Poland Today Business Review+ No. 015 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. 015 / 16th December 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

HEALTHCARE British firm McKinlay Development open their first Polish retail park page 11

MANUFACTURING & PROCESSING Steel structures maker Vistal hits the bourse to speed up expansion page 2 Foreign buyers lining up for Polish ceramic proppants producer page 3

Chevron has experience with shale, PGNiG knows the local market.

Photo: Chevron

Chevron and PGNiG join forces in shale US energy giant Chevron has signed an agreement with Poland's gas & oil company PGNiG to cooperate on shale gas exploration in southeastern Poland. The two firms are hoping the deal will help them cut costs and speed up work. page 4

Top cigarette distributors to merge

Poland's top FMCG wholesaler Eurocash is teaming up with retail & logistics firm Kolporter to establish a PLN 5bn company that will focus on distribution of tobacco products, foodtuffs, and other goods. page 10

tel. +48 881 650 600

IT & TELECOM Belgian MVNO Mobile Vikings launches in Poland page 9 CONSUMER GOODS & RETAIL Ghelamco gets permit for its first retail project in Warsaw page 11

BANKING & FINANCE Invest Bank to become Plus Bank, strengthen ties with Polkomtel page 3

New shopping centre completions to reach 0.5m sq.m in 2014 page 12

ENERGY & RESOURCES GDF Suez acquires E.ON's district heating business in Poland page 5

HEALTHCARE Bupa subsidiary Lux Med acquires leading orthopedic hospital page 12

Power utility Energa's share price drops on first day of trading page 6

POLITICS & ECONOMY Polish companies are back in hiring mode, says Manpower page 13

PROPERTY & CONSTRUCTION Skanska Property Poland to buy four sites for new office projects next year page 6 TriGranit completes phase one of Krak贸w office park, will build a further 30,000 sq.m page 7

KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

weekly newsletter # 015 / 16th December 2013 / page 2

MANUFACTURING & PROCESSING

Steel structures maker Vistal hits the bourse to speed up expansion

pany, which employs approximately 380 staff, belongs to its CEO Ryszard Matyka and his wife, whose ownership will decrease down to slightly more than 70% following the IPO. With a maximum price set at PLN 18 per share, the book building is to end on 17th December, with shares to be allocated on 24th December.

"This project is unique in Poland and the Baltic Sea basin, due to both its size as well as state of the art cranes and welding equipment. Just to give you an idea - with a floor space of 13,450 sq.m and height of 34m, the production hall could fit inside between seven and eight 11-storey buildings. This factory enables Vistal to produce a full range of assembles for the offshore and marine sectors. Moreover, he final products can be loaded directly onto ships from our waterfront location," Vistal Gdynia's CEO and owner Ryszard Matyka tells Poland Today.

Vistal Gdynia, one of Poland's top producers of steel structures to the offshore and infrastructure industry, seeks to enter the Warsaw Stock Exchange before the end of 2013. New investors will be offered up to 4.2m newly issued shares corresponding to a 29.6% stake in the company. The estimated PLN 70m worth of proceeds from the IPO will increase Vistal's working capital (by ca. PLN 50m) and finance an ongoing investment program. With more than two decades of experience, the Vistal Group includes a number of ventures that specialize in turnkey delivery of various steel assemblies for Polish and international clients. The company focuses mainly on manufacturing, assembly, corrosion protection, and testing of steel structures for bridge, shipbuilding, wind and offshore industry. In the first half of 2013 Vistal Gdynia saw its revenues go up by 10% y/y, mainly thanks to a number of lucrative contracts from foreign customers. Exports represented 58% of Vistal's turnover in January-June 2013, up from 42% in 2012 and merely 9% in 2011. Its key foreign markets include Sweden, Norway, Denmark and Finland. From its waterfront location in the Port of Gdynia, Vistal supplies large structures to all of Scandinavia as well as clients in Germany and the Netherlands. Vistal's management expects its full-year net profit to reach PLN 19.5m on PLN 290 revenues, up from the respective PLN 1.1m and PLN 230m in 2012. The com-

not least, the company seeks to inject PLN 5m into its Vistal Offshore subsidiary, which is currently developing the group's key investment project: a modern production plant located in Indyjskie Quay, in the Port of Gdynia.

Vistal Gdynia key figures in PLNm Vistal's new waterfront production plant in the Port of Gdynia will double the company's production capacity, allowing it to produce the largest and most Photo: Vistal advanced types of assemblies.

2010

2011

2012

197.5

247.6

230.2

290

EBITDA

52.8

31.4

10.8

33.4

Net profit

36.8

9.6

1.1

19.5

Turnover

Source: Vistal Gdynia

The key objective of the IPO is to increase Vistal's working capital, to enable the company seamlessly handle a growing project pipeline. Its order backlog is worth PLN 276m at the moment and Vistal is finalizing talks on a number of further large-scale deals. As far as its investment program is concerned, Vistal seeks to purchase one of its current storage and assembly sites at the cost of PLN 6.5m , cutting annual rent expenditure by PLN 0.75m, as well as acquire and expand its production unit in Czarna BiaĹ&#x201A;ostocka near BiaĹ&#x201A;ystok for PLN 5m, boosting the latter's production volume and taking advantage of competitive labor costs in the region. A further PLN 5m is to be spent on the creation of a main operations centre for the group, which will consolidate its IT and bookkeeping systems, resulting in efficiency improvements. Last but

*2013

*) projected

Designed and built at the cost of PLN 102m to match the quality requirements of Vistal's foreign partners, the new Gdynia plant will open in early 2014 and reach full operational capacity later that year. It will raise the company's production capacity to 30,000 tons per annum, enabling Vistal to produce very large assemblies (up to 4,000 tons) all year round. "Sales to the offshore sector represented 35% of our turnover in 1H 2013, some 27% of our order backlog. Thanks to the additional capacity and more advanced capabilities offered by our new factory, we hope to keep increasing that ratio. We have PLN 58m worth of orders at final stage of talks, and 88% of them are from offshore sector clients," says Ryszard Matyka.

weekly newsletter # 015 / 16th December 2013 / page 3

MANUFACTURING & PROCESSING

Foreign buyers lining up for Polish ceramic proppants producer Warsaw-listed venture capital fund LST Capital has found a third potential investor for its portfolio company Baltic Ceramics, a manufacturer of ceramic proppants - a high-quality product used in the extraction of gas and oil from shale rocks. Baltic Ceramics has reported that it had inked a non-disclosure agreement with an unnamed US-based company that may decide to invest in the business. LST Capital invests in innovative technology projects in relatively early stages of development that are judged to have very high growth potential and competitive advantage. "The investor is a NASDAQ-based company operating in the energy industry that is currently seeking to enter the Oil&Gas sector. The party has completed a preliminary assessment of Baltic Ceramics based on publicly available materials and concluded that the venture meets its criteria," the company said in a communiquĂŠ, adding that besides acquisition the potential partner may consider also other forms of participation, for instance co-financing. Baltic Ceramics has not given the new suitor negotiation exclusivity as there are two other companies interested in the Polish business, one being a European player and one - a NYSE-listed firm. Due diligence is to begin in Q1 2014 and decisions may be made a few months later. Baltic Ceramics is building Europe's first ceramic proppants plant in Lubsko (40km southwest of Zielona GĂłra, near the German border). Developed in

the 1990s in the US, ceramic proppants are being used in hydraulic fracturing and extraction of oil and gas from conventional and unconventional resources. Baltic Ceramics has exclusive rights to deposits of fireproof loams and others with a high content of aluminum oxide and titanium dioxide, and enriched with other minerals, with the total mass of 4.8m tons. These deposits are now valued at PLN 17.6m. According to the current business plan, they should suffice Baltic Ceramic for 80 years of production of ceramic proppants.

grants from state institutions PARP and NCBiR, with a combined value of PLN 26m. The global market for ceramic proppants is being estimated at some 2.3m tons / USD 3.7bn. Since the beginning of the century it has grown at 23% CAGR and according to Freedonia Group over the 2015-20 period the figure will reach 40%. The leading player is the NYSE-listed Carbo Ceramics company, which controls roughly a third of the market with a production capacity of 0.8m tons.

