Poland Today Business Review+ No. 57 by Poland Today Business Review+

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No. 057 / 20th October 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING Norway's Tritec opens new production unit in Słupsk page 2 Chinese shoe sole maker Fenghua eyeing Warsaw IPO page 2 Heat treatment firm Bodycote to set up new plant near Wrocław page 3 BANKING & FINANCE GE analyzing sale of Polish BPH Bank; the latter's share price soars on the news page 3 The headcount at Kellogg's Kutno plant will reach 200 next year.

Photo: Kellogg

Kellogg to expand Polish Pringles plant

Although it's been merely four months since production began at the newly opened Pringles chips factory in Kutno, the latter's US owner Kellogg Company is already gearing up to double the plant's capacity next year with a second production line. page 9

ThyssenKrupp to employ 700 in Gdańsk

German industrial giant ThyssenKrupp has chosen the northern Polish city of Gdańsk for one of its global shared services centres. Over the coming years the facility is to create 700 jobs. page 7

ENERGY & RESOURCES Tauron awards 18MW wind farm contract to Spain's Iberdrola page 4 PROPERTY & CONSTRUCTION Deutsche AMW add the Metropolitan office building to their Warsaw portfolio page 5 RETAIL PROPERTIES Atrium acquires Bydgoszcz mall from Aviva for EUR 122m page 6

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SERVICES & BPO Teleperformance to recruit 250 staff at customer support center in Katowice page 7 TRANSPORT & LOGISTICS P3 doubles Polish logistics portfolio page 8 MEDIA Canal+ and ITI mulling sale of majority stake in TV broadcaster TVN page 10 POLITICS & ECONOMY Industrial production rebounds in September page 11 Deflation stays flat at 0.3% y/y in September page 12 MEDIA PATRONAGE NPCC Rijsttafel event raises PLN 25,000 to help treat children in comas page 12 OPINION Reaching for the stars page 13 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

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MANUFACTURING & PROCESSING

Norway's Tritec opens new production unit in Słupsk Norwegian investor Tritec has launched a brand new production unit in the Redzikowo section of the Słupsk special economic zone. The company, which works primarily for customers in the offshore and maritime industries, built a brand new production facility in less than nine months, seeking to expand its capacity and improve operational efficiency. Tritec has spent PLN 8m on the project, creating 46 new jobs. Spread across a 1.33ha site, the new plant includes two halls, for welding and hydraulic assembly (with a combined floor space of 2,000 sq.m and indoor cranes than can lift objects of up to 10 tons) as well as offices and staff facilities. Phase two will include a testing site for devices assembled here. "This investment enables us to carry out hydraulic assembly of complex hydraulic systems. Additionally, we will be able to perform simulations and complete factory acceptance tests of the finished product. Our next step will be to finalize the test station. This project will bring new and improved competence to the business, but in the first stage it will not create new jobs," Tritec's managing director Bjørn Kverneland tells Poland Today. With an annual turnover of approximately NOK 50m, Tritec is a group of companies that specializes in high quality engineering and steel construction, supplying mainly the Norwegian market. It has a total of 70 employees, of whom 68 are based in Poland.

"The biggest benefit of operating from Poland so far has been the cost level, but also logistics, due to Poland's location in central Europe, and the general competence level of Polish employees," says Kverneland. "Our main product are davits [a type of crane that projects over the side of a ship or a hatchway and are used especially for boats, anchors, or cargo; ed.] and other special constructions for the Norwegian maritime and offshore market. Our main customer is Vestdavit but also other Norwegian offshore and maritime customers."

container handling on the building site. The main goal of our R&D activity is to develop products suited for our production area," says Tritec's managing director.

MANUFACTURING & PROCESSING

Chinese shoe sole maker Fenghua eyeing Warsaw listing China's second largest sports shoe sole manufacturer, Fenghua SoleTech AG, is gearing up for a double listing at the Frankfurt and Warsaw stock exchanges. The IPO will include new shares representing a 10.7% stake in the company, which supplies soles to some of the world's leading sports shoe brands. If successfully finalized, the IPO will make Fenghua the third Chinese company listed in Warsaw, alongside automotive parts firm JJ Auto and diaper-making machine manufacturer Peixin.

Tritec's brand new plant in Słupsk with a sample of its main product in the foreground. Photo: Tritec

Tritec had been operating in Poland since 2002 and besides the manufacturing unit, which produces chiefly various lifting devices and steel structures, the company has an R&D centre in Slupsk. "We have available six engineers in Poland who are working on customer projects related to patented solutions. Our service covers GA drawings, FEA analysis, work drawings, CE marking. At the moment we are running two bigger projects. One focuses on the Rapid Purge Technology which seeks to find a solution for transport of CO2 in vessels. The other interesting project is Jack Pack, a patented special solution for

At its production facilities located in Jinjiang County, Fujian Province, one of the leading shoe industry hubs in China, Fenghua produces more than 40m pairs of shoe soles per year. The expected EUR 10.4-12.7m worth of net proceeds from the issue, Fenghua plans to use mainly to boost its production capacity. The company seeks to further expand usable space and to invest in new machinery for the production of shoe soles. The expansion would nearly double the total floor space of the factory from currently 1,600 sq.m to 3,000 sq.m. Unlike most of its competitors, who offer only OEM (original equipment manufacturing) capabilities, Fenghua has its own research and development team and therefore can offer also its own designs. The soles manufactured by Fenghua are designed for perfor-

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mance sports shoes as well as for leisure and casual sports-inspired shoes targeting mid to high end shoe producers in China and international brands. As of June 30, 2014, Fenghua had a workforce of 1,822 employees. Fenghua's financial performance has been quite encouraging in the past three years with operating and net margins averaging the respective 27% and 20% during the period. in 1H 2014 the company turned over EUR 42.5m (+14% y/y), while its net earnings topped EUR 9.7m (+20% y/y). The 2013 full year 2013 turnover came to EUR 90.1m with a net income of EUR 18.8m. The main shareholder in the company, which is registered in Germany, is its CEO Weijie Lin, holding 67.5% of its equity.

MANUFACTURING & PROCESSING

Heat treatment firm Bodycote to set up new plant near Wrocław British heat treatment specialists Bodycote have picked a location for their sixth Polish production site, in Siechnice near Wrocław. The 2,500 sq.m built-tosuite facility is being developed by Polish general contractor P.A. Nova. With 190 locations across 26 countries, Bodycote S.A. is the world's leading provider of thermal processing services to a wide range of industries, including aerospace, defense, automotive, power generation, oil and gas, construction, machine building, medical and transportation. Bodycote's key technologies include thermal processing, metal joining, hot isotactic pressing and surface technology. Bodycote turned over GBP 620m and earned GBP 73m after tax in 2013.

In a move to better serve its clients in the Wrocław area, mainly automotive firms., the company chose an investment site near the city's eastern ring road. Sitting on a 1ha site, the project will include 2,250 sq.m of production space as well as 214 sq.m of office and staff quarters.

