Poland Today Business Review+ No. 053 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. 053 / 22nd September 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING IKEA Industry opens its largest sawmill in Stalowa Wola page 2 Poland's top paraffin maker to hit Warsaw bourse in October page 2 Swedish automotive fasteners maker Bulten to expand Polish unit page 4 BANKING & FINANCE AXA acquires mBank's insurance unit for PLN 570m page 5 MoneyGram will take up 7,300 sq.m at Konstruktorska Business Center.

Photo: HB Reavis

MoneyGram to hire 500 in Warsaw

US money transfer company MoneyGram will establish its European shared services center in Warsaw. "We will recruit more than 500 staff," MoneyGram's EVP Luke Wimer tells BR+. page 4

New cabinet cabinet lineline-up without Sikorski

The new government line-up,which was announced last week by PM designate Ewa Kopacz, does not include Foreign Minister Radek Sikorski, one of Poland's best known politicians. page 11

PROPERTY & CONSTRUCTION GTC gears up for major equity boost page 6 Skanska signs record office lease in Łódź page 7 Poland is an "exciting and successful" market for Immobel, CEO says page 8

tel. +48 881 650 600

RETAIL PROPERTIES New retail park to open in Jarocin in 2015 page 9 TRANSPORT & LOGISTICS Alstom's Pendolino high speed trains get certified to operate in Poland from December page 10 POLITICS & ECONOMY Industrial output drops 1.9% y/y in August page 11 EBRD raises GDP growth projection for Poland page 12 Polish exports to keep growing at robust pace, says HSBC page 12 OPINION Marek Belka: a deficit of trust page 13 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

weekly newsletter # 053 / 22nd September 2013 / page 2

MANUFACTURING & PROCESSING

IKEA Industry opens its largest sawmill in Stalowa Wola

"The sawmill has been equipped in a number of cutting edge technologies, such as 3D log scanners that enable us to make the best use of the logs, and an automated sorting systems which can sort through 150200 pieces of sawn timber per minute, whereas a human can handle only 30-50 pieces a minute."

IKEA Industry, the manufacturing arm of Sweden's flat pack furniture giant, has launched a new production unit in the town of Stalowa Wola. With a staff of 43, the sawmill can process 400,000 cb.m of logs per annum, and it will supply sawn timber to IKEA factories in Poland and Slovakia. It is the largest sawmill operated by IKEA Industry worldwide. "The location in Stalowa Wola gives us good access to raw material, boosting the reliability and consistency of our solid wood division's supply chain," Ewa Cander-Karolewska, communications manager at IKEA Industry, tells Poland Today. "Due to proximity to our furniture and component factories in Poland and Slovakia, we get to shorten delivery times, cutting transportation costs and CO2 emissions." The company will be sourcing timber locally, from FSC-approved Polish forests. The factory is located on a 25-ha site, which according to a number of sources is likely to see further investments from IKEA Industry in the future, including a furniture plant. "At the moment our focus is on rolling out production in Stalowa Wola and gradually achieving full operational capacity. We expect it to happen in two years at which point the plant's workforce will include around 80 employees," says Cander-Karolewska, refusing to disclose any details regarding IKEA Industry's capital expenditures in Stalowa Wola.

"Poland is currently the fastest growing market in the European Union for IKEA but our goal is to speed up that growth and make our products available to more Poles. Our goal is to multiply our turnover in Poland eight times over the next two decades to reach sales revenues of PLN 16bn. The new sawmill in Stalowa Wola is part of our dynamic growth platform," said Evelyn Higler, Managing Director of IKEA Retail in Poland.

MANUFACTURING & PROCESSING

Poland's Poland's top paraffin maker to hit Warsaw bourse in October IKEA Industry 's Stalowa Wola sawmill can process 400,000 sb.m of timber per annum.

Photo: IKEA Industry

IKEA Industry operates 44 production plants in 11 countries. Roughly a half of the company's global workforce of 20,000 people are employed at its 16 Polish factories that supply most of the solid wood and furniture board products to the global IKEA chain. Besides production facilities, the company has three product development centers in Poland. Its sister unit IKEA Retail runs eight furniture and interior goods outlets in Poland and has recently broken ground on another one in Bydgoszcz. Preparations are currently underway for a new IKEA store in Lublin. With a staff of 12,000 IKEA Retail Poland turned over approximately PLN 2bn in the financial year 2013, but the company has recently communicated a new ambitious growth strategy.

Polwax, one of Europe's top paraffin producers, seeks to hit the bourse in October, becoming the second chemical company this year to carry out an IPO on the Warsaw Stock Exchange, following the successful floatation of PCC Rokita a few weeks ago. Polwax's IPO is to enable its majority owner, Krokus Private Equity as well as other shareholders, including the company's CEO Dominik Tomczyk, to partially cash out of the investment. Based in JasĹ&#x201A;o, in the south-east of Poland, Polwax was spun off in 2012 from Lotos Group, Poland's second largest oil refiner, which eight years earlier had put together its two units in JasĹ&#x201A;o and Czechowice, creating Poland's largest producers and distributor of refined and deodorized paraffin. As part of its noncore asset sell-off, Lotos offloaded the company to a group of executives and Krokus Private Equity, which currently holds nearly two thirds of the business. The current owners are hoping to sell up to 3.8m of shares in Polwax, representing 38% of its equity (32% of

weekly newsletter # 053 / 22nd September 2013 / page 3

votes). According to estimates, the offer may amount to PLN 100m.

turnover and the company is unlikely to expand its geographical footprint due to high cost of logistics. Its key exports products are industrial paraffin and waxes, anticaking agent, paraffin emulsions, and waxes for rubber. As for Krokus PE, its team has been managing private equity in Poland for way over a decade. In 2007 the company launched Nova Polonia Natexis II, a EUR 100m mid-market expansion capital and buy-out fund focused on Poland. Its backers include Natexis Private Equity, which is the leading provider of private equity to small and mid-sized companies in France. Natexis is also a major player in Europe (Germany, Spain and Italy) and it has made some inroads into the fast-growing markets of Asia and South America.

