Poland Today Business Review+ No. 052 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. 052 / 15th September 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

President Bronisław Komorowski accepted Tusk's resignation last week.

MANUFACTURING & PROCESSING Finnish wiring systems maker PKC Group to close down Sosnowiec plant, sack 500 staff page 2

PROPERTY & CONSTRUCTION HP's shared services unit books 16,400 sq.m at Skanska's new office project in Wrocław page 8

ENERGY & RESOURCES Lotos shareholders approve PLN 1bn equity boost page 2

France's Yareal to build 400 apartments in new Warsaw project page 9

Australian investor begins prefeasibility study for new coalmine near Lublin page 3

RETAIL PROPERTIES Immofinanz opens third STOP.SHOP. retail park in Poland page 10

Energy stocks plunge as government mulls news ways to save Poland's coal industry page 4

Warsaw awaiting new retail developments page 11

Gazprom reduces gas deliveries to Poland amid Ukraine row page 5

POLITICS & ECONOMY Government data and recruiters confirm upturn in employment page 12

Photo: M.Smiarowski/KPRM

Poland awaits new cabinet as PM Tusk steps down after seven years in power

Donald Tusk, Poland's longest serving Prime Minister after 1989, resigned last week, paving the way for him to take over as European Council president in December. He is to be succeeded by Ewa Kopacz, the current parliamentary speaker and an unwavering Tusk ally. Ms. Kopacz, Poland's second ever female PM, is facing a tough challenge of leading the ruling centre-right party PO to victory in next year's general election. page 11

tel. +48 881 650 600

Polish electrowaste recycler acquires Turkish peer page 6 HOSPITALITY New Ibis hotel to open near Poznań in 2016 page 6 TRANSPORT & LOGISTICS Prologis adds 55,400 sq.m in Warsaw to its Polish portfolio page 7

KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 13-15

Conference: New technologies â&#x20AC;&#x201C; new horizons. II International Innovation Forum in Gliwice Friday, 19th September 2014, Silesian University of Technology, Faculty of Architecture, Strzody 10

Zygmunt Frankiewicz, the Mayor of Gliwice, is pleased to invite you to the 2nd International Innovation Forum in Gliwice. Representatives from the public sector, business and education will have an opportunity to exchange their experiences in economic stimulation through innovation. Experts from Poland and abroad will discuss how to stimulate human potential in order to improve the business environment.

Host & organizer

Registration till 15.09.2014 on www.prospectsinpoland.com

Co-organizer

Main media partner

Partners

Honorary patronage

Media partners

weekly newsletter # 052 / 15th September 2014 / page 2

MANUFACTURING & PROCESSING

Finnish wiring systems maker PKC Group to close down Sosnowiec plant, sack 500 staff Finnish wiring harness maker PKC Group will close down its factories in Sosnowiec (Poland) and Haapsalu (Estonia), as part of its development program in Europe and South America, resulting in 900 redundancies, the company announced. PKC is anticipating a change in purchasing behavior resulting from consolidation of customers, which, according to the company requires a new production structure and model in the two regions.

"At the moment Starachowice is important part of our footprint and we don’t have any other plans for it. A company's responsibility is to take care of competitiveness and that's why PKC is always monitoring its factory network to remain competitive in our field. Both factories of PKC Group Poland are located in special economic zones. Any long-term commitments have been fulfilled either prior to the acquisition of these manufacturing units or thru PKC after their acquisitions," says Mr. Seppä.

existing shareholders, who will hold pre-emptive rights to acquire the shares. The main shareholder in Lotos in the Treasury Ministry, which controls the company through a 53.2% stake. The Polish state is prepared to buy some of the new shares released by Lotos in the new share issue, Deputy Treasury Minister Rafal Baniak said last week in a statement. Although Baniak did not specify how many shares the state will acquire, market insiders expect the state to buy enough shares to retain control of Lotos.

PKC Group designs and produces electrical distribution systems, electronics and related architecture components for the commercial vehicle industry and other selected segments. With a global turnover of EUR 884m in 2013, PKC has production facilities in Brazil, China, Estonia, Finland, Germany, Lithuania, Mexico, Poland, Russia, Serbia and the USA.

Lotos Group's key financials Revenues in PLN bn, left axis Net r esult in P LNm, right axis 36

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750

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In Europe, PKC will consolidate production at its sites in Serbia and Lithuania. "The objective is that by the end of 2016, more than half of Europe's production capacity is in these factories," an official communiqué said. The Sosnowiec and Haapsalu units are to be shut down. A similar fate awaites PKC's Itajuba factory in Brazil, which will be closed down by year's end and its 500 staff laid off. The factory closures as well as the planned streamlining of overlapping functions across Europe and South America are to result in EUR 1214m annual cost savings when completed. "PKC’s development program and the resulting rampdown of the Sosnowiec factory affects approx. 500 positions within the next five months," Timo Seppä, Vice President of Operations, Europe, tells Poland Today. Besides the Sosnowiec unit, located in the Katowice special economic zone, PKC has a factory in Starachowice.

ENERGY & RESOURCES

Lotos shareholders approve PLN 1bn equity boost The shareholders of Poland's second-largest oil refiner Grupa Lotos have approved a share issue worth about PLN 1bn, which the company to finance more oil and gas production. "The proceeds will be used to finance the Company’s strategy, which envisages further investments to increase the Gdańsk refinery's complexity and step up hydrocarbon production," Lotos said. In line with its strategy until 2015, Lotos intends to increase its production to 1.2m tonnes of crude oil per annum. As part of the approved share capital increase, Grupa Lotos will offer PLN 55m new ordinary shares to its

-250

-500 20 06

200 7 200 8 20 09

20 10

2011

20 12

20 13

Source: Grupa Lotos

Through its subsidiaries (Lotos Petrobaltic S.A., Lotos Exploration and Production Norge AS, and AB Lotos Geonafta), it also operates in the Baltic Sea, the North Sea and the Norwegian Sea, as well as in Lithuania, where it is involved in exploration for and production of natural gas and crude oil from onshore and offshore fields. Lotos is the second largest producer of hydrocarbons in Poland, and the only Polish operator extracting crude oil and natural gas from offshore deposits in the Baltic Sea. It is also the largest crude oil producer in Lithuania. The company produced 146,000 tonnes of oil and 16m cb.m of gas from its Baltic fields last year but now wants to boost output of both over the coming three years. In addition to scaling up production from its ex-

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isting facilities, the company plans to launch production of 250,000 tons of oil a year from the B8 Baltic field by the end of 2015 and begin extracting gas from its B4 and B6 fields by the end of 2017, with production from both seen at a combined 250m cb.m a year. The B8 field's production potential is estimated at some 3.5m tons of crude oil, while the combined production potential of the B4 and B6 fields tops approximately 4 bn cb.m. The group is also aiming to boost efficiency at its refining business, with a number of new facilities in the pipeline, including a delayed coking unit (DCU) and a hydrocarbon recovery unit (HRU). The DCU would improve the refinery's annual output of motor fuels by 900,000 tons and allow it to increase its refining margin by approximately USD 2/bbl. The unit is scheduled to come on stream in 2017–2018. With the HRU, Lotos would gain an additional 100,000 tons of LPG and 25,000 tons of gasoline annually, which will be placed on the market. The unit is scheduled to be placed in service in autumn 2016. In the retail area, Lotos aims to raise its share in the home retail market, where it competes with statecontrolled PKN Orlen, to 10% next year from 9.2% now, through expansion of its gas station network and sales efficiency improvements. In the first half of 2014 the Lotos posted a net loss of PLN 155m on PLN 14.4bn revenues, up from a PLN 273m loss and PLN 13.3bn turnover in January-June 2013. The 1H loss was due to a PLN 545m full writedown on the Yme field off the Norwegian coast, which knocked PLN 191m off the company's profit for the period. Lotos, which controls 20% of Yme, said the write down was due to lack of new plans for the oil field, in which Canada's Talisman Energy owns 60%, Germany's Wintershall , a unit of chemical giant BASF, has 10%, as does Norske AEDC, a unit of AOC Arabian Oil Company.

