Poland Today Business Review+ No. 012 by Poland Today Business Review+

1 year subscription: EUR 690 (PLN 2760) Newsletter Editor: Lech Kaczanowski lech.kaczanowski@poland-today.pl tel. +48 607 079 547 Sales Contact: James Anderson-Hanney james.anderson-hanney@poland-today.pl

No. 012 / 25th November 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING Slovenian white goods maker Gorenje plans equity boost and listing in Warsaw page 2 GM merges Polish car and engine factories into single business unit page 2 BANKING & FINANCE PKO BP sells 66% of leading merchant acquirer eService to US EVO Payments page 3

PM Tusk said the new nominees are to bring "fresh energy" into his cabinet.

Photo: KPRM

Gov't shakeup sees seven new ministers

In a long-awaited government reshuffle, Polish Prime Minister Donald Tusk has nominated seven new members of his cabinet, including a new finance minister, hoping to reverse the declining fortunes of his Civic Platform (PO) party. page 14

Goodman to build build first hub for Amazon Global industrial property developer Goodman will build the first of three Polish distribution centres for e-commerce giant Amazon. The 95,000 sq.m facility is to reach completion next year near Wrocław, creating some 2,000 full-time jobs. page 9

ENERGY & RESOURCES CEO of power utility PGE steps down over Opole power plant row page 4 Polkomtel is Poland's first mobile operator to sell electricity page 5 PROPERTY & CONSTRUCTION Israeli founders exit retail center developer Globe Trade Centre page 5 Warsaw Spire office tower construction moves above ground page 6

tel. +48 881 650 600

SERVICES & BPO Accenture to create 100 jobs at Łódź center page 7 Capgemini expands Wrocław software unit page 8 TRANSPORT & LOGISTICS Stena Line puts fresh ferry on Gdynia route as discussions on new terminal continue page 10 DCT Gdańsk is Poland's first terminal to handle 1m TEU in one year page 11 CONSUMER GOODS & RETAIL Tesco seeks buyers for 35 investment sites page 12 Nowy Świat remains Poland's priciest retail street despite drop in rents, report says page 13 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 16-18

weekly newsletter # 012 / 25th November 2013 / page 2

MANUFACTURING & PROCESSING

Top Slovenian white goods maker Gorenje plans equity boost and listing in Warsaw

"The current capital increase, following the successful forging of the partnership with Panasonic, is an important step in Gorenje's development strategy. The proceeds will be used to further improve the Group's financial stability and to fund the strategic projects upon which the Group's further growth is based," commented Gorenje's President and CEO Franjo Bobinac.

Slovenia's Gorenje, one of Central and Eastern Europe's top household appliance makers, plans to raise EUR 45m by selling new shares through the Warsaw stock market, in addition to the Ljubljana Stock Exchange, where it is currently listed. Gorenje, a manufacturer of energy-efficient appliances under multiple brand names, said it planned to offer up to 10.44m new shares, equivalent to about 36% of its current share capital, at EUR 4.31 each. Gorenje said it would use approximately two thirds of the proceeds from its second equity boost to deleverage, while the rest will be allocated to strategic investments. In a statement, the company emphasized, that the share price remains the same as in its first capital increase, which saw Japanese corporation Panasonic acquire EUR 10m worth of Gorenje shares. "The new capital increase will take place in two rounds. In the first round, Gorenje will address the current shareholders; in the second round, further divided into two steps, Gorenje will invite its employees, followed by new investors. The stock will be offered in Slovenia and Poland; in the latter market, Gorenje will invite both institutional and retail investors to subscribe the new shares. All Gorenje shares will presumably be listed on the Warsaw Stock Exchange, in addition to the Ljubljana Stock Exchange, by the end of this year," Gorenje said.

Gorenje, which has a market capitalization of EUR 121m and is already listed in Slovenia, sells its products to 90 countries and exports 95% of its output. In the first nine months of 2013 Gorenje turned over EUR 897.1m (down 1.5% on the same period last year) and posted an operating profit of EUR 23.6m (+6% y/y). Its net result was a EUR 18.2m loss, caused largely by onetime events. The company has chosen DM BZ WBK to act as sole global coordinator, joint bookrunner and offering agent in Poland, while Nova Ljubljanska banka would be the joint bookrunner and offering agent in Slovenia.

MANUFACTURING & PROCESSING

GM merges Polish car & engine factories into single business unit Gorenje's is well known across the CEE region for its

kitchen and bathroom appliances.

Photo: Gorenje

Panasonic said it would take up to 13% of Gorenje back in July, as the Japanese giant seeks to boost its presence in Europe's fastest growing region. Gorenje's debut on the Warsaw Stock Exchange underlines the increasing appeal of CEE's largest bourse for companies across the region. "The secondary listing on the Warsaw Stock Exchange will allow Gorenje broader access to the capital markets and improve the Group's recognition in the international financial markets, with financial institutions, business partners, and customers. Moreover, secondary listing may improve the liquidity of Gorenje's shares," said Gorenje CFO Peter Groznik.

US carmaker General Motors has consolidated its two production plants in Poland, the Opel factory in Gliwice and the former Isuzu diesel engine plant in Tychy into a single business unit. Following the merger, General Motors Poland employs more than 3,500 workers. "This makes us the only GM unit in Poland with both car assembly as well as engine capabilities, which certainly strengthens our position when competing for new models," says GM Poland spokesperson PrzemysĹ&#x201A;aw Byszewski. "It also gives us additional flexibility as far as staff and technology transfers between the two plants are concerned." Launched in 1999 the Tychy engine factory used to be part of Japan's Isuzu Motors. GM acquired a 60% stake in the business back in 2002 and purchased the outstanding 40% earlier this year. According to the

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company, the transaction underlined Europe's importance of Europe for GM, as "one of the most competitive car markets in the world with highest customer demands in terms of fuel economy and CO2 standards." With a staff of just over 500, the Tychy factory currently makes the Circle L 1.7l diesel engines. Since its founding, the plant has turned out more than 2.5m engines.

No official announcements have been made so far with regard to GM's plans for the Tychy powertrain plant, but according to a number of sources the US carmaker is currently analyzing potential production sites for a next generation diesel engine, as the 1.7l units made in Gliwice may soon become obsolete due to the increasingly strict EU emissions norms. GM and its partners produce vehicles in 30 countries. Together with its subsidiaries and joint venture entities the company sells vehicles under the Chevrolet, Cadillac, Baojun, Buick, GMC, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling brands.

GM is Poland's No. 3 car manufacturer Car production in Poland by maker in '000 units

Fiat

DATA BOX: INDUSTRIAL OUTPUT

2009

Opel

2010 2011 VW

600

500

400

300

200

100

2012

Source: Samar

GM's main Polish production unit is the Opel plant in Gliwice, which made 125,300 cars last year, down by some 50,000 from the 2011 level and well below its total annual capacity of 207,000 units. Opel employs some 3,000 staff in Gliwice and cooperates with an estimated 100 suppliers in Poland. The Polish plant manufactures the Astra IV compact in several versions (hatchback, sedan, GTC, and OPC). Recently it has added the new Cascada convertible to the mix, which required investments to the tune of EUR 55m. The Cascada is part of Opel's multi-billion euro model offensive introducing 23 new vehicles and 13 new powertrains from 2012 through 2016. In mid-2015 GM seeks to launch production of the next generation Astra V in Gliwice, which will require capital expenditures to the tune of EUR 200m.

Poland's industrial output increased by 4.4% y/y in October vs. 4.7% y/y growth expected in the PAP consensus survey, as output rose 6.0% from the prior month, the stats office GUS announced. Analysts surveyed by PAP had expected a monthly jump of 6.3%. Polish seasonally adjusted industrial output in October was up by 3.8% on a 0.2% monthly increase. In September, Poland's industrial output increased by 6.2% y/y and by 9.6% m/m.

