BizPoland Magazine, March/April 2016 by BiznesPolska/CEE Business Media

Special Focus: Gdańsk and Pomerania

March–April 2016 vol. 8 no. 1(50) Price: 20 zł

Dumbest Deal of the Decade

KGHM deal illustrates dangers of governmentcontrolled companies doing mega-deals

The Big Short

The CEO Seller

The Buyer

$400 million profit

$21 million in his pockets

25 billion market cap loss for KGHM

SSC News, p31:

Energy, p 43:

Advisory, p47:

ABB and CreditSuisse open new offices

Largest Solar farm launched

Smith: Danger in the Streets

Cover Story

(4) Dumbest Deal of the Decade

Tricity and Pomerania Special

March–April 2016 vol. 8 no. 1(50)

Published by: BizPoland Media Group 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@biznespolska.pl) Editorial staff, contributors and columnists: Preston Smith, Steven Foster, Marek Matraszek, Christian Schnell, multiple Chambers of Commerce, more than 10 Polish cities and Special Economic Zones, PAIZ Maria Ponomareva (maria@biznespolska.pl) Armine Starowicz (armine@biznespolska.pl) Advertising Sales: Magdalena Jakubowska (mjakubowska@biznespolska.pl) Graphic Design: Sławek Parfianowicz (sparfianowicz.wordpress.com) Distribution of BizPoland Magazine: Direct, controlled distribution via post to international investors in Poland - members of major foreign Chambers of Commerce: United States (AmCham) • Canada (PCCC) • Ireland (IPCC) • Netherlands • Scandinavia (SPCC) • United Kingdom (BPCC) • France • Spain • Portugal • Switzerland

(8) Infrastructure investments underpin strong growth of Pomorskie region (10) Baltic ports fight for EU pot of €EUR 7.5 billion (11) Gdańsk Science and Technology Park (12) Gdansk attracting global investors (13) DCT Gdansk backed by new €290 million investment (15) Port of Gdansk presents latest investment projects (16) PKP Polish Railway Lines to launch PLN 4 billion tenders for rail infrastructure (17) Transport Week 2016 ends in Gdańsk (18) Pomerania Investment News (20) Gdansk/Gdynia strong showing at MIPIM real estate investment forum (22) Young Architects’ Dreams of Future Gdansk (24) Multi’s Forum Gdańsk to revitalise Hay and Crayfish markets (26) Goodman in big expansion in Gdansk on strong port traffic growth

BPO/Shared Services News

(30) Hong Kong’s Cathay Pacific Airways to open in Krakow (31) BPO/SSC sectors are driving office space in CEE markets (32) Winners Awarded in 26 Categories for 4th Edition of CEE SSO Awards 2016

CEO Interview

(35) Employers adapt to tighter labour market

Anniversary

(36) This year we’re all Onlineprinters!

Energy News

(38) New law threatens wind power in Poland (39) Ground-Mount Solar PV Farm in Southern Poland; Veolia to build a new, energy-neutral wastewater treatment plant for Namyslow Brewery (40) Poland to develop geothermal as wind farms fade; Yingli Solar & R.Power Expand Solar Developments In Poland; Fortum finalizes takeover of Duon (41) LOTOS and CalEnergy in NatGas deal (42) PGE faces challenging 2016 (43) Poland launches largest solar farm (44) Tilting at windmills

Advisory

(46) Maintaining tradition in chaotic times (47) Danger in the streets

Equities News

(48) WSE 2015 IPOs (49) London Stock Exchange aims at Warsaw

FDI Investment News

(50) Poland’s Treasury terminates Bilateral Treaties, jeopardizes FDI Investment into Poland (51) Germany’s Rheinmetall to modernize Leopard 2A4 tanks in €130 million deal (52) Poland, Czech Republic To Jointly Make APCs (53) German Goldschmidt Thermit Group expands its rail operations to Poland (54) Polish roadbuilding boom

EU Funds

(55) Rural development in Poland will focus on smallholders’ poverty (56) All 118 Rural Development Programmes adopted

Events

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(57) Polish Wind Association trade fair puts on a brave face (58) Polish cities strong presence at MIPIM

2016

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Cover Story

Dumbest Deal of the Decade KGHM deal illustrates dangers of government-controlled companies doing mega-deals It was December 2011. The season for celebration. Champagne corks were flying and the Canadians were cheering. At the Embassy, the Ambassador heralded the deal as a major victory for inward investment, and a milestone for Polish companies in their “Go Global” journey. KGHM, the state-controlled copper and silver miner and one of Poland's largest companies, had just announced its first megadeal outside Poland – the takeover of Quadra FNX for a mind-boggling 15 billion pln. The $15-per-share offer represented a substantial premium of 41-percent over Quadra FNX's share price. The total value of the transaction was announced at $3.5 billion, including $500 million of outstanding debt. The deal was financed easily by cash on KGHM's balance sheet. The story and rationale seemed compelling: A booming China with an unquenchable thirst for copper – a key component in much industrial production – would continue to drive demand and prices up. And the Canadian deal would put KGHM in the global “big leagues” – especially when the deal included an option to develop the Sierra Gorda “Shangri-La” in Chile – a deal JV'ed with Japanese Sumitomo in the co-financing role. Copper prices seemed a good

Quadra FNX CEO Paul Blythe

value, especially since this irreplaceable commodity is essential in the production of industrial machinery and transport vehicles. Canadian-born entrepreneur President and CEO Paul Blythe convened his Board and rapidly approved the sale, which

subsequently put $21 milion into his pockets. KGHM, with ample cash on its balance sheet, had money in the bank and was itching to put it to use to fund its global expansion. The deal, in theory, would help KGHM cut production costs and raise output. The purchase was to allow Lubin-based KGHM to increase its annual production by more than 100,000 tons starting in 2012 from 570,000 tons planned in 2011, KGHM said. Fast-forward just 4 years. Copper prices have dropped more than 50%, from $4.5/ pound to just over $2.10/pound as China's demand for copper has declined. KGHM's share price dropped from a record high of nearly 200 pln in 2011 to a low of 52pln in January 2016, taking KGHM's market value from 40 billion pln to just over 12 billion pln. And in March 2016, as cash began to be scarce, KGHM slashed its generous dividend from its 2011 payout of 5.6 billion pln - to zero. The deal highlights the dangers of mixing management hubris with other people's money – in this case, government funds

Copper is used in building construction, power generation and transmission, electronic product manufacturing, and the production of industrial machinery and transportation vehicles. Copper wiring and plumbing are integral to the appliances, heating and cooling systems, and telecommunications links used every day in homes and businesses. Copper is an essential component in the motors, wiring, radiators, connectors, brakes, and bearings used in cars and trucks. The average car contains 1.5 kilometers (0.9 mile) of copper wire, and the total amount of copper ranges from 20 kilograms (44 pounds) in small cars to 45 kilograms (99 pounds) in luxury and hybrid vehicles. n KGHM’s CEO Herbert Wirth

BiznesPolska.pl/EN

March–April 2016

Cover Story (ie. Taxpayers' money). Poland's Treasury owns 32% of KGHM. For the period 2012-2015, KGHM's CEO Herbert Wirth oversaw the largest transfer of capital from Poland to foreigners since the 2nd World War.

punished the price of the company’s shares,” said Raymond Goldie, a Toronto-based analyst at Salman Partners Inc.. “The 41% premium reflected that”. At the time, the Quadra board dismissed the idea of starting

Blue Ridge Capital’s John Griffin and hedge fund guru Julian Robertson

Before the ink was dry on the deal in early 2012, a few astute US hedge funds began circling like vultures. Before the end of that year, they had bet about $300 million against the deal, by selling short about 6 million shares of KGHM. As disclosed in US SEC filings, hedge funds Blue Ridge Capital and Discovery Capital Management had made a big wager that KGHM had overpaid significantly. They were right. And the hedge funds made a profit of more than 600 million pln in the next 18 months as KGHM's share price dropped 50% in the first year following the buyout, and another 50% in the subsequent year. US SEC documents show that together that shorted about 3% of the total shares of KGHM, approximately 6 million shares. “They are overpaying” “The market had treated Quadra FNX's management as a serial disappointer and they heavily

2016 March–April

an auction to look for a higher price. "We decided that the deal that we’ve got, the bird in the hand, was the best way to go," Blythe said. "It was a significant premium to our stock price." KGHM shares dropped 8 percent one day after the announcement. "It’s really bad news because there won’t be a big dividend," said Tomasz Duda, an analyst at Ipopema Securities SA. "They are buying poor assets with high production costs and they are overpaying." The acquisition was KGHM’s second takeover outside Poland in almost two years. Chief Executive Officer Herbert Wirth said at the time that buying Quadra will make his company "more immune to price slumps on the cyclical copper market." The Ministry chime in. The plan to buy Quadra is an "interesting idea," said Maciej Wewior, a spokesman for the Polish Treasury Ministry, KGHM’s biggest shareholder. The ministry controls KGHM, with its 32 percent stake.

The Deal – as announced in December 2011: Polish mining company KGHM Polska Miedz S.A. has agreed to buy Canada’s Quadra FNX Mining for $15 per share. Quadra FNX produces base metal and owns and operates the Robinson copper mine in Nevada. In addition, Quadra holds a 100-percent interest in the Carlota Copper Project, a copper project under construction in Arizona. Quadra FNX also has an option to purchase the Sierra Gorda Project in Chile and recently acquired an 82-percent interest in International Molybdenum and its Malmbjerg Project. KGHM calls itself the world’s ninth largest producer of copper and third largest producer of silver. KGHM recently hinted about its intentions, with Chief Executive Officer Herbert Wirth saying in early November 2011 that the company was planning on making a bid for a Canadian mining company. Quadra FNX has mining assets in Canada, Chile and the U.S. More than 77 percent of the company’s revenue comes from copper, while nickel accounts for 12 percent of revenue. Quadra FNX produced 60 million pounds of copper in the third quarter, at the low end of its guidance. President and CEO Paul Blythe recently defended those production numbers, telling BNN: “If you look at our results for this quarter, it’s the best quarter we’ve had since the end of 2009.” He added the Robinson mine in Nevada produced 30 percent more copper than in the previous quarter. He also said he is confident in copper over the longterm, despite the metal’s price downturn. “Clearly China is growing, it’s moving into a middleclass society, it’s much more of a manufacturing society. It needs a lot of copper to make that infrastructure happen… so in the long term, even in the medium term, we think that supply and demand will support copper.” n

2015 Results worst than expected Europe’s second biggest copper producer, Poland’s state-run KGHM, signalled plans to cut its copper output this year after writedowns pushed its 2015 net loss higher than expected. The miner posted a record loss of 5.01 billion zlotys at the group level and 2.8 billion loss for the parent company, from which KGHM pays dividends. Analysts had expected losses of 4.81 billion and 2.29 billion respectively. Earlier this year, the company reported writedowns of $1.3 billion on its foreign assets due to falling metal prices, with the largest drag coming from its main overseas mine Sierra Gorda in Chile. The company, which is also the world’s largest silver miner, had planned to almost double its copper output to more than 1 million tonnes a year by 2020, but signalled a revision of its plans and its foreign assets after worries about Chinese demand battered metals prices. n

BiznesPolska.pl/EN

Cover Story Blythe resigns with $21 million Shortly after the deal was done, Paul Blythe, the former chief executive officer of Quadra FNX, stepped down from his role within KGHM. Mr. Blythe didn’t say specifically why he was leaving, but noted he had more or less only stayed on to help with the transition. “After the acquisition of Quadra FNX by KGHM Polska Miedź S.A., I decided that this was a logical time for me to retire from the company, however, I wanted to support the transition and all our employees by remaining in place as CEO for 6 months,” Mr. Blythe said at the time.

Blythe's resignation was not unexpected. When the deal was first announced, he made it pretty clear that he would have liked to keep Quadra FNX on its own. “We weren’t driving the process,” he said at the time. “The timing isn’t something we picked. The offer was there and we had to deal with it.” According to financial documents, Blythe did well in the transaction. In addition to receiving approximately $3 million in “exit” compensation, he also had almost 660,000 Quadra FNX stock options and 525,000 shares. At the purchase price of $15 per share, that put a value of about $18 million on his shares.

KGHM Financial Summary – 2011-2015

2015 2014 2013 2012 2011

Sales (pln billion) Net Profit (-5.01) Dividends (pln million) 0 Dividends per share

Timeline:

16.6 2.4 800 zł4.00

July 2011 KGHM stock price hits record high of nearly 200pln, valuing the firm at 40 billion pln.

18.5 3.1 1,000 zł5.00

20.7 4.8 196,000 zł9.80

December 2011 KGHM agrees to pay $2.84 billion for Canada’s Quadra FNX Mining Ltd., making this the largest overseas acquisition by a Polish company. Shares in KGHM immediately drop 8% to 122pln on fears that the firm is overpaying.

6 BiznesPolska.pl/EN

20.1 11.3 5,668 zł28.34

Relieved of his duties While the new PiS government has replaced nearly all government-controlled entities' management with PiS appointees – indiscriminately and virtually without regard to management performance – perhaps the only fully-justified firing of management is the case of KGHM. In February, CEO Herbert Wirth and much of the Board was summarily dismissed. While his dismissal is easily discounted as another PiS-driven house cleaning, his instigation of the Quadra FNX deal was either misguided – to be kind – or shameful – to be critical. To be sure, one of Poland's top cash-cows has dried up. Hit to Polish government income In addition to the slashed dividend, which will be zero in 2016, the Polish government has said it is

March 2012 Quadra FNX's CEO Paul Blythe resigns, pocketing $20 million on the transaction and termination fees.

December 2012 US hedge funds disclose aggressive “short” positions in KGHM, betting $350 million that shares in KGHM will soon drop.

KGHM pays out 5.6 billion in Dividends to shareholders.

March–April 2016

Cover Story “reviewing” the mining tax, which has been another major source of income for the government, at the expense of KGHM. The very fact that the government is considering reducing this tax speaks to the level of financial stress that KGHM now faces, burdened by a botched acquisition and tumbling global copper prices. Ripe for restructuring Going forward into 2016, with its new CEO Krzysztof Skóra (as well as new Board members Mirosław Stanisław Biliński and Jacek Rawecki), substantial restructuring plans will certainly be announced. Outside of its core copper and silver business, KGHM owns a slew of unrelated businesses: health spas, ranches, and real estate development companies. Under pressure to restore the shine to KGHM, asset sales are likely following the recently announced $1.3 billion asset write-offs. n

2013

2014

KGHM shares collapse nearly 50%.

Global commodity prices plummet.

Hedge funds cover their shorts, pocketing about $400 million.

KGHM's flagship project Sierra Gorda in Chile faces uncertainties. KGHM slashes dividend payout to shareholders.

2016 March–April

Trouble at crown jewel Sierra Gorda The Chilean government is investigating KGHM for alleged environmental infractions at its Sierra Gorda mine. While various reports in mining publications have indicated KGHM International may be fined for alleged environmental infractions at its majority-owned Sierra Gorda mine in Chile, the amount the company may be fined is unclear. KGHM International is the company behind the Ajax copper and gold mine proposed for just south of Kamloops. A miningweekly.com report on March 9 stated Chile’s Superintendence for the Environment indicated KGHM could face fines of up to US$29 million for what it calls seven “serious” and two “mild” environmental infractions at the massive copper-molybdenum mine. Those alleged breaches include not implementing measures to control emissions, altering the natural habitat for native wildlife, and operating a tailings dam in an unauthorized manner. However, a subsequent report from mining.com noted the Superintendence for the Environment has clarified the potential fine facing KGHM to be a maximum of US$4 million. According to miningwatch,com, Sierra Gorda has 10 days to present a compliance plan to the Superintendence for the Environment or 15 days to present a legal defence. KGHM International owns 55 per cent of Sierra Gorda, with Japan’s Sumitomo Metal Mining owning 45 per cent of the project. The mine also faces the prospect of having its licence revoked. According to the KGHM International website, the Sierra Gorda

2015 Rout in copper prices continues with additional 50% collapse during the year. KGHM share price ends the year at 63pln, down 70% since the Canadian deal was done – a decline of nearly 30 billion pln in KGHM's market value.

mine operates on one of the world’s largest copper-molybdenum deposits, comprising both sulphide copper ore as well as an upper layer of oxide copper ore. The deposit was discovered in 2006. Two years later, KGHM International took over the project, which since September 2011 has been a joint venture of KGHM International (55 per cent), Sumitomo Metal Mining (31.5 per cent) and Sumitomo Corporation (13.5 per cent). According to KGHM’s website, development of the mine is being carried out in two stages. The first stage was completed in July 2014 and comprised construction of a conventional open-pit mine (extraction using blasting materials and dump trucks, loading and the transporting of ore for processing), infrastructure (including a tailings pond, power line and sea water pipeline) as well as a processing plant for the separation of molybdenum concentrate (high-pressure grinding rollers, ball mills and conventional floatation) with a processing capacity of 110 thousand tonnes of ore per day. The oxide ore being stored for potential heap leaching. The copper concentrates produced by Sierra Gorda is transported to the port of Antofagasta, and from there by sea to smelters around the world. The mine also has exploration potential in adjacent terrain. KGHM International said Sierra Gorda operates with the use of sea water from the cooling systems of a power plant in the town of Mejillones. Instead of being recycled to the sea, the water is pumped to the mine through a 142.6-kilometre pipeline, which the company said eliminated the risk of contaminating the region’s desert resources. n

January 2016

February 2016

KGHM shares hit low of 52pln.

CEO Herbert Wirth and full board is sacked.

Management announces plans to write-off 4.5 billion pln.

Shares rally from 57 to 76.

Dividend slashed to … Zero.

Polish government says it may cut the mining tax to ease the financial burden on KGHM.

BiznesPolska.pl/EN

Pomorskie & Tricity

New Infrastructure

Infrastructure investments underpin strong growth of Pomorskie region

The scale is astounding. Seaports, airport, intercity rail lines, metropolitan rail lines, upgraded roads, completely new roads, tunnels, shopping centres, new Class A offices, and industrial warehouses. The renaissance of Gdansk, Gdynia and Sopot is well-underway, and underpinned by ambitious infrastructure plans that are clearly providing additional impetus for large private investors to invest. In this Special Focus section of BizPoland Magazine on the Pomorskie region and its TriCities, we’ve concluded that one word might best encapsulate the region’s momentum: Connections. Connections underpin the infrastructure projects, whether it is intra-region connections such as the Metropolitan rail investments or road connections that have compressed the journey time from Gdansk to Gdynia. Or domestic connections including the fast rail line to Warsaw and much-improved railroad lines that underpin the region’s fast-growing position as a transport and industrial distribution hub. Better road infrastrucure is still badly needed to connect the Baltic Sea cities of Gdansk to Szczecin – but this is underway and when complete will further boost the region’s appeal. International connections include the Gdansk Walesa International Airport, which has vastly improved the accessibility with major European capitals. And the port projects have put Gdansk on the global map for the world’s largest cargo ships.