ENERGY & RESOURCES

Australian investor begins prepre-feasibility study for new coalmine near Lublin

Golder Associates (UK) Ltd and Royal Haskoning DHV (Haskoning UK Ltd) to complete the study, which is designed to support detailed technical and financial due diligence by strategic equity partners, offtakers, financial institutions and to promote a seamless transition to the Bankable Feasibility Study stage. The two consultancies were chosen due to their extensive and recent track record of successful involvement in the international coal sector, and in particular European projects, Prairie said.

Poland's most profitable coalmine Bogdanka may soon face foreign competition right at its doorstep. Australia's Prairie Mining Limited, which holds four exploration concessions in the Lublin Coal Basin, adjacent to the Bogdanka mine, has just commenced work on a pre-feasibility study for a large-scale coal project in the area. In April 2014 Prairie published the results of a scoping study for its Lublin Coal Project which confirmed the potential for a world class high margin semi-soft coking and premium thermal coal. The study assumed annual operating costs at USD 37 per ton which would place the project on the lowest position on the global cost curve for coal delivered into Europe, Prairie said. The project's current coal resource estimate of 1.6bn tons is based on the review and modeling of historic data over the said four concessions, including the logs from 200 cored boreholes. Moreover, according to Prairie, its Lublin project is located close to well established regional rail and port infrastructure with underutilized bulk cargo capacity for low transportation costs within Poland, to regional European markets by rail, and to the seaborne export market through ports in the north of Poland. Prairie’s pre-feasibility study is expected to be completed during the first half of 2015. The Australian investor has appointed a joint team of consultants from

Prairie Mining holds four expoloration concessions that cover an area directly adjacent to the Bogdanka mine (blue lines indicate concession boundaries and yellow dots are exploration drill holes. Image: Prairie Mining

"We are looking forward to rapidly progressing the PFS for the Lublin Coal Project and have assembled a strong team of study consultants with skills and experience in deep underground coal mining that I am confident will deliver the first study of its type in accordance with international standards within the entire Lublin Coal Basin. In addition, we will continue to upgrade the existing coal resource through targeted drilling and will initiate discussions with European steel mills and coal power plants who we believe will place strategic value on a significant new independent production source from within the heartland of industrial Europe," commented Prairie’s CEO Ben Stoikovich. The Bogdanka coal mine, which has been in commercial production since 1982, has recently expanded its

weekly newsletter # 052 / 15th September 2014 / page 4

production levels to over 8m tons per annum (targeting production of 11.5m tons per annum by 2015) of thermal coal. Since debuting on the Warsaw Stock Exchange in 2009, Bogdanka has more than doubled in value as profits rose every year but one. It has done so even as the price of coal more than halved since 2008, when the global financial crisis took hold, pushing Poland's largest coalminer Kompania Weglowa to the brink of collapse. According to Prairie, Bogdanka has successfully been able to demonstrate that the Lublin Coal Basin has the potential to host a new generation of large scale coal projects as it offers ideal geological and mining conditions for high productivity longwall plow operations with world record production rates. As a result, the Boganka mine is currently the lowest operating cost hard coal mine in Europe. Bogdanka employs about 5,000 and posted a net income of PLN 188m on PLN 879m turnover in 1H 2014, making it the most profitable of seven Polish coal producers. Kompania WÄ&#x2122;glowa has 56,000 miners, the biggest employer after the postal service and railroad. It lost about PLN 329m after six months with the coal price below the cost to mine it. Bogdanka is not particularly happy to watch the Australians get comfortable in concession areas that seem like a natural expansion grounds for the Polish miner. It has applied for a mining concession over Prairie's K6-7 exploration concession (see map), which is part of their Lublin Coal Project. The Polish Ministry of Environment officially rejected Bogdanka's application on August 28, as under the Polish Geological and Mining Law, a clear pathway exists to progress from an Exploration Concession to a Mining Concession. "Granting a concession for the production of black coal from a deposit for which an appraisal concession has been previously granted undermines the geological sense of further appraisal of the mineral in this area,

makes the granted appraisal concession void and may violate the right to use the rock mass set forth in the agreement on establishing mining usufruct concluded with PD Co Sp. z o.o. [Prairie's 100% owned Polish subsidiary; ed.]. Such a decision would be contrary to public interest, and the concession authority may not make decisions that abuse the trust of entities in the authority, as well as in the fundamental principles laid down in the Constitution of the Republic of Poland, i.e. the principle of citizen's trust in the state and the principle of protection of the interests in progress," the Ministry said.

The idea was first brought up by Poland's outgoing Prime Minister Donald Tusk and last week confirmed by deputy Economy Minister Tomasz Tomczykiewicz, who listed top utilities Enea, PGE, and Tauron as likely partners for some of KW's mines. Shares in the three energy firms dropped by up to 4% on Tomczykiewicz's announcement.

The competition between established local players and newcomers can get nasty. Following a recent concession row between Polish copper mining giant KGHM and Canadian-owned Miedzi Copper Corp. (see BR+ No. 047) the latter's has suspended exploration work in Poland in protest against the government's decision to revoke a strategically important license the company had obtained a few months ago. The Canadians had plans for a brand new PLN 12bn-15bn copper mine in Western Poland near existing facilities operated by KGHM.

In the first half of the year Polish coalmining companies posted a net loss of PLN 772.3m, compared to a tiny profit of PLN 15.6m in the corresponding period of 2013. With a net loss of PLN 329m, KW was responsible for a major portion of the sector's losses. The situation looked even worse when taking into consideration only the sector's core business: coal sales. Here, the loss exceeds PLN 1bn vs. a PLN 64m profit in JanuaryJune 2013.

ENERGY & RESOURCES

Energy stocks plunge as government mulls news ways to save Poland's coal industry Polish energy stocks took a beating last week after comments from government officials regarding the possible consolidation of the ailing state-owned coal group Kompania WÄ&#x2122;glowa (KW) with other entities, ine a move to strengthen its competitive position.

Dark clouds have been looming over Poland's coalmining sector for years but recently the situation has gotten so serious, the government has no choice but to seek solutions.