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

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

Apr 12

Jun Aug Oct 12 12 12

Dec Feb 12 13

Source: GUS, the central statistical office

Apr 13

Jun Aug Oct 13 13 13

BANKING & FINANCE

PKO BP sells 66% of Poland's top merchant acquirer eService to US EVO Payments EVO Payments International, a major payment service provider operating in the United States, Canada and Europe has teamed with Poland's top lender PKO BP in the payment processing and acquiring business. Under the proposed transaction, EVO Payments International will acquire a 66% stake in eService, PKO's existing merchant acquiring business. In addition, the parties will establish a 20 year alliance under which they will continue to work together to grow further eServiceâ&#x20AC;&#x2122;s business within Europe. PKO will receive USD 113.5m for its stake, plus an additional earn-out based on future performance. The transaction, which is subject to regulatory approvals, will have a positive effect on the bank's capital ratios, PKO BP said in a statement. "We expect gross profit on this transaction at PLN 377m," PKO BP's official PaweĹ&#x201A; Borys told a press conference after PKO BP announced the sale in midNovember. "The transaction is to be concluded at the turn of 2013 and 2014." At present eService, with over 35% of market share in terms of transaction count and volume, is the leading Polish merchant acquirer. The eService acceptance network consists of more than 80,000 POS terminals and represents the largest network of terminals supporting contactless payments in Poland. The company also performs a key role in the development of PKO's mobile banking solution IKO. In 1H 2013 eService

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posted a net profit of PLN 19.3m, marking a 67% increase y/y, becoming Poland's top clearing agent. According to The Nilson Report, eService ranks in the top 30 of the largest European merchant acquirers.

increased 3.7% and reached PLN 153.8bn, whereas its deposit portfolio rose 2% and came to PLN 157.9bn. PKO BP is in the process of acquiring the Polish arm of Swedish bank Nordea.

PKO BP will remain a minority investor in the firm and has signed separate deals with EVO detailing cooperation between the two sides, PKO BP said in a market filing. The two allies will now seek to expand eService's reach beyond Poland, leveraging EVO’s experience as a payment processing partner, while allowing both EVO and PKO to focus on introducing innovative products and services to eService's existing and future merchant customers.

Founded in 1989 and based in New York, EVO Payments International is among the largest fully integrated merchant acquirers and payment processors in the world. EVO operates as a payments service provider for both face-to-face and e-commerce transactions for all major credit cards, debit cards, commercial cards and electronic bank transfers. EVO can process in nearly 50 markets and 120 currencies around the world. Through its European subsidiary, EVO operates as a principal member of MasterCard Worldwide and Visa Europe.

"eService has achieved a leading position in the Polish market, is highly profitable and well positioned to expand internationally. Now, with a prominent and one of the most dynamically developing payments service providers in the world, we can mutually focus on further developing eService as a leading merchant acquirer in Poland, while expanding throughout Central and Eastern Europe," said Zbigniew Jagiełło, CEO of PKO Bank Polski.

of PGE appointed deputy CEO Piotr Szymanek as acting CEO, and decided to launch a competition for the CEO post the company said in a market filing. Wood & Co. analysts said the market would not be pleased with the news. "The previous management had demonstrated strong capex discipline, a key differentiator within the Polish sector. We believe it is reasonable to expect that new management will be considerably more compliant with the state treasury regarding projects 'in the national interest,' which, all things considered, could mean a worsening outlook for dividends and the company's balance sheet over the rest of this decade," they said.

ENERGY & RESOURCES

CEO of power utility PGE steps down over Opole power plant row

"This alliance fits perfectly with our strategy of expanding our global reach and strengthening our position in an important European market. We have been very impressed with the eService team and will continue to support them in growing the market and the region by bringing our proven sales solutions to expand the market. We intend on making our existing products available to eService, while leveraging the remarkable eService infrastructure," commented James G. Kelly, CEO of EVO Payments International.

Krzysztof Kilian, former close friend of Prime Minister Donald Tusk, has resigned as CEO of Poland’s top power utility PGE, reportedly due to disagreement with the Polish government over the planned construction of a PLN 11.6bn coal fired power station in the southern city of Opole. According to Mr. Kilian, the project, which the government regards as key for Poland's energy security, would not be profitable for PGE.

Listed on the Warsaw Stock Exchange, PKO BP is Poland's largest universal bank in terms of both scale of business activities and financial results. In the first half of 2013 the bank reported a strong bottom line of PLN 1.53bn. During 1H 2013, its gross credit portfolio

Officially, Kilian cited recent management changes as the reason for his resignation. His close associate and board member Bogusława Matuszewska, in charge of strategy and development, was fired last month along with CFO Wojciech Ostrowski. The supervisory board

The giant investment in Opole has become a major bone of contention between the government and PGE's management. Photo: PGE

Although the PLN 11.6bn expansion of PGE's Opole power plant was meant to be the largest ever project in Poland's energy sector, recently it has started to look like a yet another never-ending investment saga. Earlier this year, PGE decided to abandon the project, saying that falling energy prices had decreased its potential profitability, but the Polish government, which controls the energy giant, wants the investment to

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move ahead as planned. Back in June Prime Minister Donald Tusk said that the government will find financing and necessary means to build the two new coal-fired power units, 900MW each at the Opole power plant. The contract was awarded to a Polish consortium of Polimex-Mostostal, Mostostal-Warszawa, and Rafako, but its implementation has seen some serious setbacks due to appeals from environmental activists as well as uncertainty over the main contractor Polimex-Mostostal, which barely escaped bankruptcy and had to be rescued by the state-owned Industrial Development Agency ARP. France;'s Alstom, which is to supply some crucial parts of the project, may participate in its financing, but so far no agreement has been sealed. In its Q3 financial report, PGE said the general contractors were told that the final decision on the investment would be issued by 15 December 2013. The reason the government is pushing for the Opole project has to do with the imminent closure of Poland's oldest and most polluting power stations, amid the expected growth in demand for electricity. Some experts argue that without huge new investments by 2016 Poland may face blackouts. However, domestic and foreign environmental activists strongly oppose construction of new coal-fired units, even though the country lacks a viable clean domestic alternative to coal, despite a robust growth of the country's wind energy sector. PGE's consolidated sales revenue rose 9% last year and totaled PLN 30.1bn, while its net earnings came to PLN 3.2bn. Its net electricity generation volume rose 1% and topped 57.05 TWh. Besides the Opole project, the company is responsible for building Poland's first nuclear power plant, with an estimated price tag of PLN 50bn.

ENERGY & RESOURCES

Polkomtel is Poland's first mobile operator to sell electricity Polkomtel, owner of the Plus network, is Poland's first mobile operator to sell electricity besides telecommunications services. Tailor-made telecom & energy bundles are currently being offered to Polkomtel's business customers, with a similar product for individual users is to be introduced at a later point. The company will buy electricity on the TGE commodity exchange and from the ZE PAK power plant group, which has the same majority shareholder as Polkomtel: Polish billionaire Zygmunt Solorz-Żak. The operator emphasizes that since Poland's energy sector was liberalized, customers are free to choose any power supplier operating on the market. According to figures, since 2011 some 25% of households and 18% of companies in Poland have changed electricity suppliers. "This is good news for us, especially since we estimate the potential of the Polish market at some 13m households and 1m companies," says Tomasz Zadroga, member of Polkomtel's board and former CEO of Poland's top energy utility PGE. "Our unique offer gives us an edge over competitors, as we are the first in Poland to offer mobile phone and internet services, television, and electricity in a single package." Other Polish telecom operators have also been looking into energy sales as a way to prop up their declining revenues. Orange Polska discussed cooperation with PGE, and T-Mobile talked to Tauron, but so far no further steps have been made. For energy suppliers,

which may face large scale rollouts of smart grid solutions in the coming decade, cooperation with telcos can also be advantageous.

PROPERTY & CONSTRUCTION

Israeli founders exit retail center developer Globe Trade Centre Israeli Kardan NV, a company linked to the original founders of the Warsaw-based commercial property developer Globe Trade Centre SA (GTC) has sold its 27.75% stake in the company to Lone Star Real Estate Fund III for EUR 160m. Kardan booked GTC Poland at a value of EUR 194m at the end of June 2013. The Israeli company decided to sell GTC Poland mainly because of its liquidity needs for its pending bond principle and interest payments in February 2014 and February 2015.

GTC's new shopping center in Warsaw's Białołęka Image: GTC district is set to open in 2015. Established in 1994 in Warsaw, GTC currently operates in Poland, Hungary, the Czech Republic, Romania, Serbia, Croatia, Slovakia, Bulgaria, Russia and Ukraine. The company develops new projects and

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manages completed properties in three key sectors of real estate: office buildings and parks, retail and entertainment centers and residential. To date, GTC has developed approximately 950,000 sq.m of net commercial space and 300,000 sq.m of residential units. The company currently manages a combined 602,000 net sq.m of completed and operational commercial space and holds a large portfolio of investment projects at various stages of development that will enable it to develop of 1.1m sq.m of commercial space and 615,000 sq.m of residential space. GTC's total assets exceed EUR 2.2bn. Its shares are listed on the Warsaw Stock Exchange on the WIG30 index and they are included in the international Dow Jones STOXX Eastern Europe 300 index, the GPR250 index, which comprises the 250 biggest and most liquid real estate companies of the world, and the FTSE EPRA/NAREIT Emerging Index.

ue to focus on real estate and water infrastructures in emerging markets, which are expected to have faster growth than developed markets," Kardan's CEO Shouky Oren told Israeli paper Globes.