BANKING & FINANCE

Invest Bank to become Plus Bank, strengthen ties with Polkomtel The Baltic Ceramics factory in western Poland is to Image: BalticCeramics be operational in 2015.

The Baltic Ceramics production plant, with target production capacity of 135,000 tons of ceramic proppants per year (5% global market share) will be created in the immediate vicinity of deposits of fireproof loams. The average distance to the wells at the largest deposits of shale gas discovered so far in Poland is no more than 400 km. This will enable direct, just-in-time delivery of ceramic proppants in retail quantities (about 1,200 tons). Thanks to excellent connections, wholesale quantities (more than 10,000 tons) will be transported by inland ship to designated ports in Poland or Western Europe. The investor received a building permit for the plant in October and plans to complete the investment in 2015. Due to its innovative nature, the project has been awarded investment

Following the recent merger of his two key assets, mobile operator Polkomtel and digital-to-home provider Cyfrowy Polsat, Polish billionaire Zygmunt SolorzĹťak has made further steps to consolidate his business empire. Solorz's banking asset Invest Bank will be renamed Plus Bank in order to bear the same logo as Polkomtel's mobile business Plus. Besides Plus Bank Solorz has registered two other brands: Plus Bank24 and Plus Bank Partner. The brand unification is to take place in Q1 2014 when more details about Plus Bank and its offer will be made public. Closer cooperation with Polkomtel and Cyfrowy Polsat, which boast 14m and 3.5m customers respectively, is set to open new opportunities for Invest Bank, which serves merely 300,000 clients at the moment. Provision of financial services has recently become the hottest trend among telecoms, which are desperately seeking new sources of revenue amid shrinking profits from traditional voice services and

weekly newsletter # 015 / 16th December 2013 / page 4

tough competition in data transmission. With total assets of slightly less than PLN 2.1bn, Invest-Bank employed 975 persons as of end of last year and boasted a solvency ratio of 16%. Its net earnings came to PLN 8m, up from PLN 5m in 2011. Besides the Polkomtel-Cyfrowy Polsat merger, Solorz has recently started using its Polkomtel sales network to offer electricity to business clients. The power will be supplied by one of Poland's top power plant groups Pฤ tnรณw-Adamรณw-Konin (ZE PAK) in which the entrepreneur has a controlling stake of 52%. A similar offer, aimed at households, is to be introduced shortly (see PT Business Review+ No. 012 page 5).

tion and production. I am convinced that a policy of openness, paving the way for partnership and cooperation between Polish and foreign companies, can be of benefit to everyone involved. Both parties could profit from sharing the exploration risk and from reduced costs, including the potential cost of developing the reserves," said Jerzy Kurella, acting President of the PGNiG SA Management Board.

The announcement comes little more than a week after Polish government officials said commercial production of shale gas in the country could begin as early as next year (see PT Business Review+ No. 013 page 4). Poland's newly appointed Environment Minister Maciej Grabowski has said that exploiting shale gas at home will be "his priority."

Assessing Poland's shale riches Estimated recoverable shale gas reserves in bn cb.m

EIA (2011) EIA (2013) Wo o d M ackenzie (2010)

ENERGY & RESOURCES

6,000

5,000

4,000

3,000

2,000

1,000

*PIG (2012)

Chevron teams up with PGNiG to explore shale shale gas in southern Poland

*) Poland's Geological Institute PIG estimates the country's recoverable shale gas reserves at 346-768bn cb.m Source: EIA, PIG, Wood Mackenzie, PT archives

US energy giant Chevron last week signed a preliminary agreement with Poland's gas & oil major PGNiG to join forces on shale gas exploration in south-eastern Poland, the firms said. According to PGNiG, the agreement stems from the company's new policy of "openness" to cooperation with other companies interested in Polish shale deposits. The idea is to reduce costs, share risk, and by virtue of an economy of scale, increase the pace of their exploration work. As a result, the assessment of potential shale gas resources in Poland could be accomplished much faster, the two partners said. "In establishing this relationship, PGNiG would win a solid and experienced business partner for a challenging exploration effort, and we would be able to draw on Chevron's global experience in shale gas explora-

Since 2009 Chevron has acquired four exploration licenses to explore for natural gas from shale formations in southeast Poland, a total of 1.1 million Image: Chevron acres (4,433 sq.km).

Chevron and PGNiG have yet to hammer out the details but plan to sign a final agreement as early as next year, according to the statement. They said that if their exploration efforts succeed, they could form a joint company with each holding a 50% stake. The company would obtain four licenses in south-eastern Poland: Tomaszรณw Lubelski and Wiszniรณw-Tarnoszyn from PGNiG SA, and Zwierzyniec and Grabowiec from Chevron. The newly-established company would also become the operator of those licenses, according to a work program agreed between the partners.

Poland, which imports two-thirds of the 14m cb.m of gas it consumes from Russia, had high hopes for its own shale gas reserves estimated at between 800 and 2,000bn cb.m. But red tape and poor drilling results have forced some global players to pull out. They had also complained that Polish companies were reluctant to cooperate. The Chevron deal is the first example of cooperation between a Polish firm and a foreign investor in the shale gas sector. Northern American firms would bring expertise in shale gas exploration, while local firms would contribute access to exploration licenses and can help speed up bureaucratic procedures. Poland, which seeks to anchor its energy strategy in coal and shale gas, with only limited emphasis on renewable, plans to invest EUR 12.5bn by 2020 in its shale gas sector.

weekly newsletter # 015 / 16th December 2013 / page 5

ENERGY & RESOURCES

GDF Suez acquires E.ON's district heating business in Poland France's GDF SUEZ, through its Cofely subsidiary, has acquired a 30% stake in district heating company MEC Koszalin from E.ON Sverige, the Swedish arm of German energy group E.ON. The transaction is part of a larger deal the two companies sealed earlier this year, under which GDF will take over all of E.ON's heat assets in Poland. The agreement, which enables GDF to enter the Polish district heating market, covers heat generation and network assets in the cities of Słupsk, Złotów, Koszalin, Ostrów Wielkopolski and Ustka that, according to GDF, have all undergone an in-depth restructuring resulting in efficiency levels which locate them among the best in class as compared to their Polish and EU peers. The deal price has not been disclosed. The acquisition, subject to municipalities agreements and antitrust authorities approvals, is expected to be closed by the end of 2013. E.ON Sverige (at the time operating under the Sydkraft brand) acquired the stake in MEC Koszalin back in 2011 for PLN 15m. The remaining shares in the business, which covers 57% of the town's heating needs, belongs to the Koszalin municipality. Last year MEC turned over PLN 57.4m and posted a gross profit of PLN 6.2m. The company is currently implementing a large-scale investment program worth PLN 26.4m, of which the European Union has contributed PLN 11.1m. As for E.ON Sverige, the Swedish company has decided to focus on the Nordic market.

