page 9

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with nearly 150,000 sq m of newly occupied space. Total modern office stock in the end of 2011 amounted to about 3,600,000 sq m.

Only 14 office buildings were completed last year, totalling 120,000 sq m.

That was the lowest supply level recorded since 1998. Pipeline stock for the next 6 months will still remain limited, but a number of bigger projects are planned for completion in mid-2012. These include the first phase of Business Garden and Senator.

At the moment, there are around 530,000 sq m under construction with 38% pre-leased in total.

The most popular Warsaw zones, in terms of both take-up and new planned developments, are City Centre Fringe, Mokotow district and Jerozolimskie area.

CBRE predicts that around 300,000 sq m will be completed this year in Warsaw, 60% of which will be located in non-central areas.

In the 4Q 2011 the vacancy ratio diminished to the level of 6.7%. However, due to a growing number of tenants’ inquiries, the upward trend in terms of the demand for office space should be sustainable through the next year, which should cause vacancy rates to compress further.

The new deals had the biggest share in 2011, amounting to 46% of the take up. Pre-lets totalled 21% of the total leased space. The largest transaction of year 2011 were: pre-let of TP SA in Miasteczko Orange (43,700 sq m) registered along with the start of construction works, renegotiations of Ernst & Young(11,000 sq m) in Rondo 1 and the pre-let of Orlen Group in Senator (9,100 sq m).

Prime headline rents are slowly increasing in Warsaw, particularly in CBD (now at EUR 2526 /sm). Rents in non-central areas have been stable at the level of EUR 15 -16.50 sm. Still popular tenants’ incentives are now being successively reduced.

Decreasing vacancy rates and growing demand should exert further upward pressure on rental levels in 2012, particularly in the central and established office locations.

“We are particularly pleased with our recent deals, as it proves global corporate expansion plans are continuing despite European economic pessimism”, commented Colin Waddell, Managing Director of CBRE Poland. Basing on the current level of enquiries, we expect approximately a 10% yearly increase within the next two - three years, supported by general infrastructure improvement in the city”, he added.

www.bizpoland.pl Tenants have broader range of choices for office space In the very center of Warsaw, in the newest buildings, office rental rates range from 22 to 28 euros per sqm, and in older buildings, outside of the city centre, about 12 to 13 euros per sqm. Companies can choose from offices available immediately, or those which will be ready for occupancy later this year or next year.

While the average office module is 320 sqm, developers are open to leasing space as small as 50 sqm. For example, Catalina office building, built in 2009, and located close to Warsaw’s Slu-

gulated NewConnect market on 1st February.

The company plans to purchase land for two office projects, to be named Sky Office Center and Sky Office Tower.

According to the president of the firm, Jakub Robel, the company will “in each subsequent year start at least one new development and sell at least one project”.

Shares to be traded on NewConnect include several “series”, including 1 million shares of Series A, 9 million of Series B shares, 5 million shares of Series C and 4.06 mil-

zewiec horse-racing track, is open to deals like this, leased at 16 euro/sqm plus 4 euro/sqm service charge. At the high-end are offices in Royal Trakt Offices at al. Ujazdowskich, which are leasing at about 28 euro/sqm plus 6 euro/sqm service charges.

While lease terms from just a few years ago were dominated by 5-year lease terms, now more and more office owners are agreeing to 3year contracts.

Exceptions include the small offices of Holland Park, which is seeking 7-year lease deals priced at about 25 euros per sqm and service charges of 7.5 euros/sqm. The recent large office deal signed by ING Group at Plac Unii was for a 10-year lease period.

Cheaper proposals fluctuate around the 12 euros mark, with service charges of 4 euros/sqm, at locations such as the 12-year-old office building at Puławska 366 in Ursynów, or Mon Grand Plaisir.

lion shares of Series D. The firm has already raised 7 million pln via the private issuance of Series D shares.

New funds are slated for the purchase of land for the project Sky Office Center, and the firm plans to purchase land for the next project - Sky Office Tower.