Polish coalmines extracted slightly more than 34m tons of coal in the first six months of the year (down by 2.8m tons y/y) with sales reaching 31.8m tons (down by 4.3m). Exports (mainly to Germany and the Czech Republic) totaled 4m tons. Meanwhile, stockpiles of unsold coal amounted to 8.3m tons as of end of June. The key problem for Polish coalmines are high production costs, which at PLN 311 (slightly below USD 100) per ton in 1H 2014, make Polish coal way too expensive, against global prices that oscillate around USD 70 per ton. In Poland, coal prices dropped 8% y/y in 1H, down to PLN 280. Clearly, in order to sell anything, Polish mines have to sell below production costs. With approximately 104,000 employees (including some 80,000 miners) and powerful trade unions, Po-

weekly newsletter # 052 / 15th September 2014 / page 5

land's coalmining industry has effectively resisted any real change, even though only three of the 15 mines that make up the state-owned giant KW showed profit in 1H. While some of the loss-making ones simply fell victim to temporary problems and price fluctuations, a few have been in the red for years, being kept alive to avoid unrest, despite immense costs. The government has been tiptoeing around the issue for months, never failing to emphasize that job cuts at KW were not an option, even though the company produces merely 620 tons of coal per employee (35m tons in total). Globally, the worst-performing companies mine about 1,000 tons per full-time employee. The listed Polish Lublin-based coalminer Bogdanka, which benefits from a much more favorable geology than KW's Silesian mines, but has also undergone indepth restructuring, aims to produce 11.5m tons this year, or 2,300 tons per worker. Fearing strikes and civil unrest, no government in the past quarter of a century dared to take on the miners, who continue to enjoy wage levels and perks that are unheard of in any other industry. Despite the sector's tragic financial condition, trade unions demand pay increases that had been promised to miners when the situation looked a bit more promising. Proposals to give up some perks including double-than-average pensions, two annual bonuses, discounts for city transport, free coal allowances, or school subsidies for children, are being met with strong resistance on the part of the unions, who believe their members deserve what their fathers and grandfathers got, paying no attention to changing market conditions. Little less than a decade ago, the Solidarity union blocked government plans to raise the retirement age for miners after demonstrations turned into street fights. The memory of those scuffles remains vivid among Polish politicians, which partly explains Poland's newly discovered love for coal. The country, which relies

on coal for 90% of its electricity, had been trying for years to reduce its dependence on this highly polluting form of fuel, but recently the government has been pushing for stronger ties between the country's energy producers (which are profitable and fully restructured) and coalmines. Even before the recent announcements, Tauron, the countryâ&#x20AC;&#x2122;s second-biggest utility, agreed to pay PLN 310m to buy a stake in one of KW's businesses, while in August JSW SA, the biggest coking coal producer in the EU, paid PLN 1.49bn for another. PGE, the largest utility, revived the PLN 11.6bn coal-fired power plant project and will buy coal from Kompania. All in all, the authorities are getting creative in finding ways to avouid an drastic measures in Silesia, but many observers believe this is approach will merely prolong their agony and increase the end cost to taxpayers.

Poland's gas company PGNiG said it received 20 to 45% less fuel at the beginning of last week and it was compensating the shortage with supplies from the West. Poland is able to receive 2bn cb.m of gas per year via an interconnector with the Czech Republic and via the Lasow link with Germany. It also can use the Yamal pipeline for reverse flows and import as much as 5.5bn cb.m from the West. PGNiG bought 0.6bn cb.m of gas from Germany and the Czech Republic in the first half of 2014, compared with 4.5bn cb.m imported from Russia. Shortly after the news of the reduced deliveries from Russia reached the media, Polish gas pipelines operator Gaz-System confirmed the available transmission capacity on links from the Czech Republic and Germany was being used in full.

ENERGY & RESOURCES

Gazprom reduces gas deliveries to Poland amid Ukraine row Russiaâ&#x20AC;&#x2122;s Gazprom reduced natural gas flows to Poland last week, seemingly as part of Moscow's pressure on Ukraine, which has not been receiving Russian gas since mid-June in a row over debt and prices. Due to insufficient flows from Russia Poland halted deliveries to Ukraine on Wednesday, according to Ukraine's UkrTransGaz. The latter's CEO Ihor Prokopiv said Russia was reducing flows to the European Union to restrict supply to Ukraine, which previously had been receiving 4m cb.m per day via so-called reverse flows from Poland. Gazprom CEO Alexey Miller said in June the company might limit supplies to gas-metering stations where it observed reverse flows.

Tampering with gas supplies has been Moscow's favorite way of disciplining its neighbors. Photo: Gaz-System

Poland has lobbied the European Union hard to impose tougher sanctions on Moscow, and it is to host elements of a new NATO rapid reaction force, created in response to the Russian intervention in Ukraine. Some observers believe that the Kremlin may use a disruption of gas to Europe as a trump card in its confronta-

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tion with the west over Ukraine. The row has already brought relations between Moscow and the west to their lowest point since the cold war. Gazprom supplies a third of Europe's gas and for many EU countries it is the main source of power for homes and industry. Poland got 9.6bn cb.m of gas from Russia last year, or 64% of its total use, according to BP Plc’s Statistical Review.

company's core business has been collection, disassembly and mediation in the recycling of electronic and electrical equipment (electrowaste) and waste catalytic converters in Turkey, Europe, Africa, the Middle East and Asia. Additionally, together with its partners, Evciler also collects batteries, CRT monitors and lighting equipment, including fluorescent lamps and cables.

Poland's PGNiG filled 100% of its available natural gas storage capacity, i.e. some 2.58 bn cb.m as of September 4, PGNiG said in a market filing. At the same time, PGNiG is pumping natural gas to natural silos at northern Kosakowo, southwestern Wierzchowice and southeastern Husów silos which are currently being expanded and are not reported as part of the silo system of PGNiG's storage unit OSM, the firm added. The rise to maximum storage capacity in early September is the first in PGNiG history, the firm said. In the corresponding period of 2013, PGNiG has 2.1 bcm stored, the firm said.

The company carries out its operations via two facilities based in Ankara, but it has been gradually expanding the outside Turkey, collecting and recycling electrowaste and catalytic converters in Germany, Africa, the Middle East, Asia and in the neighboring countries.

Warsaw-listed metals recycling company Elemental Holding has agreed to acquired a 51% stake in Turkish peer Evciler for USD 11m. The transaction, which the Polish company will partially finance with proceeds from a new share issue, is to be sealed by December 15, 2014. Evciler Chemical, Mining and Precious Metals Industry and Trade Limited Company has operated in the non-ferrous metals sector since 1982. Since 1996, the

In March, the Polish company took over a controlling stake in Lithuania's EMP Recycling, which holds a 60% share in Lithuania's electrowaste, catalytic converter and non-ferrous metals recycling sector. Elemental Holding representatives said their goal is to reach a similar market position in the other two Baltic states, Latvia and Estonia. "We keep looking at potential acquisition targets along the Estonia-Turkey axis, or from southern to northern Europe. In the Baltics, our goal is to expand EMP's operations from Lithuania to Estonia and Latvia," Szymański says.

ENERGY & RESOURCES

Polish electrowaste recycler acquires Turkish Turkish peer

With a modern processing plant in Tomaszów Mazowiecki in central Poland and a waste obtaining network spanning the entire country, Elemental Holding specializes in recycling of integrated circuits and printed circuit boards, processing of electrowaste, as well as recycling, transport and trading in non-ferrous metals and steel. It is one of the leading suppliers of non-ferrous metals to Polish foundries.

There is big money to be made in recycling old electrical appliances. Elemental Holding's earns approximately PLN 25m a year after tax.