Polwax is Poland's largest producers and distributor of refined and deodorized paraffin.

Photo: Polwax

Polwax offers high-quality paraffin, which is a basic raw material for candles and grave lights, as well as a valuable feedstock in the paint, textile and paper industries. Its products are being used in the food sector (for instance in cheese coating, packaging and poultry defeathering), wood industry (paraffin emulsions and wax), foundry industry (wax casting), chemical industry (anti-caking agents), machine-rubber industry (waxes for wire and conveyor belts coating, wax for tires), packaging industry (hot-melt type adhesives used in juice cartons), as well as cosmetic and pharmaceutical industries (white ceresin). With a combined staff of approximately 250 people at its Jasło and Czechowice-Dziedzice sites, Polwax turned over PLN 95.6m in 1H 2014 (up from PLN 85.8m in 1H 2013) and net-earned PLN 8.4m (PLN 5.9m). The full year figure earnings totaled PLN 20m on PLN 241m turnover last year. Exports (mainly to Germany, Hungary, the Czech Republic, Slovakia, Lithuania, and Ukraine), represent 15% of Polwax's

Poland Today talks to: Dominik Tomczyk, CEO of Polwax Photo: Polwax

• PT: How long is Krokus to keep its stake in Polwax? Dominik Tomczyk: Assuming Krokus sells all the shares it has on offer in the IPO, its stake in Polwax will go down to 32.6%. This divestment is natural step for the fund, which assumes an investment horizon of 3-5 years per project. Krokus is subject to a lock-up period, which means it will have to maintain its outstanding shares in Polwax for at least 12 months following the IPO. • PT: What will be the key source of value creation for Polwax over the coming years?

DT: We will continue building value for shareholders by improving our financial results, particularly net earnings, and strengthening our competitive position. To this aim, we are gradually transforming our operations towards production of specialized paraffin- & wax-based products that offer much higher margins. We want this products group to represent more than a half of our turnover by 2020. At the same time we intend to boost our sales volumes and increase our operating profitability. • PT: What capital expenditures will this require and how will you finance any potential investments? DT: Our plans for the coming years are not particularly capital-intensive. We are expecting annual outlays to the tune of PLN 2-3m. We will continue to finance them from the company's own resources as well as external sources, mainly bank credit, depending on the size of a given project. • PT: Can you give us an example of the kind of "high margin products" that one day are to generate the bulk of your revenue? DT: One example are products for the aviation industry, so-called modeling putty. Polwax participates in the INNOLOT initiative, under which we are working on hard wax that would be used in the casting of aircraft engine rotor blades. Polwax holds paptent for soft wax in this area and upon completion of our current research we aim to have one also for hard wax. • PT: So far exports have represented a small fraction of your sales and your focus on CEE markets was determined by high cost of logistics. Now your plans include expansion to Western Europe and other continents. Are we talking about a certain limited product group? DT: Our goal is to take these new specialized products to new markets. We expect that higher margins on these products will compensate for higher shipping costs.

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MANUFACTURING & PROCESSING

Swedish automotive fasteners fasteners maker Bulten expands Polish unit Sweden's Bulten AB, one of Europe's largest manufacturers of fasteners for the automotive industry is adding a logistics center to its Polish production unit in Bielsko-Biała. The built-to-suit project, to be developed by Polish P.A. Nova which will include 6,800 sq.m of production space and 700 sq.m of offices, is under construction in Wilkowice near Bielsko-Biała. The investor has chosen not to disclose its capital expenditures on the project and the number of jobs that may be created following its completion. "In 2013, Bulten established a logistics hub in the US and strengthened its logistics capacity in the UK. Now we are also strengthening our logistics capacity with a new logistics centre nearby our Polish factory. Bulten has grown strongly with a clear focus on organic growth and the conditions for continued growth remain good," Kamilla Oresvärd, Senior Vice President Corporate Communications at Bulten AB told Poland Today. Bulten said its expansion in Poland has to do with an increase in orders the company has experienced since 2011 and expected growth over the 2015-2017 period. "In 2013 Bulten signed new contracts worth around SEK 500m in total. Deliveries have started and will continue over a number of years and full volumes are expected in 2015," Ms. Oresvärd said. Bulten Polska S.A., which has been present in Poland for over 15 years, is part of the international group

Bulten AB, which until recently had been operating under the FinnvedenBulten logo. The origins of the business can be traced back to 1873 when Bultsfabriks AB was established in Hallstahammar. In 2001, Finnveden (founded in 1982) took over Bulten and moved the headquarters to Gothenburg. Bulten was delisted, but under the name FinnvedenBulten the company was finally listed again in 2011, and from September 1, 2014 it has gone back to the Bulten brand, following the sale of its Finnveden Metal Structures unit to Ohio-based Shiloh Industries.

We have not released any number of new jobs that will be created. We have not released capex nor do we leave turnover per site. FinnvedenBulten turned over SEK 3,061m in 2013 (+3.3% y/y) and its profits almost doubled from SEK 43m in 2012 to SEK 88m last year. The Bulten division had sales of SEK 1,811m in 2013. The group had 1,837 staff as of end of last year.

BANKING & FINANCE

Cash transfer firm MoneyGram to create 500 jobs at new Warsaw unit US-based MoneyGram International, one of the world's leading money transfer companies, will create more than 500 positions over the coming years at its new Global Business Center that launches next month in Warsaw. The Bielsko-Biała plant is Bulten's largest production Photo: Bulten unit worldwide.