Financial results for 5th Avenue Holding Company for the third quarter of 2011: the firm recorded EBITDA of 1.7 million pln and net profit of 1.35 million pln.

5th Avenue Capital Group Holding consists of subsidiary firms named: 1 Sky Office Center, London Real Estate Investment, New York Real Estate Management, 1st Real Deal and AlertFinansowy.pl. The company’s activities, to date, have been focused on leasing office space to small and medium-sized enterprises, and offering self-contained, turnkey furnished offices in Class A and B +, ranging in sizes from 30 to 150 sqm.

Small offices owner raises 7 million pln on NewConnect to buy land for office development

Developer signs office lease with Citibank for outsourcing services

5th Avenue Holding, a new firm targeting the commercial real estate sector, debuted on the Warsaw Stock Exchange’s lightly-re-

The Polish branch of Citibank International PLC has signed a lease with Globe Trade Center (GTC) for 2,000 sqm of office space in the University Business Park in Lodz.

February 2012

Tenants Corner

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According to the agreement, the lease area can be increased in the future to accommodate growth. The lease is with Citi’s Center of Excellence, which deals with counter-money laundering operations, handling banking, securities and investment funds, settlement of claims and payments, and other technology functions.

The firm supports 54 countries in Europe, Asia, Africa, the Americas and Au-

February 2012

stralia. GTC’s University Business Park also leases space to Intergraph, Kredyt Bank, AEGON, insurer Warta, Hermann Kirchner, Bankruptcy Management Solutions, TaxCare and Pharmena. University Business Park’s first building (completed in 2010) has 18,500 sqm of Class A office space and 300 parking spaces. The building has seven floors and a typical floor has 2700 sqm.

Lodz’s newest hotel tops out - and plans for new office building Less than a year ago, on the site of the former Film Studio in Lodz, was begun the construction of the first Hilton Worldwide hotel in the city of Lodz - a “DoubleTree by Hilton”.

Construction has just finished, and now development of a Class A office building on the western part of the building has begun by investor Toya. The developer plans to lease space to firms from the IT sector as well as TV and media industries. The building will have 10 floors above ground and underground parking. The office building will be equipped with facilities to allow for flexible arrangement of the space. The hotel will have 193 rooms, including a luxury presidential suite and seven Junior Suites.

The hotel also has a fitness/spa with a swimming pool on the top floor overlooking one of the largest parks in Lodz, a restaurant for more than 280 people and a cinema hall for 161 persons.

The “topping-out” ceremony of the building took place on 26 January, with representatives from DoubleTree, Toya Group, the contractor Budimex, as well as local authorities, city officials, and top personalities from Lodz’s business, political and cultural n scenes.

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Taxes 2012

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Fewer changes to CIT provisions in 2012 increases the level of certainty 2012 brings fewer changes to corporate income tax (CIT) provisions than earlier years.

This is positive.

by Adam Hellwig

Before introduction of this straightforward rule, taxpayers faced many practical problems associated with applying somewhat vague rules concerning exchange rate differences. The amendment should be welcomed, hopefully making the life of accountants easier.

General binding rulings The absence of widespread changes increases the level of certainty, something which is fundamental for all businesses in their decisionmaking process. Significant amendments include a change to provisional tax payments for the final month of the tax year, clearer rules on calculating exchange rate differences, amendments to general binding rulings and provisions relating to omnibus accounts

Monthly provisional (advance) tax payments In general, taxpayers pay corporate tax instalments monthly in arrears during the course of the relevant year. However, a usual situation has long related to the payment for December (or the last month of the tax year if different).

Starting from calendar year 2012, taxpayers may pay the (2012) December CIT advance payment in January (2013). In earlier years, taxpayers paid the final monthly instalment (December) for the tax year in that month (December), not in the following month. Thus, of necessity, payment for the month of December was deemed to be the same as that for November (as December results were not available).