Elemental Holding turned over PLN 860m last year (down from PLN 895m in 2012) while its attributable net earnings topped PLN 24.4m (up from PLN 18.4m in 2012). The company has been listed on the Warsaw Stock Exchange since December 2013..

Photo: Elemental Holding

HOSPITALITY "We expect this acquisition to boost our annual revenues by some PLN 120-150m," Krzysztof Szymański, spokesperson at Elemental Holding, tells Poland Today. "The Turkish market is attractive due to its size and growth prospects and local regulations follow the EU norms. The fact that Evciler operates across tens of markets in Africa, Middle East and Souther Europe enables us to maintain a large geographical footprint."

New Ibis hotel to open near Poznań in 2016 Poland's leading hotel operator, the French-owned Orbis Hotel Group has signed a franchise agreement for a brand new property in the Poznań suburb of

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Suchy Las. The new hotel, Ibis Poznań Północ, which is being developed by a local company Anwil Transport, will open in Q1 2016 offering 77 rooms. Orbis is part of Accor, Europe's number one hotel operator with 3,600 hotels and more than 460,000 rooms across 92 countries. The group entered Poland in 1973 through Novotel franchise with Orbis in which it became a majority shareholder 35 years later. The Orbis Hotel Group manages 62 hotels in Poland and five in the Baltics with 11,600 rooms under the ibis, ibis Styles, ibis Budget, Mercure, Novotel, Sofitel and Orbis Hotels brands. In 2010 Orbis adopted an asset-light strategy, which emphasizes the company's role as a hotel operator and prioritizes expansion via management and franchise agreements. Hence, Orbis has been gradually restructuring its asset portfolio, seeking ways to refinance certain real properties with the help of long-term investors. Most of the group's new hotels are being developed under Mercure and ibis Styles conversion brands, which Orbis sees as best fitting the franchisee market. The French group is tempting potential partners with its dominant market position, booking system that generates close to a half of hotel revenue in Europe, 250-strong global sales force and loyalty program which boasts 8.5m members worldwide including 160,000 in Poland. Orbis has so far signed 19 franchise agreements of which eight in 2013. Earlier this year Orbis signed franchise agreements for new hotels in Grudziądz (ibis Styles), which will open in Q4 2014 offering more than 80 modern rooms, restaurant and conference facilities, as well as Lithuania's Marijampole (Mercure), which joined the Accor network in April with 47 rooms, alongside a new Mercure location in Riga, Latvia. In August last year, Orbis signed a franchise agreement for a new ibis Styles hotel in the southern Polish town of Nowy Sącz, to be developed by a local investor. With 57 rooms, the

three-star property will open in Q4 2014 as the first hotel in Nowy Sącz belonging to an international chain. Orbis is also working on a Mercure hotel in Bydgoszcz, which is to open in November with 90 rooms as well as Mercure/ibis Styles combo in Sosnowiec. Last year saw the opening of a Novotel hotel in Łódź, while in 2012 Orbis launched ibis and ibis Budget Reduta in Warsaw as well as a similar double project in Krakow, alongside an ibis hotel in the Lithuanian city of Kaunas.

szawa is PLN 75m. Total capital expenditures in 2013 came to PLN 95m and included also substantial outlays on IT.

TRANSPORT & LOGISTICS

Prologis adds 55,400 sq.m in Warsaw to its Polish portfolio US industrial property giant Prologis has further strengthened its position in Central and Eastern Europe with the acquisition of 23 class-A distribution centers in the Czech Republic, Poland and Slovakia. The portfolio, encompassing some 230,000 sq.m, will be included in Prologis European Properties Fund II (PEPF II).

Developed by a local investor, the new Ibis Poznań Północ will open in Q1 2016 with 77 rooms. Photo: Orbis

The Warsaw-listed Orbis turned over PLN 671.5m in 2013 (down from PLN 688m in 2012, in like-for-like terms), while its EBITDA came to PLN 199.1m (vs 204.7m in 2012). Average revenue per room dropped 4.6% last year, down to PLN 124.1, while room occupancy rose by three percentage points and topped 58.8%. The company has recently embarked on a PLN 100m investment program, seeking to upgrade some of its key properties by the end of 2014. Some 90% of the total amount is to be spent in Warsaw, where Orbis operates 11 hotels. The combined price tag on the ongoing makeovers of Mercure Warszawa Centrum, Novotel Warszawa Centrum, and Sofitel Victoria War-

In Poland, Prologis has purchased four properties totaling 55,400 sq.m in Warsaw, Poland. Prologis Park Warsaw-Żeran is located near the Warsaw city center east of the A2 highway, a key regional transport route. The company has also acquired 17 properties totaling 163,000 sq.m in Prague, Czech Republic and two assets totaling 11,600 sq.m in Bratislava, Slovakia. A few weeks ago, PEPF II took over two logistics facilities in Poland and Hungary from Invesco Real Estate, including a 56,700 sq.m building in Gliwice, in upper Silesia. The facility, renamed Prologis Park Gliwice, is located in the centre of the Silesian agglomeration and one of Poland's core markets – next to the crossroads of two trans-European networks the A1 and A4. Its sole tenant is the British-owned retailer Tesco. In recent months Prologis broke ground on two speculative projects (27,000 sq.m and 28,240 sq.m) in the

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Wrocław area. Other ongoing projects from Prologis in Poland include a 11,200 sq.m BTS scheme for Danish forwarder Prime Cargo in Prologis Park Szczecin as well as a 27,000 sq.m speculative development in Prologis Park Wrocław V.

Largest warehouse owners in Poland As of 1H 2014, in % of total stock Prologis 26%

SEGRO 13%

Blackstone 12%

PEPF II, which was established in August 2007, owned 253 properties, for a total of 5.9m sq.m with a net market value of EUR 3,595.4m as of March 31, 2014. Globally, Prologis owned or had investments in, properties and development projects expected to total approximately 53.3m sq.m in 21 countries including 3.7 sq.m in Central and Eastern Europe as of end of Q1 2014.The company leases modern distribution facilities to more than 4,700 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises. Last year alone, the company leased 1.15m sq.m of industrial distribution space in Central and Eastern Europe, including 595,000 sq.m in renewals and 363,000 sq.m in new leases. Prologis’ occupancy in the CEE was 89.5% as of December 31, 2013.

Panattoni 5%

Other 44% Source: JLL

Prologis owned 26% of Poland's entire modern warehouse stock as of mid-2014 according to figures from JLL, the property advisory, followed by SEGRO (13%) and Blackstone (12%). Following the most recent acquisitions, Prologis' Polish portfolio includes 103 buildings in 21 industrial parks with a combined space of nearly 2.1m sq.m. The company has three projects under construction (two speculative schems in Wrocłąw and one BTS in Szczecin) with a combined floor space of 56,400 sq.m. In terms of the ownership structure of the Polish industrial market, more than half of existing floor space is in the hands of the three largest market players and their partners. Despite being the most active on the development front, Panattoni owns merely 5% of the existing stock, as the company's strategy is to dispose completed projects.

Prologis Park Warsaw-Żerań is the newest addition to the US giant's Polish portfolio. Photo: Prologis

According to JLL, with 811,000 sq.m of warehouse space under construction in Poland as of mid-2014, the market is showing its best performance since 2008. In the first half of 2014, gross take-up stood at 912,000 sq.m, of which 526,000 sq.m was in new contracts. During the first half of 2014, developers delivered 298,000 sq.m of new supply, marking an 85% increase on 1H 2013.