Prior to that split-up, FinnvedenBulten's Polish plant in Bielsko Biala, established in 1997, had 700 staff and its operations were almost evenly divided between the fasteners and metal structures business. Over the past years the company has been gradually relocating production from its Swedish plants to Poland. Following the Finnveden spin-off, Bulten Polska has some 350 employees and it remaisn the company's largest site. Its operations include cold forging, threading, heat treatment, case- and induction hardening, secondary operations such as machining, turning, drilling, sorting and packaging.

"The Warsaw location will primarily be a sharedservices center with a variety of functions, including information technology, finance, compliance, human resources and customer care and agent services operations. MoneyGram’s sales and account management teams for this region will also be based in Warsaw," Luke Wimer, MoneyGram Executive Vice President of Global Operations tells Poland Today." The center will take up an entire floor of more than 7,300 sq.m at Konstruktorska Business Center, developed by Slovakia's HB Reavis in the Polish capital's booming business district of Mokotów. Working with employees, agents and consumers around the world,

weekly newsletter # 053 / 22nd September 2013 / page 5

the Warsaw center will support MoneyGram’s global business in more than 200 countries and territories. "In selecting Warsaw for its new Global Business Center, MoneyGram was impressed by the deep talent pool available across multiple functions, multilingual workforce and strong financial services sector in a business friendly environment. Warsaw offers a strong labor force that is ready to do business across cultures and languages, ensuring a smooth transition for MoneyGram’s global, cross-functional teams," says Wimer.

sumers around the world. The company operates through a vast network of more than 345,000 agent locations - including retailers, international post offices and banks - in more than 200 countries and territories, and through mobile and online channels. MoneyGram's revenues increased 10% last year, nearing USD 1.5bn and its goal is to reach USD 2bn turnover in 2017 with 15 to 20% of money transfer revenue from self-service channels (up from 6% last year). The company reported EBITDA of USD 226m and net income of over USD 52m.

"Warsaw offers a strong labor force that is ready to do business across cultures and languages," says Luke Wimer, EVP of Global Operations at MoneyGram Photo: MoneyGram

Asked whether the processes and functions will be transferred to Warsaw from other MoneyGram locations worldwide, Mr. Wimer replies: "The Global Business Center in Warsaw is part of MoneyGram’s Global Transformation Program, an initiative that began in 2014 designed to increase our global competitiveness and enhance MoneyGram’s suite of innovative products and services. MoneyGram has nearly 35 office locations around the world and some positions will be transferred from locations in the US to the Warsaw location." The NASDAQ-listed MoneyGram is a leading personto-person global money transfer company that provides access to financial services for millions of con-

Konstruktorska Business Center is a 7-storey building with a GLA of 48,000 sq.m and 1,050 parking spaces. Its tenants include Procter & Gamble, Grupa Żywiec, Otis, Carrier, Comperia.pl and IMS Health. Photo: HB Reavis

"Poland is an important part of MoneyGram’s business as a top remittance receive country, and its strong economic growth also makes it an increasingly important send market. MoneyGram already has nearly 7,000 Polish agent locations, and we are excited to expand our presence in Poland’s vibrant economy," concludes MoneyGram's EVP.

BANKING & FINANCE

AXA acquires mBank's insurance unit for PLN 570m French insurance giant AXA has agreed to acquire BRE Insurance, the property and casualty subsidiary of the Warsaw-listed mBank, for PLN 570m (EUR 136m). The value of the deal may be increased by a further PLN 31m (EUR 7m), as long as certain additional conditions are met. The transaction, which is subject to regulatory approval, will boost mBank's consolidated gross profit by PLN 180m, the Polish unit of Germany's Commerzbank said in a statement. mBank is one of Poland's top retail banks, with 4m customers and 250 outlets. At the beginning of the previous decade mBank pioneered the online banking revolution in Poland and it remains at the forefront of the sector. Celent Research has recently named mBank Europe's top digital model bank in 2014. BRE Insurance is mBank’s captive insurance subsidiary which underwrites mainly motor, payment protection and household insurance. The business has seen 15% annual premium growth from 2010 to 2013. Last year it posted net income of EUR 21m on EUR 46m gross written premiums. As part of the deal, AXA has entered into a 10-year exclusive distribution agreement with mBank in Poland, for property & casualty and life protection insurance. According to AXA, the transaction will strengthen its distribution reach in Poland through access to mBank's multi-channel distribution model, and boost the French insurer's presence in the country's direct motor channel. The French are apparently not done expanding in Poland, however.

weekly newsletter # 053 / 22nd September 2013 / page 6

"We are not as big as we would like on the Polish market," said AXA Global Direct CEO and AXA group executive committee member Stephane Guinet. "So we will watch the market and look for potential opportunities." AXA has been in Poland since 2006 offering life & savings, accident, motor, travel, pension insurance products and asset management services to over 2m individual clients. AXA also provide property & c asualty insurance cover for corporate clients, including international corporations. In 2007 the company launched AXA Direct Poland, which has since become Poland's number two direct motor player with PLN 303m (EUR 72m) of gross written premiums and 450,000 customers. According to AXA, its Polish unit is profitable. Globally, the Paris-listed firm has 102m clients in 56 countries. In 2013, Its revenues amounted to EUR 91.2bn and underlying earnings totaled Euro 4.7bn, according to IFRS. AXA had EUR 1,113bn in assets under management as of December 31, 2013. The number one direct insurer (and AXA's top competitor) in Poland is Link4, which has been recently snatched up from its previous owner, UK's Royal & Sun Alliance Insurance for a EUR 93.9m consideration, by Poland's top insurance firm PZU. The transaction was announced back in April but closed last week.