In related news, Cofely GDF SUEZ has signed a 25 years public-private partnership contract with the Jagiellonian University in Kraków for modernization and maintenance of three students dormitories with sport facilities, in cooperation with Bouygues Construction. Signed in October, the contract is Cofely's first PPP in Poland. Cofely GDF SUEZ operates nearly 200 district heating and cooling systems worldwide, including the cities of Amsterdam, Barcelona, Lisbon, London, Monaco and Paris. The company has signed about 75 public-private partnerships in Europe to improve energy efficiency of high schools, public lighting, public buildings, and sports centers. Following the acquisition of Balfour Beatty Workplace in the United Kingdom and Emac in Brazil, the expansion in Poland is in line with the international development strategy of Cofely GDF SUEZ. GDF Suez's key Polish asset is the Połaniec power plant, located halfway between Kraków and Lublin. Sporting eight coal & biomass-fired units with a combined capacity of 1,800 MWe, the facility generates some 9.4 TWh per annum. In May 2013, GDF Suez and the Lublin-based coalminer LW Bogdanka signed a letter of intent regarding a joint feasibility study for a brand new power station in the Lublin area. Located in Łęczna near Lublin, where GDF Suez owns a suitable site, the 500 MWe coal-fire unit could go online by 2020 at an estimated cost of PLN 3.5bn. Bogdanka's key role in the project is to supply coal to the new facility, which will be situated only 15km from the mine. The scope of its participation in the development of the new power station is yet to be determined. The two parties are to first analyze the economic aspects of the project and terms of their cooperation. As an idea, the Łęczna project first surfaced over half a decade ago. Originally the investor had plans for a 800 MWe ultra super-critical

coal fired power plant, but the size of the project had to be reduced due to limited supply of water for cooling in the area. According to current projections, the facility will employ some 100 staff, once it is operational. With a staff of 138,200 globally, GDF SUEZ turned over EUR 82bn in 2012. Listed in Paris, Brussels, and Luxembourg, the company focuses on four key sectors: independent power production, liquefied natural gas, renewable energy and energy efficiency services.

ENERGY & RESOURCES

Power utility Energa's share price drops on first day of trading Poland's third largest power utility Energa saw its share price drop on 12 December - its first day of trading - after the government sold a 34.2% stake in the company for PLN 2.4bn. The shares fell as much as 10% and traded down 2.7% at PLN 16.55 as of 9:06 a.m. in Warsaw, valuing the Gdańsk-based utility at PLN 6.85bn. According to many observers, the sellers were mainly Energa employees, who had obtained shares in the company as part of a privatization bonus and who finally had the chance to exchange them into cash. Energa was the last state-owned Polish energy company to hit the bourse and its IPO was the biggest in central Europe since Polish coal producer Jastrzębska Spółka Węglowa's PLN 5.37bn sale in 2011. Over the last five years, Poland sold stakes in Energa's competitors including PGE, Tauron, Enea, and PAK, raising a total of PLN 12.9bn from their IPOs, according to data compiled by Bloomberg. So far this year the government has raised PLN 4.6bn from

weekly newsletter # 015 / 16th December 2013 / page 6

the sale of state-owned enterprises, falling short of its PLN 5bn target. Besides Energa, the Warsaw Stock Exchange has a seen a number of other major IPOs in recent weeks, including rail freight operator PKP Cargo, train maker Newag and developer Capital Park. Energa is one of Poland's leading vendors of clean energy, supplying more than a third of all renewable energy produced in the country. Earlier this year Energa, which operates the country's biggest hydroelectric plant in Wloclawek, bought 165 MW of wind farms from Denmark's Dong Energy and Spain's Iberdrola, raising its total renewable energy capacity to 508 MW, or 40% of its portfolio. Energa, which makes most of its profit from a regulated powerdistribution business, boosted nine-month earnings before interest, taxes, depreciation and amortization 13% to PLN 1.5bn. Net income rose 15% from a year earlier to PLN 610.8m.

deliver office space to tenants at the right location, time and standard," said Waldemar Olbryk, President of Skanska Property Poland. Over the past 12 months, Skanska Property Poland sold four office complexes with a combined GLA of almost 85,000 sq.m for approximately EUR 300m, including the twin-building Green Towers in Wrocław for EUR 64m, Nordea House and Green Corner in Warsaw (EUR 94.6m), Green Day in Wrocław (EUR 43.4m) and most recently, Atrium 1 in Warsaw for EUR 94m. The fact that the latter two projects are due to be completed in 2014 hadn't discouraged the buyers.

Preparatory work is underway at Rondo Daszyńskiego in Warsaw, where Skanska owns a very attractive piece of land between Prosta, Towarowa, Łucka and Wronia streets, right by a key intersection and a subway station. Referred to as the "Green Square" the project is to deliver 75,000 sq.m of office space as well as 25,000 sq.m of retail space according to initial plans. Details on this undertaking have not yet been made public, but demolition of buildings that currently occupy the site is well-advanced.

PROPERTY & CONSTRUCTION

Skanska Property Poland to buy four sites for new office office projects next year Following what Skanska Property Poland's representatives described as "the best 12 months in its history," the Swedish developer is determined to keep up the momentum. "In 2014 we aim to purchase four new land plots for office projects, at least one in Warsaw and three in regional cities. We are aware that only having the best sites purchased early enough will make it possible to

In Warsaw, the developer is currently finalizing work on Atrium 1, its flagship office project in the city centre, which the Swedes have recently sold to the German open-ended property fund Deka ImmobilienGlobal (see PT Business Review+ No. 011 page 5). Scheduled to reach completion in early 2014, Atrium 1 will offer 18,000 sq.m of leasable office and retail space. Currently the building is 75% leased, with Santander Group subsidiary BZ WBK as the key tenant. The 12-year contract for 12,200 sq.m signed in September 2013 was the largest lease agreement in Warsaw's Central Business District in recent years. Atrium 1 will house the new headquarters of BZ WBK along with the bank's flagship branch. The remaining space will be occupied by the property consultancy CBRE as well as the developer, Skanska Property Poland itself.

Skanska Property Poland's CEO Waldemar Olbryk. Photo: Skanska

Skanska Property Poland is very active in Poland's regional cities, with investments in Poznań, Łódź, Kraków, Wrocław and Katowice. Projects currently under construction by Skanska include Kapelanka 42 in Kraków (see PT Business Review+ No. 010 page 9), Dominikański in Wrocław (see PT Business Review+ No. 006 page 6), as well as Silesia Business Park in Katowice (see PT Busines Review+ No. 013 page 6).

The 2013 has been a good year for Skanska also in Hungary, in the Czech Republic and Romania. Their Green House office building in Budapest, which received Hungary’s first LEED Platinum certificate, is already 93% leased. Currently Skanska is working on two office projects in the Czech Republic’s capital: Riverview with a GLA of 7,000 sq.m already under construction, and Corso Court with 17,000 sq.m to start before year end. Skanska also made a debut in Romania, launching its first project – Green Court Bucharest - a three-phase complex with a total GLA of 52,000 sq.m.

weekly newsletter # 015 / 16th December 2013 / page 7

"I am greatly satisfied with our results in 2013, which prove that our business model is successful," commented Waldemar Olbryk, President of Skanska Property Poland. "We buy land in the best locations at the right time, we design comfortable, healthy and costefficient workplaces, and the general contractor of our office buildings is Skanska S.A. This way we deliver high quality at short deadlines – exactly what tenants and investors are looking for nowadays," Waldemar Olbryk added.