In October Warsaw-listed GTC and European real estate private equity firm Avestus Capital sold their Galeria Kazimierz shopping mall in Kraków, Poland, to a subsidiary of Invesco Group for EUR 180m. Each of the sellers received EUR 90m, according to a GTC stock exchange filing, and the transaction were to generate EUR 50m in net cash proceeds for the Polish developer (see PT Business Review+ No. 007 page 10). GTC, which developed one of Warsaw's most popular shopping centers Galeria Mokotów, is currently getting ready to break ground on two new massive retail projects in the Polish capital's fastest growing residential districts of Wilanów and Białołęka.GTC estimates that phase one of Galeria Białołęka will open its doors in 2015 with a GLA of 64,000 sq.m, whereas Galeria Wilanów is to welcome its first customers in 2016 with an initial GLA of 61,000 sq.m.

PROPERTY & CONSTRUCTION

"We are completing with great success a complex sale in an especially challenging market. The sale of the shares in GTC Poland is a major step for Kardan in dealing with its liquidity situation. Kardan will contin-

beginning of construction of the aboveground section of Warsaw Spire's main 220-metre tower building, which will reach its maximum height by the end of 2014.

Lone Star Funds is a US private equity firm that invests globally in distressed assets. Since the establishment of its first fund in 1995, Lone Star has organized twelve private equity funds with aggregate capital commitments totaling over USD 45bn. Lone Star Real Estate Fund III formed in October 2013, held its final closing in October 2013 with USD 7bn in combined capital commitments. Transactions consummated and targeted by Lone Star Real Estate Fund III include investments in distressed commercial real estate debt and equity products in the Americas, Western Europe and Japan.

Warsaw Spire office tower construction moves above ground Few office buildings attract as much media attention as Flemish developer Ghelamco's Warsaw Spire complex, and the latter's cornerstone laying ceremony last week featured a rare selection of distinguished guests. The foundation act for that landmark project was signed among others, by Janusz Piechociński, Deputy Prime Minister of Poland, Minister of the Economy, Raoul Delcorde, Belgian Ambassador to Poland, Ilkka Laitinen, Executive Director of the EU border agency Frontex, Paul Gheysens, President of Ghelamco Group, Jeroen van der Toolen, Ghelamco’s Managing Director CEE and, Kris Peeters, MinisterPresident of the Government of Flanders, all of whom attended the event on 18th November that marked the

Warsaw Spire is Ghelamco's most ambitious project to-date.

Image: Ghelamco

It has taken Ghelamco two years to complete the underground section of Warsaw Spire, a BREEAMcertified project that will include three office buildings (the main tower plus two 55m-tall buildings) with a combined office space of 100,000 sq.m. The initial stage of construction, which took eight months to complete, included a 55m-deep slurry wall, for which the company used more than 22,000 cb.m of concrete. It has taken them another year to build an underground parking lot for 1,200 vehicles. It is no coincidence that last week's event was attended by Frontex boss Ilkka Laitinen, as the EU border agency will be the main tenant in Warsaw Spire, occupying some 14,600 sq.m in its main tower.

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SERVICES & BPO

Accenture to create 100 jobs at Łódź delivery center Global consultancy & service outsourcing giant Accenture is expanding its technology unit in Łódź. After relocating to brand new 1,700 sq.m offices in Łódź's University Business Park, Accenture Łódź Delivery Center seeks to recruit 100 new professionals next year and reach a staff of 500 in 2015.

o.o., which encompasses its technology solutions and business process outsourcing operations . According to company representatives, it is just a matter of time before Accenture's Polish staff numbers reach 2,5003,000.

Decade of remarkable growth Number of foreign-owned business services centers in Poland 450 400 350 300 250 200 150 100 50

Image: GTC

Accenture Łódź Delivery Centre is the company's main technology unit in Poland and one of 50 centers worldwide that constitute the Accenture Global Delivery Network. It specializes in retail and e-commerce solutions, billing & revenue management and other tailor-made solutions for the banking and finance industry. Some 50% of its clients, which include top banks, retailers and mobile operators, are foreign companies. Every year the centre creates some 70-100 new jobs for students and graduates with engineering, IT, and technology credentials and foreign language skills. Accenture has been present in Poland since 1990 and currently the company employs some 1,750 staff in the country, at the consulting unit Accenture Sp. z o. o. as well as the outsourcing arm Accenture Services Sp. z

Source: ABSL

2013

2012

2011

2010

2009

2008

2007

2006

Developed by GTC, Łódź's University Business Park will offer 38,710 sq.m once fully completed.

2005

0 2004

Over the past 22 years Ghelamco has developed nearly 0.5m sq.m of offices and warehouses. Their other major recent and ongoing developments include Łopuszańska Business Park with 17,000 sq.m, and the new T-Mobile HQ, a 40,000 sq.m office complex on Marynarska 12. Outside of Warsaw, Ghelamco is developing a 60,000 sq.m. class A project Synergy Business Park in Wrocław. Earlier this year the company sold its Warsaw office projects Mokotów Nova (to Curzon Capital Partners III fund for EUR 121m) and Senator (to Union Investment for EUR 120m). The Belgians have also made inroads into the residential segment with and upscale Warsaw project Woronicza Qbik (350 soft lofts)..

"With the new, larger office we seek to consolidate our team and accommodate the constant expansion of our business. Over the past three years employment at the Łódź branch has nearly tripled and currently totals 220. A further 140 staff are located in Warsaw," says Witold Rogowski, head of Accenture Delivery Center Polska.

2003

As for Ghelamco, after more than two decades of developing offices and industrial properties, the company is getting ready to break ground on its first retail projects. The Belgians have recently unveiled plans for three neighborhood shopping centers (see PT Business Review+ No. 011 page 9) in the greater Warsaw area (Piaseczno, Łomianki, and Wilanów) with a combined GLA of nearly 30,000 sq.m and they are actively scouting sites for subsequent developments of similar size (7,000-12,000 sq.m per project).

*) projected

In February last year a new management consulting unit was established at Accenture's Warsaw centre, with plans to hire 150 staff by the end of 2012 and some 500 in two-three years' time. The Polish capital beat Prague, Bratislava, Bucharest, and Madrid to the project, which is part of Accenture's global talent and innovation network. Unlike many other outsourcing companies, which have been focusing lately on Poland's regional cities, where wages are lower and competition on the labor market less severe, Accenture remains focused mainly in Warsaw, praising the city's good transport connections to other European countries where it recruits specialists (for instance Russia, Ukraine, Estonia, Spain, Germany, and the UK) as well as its intellectual

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potential, represented by thou-sands of university graduates. Headquartered in Dublin, Accenture is a NYSE-listed multinational management consulting, technology services and outsourcing company. With a net turnover of USD 27.9bn in the financial year ended in August 2012, the company has more than 275,000 employees worldwide.

DATA BOX: ŁÓDŹ OFFICE MARKET IN 1H 2013 • At the end of Q2 2013, Łódź’s office stock stood at 302,000 sq m. In H1 2013 four office buildings entered the market, including phase II of Skanska’s Green Horizon complex (14,000 sq m) and Film Hotel’s small building MediaHUB (3,850 sq m) located near Hilton’s hotel Double Tree. The second part of the office project at 35 Targowa Street to provide 8,000 sq m is still to be completed. •Take-up in the first two quarters of 2013 was almost the same as in the same period of 2012 and reached 12,000 sq m following several major deals such as Infosys’s lease of more than 4,100 sq m in the Green Horizon building and Accenture’s lease of 1,700 sq m in the University Business Park complex. •The vacancy rate at the end of Q2 2013 rose by 3 percentage points to 15% compared with the rate at the end of 2012. Headline rents remained flat at EUR 12–14/sq m/month, with effective rents at EUR 10– 11/sq m/month.. Source: Cushman & Wakefield

Poland's business services sector currently employs some 115,000 people and since the sector is growing at the pace of 15-20% a year, the figure is likely to reach 140,000 next year. According to estimates by the industry organization ABSL the number of foreign-run

outsourcing centers in the country will come in excess of 450 by the end of 2013.