The renaissance of Gdansk, Gdynia and Sopot is well-underway, and underpinned by ambitious infrastructure plans

This improved connectivity is a key factor driving new investment in the region. Investors from an array of industries are coming in. Yet a few sectors are driving the region’s development and remain the priority sectors according to the region’s leaders: Shared Services, ITO and R&D; SeaTrade-related businesses; and Tourism. And the growth in these sectors is further supporting growth in related sectors such as Class A office and hotel development, shopping centres, and industrial warehousing. The region continues to win new Awards for its projects and development potential. In the following pages, we highlight some of the key developments

BiznesPolska.pl/EN

in these sectors, and provide an overview of the economic ecosystems that are rapidly developing. Strategic Investment Projects for TriCity: Gdańsk and Gdynia ports development The state-of-the-art Deepwater Container Terminal Gdańsk provides Pomerania with a direct connection with Asia through the Maersk Line service point. It is worth mentioning that the new terminal is able to handle the world’s largest container ships. Port of Gdańsk authorities and DCT have signed additional agreements to further extend the DCT capacity. In order to maintain its competitive edge, Gdynia port decided to improve its capacity and transport infrastructure. In January 2014, Port of Gdynia Authority SA. acquired the Gościnne quay from Naval Shipyard Gdynia Poland, which will allow the port to build a new 480 m-diameter turn-table. The next stage of the Gdynia port refurbishment is deepening the port channel by 2 m from 13.5 m to 15.5 m. All these planned improvements will allow Gdynia port to handle 380 m-long container ships of up to 14,000 TEU capacity. The Tri-City’s accessibility from Poland’s hinterland has improved greatly as a result of the completion of the A1 motorway to Stryków and, more recently, as a result of the new Pendolino trains, which have been operating since December 2014. The journey from Warsaw to the Tri-City takes approximately three hours and it is being operated by five trains which have a maximum speed of 200km/h. The Pomeranian Metropolitan Railway The initial service comprises shuttles from Gdańsk Wrzeszcz to the airport and Osowa. Through services from Gdańsk’s main station, Gdańsk Główny, to Gdynia via the airport are scheduled to start on October 1. Revenue services on the Pomorska Kolej Metropolitalna line serving Gdańsk airport began on September 1, following inauguration celebrations including steam-hauled trains on August 30. The new line is owned by PKM, a dedicated company established by Pomorskie voivodship. Branching from the existing network at Gdańsk Wrzeszcz, it uses the alignment of a 18 km singletrack line to Gdańsk Osowa. This has been rebuilt as double-track, with a diversion to serve the airport. There are eight stations, and the 41 structures include a 940 m viaduct at the airport. Civil works were undertaken by a consortium of Budimex and Ferrovial under a 716m pln contract. The voivodship bought seven three-car and three two-car Pesa DMUs for 114m pln to operate the PKM service. These are supplemented by three older Newag 220/221 DMUs which the voivodship already owned.

March–April 2016

The operating contract was awarded to SKM w Trójmieście, which runs the existing commuter services linking Gdańsk, Sopot and Gdynia. PKM not only improves the quality of public transport in the Tri-City area, but also influences the geography of the real estate market there. Similar transport projects in other cities, in particular those involving rail, have been a stimulus that inspired changes of both local and regional scale. The PKM has opened new areas of the agglomeration for investments, integrated various means of transport and operates as commuter transportation for the residents of the wider agglomeration. As a result of improved accessibility, areas adjacent to the new stations gain the potential necessary for them to become attractive new locations for commercial and residential projects. The rapid rail connection from Gdańsk and Gdynia to Żukowo, Kartuzy and Kościerzyna reduced travel time to Tri-City for the residents of the Kaszuby region (almost 200,000 people live in the Kartuzy and Kościerzyna poviats). Consequently, the mobility of potential employees for the TriCity’s offices has been enhanced. PKM also provides a new influx of potential customers for shopping centres located in Wrzeszcz, Gdynia and the area of the Tri-City ring road. In addition, the new rail line will boost the investment attractiveness of the municipalities located along rail line No. 201, especially in terms of the residential market.

The new tunnel under the Martwa Wisła river facilitates transportation around Gdańsk city centre and improves the accessibility of the Wyspa Portowa island. It will not disturb the only waterway between the Motława river, Martwa Wisła and the open sea. The tunnel will also reduce transit traffic in Gdańsk city centre. The Tri-City northern ring road. The northern by-pass is designed to redirect transit traffic from the centres of Reda, Rumia and Gdynia and to generate attractive investment areas along the regional transportation corridors. The project will also improve the accessibility of the north-western part of the Pomeranian voivodeship from the Tri-City and the rest of the country, which is one of the priorities of the Development Strategy of the Pomeranian voivodeship. SKM station Gdańsk Śródmieście is a project that was completed in 2015. The SKM rail line was extended by 1 km and a new station, Gdańsk Śródmieście, has been added to the existing network. The station is located next to the Urząd Marszałkowski office and the planned Forum Radunia shopping centre. The project also involves the construction of a new integrated transportation hub. The European Solidarity Centre in Gdańsk opened in August 2014. It was co-funded by the European Regional Development Fund within the Infrastructure and Environment Programme. The ESC, located next to Gdańsk shipyard, has, due to its extraordinary design, become an important historical and architectural symbol of the city. Moreover it is an interesting point on the landscape of the Tri-City area. n

Pomorskie & Tricity

New Infrastructure

9 2016 March–April

BiznesPolska.pl/EN

Pomorskie & Tricity

New Infrastructure

Baltic ports fight for EU pot of €EUR 7.5 billion On February 16th, 2016, the European Commission and the

The total available budget is €EUR 7.56 billion, meaning that not every proposal will make the final cut. The evaluation process, conducted with the assistance of external experts, begins in March and is expected to run its course by the end of July. Two calls were launched – under the CEFTransport-2015-Cohesion envelope – encompassing 140 proposals with a total value of €EUR 9.79 billion. The Cohesion Call includes key infrastruc-

from Baltic ports, linked to the Motorways of the Sea programme, featuring projects focusing on port infrastructure, LNG and scrubber installations. The EU Commisioner for Transport Violeta Bulc said: “I am glad that so many project promoters are eager to invest in efficient, intelligent and sustainable transportation. The Connecting Europe Facility may be the largest funding instrument ever dedicated to transport by the EU.” It remains to be seen how many projects from the Baltic ports will benefit from the available funding. Cohesion countries very often have priority over rail or road projects and ports from these countries have limited possibilities to apply for grants (up to 85 % of co-financing rate). This may limit the number of proposals within the Motorways of the Sea programme, where there must be at least

ture projects in sustainable transport modes, which are among the proposals most valued by the European Commission and is reserved for 15 Member States eligible for the Cohesion Fund, including Estonia, Latvia, Lithuania and Poland. The CEF-Transport-2015-General envelope encompasses 287 proposals with a total value of €EUR 3.17 billion. This bodes well for a number of project proposals from the Baltic region, among them proposals

two ports located in different EU countries. Many of these ports are from cohesion countries. Bogdan Ołdakowski, BPO Secretary General said: “We are crossing our fingers for Baltic ports. A part of the challenge for ports from cohesion countries, also comprehensive ports, is that they have a limited possibility to apply for CEF funds, which is a serious problem for substantial parts of the Baltic ports. We will raise this issue in a discussion with the European Commission.” n

Innovation and Networks Executive Agency (INEA) sounded the bell ending the second round of calls for proposals of the Connecting Europe Facility (CEF), which attracted 427 projects worth €EUR 12.96 billion in requested EU funding, says Baltic Ports Organization.

BiznesPolska.pl/EN

March–April 2016

Gdańsk Science and Technology Park Gdansk Science and Technology Park is one of the crucial elements of the Pomeranian Innovation Network in the system of implementing the Regional Strategy for Innovation in the Pomorskie Voivodship, and it is a joint enterprise by the Pomeranian Special Economic Zone, Pomorskie Voivodship, the city of Gdansk and Gdansk University of Technology.

Gdansk Science and Technology Park – which calls itself a place where science, innovative economy and versatile initiatives merge – is located in a Special Economic Zone in a post-industrial building in Gdansk, close to the higher education schools of Gdansk University of Technology, Medical University of Gdansk and Gdansk University. The Park aims to provide the best conditions for locating research and development laboratories, as well as companies using advanced technologies in such business sectors as: • information and communication technologies • functional materials and nanotechnologies • environmental protection

• biotechnology, food chemistry and pharmaceutical sciences In the years 2006-2008, there was an adaptation of rooms in the former Printing House for the needs of the Gdansk Science and Technology Park. As a result of the project, new technological and manufacturing, as well as technological and office spaces, were created, equipped with ICT infrastructure and technological companies’ incubators, providing conditions for graduates of schools and academic employees to create and develop new companies based on modern technologies and networks of connections between the companies. Projects in 2016 and beyond include the creation of two combined office and technological buildings, which will complement an existing manufacturing complex. Additional projects include creation of an infrastructure for the Institute of Homeland Security Technology, which is a part of an activity run by the Polish Platform for Homeland Security. The activity of the Institute includes the cooperation of the best Polish scientific and research and development institutions conducting world-class research. n

Pomorskie & Tricity

New Infrastructure

DCT Gdansk

Your Deepwater Gateway to Central and Eastern Europe

www.dctgdansk.com

2016 March–April

11 BiznesPolska.pl/EN

Pomorskie & Tricity

Interview

Gdansk attracting global investors One of the most pleasant views a mayor can experience is a skyline with plenty of tower cranes. This is a visible sign of city’s development, its attractiveness for residents and investors. By Pawel Adamowicz Mayor of Gdansk

Years ago the local government of Gdansk made a decision to support the development of high-quality office space market and today I am very proud to see it flourishing. Tower cranes in Gdansk have been very busy on construction sites of new business parks. According to JLL report, approximately 140 000 sq. meters of office space are currently under construction in our metropolis. Gdansk is among first choice cities for international business in Poland. Perfect location not far away from Scandinavia, Germany and Eastern markets, availability of qualified work-force, strong cooperation with local universities and friendly environment for investment have already been appreciated by many global companies. It is hard to mention here all the great companies that decided to run a part of their operations in Gdansk. Let me name just few: Intel, Bayer, PwC, State Street, ThyssenKrup, Jeppesen (Boeing), Amazon and Arla Foods. The above-mentioned 140 000 sq. m of new office space is still the song of the future, but a lot has already been achieved. Just a few weeks ago we were pleasantly surprised with a prize for the “Best new office development for SSC/BPO sectors” for Gdansk’s Olivia Six building, awarded at the 4th annual CEE Shared Services and Outsourcing Awards. Certified with BREEAM Excellent certificate, the centre is considered one of the greatest locations for business in Gdansk and Poland, along with other buildings constituting Olivia Business Center (OBC). It is a hot spot for business in the Tri-city, where - among others - Epam Systems, Sii, Energa, ThyssenKrupp and PwC have their headquarters. OBC has currently 75 000 sq. m of office space, with another 100 000 sq. m planned. The location couldn’t be better - along Grunwaldzka Ave., the main thoroughfare connecting Gdansk, Sopot and Gdynia, running along the coast of the Baltic sea bay, within a walking distance to a commuter rail service and a university campus, 15 minutes away from the airport. Not to mention a great view from the OBC windows - just onto the bay. Good things come in pairs! Another office park we are proud of - Alchemia, located just across the street from OBC. It has already added about 40 000 sq m. to the city’s office space, with another 40 000 currently

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under construction. Boasting its perfect location with a direct access to a commuter rail platform and fitness facilities, Alchemia is a place which has attracted such companies like State Street, WIPRO IT, and Alexander Mann Solutions. It is also worth mentioning that Alchemia has won Eurobuild Awards 2015 in the category “office building of the year in Poland”. Travelling south on Grunwaldzka Ave., we get to the Neptun Office Center, offering 16 000 sq. m on its 19 floors. The building, one of the top three tallest office buildings in the Tri-city, is hosting companies like Arla Foods, Comarch and Deloitte. Getting closer to Gdansk old town we approach a place where events crucial for European history took place. Just in the front of the Gdansk Shipyard and European Solidarity Center, the new investment has already been completed - Tryton Business House. It is a great change for the old town, since there was a significant shortage of modern office space in this part of the city. I like the fact the new building interacts well with its historical surroundings of the Solidarity Square. ICT companies Ciklum, Kainos and PGS Software as well as a new office of Ernst & Young have already been announced as tenants of the space in the building. Half a year ago the Financial Times described my city as the next hot outsourcing town. The article emphasized the fact, that “Gdansk [...] now derives almost a third of its economic activity from service centres for global business”. Since the year 2008 the office space available in Gdansk has doubled, proving city attractiveness to global business. I am sure that in upcoming years the trend will continue, and both Gdansk and global investors will benefit from it. n

March–April 2016

DCT Gdansk backed by new €290 million investment First of all, give us quick background on DCT these days (growth in numbers in last 2 years; employee numbers, revenues, cargo statistics etc.) In 2013 DCT exceeded the level of 1000 000 TEU handled in one year - unique in the history of Polish containerization sector. This record has permanently put DCT on the map of the world’s major container terminals and ensured its position as the biggest container terminal in terms of volume in the Baltic area. DCT is continuing this trend with the final operating result of 1 118 380 TEU in 2014 and 1 069 705 TEU in 2015. The lower 2015 volume was influenced by the Russian crisis. DCT is now one of the largest employers in the region with 610 staff members. We hire young employees with a potential, willing to stay in the company for a longer time.

Pomorskie & Tricity

Interview

Tell us about Australia-based Macquarie’s investment in Gdansk’s Deepwater Container Terminal (DCT) and are they pleased? What are their future investment plans? Do you have additional investors in DCT? DCT Gdansk is owned by funds managed by Macquarie on behalf of the Fund’s investors – largely pension funds from all over the world. The first investment project was so successful that investors decided to expand the terminal. In November 2014 DCT Gdansk managed to finalize the financing for the new project. The group of commercial and development banks has started to finance the investment by up to €290 million. Update us about the T2 expansion, and your capacity constraints/expansions. According to the project schedule DCT plans to finish the T2 construction in the second half of 2016. After completing the infrastructure works, equipment will be installed. A new terminal should start its operations by the end of 2016. With the second berth, the terminal will double its handling capacity up to 3 million TEU annually. The new berth will be about 656 m long and up to 17 m deep. The most modern STS cranes for T2 terminal will have an outreach of 25 rows. Please explain other infrastructure investments going on around DCT. (Ports, Roads, Distribution, etc). And comment on the support that you get from government/local authorities. Government and local authorities are investing in road and rail network at the Port of Gdansk. Thanks to such investments, DCT terminal is well linked with the international hinterland which ensures its ideal position as a true Central

2016 March–April

European and Russian Gateway. It takes 15 minutes from the port to A1 motorway without traffic lights. 200 trains a day reflects a good condition of railway network. The most important attribute of DCT is an excellent access to the sea. What are plans with EU transportation corridors and impact on the Gdansk port? We hope that works aiming to upgrade and renovate road and rail infrastructure will be continued with a focus set on ports. Gdansk is an important element of Baltic-Adriatic Corridor, thus improving road and rail infrastructure around DCT will

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Interview

Pomorskie & Tricity

help to strengthen its position as a natural gateway for Central and Eastern Europe. Last time we spoke, DCT was beginning to compete well with both German and Dutch ports. Can you give us update on this competitive position. The competition with German and Dutch ports is a reality. Last time we spoke, DCT had one client and now it has ten. Our competitive position will be much stronger the moment the second berth in

A new terminal should start its operations by the end of 2016. With the second berth, the terminal will double its handling capacity up to 3 million TEU annually.

DCT Gdansk is fully operational. It will allow the terminal to meet growing demand for deep-sea services in Central-Eastern Europe. The new 650m long quay will increase DCT’s annual handling capacity to up to 3 million TEU. New berth at DCT Gdansk will be able to handle Ultra Large Container Vessels of capacity exceeding 18000 TEU. And speaking of competition, tell us how the Gdynia port has changed its strategy given Gdansk’s deepwater access for huge ships. Gdynia is and will be a significant port for Poland. However, due to a geographical position including container terminals being located in the depth of the port, its role in the area of container handling is not going to grow. Theoretically, if there were several billion PLN spent, port of Gdynia could become competitive but an external port would have to be built. It probably does not pay off. Please provide information about the financial impact of DCT on both Poland’s overall budget but also local tax and financial benefits. Based on custom office data, we assess that DCT generates around 2 billion PLN from VAT, customs and excise duties every year.

was neutralized by attracting more export and import cargo.

What impact has the slowdown in Russia/Belarus had on DCT over the last 18 months? A lot of your cargo is trans-shipped beyond Poland, so tell us about that. Russian ports handled even 50% cargo less in 2015 compared to 2014. It must have had impact on DCT but due to our proactive approach the effect

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Your biggest client is Maersk. Who are other clients and plans to diversify your client base? Shipping lines market is changing due to the economic situation. Maersk lined up with MSC and created 2M alliance – the biggest in the world. The second largest alliance G6 started to navigate to Gdansk in August 2015 (APL, Hyundai Merchant Marine (HMM), Mitsui O.S.K. Lines (MOL), Hapag-Lloyd, Nippon Yusen Kaisha (NYK), Orient Overseas Container Line (OOCL). We are proud to work with them. We observe that more clients noticed the attractiveness of DCT Gdansk especially in the context of the new investment. The Baltic Dry Index has collapsed in recent months. What do you see happening in Poland/CEE, given this global “hiccup” in shipping? Volumes from China and Korea? And comment about the commodity slump (including coal) and its impact on DCT. Have you been able to win any business handling Russian crude oil, which so far continues to bypass Polish ports. DCT handles only container ships, not bulk carriers or tankers. In the area of our specialization we are very optimistic because we expect an increase in export and import cargo to and from Central and Eastern Europe. When it comes to Russia, we do not expect further drops, but also the increase of volume will take some time. What is more

The competition with German and Dutch ports is a reality. Last time we spoke, DCT had 1 client and now it has 10.

interesting, container lines noticed the benefits of DCT during the crisis in 2008, which resulted in significant savings among carriers. Therefore the cooperation with DCT increased the competitiveness of shipping lines in that part of Europe. Comment on changes to Poland’s tax and customs regulations, and impact on ports such as DCT. Thanks to “Ports package” law, container clearance in Polish ports takes less than 24 hours, comparable with North European ports. DCT Gdansk is a big propagator of the changes as it was the last obstacle to the competitiveness of Polish ports. New regulations came into force in June 2014. As a result around 90% of containers are already after custom clearance when still on the ship. n

March–April 2016

EU Funds

On 3 March, the Port of Gdansk Authority SA presented its latest investment projects aimed at increasing the safety level at the port to a range of eminent guests, including representatives of the local authorities, municipal authorities, the Maritime Office, the State Commission on Maritime Accident Investigation, the uniformed services and port operators. PGA says the initiative included four projects for a total amount of PLN 15 million, which were EU co-financed. Two of them concerned the purchase of vessels intended to provide safety at the port, another one involved the modernisation of the Strazak 6 fire and rescue vessel, while the fourth project concerned the organisation of a specialist new PGA SA Rescue Centre, which is supposed to function as the Coordination and Rescue Centre, bringing together all of the services responsible for safety at the port. The newly purchased vessels include a quick response environmental rescue vessel and a hydrographic and inspection vessel. The daily use of the former will focus mainly on reconnaissance and patrolling activities, but the potential and equipment on the vessel guarantee full effectiveness in conditions requiring rescue, environmental and fire-fighting interventions.

The second vessel is a hydrographic and inspection motor boat, which will guard the hydrographic safety of the Port of Gdansk and will additionally be used to make specialist environmental measurements of the basin and hydrological measurements of the bottom. The last project completed at the Port of Gdansk is the organisation of the Rescue Centre. The undertaking was financed largely from the Port of Gdansk Authority SA’s own resources. The centre will bring together all of the services responsible for safety at the port. The centre will also enable full coordination of the port’s services, including the Port Master, the National Fire Service, the Police, and Emergency Services. The event, during which the potential of all four projects was presented. Guests such as Mariusz Luczyk - Deputy Governor of the Pomeranian Region, Pawel Adamowicz - Mayor of the City of Gdansk, senior foreman Waldemar Milejko - Deputy Regional Chief of the National Fire Service, and Marek Szymankiewicz - Secretary of the State Commission on Maritime Accident Investigation - each took the floor, and in their speeches, they unanimously emphasised the significance of the completed investment projects to the entire local community. As Dorota Raben, President of the PGA SA, added that we have an excellently prepared team of people with professional, state-of-the-art equipment at their disposal. n

Pomorskie & Tricity

Port of Gdansk presents latest investment projects

ROP 11 Regional Operational Programme for Pomorskie Voivodeship for years 2014-2020 Programme description and Main Objectives The objective of this multi-fund ERDF/ESF Operational Programme (OP) is to increase the competitiveness of the region, ensuring in parallel the improvement of living conditions of its inhabitants through the principles of sustainable development. The total OP budget is €2,19 billion, of which the EU contribution is: €1,86 billion.