Its total GLA of 9,500 sq.m has been divided into seven stories, each offering 1,385 sq.m of office space. One of B4B's key assets is its location, as the office park is situated on Puszkarska St., close to the A4 motorway entrance and the main square of the neighboring Bonarka City Center shopping and entertainment center. There are 82 parking places in an underground garage as well as additional parking spots for visitors.

Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world’s leading project development and construction groups. The group currently has 57,000 employees in selected home markets in Europe, the U.S. and Latin America. Skanska's revenue in 2012 totaled EUR 15.2bn.

It's been a busy autumn in Poland for Hungary's TriGranit Development Corporation. Merely a few weeks after the launch of its massive mixed-use project Poznań City Center (see PT Business Review+ No. 009 page 9), the developer has completed phase one of its class-A office complex Bonarka for Business (B4B) in Kraków. The freshly-completed building D of B4B is equipped in all the standard class A amenities: suspended ceilings, raised floors, cabling, and modern A/C system.

DATA BOX: KRAKÓW OFFICE MARKET IN 1H 2013 • In June 2013, total prime stock in the second-largest office market in Poland stood at 605,000 sq.m. Only one small office building in Dekerta Street totaling around 1,800 sq m has been delivered since the beginning of the year. In H1 2013, Krakow’s absorption declined by more than 50% compared with the same period of 2012, which, however, owing to the low supply should not stir anxiety among investors. • Take-up remained high at close to 55,000 sq.m. The largest deal was Lufthansa’s lease of approx. 8,500 sq.m in building D of the Bonarka4Business complex..

PROPERTY & CONSTRUCTION

TriGranit completes phase one of Kraków office park, will build a further 30,000 sq.m

center, fitness club, canteen or the shopping mall," adds Tomasz Lisiecki.

Phase two of TriGranit's Bonarka 4 Business office park will deliver 30,000 sq.m in three buildings. Image: TriGranit

"Six months before the construction was finished, 92% of the building had been leased," said Tomasz Lisiecki, Chief Development Officer, TriGranit Development Corporation. The main tenant, which has taken up six floors or approximately 8,000 sq.m net in the building is Lufthansa Global Business Services, formerly operating as Airline Accounting Center. The other tenant is a kindergarten. "Our tenants appreciate the uniqueness of this investment, its convenient location, flexibility in arranging the interior space and all amenities located within the complex, such as a medical

• At the end of June 2013, there was 16,400 sq.m of vacant space, accounting for 2.7% of Krakow’s total stock, being its record high vacancy rate. Around 28,000 sq m is in the development pipeline to be completed by the end of this year. The largest schemes under construction include phase III of the Quattro Business Park (12,000 sq.m), developed by the Buma Group, and building D of the Bonarka4Business complex (8,700 sq.m), developed by TriGranit. • Despite the relatively low supply, rents remained stable. Asking rents stood at EUR 13–15/sq.m/month, with effective rents at EUR 12–13/sq.m/month. Source: Cushman & Wakefield

TriGranit and its partner IPR Group have already broken ground on phase two of B4B (buildings E, F, and G) of B4B. The three buildings will offer in total approximately 30,000 sq.m of modern office space.

weekly newsletter # 015 / 16th December 2013 / page 8

The developers will seek a BREEAM sustainable building certificate with a "very good" grade for the new part of the complex. The first of the three new buildings is to be delivered in Q1 2015. The leasing agent for B4B is Jones Lang LaSalle. IPR is a group of property development companies operating in Poland, Slovakia, Russia, Germany, and Cyprus that specialize in transforming post-industrial premises into modern property assets. With operations in nine CEE countries, a large portfolio of completed trophy assets, and a EUR 4bn pipeline of major mixed-use developments, as well as a number of public private partnership (PPP) investments, TriGranit is one of the leading fully integrated regional real estate investment, development, and management companies in the region. The Hungarian developer has invested more than EUR 1bn and completed in excess of 500,000 sq.m in Poland to-date. Their first project, opened seven years ago, was the Silesia City Center in Katowice, and four years later the company completed its residential project Oak Terraces in the city. In 2009 TriGranit launched the Bonarka City Center mixed use project in Kraków, which has since been expanded to include Bonarka 4 Business, a complex of four class A office buildings. In October, TriGranit completed the EUR 385m mixed use complex Poznań City Centre. With a gross building area of 140,000 sq.m, the investment comprises of a three level shopping centre with a leasable area of 58,000 sq.m with 230 shops and 35 bars, restaurants and cafes arranged into two large food courts. There is also a fully integrated transport hub, which includes a new train station built for the EURO 2012 soccer tournament, new bus station with 19 bays and a three-story car park for 1,500 cars. TriGranit's partners in this undertaking were Europa Capital, an international property fund, as well as Po-land's state-owned railways operator PKP, which contributed the site.

PROPERTY & CONSTRUCTION

Property investment investment volume to hit EUR 3bn and remain strong in 2014, says CBRE Experts at property consultancy CBRE expect this year's total investment transaction volume on the Polish commercial property market to exceed EUR 3bn - a very positive result that underscores the country's position as an important destination for investors. According to CBRE, the biggest challenge for the market in 2014 will be the limited supply of core assets (the best shopping centers, office buildings or warehouse properties in the largest cities). However, a number of large transactions sealed in recent months are likely to be concluded during the first or second quarter of 2014, further confirming the attractiveness and stability of the Polish market. Additionally, several notable office, retail and warehouse projects are to be put up for sale next year in Warsaw and large regional cities, which should be welcomed by funds operating on the market. "Following an increase in investor activity on the warehouse and logistics market in 2012, 2013 has confirmed strong demand in this segment. Yields have dropped to record levels, while the number of investors looking for warehouse schemes has increased. There are also new players coming to the market, mainly from the USA, who were not active in Poland before and who are investing mainly in this sector," said Przemysław Felicki, Associate Director, Capital Markets, CBRE in Poland.

The amazing growth of Poland's Business Process Outsourcing (BPO) sector has been the key driver of growth in the country's office property sector and the trend is expected to continue throughout 2014, according to experts at property consultancy CBRE. Poland has become a magnet for BPO and shared services centers due to its large pool of talents, competitive wages, availability of modern office space and strong academic centers in regional cities. Due to the rapid expansion of the sector worldwide, the sophistication and complexity of the services rendered in Poland's biggest office hubs is constantly increasing. Western companies looking to outsource their processes to Poland appreciate the country's proximity in terms of time zone and culture, which enables the country to effectively compete with Asia. As the sector expands, new BPO hotspots appear on the map, including cities like Lublin, Szczecin, Bydgoszcz, Rzeszów, Toruń and others. According to CBRE, in the past two years, leasing office space has become easier for tenants in most large Polish cities. This is mainly due to an increase in speculative office space under construction and the resulting growth in vacancy rates in most of the regional markets. This situation is creating an opportunity for many tenants to relocate and enjoy savings in leasing expenditure, says the consultancy. Rents for prime office space in Warsaw are at around 25-26 EUR/sq.m/month while in non-central Warsaw and in the biggest regional cities of Poland they stand at 10 16 EUR/sq.m/month. The total stock of modern office space in the whole of Poland now amounts to 6.8m sq.m. "In the first three quarters of 2013, there was around 791,000 sq.m of office space leased throughout Poland's nine biggest agglomerations in Poland – that is 7% more than in the corresponding period of last year. We are seeing that companies from the BPO / SSC sec-

weekly newsletter # 015 / 16th December 2013 / page 9

tor are increasingly often drawn to smaller cities. However, new destinations pose little competition for the established locations. On the contrary, the processes managed in the biggest BPO destinations are gaining in complexity, while the basic processes are transferred to the smaller cities," says Konrad Heidinger, Consultant, Research & Consultancy Department, at CBRE in Poland.