BANKING & FINANCE

GE mulling sale of Polish BPH Bank; Bank; the latter's share price soars on the news US giant General Electric said last week it was considering the sale of its Polish banking business Bank BPH. Shares in the Warsaw-listed bank surged 23% on the news, taking BPH's valuation to PLN 3.64bn - its highest level since August 2009. BPH said in a statement that it had been informed by its owner that the latter was "analyzing strategic possibilities" of selling the bank's shares. The American investor holds a 90% stake in BPH through three subsidiaries. The announcement does not come as much of a surprise, as unlike its competitors, BPH has remained rather passive in recent years, despite being Poland's 10th largest bank by assets. GE has been lacking a clear vision for the bank, which it acquired in 2007 for EUR 625.5m together with a mutual fund from Italy's UniCredit. With total assets at PLN 10.4bn, BPH saw its net earnings shrink by a quarter in Q2 2014. In fact, the bank's net income declined in five of the past six quarters. Although widely anticipated by the market, BPH's sale may face regulatory hurdles, however, as Poland's

banking supervisor KNF has been openly against any further mergers of Polish banks. Following BPH's announcement, the KNF issued a statement in which it signaled it may oppose GE's plans. "KNF attaches great importance to the fulfillment of commitments by majority shareholders of banks, especially those commitments that have not been fulfilled," the banking watchdog said. "Any potential unilateral actions of a shareholder, without seeking KNF's consent, could form a basis of supervisory action against the investor not fulfilling the commitments," KNF said. The regulator seems to be referring to the requirement, under the Polish banking law, for all banks listed on the Warsaw Stock Exchange to maintain a free float of at least 25%. With GE controlling close to 90% of BPH, that requirement clearly has not been met. According to KNF's boss Andrzej Jakubiak, the concentration on Poland's banking market is close to optimal at the moment, and therefore GE should look for buyers among banks that are not yet present in the country. The new investor’s rating shouldn’t be lower than Poland’s A- rating at Standard and Poor’s, Jakubiak said, adding that KNF will "closely monitor the sale." Apart from the banking business, GE has a strong, export-oriented industrial base in Poland with 10,000 employees. GE Power Controls, (part of GE Industrial) has factories in Kłodzko, Łódź and Bielsko-Biała, whereas GE Aviation operates a manufacturing unit in Dzierżoniów. With a staff of 1,300 engineers the Warsaw-based GE Engineering Design Center (EDC) is one of the company's most advanced R&D units, working for the Aviation, Energy, as well as Oil & Gas industries. The combined turnover of GE's Polish operations came to USD 1.18bn in 2012.

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Consolidation continues

Iberdrola Engineering and Construction Poland and its Spanish owner Iberdrola Ingenieria y Construcción have won a tender for the expansion of the Marszewo wind farm in northwestern Poland, organized by Tauron Ekoenergia, the renewable energy arm of Poland's listed second largest energy producer Tauron. The winning consortium offered to deliver phase two of the Marszewo project, including nine windmills with a combined installed capacity of 18MW, by the end of October 2015 at the cost of PLN 124.5m gross. The competing bid, from Energal II and Aldesa Constructiones, was only a few million more expensive.

land where it had commissioned facilities with a combined capacity of over 480 MW to date. Built at the cost of EUR 135m, the Marszewo I wind farm has an installed capacity of 82 MW and includes 41 Vestas turbines. As for Tauron, the Polish company has recently obtained a PLN 295m loan from the European Investment Bank to support the development of its distribution network and renewable energy projects. Including the new agreement, Tauron has obtained four loans totaling PLN 1.7bn from the EIB to-date.

Poland's installed wind energy capacity in MW Phase one of the Marszewo farm was commissioned in October 2013. Photo: Iberdrola

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500

Source: URE

*2014

2013

2012

2011

2010

2009

2008

0 2007

Foreign banks control about 70% of the Polish banking sector, but several have looked for an exit to boost capital positions hit by the global economic crisis, with others being keen to strengthen their foothold in an economy which has outperformed much of the euro zone in recent years. Major recent exits from Poland's banking market included Belgium's KBC and Ireland's AIB which sold their Polish units to Spain's Santander, Greek Eurobank EFG (their Polbank EFG merged with Raiffeisen Polska), Swedish Nordea (their Polish arm was acquired by Poland's largest lender PKO BP for PLN 2.83m), and Dutch Rabobank (which has just recently sold its Polish business BGŻ to France's BNP Paribas for PLN 4.2bn).

Tauron awards 18MW wind farm contract to Spain's Iberdrola Iberdrola

2006

"From the point of view of systemic risks and of the safety of the financial system it is important that there are no too large banks in Poland, i.e. such whose potential problems could not be resolved based on domestic instruments of crisis management," the regulator said after PKO BP announced the acquisition of the Polish Nordea unit.

ENERGY & RESOURCES

2005

Another large Polish bank that is seeking new owners at the moment is Alior Bank, controlled by FrenchItalian investor Carlo Tassara. By taking over Alior and BPH any newcomer would immediately get a solid foothold in the highly competitive Polish market. However, Poland's top lenders, Polish-owned PKO BP, UniCredit subsidiary Pekao SA and Santander's BZ WBK all signaled in recent months they would look into possible acquisitions. It seems like their appetites can only be curbed by KNF's tough stance on concentration.

*) as of end of H1

Iberdrola was also responsible for the construction of the initial phase of the Marszewo farm, which was launched in October 2013 as the company's 12th in Po-

With the support of the EIB, The Polish energy group will expand its electricity distribution networks by adding an estimated 11,000 new connections and upgrade the existing equipment, which will predominantly serve to connect new customers to the distribution grid. The company will also roll out a smart metering pilot program, which should be particularly beneficial to residential, commercial and public authority customers, as the program’s aim is to verify the technology, facilitate data management and provide better information flow between customers and suppliers. The EIB will also support the modernization and refurbishment of several of Tauron Group’s hy-

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dropower plants, which will increase their efficiency and generating capacity. Tauron is the second largest energy producer in Poland as well as the largest distributor of electricity. In 2013, the company made several investments including a modern power unit using cogeneration at its plant in Bielsko-Biała and two wind parks in Wicko and Marszewo with a combined power output of 122 MW. A 450 MW power unit is also currently being constructed in Stalowa Wola as well as a 413 MW unit in Łagisza. The latter is a PLN 1.5bn investment, of which up to PLN 750m may be contributed by Polskie Inwestycje Rozwojowe (PIR), a state investment vehicle (see BR+ No. 027 page 6). In recent months Tauron broke ground on a PLN 618m heat & power project in Tychy (see BR+ No. 029 page 4), and signed a long-awaited PLN 4.4bn contract with the consortium of engineering firm Rafako and builder Mostostal Warszawa for the construction of a 910 MW power block at the Jaworzno power plant (see BR+ No. 032-33 page 8). With a total capex of PLN 5.4bn, the new coal-fired unit will replace older, much less efficient facilities at Jaworzno, bringing the site up to date with stricter EU emissions limits. Despite its ambitions investment pipeline, Tauron reported an 11% drop in net profit in 2013, with expectations of even weaker results in 2014 due to the statecontrolled utility's struggle with falling energy prices and weak demand caused by the sluggish Polish economy. The group posted a PLN 1.3bn profit on PLN 19.1bn revenue.

PROPERTY & CONSTRUCTION

Deutsche AMW add the Metropolitan office building to their Warsaw portfolio Deutsche Asset & Wealth Management has sealed its second major purchase on Warsaw's property market this year with the acquisition of the Metropolitan office project in Warsaw. The value of the transaction was agreed to be kept confidential, but market watchers are speculating that the price tag on this prime piece of property must have been in the region of EUR 190-200m.

The acquisition brings the total assets under management in Poland to over EUR 1bn making Deutsche AWM one of the largest real estate investors in the country. In April, the company acquired another iconic Warsaw building, the 70,000 sq.m Rondo 1 office tower, for approximately EUR 300m, in what remains one the largest deals Poland's office market has seen to-date.