Funding priorities: Funds are concentrated on the key drivers for competitiveness, which is one of the main principles of the reformed Cohesion Policy. • 50.01% of ERDF will be allocated to the support for innovation, R&D, SME, e-services, as well as improving energy efficiency and use of renewable energy sources; • 21.8% of EFS will be allocated to promote social inclusion and combat poverty

2016 March–April

Expected impact and the expected results of the OP are among others: • Increase the share of innovative enterprises in the total number of industrial enterprises and the service sector to 13%; • support 3,700 enterprises; • create 4,000 new places in crèches and 3,000 new places in kindergartens; • 45,000 students participating in internships; • support more than 33,000 unemployed people in their search for a job; • upgrade 110 km of railway lines and 150 km of roads; • increase the share of renewable energy in the final energy consumption to 18%; • cover 36,000 people by flood protection; • increased percentage of population connected to sewage system to 86%.

Regional Development Fund (ERDF): 1,340,249,168 € European Social Fund (ESF): 524,562,530 €

Thematic priorities: TA - Technical Assistance TO1 - Research and innovation TO10 - Education and training TO2 - Information and communication technologies TO3 - SMEs competitiveness TO4 - Low-carbon economy TO5 - Climate change and risk prevention TO6 - Environment and resource efficiency TO7 - Transport and energy networks TO8 - Employment and labour market TO9 - Social inclusion n

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Pomorskie & Tricity

Investment News

PKP Polish Railway Lines to launch PLN 4 billion tenders for rail infrastructure Infrastructure manager PKP Polish Railway Lines (PKP PLK) is preparing to launch tenders for the preparation of pre-project documentation for improving the rail connectivity of Gdynia, Gdańsk, Szczecin and Świnoujście Baltic ports. The total value of the projects related to the modernisation of rail and port associated infrastructure, including Bydgoszcz – Trójmiasto (Tri-city) PLK, is estimated at PLN 4 billion. PKP PLK is currently implementing the PLN 370 million project “Improvement of the railway access to the Port of Gdańsk”. A sixfold increase in rail traffic volume is expected after modernisation of the railway line, allowing heavier trains and speeds of 100km/h. Works, carried out by Spanish company Dragados, in colaboration with Vias y Construcciones and Electren, include the modernisation of the 12 km long railway line 226 between Pruszcz Gdanski and Gdansk North Port, and the construction of a doubletrack bridge over the Martwa Wisla River. In Q1 21016, PKP PLK plans to launch tender for preparation of pre-project documentation related to investments dedicated to rail freight stations and freight dedicated lines connections in the Port of Gdańsk: Gdańsk Port Północny (Gdańsk North Port), Gdańsk Kanał Kaszubski, Gdańsk Zaspa Towarowa. The project is included in the National Programme for Railways and has been proposed for EU financing under CEF second call. Its total value is estimated at PLN 600 million ( PLN 490.7 proposed for CEF cofinancing) and will be carried out during 2017 – 2020. The company plans projects worth nearly PLN1.5 billion for 2017-2020, which include modernization, construction and development of railway infrastructure and investments in rail-port connectivity. The preparation of ten-

A sixfold increase in rail traffic volume is expected after modernisation of the railway line, allowing heavier trains and speeds of 100km/h.

der documentation for the selection of the design work for Gdynia, Swinoujscie and Szczecin ports is ongoing and the actual tenders will be announced at the end of Q1 and Q2 2016. Port

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projects, including railway lines modernisation were also proposed for financing under CEF. After modernisation works estimated at PLN 850 million, rail access to the Port of Gdynia will comply with TEN-T standards (for freight traffic). The lines will also allow the operation of heavier 740m-long freight trains. The reconstruction of the traffic control system and construction of the Local Control Centre in Gdynia Port Rail Station will enhance safety and efficiency of railway traffic.

Reconstruction works worth more than PLN 600 million in Szczecin Port Centralny and Swinoujscie Port (about 38 km of lines) will include modernisation of the substructure and drainage, reconstruction of the traffic control system and telecommunications equipment, reconstruction of two railway viaducts, one railway bridge, electrification of lines in Swinoujscie commercial port area, construction of three 2 km-long tracks. Modernisation works for lines 201 Maksymilianowo-Kościerzyna-Gdynia and 203 connecting Tczew and Kostrzyn railway stations are complementary to improving access to Port of Gdynia. The project is divided in two stages and its value is estimated at PLN 1.6 bn, funded under the Operational Programme Infrastructure and Environment-POIiŚ). Its implementation is planed for 2018-2021. n

March–April 2016

Transport Week 2016 ends in Gdańsk Over 300 participants representing 21 nationalities took part in the 6th edition of Transport Week, one of the most interesting events this year in the CEE region for the Transport sector. Each year Transport Week gathers expert speakers and audience representing shipping lines, container, seaports and ro-ro shipping operators, seaports and terminal operators, local and EU authorities and various associations. This particular 6th edition of the event represented a high-class meritorical agenda with many opportunities to discuss. The Transport Week commenced 8th March with the Ports and shipping of tomorrow conference. The meeting was inaugurated by a perspective

The container industry is in a deep crisis today. Oceanic shippers cancelled 230 fixed cruises between Asia and Northern Europe last year.

for the world of transport & logistics in 2050 given by Przemysław Myszka, Baltic Transport Journal’s Editor-in-Chief, followed by Johan Algell, the Vice President of SSPA Sweden who presented the challenges and opportunities in the ports and shipping sector. Ioannis Mispinas, Project Officer for Environmental Protection of EMSA introduced us to the subject of the SECA requirement featuring the monitoring systems of the implementation of Sulphur Directive in the EU countries. The MGO (Marine gas oil) got cheaper and available since the very implementation of the rule, supported by the EU. This viewpoint was presented by Poul Woodwall, the Director of Environment & Sustainability of DFDS Seaways, who was followed by Staffan Herlin from Finnlines, who excerpted the Finnlines experience of running a ro-ro and ferry business under the new emission rules. The first day of Transport Week ended with a discussion panel on the “ports of the future” concept, moderated by Przemysław Myszka and Przemysław Opłocki from the Baltic Transport Journal. Experts invited to the floor: Julian Skelnik, Director Foreign Contacts

2016 March–April

and Public Relations, Port of Gdańsk Authority, Gun Rudeberg, Legal Counsel and Head of Environmental Affairs, Ports of Stockholm, and Krzysztof Gromadowski, Director International Cooperation and Public Relations, Port of Gdynia Authority. The container industry is in a deep crisis today. The major part of the conference was dedicated to a diagnosis of existing problems and finding the solutions. James Kyritsis of Drewry raised his voice on that subject. What the researches say is that oceanic shippers cancelled 230 fixed cruises between Asia and Northern Europe last years since they came out to be unprofitable. The crisis in the container market is visible also in the Baltic ports. As Maciej Matczak of Actia Forum admits, the tempo of trans-shipment has been constantly declining since 2010 and last year showed a 12,5 % decline. This is a very bad outcome taking into consideration the global outcome of 5 % improvement. Only Finnish and Danish ports recorded a positive result in Europe, while Russian ports noted the biggest decline of 30 %. Central European countries with a high potential for a fixed economic growth will boost the container handlings – explained Agnieszka Kubaszewska-Monik of Seago Line. The Russian market will still have a significant impact. The actual political situation together with the sanctions imposed on Russia do not ease the trade. An additional problem to the ports may pose the implementation of SOLAS convention earlier this year. According to the regulation, the shippers will have an obligation of verifying the weight of containers dedicated to seaway shipment. Andrew Huxley (TT Club) presented the implementation of the SOLAS. Dominik Landa from the DCT Gdansk said about the ongoing expansion of the terminal, which commenced in the beginning of the last year and is to be finished by the 2016 Q2. “The new wharf will double its capacity to 3 mln of containers yearly which will lead DCT to the tight European terminals elite” – said Landa. Day 3 – the Intermodal Conference 2016 gathered experts of various backgrounds. Isabelle Ryckbost (ESPO), the regular visiting expert of the Transport Week 2016 conference officially opened the last day of conferences. The Intermodal day brought a discussion between various Baltic countries representatives from the intermodal transport: Agnieszka Szymczyk (EBRD), Ludmiła FilinaDawidowicz (West Pomeranian University of Technology in Szczecin), Thomas Kargl (Far East Landbridge), Mindaugas Butnorius (Lithuanian Railways), Stephen Archer (AS Baltic Rail) Wojciech Żuk (BZ WBK) and Krzysztof Gomuła (CLIP GROUP). While Borut Čok from Port of Koper, Carmen Costache from Danube Ports and Mindaugas Butnorius from the Lithuanian Rails discussed the bridging opportunities for Baltic, Adriatic and Black seas. n

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Pomorskie & Tricity

Investment News

Pomorskie & Tricity

Sits Industry expands in Grudziądz section of Pomeranian SEZ Sits Industry sp. z.o.o., a furniture producer from Brodnica, will start to operate in the Pomeranian Special Economic Zone. SITS is a company with more than 20 years experience in designing and producing upholstered furniture. More than 700 000 armchairs and sofas are being produced in the SITS factory each year. Polish furniture production tradition combined with the Swedish design are the recipe for the success of the SITS on international markets. The investment project, which is being released on the area of 13 ha in the Grudziądz

Subzone, assumes construction of the new production facility. The production hall is going to be equipped with all the necessary processing lines and machinery. The company also plans to build a modern high bay warehouse, which is going to secure the warehouse needs of the facility. The project will cost almost PLN 60 mln. After completion of the project at least 520 people will be employed. The investment is scheduled to be finished on December 31, 2022. n

Staples Europe expands in Gdansk Staples Europe announced further expansion of its presence in Poland. In the past year, Staples has relocated and expanded its Global Competence Centre in Gdansk, and continues to grow Staples Advantage, its businessto-business division. Staples is the world’s top office products company and one of the largest internet retailers. The Staples Global Competence Centre opened last year with the support of Invest in Pomerania. The centre quickly outgrew its previous location, and has now relocated to a permanent home at Olivia Six, in the heart of the Gdansk business district. The centre employs experts from a variety of disciplines, including IT, e-commerce, supply chain and telecommunications, and provides strategic, analytical

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and operational support to Staples offices throughout Europe, as well as telecommunications support globally. “We are excited about our growth in Poland,” said John Wilson, President, Staples International Operations and Head of Global Transformation. “The rapid expansion of our Global Competence Centre confirms that Gdansk is an ideal business location, with its high concentration of universities and welleducated workforce. We look forward to continuing to attract top talent to help us grow in the future.” Marcin Piątkowski of Invest in Pomerania said, “Staples’ Global Competence Centre benefits the local economy in Gdansk, and offers great opportunities for talented future leaders, both in Poland and abroad. We are thrilled to be able to support Staples.” In recent years, Staples has also continued to make key investments in its business-to-business delivery operation in Poland, which is growing rapidly. “Customers understand that Staples Advantage Poland stands for unmatched service and value,” said Piotr Kiszkis, Managing Director, Staples Advantage Poland. n

March–April 2016

Investment News

World Sailing has chosen Gdynia to host the 2019 Youth Sailing World Championships, will be held out of Marina Gdynia which is close to the city centre and offers excellent sailing and recreational facilities. Gdynia has hosted a number of international regattas in recent years, including the 2004 edition of the Youth Worlds, 470 and Laser European Championships as well as Volvo Gdynia Sailing Days, attracting thousands of participants and spectators. Bid partners, the Polish Yachting Association and the City of Gdynia, bring together proven experience in hosting large scale events with the regatta to take place from 13-20 July 2019. Alistair Dickson, World Sailing Events Manager, said, “With experience of hosting high calibre sailing events, Gdynia is a perfect

fit to hold the 2019 edition of the sports premier event for young sailors. Excellent onshore facilities in a great location coupled with a good breeze in July will ensure the delivery of a fantastic all-round championship. World Sailing look forward to working with the Polish Yachting Association and the City of Gdynia.” An Evaluation Panel received presentations for potential hosts of the 2019 Youth Worlds in February 2016 from the following venues: Gdynia; Lelystad, The Netherlands; and Shanghai, China. The Panel made their recommendation to World Sailing’s Executive Committee who unanimously endorsed the recommendation. The selection of Gdynia is subject to a successful site visit and satisfactory contractual arrangements. n

Pomorskie & Tricity

Gdynia to host the 2019 Youth Sailing World Championships

Pomeranian Special Economic Zone expands with HAAD project Another permit to conduct activity was issued in the Pomeranian Special Economic Zone - the HAAD Sp. z o.o. will start its business activity on the premises of the PSEZ. HAAD sp. z o.o. is planning to build a production hall of 150 sq.m. with a separate office part. The investment foresees installation of machines for bending pipes, profiles and rods, as well as installation of machines to form the ends of tubes and machines and associated equipment (saws, grinders and polishers destined to give the pipes satin surface). n

2016 March–April

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Pomorskie & Tricity

Real Estate

Gdansk/Gdynia strong showing at MIPIM real estate investment forum Gdynia’s Deputy Mayor Katarzyna Gruszecka-Spychala joined Deputy Development Minister Mateusz Morawiecki on the “Poland Investment” panel at MIPIM, to allay investors’ concerns about Poland and boast of the benefits of the Trojmiasto region. She pointed out the the business services sector in Poland is number one in Europe, and a strong driver of job growth in Gdynia and Gdansk. Deputy Morawiecki assured the panel that economic governance is “the top priority of the government. We know that we can not do much without the economy aimed in the right direction,” - he stressed. He added that the government wants to be inclusive, such that all parts of society benefit from development”. “Public debt is not too high, the overall debt of the economy is not high” - said Morawiecki. When asked by “Financial Times” on Poland correspondent Henry Foy if investors concerns about Poland

are overblown, he replied: “Very.” In his opinion, some of the ruling camp, until recently, find it difficult to get used to being in opposition. “For them it’s a shock, and if you’re shocked, you’re doing different things, and these things are calling for support from abroad” - said Morawiecki. He expressed the hope that the “dust has settled”. He pointed out that on Tuesday in London, he met with investors including 30-40 pension funds, and that maybe 20 percent of their questions were related to policy, and further discussion related to Poland’s positive macroeconomics, budget and growth prospects. At this year’s MIPIM fair, held annually in Cannes, there were 38 Polish exhibitors: cities, regions, Special Economic Zones and real estate developers. The largest part of the Polish exhibition were presentations of the Tri-City (Gdańsk, Gdynia, Sopot and Pruszcz Gdanski), Warsaw, Lodz, Wroclaw, Poznan and Krakow. Totals at MIPIM this year included 21,500 attendees, 4800 investors, 1500 architects, 370 political leaders and more than 400 journalists. n

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March–April 2016

Pomorskie & Tricity

Real Estate

Belfast-headquartered IT business Kainos opens new office in Gdansk The company has attributed its expansion into Gdańsk to a rapid growth in the volume of its global projects. The new office provides capacity for 500 staff. `Brendan Mooney, Kainos chief executive, said the investment highlights not only the company’s success in Poland to date but also its ambition to “remain as one of the most committed and attractive high-tech employers here”.

2016 March–April

“Gdańsk has proven to be a very fertile location for recruiting technical talent and expertise,” he added. “We are consistently impressed by the calibre and enthusiasm of the graduates and experienced professionals we employ here.” Stephan Sakowicz, head of Kainos’ Gdańsk operations, said: “It’s important to us that the new office reflects the company in every way possible. “We have deliberately chosen a landmark location in the heart of Gdańsk to emphasise our commitment to be part of a growing business community and to be easily accessible for staff and clients.” n

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Office Market

Young Architects’ Dreams of Future Gdansk Pomorskie & Tricity

An exhibition “Diplomas 2015” can be viewed at Gdansk Polytechnic, showing forty two best architectural visions of the new, emerging Gdansk and the Tri-city. The Mayor of Gdansk awarded three of them a prize, acknowledging the city’s need of modern architectural excellence balanced with the sensitivity of the city’s unique, rich past. The new urban vision will be an important element of the city’s new image: a network of convenient, beautiful and modern infrastructure remaining in an agreement with Gdansk’s complex pedigree. The first prize went to Tomasz Urbanowicz for “The project of a multiuse building with a marina in Gdansk Young City District”. The young architect proposed a very attractive, simple in form, structure, situated in the Gdansk shipyard, and surrounded by a vast, inviting rest area, passing into a marina on Dead Vistula canal. “The project could successfully find its place in a rich program of the city, becoming a regular meeting place for locals, a tourist accommodation, a showcase of the city and a perfect complement to the functionality and space of both the district and the entire city, in addition to creating

a new piece of Dead Vistula waterfront “ - wrote Tomasz Urbanowicz in his diploma description. Shipyard grounds were also the subject of a diploma of Tomasz Zabłotny - the winner of the Gdansk Mayor’s second prize. The young architect has created a vision of the office building on the site of the former, 19th century Imperial Shipyard - the oldest part of Gdansk Shipyard. The light, airy, office building made of glass is adjacent to the preserved waterfront shipbuilding halls with the very characteristic three shipyard cranes in the background. The new Waterfront district flawlessly connects the oldest part of the historic Imperial Shipyard with the Old City, preserving the exclusive identity of the place. “An important part of creating a new showcase of the city - a district of the waterfront area linking the former shipyard to the Old Town - should be to preserve and take advantage of the unique identity of the place. The premise of the project is to create an architectural background sustainable in form. It will create a special atmosphere of the place - brick halls and steel industrial infrastructure - remain a clear, legible symbol of Young City pedigree “- emphasizes Tomasz Zabłotny in the description of his work. The judges of the competition awarded this project for its asceticism, pure form of the office building, and the dialogue that it establishes with the environment. n

Offices Trojmiasto Total Office Stock (m²): 573,500 Vacancy Rate (%) 10.8% Available Space in existing buildings (m²) 61,700 Completions in 2015 (m²) 79,200 Net / GrossTake-up (m²) – 2015: 90,200 / 107,500 Rental Band (EUR/ m² /month) 12.75 – 13.5

Supply: At the end of 2015, some 138,100 m2 of office space was under construction across the Tri-City, out of which around 96,900 m² will enter the market in 2016. It is worth noting that 17% of the under construction office pipeline has been already secured by pre-lets. The largest office projects under construction include:

BiznesPolska.pl/EN

• Alchemia phase III (36,000 m2) • Olivia Business Center- Olivia Star (27,200 m2) • Tryton Business House (21,000 m2 – completed in Q1 2016) • C200 (17,600 m2) Demand: Tri-City remains the fourth largest market in Poland in terms of BPO/SSC employment with some 13,700 people active in the sector. Take-up volumes in 2014 amounted to 66,500 m2, and exceptional 107,500 m² in 2015, largely due to the new entrants such as State Street (15,000 m2 in Alchemia) or ThysenKrupp (4,900 m2 in Olivia Business Center). (source: JLL)

March–April 2016

Pomorskie & Tricity

Retail Market

Multi’s Forum Gdańsk to revitalise Hay and Crayfish markets The new centre will offer some 63,000 m2 of gross leasable area in the inner city of Gdańsk, adjacent to the main railway station, the Old Town and key municipal buildings. Total investment, including road infrastructure development, is approximately PLN 800 million. The project started with preparatory work and archaeological excavations in autumn 2014, and the grand opening is scheduled for 2017. Forum Gdańsk has been designed to revitalise the historic areas of the former Hay and Crayfish markets, and will combine a retail scheme with the creation of quality public space and the modernisation of the road infrastructure. Multi Poland, the Gdańsk municipal authorities and PKP Polish Railways are cooperating on this project. “We are bringing the Hay and Crayfish markets back to life and back to their original function. Years ago this area was a lively marketplace, and also the first stop for those arriving in Gdańsk. For many visitors, this will be the starting point of their visit to the Old Town, with its historic sites and attractions. And for us, the residents of Gdańsk, this will be a new place to meet, chat, spend time together and, of course, go shopping. What would a market be without shopping?” said Paweł Adamowicz, the Mayor of Gdańsk. “In one year’s time, we want the residents of Gdańsk to come and enjoy their free time at Forum Gdańsk – whether shopping, watching a movie, eating at one of the restaurants, exercising at the gym, or visiting the Gdańsk Heritage Centre. We hope many people will also come here just to spend time at the public square over the Radunia canal. The prestigious location in the heart of the city makes Forum Gdańsk a very special project for Multi and we are fully committed to making it a success,,” said Tomasz Matusiak, Director at Multi Poland. Forum Gdańsk - summary The 63,000 m2 Forum Gdańsk will provide space for some 220 stores, the city’s largest, nine-screen Multikino cinema, a Pure Jatomi fitness club, a selection of restaurants and cafes to suit every taste, and a multilevel car park for 1,100 vehicles. Tenants already on board include well-known Polish and international brands, such as C&A, City Sport, Deichmann, Diverse, Douglas, H&M, Le Coq Sportif, Mango, Pandora, Piotr i Pawel, Red Rubin, Rossmann, Solar, Super-Pharm, SWISS, Triumph, Vistula, W.Kruk, Wólczanka. These will be joined by five brands of the internationally expanding Polish LPP Group: CROPP, HOUSE, Mohito, Reserved and Sinsay, together with the home furnishing brand home&you. Inditex will also be present with its brands Zara, Zara Home, Bershka, Massimo Dutti,