IT & TELECOM

New MVNO player Mobile Vikings launches in Poland After many spectacular flops in Poland, one might think that the Mobile Virtual Network Operator (MVNO) formula simply wasn't meant for Poland's price-conscious market, but every year there's a bold new player that tries to convince us otherwise. The latest newcomer is Belgium's Mobile Vikings which launched operations in Poland on 4th December, following a successful start in Belgium and the Netherlands, aiming to attract some 100,000 clients in two years. Considering that the existing Polish MVNO's hold a 1.5% share in the market with their estimated 800,000 SIM cards, the Vikings seem like a rather conservative bunch. As far as their marketing strategy is concerned, the company seeks to establish a community of early adopters and innovators, who would spread the "Viking philosophy" further. Since Mobile Vikings are starting with a team of 10 employees at their Polish office in WrocĹ&#x201A;aw, the community will be key to enabling the business reach a momentum. As far as their product is concerned, Mobile Vikings will rely on infrastructure provided by P4 (Play) and their focus will

be on data. The Polish Vikings will have the choice between PLN 29 and PLN 19 bundles and a PLN 8 Play Viking bundle for free calls between the 10m Play users.

MVNOs represent 2% of the market Mobile operators in Poland, market shares as of Q2'13*

with its members. Their business model is substantially different from all other operators: almost no marketing budget, no stores and no salesmen. According to the company, 78% of all new members find their way to Mobile Vikings through recommendation by other Vikings. Despite the fact the Mobile Vikings offer is prepaid based only, its members are one of the most loyal telecom customer groups worldwide.

Orange 27% T-Mobile 29%

Plus 25%

Other 2%

Play 18%

Source: Telepolis *) based on SIM card numbers

"The 10 initial employees will be working, among other things, on marketing, R&D and at the helpdesk. Play is our local telecom partner. And they're not just any telecom company: they grew from 0 to over 10m users in just five years. This means Play is the fastestgrowing Mobile Network Operator in the world, innovative and ambitious, just like us. Besides, the Polish telecom market quite volatile. A strong partner, together with our focus on the data market as USP, should help us secure our place in this large but difficult market," says CEO Frank Bekkers. The Mobile Vikings concept was launched in Belgium in January 2009 and over the following four years it attracted more than 150.000 members. The company claims to be the very first community-driven operator worldwide, focusing on building a strong relationship

Mobile Vikings' CEO Frank Bekkers in full press conference gear.

Photo: Mobile Vikings

Poland Today talks to: Frank Bekkers, CEO of Mobile Vikings â&#x20AC;˘ PT: So far, most MVNO projects in Poland have been failures. What makes you believe Mobile Vikings will do any better? Frank Bekkers: Unlike any other provider, we focus on our community. Our Vikings are always the center of our attention. Not making profit, but building a strong relationship with our members is crucial. On top of this, we offer a competitive product with a strong focus on mobile data and a good service.

weekly newsletter # 015 / 16th December 2013 / page 10

• PT: Poland does not seem like the most obvious choice after the Benelux. Why Poland? FB: Poland has a large and very young population, the use of mobile data is very high and there is a large prepaid market. • PT: And how did you end up in Wrocław? FB: We've chosen this location together with our Polish project manager. Wrocław is a city with a lot of students and fits perfectly with the philosophy of Mobile Vikings. • PT: Although you say the Vikings are not all about profit, you must have some business targets. What are they for Poland? FB: We're expecting as slow growth since we'll be relying mainly on our member-gets-member principle, which rewards existing users with free top-ups for recruiting new Vikings. With a limited marketing budget and a strong focus on service it will take some time before this formula catches on. We prefer a strong community base rather than a rapid growth. • PT: Mobile Vikings attracted 150,000 users in Belgium in four years. Do you consider this a success? FB: We now have over 180,000 active users in Belgium. Our goal is to have 2% of the market, the global market that is. We are not planning to become the largest provider in Belgium. In this respect, I think we are doing a very good job. Moreover, we managed to create a strong and loyal community in Belgium. • PT: Is this business profitable? FB: Mobile Vikings are profitable, but we've chosen to invest our profits in new and innovative projects such as Citylife, a free mobile app that enables users to discover what's happening nearby, explore the cities around them and share discoveries and experiences with friends. For now, it can be used only in Belgium.

CONSUMER GOODS & RETAIL

KDWT and Kolporter, two major Polish FMCG distributors join join forces Poland's leading FMCG distributor, the Warsaw-listed Eurocash, is joining forces with another major player in the sector, the Kielce-based Kolporter. Eurocash's subsidiary KDWT, which is Poland's top distributor of tobacco products, will work together with Kolporter to distribute tobacco products, foodstuffs, drinks and other FMCG goods. Kolporter will have a 25% plus one share stake in the Eurocash subsidiary. The merging entities generated PLN 4.6bn in aggregate revenue in 2012. Under an investment agreement that the two companies signed in early December, Kolporter will acquire 25% plus one share in KDWT in exchange for 100% of shares in a newly established company, to which Kolporter will transfer an organized part of its business comprising operations in distribution of tobacco products, foodstuffs and other FMCG products (Kolporter Departament Dystrybucji FMCG). The agreement will enter into force after the fulfillment of certain conditions, in particular after consent has been obtained from banks and Poland's competition regulator.

bution of FMCG goods and the principal partner for traditional stores and retailers throughout Poland," says Luis Amaral, CEO of Eurocash. A 100% subsidiary of Eurocash, KDWT is the domestic leader in active distribution of tobacco products. Its product range covers cigarettes and other tobacco goods, coffee, tea, confectionaries, batteries, telephone cards and non-prescription medicines. KDWT has over 140 branches, many of them at Eurocash Cash&Carry wholesale locations, together with two distribution centers. In 2012, KDWT generated PLN 2.6bn in external sales. The Eurocash Group, which besides KDTW includes also cash & carry warehouses, turned over PLN 16.6bn last year and posted net earnings of PLN 250m. Its workforce includes more than 12,000 people..