Constructed in 2003 according to Sir Norman Foster’s design, Metropolitan has received a number of prestigious awards, including the MIPIM Award 2004 in the Business Center category, and RIBA Worldwide Award. Photo: Cushman & Wakefield

Designed by Sir Norman Foster and delivered by Hines in 2003, Metropolitan was sold to Aberdeen Asset Management Deutschland in 2006 for EUR 169m. Located on Piłsudski Square, on the edge of Warsaw's Old Town, the Metropolitan remains one of Warsaw's most prestigious addresses. Its GLA of 38,000 sq.m of (of which some 3,700 sq.m is retail) is being occupied by 45 tenants that include DZ Bank Polska, BNP Paribas, McKinsey & Company, Cushman & Wakefield and Colliers International. The property is being managed by Cushman & Wakefield and it obtained "very good" BREEAM certification last year.

"We are pleased to add the Metropolitan to our portfolio. Its unique design by high profile architect Norman Forster, in addition to its location in Warsaw's city centre - one of the CEE's most vibrant and growing business centers, makes it an attractive investment opportunity. We will continue to focus on acquiring quality assets for our clients," commented Gianluca Muzzi, Head of Real Estate, Europe ex-Germany for Deutsche AWM.

"Metropolitan boasts an impressive occupancy rate and is expected to continue outperforming its rivals on the Warsaw market. This is a unique investment transaction in a unique location within Warsaw’s CBD," commented Soren Rodian Olsen, Head of Office & Industrial Investments at Capital Markets of Cushman & Wakefield, which brokered the deal alongside JLL.

With EUR 923bn of assets under management (as at December 31, 2013), Deutsche Asset & Wealth Management is one of the world's leading investment organizations. The company offers individuals and institutions traditional and alternative investments across all major asset classes. It also provides tailored wealth management solutions and private banking services to high-net-worth individuals and family offices.

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EXPERT VIEW Central and Eastern European (excluding Russia) commercial real estate investment volumes have risen 11% y/y according to CBRE’s latest report. Poland’s real estate market continues to attract strong investment, with €1,8 billion invested in Q1-Q3 2014. However, limited availability of product in prime commercial real estate in Poland means investors are now looking more closely at the Czech Republic, Romania and Hungary, which have seen increases of 11%, 215% and 126% respectively. Investment into Russian commercial real estate has dropped 45% y/y in Q1-Q3.

ing cash resources and is subject to approval by the Polish antimonopoly office, which is expected to be obtained in Q4 2014, the company announced. The acquisition is in line with Atrium’s strategy to become the dominant player in its core markets of Poland, Czech Republic and Slovakia through the purchase of strong income producing shopping centers which complement its existing portfolio, Atrium said. As a result of the acquisition, over 55% of Atrium’s total income producing portfolio by market value is in Poland.

Atrium acquires Bydgoszcz mall from Aviva for EUR 122m Retail property company Atrium European Real Estate has agreed to acquire retail center Focus Mall in Bydgoszcz from Aviva Investors for EUR 122m. The acquisition will be financed from Atrium's exist-

Bydgoszcz is Poland’s eighth largest city with approximately 360,000 inhabitants and Focus Mall is well located in a heavily populated city centre area, adjacent to both the city’s main football stadium and the bus station, at the intersection with the city’s two main roads.

EXPERT VIEW

Opened in 2008, Focus Mall offers 41,000 sq.m of retail GLA. Photo: Atrium

“The total volume of retail transactions concluded in Poland in Q1-Q3 2014 is estimated at €410 million, with approximately €50 million in Q3. The most notable retail transaction in Q3 2014 was the acquisition of Galeria Piła by Immofinanz from Rank Progress, while the biggest transaction this year is still the acquisition of Poznań City Center by a consortium of Resolution and ECE Fund from TriGranit, Europa Capital and PKP. We expect increasing retail investment activity in Q4 illustrated by a preliminary sale agreement recently signed by Atrium European Real Estate to acquire Focus Mall in Bydgoszcz from Aviva Investors for approximately €122 million. In addition, a number of other transactions in the retail sector are at advanced stages with a likely closing by the end of 2014,” says Adam Kiernicki, Senior Financial Analyst, JLL.

Focus Mall was originally developed in 2008 and is the dominant shopping centre in Bydgoszcz. It comprises 41,000 sq.m of retail GLA across two storeys, which is currently 96.1% let to a number of anchor tenants including a c. 2,800 sq.m Alma supermarket, a Saturn electronics store and a Cinema City, as well as a large number of other high profile international and domestic retail fashion brands including C&A, H&M, Reserved, Cropp, House, Bershka, Pull & Bear and New Yorker. A further two floors over the shopping centre are predominantly given over to car parking for

In March Atrium opened its EUR 120m retail project Atrium Felicity in the eastern Polish city of Lublin. The property offers 75,000 sq.m of gross leasable area of retail across 120 units. As of mid-2014, Atrium owned 23 properties in Poland with a gross lettable area of 0.5m sq.m and a market value of EUR 1.32bn. In the first half of the year the Polish portfolio generated a gross rental income of EUR 44.7m, representing an increase of nearly 18%, which was entirely due to the acquisition of Galeria Dominikańska and the Atrium

“Poland has the most dynamic real estate market amongst all CEE countries. When analyzing data from Q3 2014 we can see increased activity in the office and industrial segments of the market. Both segments recorded boosted interest from investors and grew by 20% y/y. Almost 60% of transactions, which were signed in Q3 took place in Warsaw. We have observed a number of new American investors entering our market. Based on the deal pipeline, we expect the total volume of transactions to exceed the last year level," commented Joanna Mroczek, Director of Consultancy & Research at CBRE.

RETAIL PROPERTIES

approximately 850 cars , as well as 830 sq.m of storage and a 156 sqm office suite for the centre management.

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Felicity launch. In like-for-like terms, the revenues shrunk by more than 2%.

ing located in Germany (Essen & Bochum), as well as India, China and Brazil.

vice and IT, providing jobs for graduates with language skills.

On the development side, besides the Lublin project, the company is expanding its Atrium Copernicus property in Toruń, which will get an additional 17,300 sq.m of GLA and 640 parking spaces by the end of the year. The company's board has also recently approved a major modernization of the Promenada shopping center in Warsaw that will see the property expand by even as much as 44,000 sq.m.

"SSC Gdańsk began operations in August 2014 and since the end of September financial and accounting services have been delivered directly from Gdańsk. The center will be continuously built up over five to eight years with a possible range up to 700 workplaces," Robert Góra, Head of Shared Services Gdańsk at ThyssenKrupp tells Poland Today. "The goal of GSS is to provide high-quality, standardized services at a competitive level and thereby establish efficient administrative functions and support processes throughout the group worldwide."

Poland is ThyssenKrupp's most important sales market in Central and Eastern Europe. With sales of almost EUR 900m in fiscal year 2012/2013, the country ranks number 10 of ThyssenKrupp's foreign markets. The largest ThyssenKrupp company in Poland is ThyssenKrupp Energostal S.A., Toruń, with about 800 employees, specializing in rolled and stainless steel, steel tubes/pipes and nonferrous metals. Besides Poznań and Warsaw, the company operates a third warehousing and service center in Dąbrowa Górnicza. With a storage area of around 70,000 sq.m, this facility is the largest warehousing and service center in Eastern Europe. ThyssenKrupp Stal Serwis Polska has also been integrated into this location to generate synergies. Altogether, local ThyssenKrupp companies in Poland employ around 1,000 people.