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Oysho, Pull&Bear and Stradivarius. McDonald’s, Pizza Hut, Burger King and KFC have already signed up for the foodcourt. Popular local and regional brands Szydłowski bakery, Delicje cake shop and BIOWAY will also be opening stores in Forum Gdańsk. Gdańsk Heritage Centre A vital part of Forum Gdańsk will be Gdańsk Heritage Centre, which will serve as a welcome point receiving guests arriving in the city. The Heritage Centre is to house a multimedia room, an exhibition hall, a scale model of the City of Gdańsk, a theatre hall, a cafe, as well as offices of the Gdańsk Tourist Organization. Public infrastructure Forum Gdańsk will also provide the city with new public infrastructure. A new transfer hub will be located on the overpass on Armii Krajowej Avenue, integrating bus, tram and rail services. Targ Rakowy will be rebuilt as a pedestrian passageway. Nowe Podwale Grodzkie will be created as a new street running underneath

the buildings of Forum Gdańsk, and the neighbouring crossroads will be modernized. A public square, designed as an attractive space to meet and relax, will be included in the complex. Visitors will be able to enjoy comfortable seating surrounded by greenery, or choose one of many cafes and restaurants with external gardens, open until late in the evening. The banks of the Radunia canal will be revitalized and covered with a glass roof. As a result, residents of Gdańsk and visitors will gain quality urban space in the very centre of the city, bustling with activity and offering a variety of leisure time options. Design The concept design was provided by T+T Design, Multi’s in-house design studio. The Polish branch of renowned French construction designers SUD Architectes is in charge of the detailed architectural plan. BPBK of Gdańsk has designed the technical and road infrastructure. The Heritage Centre was designed by Studio Architektoniczne Kwadrat of Gdynia, selected by way of a public competition. n

March–April 2016

Retail Market

Currently under construction in Gdańsk-Wrzeszcz and with Cushman & Wakefield acting as leasing agent, Galeria Metropolia continues to announce more lease deals with international retailers. Sports Direct, a UK leading sports apparel and footwear retailer, has recently joined other tenants of Galeria Metropolia. Founded in 1982, it already has nearly 700 stores across Europe, including about a dozen in Poland. Sports Direct offers a wide range of top sports brands, including Puma, Adidas and Nike, as well as its own well-known brands such as Lonsdale and Everlast. It will take up around 1,660 sq m in Galeria Metropolia. “Sports Direct is the United Kingdom’s largest and firstchoice retailer offering sports equipment and clothing. It is valued for quality and affordable prices. I’m pleased that Galeria Metropolia customers, undoubtedly including many outdoor enthusiasts, will have access to such a broad sports retail offer in addition to our large fitness club,” said the investor, Bogdan Górski, President of PB Górski. Galeria Metropolia is part of a phased project developed by Przedsiębiorstwo Budowlane Górski in Gdańsk-Wrzeszcz.

It will comprise the Galeria Metropolia shopping centre, a 126-room hotel and a conference centre. Developments in its vicinity also include Browar Gdański, a housing estate with more than 800 apartments, and Browar Kulturalny providing 20,000 sq m of service and entertainment space. When completed, Galeria Metropolia will provide more than 34,000 sq m to its customers and tenants, including around 150 retail and service stores and stands spread over its four levels. Cushman & Wakefield is the exclusive agent responsible for retail space leasing in Galeria Metropolia, which has already been more than 70 percent let. The scheme is scheduled to be delivered in late 2016. Ka Sport and Apart have also joined the tenant mix in Galeria Metropolia. Ka Sport is the owner of a retail chain offering sports footwear and outdoor clothing by leading manufacturers, including renowned brands like Regatta, Dare2b, Alpine Pro, and Brubeck. The shop in Galeria Metropolia will have the area of 140 sq m. Apart, the largest and most popular Polish jewellery brand, will lease a 114.5 sq m boutique. n

Pomorskie & Tricity

UK retailer Sports Direct to open in Galeria Metropolia

Talliner brand expansion gains momentum After the opening of its first outlet in Galeria Bałtycka in Gdańsk in February, another two stores opened on March 2nd: in the Tarasy Zamkowe shopping centre in Lublin and the Zielone Arkady shopping centre in Bydgoszcz. The Talliner store in Tarasy Zamkowe has an area of app. 409 sqm, while

the outlet in Zielone Arkady measures 440 sqm. More stores are to be opened in shopping centres in Katowice, Szczecin, Wrocław and Gdynia. Talliner is a premium brand targeted at the 30+ age group and older. Its range includes women’s and men’s clothing, accessories and shoes. n

25 2016 March–April

BiznesPolska.pl/EN

Pomorskie & Tricity

Logistics

Goodman in big expansion in Gdansk on strong port traffic growth Goodman Group, a leading global owner, developer and manager of industrial property, has delivered two additional units totalling 38,700 sqm at the Pomeranian Logistics Centre (PLC) located near the Gdañsk Deepwater Container Terminal (DCT). The centre’s total space has increased to 53,000 sqm, including 7,700 sqm of warehouse space available for immediate lease. “Thanks to growing customer interest, we are continuing with the expansion of the Pomeranian Logistics Centre, which is one of our flagship investment projects in Poland. This is a perfect place for logistics firms and distributors because of its close proximity to the container terminal in Gdañsk as well as access to well-developed road infrastructure, both of which facilitate easy access to numerous markets,” said Blazej Ciesielczak, Goodman Regional Director for Central and Eastern Europe. The first of the new facilities in the Pomeranian Logistics Centre is a 24,900 sqm warehouse fully leased by Eurocash, the FMCG distributor. Customers at the second facility, comprising 13,800 sqm of warehousing space and built on a speculative basis, are logistics operators Poland Services Transport-Logistyka and Univeg Logistics Poland. They are leasing 3,500 sqm and 2,600 sqm, respectively. An additional 7,700 sqm of warehouse space is available for immediate lease. “The dynamic growth of the DCT Gdañsk is having a positive impact on the attractiveness of the logistics market in the Tri-City area. More and more companies are deciding to locate their operations in Gdansk and the expansion of the Pomeranian Logistics Centre shows that Goodman’s investment is the right choice for them,” says Tomasz Mika, Head of Industrial Department Poland at JLL. Customers that have leased logistics space at the Pomeranian Logistics Centre also include logistics operators Kuehne + Nagel and Terramar, forwarding company NTA, and NRF Poland, a producer of coolers and air conditioning components. The Pomeranian Logistics Centre in Gdañsk is Goodman’s premier development project in Poland and is owned by the Goodman European Partnership, Goodman’s flagship real estate investment vehicle. Goodman has the opportunity to develop up to 500,000 sqm of flexible logistics warehousing and production facilities with integrated

BiznesPolska.pl/EN

office space. On completion, the total value of the project is estimated to exceed €300 million. Among the main advantages of the Pomeranian Logistics Centre is its proximity to the Gdañsk Deepwater Container Terminal, which has become an important regional port as a result of its ability to receive some of the world’s largest ships. After the completion of the second quay, which is expected in 2016, Gdañsk Deepwater Container Terminal will double its handling capacity to reach three million TEU annually. The Pomeranian Logistics Centre’s location provides a unique opportunity for port-centric logistics, allowing customers to combine their

logistics and production activities with the services offered by the largest deepwater container terminal in the Baltic Sea. Goodman’s Pomeranian Logistics Centre also enjoys excellent road access. The Sucharski Route and Gdańsk’s southern ring road connect the centre with the A1 motorway to southern Poland and S7 expressway to Warsaw and S6 to Szczecin, which continues further to Germany. It is also located just 23 km from the Lech Wa³êsa Airport in Gdańsk, Poland’s third largest airport, serving both domestic and international flights. Industrial: Road, rail and port investments boost appeal of Pomorskie as logistics and distribution hub JLL’s recent report on the Northern Poland market covers the two distant submarkets of the Tri-City and Szczecin. Both are relatively young, with strong development activity over the last two years, during which

March–April 2016

time almost 190,100 m² of modern A-class stock was completed. Both have a few common features, i.e. their peripheral location, proximity to seaports and location within larger urban areas. Recent investments in road infrastructure towards the south, the S3 from Szczecin and the A1 and S7 (still under construction) from the Tri-City, have significantly shortened driving times to other major agglomerations in Poland. Also, the planned S6 between Szczecin and the Tri-City will significantly improve transport along the Polish Baltic sea coastline.

The Pomeranian Logistics Centre is Goodman’s flagship project. The total value of the project is estimated to exceed €300 million. Additional investments made by port authorities in both locations have spurred further economic growth and demand for warehouse space. These investments improve both the volume of carried

goods and the quality of provided services and are focused on product and service diversification. A third important factor in Szczecin is the development of the Special Economic Zone in the suburbs of the city. Strong development activity was seen in Szczecin in 2015, with 70,000 m² of new supply, ranking that market in fifth position. By the middle of 2016 stock in Northern Poland will increase by an additional 79,000 m² (20% of existing stock) in four new projects, but the total stock will be roughly 0.5 million m², far behind the demographic and economic potential of these regions. Some 54% of the pipeline as of the end of 2015 was secured by signed pre-let agreements and overall these markets show stable organic growth. The vacancy rate in Szczecin is on a par with the national average (6.2%), but for the Tri-City the picture is slightly misleading: due to a change in occupancy in a large park in Q4 2015 the vacancy rate increased from 6.0% to 12.3%. With such limited market stock even a small change in one of the projects has a significant impact on the overall data for the region. New supply under construction in the Tri-City (46,500 m² at the end of 2015) shows the confidence of developers in the region, as taking into account the rather strong demand, the vacancy rate in the Tri-City might quickly return to the national average level. Headline rents in the Tri-City and Szczecin remained stable during 2015, at €3.0–3.3 / m 2 / month and €3.0–3.75 / m 2 / month respectively. n

Pomorskie & Tricity

Logistics

27 2016 March–April

BiznesPolska.pl/EN

Top 100 Pomerania Companies

Top 100 Companies in Pomorskie Revenue in 2014 (thousands PLN)

Grupa Lotos SA GK

Gdańsk

28,501,887

Energa SA GK

Gdańsk

10,590,595

Pomorskie & Tricity 28

Company

City

Revenue in 2014 (thousands PLN)

Markisol International Ltd sp. z o.o.

Wejherowo

154,042

Mega SA

Gdynia

153,508

Inpro SA GK

Gdańsk

147,732

Rank

City

Rank

Company

Grupa Ergo Hestia

Sopot

4,974,007

LPP SA

Gdańsk

4,769,288

PTS Plast-Box SA GK

Słupsk

146,532

Glencore Polska sp. z o.o.

Gdańsk

3,483,201

Fast SA GK

Gdańsk

137,158

Flextronics International Poland sp. z o.o.

Tczew

3,132,663

Euro Styl sp. z o.o. S.K.A GK

Gdańsk

136,933

Morpol SA

Sopot

2,311,645

Trefl SA

Sopot

136,069

Remontowa Holding SA GK

Gdańsk

2,261,651

PEWiK Gdynia sp. z o.o.

Gdynia

133,916

International Paper Kwidzyn sp. z o.o.

Kwidzyn

2,257,235

Apator Metrix SA

Tczew

131,712

Polpharma SA

Starogard Gdański

1,819,579

Seko SA

Chojnice

130,284

Bank BPH SA

Gdańsk

1,386,882

PB Górski sp. z o.o. S.K.A

Gdańsk

129,065

Jysk sp. z o.o.

Gdańsk

1,230,840

Epigon SA

Słupsk

126,602

Cefetra Polska sp. z o.o.*

Gdynia

1,224,494

Best SA GK

Gdynia

124,006

Graal SA GK

Wejherowo

860,793

Korporacja Budowlana Dom SA GK

Krokowa

123,989

Multimedia Polska SA GK

Gdynia

705,822

GIWK sp. z o.o.

Gdańsk

123,957

Balex Metal sp. z o.o. GK*

Bolszewo

625,305

Port Lotniczy Gdańsk sp. z o.o.

Gdańsk

121,114

Blue Media SA*

Sopot

602,864

Esotiq&Henderson SA GK

Gdańsk

109,624

Prime Car Management SA GK

Gdańsk

552,065

Towarzystwo Finansowe SKOK SA

Gdańsk

109,583

Drutex SA

Bytów

525,000

Zremb Chojnice SA GK

Chojnice

107,688

Procam Polska sp. z o.o.*

Tczew

517,707

Techno-Service SA GK

Gdańsk

107,653

Zakłady Mięsne Skiba*

Chojnice

484,240

Llentabhallen sp. z o.o.

Gdańsk

99,428

GPEC sp. z o.o. GK

Gdańsk

482,307

Ekolan SA GK

Gdynia

97,987

Meritum Bank ICB SA

Gdańsk

450,796

Damen Shipyards Gdynia SA

Gdynia

97,961

Crist SA

Gdansk

401,334

Ensto Pol sp. z o.o.

Straszyn

90,974

Vistal Gdynia SA GK

Gdynia

322,361

Ziarn-Pol sp. z o.o.

Kwidzyn

90,604

Porta KMI Poland sp. z o.o. S.K.A

Bolszewo

295,083

Metalzbyt sp. z o.o.

Gdańsk

90,181

Stocznia Remontowa Nauta SA

Gdynia

289,807

WNS Pomorze sp. z o.o.

Gdańsk

89,632

Korporacja Budowlana Doraco sp. z o.o.

Gdańsk

280,687

KBR Poland sp. z o.o.

Kwidzyn

84,510

Gino Rossi SA GK

Słupsk

265,494

Radmor SA

Gdynia

83,261

Dekpol SA

Pinczyn

251,082

Naftoport sp. z o.o.

Gdańsk

76,440

Saur Neptun Gdańsk SA

Gdańsk

250,710

Balticon SA

Gdynia

74,588

Zakład Komunikacji Miejskiej w Gdańsku sp. z o.o.

Gdańsk

245,837

Jantar sp. z o.o. GK

Słupsk

73,765

Grupa Inwestycyjna Hossa SA

Gdynia

240,471

Navimor-Invest SA GK

Gdańsk

68,344

OPEC sp. z o.o.

Gdynia

238,562

Botrans sp. z o.o.

Kościerzyna

65,572

Atlanta Poland SA**

Gdańsk

233,995

Trans Polonia SA GK

Tczew

65,286

Ziaja Ltd. ZPL sp. z o.o.

Gdańsk

224,390

DSV sp. z o.o. S.K.A

Gdynia

63,387

Zarząd Morskiego Portu Gdańsk SA

Gdańsk

223,749

Polmed SA GK

Starogard Gdański

61,076

GZNF Fosfory sp. z o.o.

Gdańsk

223,500

Kompap SA GK

Kwidzyn

56,259

Radpol SA GK

Człuchów

205,396

Sevenet SA

Gdańsk

55,017

Mercor SA GK

Gdańsk

197,630

Robod SA

Gdańsk

54,663

Sigma sp. z o.o.

Gdańsk

195,182

Graso Zenon Sobiecki

Starogard Gdański

53,227

Omida sp. z o.o. GK

Sopot

193,486

Procad SA GK

Gdańsk

49,893

PPT PKS Gdańsk-Oliwa SA

Gdańsk

186,733

Przembud Gdańsk SA

Gdańsk

48,997

PCC Intermodal SA GK

Gdynia

185,321

Aste sp. z o.o.

Gdańsk

43,485

Polnord SA GK

Gdańsk

183,188

Swissmed Centrum Zdrowia SA GK**

Gdańsk

43,261

Zarząd Morskiego Portu Gdynia SA GK

Gdynia

182,884

eCard SA

Gdańsk

43,196

ATC Cargo SA GK

Gdynia

178,170

KB Pomorze sp. z o.o.

Gdańsk

42,064

BMG Goworowski sp. z o.o.

Gdynia

176,246

Wilbo SA

Gdynia

40,433

Fota SA GK

Gdynia

173,818

P&P sp. z o.o.

Orle

40,025

Eurotel SA GK

Gdańsk

164,579

100

Admiral Boats SA

Gdynia

39,079

*Lista500Rzeczpospolita, **gielda.onet.pl source Polska Dziennik Baltycki

BiznesPolska.pl/EN

March–April 2016

BPO/Shared Services News Wincor Nixdorf to open international service centre network in Szczecin The company’s new office will be located in Echo Investment’s Oxygen office building on ul. Malczewskiego. WN aims to employ 80-100 people by the end of 2016. Ultimately, the headcount will go up to 300. The new office will be part of Wincor Nixdorf’s international customer service centre network. This will be the second such unit in Poland, after one centre previously opened in Warsaw, and the fifth one in the world. The remaining three centers are located in Mexico, Malaysia and Venezuela. Apart from the Warsaw centre, Wincor Nixdorf has three other locations in Poland: in Kraków, Katowice and Wrocław. The nine-storey 14,000 sqm gla Oxygen is part of the 18-asset commercial real estate portfolio controlled by Echo Prime Properties, an Echo Investment subsidiary, in which the South African property investor Redefine has recently bought a 75 stake. In the past Oxygen was leased to such tenants as BrightOne, PKO BP and Enea.

Administration Personnel Services Telecom sector outsourcing company Administration Personnel Services (APS), which is owned by Bertelsmann Media, has leased over 3,000 sqm of office space in the Maraton office building currently being developed in Poznań by Skanska Property Poland. APS is consolidating all of its Poznań-based operations previously divided between two locations within the new office building. The first lease contract for Maraton was signed last November with accounting services firm Duni European Finance Function. More recently, a lease agreement for almost 2,000 sqm was signed by international tyre and rubber products manufacturer, Bridgestone, which has also selected Maraton for its shared services centre. n

BiznesPolska.pl/EN

Hong Kong’s Cathay Pacific Airways to open in Krakow

Hong Kong’s Cathay Pacific Airways will hire 100 employees in its Global Contact Center which will be based in Kraków and will open in April 2016. The company is expected to hire as many as 250 employees in the next stage. The airline has received accolades and has been awarded a lot of times in numerous categories: Best airlines on transpacific routes in 2015, World’s best airline in 2014, Best flight attendants in 2013. The decision of opening the office in Kraków was a deliberate choice. As Simon Kriss, Global Contact Centres Manager in Cathay Pacific explains: “The decision of choosing Kraków for the Global Contact

Center has been made after months of analysis and complex preparation. The process involved a lot of other potential locations. Taking into consideration that Cathay Pacific has a liking for quality, the most important indicator for us is the company’s ability to coherent provision of best services related to customer service. We are deeply convinced that Kraków creates such possibilities for us. It is also interesting that we came to such conclusion in two ways - first of all we verified the facts, data, statistics, infrastructure, maturity of the market, growth trends. Second of all, when we entered any coffee shop, restaurant or shop in Kraków we could come across with the quality service ethos which seems to be inserted into the modern Polish culture in a natural way.” n

March–April 2016

BPO/Shared Services News

BPO/SSC sectors are driving office space in CEE markets MIPIM, March, 16, 2016 – Investment funds such as Griffin Real Estate, Starwood, Union Investment and TPG are still very active in the CEE region and are increasingly looking for products in regional cities away from capitals. Undoubtedly, the BPO/ SSC sector is a driving force for the development of office space in regional cities, which translates into a growing trust among funds for products with a tenant from this sector. In Poland, transactions by these funds have

included the office buildings Dominikański in Wrocław (Union Investment) and Green Horizon in Łódź (Griffin). By contrast, according to the Polish Agency for Information and Foreign Investment, the largest investors in Poland last year were three American companies: the passenger transport company Uber (shared service center in Krakow, 9 million euros), the financial services company State Street (BPO in Gdansk, 7.3m euros) and the money transfer company MoneyGram (shared services center in Warsaw 4.8m).