This was detrimental for taxpayers who had poorer financial results for December than November. Effectively, they overpaid tax for December. Until the excess of tax paid during the year over the final tax liability (calculated on the basis of actual results for the year) was refunded, they were funding the government.

Exchange rate differences

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When buying and selling foreign currency to pay liabilities or convert receipts, taxpayers may now use the exchange rate in the transaction to calculate exchange rate differences.

In other cases, where there is no actual conversion of currencies, taxpayers should apply the official exchange rate for the preceding working day as published by the National Bank of Poland.

There are two types of binding rulings. The first category relates to rulings issued by the tax administration in specific cases and are binding only for the taxpayer concerned. For example, where a company intends to enter a complex transaction or is uncertain about the interpretation of a piece of tax legislation, it can apply for an official ruling. If the taxpayer follows the ruling issued, the tax authorities cannot change their interpretation during a tax audit.

The second category of rulings is (more) general rulings issued by the Ministry of Finance where the tax administration’s interpretation has not been consistent. As of 1 January 2012, a taxpayer can apply for this type of ruling. Before 2012, the initiative in

The absence of widespread changes increases the level of certainty, something which is fundamental for all businesses in their decision-making process

“

”

this respect was with the Ministry. Consequently, this type of ruling was rarely issued.

This change will be interesting, for example, for companies operating in a specific sector of the economy and with a common interest in obtaining a specific binding interpretation of unclear tax rules.

Omnibus accounts New provisions provide for a technical mechanism of collecting withholding taxes applicable to dividend or interest payments

Adam Hellwig is a director in Tax & Legal Services department in PwC (based in PwC’s regional office in Katowice). Certified tax adviser since 2004; licence number 10083.

transferred to foreign tax residents via omnibus accounts. This is a very specific and technical issue and so is only mentioned briefly in this article to make the reader aware of the matter.

An omnibus account is a specific kind of stock (share) holding account that involves multiple investors. In the omnibus account, the account holder is e.g. a stock broker who is holding the investments of various clients in one account which he or she trades on behalf of his or her client base. In this way, each of the individual investors does not have his or her name attached to the account, but they are still actual shareholders.

In the situation where the identity of a taxpayer benefitting from the omnibus account is unknown, withholding tax is applicable at the rates stipulated under Polish domestic law (20% for interest and 19% for dividends). The tax should be withheld by the administrator of the omnibus account.

The payment recipient is entitled to apply for a refund of tax if a relevant double tax treaty provides for a lower tax rate or exemption. The refund is made on the basis of the relevant application supported by the certificate of tax residency and a specific certificate issued by the omnibus account’s n administrator.

February 2012

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International Trade

World Games in Wrocław in 2017 Wroclaw beat several competitors, including the city of Budapest, in the competition to host the World Games. The decision came in mid-January from the International World Games Association.

The World Games were first held in 1981, and are held one year after the Summer Olympics. The Games 37 sports, including canoeing, skydiving, water rescue and orienteering. Sports are divided into 5 groups: dance, artistic sports, team sports, precision sports and weightlifting. The committee said that Wroclaw’s improved sports infrastructure, based on the Euro 2012 stadium, was n a deciding factor in the decision.

International Sweets Fair attracts 50 Polish exhibitors Chocolates and sweets manufacturers from around the world swarmed on the annual ISM trade fair matching buyers with producers of fine baked goods, snack products, ice creams, confectioneries and chocolates of all kinds.

This year’s event featured 1412 exhibitors, and Poland’s top brand names like Mieszko, Wedel, Wawel, and Jutrzenka were also there. Smaller companies like CandyFloss and Krowki and Dobosz exhibited, hoping to draw buyers and generate more export sales. Manufacturers complained about the big price increases in 2011 for raw materials, which were especially dramatic for sugar, flour, almonds and hazelnuts. While cocoa prices retreated, packaging prices increased, driven by high oil prices.

Warm weather in late 2011 meant reduced demand for chocolates, but chocolate manufacturers were pleased with the bout of severe cold in January and February in Europe, which is n driving up demand.