SERVICES & BPO

Capgemini expands Wrocław software unit Global technology outsourcing and consultancy giant Capgemini seeks to create 150 jobs at its Software Solutions Center in Wrocław, an R&D unit devoted to creation, testing, and implementation of advanced IT solutions. In a move to accommodate its growing staff numbers, the center, which currently employs some 500 staff, will relocate to new offices in Millennium Tower IV. "Our Wrocław centre is handling a growing number of projects for our current and new clients," Capgemini's Joanna Nowocień tells Poland Today. "In recent weeks we signed a framework agreement with Poland's social security administration ZUS regarding development and upgrade of their IT system KSI, one of Europe's largest. This contract is a perfect match for Capgemini's competences and strategic expansion plans in Poland." The company is recruiting both experienced staff as well as IT graduates for the software solutions unit in Wrocław, which cooperates closely with Capgemini centres in Germany and provides services to many German clients, such as Daimler, BMW, and ZDF. The centre specializes in change management, business process outsourcing, IT infrastructure management services and tailored software solutions. Its clients include top brands from the automotive, finance, logistics and media sectors. One of its best-known implementations in Poland is the Express Elixir system for

Poland's national clearing house KIR, which enables immediate transfers between banks. Overall in Poland Capgemini has five centers (Kraków, Katowice, Warsaw, Wrocław, and Opole) that employ 5,500 staff and deliver a whole range of services in nearly 30 languages. "We are already Poland's number two BPO employer, and considering our growth pace to-date, we are on track to pass the 6,000 employment mark in 2015." Earlier this year Swedish tooling, materials technology, mining and construction group Sandvik awarded Capgemini BPO with a five year, multimillion euro contract, to standardize and optimize its global transactional finance activities, implementing the new model in 29 countries across all business areas. The key part of the project will be migrating Sandvik’s global financial processing for accounts payable, accounts receivables and general accounting to Capgemini’s delivery centers in Brazil, Poland, China and India. In Poland, the Sandvik deal created some 50 new jobs.

Developed by Wrocłąw's Descont, Millennium Towers is a complex of four class-A buildings with a combined office space of 33,500 sq.m. Image: Descont

With more than 125,000 people in 44 countries, Capgemini is one of the world's foremost providers of consulting, technology and outsourcing services. The group reported 2012 global revenues of EUR 10.3bn.

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Capgemini's team of over 13,500 BPO professionals (including 9,000 finance and accounting outsourcing staff) provide services to more than 100 clients in 37 languages from an integrated global network of 23 delivery centers located in Australia, Brazil, Canada, Chile, China, France, Guatemala, India, Poland, Sweden and the United States. Their key finance & accounting outsourcing services include procure-to-pay, bill-to-cash, record-to-analyze and multi-process.

DATA BOX: WROCŁAW OFFICE MARKET IN 1H 2013 • In H1 2013, the transaction volume in Wrocław’s modern office market reached nearly 51,000 sq.m, with new leases accounting for 43% of which pre-lets account for over 50%. It represents nearly a threefold rise on the leasing volume recorded in the same period of 2012. The largest deals were the Getin Group’s lease of 11,700 sq.m in the Sky Tower office building and Kruk’s 7,500 sq.m lease expansion in Wrocławskie Centrum Biznesu. • At the end of June 2013, the city’s office stock stood at 510,000 sq.m, up by more than 40,000 sq.m compared with the beginning of the year, largely following the delivery of office space in the Sky Tower (28,000 sq.m) and phase II of Skanska’s Green Towers complex (10,800 sq.m). If all projects planned for 2013 are completed on time, this year’s supply will total around 80,000 sq.m. • The vacancy rate rose in Wrocław by nearly 4.4 percentage points to 12.4% from the rate of December 2012. Headline rents stood at EUR 13–16/sq.m/month, with effective rents at EUR 11–14/sq.m/month. Source: Cushman & Wakefield

TRANSPORT & LOGISTICS

Goodman to develop Amazon's first Polish logistics hub near Wrocław The world's top e-commerce provider Amazon, which merely a few weeks ago confirmed plans to establish three major logistics centers in Poland (see PT Business Review+ No. 006 page 10), has awarded the contract for the construction of the first Polish facility to its long-time partner in Europe, the Australianowned industrial space developer Goodman. Based in Wrocław, the new development will be the largest free standing logistics facility in Poland, and will be built in record time to meet Amazon's requirements. According to Goodman, the transaction represents the biggest contract for a logistics warehouse in central Europe to date. The development of Amazon's first fulfillment centre in Poland will have a footprint of approx. 95,000 sq.m. Construction of the facility commenced in October 2013 and it is planned that the fulfillment centre will be fully operational in the second half of 2014. Amazon's new logistics hub will be located in Wrocław's Bielany Wrocławskie suburb, some 5km from the city centre. The location boasts comprehensive transport links, spanning road (A8 and A4 motorways, together with S8 and S5 express roads), rail (10km to Wrocław's central railway station) and air (15km to Wrocław Airport). The distribution centre for Amazon will be Goodman's fifth development project in the Wrocław area. Previous facilities, totaling over 70,000 sq.m, have been

constructed for Whirlpool, TJX Europe, Walki Group and Casetech. Goodman commenced operations in Poland in 2005 and owns and manages over 275,000 sqm of facilities in various locations in Poland. The Group holds strategic land sites in all of Poland's key logistics centers, which are capable of providing approximately 875,000 sqm of additional warehouse space. "We are proud that Amazon chose to enter the Polish market in partnership with Goodman. The facility we are developing will be the largest free standing logistics property in Poland. Construction will be rapid, to allow Amazon to make full use of the warehouse's logistics capabilities in under a year," said Błażej Ciesielczak, Regional Director Goodman Poland.

Polish employees will start sorting, packing, and dispatching orders for Amazon's European customers Photo: Amazon next year.

"We have decided to partner with Goodman in Poland due to the firm's extensive experience in building similar warehouse facilities for Amazon in Western Europe and its knowledge of the local logistics market, based on numerous projects completed in Poland," said Raimund Paetzmann, Director Real Estate of Amazon. Since 2006, Goodman has completed over 900,000 sq.m for Amazon across 11 developments in Germany,

weekly newsletter # 012 / 25th November 2013 / page 10

France and the UK. A key factor in Amazon's decision to choose Goodman as the developer was its ability to deliver such a large facility in a relatively short time frame, while simultaneously ensuring a high quality finished product. Amazon plans to create up to 2,000 long-term jobs at the warehouse, plus an additional 3,000 seasonal jobs in order to cover peak times during the holiday season. The Wrocław center is part of a larger project by Amazon that will see the Seattle-based e-commerce giant create 6,000 permanent jobs at three logistics centers in Poland. The company seeks to establish one center in Poznań and two in Wrocław. The Poznań and one of the Wrocław centers will open in August 2014, while the second Wroclaw logistics hub will start operations in mid-2015. In addition to full-time employees, as many as 9,000 temporary staff could be employed at peak periods. Poland's central location in Europe, proximity to Amazon’s European clients and access to a skilled workforce were among the reasons for Amazon's investment decision, Tim Collins, director of retailer’s European operations, told reporters at news conference in Warsaw in October. Amazon won't close any of its existing European logistic infrastructure, he added. The three sites will be integrated into the network of 25 centers in Europe as part of an expansion strategy to serve customers in every European country, including Russia and Ukraine, Collins said. He declined to disclose the value of Amazon’s planned investment, saying only it would be in the "hundreds of millions of euros."

TRANSPORT & LOGISTICS

Stena Line puts fresh ferry on Gdynia route as discussions on new terminal continue Swedish ferry operator Stena Line introduced a new larger ship, Stena Baltica, on the Gdynia-Karlskrona crossing on 24th November. Her predecessor, Stena Allegra, was driven ashore at Karlskrona on 28 October during the St Jude storm, less than four months after it was put in service on that route. According to the operator, with a deck area of 2,188 lane meters, the new vessel will be able to carry more freight than Stena Allegra: 120 trucks and 240 passengers in 120 cabins, supporting the rapidly growing traffic between Sweden and Poland.

nal, which is to be developed in Gdynia by 2016 at the estimated cost of PLN 120m. A PLN 3m contract for the design of the new facility has just been awarded to Dutch engineering company Tebodin. "Since a year back we have a joint project to develop plans and documentation in order to have facts and figures to discuss and negotiate down the line," says Tony Michaelsen, who is responsible for Stena Line's routes Karlskrona-Gdynia, Nynäshamn-Ventspils and Travemünde-Ventspils/Liepaja. Located in the Polskie Quay, much closer to the city center, the new terminal will make it easier for ferries and their passengers to access Gdynia, freeing up space for expansion of the Baltic Container Terminal (BCT). Besides a new terminal with a cargo storage area of 450 sq.m, the investment will include a parking lot for 100 vehicles and renovation of the existing quay.