Sebastian Bedekier, Regional Director, Poznan, Colliers International said: “As regards the markets in capitals in the CEE region, Warsaw, Bucharest, Budapest, and Prague dominate the BPO/SSC map, and this trend is expected to continue over the coming years.” A rising star among the capitals of the CEE region is Vilnius, which is becoming an increasingly noticeable destination for the BPO sector, and is the result of a very active promotional strategy by the city’s authorities. n

ABB to open in Poland ABB, the Switzerland-based automation and power technologies major, plans to consolidate its global back-office operations for human resources, accounting, and supply chain in India and Poland. This would help the firm cut annual costs by as much as $1 billion. ABB, through its shared services unit, already has around 2,000 people working on technology and research

in India, including services such as monitoring the working of about 3,500 robots at its customer factories globally. ABB currently has 68 backoffice centres globally providing finance, payroll and supply chain services. These would be consolidated into two large centres — India and Poland — and four regional ones over the next two years, Chief Executive

Officer, Ulrich Spiesshofer said in an investors call in February. “The process is under way and will enable us to deliver higher-quality services at bestin-class costs,” said Spiesshofer. ABB joins global manufacturing firms such as Caterpillar, Denso, Shell, Siemens and John Deere to set up captive backoffice centres that would service its businesses globally. n

Credit Suisse with second location in Poland Swiss financial services group Credit Suisse, already operating with a major presence in Wroclaw, has apparently

decided to follow in the steps of State Street, and open up a 2nd location in Poland in a new city. While details

were not available at press time, insiders say that the 2nd city will be either Krakow or Warsaw. n

Rumors swirl around Zurich Financial Services. Krakow may be the location of a new business services operation of Switzerland-based Zurich Financial Services. Unconfirmed rumors are that a

2016 March–April

final decision is to be made before summer 2016. A key factor in the decision is the frequency of direct flights of Swissair from Zurich to Krakow. n

31 BiznesPolska.pl/EN

Central Eastern Europe Shared Services & Outsourcing Awards

Winners Awarded in 26 Categories for 4th Edition of CEE SSO Awards 2016 More than 300 top execs from 129 companies and 23 countries celebrated this year's top winners at the 4th annual CEE Shared Services and Outsourcing Awards on 4 February 2016 in Warsaw – with more than 50 being international firms from western Europe, Scandinavia, United States, United Kingdom, east Asia and India - interested in setting up, expanding, or fine-tuning their business services centres in central Europe. The annual CEE SSO Awards Gala is dedicated to recognizing excellence in the sector for the Central and Eastern European region. Best CSR initiative of the Year 2016

Credit Suisse partnership with Wroclaw Children’s Hospice Foundation

Central and Eastern Europe (CEE) is wellestablished as a world-class destination for Shared Services centres and BPO investment. With Poland the strongest location in the region, other countries such as the Baltics, Czech Republic and Romania are important investment destinations. Global outsourcing firms, business services projects and sector professionals were presented with awards of acknowledgment - by an independent jury from the industry - for their contribution to the development of the business services sector in CEE for 2015. The Awards Gala was preceded by a half-day Forum of discussion panels covering the shared services and outsourcing sector, led by investors such as State Street, Goldman Sachs, CH2M, and Cisco.

Best University-Business cooperation of the Year 2016

Best Public Sector Project of the Year 2016

District Authority of Ketrzyn and Shared Services Center for Ketrzyn District

Cisco Engineer Incubator Program

Emerging City of the Year – CEE 2016

Emerging City of the Year – Poland 2016

Most Dynamically Developing City – CEE 2016

Kaunas (Lithuania)

Bydgoszcz

Vilnius (Lithuania)

www.CeeOutsourcingAwards.com BiznesPolska.pl/EN

March–April 2016

Central Eastern Europe Shared Services & Outsourcing Awards Most Dynamically Developing City – Poland 2016

Best Real Estate Advisory Firm of the Year 2016

Best New Office Development for SSC/BPO Sectors 2016

Tri City

JLL

Olivia Six (Gdansk)

Best Executive Search Firm of the Year 2016

Best Recruitment Firm of the Year 2016

Best General Advisory Firm of the Year 2016

Hays Executive

Randstad Polska Sp. z o.o.

PwC Poland, SSC/BPO CoE Team

Best Business Centre Manager of the Year – BPO 2016

Best Business Centre Manager of the Year – Shared Services 2016

Best Employer of the Year – BPO 2016

Agnieszka Zygner, Capita Poland General Manager

Terri Gerosa, CSC Poland Head, Citi Service Center Poland

CPL Integrated Services Budapest, Hungary

Best Employer of the Year – Shared Services – CEE 2016

Best Employer of the Year – Shared Services – Poland 2016

Best New-entrant SSC of the Year 2016

Danske Bank Group IT Lithuania (DGITL) (Vilnius, Lithuania)

Credit Suisse Center of Excellence Wroclaw

NASDAQ Vilnius Services

33 2016 March–April

BiznesPolska.pl/EN

Central Eastern Europe Shared Services & Outsourcing Awards Most Unique Services Provider – Poland 2016

Most Unique Services Provider – CEE 2016

Best IT Services Firm of the Year – CEE 2016

Capita Polska (Kraków / Łódź, Poland)

Nasdaq Vilnius Services (Vilnius, Lithuania)

SoftServe

Best IT Services Firm of the Year – Poland 2016

Best BPO Firm of the Year – Poland 2016

Best BPO Firm of the Year – CEE 2016

Sii Sp. z o.o.

Capita Polska

Conectys (Romania)

Best Shared Services Firm of the Year – CEE 2016

Best Shared Services Firm of the Year – Poland 2016

BT Regional Operations Centre (Hungary)

State Street Bank Poland

Next Edition 2nd February 2017 Warsaw 34 BiznesPolska.pl/EN

March–April 2016

CEO Interview

Employers adapt to tighter labour market As the labour market continues to change, employers must adapt. What are HR consulting and professional recruitment agencies advising clients to do? Finding the right employee has never been easy and now it is becoming even more difficult. The drop in the unemployment rate over the past few years is slowly turning our labour market into an employee’s market. This means that those who are looking for a job have greater freedom to choose their future employer, which gives them a stronger position in a job interview. Companies are aware of that and more and more often they decide to commission recruitment and HR management tasks to firms which are experts in this field and are able to quickly address these needs. Moreover, employees more frequently expect more from their employers than just a good salary. Hence the growing popularity of various non-salary benefit programs offering unique extras, from sports activity programs to complex insurance and investment schemes. Large companies, in particular, are seeking help in the area of HR consultancy of companies like Adecco Poland and expect support in recruiting specialist personnel, performing audits of internal HR departments or helping to create attractive and flexible packages of non-salary benefits. Research shows that a well-chosen range of benefits may keep the most talented staff in the company and attract candidates. Which sectors of the economy are driving employment growth? Several growing sectors are contributing to lower unemployment. Certainly, through the end of this year we expect positive labour market results in FMCG, production and infrastructure segments. The growing employment rate in TFL (transport, forwarding, logistics) is directly related to that, since more intensive production requires additional expenditures on logistics and transport. We will also see low unemployment rates duing periods of intensive work in the construction sector and seasonal work in Polish agriculture, for instance. Yet the main reason for improvement of the labour market is Poland’s consistent economic development. The stable economic situation also contributed to relative stability of the value of the Polish zloty, which has

2016 March–April

traded within a 15 percent range with the Euro and US Dollar in the last few years. This currency stability gives confidence to export-oriented manufacturers, who are more willing to boldly plan development and higher production volumes. Expansion of the HR base is a natural consequence of a growing economy. When looking at the Polish labour market, it is hard not to be optimistic. More and more Poles are finding jobs, salaries are growing in a number of economic sectors and non-salary benefits are on the rise. The “employer’s market” is becoming the “employee’s market” – in construction, finance or TFL. Other sectors are also growing, like shared services centres, automotive, FMCG and HoReCa. If the market is becoming more and more employee-focused, what groups are in the worst situation in the labour market? The young generation is now in the worst situation. At present, in the whole European Union, including Poland, unemployment within this group slightly exceeds 20 per cent. It is extremely important to actively communicate with young people, whom Adecco Poland treats as potential candidates in the labour market. It is important to communicate to young Poles that a dreamed-of full-time job, on the one hand, and unemployment, on the other, are not the only choices they face. The contemporary labour market offers various forms of employment. We want to show that flexible forms are as secure as their desirable full-time job. We believe that continuous education of society may translate into a significant decrease of unemployment among the young. This is why Adecco carries out various projects, including a very interesting program called “CEO for One Month”, where we recruit people for my position, Chief Executive Officer of Adecco Poland. The winner of this competition will work for one month and within our structure will undertake decisions which are binding for the entire organisation and for this work will earn a salary of 20,000 PLN before tax. The winner will truly feel what it is like to sit behind the desk of the CEO and will actually experience the burden of true responsibility. n Anna Wicha is CEO of Adecco Poland since 2007. She is also responsible for the strategic activities of Adecco in Romania. Since 2010 she is the President of the Polish HR Forum and Board Member of Eurociett.

BiznesPolska.pl/EN

Anniversary

This year we’re all Onlineprinters! 2016 is a special year for Onlineprinters. The company is not only celebrating 30 years of high-quality production, but also the 10th anniverary of the company’s huge e-commerce success in Europe.

Anniversary

Their product mix ranges from business cards, stationery, flyers, postcards, posters, catalogues, brochures and calendars all the way to large format advertising systems. What was the key to the international sucess of the company? The idea is as simple as the company’s claim: Printings simply ordered online. The road to success The history of the company starts in Neustadt an der Aisch, Germany in 1984. The typesetter Erwin Meyer founded a traditional

print shop, targeting local clients. The starting capital was 100,000 Deutsche Mark, and the family car was provided as security. His son Walter Meyer revolutionised the classic business model in 2004 by going online with the launch of the first webshop. Now Onlineprinters serves 340,000 customers with sites like Onlineprinters.pl. During

the last 3 decades, a small, familyowned business has developed into an international leader in modern printing providing high-quality

services in 30 European countries and a portfolio of more than 1,400 print products. Today over two billion printings are produced annually in the in-house production. Naturally, this is only possible with a well-synchronised team of 550 employees and state-of-the-art production technology. Currently, the entire production, processing and storage spans an area of 40,000 m². Competitive market While many small printers were no match for the extreme drop in prices and competitive pressures in the recent years, Onlineprinters was able to not only maintain its stance in the market thanks to its innovative, international and sustainable growth and production strategy, but to benefit from the change process. Reasons for this are investments in new machines

FDI Poland Investor Awards Gala 2016

A Black-tie Awards Gala and Forum recognizing top Foreign Direct Investors in Poland – and top Polish Investors expanding abroad. 20 October 2016, Warsaw, Hotel Intercontinental

www.fdipolandawards.pl/

36 BiznesPolska.pl/EN

March–April 2016

with the latest technology and a strong IT-based automated production and the efficient combined printing process. Business customers benefit from the possibility of ordering 24 hours a day, fixed prices and quick production and delivery. The order process is simple: Customers choose the product they need, configure it as required, order online and upload their print files. This allows not only for cost-cutting thanks to the simple and user-friendly price calculation, but also makes the whole process easily manageable for the customer as well as the company itself. Service is key Onlineprinters is developing constantly to meet the needs of the clients. "The dynamics of the Two generations of printing: Erwin and Walter Meyer (back) market require that we develop our processes constantly, taking new customer requirements into account and not neglecting trends," said CEO Walter Meyer. Because of this, in July this year

a new International Team in the Customer Service Centre was created. The main goal of this investment is to provide excellent service via E-Mail and Phone. That is why members of the international team are native speakers of Polish, English, German, French, Dutch, Italian and Spanish. What are the future plans of Onlineprinters? The company is genuinely interested in development and satisfying client needs in Europe, especially in the Polish printing market. Poland in particular is being perceived as a natural direction for development, as Polish people are known for their love of innovation and new technologies. "We’ve noticed that our Polish customers have very high standards – and so do we”, says Meyer proudly. Of course, the competition in the online business will continue to increase. "We want to continue to compete in the European printing market as a market leader and to grow profitably," said the CEO, expressing his optimism for the future. n

Anniversary

I’M An OnlIneprInter. p r I n t I n g s s I M p ly O r d e r e d O n l I n e

2016 March–April

.pl BiznesPolska.pl/EN

Energy News

New law threatens wind power in Poland The Polish government plans to unveil new legislation that could swing the country’s energy mix even more towards coal and favor biomass energy production over the nascent wind power industry. Although Poland was one of 195 nations that backed the Paris deal on climate change in December, it sought a special status for coal. Not surprising, given that most domestically consumed electricity in Poland is generated by coalfueled power stations. What’s more, every post-communist government has been paralyzed by fear of industrial unrest should they attempt to reform the lossmaking coal industry. Under EU rules Poland is also required to produce 15 percent of its electricity from renewable sources by 2020, up from around 11 percent today. This means choosing which renewable sources to support – and then how to do so. For now, the Polish wind power sector – one of Europe’s fastest growing in 2015 – looks likely to take a back seat. The new Law and Justice (PiS) government, some believe, may be returning favors with friends in the local biothermal and biomass energy industry. “The common opinion of the industry is that if the bill is adopted without any changes it will effectively stop the further development of onshore wind turbines,” Kamil Jankielewicz, a lawyer at Allen & Overy in Warsaw, said.

Government supports use of coal If the bill is not withdrawn or revised materially, he says, “international investors and financial institutions may seek protection of their investments under bilateral investment treaties as well as under EU rules.” PiS says that wind installations cause conflict between local communities and investors and are a blight on the landscape. But

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some believe the government’s anti-wind approach is motivated at least in part by PiS’s close ties with the Catholic-nationalist radio station Radio Maryja (RM) and its mainly rural audience. RM owns geothermal facilities and is backed by mainly rural and socially conservative groups in Poland. It also played a prominent role in helping PiS win a majority in parliamentary elections last fall. RM has recently also been making gestures towards the Polish Peoples’ Party (PSL) and some believe this may be pushing PiS to show greater loyalty to the influential radio station. “Most biomass producers are rich farmers supporting PSL, while PiS attracts mainly poorer people,” Professor Wladyslaw Mielczarski, a professor at Lodz University in central Poland, said. “But this plan to limit wind generation results from the threat to system stability, plus very high and unjustified profits for wind generation and the transfer of wealth to rich European countries that produce wind installations,” he argues. Wind power on the retreat? The new proposals would make it illegal for new wind turbines to be located near homes, schools and natural reserves and be at a distance of more than 10-times their height, that is about 1.5 kilometers. Existing wind farms would also face audits every two years. “This legislation is a clear statement of intent and should not be allowed to stand,” according to Oliver Joy, a spokesman for the European Wind Energy Agency (EWEA). Poland had the EU’s secondhighest number of wind-power installations in 2015, with developers installing 1.26 gigawatts of new capacity. The country now has 5.1 gigawatts of

installed wind capacity, equivalent to about 9 percent of the installed base in Germany. In 2015, investments in the wind sector were 26.4 billion euros, a 40 percent increase on 2014. “Poland is emerging as a leader for wind power in Europe,” says Giles Dickson, CEO of EWEA. “The draft law proposed is deeply troubling. It will tie new projects up in red tape and make life hard for existing wind turbines that do not meet the legal demands. Imposing these rules will damage investor confidence and put the brakes on future deployment in a country with huge potential,” Dickson said. Anything but wind “Geothermal energy will definitely be a priority of this government,” Environment Minister Jan Szyszko said recently. “In this we see a chance to meet the air quality norms in big urban municipalities,” he said. “The situation is completely different with wind farms, which destroy the landscape, are alien to Poland’s cultural heritage and harmful to natural reserves.” Poland is ranked fifth in the EU in the production of primary energy from solid biomass and about 47 percent of the land area of Poland (14 million hectares), consists of arable and agricultural lands. Added to this, biomass technologies and supply sources are relatively mature and investment costs are lower than for other renewable energy technologies. Norwegian energy firm Fortum said in 2015 it is building a multi-fuel combined-heat-and-power plant in Zabrze, southern Poland, with an investment of 200 million euros and operations primed to start by the end of 2018. GDF Suez and engineering firm Foster Wheeler recently built a 190-megawatt 100-percent biomass-fueled power station near Polaniec. n

March–April 2016

Energy News

Ground-Mount Solar PV Farm in Southern Poland The municipal authorities of Chelmiec, in the south of Poland, have launched the region’s first PV farm, which is fitted with a capacity of close to 1MW, and located on a land plot of some 20,000 square meters. The project was carried out by the municipally-owned company Kopalnia Surowcow Skalnych (KSS) Kleczany sp. z o.o. To develop the project, the company secured an investment grant from the European Union as part of its Cohesion Funds for the 2007-2013 financial period. The grant is worth some PLN 2.5 million, and, together with an additional PLN 3.5 million acquired by the Polish municipality, it allowed the investor to allocate a total of PLN 6 million with the aim to launch the region’s first PV farm. Artur Pietrzak, the chief executive of KSS Kleczany, told Solar Novus Today that the project in Chelmiec was implemented in line with the initial planning phase.

The facility was launched in late December 2015, several days before Christmas, as originally planned, according to the chief executive. “The only challenge that we encountered in the course of the project was related to the fact that, for some of the ordered components, the delivery time was quite lengthy,” Pietrzak said. “The farm is fitted with some 3,800 panels, and each panel is enabled with a capacity of 260 Watts.” The chief executive said that, as part of the project, two 0.5 MW inverters were installed at the farm. The inverters were supplied by ABB, according to Pietrzak, and solar panels and racking from Polish firm Bruk-Bet Solar. In January 2016, the Polish farm was connected to the grid, and the municipality is aiming to further expand the farm’s surface on a land plot of about 60,000 square meters (645,800 square feet). This will allow Chelmiec to gradually increase the

farm’s total capacity to as much as 5MW, according to the company. Under the plan, following the launch of its latest investment, KSS Kleczany is aiming to turn the project to profit in a foreseeable future, and generate revenues of about PLN 600,000 per year from the PV plant, according to the information obtained by local news site Gramwzielone.pl. Should the company’s estimates prove to be correct, the investment in Chelmiec would turn to profit after a five-year period. KSS Kleczany said in a statement that its contract with the electricity transmission network will allow it directly sell the generated electricity. The farm was built by local company Caldoris. On a related note, KSS Kleczany is planning to acquire further funds from the European Union to implement its project of expanding the PV plant. The municipally-owned company says that the mining sector is its prime field of activity, but KSS Kleczany has also been expanding its involvement in other sectors, including the PV industry. The municipality of Chelmiec is inhabited by less than 27,000 people, and it is located slightly more than 330 km from the Polish capital city Warsaw, in the country’s southern region of Malopolskie. Source: SolarNovus

Veolia to build a new, energy-neutral wastewater treatment plant for Namyslow Brewery The new wastewater treatment plant will provide Namyslow Brewery with a highly-effective treatment system coupled with energy efficiency. Proven anaerobic processes were selected to maximize the biogas production and convert it into energy. The energy will be used to power the wastewater treatment plant, covering operating costs and bringing additional profits to the brewery. Veolia’s technological approach made it possible to reuse the wastewater as a resource for energy production and thereby lower the operation cost of the

2016 March–April

plant. The sustainable solution is based on Veolia’s Biobed Advanced EGSB, a highly effective second generation anaerobic reactor using granular sludge technology, and on aerobic reactor AnoxKaldnes MBBR (Moving Bed Biofilm Reactor). A dissolved air flotation system ensuring the required discharge parameters was also included at the wastewater polishing stage. These processes were selected after conducting analysis of the sewage produced by the brewery.. Dariusz Jasak, CEO of Veolia Water Technologies in Poland,

said: “We put forth our most innovative proprietary technologies to help Namyslow Brewery achieve their goal of having a highly-effective treatment system coupled with energy efficiency. We are confident that this new plant will allow Namyslow Brewery to reduce their operation costs and improve their environmental footprint.” Veolia group designs and provides water, waste and energy management solutions that contribute to the sustainable development of communities and industries. n

BiznesPolska.pl/EN

Energy News

Poland to develop geothermal as wind farms fade Poland, under pressure from the EU to reduce its use of highly polluting coal, will develop geothermal energy resources rather than wind farms “which spoil the landscape”, according to the environment minister. Most of the electricity used in Poland is generated in coalfuelled power stations, but under European Union rules the country is required to produce 15 percent of its electricity from renewable sources by 2020, up from around 12 percent currently.