February 2012

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FDI News

www.bizpoland.pl

Kram Polska plans to build a factory producing packaging in Ostrowiec Świętokrzyski.

The company bought a site of 2 hectares for the paperpackaging plant and a flexo printing house. The production floor will be 3000 sm size, and will churn out packaging, including for paper cups and bags.

The firm said that the investment cost is 10 million pln and that 50 new people will be hired. Kram Polska produces barrier films, “breathing” films (the only producer in this part of Europe), paper cups as well as production machines and devices. The company’s clients include meat factories, food-processing factories, fish-processing factories, chemical plants, chain stores and smaller shops and bakeries. In 2011, Kram Polska had revenues of 60 million pln and net profit of 3 million pln.

FDI inflows to Poland increased by 47% According to UNCTAD, the inflow of FDI to Poland increased by 46.7% in 2011, while the worldwide increase in FDI amounted to 17%. Poland received USD 14.2 billion of investment in 2011, versus USD 9.7 billion in 2010. Mergers and acquisitions have been a major driver of higher FDI. Two investments were among the largest in the world.

Production and manufacturing investments

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Łódź Special Economic Zone recently approved the following investments in the Zone: Izo-Balex will set up operations in Tomaszów Mazowiecki subzone. The company will start production of polyurethane insulation boards with elastic and rigid lining – this is the first such manufacturing operation in Poland. The highly-specialized production machines and related investment is worth 38 million pln and will create 41 new jobs.

St-Majewski will build a production warehouse and office complex of 5000 square metres, investing 16 million pln, in the

Wałbrzyska Special Economic Zone approved an investment by THT Produkcja Opakowań Przemysłowych in the Świdnica Subzone. The investor will take up 2.09 hec-

tare of land for the project. THT manufactures industrial packaging and will invest at least 3.5 million pln and hire 30 new emplon yees.

Pruszków subzone, to manufacture innovative pencils with triangular cross sections.

The company will create 20 new jobs and plans to increase employment to 138 people within five years.

Two new German investors in Kostrzyńsko-Słubicka SEZ

Ericpol Telecom, which specializing in software design and development for the telecoms market, plans to invest 40 million pln in an R&D facility, and plans to hire 800 people, especially engineers and software developers. Ericpol is particularly targeting graduates from IT, telecommunications, electronics, robotics, mathematics and physics.

In the Zduńska Wola subzone, CKM Technologie will build a plant for PVC profiles with high thermal isolation which will be used in the manufacture of window frames.

The total value of investment is 23.4 million pln. The investor will create at least 25 new jobs.

Stenqvist Poland will build in Kostrzyn a new facility producing paper packaging, especially for food products. The company already employs 80 people and will invest a further 16 million pln in the facility. And also in Kostrzyn, the German firm Guri Vital will invest 5 million pln in a production plant, which will manufacture the dietary supplements and pharmaceutical preparations. The Polish plant will fabricate the substance (protein) which, when combined with vitamins and medicines, targets precise organs. This technology has never been implemented anywhere in the world before.

Kraków Technology Park approved its 101st investment.

CELL-Fast, a leading manufacturer of hose and other garden accessories in Europe, will hire about 20 people to work in its new 25 million pln facility, which will be located in the Krosno subzone

First investor in Kamienna Góra SEZ in 2012 Kamienna Góra Special Economic Zone landed an investment in January from German

February 2012

FDI News

www.bizpoland.pl firm BDN. BDN is a printing house with operations in Wykroty (Nowogrodziec commune) since July 2006. The facility belongs to Heinz Bauer, though it is not formally a part of Bauer Group. The printing house is equipped with state-of-the-art technology.

BDN will start a new type of printing technology, investing about 40 million pln in the project. The firm employs more than 400 people.

Iwona Krawczyk, President of Kamiennogórska SEZ

computer and outsourcing services, will create a new office in Opole.