The number of freight units on the Gdynia-Karlskrona route increased by 7% in 2012, while the number of cars increased by 9%. This trend has only strengthened in 2013. "During the first ten months of this year freight volume increased by 18% while car and passenger numbers have gone up by 9% and 7% respectively," Tony Michaelsen, Route Manager Baltic Sea at Stena Line tells Poland Today. Besides Stena Baltica, which is departing from Karlskrona and Gdynia three times a week, the Swedish operator has two ferries: Stena Vision and Stena Spirit on the route. Mr. Michealsen confirms that the operator has plans to increase the number of cruises in the future. Meanwhile, Stena Line and the Gdynia Port Authority are continuing their talks on the new passenger termi-

The current location of Gdynia's passenger terminal is problematic for both the port Authority as well as Image: Port of Gdynia ferry operators.

"The new terminal will enable us to develop the Gdynia-Karlskrona route by allowing Stena Line to use larger, 240m-long vessels that can carry some 250 trucks and 1,300 passengers," said Marek Kiersnowski, managing director of Stena Line Polska. "Moreover, due to its location near the entrance to the port, the new terminal will shorten the crossing time by up to

weekly newsletter # 012 / 25th November 2013 / page 11

30 minutes, thus reducing fuel usage and emissions. A railway siding should contribute to development of intermodal services and passengers will get access to more convenient facilities. We are hoping that due to its location close to Gdynia's city centre, the terminal will make our weekend trips to Tricity more popular with Swedish tourists." By relocating the ferry terminal to the Polskie Quay, the Port of Gdynia Authority can provide additional room to grow for the BCT container terminal, which is competing fiercely with Gdansk's DCT. BCT's current site at the Helskie quay is becoming cramped. Besides economic benefits, there are also safety issues that a new terminal will resolve. Difficult access to the existing terminal, combined with heavy winds, already contributed to an accident last year, which involved the Stena Spirit ferry knock down a BCT gantry crane, injuring three employees. As for the BCT, it has benefitted from rapid growth of container traffic in the Baltic. In 2012 Baltic Container Terminal handled 408 722 TEU, which means a 13% increase in comparison with the year 2011. Last year also was remarkable due to the record railway share of handling operations, which reached 42%. Today BCT services over 40 trains a week. In the coming years the intermodal potential of the terminal will be increased thanks to the implementation of the greatest investment plan in BCT history. The PLN 153m investment will include, among others, new container, yard and railway gantry cranes, surface replacement as well as the preparation of new stations for r-frigerated containers. As much as 35% of the total tab will be picked up by the EU. Since 2003 BCT has been part of the Philippines-based port management giant International Container Terminal Services, Inc. (ICTSI). Stena Lina AB belongs to the Gothenburg-based family-owned conglomerate Stena AB whose interests involve recycling, shipping and real estate. Stena Lina is

one of the largest passenger ferry companies in the world - it operates 38 vessels, employs 6,000 staff across nine countries and turns over SEK 10bn.

TRANSPORT & LOGISTICS

DCT is Poland's first terminal to handle 1m TEU in one year With more than 1m TEU trans-shipped since the beginning of the year, the first Polish operator to brerak that record, DCT Gdańsk is well on track to joining the ranks of the world's 50 largest container terminals in the near future. In merely six years, DCT Gdańsk became a hub port for the CEE region, serving as a true gateway to Poland and other Baltic states, largely due to its cooperation with the Danish shipping giant Maersk Line, which made Gdańsk a port of call on its key Asia-Europe oceanic route. "The increased capacity of Polish ports and the ability to handle large vessels [up to 18,000 TEU in the DCT Gdańsk; ed.] can recapture cargo previously transshipped through other northern European ports. Over time, the improved port infrastructure will bring along a change is supply chain management for companies operating in Poland and the wider region as goods will be increasingly shipped via the Polish ports," Tomasz Olszewski, Head of Industrial Department CEE at Jones Lang LaSalle commented in a recent report on Poland's port industry. DCT emerged by attracting deep sea calls to the Baltic Sea and its role is bound to grow as Poland's modernized road and railroad network connects key logistics hub across the region. Currently, six major container terminals operate within Poland's three main port

complexes of Gdańsk, Gdynia and SzczecinŚwinoujście. Over the past five years their TEU throughput has doubled and in 2012 stood at 1.66m TEU (twenty-foot equivalent unit). The terminals feature various capacities, shipping directions, infrastructures and development constraints and are, in fact, often competing for different clients.

DCT Gdańsk can receive the world's largest container ships, such as Maersk's Triple-E vessels. Photo: DCT

"It is crucial for the whole Baltic industry to develop a coherent pattern of container transport, with Gdańsk being the leading container hub port, and other main Baltic ports becoming efficient and modern feeder terminals, " says Maciek Kwiatkowski, President of the Board, DCT Gdańsk.

Growing importance of seaports

The port of Gdańsk is home to two terminals – the Deepwater Container Terminal or DCT (annual capacity of 1,250,000 TEU with expansion capacity to 4,000,000 TEU) and the Gdańsk Container Terminal (annual capacity of 100,000 TEU). Only the DCT is capable of receiving the largest container vessels, including the most advanced ones that can carry 18,000

weekly newsletter # 012 / 25th November 2013 / page 12

TEU. With a secured operator, Maersk Line, which established Gdańsk as its last port of call for the AE10 service, this terminal primarily focuses on the Asia Pacific trade as well as trans-shipments to other Baltic ports in Russia, Sweden, Finland and the Baltic States. Furthermore, the DCT's natural features, such as nautical accessibility, tide and ice-free access and extension potential, offer a considerable potential for further growth and leveraging its strengths in the Baltic Sea. Improved hinterland road infrastructure, provides a good connection between the port and the A1 motorway, which enables the port to compete for clients from southern Poland and neighboring countries.

Poland's key container terminals

authorities of the port of Gdynia plan to deepen the port channel and develop a larger turning circle.

northern Europe, Poland could lure some 70% of that cargo back to its own ports.

The least accessible of all Polish seaports is the port of Szczecin (annual capacity – 120,000 TEU) which can handle vessels that carry no more than 1,400 TEU. However, according to experts, it remains an attractive option for local clients as well as those operating in eastern Germany. This port is also supplied by feeders loaded in other major European hubs. Plans for the Szczecin-Świnoujście port complex include a number of improvements such as the deepening of its waterways, modernization of road and rail access and, last but not least, the restarting of regular operations in the container terminal in Świnoujście.

"The Polish seaports are well positioned to become gateways for many of the growing economies of the CEE, Baltics, Russia and the CIS countries. It is worth highlighting that the great advantage of Polish seaports is their potential to expand. The largest ports in Europe already face congestion and their spatial reserves are limited, whereas the supply of land on the Polish coast is seemingly inexhaustible. The simplification of tax, customs and sanitary procedures and further improvements in infrastructure will help them compete for clients from the industrial hubs of southern Poland and parts of the Czech Republic, Slovakia and CIS countries," said Jan Jakub Zombirt, Senior Research Analyst, Jones Lang LaSalle.

"Further improvements in port infrastructure, which also include the development of port-centric warehousing, coupled with the container ports reaching the critical mass of the handled cargo volumes will lead to a shift in supply chains and will change the landscape of the Polish industrial warehousing market," added Tomasz Olszewski.