Atrium is a real estate company focused on shopping centre investment, management and development in Central and Eastern Europe. As at 30 June 2014 the Group owned 153 shopping centers and retail properties, with a market value of EUR 2.5bn, diversified across seven countries with a total gross lettable area of 1.3m sq.m. In 2013, Atrium produced a gross rental income of EUR 203.5m.

SERVICES & BPO

ThyssenKrupp to create up to 700 jobs at new shared services unit in Gdańsk German industry giant ThyssenKrupp has set up a global shared services center in Gdańsk, aiming to create up to 700 positions at the new facility over the coming years. The center will handle a broad range of processes for ThyssenKrupp's units in all European countries, focusing mainly on finance and accounting, HR, real estate, and IT services. Gdańsk will be one of ThyssenKrupp's six global centers, the other ones be-

The company listed the existing shared services centre environment, dynamic economic growth and educated staff in Gdańsk among the city's key pull factors, alongside its convenient location and good language skills (particularly English and German) of available candidates. The new ThyssenKrupp facility will be the largest shared services center in the Pomeranian region and at the same time the largest investment project ever supported by Invest in Pomerania, the regional investment promotion agency. "ThyssenKrupp Group Services Gdańsk offers also a unique opportunity for graduates, specialists and professionals to develop their skills and start a career in an international corporation. In cooperation with universities a special educational offer will be created – courses and new profiles of studies will provide education focused on corporate and financial accounting, business process outsourcing, payroll and administration, HR processes, SAP system and languages skills," Mr. Góra says. There are an estimated 40 business services centers with a combined workforce of 13,000 in Gdańsk. They specialize mainly in financial services, customer ser-

ThyssenKrupp employs more than 160,000 people across 80 countries in business areas that span steel, materials services, industrial solutions, components technology and elevator technology. In fiscal year 2012/2013 ThyssenKrupp generated sales of around EUR 39bn.

SERVICES & BPO

Teleperformance to recruit 250 staff at new customer support center in Katowice Global customer care services giant, the Paris-based Teleperformance Group, will create up to 250 jobs over the coming months at a new unit in Katowice.

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The company will take up 2,300 sq.m at the Alder building in Katowice's GPP Business Park.

national companies operating in a wide variety of industries. Its German division employs some 3,300 people at seven locations.

"TPG Katowice, subsidiary of Teleperformance Germany, will open its unit in Katowice, which will serve as a technical and IT support center for external clients. The first key areas of expertise that we will deploy in our Katowice-based BPO service for the German market are e-commerce and telecommunications. TPG Katowice will use integrated multimedia customer contact center solutions offering advanced functionalities such as e-mail, web chat, call-through, cobrowsing and intelligent contact routing to best serve our clients," Thomas Güther, CEO of Teleperformance Germany, tells Poland Today. Asked why they chose Katowice, of all available locations in Poland, Mr. Güther replies: "The key decisive factor was obviously the availability of German language skills in Silesia. However the availability of a qualified workforce, the accessibility of the area and its industrial maturity were also very important factors taken into account when we finally selected Katowice for our location in Poland. Currently we are recruiting a team of 250 employees who will serve our German-speaking clients from Katowice however we have intentionally chosen a location with expansion potential." The Teleperformance Group, a majoir global player in outsourced multichannel customer experience management, serves companies around the world with customer care, technical support, customer acquisition and debt collection programs. In 2013, it reported consolidated revenue of EUR 2.4bn. Listed on Euronext Paris, the group operates around 135,000 computerized workstations, with more than 175,000 employees across around 270 contact centers in 62 countries and serving more than 150 markets. It manages programs in 63 languages and dialects on behalf of major inter-

Economic Zone, a number of leading global brands, such as Capgemini, IBM, PwC, ING, Unilever, Ericsson or Oracle, have set up their business services units in Katowice. GPP Business Park has gained a lot of attention in the property sector after its first building obtained BREEAM certification at the "Outstanding" level and remains the only asset in the country with such impressive sustainability credentials. Located in the north of Katowice, at Konduktorska Street, within the boundaries of the Katowice Special Economic Zone, GPP Business Park encompasses 25,000 sq.m of modern, energy-efficient office space. The Alder building, to where TPG Katowice will move this October, is the park's third office building.

Katowice's GPP Business Park offers 25,000 sq.m across three buildings. Photo: GPP Business Park

"The actual Polish Teleperformance subsidiary is located in Warsaw and Siedlce with 370 employees. Teleperformance Polska, managed by my colleague Mariusz Odkala, the CEO of Teleperformance Polska, focuses on the Polish domestic market and also on multi-lingual programs for some of our global and international clients while the Polish subsidiary of Teleperformance Germany in Katowice is explicitly designated to serve the current German clients and under the leadership of Teleperformance Germany. Nevertheless we work closely together to provide synergies and value adds for our clients," Thomas Güther says. Despite its traditional associations with mining and heavy industry, in recent years Katowice has emerged as a recognized location for business services sector projects. Attracted by the region's well-developed labor market and infrastructure, friendly authorities as well as incentives offered by the Katowice Special

According to property consultancy JLL, Katowice, with total office stock of 337,000 sq.m, is the largest office market in the Silesian Agglomeration, and fifth among major Polish cities, after Warsaw, Kraków, Wrocław and Tri-City. In 2014, record levels of demand and developer activity are expected. In H1, lease agreements of 34,500 sq.m were signed (compared to 32,000 sq.m in H1 of 2013, and 60,500 sq.m through 2013), proving that the Katowice office market enjoys the continuing interest of tenants. At the same time, developers are aware of the trend and remain active, so the market in Katowice will gain 67,000 sq.m office space supply in 2014.

TRANSPORT & LOGISTICS

P3 doubles Polish logistics portfolio It's been nearly a year since TPG, a leading global private investment firm and Ivanhoé Cambridge, one

weekly newsletter # 057 / 20th October 2014 / page 9

of the world’s largest real estate companies, took over warehouse developer PointPark Properties (P3), pledging a more aggressive expansion in the CEE region. After completing large acquisitions in the Czech Republic and Italy in recent months, last week saw P3 seal an agreement to buy two logistics parks in Poland and one in Romania with a combined total of 467,000 sq.m of lettable space, from CA Immobilien Anlagen AG. The purchase, which is still subject to contractual terms and regulatory approvals, includes also almost 165 ha of land for development, principally in Poland and Romania. The two parties decided not to disclose the financial terms of the deal. "P3 now operates more than 2.9m sq.m of modern logistics and distribution facilities and also owns one of the largest land banks for logistics development in Europe. This acquisition of high quality assets produces strong cash flows that will provide attractive returns for our stakeholders," commented Ian Worboys, P3’s Chief Executive. In Poland, P3 acquired a 177,000 sq.m park at Błonie, some 30 km west of Warsaw city centre, with links to the A2 motorway to Poznań and Berlin. Tenants include Bayer, IBM, Orange, Triumph and online retailer Allegro, reflecting the park’s appeal to large retailers seeking proximity to the Polish capital. This park offers 17 ha. of development land. The second park lies near Piotrków, South East of Łódź in central Poland. It provides 75,000 sq.m of space and direct road links to Warsaw, Wroclaw and Katowice. The park is on a 120 ha. plot, offering scope for development. Kühne & Nagel, FM Logistic and InPost are among the park’s largest tenants. "After the transaction, P3 will increase warehouses in ownership in Poland from eight to 23 and lettable area from 200,000 sqm to 450 000 sq.m. We will also own almost 1m sq.m of developable land bank in Poland,"