PROPERTY & CONSTRUCTION

GTC gears up for major equity boost Shares in the Warsaw-listed property developer Globe Trade Centre (GTC) took a plunge last week after the company announced plans for a new rights issue. GTC said it would issue up to 140m new shares

(representing a 43% increase in the volume of outstanding shares according to Bloomberg) "to finance acquisitions of yielding properties, where GTC will unlock value added potential through its regional platform and asset management skills, as well as organic growth from selected development projects." GTC's share price dropped by nearly 9% on the morning of September 15, down to PLN 5.3 – its lowest level in more than two years – amid trading volumes that were six times the daily three-month average. Seemingly, besides the sheer size of the planned equity boost, what raised investors' concerns were GTC's vague investment plans. GTC's shareholders are to decide on the new issue in October. "The CEE and SEE markets are now offering attractive investment opportunities arising from the high yield spread in a low interest rate environment allowing for accretive growth. Rents in many capital cities in the region are at their historical lows. The combination of these factors creates investment opportunities for GTC," said the firm, which has performed rather poorly in recent months. Since late August, when it posted a EUR 63m Q2 loss (four times higher than average projections), GTC saw its share price drop by nearly 17%. The company attributed much of the loss to revaluation of properties due to a decline in expected rental values and lack of investor interest, particularly on the Croatian and Romanian markets. Despite the recent hiccups, GTC's executives are in a bullish mood: "GTC has completed its restructuring phase and achieved good and stable operating results. Now, GTC is in good shape to take advantage of the attractive investment opportunities that we have identified to stimulate company growth. The potential acquisitions, to be partially financed with the new capital, will enhance GTC’s investment portfolio, effectively creating

shareholder value," Thomas Kurzmann, GTC's Chief Executive Officer. According to GTC, it has carefully selected a number of potential acquisition targets, in Poland and capital cities in the CEE and SEE region, that meet its investment criteria. GTC aims to invest in yielding office and retail properties with value added potential which can be realized through its regional platform and asset management skills. Potential acquisition targets are located in Poland and capital cities in the CEE and SEE region. These acquisitions and selected project developments, most importantly the two shopping malls in Warsaw, should allow GTC to boost its real estate portfolio and increase cash flow from operations. GTC representatives told Poland Today the equity boost is a direct consequence of a strategic shift from property development to development and asset management, which the company communicated at the beginning of the year.

The Pascal office building in Kraków is GTC's most Photo: GTC recent completion in Poland.

"We see acquisition opportunities that can be translated into highly accretive growth at GTC. In order to take advantage of these opportunities GTC needs to

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raise equity. We believe the execution of our growth strategy will change GTC’s profile into a cash generating company in the mid-term," added Alexander Hesse, Chairman of GTC’s Supervisory Board. GTC, which developed one of Warsaw's most popular shopping centers Galeria Mokotów, is currently pooling together resources to finance two major retail projects: Galeria Wilanów and Galeria Północna in Warsaw, Poland. GTC estimates that phase one of Galeria Północna will open its doors in 2015 with a GLA of 64,000 sq.m, whereas Galeria Wilanów is to welcome its first customers in 2016 with an initial GLA of 61,000 sq.m. The dates are not final, however, as GTC is yet to obtain building permits for the two projects, each of which is to cost some EUR 170-180m to build, according to information Poland Today received last year from GTC's Małgorzata Czaplicka. The developer has recently signed leases with key tenants for the two centers: hypermarket operator Carrefour (9,300 sq.m in Północna and 6,800 sq.m in Wilanów) and fashion retailer LPP (4,670 sq.m and 4,680 respectively). Established in 1994 in Warsaw, GTC currently operates in Poland, Hungary, the Czech Republic, Romania, Serbia, Croatia, Slovakia, and Bulgaria. GTC develops and actively manages real estate portfolio in two sectors of the market: office buildings and retail centers. Since its establishment, the Group has developed 47 office buildings and 12 shopping malls with a total net space amounting to more than 1 million sq m. GTC currently manages 28 commercial real estate projects with a total commercial space of over 589,000 sq m. One of the leading shareholders in GTC is the Lone Star Real Estate Fund III, which acquired a 28% stake in the company last year for EUR 160m from Israeli Kardan NV, a company linked to GTC's original founders.

PROPERTY & CONSTRUCTION

Skanska signs record office lease lease in Łódź Merely a week after it had bagged a 16,400 sq.m lease agreement in Wrocław, Sweden's Skanska Property Poland has broken another record by signing a 10year agreement in Łódź for more than 21,000 sq.m of office space with business services company Infosys BPO. The contract, which according to Cushman & Wakefield is the largest ever in Łódź and the biggest so far this year in all of Poland, covers new lease terms for the area already occupied by Infosys at Łódź's Green Horizon office building as well as an additional 3,800 sq.m the company has booked to accommodate its growing staff numbers. Infosys BPO Poland is the largest business services center in Łódź and one of the largest in Poland. India's Infosys landed in Łódź in 2007 with the acquisition of a Philips shared services centre in the city. The company has since seen remarkable growth both in terms of size as well as the range of supported processes, gradually shifting its profile from transactional services provided in the English language (mainly bookkeeping) to a broad array of multi-language consulting services. Having recruited some 800 new staff last year, Infosys BPO reached the 2,000 employee mark in April 2014 and the company seeks to create a further 500 positions over the subsequent months. "Infosys BPO Poland serves clients in nearly 50 countries in 24 languages," Wojciech Karpiński, operations manager at Infosys BPO Poland told Poland Today back in spring. "We continue to expand our client base, on a project and well as long-term cooperation basis. They are mainly global corporations from sec-

tors that span retail & services, property, chemicals, machinery and mining, but we do have some Polish clients as well."

Infosys is the key tenant in Skanska's Green Horizon building.