Handling capacity (million TEU)

DCT Gdańsk BCT Gdynia GCT Gdynia DB Port Szczecin GCT Gdańsk 0.00

0.25

0.50

0.75

1.00

1.25

Source: terminal operators

The two container terminals in Gdynia: the Baltic Container Terminal (annual capacity – 750,000 TEU) and the Gdynia Container Terminal (430,000 TEU) do not handle any direct oceanic services but rather smaller feeder vessels, which are loaded in the major northern European hubs. Importantly, smaller feeders (up to 2,500 TEU) are often routed through the Kiel Canal, which shortens shipping times by almost two days compared to the route through the Danish straits. In order to attract deep-sea calls, the

According to experts, Poland's inefficient fiscal regulations are among the key stumbling blocks that hamper the potential throughput increases in Polish seaports. At the moment, importers must settle VAT within ten days, forcing companies to freeze a portion of their working capital. This, however, looks set to change in the near future, following recent announcements from the government. An additional obstacle is customs clearance, which often takes an unreasonably long time. One of the latest proposals which could shorten the time needed to exit the terminal gate is clearing the customs still onboard a ship. According to estimates by Investment Partners, some 670,000 TEU directed from or to Poland are handled outside Polish ports. According to Jones Lange LaSalle, by adopting customs & tax regulations similar to those used in

CONSUMER GOODS & RETAIL

Tesco seeks buyers for 35 investment sites British retailer Tesco, which in recent years has experienced a decline in turnover on the Polish market, is seeking to free up some of the capital it keeps frozen in real estate. The company has decided to "optimize the development of its selected properties across Poland" and to sell off excess land. A total of 35 properties intended for commercial developments and located largely near Tesco's existing stores will be put up for sale, Tesco said, adding that their goal is to "extend the offer of Tesco's stores to include additional services." The retailer has appointed property consultancy Cushman & Wakefield to represent Tesco in negotiations with potential investors.

weekly newsletter # 012 / 25th November 2013 / page 13

The plots to be sold have a combined area of more than 30 hectares and most of them constitute undeveloped sites adjacent to existing Tesco schemes. The sites could create attractive opportunities for developers of retail parks and strip malls, which are usually located next to big box retailers, such as supermarkets or DIY outlets. Tesco's properties will be marketed gradually and sold through a competitive bidding process, the retailer said.

Since 1998 Tesco has established a network of approximately 450 outlets in Poland. With a staff of 28,000 the company is the largest British employer in the country. However, due to economic slowdown and tough competition from discount groceries, its Polish business has been shrinking lately. After posting a gross turnover of PLN 12.6bn in the financial year 2011/2012, marking a 8.8% increase y/y, the company stopped publishing detailed nominal figures with regard to its Polish business. Tesco has confirmed, however, that its like-for-like sales in Poland dropped 3% in the subsequent year and fell a further 6.4% in the first half of 2013-2014 (against a decline of 2.3% and 5% respectively in Europe). The company has been trying to improve its declining position by remodeling many of its stores, as well as developing e-commerce, loyalty schemes and a fashion brand F&F.

Nowy Świat rents are some 25 times lower than on Hong Kong's Causeway Bay, the world’s most expensive retail location for the second year running. Fuelled by competition between both high-end and non-luxury retailers for limited space, Causeway Bay experienced a 14.7% growth in rental values and broke through the USD 3,000 per sq.ft barrier for the first time in the survey's history (or EUR 24,983 /sq.m/year on this side of the big pond). New York's Fifth Avenue and Avenue des Champs-Élysées in Paris, which saw nearly a 40% rental rise, hold on to second and third place respectively. In the CEE region, rents on Nowy Świat are more expensive than the main streets of the Romanian or Bulgarian capitals, but still cheaper than for instance in Prague and Kiev.

Nowy Swiat tops high street ranking Polish high streets & prime retail rents

CONSUMER GOODS & RETAIL

Nowy Świat remains Poland's priciest retail street despite drop in rents, report says Tesco seeks to sell 35 sites, located mainly in Silesia

and Western Poland.

Image: Tesco

"Tesco has decided to sell its excess land to enhance the retail attractiveness of its store locations. Tesco is a highly recognized brand in Poland with its stores driving strong footfall," said Marek Noetzel, Partner from the Retail Department of Cushman & Wakefield.

With rents at EUR 996 per sq.m/year (down by 2.4%), Poland's most expensive shopping street Nowy Świat in Warsaw came 45th globally in Cushman & Wakefield's Main Streets Across the World report, which is widely recognized as the barometer for the global retail market due to its annual ranking of the most expensive locations in the top 334 shopping destinations across 64 countries. According to the report, rents in Poland's high streets have dropped due to the "weaker than expected consumption growth and a change in tenants' expectations of revenue growth."

Prime retail rents

City

Street

Warszawa

ul. Nowy Świat

996

Kraków

ul. Floriańska

936

-1,3%

Warszawa

ul. Chmielna

828

-2,8%

Warszawa

ul. Marszałkowska

696

-4,9%

Katowice

ul. 3 Maja

672

-3,4%

Poznań

ul. Półwiejska

660

-5,2%

Warszawa

Plac Trzech Krzyży

636

-3,6%

Warszawa

Al. Jerozolimskie

552

-4,2%

Wrocław

ul. Świdnicka

492

-8,9%

Szczecin

Al. Niepodległości

396

-2,9%

Gdynia

ul. Świętojańska

372

-6,1%

Łódź

ul. Piotrkowska

312

-3,7%

EUR/sq.m/year

y/y -2,4%

Source: Cushman & Wakefield

Cushman and Wakefield has also put together a ranking of the 12 most expensive retail streets in Poland. Traditionally, the number two spot belongs to Kraków's Floriańska Street (EUR 936 /sq.m/year), followed by Warsaw's Chmielna (EUR 828/sq.m/year).

weekly newsletter # 012 / 25th November 2013 / page 14

Most streets maintained their positions from last year's ranking, with one notable exception being 3 Maja St. in Katowice, which replaced Poznań's Półwiejska St. as Poland's fifth most expensive shopping street. "3 Maja's leap in the ranking was mainly due to its revitalization, redevelopment of the nearby train station, and completion of the Galeria Katowicka mall. The situation in Warsaw will improve following next year's launch of line two of the city's subway, which will affect mainly the Świętokrzyska Street that crosses Nowy Świat. Retail streets are often the only locations taken into consideration by certain luxury retailers. Unfortunately, ownership, adaptation and renovation issues are contributing to a slower than expected growth of such locations," says Tomasz Górski, senior negotiator at Cushman & Wakefield's retail department.

months (4.5%), rental values in 285 of the locations surveyed for the report (85%) were either stable or rose. Rental growth in the EMEA region increased by 2.1% overall, fuelled by better economic news in Europe, greater finance availability, a very active demand from luxury retailers and improved general consumer sentiment. Specifically, there were encouraging performances from Western (2.4%) and Eastern Europe (2.6%). Out of the 33 EMEA countries surveyed in the report, only seven recorded rental falls while the other 26 saw values either stabilize or rise.

POLITICS & ECONOMY

Poland gets seven new ministers in major government shakeup In a long-awaited government reshuffle Prime Minister Donald Tusk has nominated seven new members of his cabinet, including ministers of finance, education, science, transport, sports and environment, hoping the changes will bolster the declining popularity of his Civic Platform (PO) party. Poland's new finance minister, replacing Jacek Rostowski, who held the post for the past six years, will be Mateusz Szczurek, chief economist for Central Europe with ING bank in Warsaw.

Prime rents on Warsaw's Nowy Świat Street dropped 2.4% last year, down to EUR 996/sq.m/year. Photo: Cushman & Wakefield

Although global retail rental growth, at 3.2%, was slightly tempered when compared to the previous 12

Mr. Rostowski was the face of several crucial yet unpopular reforms, such as the raising of the retirement age to 67 for both men and women, from 65 and 60, respectively, as well as a controversial pension overhaul, which will see privately managed sovereign bonds canceled in 2014 cutting public debt to some 50% of GDP, according to government estimates. Under Rostowski watch, Poland's public debt rose to nearly 58% of gross domestic product this year, very near the constitutional ceiling of 60%.

PM Tusk, outgoing Minister Rostowski and the new Minister Szczurek share the same view on macroeconomic strategy, which "ensures continuity but also new energy," according to Premier Tusk. Lacking any direct political affiliations himself, Mr. Szczurek, who holds a Ph.D. from the University of Sussex in the UK, said he will try to reconcile budget spending to fuel growth with the need to keep a lid on public debt.