PROPERTY & CONSTRUCTION

HP's shared shared services unit books 16,400 sq.m at Skanska's new office project in Wrocław In what the property consultancy CBRE describes as the largest office lease transaction in Polish regional cities since the beginning of this year, HP Global Business Center has secured close to 16,400 sq.m of office space in Skanska Property Poland's latest Wrocław office project: the Dominikański. The contract also happens to be the biggest lease agreement the Swedish developer has signed in Central and Eastern Europe to-date. HP GBC, the US IT giant's business services unit, will relocate to Dominikański at the turn of 2015 and 2016 from its current premises at the Grunwaldzki Center (which was delivered also by Skanska, in 2009) and the Globis building. The company will keep its third Wrocław office in the historic Renoma building. HP GBC's offices will be located in both buildings of the Dominikański complex, which will total 40,000 sq.m upon completion. The HP unit will also take 166 of the project's 370 parking spaces. Dominikański is Skanska Property Poland’s fourth, flagship investment in Wrocław. This class A office complex is being developed in one of the city’s prime locations near Dominikański Square and close to the Galeria Dominikańska shopping center and Wrocław's historic Market Square. The complex, which will undergo LEED Gold certification, has been 52% leased approximately 10 months before its scheduled completion. The first signed tenant was Deloitte.

weekly newsletter # 052 / 15th September 2014 / page 9

Skanska Property Poland is very active in Poland's regional cities, with investments also in Poznań, Łódź, Kraków and Katowice, where it has broken ground on its largest Polish office project to-date, the 46,000 sq.m Silesia Business Park. In Wrocław, it has recently delivered its third scheme, Green Day (see BR+ No. 028 page 5). According to Arkadiusz Rudzki, Leasing And Asset Director at Skanska Commercial Development Europe, the company will begin the construction of one more project outside Warsaw this year.

More than a half of the total office space at Skanska's new Wrocław project "Dominikański" has already been booked. The complex is currently under conPhoto: Skanska Property Poland struction.

In Warsaw, Skanska has recently broken ground on Atrium 2, a 20,000 sq.m office tower in the heart of the city's central business district. The project is a yet another installment of the Atrium complex Skanska has been building on the Western side of the Jana Pawła Avenue since the late 1990s. Its previous phase, the 18,000-sq.m Atrium 1, was completed a few months ago and sold to the German open-ended property fund Deka Immobilien-Global for EUR 94m (see BR+ No. 011 page 5). Later this year the developer will break ground the first of three buildings that will make up the 80,000-sq.m Generation Park, Skanska's largest

project in Warsaw to-date. Atrium 2 and Generation Park will both be located by the new east-west subway line, only one stop away from each other. The Swedes own at least one more site in this area, the one directly by the ONZ roundabout, where they intend to erect an office sky-scraper in the future. "Warsaw is a market with enormous potential and we have ambitious plans for the city. We have not given up our plans for a high rise next to Atrium 2. There is still space left for a tall building that is currently at the concept design stage. However, we are focusing on other projects at the moment, for instance Atrium 2 and Generation Park, which will also include a highrise section," Katarzyna Zawodna CEO of Skanska Property Poland, told Poland Today. "We have recently sold four office parks for a combined EUR 300m or PLN 1.2bn. Moreover, all those buildings had been sold prior to their completion. We intend to maintain this ambitious pace, with five new projects to be launched in 2014, two in Warsaw and three in regional cities," Arkadiusz Rudzki told Poland Today. Their two new Warsaw projects alone (Generation Park & Atrium 2) will have a combined GLA of some 100,000 sq.m. 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, which currently has 57,000 employees in selected home markets in Europe, the US and Latin America. Skanska’s revenue in 2013 totaled SEK 136bn (EUR 15.8bn).

PROPERTY & CONSTRUCTION

France's Yareal to build 400 apartments in new Warsaw project French developer Yareal is embarking on its largest residential project in Warsaw's southeastern Gocław area. The project will be developed in two phases and, once completed, it will include six six-story buildings with a total of nearly 400 apartments, ranging from 28 to 92 sq.m in size. The company has just launched apartment sales in the Kolorowy Gocław project, with prices starting at PLN 6,800 per sq.m, aiming to begin construction in 1H 2015. Better known for its office developments, Yareal has been involved in a handful of small upscale residential projects in Warsaw, including the award-winning Hoża 55 project. Its ongoing residential schemes (Brylowska 2, Rezydencja Konstancińska, and Londyńska 5) have a combined floor space of 13,500 sq.m. Yareal is part of Yareal International, whose shareholders include YAM Invest, a group that brings together a range of European real estate development and investment companies. Yareal's best-known development to date is the Renaissance Building on Warsaw's Zbawiciela Square (4,575 sq.m of offices and 600 sq.m of retail space on the ground floor). Renaissance Building was named the best office development of 2004 and sold two years later to a Spanish investor for a reported EUR 25m. Subsequently the company delivered the 9,800 sq.m Cristal Park complex in the Aleje Jerozoliskie area and carried out a a total makeover of a modernist office

weekly newsletter # 052 / 15th September 2014 / page 10

building on Mokotowska street (next to Deloitte House built by Ghelamco), turning it into 9,600 sq.m of class A offices. Yareal's most recent office project has been Oxygen Park, a complex of two six-story buildings with a combined lettable space of 18,300 sq.m, located near the A2 highway intersection with the Aleje Jerozolimskie artery.

RETAIL PROPERTIES

Immofinanz opens third STOP.SHOP. retail park in Poland Austrian property firm Immofinanz Group has recently opened its third STOP.SHOP.-branded retail park project in Poland. Located in Kętrzyn, near an existing Tesco supermarket, the project encompasses 3,500 sq/.m of retail space and its tenants include Media Expert, Jysk, CCC and Martes Sport.

Kolorowy Gocław will be Yareal's largest residential Photo: Yareal prokject in Poland to date.

Earlier this year Yareal announced a large new project on the corner of Cybernetyki and Wynalazek streets in the Mokotów district, a stone's throw from the Okęcie airport and close to the Galeria Mokotów mall. The Neopark development will include two buildings with a combined GLA of 24,000 sq.m, separated by a green patio with restaurants, retail outlets and a fitness center. The developer will seek BREEAM sustainable building certification for the project, hoping to obtain a building permit for Neopark this year.

expected to total EUR 50m, with completion being scheduled for the first half of 2015, Immofinanz said. Besides shopping centers, Immofinanz Group's ongoing investments in Poland include the Nimbus office building (19,000 sq.m of GLA) in Warsaw, and residential projects Riverpark in Poznań (189 apartments) and Dębowe Tarasy in Katowice (phase three with 317 apartments). Immofinanz has recently decided to pull out of the logistics sector in Poland and the Czech Republic, starting with the sale of Bokserska Distribution Park in Warsaw and Westpoint Distribution Park in Prague for a combined EUR 33.2m.