Photo: Skanska Property Poland

Expansion possibilities are one of the main issues BPO companies pay attention to when choosing offices. Since their growth can be extremely rapid or gradual, flexibility is key. Top security standards are equally important, as BPO operators often handle highly confidential, critical client data. Infosys BPO Poland offers services that include hedging, financial statement consolidation, internal audit, business process and strategic consulting, management systems implementation, as well as purchasing and products database management. "Poland's service outsourcing sector has seen intense expansion in recent years, and as it is shifting towards more complex processes, the demand for experienced employees increases, which may lead to shortages on local labor markets. At Infosys BPO we are currently redefining our existing training and recruitment models to continue selecting the most talented students and graduates, at the same time investing in their soft and hard skills though series of lectures, workshops,

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and internships as well as tightening cooperation with local universities. One example is the "Linguistics for Business" major at the Łódź University, launched last year, which combines language skills with business studies," Wojciech Karpiński told Poland Today. In the preceding week Skanska Property Poland signed a new lease agreement with HP Global Business Center concerning an area of 16,400 sq.m in the Dominikański office building in Wrocław, Skanska's 4th project in the southwestern Polish city. Skanska Property Poland is very active in Poland's regional markets, with investments also in Poznań, Kraków and Katowice, where its largest Polish office project to-date, the 46,000 sq.m Silesia Business Park, is currently under construction. 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. Later this year the developer hopes to start working on the 80,000-sq.m Generation Park, Skanska's largest project in Warsaw to-date. 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

Poland is an "exciting and successful" market for Immobel, CEO says BR+ wrote a few weeks ago about Belgian developer Immobel obtaining a building permit for its flagship

CEDET project in downtown Warsaw, the construction of which is to begin this autumn. The mixed-use scheme is to reach completion in Q1 2017, delivering 15,000 sq.m of office space and 7,050 sq.m of retail space in one of the Polish capital's busiest pedestrian areas, at the intersection of Krucza and Bracka streets. Last week we caught up with Gaëtan Piret, CEO of Immobel S.A., which has been one of the most important players of the Belgian real estate market for over 150 years. The company has been operating in Poland since 2011, focusing on development of office and residential projects. Its key Polish projects include the Okrąglak and Kwadraciak buildings in Poznań, and CEDET in Warsaw. All three are based on assets acquired from Centrum Development & Investments, with which Immobel shares the same shareholder, the Eastbridge group.

Poland Today talks to: Gaëtan Piret, CEO of Immobel Photo: Immobel

• PT: It's been more than three years for Immobel in Poland. Has the market lived up to your expectations? Gaëtan Piret: As expected we found the market very exciting and successful. Although certain developments such as CEDET were not launched according to our initial expectations, we have managed to complete other projects. Together with our JV partner - Griffin we have acquired and sold plots across Poland for approximately 150,000 sqm of lettable area to be con-

structed. Our project in Poznan - Okrąglak is 90% leased and is expected to be sold in the coming months. During the period we became partner in a significant residential development - Eko Natolin with 36 ha of land to be developed in Wilanów district in Warsaw. We are also advanced in several interesting acquisition schemes that will provide a pipeline for the future. Our projects provide us with healthy mix of both office and residential projects. The last but not least we have established a strong local team in Poland.

Immobel seeks to give a new lease of life to one of Warsaw's architectural gems. Image: Immobel

• PT: You were hoping to launch the CEDET redevelopment in 2012 but you are starting two years later. What took so long? GP: The renovation and extension of such historical and important to the city project is a complex endeavor. We had to make sure that the final building will not only meet the modern requirements of the tenants but will still preserve the historical elements of the project. We wanted to reconstruct the historical facade that existed prior building fire which took place in 1975 and still make sure that the space will be functional and efficient for our future tenants. We have also spent substantial amount of time on the final design

weekly newsletter # 053 / 22nd September 2013 / page 9

of the new, extended part of the building. Our intention was to create a building that will correspond well with the historical part of the building and neighborhood, that will not overwhelm the closest vicinity and will melt into the surroundings. Our design was also subject to approval by the City Historic Preservation Officer, who implemented some valuable changes and modifications to the project. Although all those activities took us longer than we have initially expected, we are now convinced that our project will be new icon of the city and also will fulfill the highest requirements of our tenants. • PT: What will be the estimated capex on the CEDET project? GP: The total investment value of this project exceeds PLN 400m. • PT: Do you intend to maintain the same small scale of operations in Poland in the coming years, or is Immobel's Polish business going to pick up speed? GP: As of end of 2013 we had invested more than PLN 200m in Poland. This currently represents 15 % of the Group investments and will gradually increase. I would not call it small scale operations. What is important is that we invest selectively, in prime office & residential projects in downtown locations. We target the capital city and other major cities with the healthiest indicators.

RETAIL PROPERTIES

New retail park to open in Jarocin in 2015 Property firm Multishop Development is gearing up to break ground on its second Multishop project in Po-

land. With a leasable area of 5,400 sq.m and 230 parking spaces Multishop Jarocin is to reach completion in Q4 2015. The project will be located in the town of Jarocin (65km south east of Poznań), near an existing Bricomarche DIY outlet and Intermarche hypermarket. According to the investor, its catchment area covers some 27,000 of Jarocin’s inhabitants and more than double that number of potential clients from surrounding regions of the Wielkopolskie voivodship. "Within a year from the planned opening date of the scheme the Jarocin ring road is expected to be completed. It will run in close proximity to Multishop Development’s project, which will additionally enhance the facility’s exposure, enlarge its catchment area and improve access. The closest large shopping centers are located in Kalisz and Ostrów Wielkopolski, 50km away. All of these factors will help to attract interest of potential tenants," says Tomasz Lipiński, negotiator from the retail department at Cushman & Wakefield, which is the leasing agent for Multishop Jarocin. Multishop Development, part of British-owned McKinlay Development, has recently completed the final extension of first Polish project, the 20,000 sq.m Multishop Sochaczew, some 60km west of Warsaw. Anchored by a Tesco hypermarket and OBI home improvement store, the project has been expanded by 4,500 sq.m to include 11 new outlets. Located near the Warsaw-Poznań road, Multishop is a typical retail park, enabling customers to enter stores directly from the parking lot, which offers 600 spaces. Back in 2011 McKinlay Development's key shareholder and CEO Craig Thomas McKinlay said his company were to build 10 Multshop retail parks in Poland with a combined GLA of more than 200,000 sq.m in five years. His target were regional towns such as Żywiec, Jelenia Góra, Bochnia, Iława, Sieradz and Ciechanów, offering an average catchment of 150,000-200,000.