Peter Bečár, P3’s Managing Director for Central & Eastern Europe, tells Poland Today "Our latest investment in Poland and Romania along with other P3’s logistics centers enables us to offer our customers warehouses in a true pan-European platform. Poland has a perfect location for the development of the logistics market. Its location between East and West makes Poland a natural transit country for the transport of goods. Therefore we still see opportunities also in Poland for further expansion of our activities, mainly in the southern regions of the country. We are continuously looking for opportunities in all of Europe," he adds. P3's two existing Polish logistic parks (in Mszczonów south of Warsaw and near Poznań), are both strategically located and have excellent transport connections. Once fully built-up, PointPark Mszczonów will comprise close to 320,000 sq.m in 12 buildings. Currently its three largest tenants are Fiege, Jeronimo Martins Dystrybucja (operator of Poland's top retail chain Biedronka) and ID Logistics Polska. PointPark Poznań as a whole offers up to 195,000 sq.m of warehouse space, including more than 131,000 sq.m of zoned land for further build-to-suit developments. Key customers include Hager, DAMCO, Jeronimo Martins Dystrybucja, ND Poland, CEVA, and PF Concept. The parks have planning consents for new warehouse developments, while P3 is also able to offer other locations for BTS projects near key Polish cities, including Warsaw, TriCity, Wrocław, Kraków, Rzeszów, Bydgoszcz and Lublin as well as in the industrial regions of Upper Silesia and Legnica. P3's asset base comprises 144 warehouses spread across nine countries and a land bank with zoning for more than 1.45m sq.m of potential development.

FOOD

Polish Pringles plant up and running; owner Kellogg to double its capacity next year Four months after it launched production at its stateof-the-art factory in Kutno, in central Poland, US Kellogg Company, the world’s leading cereal maker and second largest savory snacks producer, announced plans for a substantial capacity boost at the site. The company said it would install a second production line at Kutno in early 2015, boosting the plant's workforce in excess of 200 staff. Kellogg makes the popular Pringles chips at the Polish plant. The US investor acquired the Kutno site in 2007 and completed a factory building of approximately 15,000 sq.m shortly after. At the time, Kellogg's focus was on breakfast cereal as the company had plans for introducing its brands to Central and Eastern Europe. In the end, Kellogg gave up on that strategy, resulting in the newly-completed buildings sitting idle for nearly half a decade. Following the USD 2.7bn acquisition of the Pringles business from P&G in 2012, which instantly made Kellogg the world's second largest savory snack maker, the Americans returned to Kutno the following year with new plans. In early 2013 the Łódz Special Economic Zone said Kellogg's SPV UMA promised to invest a further PLN 225.8m (approx. EUR 54.8m) in the Kutno project that were to create a minimum of 40 new jobs. Company representatives explained the investment was for a 10,000 sq.m extension to the exist-

weekly newsletter # 057 / 20th October 2014 / page 10

ing building which would contain a raw material area, process, packing and warehouse.

rope," said Chris Hood, President of Kellogg Europe. "The success of Pringles in Europe was so great that we were struggling to meet the demand. With the new production facility we will be able to meet clients expectation, and through the partnership with one of the biggest distributors in the region, Orbico company, we will expand the distribution network and make our product more broadly available," he added.

Kellogg is the world’s leading producer of snacks, cereals and frozen foods. The company was founded in Battle Creek, Michigan more than 100 years ago by William Keith Kellogg. The NYSE-listed company has approximately 31,000 employees at 50+ manufacturing facilities in 18 countries around the world. Its 2013 Kellogg's net sales totaled USD 14.8bn, while its net earnings topped USD 1.8bn.

Stagnation in savory snacks

Prior to 2008 sales of savory snacks in Poland used to grow at a double digit pace, but market saturation and economic slowdown have since caught up with the segment. According to Euromonitor International, in 2011 and 2012 the market contracted and the research company expects little improvement in the coming years. For instance, sales of crisps/chips in Poland totaled EUR 213m in 2012 and in 2017 Euromonitor sees the figure at EUR 214m. Other analysts are slightly more optimistic. MarketLine expects the whole savory snacks category to reach EUR 497.1m and 117,500 tons in 2016, representing a growth by 27.6% in value terms and 15.2% in volume terms from 2011 levels. The segment is dominated by global producers with PepsiCo, Lorenz Bahlsen Snack World (LBS) and InterSnack controlling some 77% of all sales, with PepsiCo alone boasting a 44% market share.

Retail volume in '000 tons and retail value in EURm

2011 '000

In the first four months of its operation, Kellogg's Kutno plant produced 15m cans of Pringles chips. Photo: Kellogg

Kellogg said the Kutno plant represents one of the company’s biggest capital investments in the last 10 years, but failed to provide final figures. The facility, which is meant to fuel growth of the Pringles brand in the CEE region, started production in June this year. Since the launch, it runs in continuous operations mode, 24 hours a day, 7 days a week. Currently, the plant delivers products to the European markets as well as to Russia and Turkey. Earlier this month, Kellogg's top executives descended on Kutno to mark an official opening of the facility, which in the first four months turned out 15m cans of Pringles. They emphasized the fact that the plant was developed in little more than a year, but conveniently failed to mention that some of the infrastructure had already been in place for years. "We have ambitious plans related to the Pringles brand in Europe. Since its acquisition two years ago, it has been nothing but a dynamic growth of sales, twice as fast as the category. We intend to become the second largest player in the savory snacks market in Eu-

tons

2012 EURm*

'000

EURm*

tons

Crisps/Chips

34.8

220.2

35.5

213.2

Puffed snacks

15.9

86.4

16.1

82.9

Nuts

10.8

47.6

11.0

46.1

1.1

4.2

1.1

4.1

24.7

70.3

25.0

67.4

0.4

3.7

0.4

3.7

Popcorn Pretzels & sticks Tortillas

Source: Euromonitor International

*) at current prices

Kellogg’s facility in Kutno is the second Pringles production plant in Europe, the other one being located in Mechelen, Belgium. Based on the initial production data (4 months - 15m cans), one can estimate the site's current production capacity at some 45-50m cans. With a second production line in operation, from next year the figure is likely to go beyond 100m per annum. "Our production plant is one of the most advanced facilities of its kind in the world and is offering highly modern working environment. Over 80 of our employees took part in intensive training at the Pringles production facility in Mechelen, " said Bart Van Audenhove, Operation Manager, Kutno Pringles facility director. "These training programs lasted from three to twelve months."

MEDIA

Canal+ and ITI mulling sale of majority stake in TV broadcaster TVN France's Canal+ Group and the media conglomerate ITI are contemplating a sale of their controlling stake in Polish TV broadcaster TVN, the two companies said in a joint statement last week. According to Polish business daily Puls Biznesu, Time Warner Inc., 21st

weekly newsletter # 057 / 20th October 2014 / page 11

Century Fox Inc., Discovery Communications Inc, Bertelsmann SE and RTL Group SA may be among potential bidders for the TVN stake. Shares in TVN jumped on the news, boosting the market value of the Warsaw-listed broadcaster to PLN 5.2bn. "The ITI Group and Canal+ Group have been approached in recent months by various strategic and financial investors expressing an interest in acquiring the controlling stake in TVN Group, should it become available. In response to such interest, both the ITI Group and Canal+ Group have decided to jointly review their strategic options regarding the 51% stake in TVN Group," Canal+ & ITI said. Canal Plus combined its pay-TV assets in Poland with ITIâ&#x20AC;&#x2122;s three years ago as part of a push to expand its international audience. Under that agreement, Canal Plus has an option to acquire ITIâ&#x20AC;&#x2122;s stake in TVN in 2015 or 2017. Canal Plus said it will continue to run pay-TV channel nc+ and cooperate with TVN, which owns a 32% stake in the business, regardless of the outcome of the review. "Canal+ Group will continue to maintain a strong footprint in Poland, its second largest market after France, where it will further develop and strengthen nc+," the statement reads. "Both the ITI Group and Canal+ Group remain under any scenario fully committed to the high performance TVN investment. Should the current strategic review not result in a transaction the existing arrangement will remain in place." TVN was established in the 1990s by Jan Wejchert, Mariusz Walter and Bruno Valsangiacomo. The premature passing of Jan Wejchert in 2009 triggered complex ownership changes that continue to this day. In 2011 TVN and Canal+ (part of the French media conglomerate Vivendi) set up a joint venture to which each partner contributed their Polish digital-to-home business (respectively "n" and Canal+). The French