Tobacco is a shrinking business Legal cigarette sales in Poland, in bn units 70 65 60 55 50 45 40 2007

2008

2009

Source: Cyberserwis, Euromonitor

"The agreement with Kolporter will enable us to combine the potential of two leading players in the fragmented and competitive tobacco products distribution market. This is in line with our strategy, which assumes industry consolidation and a strengthening of Eurocash's position as the leader in wholesale distri-

2010

2011

2012

*2015

*) projected

"Through its unit Departament Dystrybucji FMCG, Kolporter provides comprehensive service to individual points of sale and retail chains throughout Poland. Its product portfolio includes tobacco goods, telephone cards, bus and metro tickets, impulse food

weekly newsletter # 015 / 16th December 2013 / page 11

goods, batteries and non-prescription medicines. It also has an extensive private-label range (confectionery, energy and isotonic drinks, and food products). In 2012, Kolporter's FMCG distribution unit generated PLN 2.0bn in revenue, slightly less than a half of the Kielce-based group's total turnover. Kolporter's net earnings topped PLN 24m last year. The company employed some 1,100 as of end of 2012. "For Kolporter, the investment agreement with Eurocash and KDWT does not mean an exit from the distribution business, but rather the possibility to participate in the creation of an undisputed market leader in the distribution of tobacco and other impulse products," comments Krzysztof Klicki, founder, CEO and majority shareholder in Kolporter. The KDTW & Eurocash merger should be viewed in the context of a recent announcement by British American Tobacco (BAT), one of Poland's top three tobacco producers, which decided to distribute its products directly to sales points, bypassing third-party wholesalers and distributors. According to the company, its new distribution model is to create some 700 jobs with BAT and its logistics partners, but it also deals a heavy blow to wholesalers such as KDTW. There are an estimated 9m smokers in the country but cigarettes sales have been shrinking steadily over the past years. Tobacco products are being retailed at an estimated 120,000 points of sale throughout Poland. With excise on cigarettes to go up by another 5% next year, a pack of cheapest smokes may soon cost more than PLN 12.4, up from some 11.4 at the moment. Tobacco producers argue that every rise in taxation (in the case of cigarettes VAT and excise already represent approximately 81% of the retail price) strengthens the shadow economy. Illegal cigarettes and tobacco are said to have totaled 15% of total sales or approximately PLN 6bn last year.

CONSUMER GOODS & RETAIL

Ghelamco gets permit for its first retail project in Warsaw Flemish developer Ghelamco has received a building permit for its planned Plac Vogla neighborhood shopping centre project in Warsaw's Wilanów district. The scheme will be the company's first retail development. Construction on the Plac Vogla investment is scheduled to launch next year and take approximately seven months. The facility is expected to deliver almost 11,000 sq.m of retail space and house around 50 tenants. To date best known in Poland for its numerous office projects in Warsaw, Ghelamco has recently announced it is also going to develop a number of medium-sized retail schemes in the country in the upcoming years (see PT Business Review+ No. 011 page 9). Besides Plac Vogla, the Belgians have recently unveiled plans for another two neighborhood shopping centers in the greater Warsaw area (in the Piaseczno and Łomianki suburbs) that will respectively comprise 11,500 sq.m and 7,000 sq.m of space and house 60 and 30 retailers. Jeroen van der Toolen, managing director, Central and Eastern Europe, at Ghelamco, has recently told Poland Today that his company believes there is a shortage of medium-sized neighborhood centers in the Polish market and that it would like to fill that niche. Ghelamco is currently considering the acquisition of another site in Warsaw, as well as another site near the Polish capital for its future neighborhood shopping centre projects, van der Toolen said.

Over the past 22 years Ghelamco has developed nearly 0.5m sq.m of offices and warehouses in Poland. In mid-November, the company started construction of the aboveground section of the main 220-metre office tower of their flagship office project Warsaw Spire's, which will reach its maximum height by the end of 2014. The BREEAM-certified project will include three office buildings (the main tower plus two 55mtall buildings) with a combined office space of 100,000 sq.m. and an underground parking lot for 1,200 vehicles.

Plac Vogla is one of several retail projects to be developed in Warsaw's Wilanów district in the coming Image: Ghelamco years.

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).

weekly newsletter # 015 / 16th December 2013 / page 12

CONSUMER GOODS & RETAIL

New shopping centre completions to reach 0.5m sq.m in 2014

ter, Poznan (58,000 sqm) and Galeria Katowicka, Katowice (53,000 sqm) in Poland. In the Czech Republic Galerie Santovka (46,000 sqm) opened in Olomouc, in Hungary Árkád Center - 2nd phase (20,000 sqm) and CET (12,000 sqm) opened in Budapest.

Two-thirds of CEE's retail space Existing shopping centre space in CEE, December 2013

More than 0.5m sq.m of new retail space will be delivered to the Polish market in 2014, according to preliminary estimates by global property consultants Cushman & Wakefield (C&W), further confirming the country's position as a regional leader. In H1 2013 some 190,000 sq.m of new shopping centre stock was delivered in Central European countries (Poland, Czech Republic, Hungary and Slovakia) with Poland accounting for 126,000 sq.m of the total. The largest new schemes opened in the first half of 2013 are Galeria Solna (30,000 sq.m) and Europa Centralna (27,000) in Poland. A total of 1.8m sq.m of new shopping centre space was added to the European market in the same period, according to C&W's latest European Shopping Centre Development report. "We believe there is still new development potential in Central Europe. The focus today is on natural gaps within certain cities, but more importantly on the optimization of existing centers. We see the markets as developing naturally and converging to Western numbers at a reasonable pace," says Jonathan Hallett, Managing Partner CE at C&W. C&W expects the new supply in CE to reach additional 540,000 sq.m of GLA in the second half of the year 2013, which is due to the Christmas season generally more popular for opening shopping schemes. For the whole of 2013 C&W expects the supply to reach 730,000 sq.m of GLA. The largest schemes delivered in the second half of 2013 are as follows: Galeria Bronowice, Kraków (60,000 sqm), Poznań City Cen-

Slovakia 9%

Hungary 10%

Poland 65%

Czech Republic 16%

Looking forward to 2014, there are already 171 new schemes and 65 extensions due to be delivered across Europe, with the pipeline volume estimated at 6.2m sq.m of GLA. Developers revealed plans for opening of 30 new schemes in Central Europe in 2014. Together with extensions of existing schemes there are approx. 760,000 sq.m in the pipeline for 2014 in the region. According to preliminary forecasts 2014 will see the opening of 25 shopping centers in Poland totaling 520,000 sq.m GLA, including six extensions (110,000 sq.m GLA). Provision of shopping centers in 2014 is expected to remain at a similar level, with the strongest development activity to be noted in big cities such as Łódź (Sukcesja), Lublin (Atrium Felicity, Zamkowe Tarasy), Białystok (Galeria Jurowiecka) and mediumsize cities: Olsztyn (Galeria Warmińska), Kalisz (Galeria Amber), Siedlce (Galeria S), Galeria Sudecka (Jelenia Góra), Galeria Bursztynowa (Ostrołęka), Galeria Neptun (Starogard Gdański).

Source: Cushman & Wakefield

"Poland's shopping centers market in 2013 has continued to enjoy dynamic development. Approx. 500,000 sq.m of GLA has been delivered to the market in newly built or extended schemes, mainly in large conurbations. Key openings included: Galeria Bronowice Kraków, Poznań City Center, Galeria Katowicka, Riviera Gdynia, Trzy Korony Nowy Sącz and Galeria Solna Inowrocław," said Piotr Kaszyński, Partner, Head of Retail Agency at C&W in Poland. The EU-27 average of shopping centre stock is 262 sq.m per 1,000 inhabitants while the CE average is 209 sq.m per 1,000 inhabitants. The most saturated market is Poland with 225 sq.m of shopping centre stock per 1,000 inhabitants, overtaking Slovakia, thanks to high activity in 2013. Hungary is significantly undersaturated with only 136 sqm of shopping centre stock per 1,000 inhabitants while the Czech Republic stands at 210 sq.m/1,000 population.