Prime Minister Donald Tusk introduced his new ministers at a conference in Warsaw last Wednesday. Photo: KPRM

"My job will be to facilitate a developmental leap, not just by releasing the brakes, but also making sure the growth will be sustainable," Mr. Szczurek told a news conference after his nomination. "However, it cannot be a leap into the abyss." His nomination was well received by market observers, even though unlike his predecessor, the new finance minister will not share the rank of a deputy PM. The latter honor has been bestowed by Donald Tusk upon regional development minister Elżbieta Bieńkowska, whose office will be merged with Transport Ministry after the recent resignation of the former transport minister Sławomir Nowak, suspected of having accepted an expensive timepiece as a bribe.

weekly newsletter # 012 / 25th November 2013 / page 15

Mrs. Bieńkowska, who is widely regarded as one of Tusk's most effective ministers for her role in the distribution of EU funding, will be now responsible for Poland's key infrastructure projects. Her task will be to kickstart the spending of EUR 106bn that Poland expects to receive in EU funds between 2014 and 2020, money provided for the country in the bloc's budget passed by the European Parliament. In other changes, Maciej Grabowski, who is currently Poland's deputy finance minister, was named minister for environment and his key task seems to be not so much to protect Poland's natural resources as to facilitate extraction of unconventional hydrocarbons as a way of boosting economic growth. PM Tusk also struck the innovation-economy note with changes at the helm of the Ministry of Science and Higher Education and the Ministry of Digitalization. Rafał Trzaskowski will be the new digitalization & administration minister replacing Michał Boni, who said he was going to stand as a member of the European Parliament in elections next year. Barbara Kudrycka will step down as the minister of science & higher education to be replaced by Lena Kolarska-Bobińska. The Education Ministry, recently heavily criticized for plans to lower the school starting age to six years-old, will be led by Joanna Kluzik Rostkowska, who replaces outgoing Krystyna Szumilas. Sports Minister Joanna Mucha will be succeeded by Andrzej Biernat.

are due in 2015. After six years in power, the ruling party is lagging behind its key rival, the conservative Law & Justice (PiS), in polls, enjoying the support of 22% and 31% of Poles, respectively, according to fresh data.

Minister of administration and digitization: Rafał Trzaskowski (41) •

Agenda, privacy legislation and re-use of public data; Member of EP constitutional committee and IMCO •

Although Poland's economic recovery has been gaining traction in recent months, there are still a number of huge challenges ahead of the country and its regional peers. Cutting down the red tape, promoting innovation, reforming the labor market and laying foundations for long-term growth that does not rely solely on EU funds will require professional competences, which many in the cabinet seem to have, but also strong political backing. Time will tell, whether the expected economic upturn coupled with the planned government revamp will suffice to win back popular support for Mr. Tusk and his party. So far, none of Poland's opposition parties has offered a credible alternative.

Mr. Tusk in 2011 became the first prime minister in Poland's post-communist history to have been reelected for a second consecutive term. Poland will see municipal elections as well as elections to the European Parliament next year, and parliamentary elections

PhD from Warsaw University, expert on EU institutions

Minister for environment: Maciej H. Grabowski (54) •

Deputy finance minister since 2008, responsible among

•

Former deputy head of influential economic think-tank

•

His main goals are increasing of use of „natural resources

others for the VAT legislation and shale gas taxation IBnGR in Poland”, especially through finalizing works on the shale gas legislation

Minister of Education: Joanna Kluzik-Rostkowska (50) •

Former deputy minister of labor and social policy, and of regional development (in Law and Justice’s governments), former campaign chief of PiS leader Jarosław Kaczyński;

NEW GOVERNMENT MINISTERS: Minister of Finance : Mateusz Szczurek (38) •

Chief economist for CEE at ING Group; no previous political experience

•

the new appointment is her big comeback to politics •

MP since 2007, in Civic Platform since 2011

Minister of science and higher education: Lena Kolarska-Bobińska (66)

PhD in economics, Sussex; Econometrics studies in Inter-

•

EPP MP since 2009

national Centre for Money and Banking Studies in Genève

•

Professor of sociology, studied at Stanford University and

•

Head of the Institute for Public Studies think tank. Former

and London; Academic in Warsaw School of Economics,

New ministers will be sworn in on November 27 except for Lena Kolarska-Bobińska and Rafał Trzaskowski, current members of the European Parliament, who will be sworn in on December 3, prior to the December 4 government sitting.

EPP MEP since 2009; recently specializing in Digital

University of Sussex and Goethe Business School

Carnegie-Mellon University Business School advisor to Polish Presidents Lech Wałęsa and Aleksander

Minister of infrastructure & development: Elżbieta Bieńkowska (49) • •

Appointed as deputy PM; her duties have been extended

Minister of sport: Andrzej Biernat (54)

to include supervision of infrastructure development

•

MP since 2005; informal leader of one of PO's factions

Minister of regional development since 2007; Senator

•

His parliamentary work concentrated on sports issues

since 2011 •

Kwaśniewski

Highly regarded as an expert on EU (and previously PHARE) funds; took active part in negotiations regarding EU cohesion policy fund for 2014-2020

weekly newsletter # 012 / 25th November 2013 / page 16

KEY STATISTICS Consumer Prices Prices

Inflation

-0.1

Alcohol, tobacco +3.6

+0.1 +3.6 +0.2 +3.7 +0.2 +3.6

+0.1

Clothing, shoes

-5.0

-2.7

-4.8

-2.7

-4.7 +0.7

-4.8 +3.5

Housing

+2.0

+1.2 +2.0

+0.1

+1.8

+1.8 +0.2

+0.1

-1.2

+1.1

-1.4 +0.5

-1.4 +0.8

-2.3

Communications -9.7

0.0

-9.7

0.0

-9.7

-7.2 +2.8

+0.3

+1.1

-0.3

Gross CPI

+1.1

0.0

y/y

m/m

Aug '13 Sep '13

+3.8

-0.7

-0.9

+0.5

+1.8

+4.3

+3.4

+3.9

Year

2008

2009

2010

2011

2012

Turnover in PLNbn

564.7

582.8

593.0

646.1

676.0

+13.3

+4.3

+5.5

+11.6

+5.6

Residential Construction Dwellings

+1.0 +0.1 +0.8 +0.2

Jul '13

+1.5

y/y (%)

-1.0

Jun '13

+1.6

y/y (%)

Oct 13

0.0

Aug 13

-1.2 +2.6

Jun 13

2.5

Apr 13

+1.9

Transport

-0.3

Feb 13

+2.5

May '13

m/m (%)

Dec 12

Food & bev

Month

5% 4% 3% 2% 1% 0% -1%

Oct 12

y/y m/m y/y m/m y/y m/m y/y m/m

Aug 12

Sector

Retail Turnover

Jun 12

Oct '13

Apr 12

Sep '13

Feb 12

Aug '13

Oct 11

Jul '13

Dec 11

Data in (%)

2008 2009 2010

2011

2012 Jan-Oct y/y

230.1

178.8

174.9

184.1

165.1

142.9

158.1

(in '000 units)

Producer Prices Prices

Industrial Output Output

Permits

2013

(%)

117.0

-17.2

Commenced

174.7

162.2

141.8

111.6

-11.4

m/m (%)

-0.7%

+0.1

+0.7

+0.2

-0.3

+0.1

-0.5

m/m (%)

-2.3

-0.7

+2.6

+1.5

-4.5

+9.6

+6.0

U. construction

687.4 670.3 692.7 723.0

713.1

707.4

-3.9

y/y (%)

-2.1%

-2.5

-1.3

-0.8

-1.1

-1.4

-1.3

y/y (%)

+2.7

-1.8

+2.8

+6.3

+2.2

+6.2

+4.4

Completed

165.2 160.0 135.7

152.5

117.6

-2.1

Year

2006

2007

2008

2009

2010

2011

2012

Year

2006

2007

2008

2009

2010

2011

2012

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

y/y (%)

+11.6

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

Gross Domestic Product

Month

Apr '13 May'13 Jun '13 Jul'13 Aug'13 Sep'13 Oct'13

m/m (%) y/y (%) Year y/y (%)

Apr '13 May'13 Jun '13 Jul'13 Aug'13 Sep'13 Oct'13 -0.1 -1.9 2006 +3.2

-0.2 -2.0 2007 +7.4

-0.1

-2.0 2008

-0.2

-1.9

2009

+4.8

-0.1 -1.8

2010

+0.2

-0.1

2011 +1.0

-0.1 -1.7 2012 +0.2

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

Coal mining

Month

Period

Apr '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13

m/m (%)

+7.9

y/y (%)

-23.1

Year

2006

y/y (%)

+18.1

+16.1 -27.5 2007 +15.5

+19.1 -18.3 2008 +12.1

+7.8 -5.2 2009 +5.1

-0.8

+9.4

-11.1

-4.8

2010

2011

+4.6

+11.8

+14.3 -3.2 2012 -0.6

Q3 2012

Q4 2012

Q1 2013

Q2 2013

5,920

135 8,427

192 6,060

138 6,290 143

-3.1%

Q4 2012

+0.7%

442,231

-3.5%

2010

+3.9%

1,416,585

-5.1%

2009

+1.6%

1,344,384

-3.9%

Co nsumer conf id ence (lef t axis) Economic sentiment (right axis)