In attempts to comply with these regulations, previous Polish governments have developed biomass energy sources and subsidised the construction of wind farms, but Environment Minister Jan Szyszko said the ruling Law and Justice party (PiS), elected in October, was opposed to wind farms. “Geothermal energy will definitely be the priority of this government. In this we see a chance to meet the air quality norms in big urban conurbations,” Szyszko said.

“The situation is completely different with wind farms. Wind farms destroy the landscape arrangement, are alien to Polish cultural heritage and harmful to natural reserves.” The government, which has faced criticism from media and opposition lawmakers for apparent intervention in the economy since taking office, said in December that it was considering a ban on building wind farms close to houses, a move the industry said could block new investment in renewable energy sources. n

Yingli Solar & R.Power Expand Solar Developments In Poland The European subsidiary of Yingli Solar and Poland-based R Power will expand their joint project development program in Poland from 30 MW to 60 MW. The two companies aim to develop the 60 MW of ground-mounted PV in time for inclusion in the auctions of 2016 and 2017. Each firm holds a 50% stake in the projects. According to press information, development of the projects is well underway with the first bundle of projects already at advanced stages. This represents a positive step in expanding the footprint of solar electricity in this country. “The extension of this strategic partnership exemplifies Yingli Europe’s successful global downstream project development business

and strategy, which centers on identifying strong local partners to collaborate with in key regions of the world for project opportunities,” said Manuel Seiffe, Poland project director of Yingli Europe. “This joint venture is an ideal set-up to co-develop, implement and commission projects across Poland. Yingli understands the complex development process and local business requirements as well as global energy trends and is an ideal partner for us to grow our business and to promote the benefits of solar energy in Poland,” added Przemyslaw Pieta, CEO of R.Power. Supporting an EU commitment to renewable energy growth, Polish leaders have already announced they aim to have 15%

of this country’s energy coming from renewables by 2020. Solar is expected to gain a significant share of the renewables portfolio in future energy auctions. According to the plans by the Polish Ministry of Economy, a total of 11 GW of RES installations shall be added by 2020. R.Power, a leader in wind projects in Poland, also has one of the largest portfolios of PV projects in the country. “It has built up a team of highly experienced professionals with in-depth knowledge of the Polish energy sector,” said Liansheng Miao, Yingli chairman and CEO. “Together, we can expedite the deployment of solar, support Poland reaching its EU targets, and expand our footprint in the country.” n

Fortum finalizes takeover of Duon

Fortum has completed the acquisition of 93.35% of shares in the Polish gas and electricity sales company Grupa DUON S.A. The price offered per share was PLN 3.85, so Fortum paid altogether approximately EUR 100 million for the shares. The acquisition is in line with Fortum’s strategy to develop sustainable energy solutions for cities. Accordingly, Fortum seeks growth in electricity sales and related customer services in a wider market area. The transaction has no impact on Duon’s customers whom the company will continue to serve as before.

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“Duon is a well-managed company with very competent management and staff. Its position is strong especially in the small and medium-sized enterprise segment. Duon offers us a good growth platform in the large and fast developing electricity and gas end-user market in Poland,” says Matti Saario, Head of Electricity Sales at Fortum. Duon was founded in 2000 and it is currently one of the leading independent providers of electricity and natural gas in Poland. It is also a major distributor and transporter of LNG. n

March–April 2016

Energy News

LOTOS and CalEnergy in NatGas deal The Baltic Gas Project involves the development of the B4 and B6 gas fields located in Poland’s exclusive economic zone in the Southern Baltic Sea. The fields are being developed by Baltic Gas Sp. z o.o. i Wspólnicy Spólka Komandytowa (Baltic Gas). Baltic Gas is a special purpose vehicle formed by a joint venture comprising LOTOS Petrobaltic (51%) and CalEnergy Resources (49%). The joint venture was formed on 30 October 2012 in Gdansk and was approved on 9 April 2013. The offshore project received environmental approval on 16 May 2014 from the regional director for environmental protection. The project is currently in the pre-final investment decision (FID) study phase with FID approval expected in the second half of 2016. First production from the development is planned for 2017 at a rate of 250 million cubic metres (mcm) a year.

The project is currently in the pre-final investment decision (FID) study phase with FID approval expected in the second half of 2016. First production from the development is planned for 2017 at a rate of 250 million cubic metres (mcm) a year. B4 and B6 fields location Located in the Baltic Sea, the B4 and B6 natural gas fields lie in the eastern part of the Polish exclusive economic zone. The B4 reservoir is situated at a depth of 1,100m below the sea level and is approximately 90km from the coastline. The B6 reservoir lies 1,450m below

2016 March–April

the sea level and is roughly 75km from the coastline. Discovery and reserves The two reservoirs were discovered in 1981-1982 during the exploration operations conducted by the International ‘Petrobaltic’ Joint Organisation for Oil Exploration. The B4 reservoir was discovered by drilling three boreholes, while the B6 reservoir was identified by drilling two boreholes. The combined recoverable reserves of the fields are estimated to be 4bcm (149bcf). The recoverable reserves of B4 are estimated to be 1,972.4mcm and that of B6 are estimated to be 1,792.85mcm. Baltic Gas project development details The project includes reservoir drilling and borehole production of natural gas, construction of gas pipeline, and transporting the extracted gas first into the production system on the production rig and then to the hydrocarbon conversion system at the Wladyslawowo combined heat and power plant owned by Energobaltic. The project will be developed in two phases with phase one consisting of the B6 field development. It will include the drilling of up to four production boreholes and setting the foundations for an unmanned production rig. A subsea gas pipeline will also be constructed to connect to the Wladyslawowo plant. Phase two of the development will feature the B4 field involving the drilling of up to four production boreholes and installing an unmanned rig. An undersea gas pipeline will also be constructed to connect to the main production rig located on the B6 field where the extracted gas will be blended. The second phase is expected to start between 2022 and 2027.

Drilling operations A total of four boreholes are planned to be drilled in each of the two fields that will include both vertical and horizontal boreholes. The maximum length of the vertical and horizontal sections is expected to be 3,000m for the B4 field and 3,100m for B6 field. The drilling will be performed by the Lotos Petrobaltic jack-up rig owned by Lotos Petrobaltic. Subsea connection An 85km-long DN250 subsea pipeline will be laid between the B6 field and the onshore plant, during the first phase of the development. A 33km-long DN150 pipeline will be laid in the second phase, to connect the B4 and B6 fields. The pipelines will be installed in excavation made at the sea bottom and will be covered with sediments. The thickness of the protective layer will vary from 1m in the high seas to 3m while approaching land. Contractors involved with the Baltic Gas project A contract was awarded to Jacobs Engineering Group in February 2016 to conduct a pre-FID study for an onshore gas treatment plant for the project. The scope of work also includes preparing a cost estimate based on vendor quotations for the project to aid in the FID. Subsea Engineering Associates was contracted in January 2016 for detailed design, procurement and construction management. The scope of work includes subsea pipelines, horizontal directional drilling (HDD) shore crossing, prelay and post-lay trenching, risers and platform tie-ins, as well as system engineering including reservoir to gas plant flow assurance. Part of the Petrofac group, SPD entered a master services agreement in November 2014 to provide front-end engineering design (FEED) for the project. n

BiznesPolska.pl/EN

Energy News

PGE faces challenging 2016 Poland’s largest power company Polska Grupa Energetyczna said it faces a challenging 2016 due to lower electricity prices and volumes and fewer free CO2 emission allowances. PGE expects the wholesale fullyear average blended price in the range of Zloty 168-170/MWh in 2016, down from Zloty 173/MWh in 2015, the company said in a fourth-quarter earnings presentation. PGE expects blended hard coal prices this year will fall by about 5% year on year. The company expects lower generation volumes as two units at its hard coal-fired Dolna Odra plant and one unit at its lignite-fired 5.3 GW Belchatow plant are shifted to reserve. PGE said it will receive fewer free CO2 emission allowances this year, equivalent to emissions of about 3.5 million mt. For a company such as PGE, which generated 91% of its electricity from lignite and hard coal in 2015, the market trends are creating a challenging environment this year, CEO Marek Woszczyk said. “European climate policy and new regulations on renewables support in Poland were the most important topics for the sector last year. We have witnessed declining wholesale electricity prices in forward contracts for 2016, which follow global trends related to falling hard coal prices and changes in installed capacity in Poland,” he said in a video. “In 2016, I think we can expect pressure on earnings due to the situation on the commodity markets, both fossil fuels and energy, despite our optimization initiatives and unfortunately we will not be able to offset them fully,” he added.

Polish prices seen staying high Woszczyk, before being dismissed as CEO in late February, told a

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Q4 results’ news conference, the company will release its revised strategy in Q2 of this year to reflect the environment of lower prices and volumes and the need to buy carbon emission allowances. As PGE can do little to effect the macro environment, the revisions will focus mainly on increasing efficiencies inside the company, he said. Although PGE sees lower electricity prices in 2016 as the main threat to its performance, Woszczyk said he believes that Polish wholesale prices will continue to be substantially higher than in neighboring markets for the short-to-medium term due to limited volumes available via interconnectors. Yearahead baseload prices in Poland are currently around Eur34/ MWh, compared with Eur21/ MWh in Germany and Eur22/ MWh in the Czech Republic. However he said increasing wind generation in Poland -- in December last year it accounted for 11% of the country’s total generation compared to just 7% a year earlier -- and increased interconnector capacity will likely reduce Polish prices. On the other hand, he said that increased interconnector capacity will allow PGE

which Woszczyk described as “transitional.” One is an operational reserve capacity which has a 20% higher budget in 2016 and another is interventional cold reserve. In the latter PGE is being paid by the TSO from January this year to have 454 MW of old hard coal-fired capacity in its Dolna Odra plant in reserve. Carbon price concern Carbon allowance prices remain a “major concern” for PGE, but Woszczyk said he saw two reasons to expect EUA prices to remain low in 2016. The first is the two-year gap between the end of the backloading scheme at the end of this year and the introduction of the Market Stability Reserve in 2019, which should create a surplus of allowances on the market and drive prices down. Another factor that may drive down EUA prices, he said, is the economic slowdown in many European countries coupled to an expectation of cheaper gas prices. Poland has launched a legal challenge against MSR because it may minimize the compensatory effect of receiving free EUAs post 2020, Woszczyk said. In the period after 2020 Woszczyk said he was trying to be “very posi-

For PGE, which generates 91% of its electricity from lignite and hard coal in 2015, the market trends are creating a challenging environment. to export more electricity. Another factor that may keep Polish prices high is the introduction of a full capacity market Woszczyk said, noting that the government’s economic development strategy stated the need for one. Poland currently has two capacity market mechanisms,

tive that we will (continue to) get these free allowances otherwise it would be an obvious breach of the European Council summit assumptions in 2014.” Despite the challenging environment, Woszczyk said the company’s flagship investment, a 11 billion PLN project to build two 900-MW units at the hard coal-fired Opole

March–April 2016

Energy News plant was proceeding on schedule and was now 35% complete. A 4 billion PLN investment to build a 450-MW unit at the lignitefired Turow plant has required substantial redesign to meet the requirements of the BAT conclusions for new units, Woszczyk said, but excavation work at the site is continuing. PGE expects to start a trial run of its 138 MW combined cycle gas turbine cogeneration unit in Gorzow in Q1 of this year, Woszczyk said. PGE added 218 MW of new wind capacity in four wind farms to increase the company’s installed wind capacity to 529 MW at the end of last year. However, the government’s decision to postpone the introduction of a new support system based on auctioning until the middle of this year added uncertainty to the renewables market in Poland, especially about the final auction price and volumes to be purchased at auction, Woszczyk said. Woszczyk said PGE is still interested in constructing offshore wind projects, adding

however the projects were in the “very initial stages.” The company has plans to construct three offshore wind farms in the Baltic Sea with a combined capacity of 3.45 GW. Q4 output falls In Q4, PGE generated 13.84 TWh of electricity, down 4% year on year due to a 7% drop in lignite generation caused by a heavier maintenance workload in Belchatow. Lignite-fired output reached 9.25 MWh and accounted for 67% of PGE’s total generation. Hard coal-fired production was flat at 3.01 and it accounted for 22% of generation. Gas-fired generation fell 1% year on year to 750 GWh and it accounted for 5% of PGE’s output in the quarter. Biomass-fired generation fell 3% to 300 GWh, but wind output rose 65% to 280 GWh due to better weather conditions and additional capacity. Pumped storage generation rose 54% to 200 GWh due to greater utilization by the TSO, but hydro generation fell 38% to 50 GWh.

In the whole of 2015, PGE generated 55.58 TWh of electricity, up 1% year on year thanks to 77% higher gas-fired output as a result of reinstated subsidies, PGE said. Gasfired generation was 2.05 TWh. Lignite generation was flat at 38.64 TWh and accounted for 70% of total output. Hard coal-fired generation fell 1% year on year to 11.91 TWh and accounted for 21% of combined output. Biomass generation fell 2% to 1.23 TWh but wind generation increased 28% to 0.82 TWh. Pumped storage was up 10% to 0.57 TWh but hydro fell 14% to 0.36 TWh. The availability of PGE’s generation assets in 2015 rose year on year, with lignite reaching 84.9% from 83.4% and hard coal attaining 88.1% from 81.8%. Their load factor fell with lignite dropping to 84.4% from 86.5% and hard coal down to 66.6% from 69.7% due to lower demand from the TSO. PGE supplied 9.97 TWh of electricity in Q4, down 3% year on year, due to to a 3.5% fall in supply to business customers. n

Poland launches largest solar farm The largest photovoltaic array in Poland, producing enough power for 1,600 homes, has been unveiled.

2016 March–April

Poland’s largest photovoltaic farm has a capacity of almost 4 MW and was commissioned in the municipality of Czernikowo near the city of Toruń. The installation consists of nearly 16,000 solar panels, each with a capacity of 240W. The farm covers an area of over 24,000 sqm. The project is completely ecofriendly, it does not pollute the air, produces no waste or emit any noise, according to utility Energa Group which manages the array. A conventional power plant would produce approximately 3,000 tonnes of carbon dioxide to emit a similar amount of power. The total cost of the project amounted to PLN 81.6 million, of which more than PLN 19.5 million comes from funding from the National Fund for Environmental Protection and Water Management, the company said. n

BiznesPolska.pl/EN

Energy News

Tilting at windmills It now seems that 2016 will be a breakthrough year for the wind industry. However, not the kind of breakthrough we were all expecting. Wojciech Sztuba, Ph.D. Managing partner, TPA Horwath Poland

Despite various obstacles over the last decade, wind power could have boasted in excess of 5.2 GW on-shore capacity, with 2015 a record year, seeing the completion of investments of nearly 1.3 GW. However, such success is not due to great market conditions, but the departure of the green energy support system from the tradable green certificates scheme in favour of an auction model, already confirmed by the legislator in 2015. The new system, as more competitive and not as easy for projects with lower productivity, motivated many investors to bring forward completion dates of projects so that they still enter into use before the end of 2015 under the old tradable green certificate system. Chapter 4 of the RES Act governing the auction model was to enter into force on 1 January 2016. The first auction was to be held pursuant to these in the initial months of the year,

Wojciech Sztuba

And yet today we find ourselves in the most unexpected circumstances. After postponement of the date Chapter 4 of the RES Act was to enter into force until 1 July 2016, the signs filtering through from the

“The signs filtering through from the Ministry of Energy are clear: backtracking on the current auction model concept. For example, Minister Krzysztof Tchórzewski plans to reduce the share of wind power in the RES generation portfolio for the benefit of agricultural biogas-based power generation”

the parameters of which were already published in Implementing Regulations. According to these, contracts for the construction of approx. 550-650 MW of capacity from new wind sources of more than 1 MW were to be entered into. Right from the outset it was clear that this was not a tell-tale sign of a bull market, but a profoundly more subdued, yet stable growth of this sub-sector.

BiznesPolska.pl/EN

Ministry of Energy as well as other government circles are clear in that the purpose of the six month postponement is in fact to backtrack on the current auction model concept. For example, Minister Krzysztof Tchórzewski plans to reduce the share of wind power in the RES generation portfolio for the benefit of agricultural biogas-based power generation. The primary reason given here is lack of stability found

in wind generation as compared to biogas power plants, which are a controllable and stable source with a number of advantages stretching outside of the power generation industry, such as disposal of environmentally hazardous liquid manure. On top of that we have the recent private members bill on investments within the scope of wind power generation, pursuant to which, inter alia, an approx. 2 kilometre band is to be introduced around residential buildings where the construction of wind turbines would be prohibited. Together, these paint a picture of a cohesive political front opposing further development of wind power generation in Poland. However, the most sinister part of the said bill, one which not only targets future, but primarily facilities already in place, is the proposed broadening of the current construction law definition of a building for real property tax purposes. Since 2005, there have been no doubts as to the electrical and technical part of the wind turbine, i.e. the nacelle and the rotor, constituting more than 80% of the investment, not being part of the building subject to the said tax. Through this principle the industry was given an opportunity to grow, as we are talking about a 2 per cent tax on the gross book value of tangible assets. If we were to assume a tax charged subject to a 2 per cent rate practically on the balance sheet total of an enterprise year in year out, this would be a death blow for most active wind farms. The draft bill on investments within the scope of wind power generation contains just such a regulation, which is a threat to the existence of current projects and will prove an effective stumbling block in the construction of new ones. In the past, a certain dose of aversion to wind power was evident from the industrial power generation, as well as the power transmission and distribution sectors, to a large extent burdened with problems associated with connecting and balancing wind farms. To a certain extent that was understandable. However, that lobby is now joined by the agricultural biogas lobby as well as a baggage of non-scientific beliefs and aversions of politicians, who, for many years, have been against wind energy. We are now standing on the threshold of an industry breakthrough in the worst possible sense of that word. n

March–April 2016

CEE CLEAN ENERGY AWARDS The 3rd annual CEE Clean Energy Awards recognizes companies and individuals in the Central (and Eastern) European clean energy industry for: » excellence in operations » boldness in strategy, and » innovative leadership.