HEALTHCARE

Bupa subsidiary Lux Med acquires leading orthopedic hospital Poland's leading private provider of out-patient healthcare Lux Med has completed the first major takeover since it became part of the UK-based giant Bupa. The company has acquired an 80.9% stake in Sport Medica, the owner of a Warsaw-based hospital Carolina Medical Center. The terms of the deal remain undisclosed. Established in 1998, Carolina Medical Center is one of Poland's top providers of orthopedic treatments and sports medicine, which are seen as two of the most lu-

weekly newsletter # 015 / 16th December 2013 / page 13

crative services in the healthcare sector. The center has a highly specialized diagnostic center, hospital with 36 beds, trauma unit and a rehabilitation centre. Fee-for-service payments represent more than 90% of its revenues. According to estimates, some PLN 12.5bn will be spent on private medical therapies and surgeries this year in Poland, as the waiting times for certain procedures at state-run hospitals often take months or even years. With 143 clinics across Poland, Lux Med is the biggest provider of medical services in the country. UK's Bupa acquired Lux Med in April from private equity fund Mid Europa Partners for EUR 400m, outbidding private equity competitors EQT, Bridgepoint, and BC Partners, in what was one of the region's largest M&A transactions in recent years. In 2011, Lux Med recorded revenues of PLN 700m, while its EBITDA came in at PLN 115m. Lux Med made Bupa the number one player in Poland's private healthcare funding and provision markets, adding one million new customers to Bupaâ&#x20AC;&#x2122;s international portfolio. In healthcare funding, Lux Med is Poland's market leader in medical subscriptions, a corporate product offering employees rapid access to outpatient services. In provision, Lux Med has a national network of outpatient clinics and diagnostic centers, as well as a day hospital and a large nursing and residential care home in Warsaw. For Bupa, which operates mainly in the UK, Spain, Australia, New Zealand and the United States, Poland represents one of the most attractive markets in Central and Eastern Europe due to the size of its population, rising levels of disposable income and long-term growth potential. Spending on healthcare is increasing and the private healthcare market is forecast to grow by 10% per annum until 2016, according to PwC. The OECD estimates total health spending in Poland at 7% of GDP, compared to 9.6% in the UK, and 17.6% in the

USA. Bupa employs some 52,000 people, and handles approximately 10.8m patients a year. Its consolidated revenues came to approx. PLN 41.4bn and profit before tax totaled PLN 2.9bn in 2011.

er said. The survey "indicates strong optimism of employers in Poland and the highest net employment forecast in two years, at 9%, which is the highest result among EU states," Manpower said.

Besides Bupa, the only major international health care player in Poland is Medicover. A few months ago the Czech private equity company Penta Investments acquired the Warsaw-listed EMC Instytut Medyczny and confirmed its plans for further healthcare investments in Poland. Other private local chains (Enel-Med, Swissmed, Polmed) will sooner or later have to group together or find strong foreign backers in order to play an important role in consolidation and privatization of the sector. A growing number of local and regional hospitals are seeking private operators, but they represent an attractive opportunity only to cash rich investors. It does seem like in a couple of years the market will be divided between a handful of major chains, integrating outpatient, diagnostic, and hospital services. The acquisition of Carolina Medical Center by Lux Med is a part of this trend.

"At ManpowerGroup we've observed signs of gradual recovery in the labor market for a few quarters. But the growing optimism that Polish employers report for the first three months of 2014 we haven't seen for over two years," commented Iwona Janas, Country Manager ManpowerGroup in Poland. "Employers sense that the business climate is improving and they appear ready to begin rebuilding their teams. In fact, hiring intentions in our country have now gradually improved from negative levels for three consecutive quarters. As a result, Polish employers are reporting the most optimistic first - quarter hiring intentions among all European Union countries. This is encouraging news."

POLITICS & ECONOMY

Polish companies are back in hiring mode, says Manpower Although it can hardly be inferred from the unemployment updates published monthly by Poland's statistical office GUS, things are looking up for the country's labor market, according to a new report by recruitment consultancy Manpower. The country's seasonally adjusted net employment outlook is seen at a positive 9% in Q1 2014, the highest net forecast since Q4 2011, with 13% of employers surveyed planning a headcount increase and 9% predicting a cut, Manpow-

In sector terms, the most positive employment forecasts are expressed by companies from transport/logistics/communications as well as manufacturing, hospitality, retail trade and distribution. On the flip side, negative employment forecasts come from energy/gas/water supplies sector as well as public sector institutions. 72% of 756 employers surveyed plan no change in headcount. The non-adjusted net employment forecast for Poland reached 4%, the survey showed. "We note also that employers are becoming more interested in flexible workforce solutions and outsourcing of processes and functions. This is an advantage, because the job market remains fragile and is constantly changing, and innovative processes increase the efficiency of companies during uncertain market activity and has positive influence for many aspects of Polandâ&#x20AC;&#x2122;s labor market," adds Iwona Janas.

weekly newsletter # 015 / 16th December 2013 / page 14

KEY STATISTICS Consumer Prices Prices

+0.1 +3.6

+0.1

Clothing, shoes

-4.8

-2.7

-4.7 +0.7

-4.8 +3.5

-4.9

-0.2

Housing

+2.0

+0.1

+1.8

+1.8 +0.2

+1.8

+0.1

-1.4

+0.5

-1.4 +0.8

-2.3

-1.0

-2.3

-1.2

Communications -9.7

0.0

-9.7

-7.2 +2.8

-11.7

-4.9

Transport

Gross CPI

+1.1

-0.3

+0.1

0.0

y/y

m/m

Jun '13

+1.0 +0.1 +0.8 +0.2 +0.6 -0.2

Jul '13

Aug '13 Sep '13 Oct '13

m/m (%)

+1.5

+3.8

-0.7

-0.9

y/y (%)

+1.8

+4.3

+3.4

+3.9

+3.2

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

y/y (%) Nov 13

+1.9 +0.3

Sep 13

+0.2 +3.7 +0.2 +3.6

-0.1

Jul 13

+1.9

May 13

Alcohol, tobacco +3.6

0.0

Mar 13

-1.2 +2.6

Jan 13

2.5

Nov 12

Food & bev

Month

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

Sep 12

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

Retail Turnover

Jul 12

Nov '13

May 12

Oct '13

Mar 12

Sep '13

Jan 12

Sector

Inflation

Aug '13

Nov 11

Data in (%)

Residential Construction Dwellings

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

+3.6

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

706.7

-3.3

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

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

2006 +3.2

-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

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

138 6,290

143 6,061 138

Manufacturing

3,522

154

3,491

152 3,560

155 3,625 158

Energy

6,535

198 6,196

188 5,828

177

152 3,693

157 3,766 160

Construction

3,829

163 3,556

Retail & repairs

3,365

143 3,432 146

Transportation

3,816

135 3,439

IT, telecoms

6,379

Financial sector 6,044 National average 3,878

6,021 183

3,421

146 3,408 145

122 3,547

125 3,589 127

166 6,685

174 6,707

174 6,654 173

136 6,356

143 6,702

151 6,109 137

154

3,741 149

Source: Central Statistical Office (GUS)