DATA BOX: RETAIL WAREHOUSES & RETAIL PARKS IN 1H 2014 Total retail park and retail warehouse stock in Poland stands at approximately 2.4m sq.m, with parks accounting for around a quarter of the total. Due to high saturation of modern retail space in large cities, retail parks are being developed mainly in smaller cities. Four retail parks totaling 24,000 sq m (5,000-8,500 sq.m each) were opened in H1 2014: Karuzela in Lubliniec (24,000 inhabitants) and Turek (28,000 inhabitants), Era Park Handlowy in Radomsko (48,000 inhabitants) and Park Handlowy in Żory (62,000 inhabitants). The largest volume of new space in this sector was delivered through the extension of the Graniczna shopping centre in Płock: 15,000 sq.m for the Leroy Merlin DIY store. Seven retail parks totalling around 41,000 sq m are scheduled to open by the end of 2014. These include schemes sized between 5,000 sq m and 6,000 sq m in Kętrzyn, Nowa Sól, Siedlce, Chełm, Ruda Śląska, Bielsko-Biała and Łódź. Rents in retail parks are stable at EUR 6-8/ sq.m/month for large units and EUR 9-13/sq.m /month for medium-sized space. Rents for freestanding retail warehouses average EUR 6–8/sq.m/month. Source: Cushman & Wakefield

"Our goal at the time was development of regular shopping centers in cities of up to 100,000 inhabitants, albeit with a smaller GLA than in big city malls. Our Sochaczew project is a model example as it combines DIY and grocery retailers with a retail park, petrol station, and a McDonalds," Zbigniew Dymarkowski, board member at Multishop Development, the SPV in charge of Multishop, told Poland Today a few months ago. "Over the past three years we have witnessed a

weekly newsletter # 053 / 22nd September 2013 / page 10

fast paced expansion of discount supermarkets coupled with a slower growth of home improvement retailers in smaller towns, which has affected our plans." The Multishop concept is pretty straightforward: good location near a major intersection, offering good local and regional accessibility, low maintenance costs, plenty of parking and strong grocery/DIY anchors. "The idea is to create a convenient shopping location for local residents, where they are able to quickly access stores straight from the parking lot. We remain interested in building further retail parks in smaller towns, but since the retail property market is becoming saturated relatively quickly, we are now contemplating entry into residential developments as well," Mr. Dymarkowski said.

Back in May, Poland’s Deputy PM Janusz Piechociński hinted the state-owned operator PKP Intercity may pull out of its agreement with Alstom, after the manufacturer had failed to obtain UTK's certification by the agreed deadline of May 6. The Polish side said it would fine the producer close to EUR 0.5m a month for each undelivered trainset. Alstom's line of defense was that that the Polish railway network lacked the Level 2 ERTMS system that is required for Pendolino to travel at high speeds and therefore the company was not able to carry out the necessary testing that was required for certification. Therefore, Alstom wanted to deliver the Pendolino with certification allowing it to travel up to 160 km/h and not 250 km/h as originally requested, only to upgrade their permits at a later point.

TRANSPORT & LOGISTICS

Alstom's Pendolino high speed trains get certified to operate in Poland from December Following a few nerve-wrecking months, Alstom Transport Europe has finally obtained certification from the Polish Office of Rail Transport (UTK) for its Pendolino trains that will run between Poland's key cities starting December 2014. The institution, which oversees rail transport safety in Poland, has confirmed that the Pendolino can run at speeds of up to 250 km/h and is compliant with Polish signaling system and European ERTMS level 1. To-date, Alstom has already delivered on time 16 trainsets, out of the 20 ordered in mid-2011.

During testing, the Pendolino train reached a highspeed record of 293 km/h in Poland. Photo: Alstom

PKP Intercity ordered 20 of the seven-car Pendolino EMUs in May 2011 at a cost of EUR 400m, and the trains will be maintained by the manufacturer under a

17-year deal worth a further EUR 265m, which includes the construction of dedicated maintenance facilities for the fleet in Warsaw's eastern suburb of Olszynka Grochowska. The Polish company faced a great deal of criticism for having chosen a non-tilting version of the Pendolino, thus abandoning one of its key features, due to limitations of the Polish railway infrastructure. Critics argued that Poland could have chosen much cheaper and locally made EMUs instead of paying a premium price for a product, the benefits of which it cannot fully exploit. The trains are to enter service on Warsaw – Gdańsk, Warsaw – Wrocław and Warsaw – Kraków/Katowice EIC Premium services in December 2014. These routes are currently being modernized to allow the new trains to operate at higher speeds, cutting the travel time between Warsaw to Gdańsk from 4h17min to 2h58, between Warsaw and Kraków/Katowice from 3h 10 min to 2h34min, and between Warsaw and Wrocław from 5h15min to 3h40min. Following the completion of the CMK route upgrade in 2015, which includes the installation of ERTMS Level 2, it is likely the trains will be able to operate at up to 230km/h on this route, further reducing travel times. France's Alstom Transport has sold some 500 Pendolino trainsets to-date. The Italian-made high speed train is now certified to operate in 14 countries and to cross seven European borders. Alstom Transport manages entire transport systems, including rolling stock, signaling, maintenance and modernization, infrastructure and offers integrated solutions. With a global workforce of 28,300 people, the company recorded sales of EUR 5.9bn in the fiscal year 2013/14.