To-date, Immofinanz has delivered 51 STOP.SHOP. parks in a number Central European cities with populations of between 30,000 and 150,000, including Legnica and Mława in Poland. Over the coming years the company plans to build a total of 10 projects under the STOP.SHOP. logo in Poland. "The Ketrzyn STOP.SHOP. is not our last opening this year. We are planning to open another, the fourth, retail park in Żary in Q4," said Immofinanz's CEO Eduard Zehetner. Immofinanz focusing on the construction of its flagship retail development in Poland – Tarasy Zamkowe in Lublin. Scheduled to open in Q4 2014, the EUR 95m shopping and entertainment project will comprise up to 38,000 sq.m of rentable space divided into ca. 150 retail units. It has also teamed up with Polish developer Rank Progress on a 23,800-sq.m retail project in Piła, which will likewise open in Q4 2014. The company has recently announced a new retail project in southern town of Stalowa Wola, 60km north of Rzeszów, where they plan to build a shopping center with a GLA of approx. 30,000 sq.m. The investment is

Immofinanz wants to open at least 10 STOP.SHOP. properties like the one opened last week in Kętrzyn. Photo: Immofinanz

"In Poland, we currently hold two other logistics properties that are designated for sale over the medium-term," said Zehetner. "Our focus for the development of logistics properties lies on the core markets of Germany, Romania and Russia." The Vienna-listed company, which carried out a secondary listing in Warsaw last year, has recently completed one of the largest ever deals on Poland's property market with the EUR 412m sale of Silesia City Cen-

weekly newsletter # 052 / 15th September 2014 / page 11

ter retail property in Katowice to an international consortium of investors led by Allianz. Silesia City Center has about 340 stores with combined floor space of 89,000 sq.m, all of which is occupied. Since its founding in 1990, Immofinanz has compiled a portfolio that now comprises more than 1,600 investment properties with a carrying amount of approx. EUR 7.4bn. The company concentrates on development management and sale of commercial properties in top locations. Immofinanz Group concentrates its activities in the retail, office, logistics and residential segments of eight regional core markets: Austria, Germany, Czech Republic, Slovakia, Hungary, Romania, Poland and Russia.

RETAIL PROPERTIES

Warsaw awaiting new retail developments The demand for new retail projects of various scale and formats in the Polish capital remains robust, as Warsaw's shopping center density ratio remains low (at 438 sq.m per 1,000 inhabitants), despite the spending power of its residents being the highest in the country (EUR 9,706 per capita per annum i.e. 165% of the national average in the Warsaw agglomeration, and EUR 10,478 in Warsaw alone), conclude property consultantsJLL in the latest edition of their Warsaw City Report. Although the greater Warsaw area remains the country's largest retail market with a shopping centre stock of 1.1m sq.m, equivalent to 13% of the total supply countywide, the ongoing rapid development of some of the city's residential areas creates ample potential for new development, particularly in the Białołęka,

Wilanów, Wawer, Ursynów and Wola districts. Despite the perceived attractiveness of the Warsaw market to retail developers, only one shopping centre Galeria Legionowo (10,500 sq.m of GLA) in Legionowo, is under construction in the wider metropolitan area of Warsaw, and a further two are being extended i.e. Wola Park (by 17,600 sq.m of GLA) and Factory Ursus (by 6,000 sq.m of GLA). Nearly four out of five shopping centers in Warsaw are older than 10 years. Consequently, modernizations and extensions of existing retail assets remain one of the key trends, JLL said. "The first half of the year was a rather calm period on the retail market in the Warsaw agglomeration. This will, however, change with a wide selection of new retail projects planned, including, i.a., Galeria Północna, Galeria Wilanów, Ferio Wawer or Fabryka Wołomin," commented Anna Wysocka, Head of Retail Agency, JLL Poland. "Spectacular changes will soon take place in the wider city centre. The extension and redevelopment of CEDET on the corner of Krucza Street, Bracka Street and Jerozolimskie Avenue begins. What is more, building permits have been obtained for Centrum Marszałkowska on Marszałkowska Street, Hala Koszyki on Koszykowa Street and ArtNorblin on Żelazna Street. Ethos on Plac Trzech Krzyży will also be revamped. The completion of these projects will enhance the retail centre of Warsaw," she adds. There are hardly any unoccupied retail units at Warsaw area shopping centres with vacancy rate at a symbolic 1.5%. Top regional centers, such as Złote Tarasy, Arkadia or Galeria Mokotów, which often serve as expansion bridgeheads for brands entering Poland, have to put prospective tenants on waiting lists. Due to recent re-lettings in prime retail assets in the capital city, prime rents for a 100 sq.m unit for a fashion and accessories sector tenant increased by 5% to EUR 105 per sq.m a month. JLL anticipates prime rents to remain stable in the short to mid-term.

POLITICS & ECONOMY

PM Tusk resigns; new government is in the making PM Donald Tusk submitted his cabinet's resignation last week as the Polish leader gears up to assume the post of European Council President from December 1. His resignation was accepted by President Bronisław Komorowski on Thursday, September 11. According to the constitution, the President has two weeks (until September 25) to nominate a new PM candidate, who will then have a further two weeks to present a line-up of the new cabinet. The transition is likely to be smooth, as Tusk named Ewa Kopacz, the current speaker of the lower chamber of the Polish parliament, as his successor, in line with expectations. Her candidacy has been approved by Tusk's party, the centre-right Civic Platform (PO) and endorsed by the President. Kopacz, who used to serve as health minister in Tusk's cabinet, will be the second woman since the fall of communism to stand at the helm of the Polish government. Kopacz will also take over from Tusk as the PO leader. Besides Mr. Tusk himself, the new cabinet will not include his most senior minister, Elżbieta Bieńkowska, who has been nominated for the new EU commissioner in charge of the internal market. Some sources suggested that Radek Sikorski, another top member of the Tusk cabinet may succeed Kopacz as the speaker of the Sejm, but the prestigious yet somewhat boring function seems to be at odds with Sikorski's outspoken personality.

weekly newsletter # 052 / 15th September 2014 / page 12

Mr. Tusk was Poland's longest-serving PM since 1989, holding his office for exactly 2,489 days (nearly a full 7 years), the government's press office wrote in a statement sent to the press last week. In 2011, he became the first Polish leader in recent history to be re-elected to power. Mr. Tusk's rule brought a cumulative increase in gross domestic product of 20% in 2013 versus 2007, although recently the PO has been trailing behind the conservative Law and Justice (PiS) party in opinion polls ahead of national elections due to take place in a year's time.

more accommodative before the elections," BZ WBK analysts commented in their MACROscope report.

At this crucial moment, the Civic Platform is facing a period of great uncertainty, as following the departure of its charismatic and media-savvy leader, infighting between its various factions is not unlikely. At the moment, the PO-led coalition with agrarian PSL as a junior partner, enjoys a slim majority in the Sejm.

Poland's registered unemployment rate dropped to 11.7% in August from 11.9% in July, according to estimates by the Labor Ministry. With 1.86m people registered as jobless last month, the labor market has returned to levels last seen three years ago, when the economy was on the rise and it seemed like crisis was finally becoming a thing of the past.

Although Tusk's nomination for the new European Council President his scored his party some extra points, most recent polls have been pointing to PiS and his firebrand leader Jarosław Kaczyński, twin brother of the tragically deceased late Polish president Lech Kaczyński, as a likely winner in next year's general election. Few expect Kaczyński to win a majority in the parliament and since he lacks any political allies the result may be a shaky minority government. A fan of the controversial Hungarian leader Viktor Orban, Kaczyński is pushing a strongly etatist agenda, mixed with deep social conservatism.