company holds a 51% stake in the JV, with TVN and cable operator UPC owning the remaining 32% and 17%, respectively. As part of the transaction, Canal+ bought from ITI (for EUR 230m) a 40% stake in NVision, which, in turn, has a 51% share in TVN. Canal+ were to acquire full control of that TVN stake some 34 years later, which essentially means this or next year. ITI's asset sell-off included also Poland's top online portal Onet.pl (acquired by Axel Springer in 20012), cinema chain Multikino (bought last year by UK's Vue Entertainment and the Legia football club (sold earlier this year to two of its top executives).

in September and 0.7% in August, down on the MayJuly average of 2.4%. In the construction sector, where output grew by 5.6%, the positive surprise was even more pronounced, as the average expectations had been for a near-zero growth. According to BZ WBK economists, the Q3 GDP growth figure will most likely be lower than 3% and therefore it justifies another interest rate reduction in November.

Industrial output & producer prices Industry output, y/y change Producer Price Index, y/y change

It appears, however, that the French may not be so eager to increase their ownership level in TVN, especially considering the latter's massive dues. Its bonds alone, maturing in 2018 and 2020, have a nominal value of EUR 570m. Whoever takes control of the Polish broadcaster will sooner or later have to deal with this mountain of debt. Last but not least, television is not as powerful a medium as it used to be, as it keeps losing viewers and advertisers to the Internet.

8% 4% 0% -4% -8% -12% Jan 13

POLITICS & ECONOMY

Industrial production rebounds in September Poland's industrial output increased by 4.2% y/y in September, slightly above the consensus expectations for a 3.1% increase, reported Poland's stats office GUS. The improvement was partially statistical in nature, due to a higher number of working days. In the prior month, industrial production contracted by 1.9% y/y. The seasonally adjusted figures came to a positive 1.9%

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Sep 14

Source: GUS, the central statistical office

PPI inflation declined from -1.5% y/y in August to 1.6% in September. In monthly terms, prices rose 0.1%, mainly on the back of higher prices in coalmining, brought about by last month's considerable weakening of the zloty against the dollar. In the manufacturing sector, prices remained flat month-on-month. "We are expecting the PPI inflation to rise in the upcoming months, driven by the PLN depreciation. Yet, PPI is likely to stay negative until year-end," BZ WBK analysts said in an e-mailed commentary.

weekly newsletter # 057 / 20th October 2014 / page 12

POLITICS & ECONOMY

Deflation stays flat at 0.3% y/y in September Consumer prices continued to decrease in September, with the inflation index for the month reaching a negative 0.3% y/y, the same as in August, despite widespread expectations for the deflation to deepen slightly. The figures came from GUS, Poland's central statistical office. "The surprise came mainly from food prices, which rose slightly after seven consecutive months of decline. At the same time, prices in other categories remained surprisingly stable (except clothing and footwear, where a seasonal spike was recorded), showing lack of any significant upward pressure. According to our estimate, core inflation excluding prices of food and energy rose slightly to 0.7%y/y. We forecast that until the end of this year CPI growth will remain below zero and core inflation below 1%," BZ WBK analysts commented on the data. The unexpected increase in food prices seems like a one-off event however, as Russian sanctions on food imports from Europe, this year's exceptionally good harvest and sharp declines in global oil prices are all likely to keep pushing prices down over the coming months. Despite a deeper than expected rate cut earlier this month, most analysts agree that Poland's monetary policymakers are not yet done with this easing cycle, with the only question concerning the timing of the next cut. While many economists are expecting the next rate reduction already in November, some say the

rate setters may take a one month's break before the next cut.

MEDIA PATRONAGE

NPCC Rijsttafel event raises PLN 25,000 to help treat children in comas

and explained how the money raised would be used to buy more state-of-the-art equipment for the ‘Budzik’ clinic. Along with treating children in comas – working to help them regain consciousness in many cases – the clinic also provides rehabilitation and helps teach parents and caregivers how to properly take care of such children. So far, the clinic has helped 12 patients regain consciousness. It works in association with Centrum Zdrowia Dziecka (the Children’s Health Centre) in Warsaw.

Over 300 members, partners and friends of the Netherlands-Polish Chamber of Commerce (NPCC) met at the organization's sixth annual Rijsttafel charity ball at Warsaw’s InterContinental hotel in late September to enjoy a night of delicious Indonesian food and help one of Poland’s most worthy causes. The event raised 25,000 złoty for the ‘Akogo?’ charity, which treats children with traumatic brain injuries and who have entered into a coma. In 2013 the foundation established the ‘Budzik’ (‘Alarm Clock’) clinic in Warsaw, Poland’s first medical centre for the treatment and rehabilitation of children in a coma. One of the highlights of the evening were the dozens of colorful, savory Indonesian dishes for the guests to enjoy. The food was prepared by by Warsaw’s foremost expert on Indonesian cuisine, Rob Regenhardt. Guests also were treated to the musical stylings of American soul crooner Jimmie Wilson and laser-light artists MultiVisual. Media personality Monika Zamachowska hosted the event, while NPCC chairman Geert Embrechts gave the opening speech and oversaw the raffle prize giveaway. The president and driving force behind the ‘Akogo?’ foundation, actress Ewa Błaszczyk, was in attendance,

‘Akogo’ founder Ewa Błaszczyk thanks participants for their generosity, as Monika Zamachowska and NPCC leaders look on.. Photo: Multi

The Dutch community in Poland came up with the idea for organising the Rijsttafel in the early 1990s, due to their longing for Indonesian delicacies from the former colony. Over time, the Rijsttafel began to play an increasingly vital role in charity events. Translated from Dutch, the word ‘rijsttafel’ literally means ‘rice table’. The main sponsors of this year’s event were Philips and Ghelamco. by Andrew Kureth

weekly newsletter # 057 / 20th October 2014 / page 13

OPINION

Reaching for the stars stars by Poland Today Editor Andrew Kureth

me time and again that Poles are great at inventing new technologies, but still need much more experience when it comes to marketing them and building a business around them. Not that these problems can’t be solved – they all can, and I’m confident that they will. But in today’s buzz around Poland’s penchant for BPO and its citizens’ ability to provide outstanding programming for the likes of Google and Microsoft, I worry that we are beginning to forget one important area where Poles have always excelled: scientific discovery.

What are Poles good at? The question may sound strange but it’s an important one if Poland – especially its government – is to decide on strategies about where to invest money and energy in the country’s economy. Ask your typical Poland-watcher and you’ll get some similar answers: Poles are ‘entrepreneurial’; they are well-educated; they are great at computer programming; they excel at providing business process outsourcing and shared services; they are eager, openminded, and hard-working.