weekly newsletter # 053 / 22nd September 2013 / page 11

POLITICS AND ECONOMY

PM designate presents new cabinet lineup; lineup; leaves Foreign Minister Sikorski out Poland's prime minister nominee Ewa Kopacz announced the line-up of her new cabinet last week, following the resignation of Donald Tusk who is getting ready to start his new job as the European Council President in December. Although most key ministers from Donald Tusk's government (finance, treasury, defense, economy) are to keep their posts, one nomination came as a big surprise, at least to foreign commentators. Foreign Minister Radosław Sikorski, one of very few Polish politicians who are relatively well known internationally, is to be replaced by Grzegorz Schetyna, a long-time rival of Mr. Tusk, who has repeatedly challenged the latter's authority over the years. The decision to bring Schetyna into the government, despite his complete lack of international experience, is seen as an attempt by Kopacz to preserve the unity of the ruling Civic Platform (PO) party ahead of the general election due to take place next year. After Tusk announced his departure for Brussels, Schetyna said he would run for leadership of the Civic Platform, a post Tusk is vacating. That would be a direct challenge to Kopacz, as traditionally the prime minister is also party leader. "I wanted a strong government with the backing from the whole of Civic Platform," said Kopacz, who will become Poland's second woman prime minister when

she is confirmed in the post. The former speaker of parliament will be formally appointed by the president on September 22. She then has two weeks to submit her government to a vote of confidence in parliament. Since the PO and its junior coalition partner PSL have a small minority in the parliament, the whole procedure should be a mere formality.

ernment who won't be part of Kopacz's cabinet is Infrastructure Minister Elżbieta Bieńkowska, who will follow the former PM to Brussels to take up job as a an EU commissioner for internal market and services.

Radosław Sikorski, an Oxford-educated former war correspondent who is married to the Pulitzer Prize winning American author Anne Applebaum, is to take Kopacz's place as the new speaker of parliament. Although according to the constitution his will be the second most important position in the country after the president, many observers believe the job may not be exciting enough for Sikorski, whose interests have always been closer to geopolitical issues. Sikorski is being often mentioned as a potential candidate for major international posts, such as a NATO secretary general, but some believe his strongly anti-Russian views and blunt ways may keep the Polish politician from jobs that require mediation skills.

Industrial output drops 1.9% y/y in August

Sikorski's image as Poland's top diplomat was dented somewhat following the publication of illegal recordings of conversations between top Polish politicians in June. One of the leaked transcripts shows Sikorski discuss foreign policy with Jacek Rostowski, the former finance minister, referring to Poland' strategic alliance with the USA as "worthless." This and other comments made by Sikorski, in what were often rather vulgar terms, may have undermined his diplomatic credentials, even though the general public seems to share his view on the Polish-American relations. Interior Minister Bartłomiej Sienkiewicz, whose conversation with Central Bank governor Marek Belka (see our Opinion section on page 13) was perhaps the most controversial part of the illegal tapes released by the Wprost magazine in June, has also been replaced. Another high profile member of Donald Tusk's gov-

POLITICS & ECONOMY

Poland's industrial output contracted faster than expected in August due to a significant drop in production in the automotive sector. Production dropped by an annual rate of 1.9% in August after a 2.3% rise in July, Poland's statistics office said last week. The result was considerably weaker than average projections of economists, who had been banking on a 0.3% decline. Output grew annually in 15 out of 34 categories, with electronics production up 15.4% and furniture output up 11.2%. The sharpest declines were recorded in the production of cars and vehicles, down 18.6% annually while output from the drinks industry fell 11.6%. Construction output fell 3.6% on the year.

Industrial output & producer prices Industry output, y/y change Producer Price Index, y/y change 8% 4% 0% -4% -8% -12% Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

Oct 13

Source: GUS, the central statistical office

Dec 13

Feb 14

Apr 14

Jun 14

Aug 14

weekly newsletter # 053 / 22nd September 2013 / page 12

Seasonally adjusted output grew 0.7% on the year in August, but declined 1.2% from July. Polish producer prices declined at an annual rate of 1.5% in August, the statistics office said. The figure was above the forecast 1.6% decline and compared with a revised 2.1% drop in July.

POLITICS & ECONOMY

EBRD raises GDP growth projections for Poland The European Bank for Reconstruction and Development has revised up its forecasts for economic growth in central Europe for this year following what the London-based institution described as strong growth in the first half, particularly in Poland and Hungary. In its latest economic outlook report, the EBRD said the positive shift was primarily a result of reinvigorated domestic demand in the region. However, it warned that there could be a negative impact from a Russian ban on EU food imports. The EBRD raised the forecast for Polandâ&#x20AC;&#x2122;s growth to 3.0%in 2014 from a forecast of 2.8%in May, following sharply higher exports and stronger industrial production in the first half of the year. The food ban will weigh somewhat on Polish growth, although food exports to Russia only account for 0.2% of GDP. The EBRD said the three Baltic States have been more directly impacted by the sanctions and the significant slowdown in Russia. In addition to agricultural firms with large export exposure to Russia, transport firms shipping goods between European countries and Russia may also be se-

verely affected, according to EBRD. Any impact on the eurozone economy from the deterioration in relations with Russia would also feed through to central Europe, the institution said. The EBRD report has also pointed to the potential positive knock on effects of an effective quantitative easing policy in the Eurozone for emerging European countries. "The case for quantitative easing has become compelling to support the still fragile recovery in the Eurozone, to which much of the (Central Europe and Baltic and south eastern European) regions are strongly linked. An effective Eurozone QE may help lessen the risk of setbacks in the recovery of those regions," the report said.