Awards Categories » Wind Energy Company of the Year

Clean Energy Project of the Year «

» Solar Energy Company of the Year

Electric Vehicle of the Year «

» Biogas/Biomass Company of the Year

Wind Services Provider «

» Hydro Company of the Year

Solar Services Provider «

» Banking/Finance Company of the Year » Financing Deal of the Year

Software/Technology Services Provider « Engineering/Construction Services Provider «

» Top CEE Clean Energy Investor of Year

Legal Services Company of the Year «

» Top Renewables M&A Deal of the Year

Advisory Services Company of the Year «

» Top CEE Clean Energy Company of the Year

O&M Services Company of the Year «

» Top Clean Energy Consumer of the Year

9 June, 2016, Intercontinental Hotel, Warsaw ceeEnergyAwards.com

Advisory

ADVISORY

Maintaining tradition in chaotic times

Whilst we are all engulfed in chaos and worry over whether we are being spied on, Polonised or facing economic meltdown, it’s comforting to know that our friends in the tax system are plodding along in the same calm, unruffled and, er, perverse manner that we have enjoyed over the past 25 years. We have grown so accustomed to a toxic combination of poor legal drafting and immoral tax authorities that it’s almost comforting to see that it’s business as usual in the tax system. A familiar tale of incompetence and exploitation that we can all enjoy is the tax treatment of employers who pay their staff after the end of each month. This is perfectly acceptable under the Labour Code and, in any event, it is simply impossible for staff paid on the basis of hours worked, or with regular overtime, until the month-end has been reached and the time-data is available for the payroll calculation. In this situation staff are typically paid within the first week of the following month. You might think that operating a perfectly acceptable, standard commercial payroll process does not warrant being punished as a bad employer by the tax system (in which case you have probably not been

The latest confirmation of this absurd approach was issued by the Poznań Tax Chamber during January 2016. The effect of their opinion is that if a business pays their November payroll cost during early December and the December ZUS cost is then paid on time in January, both November ZUS and December ZUS are disallowed CIT deductions in that year. That could be an amount of over 20% of payroll cost for 2 months – a shameful cash grab by the tax authorities, exploiting poor legal drafting. By Steven Foster Process Solutions www.ps-bpo.com Steven.Foster@ps-bpo. com

“the tax authorities have pronounced that employers should effectively be penalised for not paying ZUS a whole month earlier than the law requires” here very long). This was presumably not the intention of Parliament, but the intention of Parliament has no relevance in the Polish legal system (well, at least not before the current Government was elected). Here is what the tax law is no doubt intended to say: 1. If you don’t pay your staff on time, you can’t deduct the wages & salaries cost until they are actually paid. 2. If you don’t pay your social security (ZUS) cost on time, you can’t deduct it until it is paid. The first rule works as intended. The problem is the second rule, which actually says that employer ZUS is deductible in the month for which the related remuneration is due, provided that it (the ZUS) is paid by the 15th of the following month. The stupidity here is “by the 15th of the following month” rather than simply “on time” and the tax authorities have seized the opportunity to pronounce that employers should effectively be penalised for not paying ZUS a whole month earlier than the law requires. In fact the ZUS authority is not even able to cope with ZUS declarations made a month before they are due.

BiznesPolska.pl/EN

Changes for property owners The foregoing tale relates to a new tax opinion on existing law, but for confirmation that things are not improving, we need look no further than the new CIT rules in force this year concerning annual price adjustments. The simply worded changes require that, except in the case of errors in the original amounts, such adjustments are effective in the year in which they are made, not the year to which they relate. The purpose of this change was actually to be helpful; it was aimed at suppliers to retailers who receive annual bonuses or rebates based on the volume of trade during the year, which are most convenient to recognise when they arise. However, the typically thoughtless drafting means that taxpayers will be caught in situations where it is manifestly unfair. Take, for example, commercial property owners who invoice monthly interim service charges to tenants, followed by an annual adjustment. If that annual adjustment is in favour of the tenants, the landlords will now be required by law to pay tax on fictitious profits because they will not be able to recognise the annual adjustment even though their actual property costs are demonstrably lower.

“That could be an amount of over 20% of payroll cost for 2 months – a shameful cash grab by the tax authorities, exploiting poor legal drafting.” Consider also what happens if the property is sold: any downward adjustment of income in the following period will be no help at all, so the tax charge on fictitious profits will become permanent. Even if those of you who are commercial property owners remembered to apply the new rules, how many of you also thought about art. 15.4 of the CIT Act? If you deferred recognition of upward annual service charge adjustments, did you also remember to defer the related costs? No? Well luckily you still have a couple of weeks to fix that. n

March–April 2016

Advisory

This month may come as a slight surprise, but let’s get political and play games as the devil’s advocate. In other words, in this age of hateful politics maybe... Just maybe... We need to be careful what we wish for. But first let’s take a look at reality. Many readers of this esteemed publication will decidedly not be fans of Law and Justice (PiS) or the founder of the party, former Prime Minister Jaroslaw Kaczynski. That should come as no surprise, as it would be extremely difficult to characterize this party as pro-business. Taxes on banks are scaring banks. Taxes to come on retail are scaring retail (as will be a law to end retail on Sundays). The zloty has slipped and will likely keep slipping. Changes to the law on surveillance are disturbing; the scythe of firings following the changes to press law have prompted outrage and the Constitutional Tribunal battle is simply not going to boost Poland’s reputation abroad. Not ideal. Yet there is another reality that is equally troubling—this being the reality (and the tradition in Poland) of street protests and what they really mean. The devil’s advocate would say that street protests have always been both a useful tool to voice and push for change (as in civil rights—think Martin Luther King and Gandhi), but the flip side is that they are a symptom of a very immature democracy. The argument here is that no matter how noble the cause, there still remains aspect of sports fans throwing a tantrum after a disappointing match. In other words—if we may be truly and aggravatingly cynical—if the will of your people had really been there to begin with, your side would have won the most recent elections. By now you may be suitably infuriated, but in a sense that is the point. But voting preferences aside, let’s first address other realities: current polls suggest that PiS support has actually risen since coming into office. Hard-line PiS voters now probably make up 35 percent of potential voters. That said, Ryszard Petru’s party, Nowoczesna, largely seen as more palatable by the expat and business community, now garners some 20 percent support. This is partially a result of PiS’s winner-take-all approach—i.e. Kaczynski’s statements tantamount to “if you are not with us, we are against you.” This has backfired in that even PO, a party ousted in one of the most overt protest votes in Polish history, has regained strength under the controversial Grzegorz Schetyna to hold some 18 percent support. Which brings us back to street protests, and the strikingly worrying question about what they really mean, for which we may look to Schetyna himself.

2015 November/December

By Preston Smith Independent Risk Consultant

“If we do not find a solution to this conflict, this will bring us all to the street,” Schetyna told Radio RMF in early March. “And if we all bring our activities to the street, we will be able to speak of a Majdan in Warsaw, but this is the last stage. This could bring us to something that we have not seen in Poland before.” Troubling stuff. I’ll leave you to decide whether he is voicing worries or making threats, but the precedent of non-stop protests could also backfire. Why? If any one party were ever in fact successful in bringing all supporters to the street, we could safely assume that party could overwhelm both police and infrastructure and “take charge.” In other words, if Warsaw were suddenly inundated not by tens of thousands of Poles but by millions of Poles from any one party, this would surely enact change and that party’s “will,” but this would hardly represent democracy. Democracy comes through a civilized voting process conducted according to the law. Thus perhaps the danger is that street protests gain too much steam—that civil society descends into what would effectively be mob rule. Indeed, there are countries known for such scenarios. They are called banana republics. So what does this mean? Poland is by no means a banana republic, but the current crisis does imply that the country is still in transition. This also implies that democratic processes must survive until the next elections, at which point allegedly damaging laws can be repealed, or if need be, democratically repaired. In short, this also means that those in support of the opposition will have to grin and bear it until new elections can be triggered. It also means that both major opposition parties should attempt to work within the system as much as possible to influence the current government. No matter how dire the current situation seems, there is still room for dialogue and compromise— and political strategy. Those who believe this is truly impossible need to go back and study the effectiveness of PO’s tactics the first time around. And those who believe otherwise? Perhaps they should remember that a quick, dramatic solution in politics is called revolution. Unfortunately, most revolutions are nasty and violent. At least Mr. Schetyna seems aware of this. Likewise they are also often tragically incomplete—and of this, Majdan is unfortunately a very good example. n

The latest poll puts PiS at 38 percent, Nowoczensa at just 13 and PO at 12 percent.

BiznesPolska.pl/EN

ADVISORY

Danger in the streets

Equities News

Closing price of rights to shares on the day of their introduction (PLN)

Closing price of shares on the day of their introduction(PLN)

Number

Warsaw Stock Exchange 2015 IPOs

Company

Date trading started

Issue price (PLN)

Value of the new issue (PLN)

Value of the offering (PLN)

Dekpol

01/08/15

1,500

29,288,235.00

1,455

Biomed-Lublin*

01/30/15

330

350

Indata Software*

04/08/15

163

150

Private Equity Managers

04/09/15

11,100

45,716,793.00,

13,210

Idea Bank

04/16/15

2,400

254,181,216.00

2,695

Izo-Blok*

04/24/15

9,670

10,095

Wirtualna Polska

05/07/15

3,200

106,871,808.00

294,156,096.00

3,500

3,502

Uniwheels

05/08/15

10,500

252,000,000.00

504,000,000.00

111.3

Atal

06/15/15

2,200

143,000,000.00

2,160

Braster*

06/24/15

1,597

39,000,000.00

1,498

PEKABEX

07/08/15

1,000

30,000,000.00

73,666,670.00

1,000

ESOTIQ & HENDERSON*

07/16/15

4,100

17,325,000.00

3,987

SUNEX*

07/30/15

PRAIRIE MINING LIMITED

09/04/15

WIND MOBILE*

09/25/15

800

5,850,000.00

10,686,000.00

810

805

AAT HOLDING

10/05/15

2,400

57,540,864.00

2,289

APS ENERGIA*

10/08/15

291

7,785,000.00

497

GRODNO*

10/09/15

545

570

ADIUVO INVESTMENTS*

10/12/15

2,415

22,000,000.00

Inpost

10/13/15

2,500

121,359,000.00

WITTCHEN

11/09/15

1,700

27,200,000.00

55,250,000.00

CITY SERVICE

11/16/15

695

705

KOFOLA ČESKOSLOVENSKO

12/09/15

8,053

22,145,750.00

120,795,000.00

8,973

KORPORACJA KGL

12/10/15

1,900

33,250,000.00

1,822

ENTER AIR

12/14/15

1,400

97,978,136.20

1,382

LOKUM DEWELOPER

12/15/15

1,200

36,000,000.00

1,249

KRYNICA VITAMIN

12/16/15

1,225

19,576,259.50

26,396,410.25

1,170

ORION INVESTMENT*

12/17/15

8,550

9,350

11 BIT STUDIOS*

12/18/15

6,725

6,700

LABO PRINT*

12/22/15

1,492

* Company moved from NewConnect alternative market

BiznesPolska.pl/EN

March–April 2016

Equities News

London Stock Exchange aims at Warsaw The February listing of Work Service Group on the London Stock Exchange is a strong signal that London looks to compete with the Warsaw stock exchange for CEE regional listings. “Without naming any company names we definitely think there is an opportunity for listings from that part of the world going forward,” said a spokesman for the LSE. This latest Polish dual-IPO listing augurs well for future Polish listings on the London market. Companies listed to date in both Warsaw and London include New World R-A SH (mining), Exillon Energy (oil & gas), International Personal Finance (financial services), Plaza Centers (real-estate investment & services), Prairie Mining (mining), UniCredit SpA (bank), Banco Santander SA (Bank) and MOL Hungarian Oil & Gas. There are also five companies listed on the LSE’s markets, but with primary business in Poland. These include Stock Spirits Group Plc (beverages and spirits) on the exchange’s Main Market, Bank Pekao SA (Main Market via a GDR),

as well as two listings on the fledgling and smaller cap Alternative Investment Market (AIM) – 3LEGs Resources Plc, an oil and gas producers, and DP Poland Plc in the travel and leisure space. Interestingly, Work Service Group’s listing solution, which was developed by the ProPrimo consultancy and implemented in collaboration with Kochański Zięba i Partnerzy law firm. Work Service’s IPO is an effort to “broaden its investor base” and assist its expansion into new markets. Potential acquisitions and moving into new territories are certainly on the cards going forward, according to Adam Jenkins, Work Services Group’s Investor Relations point man, who also heads up the firm’s international operations. It should also do no harm in raising their brand recognition and provide access to an enlarged group of investors globally. In 2014, the entire human resources (HR) services industry in Poland generated a turnover of PLN2,788m zloty (c.$710m), which represented a double-digit percentage (22%) increase

compared to 2013. So, financially pretty positive and healthy. And, in 2015 the company entered the permanent recruitment services market in Germany and Hungary, implemented a strategy for recruiting and contracting IT professionals in countries such as the Czech Republic, Slovakia, Hungary, Germany and Switzerland, and developed its cross-border recruitment activities. With their speciality areas including personnel consulting services plus HR restructuring, recruitment and staff outsourcing, already to date over 3,000 companies have selected Work Service as their business partner. And, each year around 300,000 workers find employment via the companies belonging to the group. Maciej Witucki, President of Work Service’s management board, commenting on the firm’s IPO development said: “We are convinced that our presence on the LSE will help us strengthen our position as a regional industry leader and ultimately enter the top five of HR service providers in Europe.” n

Number

WSE New Connect 2015 IPOs Company

Price of Issue

Date of debut

Value of Offer (newly offered)

Value of Offer

Gekoplast

880

02/26/15

5,406,447.20

BIO PLANET

600

04/01/15

2,307,000.00

Hetan Technologies

04/15/15

4,059,818.00

Info Scan

690

04/16/15

1,060,185.00

Corelens

290

04/20/15

TrophyResort

273

04/21/15

4,133,317.00

Summa Linguae

490

05/06/15

644,889.00

Kancelaria Prawna – Inkaso WEC

05/19/15

199,800.00,

199,800.00

Adiuvo Investment

1,721

05/27/15

39,406,278.00

LK Designer Shops

700

05/28/15

1,123,003.00

Cenospheres Trade & Engineering

600

06/09/15

3,000,000.00

Infra

240

06/23/15

900,000.00

EC2

07/07/15

336,840.00

JUJUBEE

210

08/03/15

1,743,000.00

Geotrans

600

08/18/15

1,200,000

Present24

08/24/15

BVT

09/29/15

800,000.00

VERTE

100

10/27/15

SOFT BLUE

250

12/17/15

2016 March–April

92,000.00 10,000,000.00

10,000,000.00

BiznesPolska.pl/EN

FDI Investment News Facebook opens CEE HQ in Warsaw Social media giant Facebook opened an office in Warsaw 4th March for the CEE region. As Polish Press Agency reports the company will help local firms in their marketing activities. Facebook CEE head Robert Bednarski emphasized the fact that establishment of the office will “translate into new opportunities for all companies using Facebook for marketing purposes - the biggest ones as well small and medium-sized companies” Robert Bednarski said. Mr Bednarski also underlined the fact that mobile services are becoming more and more popular and assured that Facebook takes this trend into consideration to create its strategy for the future. In December 2015th 1.44 billion of Facebook’s users were browsing the platform on mobile devices and the company revealed that 80% of its advertising revenue could be attributed to mobile advertising. The company would like to give the users some tools to use this trend. Currently the Canvas mechanism is being tested - after clicking on products from ads one will see a fast-loading, full-screen experience where one can browse through a variety of products, before going to the retailer’s website to purchase. n

Global brand in Kamiennogórska Special Economic Zone Company Dr. Schumacher has invested 150 million pln in Lubań, on the premises of the Kamiennogórska Special Economic Zone (KSEZ). The expenditures resulting from the permit issued by the Zone’s authorities are almost 91 mln PLN. The company currently employs over 660 people. Due to the dynamic development of the plant it is planned to build two more halls and it is expected to increase employment to 750 jobs. Dr. Schumacher is one of Europe’s leading specialists in developing and manufacturing disinfectants, hygiene and personal care products as well as wet wipes for baby care, cosmetics, personal hygiene and household purposes in the consumer sector. The completed investment in the KSEZ has almost 50,000 sq. m and 45 production lines operate there on daily basis. The company produces annually more than 100 million packages of wet wipes. Tissues from Lubań are produced for global companies like Johnson & Johnson and Procter & Gamble and can be purchased in Rossman. ‘Dr. Schumacher is above all a global brand. The standards and technologies which are involved in the project reflect the latest global tren ds and contribute to the intelligent development of Lubań, Lower Silesia and Poland’ - says KSEZ President of the Board Iwona Krawczyk. Dr. Schumacher is the largest investor in Lubań, of great importance for the local labour market. n

BiznesPolska.pl/EN

Poland’s Treasury terminates Bilateral Treaties, jeopardizes FDI Investment into Poland On 25 February 2016, Poland’s State Treasury announced its intention to terminate its Bilateral Investment Treaties (“BITs”). Poland currently has around 60 BITs in force, all of them signed between 1987 and 1998. Poland concluded BITs with almost every EU Member State (“intra-EU BITs”). It remains, however, the only EU Member State that is not a party to the ICSID Convention. The State Treasury indicated its intention to terminate all 60 BITs. Shortly thereafter a new announcement recommended that the Polish Government take the step of terminating intra-EU BITs only. Over the past years there have been more than 20 known investment arbitration cases against Poland. 11 cases with a total amount in dispute of more than EUR 2 billion are currently pending against Poland. The actual amount in dispute may be even higher because the majority of cases against Poland remain confidential. Based on publicly available information in a number of cases investors (from Germany, France and the US) were successful in claims under BITs and Poland was ordered to pay compensation. In its earlier statement the State Treasury said that Poland’s BITs were concluded to incentivize foreign investment in the early 1990s. According to the State Treasury since then the legal framework in Poland became sufficiently stable and “the courts can now rule on cases independently of politics so there is no need to retain investors’ privileges.” It also mentioned that investment arbitrations would be costly, and even when Poland prevailed, it would often be difficult to enforce awards on costs against unsuccessful claimants. The State Treasury concluded that BITs pose a threat to the country’s interests and should be terminated promptly. In its later statement the State Treasury appears to have

taken a less radical position as it now seeks to focus on intraEU BITs only. It said that BITs are controversial from an EU law perspective and that Poland considered terminating intra-EU BITs already in 2011. Although there is an on-going discussion with regard to the future of intra-EU BITs, to date only three EU Member States (Czech Republic, Ireland, and Italy) decided to proceed with terminating all or selected intra-EU BITs. Any termination of BITs by Poland will unlikely have immediate effect. Most BITs contain so-called “sunset clauses” which guarantee investment protection for several years after termination. For example, under both the UK’s and France’s BIT with Poland investments continue to be protected for 15 years after termination whereas under Germany’s BIT with Poland investments continue to be protected for even 20 years after termination. Although the Polish Government may endeavour to shorten the length of post-termination investment protection, it cannot do so unilaterally but would need to obtain the consent of the other contracting party to the BIT. Notably, the announcement by Poland’s State Treasury comes at a time when the new Polish Government has also taken other measures that are of concern to international investors. For example, the Government planned to introduce a bank tax and legislation regarding the conversion of foreign currency loans, mostly at the expense of banks. Investors in Poland should carefully follow events and make sure that their investments continue to be covered, to the extent possible, by investment protection guarantees, including by existing investment treaties. Source: Hogan Lovells (Markus Burgstaller and Agnieszka Zarowna)

March–April 2016

FDI Investment News

Germany’s Rheinmetall to modernize Leopard 2A4 tanks in €130 million deal Poland’s state-run defense company Bumar-Labedy SA has signed a deal worth €130 million to modernize the Leopard 2A4 tanks, which are operated by the Polish military, Bumar-Labedy said in a statement. Under the plan, Rheinmetall will build a prototype upgraded tank, dubbed the Leopard 2PL, and modernize a trial batch of about a dozen units. Following this, the German manufacturer will transfer its know-how to Bumar-Labedy, and the Gliwicebased company will upgrade the remaining tanks. In 2002, Poland acquired 128 Leopard 2A4s from the German Bundeswehr. Bumar-Labedy is part of the state-run Polish Armaments Group (PGZ), an entity set up by

the Polish authorities to integrate the country’s fragmented state-owned defense industry. Rheinmetall and PGZ are also cooperating on a program to develop a new armored vehicle for the Polish military, with Poland’s planned military vehicle tender in mind. Last year, the two partners unveiled plans to develop a six-wheeldrive armored vehicle “oriented to the requirements of the Polish Army’s LOTR [light armored reconnaissance vehicle] procurement program.” Poland’s Ministry of Defence is planning to replace the military’s outdated Soviet-built BRDM-2 amphibious armored vehicle with a new vehicle, which is to weigh less than 20 tons. n