3,613

144 3,652 145

-2.0%

395,657

-2.3%

Q1 2013

+0.5%

377,815

-3.1%

Q4 2012

+0.7%

442,231

-3.5% -3.5% -4.9%

Sentiment Indicators

2010

+3.9%

1,416,585

-5.1%

Economic sentiment and consumer confidence indicators

2009

+1.6%

1,344,384

-3.9%

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

120

Key Economic Data & Projections

100

Indicator

-20

GDP change

+3.9% +4.5%

+1.9%

+1.5%

+3.1%

Consumer inflation

+2.6% +4.3%

+3.7%

+0.9%

+1.8%

Producer inflation

+2.1% +7.6%

+3.4%

-1.2%

0.7%

CA balance, % of GDP

-5.1%

-4.9%

-3.5%

-1.5%

-0.4%

Nominal gross wage

+3.9%

+5.2%

+3.7%

+3.2%

+4.4%

Unemployment**

12.4%

12.5%

13.4%

13.5%

12.7%

3.99

4.12

4.19

4.20

4.06

-40

60 No v 1 3

192 6,060

404,310

+0.8%

1,522,736

Aug 13

A 8,427

+1.9%

Q2 2013

1,462,734

M ay 1 3

Q3 2013

+1.9%

Feb 13

Q2 2013

Current account def. in % of GDP

+4.5%

N ov 12

Q1 2013

GDP in PLN bn current prices

2011

Aug 1 2

Q4 2012

Growth y/y unadjusted

131.7

2012

M ay 12

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

Coal mining

+7.9

Source: The Central Statistical Office of Poland, GUS

Gross Wages Sector

m/m (%)

Feb 1 2

y/y (%)

-1.9

-0.2

Period

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

N ov 11

Year

-0.1

Month

Aug 1 1

y/y (%)

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

May 11

m/m (%)

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

Construction Output

Construction Prices Price s Month

Month

Feb 1 1

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

EUR/PLN

*2010

*2011

*2012

2013

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

2014

weekly newsletter # 015 / 16th December 2013 / page 15

56.08 ↓

100 SEK

46.17 ↓

100 NOK

49.19 ↓

10,000 JPY 10,000 HUF

400

USD EUR 350

300

293.97 ↓ 15.22 ↓

100 CZK

137.95 ↓

Money Supply in PLN m Monetary base M1 - Currency outside banks M2

WIG-20 stocks Price Change Change in alphabetical 13 Dec 6 Dec end of order '13 '13 '12

WIG Total index

May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 5.3%

5.0%

4.7%

4.6%

4.5%

PLN (up to 5 y )

5.7%

5.4%

PLN (over 5 y)

5.6%

5.3%

5.1%

4.9%

4.8%

PLN (total)

5.6%

5.3%

5.0%

↓ Bogdanka

4.9%

4.8%

↓ BZ WBK

EUR (up to 1m EUR) 2.3%

1.9%

2.3%

EUR (over 1m EUR) 3.2%

2.9%

3.5%

1.9%

1.8%

2.0%

↓ Eurocash

3.5%

3.2%

2.5%

↓ Grupa Lotos

↓ Asseco Pol.

Warsaw Inter Bank Offered Rate (WIBOR) as of 13 Dec 2013 Overnight

1 week

1 month

3 months

6 months

2.59%%

2.58%

2.60%

2.65%

2.70%

Jul '13

Aug '13

Sep '13

Oct '13

Reference

155,767

153,867

166,620

154,967

2.50%

530,666 112,565 921,662

531,124

540,873

114,083

113,223

928,359

931,042

536,237 113,174 935,095

- Time deposits

405,900

412,407 405,703

414,941

945,077

949,988

955,419

947,228

- Net foreign assets 159,749 154,035 147,978 150,517 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

-4%

+5%

134.5

-1%

383

-2%

+58% +6% -11%

↓ GTC

7.9

-5%

-20%

↓ Handlowy

113

-2%

+15%

2,4 2,429. 29.67

WIG-20 blue chip index

60.5

-3%

-35%

Change 1 week

-2% ↓

↓ Kernel

36.85

-8%

-45%

Change end of '12

-6% ↓

↑ KGHM

114.95

+2%

-40%

4.00%

1.00%

2.75%

↓ mBank

505.35

-2%

+55%

↓ Pekao

178.05

-3%

+6%

16.89

-3%

-7%

5.21

-8%

↓ PKN Orlen

44.31

-2%

-10%

↓ PKO BP

39.26

-1%

+6%

455.85

+4%

Credit

↓ PGE

The financial sector's net lending in PLN bn,

↓ PGNiG

Jul '13

Aug '13

Sep '13

Oct '13

896,635

901,863

908,106

901,288

→ PZU

- to private companies

261,000

263,491

262,963

559,965

↓ Synthos

5.09

-2%

-6%

- to households

552,503

556,027

560,608

260,585

↓ Tauron

4.58

-5%

-4%

Total assets of banks

1,616,221

1,627,182 1,626,489

1,612,836

↓ TP SA

9.59

-6%

-22%

Source: Central Bank NBP

+9% ↑

-1%

Rediscount

Loans to customers

-2% ↓

Change end of '12

-2%

NBP deposit

Type of loan

Change 1 week

46.4

Lombard

loan stock at the end of period

51,761. 61.82

36.68

↓ JSW

Central Bank (NBP) Base Rates

47.6

WIG Total closing index last three months 56000 55000 54000 53000 52000 51000 50000 49000 48000 13 Dec 13

100 DKK

as of 13 December 2013

21 Nov 13

342.28 ↓

13 Dec 13

497.08 ↓

100 CHF

4 Oct 13

100 GBP

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations PLN (up to 1 year)

29 Jul 13

418.44 ↓

21 May 13

100 EUR

Key indices

Term / currency

450

11 Mar 13

304.32 ↓

2 Jan 13

100 USD

Stock Exchange

Average weighted annual interest rates

4 Oct 13

as of 13 December 2013

Interest rates

28 Oct 13

100 USD/EUR against PLN

Central Bank average rates

12 Sep 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-Sep 2013

y/y (%)

share (%)

2012

IMPORTS in PLN bn share (%)

Jan-Sep 2013

y/y (%)

share (%)

2012

share (%)

EXPORTS in PLNbn JanNo Country Oct share 2013

*2012

Share No

IMPORTS in PLN bn JanCountry Oct share *2012 2013

49,806

+9.4

10.6

61,694

10.3

34,538

+4.5

7.3

44,287

6.9

1 Germany

133,127 25.0% 150,046 25.1%

1 Germany

Beverages and tobacco

6,405

+6.7

1.4

7,967

1.3

2,995

+1.2

0.6

3,989

0.6

2 UK

34,789

6.5%

40,184

2 Russia

66,670 12.4%

Crude materials except fuels

11,947

+9.9

2.5

14,024

2.4

15,917

-7.4

3.4

22,053

3.5

3 Czech Rep.

32,706

6.1%

37,475 6.3%

3 China

50,619 9.4% 57,235 9.0%

4 Italy

27,799

5.2% 32,782

5 France

20,573

3.8% 25,303 4.0%

Food and live animals

6.7%

115,531 21.5% 134,933 21.1% 91,033 14.3%

22,200

+0.7

4.7

29,389

4.9

55,502

-11.7

11.6

85,280

13.4

4 France

30,127

5.7%

34,862

1,267

+46.7

0.3

1,342

0.2

1,955

-9.4

0.4

2,887

0.5

5 Russia

28,841

5.4%

32,290 5.4%

Chemical products

43,903

+7.0

9.3

54,295

9.1

69,490

+1.9

14.6

89,140

14.0

6 Italy

22,997

4.3% 29,067 4.9%

6 Netherlands

20,271

3.8% 24,543

Manufactured goods by material

97,528

+1.0

20.7

126,161

21.1

82,985

-3.2

17.5

110,773

17.4

7 Netherlands

20,950

3.9%

7 Czech Rep.

19,660

3.7% 23,327

3.7%

Machinery, transport equip.

176,544

+5.0

37.5

223,646

37.5

156,992

+2.4

33.1

203,718

31.9

8 Ukraine

15,017

2.8%