The new office of 1000 sm will employ 100 people who will provide clients with computer support. The investment in Opole is consistent with the firm’s strategy of development of its IT outsourcing services in Poland – and an extension of its offices in Katowice and Krakow. Capgemini provides remote technical support and remote computer infrastructure management for German-speaking clients. For this reason recruitmen t, already launched, is directed to people with fluent German, working knowledge of English and with experience in customer service.

In 2012 Capgemini plans to hire more than 500 people in Poland, in its various offices in Warsaw, Katowice, Krakow, Wrocław and Opole. Currently the company employs more than 4600 people that work in computer consultancy, design and maintenance of software for enterprises, implementation and integration of computer systems and IT and business processes outsourcing

Suwalska SEZ, in the northeast lakes region of Poland, has sold land to BisonChucks, a Polish manufacturer. The 5.3 hectares was won via public tender. The company will invest 67.5 million pln and hire 100 workers. Bison-Chucks provides services for Białystok Workholding and Rotary Tool plant Bison-Bial. Bison-Bial will construct a new-generation production facitily in Dojlidy, in the district of Białystok.� Government support brings in 560 mil- German manufacturer to set up lion pln on new investments, creating more operations in Strzelce Opolskie Coroplast bought land, near a thermal than 1400 jobs Samsung Electronics Poland Manufactu- power station, as a base for a new factory ring, Pittsburgh Glass Works and TJX Euro- which will produce wiring harnesses for the pean Distribution will invest around 560 automotive industry. The firm already has million pln in their projects in Poland. In Ja- four plants in the Opolskie voivodeship and nuary the government passed a resolution employs more than 3000 people. Coroplast on multi-year programs that support inves- was established in 1928, and is well-known for its high-quality sticky tapes. Currently, tors.

Samsung Electronics Poland Manufactu- the most important share of the company’s ring will allot more than PLN 280 million for production constitutes wires and wire harexpansion and modernization of a factory in nesses, manufactured primarily for the auWronki that produces washing machines tomotive industry. Foreign branches of the and refrigerators. As a result, 250 new jobs company are located in Poland, Tunisia, will be created. Samsung will receive gover- China and Mexico. In 2011 the Coroplast plant in Dylaki was awarded the title of the nment support of PLN 7.86 million.

Pittsburgh Glass Works Poland will start “best supplier” for the Volkswagen factory. production of car windows in Środa Śląska.

The company will invest at least PLN 204 Next investment in motor sector in million and will create 150 new jobs. Gover- Mielecka Special Zone nment support for PGW amounts to PLN 3.6 million.

TJX European Distribution will build an Operational Centre in Wrocław for PLN 71 million. Around 1000 people will be employed there, and the firm will receive PLN 3.2 million from the state budget in the frame- YASA Motors Poland will lease a production area at the SSE EURO-PARK MIELEC and inwork of the multi-year program. vest over PLN 6 million in new technologies.

YASA will install machinery and equipment Capgemini expands outsourcing to support mass production of circulating operations with move into Opole water pumps. Companies in the SSE EUROCapgemini Polska, a member of the Capge- PARK MIELEC zone have invested a total of mini Group - a world leader in consultancy, 5 billion pln so far and created over 130,000

February 2012

jobs. Currently over 130 businesses operate in the zone.

Yachts sector at the BOOT Boating and Yachts Fair 13 companies from Eastern Poland representing the yachting industry took part in the world’s largest international trade fair for boats and yachts - BOOT 2012 in Düsseldorf.

BOOT is the biggest “indoor” exhibition event worldwide dedicated to the yachting industry, sailing industry and water sports.

Between the 21st and 29th of January, Düsseldorf hosted more than 1500 exhibitors. The yacht industry from eastern Poland was presented on two exhibition stands, including sailing yachts and motorboats.

Among the 13 companies from eastern Poland presenting their boats were: Sedna Yachts and Raptor from Białystok, BaltYacht, Pegazus, shipyard „ŚLEPSK” and J.M.W. Yachts from Augustów, Yacht Hornet and Haber Yachts from Iława, „Surf ” from Mikołajki, Ahoj Czarter and Northman from Węgorzewo, Nautiner Yachts from Giżycko, and the company Kano from Lublin.