Although other economic indicators have been rather disappointing in recent months, employment figures has seen steady improvement, with some 80,000 new placements on the average hitting Poland's job centers every month since the beginning of the year. Looking back at data from the past three years, the situation appears promising.

POLITICS & ECONOMY

Government data and recruiters confirm upturn in employment

employment outlook is seen at a positive 6% in Q4 2014, with 13% of employers surveyed planning a headcount increase and 8% predicting a cut. Net employment forecast for Poland after taking into account seasonal corrections has thus come to a positive 6%, representing an improvement by 2pps both y/y and q/q.

Registered unemployment in Poland Source: GUS, Labor Ministry

"It is too early to say how the changes will affect the Polish political scene. The most recent opinion poll showed a rise in support for the ruling PO party after the news of Tusk’s nomination for the top EU job. It will definitely be an interesting time in Polish politics. We do not see a significant rise in political risk, nor do we expect a major change in economic policy. However, there are already signs of fiscal policy becoming

14% 13%

12%

11% Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14

Since the state-run job centers represent only a fraction of the available positions, one has to take a look at other sources for confirmation of the optimistic trend. According to the employers' association Lewiatan, more than 26% of medium-sized businesses (20-50 workers) intend to increase employment this year. Among Poland's small (10-20 staff) and micro-firms (below 10), the result was 19% and 11% respectively.

The market is yet to experience the effects of the labor market reform, which was introduced in May. Job centers were given time until September to divide the registered job seekers according to their perceived chances of finding employment, with the toughest cases to get special attention from councilors. Shortly after, regional authorities are to invite private staffing firms and NGOs to help the officials match the jobless with open positions. The related tenders will be announced this autumn with all regions showing interest in this new approach. The expectation is that commercial contractors will do a better job finding work for the unemployed than state bureaucrats.

Staffing consultancy Manpower said Polish employers remain "moderately optimistic" about plans for hiring in Q4. According to a brand new report Manpower released last week, Poland's seasonally unadjusted net

According to deputy Labor Minister Jacek Męcina, Poland's unemployment will likely reach the lowest point in October, with jobless rate at 11.5-11.6%, and will later rebound to reach 12.1-12.2% at end-year.

weekly newsletter # 052 / 15th September 2014 / page 13

KEY STATISTICS Consumer Prices Prices

Inflation

-1.1

Alcohol, tobacco +3.9

+0.3 +3.9 +0.2 +4.0

+0.1 +4.0

0.0

Clothing, shoes

-4.4

+2.8

-4.6

-0.1

-4.7

-0.8

-4.9

-2.8

Housing

+1.7

0.0

+1.6

0.0

+1.6

-0.1 +0.6

0.0

Transport

-2.1

-0.1

-0.1 -0.4

-0.6

-0.2

Communications

-1.7

-1.5

+0.3

0.0

Gross CPI

-1.1

-0.1

+0.3

0.0

Apr '14 May '14 Jun '14 +2.3

-2.7

-1.1

+3.1

+8.4

+3.8

+1.2

+4.7 +2.1 2013

2% 1%

Year

2009

2010

2011

2012

Turnover in PLNbn

582.8

593.0

646.1

676.0

n/a

-1%

y/y (%)

+4.3

+5.5

+11.6

+5.6

+2.3

+1.2

Residential Construction Dwellings

-0.2 -0.2

2009 2010

2011

2012

2013 Jan-Jul y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

(in '000 units)

Producer Prices Prices

Jul '14

+12.5

y/y (%)

-1.0 +0.8

+1.3 +2.4 +2.6

+0.2 -0.1

Jul 14

-1.7

May 14

-0.3

Mar 14

-0.9

Mar '14

m/m (%)

m/m

Jan 14

-0.8 -0.4

Nov 13

-0.5

Sep 13

+0.3

y/y

Jul 13

Food & bev

Month

May 13

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

Retail Turnover

Mar 13

Jul '14

Jan 13

Jun '14

Nov 12

Sector

May '14

Jul 12

Apr '14

Sep 12

Data in (%)

Industrial Output Output

Permits

2014

(%)

92.2

+18.9

Commenced

142.9

127.4

85.5

+18.9

m/m (%)

0.0

-0.1

-0.2

-0.1

0.0

m/m (%)

+2.9

-1.8

+9.4

-2.3

-1.7

-0.1

+2.0

U. construction

670.3 692.7 723.0

713.1 694.0

701.7

-0.3

y/y (%)

-1.0

-1.4

-1.3

-0.7

-1.0

-1.8

-2.0

y/y (%)

+4.1

+5.3

+5.4

+4.4

+1.7

+2.3

Completed

160.0 135.7

152.5

78.8

-2.7

Year

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product

Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14

2007 +7.4

-1.6 2008 +4.8

-0.1

-1.5 2009

0.0

-1.5

-1.4

2010

+0.2

0.0 -1.3

2011

-0.1

2012

+1.0

+0.2

0.0 -1.2 2013 -1.8

413,457

-0.9%

397,429

-1.0%

Q4 2013

+2.7%

455,528

-1.3%

Q3 2013

+2.0%

405,554

-1.9%

2013

+1.6%

1,635,746

-1.3%

2012

+1.9%

1,596,379

-3.7%

Sentiment Indicators

2011

+4.5%

1,528,127

-5.0%

Economic sentiment and consumer confidence indicators

2010

+3.9%

1,416,585

-5.1%

y/y (%)

-3.9

Year

2007

y/y (%)

+15.5

+14.4 2008 +12.1

+17.4 2009 +5.1

+3.2 +12.2 2010 +4.6

+14.0

+16.9

+10.0

+8.0

2011

2012

+11.8

-0.6

+0.9 +1.1 2013 -12.0

138

8,615

6,290

143 6,061

196 6,333 144

Manufacturing

3,560

155 3,625

158 3,690

161 3,663 160

Energy

5,828

177 6,021

183 6,736 205 6,358 193

-20

3,693

Retail & repairs

3,421 146 3,408

157 3,766 160 3,895 145 3,456 3,913

166 3,706 158 147 3,544

151

Transportation

3,547

125 3,589

127

IT, telecoms

6,707

174 6,654

173 6,695

174 6,986

Financial sector 6,702

151 6,109

137 6,602

148 6,749 152

National average 3,613 144 3,652

145 3,823

152 3,895 155

Source: Central Statistical Office (GUS)

138 3,666 130 181

120

-40

Key Economic Data & Projections

100

Indicator

2011

2012

GDP change

+4.5%

+1.9%

+1.6%

+3.1%

Consumer inflation

+4.3%

+3.7%

+0.9%

+0.1%

+0.9%

Producer inflation

+7.6% +3.4%

-1.3%

-1.0%

+1.1%

CA balance, % of GDP

-5.0%

-3.7%

-1.4%

-1.3%

-2.0%

Nominal gross wage

+5.2%

+3.7%

+3.4%

+3.5%

+4.0%

Unemployment**

12.5%

13.4%

12.2%

11.7%

4.12

4.19

4.20

4.17

4.09

60 Nov 1 1

Construction

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

Aug 14

Q1 2014

May 14

Q4 2013

Feb 14

Q3 2013

Nov 13

Coal mining

Q2 2013

Current account def. in % of GDP

+3.3%

+24.2

A ug 13

Sector

GDP in PLN bn current prices

+3.4%

+18.7

M ay 13

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

146.1

Q1 2014

-64.0

Source: The Central Statistical Office of Poland, GUS

Gross Wages

Growth y/y unadjusted

131.7

Q2 2014

m/m (%)