Examples abound, but the best is Marie SkłodowskaCurie, who remains the only person ever to win a Nobel Prize in multiple sciences. There’s also Jan Czochralski, who invented a process to grow single crystals and which is used in the production of semiconductor wafers. Kazimierz Funk was the first to formulate the concept of vitamins. More recently, Poles have invented new ways of mass producing graphene – an ultra-thin material that could revolutionise a host of technologies.

As a journalist covering Poland for more than 10 years now, I’ve heard these answers over and over again. It’s all well and good. I’m glad to know that we can all agree that in general, such positive attributes can be found in abundance amongst the Polish population. Nonetheless, these answers can sometimes seem condescending. ‘Eager, open-minded and hard-working’ might be how I describe an intern just out of college. Well-educated belies some of the real challenges Poland faces in its educational system, especially in tertiary education (Jan Cienski will expand on this in the next issue of Poland Today). That Poles are ‘entrepreneurial’ seems to be shorthand for the fact that they were able to start large-numbers of businesses right out of the gate as soon as communism collapsed, but glosses over some huge gaps in Poland’s current entrepreneurial environment. Start-up experts have told

Since Copernicus, Poles have looked to the sky as another realm of discovery. In 1992 Aleksander Wolszczan, along with his Canadian colleague Dale Frail, was the first to discover an exoplanet – a planet outside our own solar system. And just last week a Polish-led group of astronomers in the US found the most recent one. Poles are leaders in finding worlds outside our own solar system. The team that made this mostrecent exoplanet discovery was led by Radek Poleski, a post-doctoral researcher at The Ohio State University. Eleven Poles from the Astronomical Observatory at Warsaw University contributed to the discovery. The observations were made using the 1.3-metre ‘Warsaw Telescope’ at Las Campanas Observatory in Chile, and part of the funding came from Poland’s Ministry of Science and Higher Education.

All of this goes to show that given the chance, Poles can make scientific discoveries that change the way we see the world – and indeed the universe – around us. But supporting such research takes money, and that means a commitment from the government. Most of Poland’s space research funding goes into the budget of the European Space Agency, of which Poland became a full member in 2012. Poland’s 2014 contribution is €28.7m, a measly 0.9% of the ESA’s budget. Around 85% of that returns to Poland in the form of contracts for companies and scientific institutes who contribute technologies to ESA projects, but you’ll still find plenty of critics who believe that money could be better spent elsewhere. They are wrong. The tiny companies and university departments that do the research on things like solar panels for satellites or robotics that endure the harsh environment of space are where high-tech innovation starts. ‘Innovation’ has become a platitude in Poland – everybody agrees it is needed, but few really know where to invest in order to get it. One thing is clear: a space programme is a high-return investment on innovation. Take the United State’s NASA: it has produced over 1,650 ‘spin-off’ technologies that have been transferred to the commercial sector, including scratch-resistant lenses, aircraft anti-icing systems, and memory foam. The European Space Agency – through its business incubator programme – has also brought its technologies into the private sector. Some of these include systems for automatically adjusting traffic-light times and long-distance data transfer using lasers. Surely there will be more such technologies, and Polish firms will make use of them. So what are Poles good at? Poles are great at science and they are great at discovery. Supporting those talents – through spending on scientific research, including space programmes – will bring real benefits back to the Polish economy.

weekly newsletter # 057 / 20th October 2014 / page 14

KEY STATISTICS Consumer Prices

Inflation

+0.1

Alcohol, tobacco +4.0

+0.1 +4.0

0.0 +3.8

0.0 +3.6

0.0

Clothing, shoes

-0.8

-2.8

-2.7

-4.7

+1.1

+0.1 +0.5

+0.1

0.0

-1.0

-4.7

-4.9

Housing

+1.6

-0.1 +0.6

Transport

-0.6

-0.2

0.0 +0.6

-1.0 +0.8

Communications +1.3

+2.4 +2.6

Gross CPI

0.0

+0.3

-5.1

-1.5

+1.2 +3.9

-0.2 -0.2

-3.2

+1.3 +4.0

-0.3 -0.4

-0.3

+4.7

-1.1

y/y (%)

+8.4

+3.8

+1.2

+2.1

+1.7

Year

2009

2010

2011

2012

2013

Turnover in PLNbn

582.8

593.0

646.1

676.0

685.7

-1%

y/y (%)

+4.3

+5.5

+11.6

+5.6

+2.3

0.0

Sep 14

-2,0

Jul 14

-1.6

-1.1

Mar 14

-2.1

Jul '14 Aug '14

-2.7

m/m

May 14

-1.1

May '14 Jun '14

+2.3

Jan 14

-1.7

Apr '14

m/m (%)

Sep 13

-0.3

Month y/y

Nov 13

-0.9

y/y m/m

Jul 13

Food & bev

y/y m/m y/y

Retail Turnover

Mar 13

y/y m/m y/y

Sep '14

May 13

Sector

Aug '14

Jan 13

Jul '14

Nov 12

Jun '14

Sep 12

Data in (%)

0.0

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-Sep y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

(in '000 units)

Producer Prices

Industrial Indust rial Output

Permits

2014

(%)

120.3

+14.8 +17.0

Commenced

142.9

127.4

114.6

m/m (%)

-0.2

-0.1

+0.3

+0.1

m/m (%)

+9.4

-2.3

-1.7

-0.1

+2.0

-8.5

+16.5

U. construction

670.3 692.7 723.0

713.1 694.0

705.7

-0.1

y/y (%)

-1.3

-0.7

-1.0

-1.8

-2.1

-1.5

-1.6

y/y (%)

+5.4

+4.4

+1.7

+2.3

-1.9

+4.2

Completed

160.0 135.7

152.5

100.1

-2.9

Year

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product (ESA2010)

Month

Mar'14 Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14

Mar '14 Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep'14

Construction Output

Construction Prices Month

Month

Mar'14 Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14

Month

Period

Mar '14 Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14

m/m (%)

-0.2

-0.1

0.0

m/m (%)

+24.2

+3.2

+14.0

+16.9

+0.9

-5.4

+19.8

y/y (%)

-1.6

-1.5

-1.4

-1.2

-0.9

-0.8

y/y (%)

+17.4

+12.2

+10.0

+8.0

+1.1

-3.6

+5.6

Year

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

y/y (%)

+7.4

+4.8

+0.2

-0.1

+1.0

+0.2

-1.8

y/y (%)

+15.5

+12.1

+5.1

+4.6

+11.8

-0.6

-12.0

Source: The Central Statistical Office of Poland, GUS

Gross Wages

131.7

146.1

GDP in PLN bn current prices

Growth y/y unadjusted

Current account def. in % of GDP

Q2 2014

+3.3%

413,457

Q1 2014

+3.4%

397,429

-1.2% -1.2%

Q4 2013

+2.7%

455,528

-1.3%

Q3 2013

-1.9%

+2.0%

405,554

2013

+1.7%

1,662,052

-1.3%

2012

+1.8%

1,615,894

-3.6%

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

Sentiment Indicators

2011

+4.8%

1,553,582

-5.0%

Sector

Economic sentiment and consumer confidence indicators

2010

+3.7%

1,437,357

-5.1%

8,615

196 6,333

144 6,382 145

3,625

158 3,690

161 3,663

160 3,743 163

Energy

6,021

183 6,736 205 6,358

193 6,020 183

Construction

3,766 160 3,895

166 3,706

158 3,884 166

Retail & repairs

3,408

145 3,456

147 3,544

151 3,577 153

3,913

3,589

127

IT, telecoms

6,654

173 6,695

174 6,987

181 6,835

177

Financial sector

6,109

137 6,602

148 6,747

152 6,738

151

National average 3,652

145 3,823

152 3,895

155 3,740 149

Transportation

138 3,666

Source: Central Statistical Office (GUS)