Participation in BOOT 2012 was organized by PAIZ as part of the Eastern Poland Economic Promotion Programme under the auspices and funding providing by the European Union.

Furniture from eastern Poland at IMM furniture fair in Cologne From the 16th to 22nd of January, 17 furniture companies from eastern Poland participated in the International Furniture Fair IMM 2012 in Cologne,.

International Furniture Fair IMM is the world’s third-largest furniture fair, and had 270,000 sm of exhibition space. Polish manufacturers had an opportunity to explore current trends in the furniture industry and gain new business contacts and market possibilities. One of the exhibitors from the Macroregion offered computer software to be used in the furniture industry, restoration services and woodworking cutting n tools.

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Chambers of Commerce News

www.bizpoland.pl

American Chamber_

Jerzy Buzek honored by the American Chamber of Commerce in Poland President of the European Parliament Jerzy Buzek received an AmCham Award granted to him by the American Chamber of Commerce in Poland in recognition of his contribution in developing entrepreneurship and a free market economy in Poland.

The award was handed out by Joseph Wancer, the Chairman of AmCham in Poland.

The awards ceremony was part of the Annual General Meeting.

“We are proud to honor Professor Jerzy Buzek with our award in recognition of the significant role he played in the transformation of Poland and his exceptional accomplishments on political, social and scientific grounds. In his many roles in academia, in Solidarity, as Polish Prime Minister and in the EU, Professor Buzek always served Poland, connecting his passions and skills with a professional approach, thanks to which he has built a solid image of Poland abroad”, said Wancer.

“The United States of America is the home of modern democracy and a second-motherland to millions of Poles. Those two simple facts made it clear that when we tore down

the Iron Curtain, our two countries were swiftly connected by strong economic and political ties. The American Chamber of Commerce in Poland has for two decades made sure that those ties became even stron-

ger. The award I’m receiving tonight is a great honor. I take this award not only as an acknowledgment of my work, but also as an inspiration for future tasks”, said Professor n Buzek.

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February 2012

Chambers of Commerce News

www.bizpoland.pl Spanish (PHIG)_ The Polish-Spanish Chamber of Commerce together with the Wielkopolska Chamber of Industry & Commerce –- organized 25 January a seminar on the development prospects for Polish companies in Spain. The event was attended by thirty representatives of businesses from the Wielkopolska region, who also feasted on Spanish olive oils and wines. The event was held to coincide with the annual BUDMA Construction Fair in Poznan, which also included several Spanish construction firms, including GRANDE Sp. z o.o.

Belgium_ The Belgian Business Chamber and the French Chamber of Commerce and Industry in Poland are co-organizing a Speed Business meeting in Warsaw, on 7 February. The Belgian Chamber is also holding its first Belgian Business Mixer of the new year on Wednesday, 22 February. More information on both events at www.belgium.pl.

Canada_ Talisman invests in Braniewo concession and community In tandem with the launch of their exploration activity in the Braniewo shale gas concession last autumn, Talisman enrolled 33 children from the town into its own uniquely created “Canadian Wonders” English language program, teaching the young students English through Canadian culture, history, geography and art. The semester was completed in January and included a visit to Talisman’s well site and a two-day visit to Warsaw.

Trigranit lays foundation for Poznan City Center development project In a groundbreaking ceremony on 17 January, TriGranit together with PKP S.A. lay the foundation for their extensive project to re-develop the main Poznan railway station. The construction also includes Poznan City Center, a shopping and office complex with a total project value of 160 million euro.

Winter Reception Talisman’s Braniewo facilities

February 2012

The Polish Canadian Chamber of Commerce (PCCC) and HE Daniel Costello, Ambassador of Canada to Poland, co-hosted their annual

Winter Reception 1 February at the embassy of Canada. Over 150 guests were in attendance including members of the government, and business and cultural communities. The highlight was a screening of Cirque du Soleil’s “Saltimbanco” show which was performed in Sopot in January.