120 100

Transportation

3,543

125

3,816

135 3,439

122 3,547 125

IT, telecoms

6,493

169 6,379

166 6,685

174 6,707 174

Financial sector 5,875

132 6,044

136 6,356

143

O ct 13

60 Jul 13

-40 Ap r 1 3

146

Jan 13

152 3,693 157

143 3,432

O ct 1 2

163 3,556

142 3,365

J ul 12

158 3,829

3,322

A pr 1 2

3,709

Retail & repairs

J an 12

Construction

O ct 1 1

J ul 1 1

-20

Apr 11

152 3,560 155 188 5,828 177

J an 1 1

3,491

Source: Central Statistical Office (GUS)

377,815

Economic sentiment and consumer confidence indicators

198 6,196

3,613 144

+0.5%

Sentiment Indicators

154

149

-2.3%

Q1 2013

-3.5%

151 3,522

3,741

-2.0%

395,507

-4.9%

176 6,535

154

n/a

+0.8%

1,522,736

3,463

147 3,878

+1.9%

Q2 2013

1,462,734

5,790

National average 3,690

Q3 2013

+1.9%

Energy

151

Current account def. in % of GDP

+4.5%

Manufacturing

6,712

GDP in PLN bn current prices

2011

3,421 146

Growth y/y unadjusted

131.7

2012

Source: The Central Statistical Office of Poland, GUS

Gross Wages Sector

Apr '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13

Construction Output

Construction Prices Price s Month

Month

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

*2010

*2011

2013

2014

+1.9%

+1.3%

+2.7%

+2.6% +4.3%

+3.7%

+1.0%

+1.9%

+2.1% +7.6%

+3.4%

-1.2%

0.7%

-5.1%

-4.9%

-3.5%

-1.3%

-0.3%

Nominal gross wage

+3.9%

+5.2%

+3.7%

+2.9%

+4.1%

Unemployment**

12.4%

12.5%

13.4%

13.7%

13.2%

3.99

4.12

4.19

4.20

4.06

GDP change

+3.9% +4.5%

Consumer inflation Producer inflation CA balance, % of GDP

EUR/PLN

*2012

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

weekly newsletter # 012 / 25th November 2013 / page 17

56.30 ↑

100 SEK

47.26 ↑

100 NOK

51.06 ↑

10,000 JPY

USD EUR 350

300

15.42 ↓

100 CZK 10,000 HUF

400

307.15 ↓ 140.83↑

Money Supply in PLN m Monetary base M1 - Currency outside banks

WIG-20 stocks Price Change Change in alphabetical 22 Nov 15 Nov end of order '13 '13 '12

WIG Total index

Apr '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13

PLN (up to 1 year)

5.4%

PLN (up to 5 y ) PLN (over 5 y) PLN (total)

5.3%

5.0%

4.7%

4.6%

4.5%

5.9%

5.7%

5.4%

5.7%

5.6%

5.3%

5.1%

4.9%

4.8%

5.8%

5.6%

5.3%

5.0%

4.9%

4.8%

EUR (up to 1m EUR) 2.1%

2.3%

1.9%

2.3%

EUR (over 1m EUR) 2.9%

3.2%

2.9%

3.5%

1.9%

1.8%

3.5%

3.2%

Warsaw Inter Bank Offered Rate (WIBOR) as of 22 Nov 2013 Overnight

1 week

1 month

3 months

6 months

2.60%%

2.58%

2.60%

2.65%

2.70%

927,345

- Time deposits

418,252 405,900 946,586

921,662

928,359

931,042

412,407 405,703

945,077 949,988

947,228

- Net foreign assets 160,267 159,749 154,035 147,978 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

+70%

↑ BZ WBK

383.4

+1%

+58%

↓ Eurocash

51.89

-1%

+19%

WIG-20 blue chip index

↑ GTC

8.59

+4%

-13%

→ Handlowy

122.5

+25%

2,5 2,590. 90.48

↑ JSW

68.3

+8%

-26%

Change 1 week

↑ Kernel

44.4

+3%

-33%

Change end of '12

121.4

+2%

-36%

39.7

+1%

-4%

↑ Pekao

191.8

+1%

+15%

Credit

↓ PGE

18.39

-1%

+1%

57500

The financial sector's net lending in PLN bn,

↑ PGNiG

5.81

+1%

+12%

55000

↑ PKN Orlen

45.95

+2%

-7%

52500

↑ PKO BP

41.50

+1%

+12%

50000

↑ PZU

468.4

+3%

+7%

47500

5.5

+5%

+2%

45000

loan stock at the end of period Type of loan

Jun'13

Jul '13

Aug '13

Loans to customers

900,999

896,635

901,863

908,106

- to private companies

263,453

261,000

263,491

262,963

↑ Synthos

- to households

553,055

552,503

556,027

560,608

↑ Tauron

1,634,587

1,616,221

1,627,182 1,626,489

Total assets of banks

Sep '13

Source: Central Bank NBP

↑TP SA

5.2

+2%

+9%

10.8

+2%

-12%

+2% ↑

Change end of '12

↑ Lotos

2.50%

113,223

+7%

2.75%

Sep '13 166,620

114,083

Change 1 week

555.1

1.00%

Aug '13 153,867

112,565

139.5

↑ BRE

4.00%

Jul '13

112,815

↑ Bogdanka

↑ KGHM

155,767

540,873

54,834. 34.12

+3%

Rediscount

Jun '13

531,124

+11%

NBP deposit

144,260

530,666

-1% +6%

Lombard

Reference

523,783

50.15

↓ Asseco Pol.

Central Bank (NBP) Base Rates

M2 M3

as of 22 November 2013

+16% ↑

+2% ↑ 0% →

WIG Total closing index last three months

22 Nov 13

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

29 Oct 13

341.08 ↑

22 Nov 13

503.51 ↑

100 CHF

13 Sep 13

100 GBP

8 Jul 13

419.95 ↑

26 Apr 13

100 EUR

Key indices

Term / currency

450

18 Feb 13

310.77 ↓

7 Dec 12

100 USD

Stock Exchange

Average weighted annual interest rates

7 Oct 13

as of 22 November 2013

Interest rates

13 Sep 13

100 USD/EUR against PLN

Central Bank average rates

22 Aug 13

Currency

Source: Warsaw Stock Exchange

T rade Poland's ten largest trading partners, ranked according to 2012

Poland exports and imports according to commodity groups, according to SITC classification EXPORTS in PLN bn Jan-Aug 2013

y/y (%)

share (%)

2012

IMPORTS in PLN bn share (%)

Jan-Aug 2013

y/y (%)

share (%)

2012

share (%)

EXPORTS in PLNbn JanNo Country Sep share 2013

*2012

Share No

IMPORTS in PLN bn JanCountry Sep share *2012 2013

43,520

+9.0

10.5

61,694

10.3

30,470

+3.1

7.3

44,287

6.9

1 Germany

Beverages and tobacco

5,633

+5.8

1.4

7,967

1.3

2,593

+0.1

0.6

3,989

0.6

2 UK

30,740

6.5%

40,184

6.7%

2 Russia

59,388 12.5%

Crude materials except fuels

10,501

+7.7

2.5

14,024

2.4

14,118

-7.9

3.4

22,053

3.5

3 Czech Rep.

28,868

6.1%

37,475

6.3%

3 China

44,332

Fuels etc

19,670

+1.7

4.8

29,389

4.9

48,392

-12.8

11.6

85,280

13.4

4 France

26,520

5.6%

34,862

5.8%

4 Italy

24,315

5.1% 32,782

1,088 +60.8

0.3

1,342

0.2

1,736

-8.8

0.4

2,887

0.5

5 Russia

25,476

5.4%

32,290

5.4%

5 France

18,262

3.8% 25,303 4.0%

20,214

4.3% 29,067 4.9%

Food and live animals

Animal and vegetable oils

118,119 25.1% 150,046 25.1%

38,680

+6.2

9.4

54,295

9.1

61,502

+0.7

14.7

89,140

14.0

6 Italy

85,413

-0.2

20.7

126,161

21.1

72,837

-5.0

17.5

110,773

17.4

7 Netherlands

18,714 4.0%

Machinery, transport equip.

155,077

+3.3

37.5

223,646

37.5

137,560

+1.3

33.0

203,718

31.9

8 Ukraine

13,277