130 3,650 129

100

-20

-40

60 Se p 14

138

120

Jun 14

6,061

Manufacturing

C onsumer confidenc e (le ft a xis) Economic se ntiment (right axis)

M ar 14

Dec 13

Sep 13

Jun 13

Ma r 13

Dec 12

Se p 12

Q2 2014

Jun 12

Q1 2014

Mar 12

Q4 2013

Dec 11

Coal mining

Q3 2013

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

Key Economic Data & Projections Indicator

2011

2012

GDP change

+4.5%

+1.9%

+1.6%

+3.1%

Consumer inflation

+4.3%

+3.7%

+0.9%

+0.1%

+0.8%

Producer inflation

+7.6% +3.4%

-1.3%

-1.1%

+0.9%

CA balance, % of GDP

-5.0%

-3.7%

-1.4%

-1.7%

-2.6%

Nominal gross wage

+5.2%

+3.7%

+3.4%

+3.5%

+4.1%

Unemployment**

12.5%

13.4%

11.8%

11.5%

4.12

4.19

4.20

4.17

4.09

EUR/PLN

2013

*2014

*2015

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

weekly newsletter # 057 / 20th October 2014 / page 15

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100 SEK

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100 NOK

50.38 ↓

10,000 JPY

USD EUR 350

300

15.39 ↑

100 CZK 10,000 HUF

400

309.42 ↑ 137.61 ↑

Money Supply May '14

Monetary base

162,246

173,096

557,651

572,376

M2 - Time deposits M3

WIG-20 stocks Price Change Change in alphabetical 17 Oct 10 Oct end of order '14 '14 '13

WIG Total index

Mar '14 Apr '14 May '14 Jun '14 Jul '14 Aug '14 4.5%

4.4%

4.5%

4.4%

PLN (up to 5 y )

4.9%

4.8%

4.7%

4.8%

↓ Alior Bank

PLN (over 5 y)

4.7%

PLN (total)

4.7%

EUR (up to 1m EUR) 1.9%

2.0%

1.9%

1.7%

1.6%

↓ BZ WBK

369

-3%

-5%

EUR (over 1m EUR) 3.3%

3.0%

2.7%

3.4%

3.1%

2.5%

↑ Eurocash

34.04

+6%

-29%

WIG-20 blue chip index

↓ Grupa Lotos

27.74

-4%

-22%

↓ JSW

Warsaw Inter Bank Offered Rate (WIBOR) as of 17 Oct 2014 Overnight

1 week

1 month

3 months

6 months

2.14%

2.09%

2.07%

2.02%

2.00%

119,649

991,120

Reference

Lombard

NBP deposit

Rediscount

164,008

167,008

2.00%

3.00%

1.00%

2.25%

570,507

574,529

Jul '14

120,828

975,001 980,090 435,386

Aug '14

Jun '14

426,351

122,209

124,986

985,769 1,003,128 434,256

448,037

996,171 1,002,137 1,020,561

- Net foreign assets 142,260 144,033 152,864 162,129 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

52,662 52,662. 662.90

PLN (up to 1 year)

Central Bank (NBP) Base Rates

in PLN m

- Currency outside banks

as of 17 October 2014

73.3

-3%

-10%

↑ Asseco Pol.

44.46

+2%

-3%

↑ Bogdanka

109.9

+1%

-13%

0% →

Change 1 week Change end of '13

+3% ↑

27.99

-10%

-47%

2,401.13 2,401.13

↓ Kernel

22.1

-8%

-42%

Change 1 week

0% →

↑ KGHM

126.55

+1%

+7%

Change end of '

0% →

9,725

+8%

→ LPP

481

+1%

-4%

WIG Total closing index

↓ Orange Pol.

10.09

-3%

+3%

last three months

Credit

↑ Pekao

180.2

+1%

The financial sector's net lending in PLN bn,

↑ PGE

21.33

+3%

+31%

↑ mBank

loan stock at the end of period

55,000 54,000

4.88

+3%

-5%

53,000

→ PKN Orlen

41.64

+2%

52,000

950,774

↑ PKO BP

36.59

+1%

-7%

274,549

277,482

→ PZU

473.5

+5%

578,639

581,447

587,136

↓ Synthos

4.08

-7%

-25%

1,660,583 1,667,783

1,678,129

1,718,251

→ Tauron

5.08

+16%

↑ PGNiG

May' 14

Jun' 14

Jul' 14

Aug' 14

Loans to customers

930,652

940,703

939,641

- to private companies

273,360

276,709

- to households

574,800

Type of loan

Total assets of banks

56,000

Source: Central Bank NBP

51,000 50,000 49,000 17 Oct 14

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

25 Sep 14

350.25 ↑

17 Oct 14

530.82 ↑

100 CHF

11 Aug 14

100 GBP

3 Jun 14

422.93 ↑

25 Mar 14

100 EUR

Key indices

Term / currency

450

16 Jan 14

329.64 ↓

4 Nov 13

100 USD

Stock Exchange

Average weighted annual interest rates

3 Sep 14

as of 17 October 2014

I nterest rates

18 Jul 14

100 USD/EUR against PLN

Central Bank average rates

11 Aug 14

Currency

Source: Warsaw Stock Exchange

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

Poland exports and imports according to commodity groups, according to SITC classification EXPORTS in PLN bn Jan-Jul 2014

y/y (%)

share (%)

2013

EXPORTS in PLNbn

IMPORTS in PLN bn share (%)

Jan-Jul 2014

y/y (%)

share (%)

2013

share (%)

No Country

Jan-Aug share 2014

IMPORTS in PLN bn 2013

share No

Country

Jan-Aug share 2014

2013

Food and live animals

42,121

+6.3

10.7

69,304

10.9

28,562

+5.2

7.3

47,906

7.4

1 Germany

114,332 25.9% 162,548 25.1%

1 Germany

96,855 21.7%

Beverages and tobacco

5,724

+15.8

1.5

8,624

1.4

2,366

+2.8

0.6

4,150

0.6

2 UK

28,057

2 Russia

50,762 11.4% 79,578 12.1%

9,655

+3.6

2.5

15,744

2.5

12,436

-1.6

3.2

21,585

3.3

3 Czech Rep.

16,270

-6.1

4.1

30,013

4.7

42,903

+3.3

10.9

75,539

11.7

4 France

Crude materials except fuels Fuels etc

6.4%

42,138

6.5%

27,311

6.2%

40,110

6.2%

3 China

44,877 10.1%

24,906

5.6%

36,367

5.6%

4 Italy

23,545 5.3% 34,940 5.3% 16,733 3.8% 25,409 3.9%

1,115

+9.2

0.3

1,864

0.2

1,531

+04

0.4

2,646

0.4

5 Russia

19,751

4.5% 34,069

5.3%

5 Netherlands

Chemical products

36,076

+4.6

9.2

59,103

9.3

58,772

+6.5

15.0

92,917

14.3

6 Italy

19,763

4.5%

27,958

4.3%

6 France

Manufactured goods by material

78,475

+3.1

20.0

129,915

20.3

70,529

+6.5

18.0

112,392

17.3

7 Netherlands

18,050

4.1%

25,707 4.0%

Machinery, transport equip.

150,231

+7.5

38.3

239,434

37.5

129,867

+3.7

33.1

216,608

33.4

8 Ukraine

n/a

18,020