New Members in 2011 The PCCC grew by 11 new members in 2011, including AECOM, B/E Aerospace Consumables Management, Coteba/Artelia Group, Embassy of Canada, Golder Associates, Lafarge Cement, Memuta, NUS Consulting, Peek Traffic, PJM Shipping and Trading, Ratn hdowney Polska and SUM Poland.

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Corporate Car Review

www.bizpoland.pl

Lexus hybrid LS 600H

by Matthew Day

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I have to confess that in the past I have often harboured an irrational bias against Lexus.

The name always bugged me; it just sounded too contrived and one I always thought would look better on a vacuum cleaner.

These thoughts accompanied me when I picked up the Lexus LS 600h. The LS 600h has been tasked to take on the German might of Mercedes Benz, Audi and BMW in the premium car sector. The three German companies, along with Jaguar, have been the established names at the top of the limousine world for decades now so the LS 600h has a battle on its hands.

But rather than being cowed and daunted by this prospect Toyota, Lexus’s parent company, have come out with all guns blazing with an original and wonderful piece of engineering.

To begin with the car comes with not one, but two engines. Its main power source is a hearty 388 hp V8 petrol-fuelled monster, but at low speeds, when you’re stuck in traffic, for example, an electric engine takes over.

This makes the LS 600h the world’s few true hybrids targeted at the premium market, and also gives it relatively green credentials. The hybrid emits just 218g/km of nasty CO2, making it one of the greenest and most fuel efficient big cars aro-

und, although given the size and price of the car you can’t see many buyers being too concerned with its tree-hugging abilities. Anybody really concerned with the environment would surely buy a smaller car.

February 2012

Corporate Car Review

www.bizpoland.pl Anyway, when you push the “power” button to start the car for the first time you do wonder if it has worked as you hear nothing.

The battery engine is mouse-like as it moves the 2,270 kilogram car around, and the switch from electric to internal combustion engine is equally unnoticeable.

On the open road the V8 mirrors its electric sister by keeping quiet, but don’t equate its barely discernable presence with weakness. Lexus claim that the car can hit 100 kph in just 6.3 seconds, and if you push down hard on the accelerator the car surges and you have that wonderful feeling of being pressed back into your seat. The engine is aided well by the fine eight-speed semi-automatic gear box, which manages the changes with ease, so you find the LS 600h just eats up the miles with effortless grace.

Steering and handling are light and precise, giving you the confidence to throw the car around a bit. And despite being a big and heavy machine the LS 600h feels light on its toes; belaying its grand dimensions.

Inside the Lexus, as you would expect for a car with the like of BMW’s 7 Series in its

sights, the trim and equipment are both lavish and well-made. Stitched leather abounds, wood is spread here and there, and the cabin is spacious, airy and comfortable.

The feeling of space is especially noticeable in the rear where the car’s long wheel base makes its presence most felt. Acres separate rear seat from front seat occupant, and to make matters better for those in the rear, the seats recline and can give you a massage. This allows you to stretch out and enjoy the journey in grand comfort.

Reclining seats, however, do contribute to one of the LS 600h’s flaws. They, along with the electric engine, eat into the car’s boot space, and so it only has 330 litres of luggage space, which isn’t as good as the 500 in BMW’s 7.

The computer system mounted in the centre and to the right of the steering wheel allows you to control everything from temperature to the sat-nav, and, unlike on other cars, doesn’t require an inexhaustible amount of patience to learn how to use it.

The main screen for the sat-nav is far from your eye line when driving so Lexus have

thankfully included a little map system that lights up on the dashboard when you’re approaching a junction to show you which way to go.

The same main monitor also changes into a television screen when you stick the car into reverse gear owing to a fish-eye camera lens stuck on the back. This provides great all-round vision, and, once you have learnt to trust it, saves rubber-necking each time you have go backwards.