Innovative factory in the Podkarpackie region The world’s first factory where photovoltaic cells will be produced has been created in Zaczernie on the premises of the Podkarpackie Science and Technology Park ‘Aeropolis’. This is the first such plant in the world as far as the technology which involves printing photovoltaic cells is concerned. ‘The very fact of printing photovoltaic cells is an innovation, but so is our method of filling the panels with electrolyte and dye. We have also shortened the time and energy intensity of production and reduced the waste. The unique chemical composition of the electrolyte with dye, which is placed in the middle of the cell, has been patented’, said David Cycoń, co-owner of the company. The project was co-financed from the EU funds with the amount of 20 million PLN by the Polish Industrial Development Agency. The building has 6000 sq. m, of which 4000 sq. m is the production hall and a 500 sq. m is a research laboratory. There are also three production lines: precision glass processing, glass fusion and printing of photovoltaic cells. The owners have been fulfilling their vision in stages: In 2012 they created an R&D unit along with a laboratory and they began to gain funds for studies and research. In 2013 they bought the land for the construction of the factory and started production of panels. They have so far finished projects worth 20 million PLN and implemented projects worth 60 mln PLN. The company has also been granted another 12 mln PLN for further research. ML System designs and manufactures complete solutions for photovoltaic arrays. But these are not ordinary panels, which are placed on the roof or in the photovoltaic farm, but those that can replace construction materials such as glass, aluminum and stone facade. The institutions which have already purchased solutions from the ML System are Medical University of Warsaw, Jagiellonian University, School of Law and Administration in Rzeszow, Podkarpacka Philharmonic or State Archive in Rzeszów. ML System is already planning its next investments. “This year we hope to build a second building and transfer the production of silicon panels there. We want to buy research equipment to our laboratory and acquire several research projects, as well as implement several new technologies. These are the plans till the year 2018”, says David Cycoń. n

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FDI Investment News Sonoco to expand Polish packaging plant U.S.-based Sonoco Products Co. is aiming to expand the output capacity of its production facility in Kutno. The company will invest about 97 million zloty at the factory and increase its workforce by about 40 new employees, reports local newspaper Dziennik Łódzki. As part of its manufacturing project, Sonoco will install two new production lines at the Polish plant, the report said. The investment will be carried out by the firm’s local subsidiary, Sonoco Poland Packaging Services sp. z o.o. The production facility is located in the Łódz special economic zone which will provide the firm with preferential tax treatment for its investment. The country’s special economic zones are to remain operational until 2026. As part of its ongoing expansion in Poland, in late 2015, Sonoco leased around 26,500 square meters of logistics space at the Panattoni Park Stryków II, close to Łódź. The Hartsville, S.C., company’s packaging range comprises round and shaped rigid containers and trays made of both composite and thermoformed plastic, blow-molded plastic bottles and jars, extruded and injection molded plastic products. n

New jobs in Legnica Special Economic Zone The jobs will be created thanks to the Wago - ELWAG Sp . o.o. company which received this month a permit to conduct business activity in the LSEZ subzone, in the Miękinia commune. The producer of electrical interconnectors and components for automation will invest at least 40 mln PLN in the construction of its plant in Wróblowice. The permit to conduct business activity for the company in the Legnicka Special Economic Zone is the first one issued this year and 142nd in the LSEZ’s history. n

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Poland, Czech Republic To Jointly Make APCs Poland’s government is planning to cooperate with the Czech Republic to jointly acquire armored personnel carriers (APC) for the Polish Armed Forces. The program will be one of the priority military procurements that will be launched by Warsaw in the forthcoming months, according to Deputy Defense Minister Bartosz Kownacki. Other planned acquisitions for the Polish military include unmanned aerial vehicles (UAV) and submarines with cruise missiles, Kownacki told pro-government daily Gazeta Polska Codziennie. According to the deputy defense minister, the procurements will significantly bolster Poland’s deterrence capacity, and they will enable the transfer of new technologies to the country’s industry.

Kownacki said his government is currently holding talks on the designed APC program with the Czech Cabinet. Under the plan, Poland is to take a leading role on the project with support from the Czech Republic. The amount of the vehicles, which will be procured under the program, was not disclosed by the deputy minister. Poland’s Defense Ministry is currently carrying out an overhaul of the previous government’s military procurement policy. Among others, the government, formed in November 2015 by Prime Minister Beata Szydlo from the right-wing Law and Justice (PiS) party, is considering a decrease of the amount of the Caracal EC-725 helos, which are to be acquired from Airbus Helicopters. n

Polish exports surpass imports on back of nearly 8% growth, but currency weakness means 10% decline The positive balance reached the level of PLN 15528.6 mln, compared to minus PLN 11095.9 mln in 2014 - such was the date published by the Central Statistical Office (GUS). Germany remains Poland’s top trade partner. In 2015, exports at current prices amounted to PLN 747,248 million, while imports amounted to PLN 731,719 million. In comparison to 2014 exports increased by 7.8% and imports by 3.9%. Exports expressed in USD amounted to 199378 mln while imports amounted to USD 195249 (a decline of 10.3% and 13.6% respectively). The positive balance reached the level of USD 4129.0 mln (against minus USD 3559.1 mln in 2014). Exports expressed in EUR amounted to 178710.3 mln while imports amounted to EUR 175031.7 mln (an increase in exports of 7.8% and in imports of 3.9% respectively). The positive balance reached the level of

EUR 3679 mln compared to minus EUR 2659 mln in 2014. The negative foreign trade balance was observed with developing and Central-Eastern Europe countries. The positive foreign trade balance was observed with developed countries, including the EU countries. In comparison to 2014, the share of Germany in Polish export structure increased by 0.8 pp and amounted to 27.1%, as far as import from Germany is concerned, it increased by 0.9 pp and amounted to 22.9%. In 2015 there was an increase in Polish export to countries like Spain, UK, the Netherlands, Italy, Germany, Czech Republic, Hungary, France and Sweden. As far as import is concerned in 2015 there was an increase in Polish import from China, USA, UK, Germany, the Netherlands, Belgium and France. In 2015 there was a decrease of Polish export to Russia and also a decrease in Polish import from Russia, Italy and Czech Republic. n

March–April 2016

FDI Investment News

German Goldschmidt Thermit Group expands its rail operations to Poland The leading global company for joint welding and servicing and maintenance of rail systems has now founded a subsidiary in Torun. The target is to expand the group’s activities in the growing infrastructure market of Eastern Europe.

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The Managing Director of Goldschmidt Thermit Polska Sp. z o.o., Robert Plötz, has worked for Elektro-Thermit GmbH & Co. KG, the largest subsidiary of the Goldschmidt Thermit Group with headquarters in Halle (Saale), Germany since April 2015. Robert Plötz is an acknowledged specialist for the aluminothermic welding process for rails and is familiar with the Polish market.

He will be supported by Sales Manager Piotr Sniezawski. “The Polish railways have entered into the largest investment programme of its history designed to modernise its railway infrastructure. Our local subsidiary will be able to offer our Polish partners and customers excellent support. This will enable us to better coordinate the continuous welding of rails in the Polish market and ensure safety and comfort for travelers and residents close to railway routes”, explains Dr. Hans-Jürgen Mundinger, CEO of the Goldschmidt Thermit Group. “This will give a further boost to our strong presence in Eastern Europe, our extensive experience and our high quality in the area of continuous welding.” In the past the state-owned railways of Eastern Europe have suffered from a chronic lack of investment. Many long-distance and local railway lines in cities are considered to be sub-standard. The environmental standards of the European Union, however, can only be met with a modern railway network and an efficient local public transport system. The Polish railways are now set to improve and expand the railway infrastructure in Poland. Investments are planned to the tune of approximately €15bn. A third of the funds will be provided by the EU which will be made directly available for the development of railway transport up to the year 2020. “The demand for our welding technology is huge in Poland”, emphasises Managing Director Robert Plötz. “Our THERMIT welding process and our services are tailor-made for the modernisation and expansion of track infrastructure. With our subsidiary in Poland we are perfectly placed to participate in the renewal and expansion of the country’s railway network.” n

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FDI Investment News Olan Południe to invest in Głogów Olan Południe invests in Głogów. The construction and road maintenance materials producer received today a permit to conduct economic activity in the Głogów Subzone of the Legnica Special Economic Zone (LSSE). This is a first investment permit to be issued this year in Głogów. This is also a success of the “S3-The Road of the Great Opportunity Project”, which is being led by the Legnica Special Economic Zone. Olan Południe is going to invest at least PLN 2.5 mln. It will also create new working places in the region. The company produces construction and road maintenance materials. “Głogów is the ideal place for our company. We have very good access to the construction site of the S3-road and other road investments in the region. As the one of subcontractors of the S3 project, we decided to use a convenient localization of Głogów and the support offered by the city and the LSSE. With our new investment in Głogów we can expand our offer also to the South-Western part of Poland”, says Mr Grzegorz Rzeszut, Member of the Board of the Olan Południe. Olan Południe investment is the first investment permit to be issued this year in the Głogów Subzone of the LSSE. The company plans to start production in Głogów before the end of 2016. n

Polish roadbuilding boom Up till 2020 most fast roads in Poland will be built in Mazovia and Pomerania, according to research company PMR, whose latest report is called Construction Sector in Poland 2016 – Regional Focus: Market Analysis & Development Forecasts for 2016 to 2021. The road construction market is expected to grow at a double-digit percentage rate in 2016, driven by a number of road projects contracted by the GDDKiA (The General Directorate for National Roads & Motorways) in 2014 and 2015. In the coming years, the biggest build-up of road projects is expected in Mazowieckie, and these projects will mostly involve the expansion of the road network surrounding Warsaw, where roads such as the A2, S2, S7, S8 and S17 will meet. As of March 2016, the GDDKiA has contracted companies to build approximately 190km of fast roads, but in most cases, construction is yet to start on these projects. Dolnoslaskie is ranked second in terms of the current

length of contracted expressways and motorways, at 165km, which largely covers the S3 expressway, at some 117km of its total, and the S5 48km. In terms of tendering activity, the most active regions in Poland are Pomorskie, Mazowieckie and Zachodniopomorskie. These three regions account for over 50% of the total length of road projects currently at tender stage. PMR said that the analysis proved that lesser-developed regions also had substantial investment needs. In the long term, road construction in Poland’s eastern regions has a very strong outlook. However, not all of the projected roads are likely to obtain full funding under the EU’s current financial perspective, and the completion of the network is not expected for some while, said PMR. At this point, the LublinRzeszow section of the S19 expressway is a project in eastern Poland with the best prospects to succeed, according to PMR. The design and build tender was announced in 2015. n

FDI Poland Investor Awards 2016 20 October 2016 WWW.FDIPOLANDAWARDS.PL

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EU Funds

Rural development in Poland will focus on smallholders’ poverty Warsaw will use the EU’s Rural Development Programme to improve the standard of living of “poor” smallholders. Supporting small and familyowned farms is among goals of the Common Agricultural Policy for the period 2014-2020. Poland stands as one of the primary beneficiaries of this focus. Poland has one of the highest shares of small farms in its agricultural sector, yet the number of working poor smallholders is high. 73% of Poland’s 1.43 million farms are considered by the Central Statistical Office of Poland to be in the “small” category, i.e. under 10 hectares (ha). They also have a small area of cultivation – farms over 15 ha in size, despite representing only 14.3% of all Polish farms in number, have 60% of all arable area in Poland. In addition, Polish farmers have already proven they are effective in getting access to EU funds and making a good use of them. In 2014, they received almost €3 billion just in direct payments (not including funds from rural developments schemes). Barbara Fedyszak-Radziejowska, an adviser to Polish President Andrzej Duda and a member of the National Development Council, has noted that “joining the EU has brought Poland the first sensible agricultural policy since 1944. Our politicians would never be able to do that by themselves”. New scheme for rural development The Ministry of Agriculture and Rural Development (MARD) has created a dedicated policy, called Rural Development Scheme for 2014-2020. It governs all of the funds from CAP outside of direct payments (i.e. funds from the so- second pillar), which amount to €3.1 billion. MARD spokesperson told EurActiv.pl that “while small farms have a relatively small role in agricultural production, they play an important part in an environmental and social sense. They

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have a significant potential for producing traditional and local food products, and their plot structure is especially valuable for preserving the landscape and environmental qualities in their area”. The food security issue The ministry also underlined the importance of the small farms for ensuring food security in Poland. The most relevant part of RDS is Payments for Small Farms (PSF) programme. Launched in 2015, it automatically covered all farms which receive less than €1,250 per year and was open to all farmers in Poland. It offers them a deal – in return for capping their payment at the level of €1,250 per year it would allow them certain privileges. One of these would be an optout from the “greening” requirements, mandatory for larger farms but problematic for smaller ones – excluding from production a significant portion of an already small farm for many farmers in Poland means a difference between sustainability and bankruptcy. PSF also allows farmers to simplify their accounting related to the EU funds. The Warsaw government argues that it will provide double benefit both by making farmers life simpler and lessening the administrative burden on state agricultural agencies resulting in higher efficiency. Restructuring as an alternative While PSF is aimed mostly at small, yet sustainable farms, in RDS there is another programme aimed at those farms which are not there yet. The Small Farms Restructuring Programme (SFR) aims at bringing Polish smallholders to a certain level of wealth and profitability. SFR has been already delayed a few times and is currently scheduled to launch in the first quarter of 2017. Despite the delays, basic requirements and goals of the programme have already been revealed by the government.

According to the ministry, SFR will focus on those farms, whose value is below € 10,000. In return for a one-off payment of €14,000, owners of such farms would promise to increase their value both by at least 20% and to a level above €10,000. They would also be required to keep that worth for at least five years straight as well – and they would not be able to use other RDS programmes for it. Participation in SFR would render a farmer ineligible for most of the other rural development programmes, in order for them not to use EU funds in order to get more EU money, without adding any value of their own. Less dependence on “brokers” The ministry is also working on projects that go beyond the scheme. For example, its Legislation Centre is preparing a new law that would allow farmers to sell their products more easily directly to the consumers while still keeping them in line with food safety requirements. It will allow all farmers and especially smaller ones to make profits from their farms in an easier way and will lessen their dependence on “brokers”. Poland’s rural areas have already been developing by leaps and bounds after the accession to the EU, and the ministry hopes that the current RDS, despite having earmarked about a billion euro less than the previous RDS, will be able to continue this trend. At the moment, data provided by the Central Statistical Office of Poland currently indicate growing affluence and satisfaction with the EU among the Polish farmers. The new development schemes will take a while before their effects could be felt on the ground, but the last 10 years have already shown that the Polish farmers are hungry for success and not afraid to compete at the European and even global stage. Source: Euractiv.com

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EU Funds

All 118 Rural Development Programmes adopted Worth €99.6 billion for 2014-2020, all 118 EU Rural Development Programmes for 2014-2020 are now ready to roll.

The recent adoption of Greece's Rural Development Programme (RDP) marks the end of the adoption process for all 118 programmes for the 2014-2020 period. With €99.6 billion from the European Agricultural Fund for Rural Development (EAFRD) and another €60.6 billion of co-funding from national and regional public funds or private investment, the RDPs will help European rural areas and communities face the current economic, environmental and social challenges, and take advantage of the opportunities ahead of them. Marking this milestone, Commissioner Phil Hogan said: "The Rural Development Programme is about jobs, growth, investment and competitiveness in rural Europe. The goal is to empower rural areas and communities to meet the wide range of challenges and opportunities that face them in the 21st century: economic, social and environmental. With smart and strategic investment, the RDPs will drive generational renewal and create the conditions for a vibrant rural economy, society and environment. With COP21 ongoing in Paris, there is an inevitable focus in addressing the considerable climate challenge and the Rural Development Programme has a significant role to play in contributing to meeting this challenge." Predominantly rural regions represent 52% of the EU territory and have a population of 112.1 million people. These regions differ significantly from one to the other and the challenges they face reflect many different circumstances. That is why the Commission

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provides greater flexibility to Member States so that the support is more closely tailored to the particular needs of each region or country and reflects a greater emphasis on subsidiarity. This way, Member States can build their own national or regional programmes, reflecting these particularities, based on at least four of the six common priorities: knowledge and innovation, competitiveness, better food chain organisation, preserving ecosystems, resource efficiency, and social inclusion. These priorities also reflect the extent to which RDP funding has a beneficial impact on society in general and not just on the farming and other rural communities. For example, the Polish authorities decided to dedicate one third of their RDP's funding to enhance farm viability and competitiveness, with a programme that will provide investment support to roughly 200 000 farms and more than 1 800 producer groups, targeting the creation of thousands of jobs. Support

For example, Austria allocated 71% of its support to better management of natural resources and to encourage climate friendly farming practices, with the objective of having 83 % of farmland managed under contracts to support improved biodiversity and 75 % to improve water quality. Similarly, the central priority of Ireland's RDP is restoring, preserving and enhancing ecosystems related to agriculture and forestry. Three quarters of the total funding for Ireland is allocated to this priority. Connecting rural areas and enhancing infrastructure is an important pre-requisite for competitiveness. In Italy, Calabria's RDP will contribute to social inclusion and economic development in rural areas by bringing improved broadband infrastructure to about 48% of the rural population. Some of the overall expected achievements for the 2014-2020 period are outlined in this fact-

With €99.6 billion from the European Agricultural Fund and another €60.6 billion of co-funding, the RDPs will help European rural areas.

for the setting-up of young farmers is included in many regional programmes, such as those for Picardie and Basse-Normandie in France. Climate action is amongst the most frequent project priority in national and regional RDPs.

sheet. The implementation and impact of Rural Development Programmes is monitored and evaluated in detail. The findings are available in reports published on the Commission's website. n

March–April 2016

Events

Polish Wind Association trade fair puts on a brave face PSEW’s annual Wind energy expo, held this year in early March at Warsaw’s EXPO XXI, had a boost from the support of the European wind energy association (EWEA). And it will need all the help it can get if the proposed new laws about wind farms go into effect. Proposed legislation would restrict the building of new turbines in one of Europe’s strongest wind energy markets. Poland’s wind market was one of the strongest performers last year – second only to Germany – installing a total of 1.3 GW in new capacity as developers pushed forward on projects, according to EWEA. To date, the wind industry in Poland supports over 8,000 jobs and generates $153 million in revenue each year. The draft legislation suggests that the minimum distance between households, buildings or nature reserves should be at least 10 times the total height of a wind turbine. The average height of a wind turbine – from base to blade tip – is between 140 meters and 160 meters. This would mean that most modern wind turbines would need to be located at least 1.5 km away from any residential zone or protected natural area.

“This is a clear statement of intent from the governing party in Poland,” says Giles Dickson, CEO of EWEA. “The draft law proposed is deeply troubling. It will tie new projects up in red tape and make life hard for existing wind turbines that do not meet the legal demands.” Other measures in the draft law include a long and drawn-out permitting process. If granted, new permits would last only two years before requiring renewal. Any planned repairs or maintenance would also require consent. In addition, the developer would be liable to pay service fees to the technical authorities, according to the draft law. Non-compliance with any of these processes could result in a hefty fine or even imprisonment of up to two years. The European Wind Energy Association (EWEA) has put out a statement concerning proposed legislation in Poland that would restrict the building of new turbines in one of Europe’s strongest wind energy markets. n

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Events

Polish cities strong presence at MIPIM Poland showed up in force at Europe’s largest commercial real estate fair in Cannes in mid-March. Led by Deputy Prime Minister Mateusz Morawiecki, other VIPs attending included Warsaw’s Mayor Hanna Gronkiewicz-Waltz, Lodz’s Mayor Hanna Zdanowska, Katowice’s mayor Marcin Krupa, and deputy mayors from Gdansk, Gdynia, and Poznan. At a jam-packed panel discussion about the investment environment in Poland Deputy PM Mateusz Morawiecki said that international worries about Poland’s political changes is overblown and exaggerated and not cause for worry. “Since we first set out the plan for developing Poland, there has been a shift to encourage investment in smaller cities. We also recognise that we need to improve infrastructure to make some locations more accessible”, he said. He said that he had just spent one day in London meeting with investment and pension funds and other portfolio investors,

and they remain confident about Poland’s economic growth story. Gdynia’s deputy mayor, Katarzyna Gruszecka-Spychala emphasized the importance of international investment. “The national plan is broad, and I would like to see the cities and regions come together to promote Poland”. n

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Events

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