F eb 13

y/y (%)

-1.7

-0.2

Period

Jan '14 Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

Nov 12

Year

-0.2

Month

A ug 12

y/y (%)

Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14

M ay 1 2

m/m (%)

Jan '14 Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

Construction Output

Construction Prices Price s Month

Month

Feb 12

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

2013

*2014

*2015

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

weekly newsletter # 052 / 15th September 2014 / page 14

56.37 ↑

100 SEK

45.49 ↓

100 NOK

50.92 ↓

10,000 JPY

USD EUR 350

300

15.18 →

100 CZK 10,000 HUF

400

302.73 ↓ 133.15 ↓

Money Supply in PLN m Monetary base M1 - Currency outside banks M2 - Time deposits M3

as of 12 September 2014

WIG-20 stocks Price Change Change in alphabetical 12 Sep 5 Sep end of order '14 '14 '13

WIG Total index

Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

PLN (up to 1 year)

4.5%

4.4%

4.5%

4.4%

PLN (up to 5 y )

4.8%

4.9%

4.8%

4.7%

PLN (over 5 y)

4.7%

PLN (total)

4.7%

EUR (up to 1m EUR) 2.0%

1.9%

2.0%

1.9%

1.7%

EUR (over 1m EUR) 3.4%

3.3%

3.0%

2.7%

3.4%

3.1%

1 week

1 month

3 months

6 months

2.63%

2.57%

2.54%

2.48%

168,511 548,394 119,261 969,754 439,137 986,142

May '14

Jun '14

162,246 557,651

173,096 572,376

119,649

120,828

570,507 122,209

975,001 980,090

985,769 434,256

991,120

996,171 1,002,137

- Net foreign assets 126,943 142,260 144,033 152,864 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

Lombard

2.59%

164,008

435,386

426,351

Reference

Jul '14

NBP deposit

4.00%

Rediscount

1.00%

+4%

54,021. 021.81

→ Asseco Pol.

43.55

-5%

Change 1 week

↓ Bogdanka

109.3

-8%

-13%

↓ BZ WBK

387.6

-4%

↓ Eurocash

35.07

-2%

-26%

WIG-20 blue chip index

29.9

-16%

30.45

-8%

-43%

2,497.38 2,497.38

↓ Kernel

24.9

-4%

-35%

Change 1 week

↓ KGHM

127.55

-6%

+8%

↓ LPP

+6%

↓ JSW

Central Bank (NBP) Base Rates Apr '14

0% 0%

→ Grupa Lotos

Warsaw Inter Bank Offered Rate (WIBOR) as of 12 Sept 2014 Overnight

84.8

→ Alior Bank

2.75%

9,500

-5%

492

-3%

-2%

↑ Orange Pol.

11.4

+6%

+16%

187.4

-2%

+4%

55,000

21.8

-2%

+34%

54,000

5.1

+1%

-1%

40.68

-1%

39.31

-2%

50,000 49,000

↓ Pekao

The financial sector's net lending in PLN bn,

↓ PGE

loan stock at the end of period Type of loan

↑ PGNiG

Apr' 14

May' 14

Jun' 14

Jul' 14

Loans to customers

928,450

930,652

940,703

939,641

↓ PKO BP

- to private companies

270,886

273,360

276,709

274,549

↑ PZU

503

+2%

+12%

- to households

573,332

574,800

578,639

581,447

↓ Synthos

4.64

-1%

-15%

1,639,359 1,660,583 1,667,783

1,678,129

↓ Tauron

5.2

-1%

19%

Total assets of banks

→ PKN Orlen

Source: Central Bank NBP

+5% ↑

-2% ↓

Change end of '13

↓ mBank

Credit

-1% ↓

Change end of '13

+4% ↑

WIG Total closing index last three months

53,000 52,000 51,000

12 Sep 14

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

29 Jul 14

346.90 ↓

12 Sep 14

527.20 ↓

100 CHF

7 Jul 14

100 GBP

28 Apr 14

419.57 ↓

18 Feb 14

100 EUR

Key indices

Term / currency

450

6 Dec 13

324.68 ↓

27 Sep 13

100 USD

Stock Exchange

Average weighted annual interest rates

21 Aug 14

as of 12 September 2014

Interest rates

7 Jul 14

100 USD/EUR against PLN

Central Bank average rates

12 Jun 14

Currency

Source: Warsaw Stock Exchange

T rade Poland's ten largest trading partners, ranked according to 2013

Poland exports and imports according to commodity groups, according to SITC classification EXPORTS in PLN bn Jan-Jun 2014 Food and live animals Beverages and tobacco Crude materials except fuels Fuels etc

y/y (%)

share (%)

2013

EXPORTS in PLNbn

IMPORTS in PLN bn share (%)

Jan-Jun 2014

y/y (%)

share (%)

2013

share (%)

No Country

Jan-Jul share 2014

IMPORTS in PLN bn 2013

share No

Country

Jan-Jul share 2014

2013

36,142

+7.5

10.8

69,304

10.9

24,588

+5.4

7.3

47,906

7.4

1 Germany

101,201 25.8% 162,548 25.1%

1 Germany

85,393 21.7%

4,613

+12.3

1.3

8,624

1.4

1,994

+4.2

0.6

4,150

0.6

2 UK

25,021

2 Russia

44,274 11.3% 79,578 12.1%

6.4%

42,138

6.5%

142,161 21.7%

8,277

+3.1

2.6

15,744

2.5

10,695

-1.4

3.2

21,585

3.3

3 Czech Rep.

23,969

6.1%

40,110

6.2%

3 China

38,226 9.7%

14,094

-4.5

4.7

30,013

4.7

37,188

+5.3

11.1

75,539

11.7

4 France

22,469

5.7%

36,367

5.6%

4 Italy

21,433 5.5% 34,940 5.3%

61,127 9.3%

980

+18.0

0.3

1,864

0.2

1,299

+1.5

0.4

2,646

0.4

5 Russia

17,355

4.4% 34,069

5.3%

5 Netherlands

14,647 3.7% 25,409 3.9%

Chemical products

30,614

+4.5

9.3

59,103

9.3

50,051

+7.8

14.9

92,917

14.3

6 Italy

18,212

4.6%

4.3%

6 France

15,374 3.9%

Manufactured goods by material

66,704

+3.5

20.6

129,915

20.3

60,007

+8.1

17.9

112,392

17.3

7 Netherlands

7 Czech Rep.

13,558 3.5% 24,054 3.7%

110,703

+4.2

33.0

216,608

33.4

8 Ukraine

n/a

18,020

2.8%

8 USA

31,898 +14.4

9.5

58,210

9.0

9 Sweden

11,081

2.8%

17,581

2.7%

9 UK

10 Slovakia

9,795

2.5%

17,099

Animal and vegetable oils

Machinery, transport equip.

128,331

+8.2

37.7

239,434

37.5