When it comes to safety the LS 600h comes festooned with airbags including knee airbags on both front seats, and rearseat airbags. A novel device is a system that adjusts the headrest to protect the neck from whiplash in an accident.

Prices for the Lexus start at PLN 530,200, which is a lot of money by any standards.

But what you do get is a fabulous piece of engineering blended with a touch of innovation. Lexus’s build quality and reputation for reliability will also mean the car should maintain its value, making it a good sell when it’s time to say goodbye, if you can bring n yourself to part with it.

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February 2012

Events

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Oysters and Dom Perignon at Złota 44 topping-out

Orco Property Group celebrated the topping-out of its 54-floor luxury residential tower in Warsaw.

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Fireworks pierced the frigid sky in early February as guests huddled inside the Palace of Culture vis-a-vis the Zlota 44 tower.

“This year, the group’s revenues may reach about EUR 300 mln,” CEO Jean-Francois Ott said, adding that the group is planning to sell, among others, its office building Sky Office in Dusseldorf in the next few months, albeit this will depend on the availability of bank financing. A key factor in achieving the revenue projections will be sales of the luxury flats in the tower. So far, our best information is that 80 flats have been sold, of the total 251 in the tower.

Orco reported revenues of 117 million euro for the first nine months of 2011 compared to revenues of 213 million euro for the same period a year earlier, and a net loss of 35 million euro. Orco is also considering building another skyscraper in Warsaw and is in talks regarding the potential location, n according to Ott.

February 2012

www.bizpoland.pl

Events

1st annual Shale Gas Awards for Poland The first event of its kind in Poland, the Shale Gas Awards Gala took place 19 January at the Hotel Intercontinental, with more than 100 guests in attendance. The 2012 Award winners were: “International Pioneer”: Global Geophysical Services; “Community Engagement”: New Gas Contracting; “Rising Star”: Mirosław Barszcz (Grynhoff, Wożny, i Wspólnicy); “Shale Gas Company of The Year”: PGNiG; “Professional of the Year”: Kamlesh Parmar, 3 Legs Resources (Lane Energy). The event was organized by n Petroleum Club.

Wedding Fair at Palace targets young couples with big plans The Palace of Culture hosted the annual “Polska Gala Slubna”, matching wedding event vendors with anxious young couples keen to make the right decisions for the “big day”.

During the fair, buyers could purchase at wholesale prices, and the wedding collections of 2011 were sold at discounts up to 80 percent. Future brides sought the advice of stylists and hairdressers, florists, photographers, and dress-makers. The event culminated in the final bridal fashion show, featuring wedding dress designers such as Adrianna Unique Fashion Izabella Kulesza, Pronuptia Adria, studio Hanna Bieńkowska, and the premiere of the salon Mariella, featuring a collection of bridal gowns from top designer Maciej Zien. The fair attracted more than 250 exhibitors.

February 2012

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Events

www.bizpoland.pl

Green Week Berlin The annual Green Week Berlin (19-25 Jan 2012) was an opportunity for Polish food exporters to exhibit - and provide taste tests - of their products, ranging from 21 types of honeys to countless varieties of kielbasa.

More than 11 of Poland’s voivoids had exhibition space and a press conference led by Minister of Agriculture Marek Sawicki boasted of Poland’s growing food export strength. Poland’s EU membership has been a bonanza for Poland’s food exporters. A combination of open western-European markets and subsidies to modernize Poland’s agricultural sector has moved Poland from a net food importer to a net exporter since its EU accession in 2004.

Food exports in 2012 will have grown 300% over the previous 8 years.

Polish food producers and farmers have parlayed their natural advantages - of lower production costs – and added a dash of focused marketing and sales to win major food supply contracts. Initially focused on the wealthier western European market, Polish firms see increasing opportunities in eastern markets including Russia, as well as the Middle East and east Asia. Honey and jam producers have found new markets in Dubai, niche pork products are being exported to South Korea, and Polish milk and ven getables are sold in shops in London.

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February 2012

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