POLITICS & ECONOMY

Polish exports to keep growing at robust pace, says HSBC Poland's exports will grow at an average pace of 9% annually in years 2014-2016, despite the crisis in Eastern Europe, according to a report by Oxford Economics for HSBC. The forecast places Polish exports growth ahead of all European countries and behind just a few Asian economies, namely Vietnam, India, Korea and Turkey. Best potential for export growth is seen in the machinery and automotive business, which should generate as much as 4 pps of the 9% total export growth. Industrial machinery and transport equipment, are expected to increase their share in Poland's total merchandise exports from around 30% in 2013 to approximately 45% the long term, similar to the current structure of German exports, the report argues.

"Given cheap labour, a favorable geographical location and a strong manufacturing base, export growth in Poland is likely to remain solid in coming years. However, weak growth prospects in Europe imply that a diversification of export destinations to faster growing Asian economies is required to support this strong export growth," the report said. Despite the recent fall in export orders from Ukraine and Russia, almost half of all respondents surveyed by Oxford Economics expect a slight increase in trade volumes over the next six months. The Trade Confidence Index improved to 110 in H1 2014 from 107 in H2 2013, indicating improved confidence regarding trade growth in Poland. More than 10% of respondents who expect trade to grow said they had recently secured large new orders. 75% of respondents consider Europe as the most promising region for trade over the next 6 months. With Europe accounting for a large share of Polandâ&#x20AC;&#x2122;s total exports, the expected recovery of demand in the Eurozone should provide a boost to export growth. Germany was identified as the most important trading partner by 40% of respondents, meaning that the expected strengthening of the German economy will be particularly important. According to HSBC & Oxford Economics, Germany will remain the main trading partner of Poland even in 2030 due to similarities in manufacturing tradition, close trade links and its favourable geographical location. However, slow growth in Western Europe means that export destinations will likely shift to faster growing large emerging markets economies such as China, India and Brazil. The share of goods exports going to Europe (excluding Russia) will fall to 77% by 2030 from the current level of over 80%.

weekly newsletter # 053 / 22nd September 2013 / page 13

OPINION

Marek Belka: a deficit of trust Prosecutors have dropped their case against NBP President Marek Belka, but questions as to his independence are still too big to ignore

by Poland Today Editor Andrew Kureth

In about two weeks, the National Bank of Poland’s Monetary Policy Council will probably decide to cut interest rates, loosening up lending and giving the country a much-needed monetary nudge. The move is overdue. Poland’s economy is slowing down after an encouraging first quarter of this year. Retail sales are slowing, as are wage and employment growth. Cutting rates will not set off any inflationary pressure. In July, Poland slipped into deflation for the first time since the statistical office began keeping records in 1982 – this after inflation had remained below the central bank’s target for 19 months prior. The much-expected cut will come just a month or so ahead of local elections that will prove a crucial first test for new Prime Minister Ewa Kopacz. Her ruling party, Civic Platform (PO), has been gaining in the polls since former PM Donald Tusk was named head

of the European Council, but in politics two months is a long time and voters forget prestige successes quickly if their wallets seem thinner. The Council is supposed to remain politically neutral, acting only on economic grounds. But after this summer’s tape scandal, which saw a number of Polish politicians’ embarrassing private conversations recorded and made public, we can no longer assume that is the case. While the recordings were certainly made illegally and mostly revealed that some of Poland’s leaders use uncouth language or hold unpalatable views, there was one conversation that Polish prosecutors decided was worth investigating.

This week prosecutors dropped their case against Belka and Sienkiewicz, claiming that there was lack of evidence that the two had exceeded their powers. And judging by what has been revealed in the media, that’s probably true. The tapes may indeed have been manipulated, and no formal deals can be heard being made.

That conversation was between President of the NBP Marek Belka and Interior Minister Bartlomiej Sienkiewicz. In it, Sienkiewicz asks whether he could count on help from the NBP if Poland’s economy goes south before next year’s parliamentary elections. Belka suggests that he could “play ball”. Solutions discussed include financing the budget deficit by the NBP. Central Bank Governor Marek Belka.

But Belka sets certain conditions for his cooperation. Namely, the dismissal of then-Finance Minister Jacek Rostowski, and the appointment of an apolitical technocrat in his place. Four months after the recording was made, that was exactly what happened. In November 2013 Donald Tusk reshuffled his cabinet, dismissing Rostowski and appointing Mateusz Szczurek, who had previously been chief economist at ING for Central Europe, with no prior political experience. Now all of that may have been a coincidence, and Belka insists the tapes were spliced. But what is clear is that Belka was setting particular political conditions, despite his supposed independence as a central banker.

Photo: IMF

But the troubling part is that Belka was setting conditions at all. The implication is that if he didn’t get his way, he might not have done what was best for Poland’s economy. Is it possible that if Tusk had not dismissed Rostowski, Belka would have worked to hold interest rates steady when they needed loosening? Would he have purposefully done damage to the economy to punish the government? That’s unclear from the tapes. But the suspicion remains. Add to that other mistakes made during Belka’s tenure, including notoriously bad communication to the market about its upcoming moves and a penchant for cutting rates too late, and a picture emerges of a central bank chief whom the market cannot trust.

weekly newsletter # 053 / 22nd September 2014 / page 14

KEY STATISTICS Consumer Prices

Inflation Jun '14

Jul '14

Aug '14

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

Food & bev

-0.8

-2.7

-1.1

+3.1

+8.4

+3.8

+1.2

+2.1 2013

+0.1 +4.0

0.0 +3.8

0.0

Year

2009

2010

2011

2012

-2.8

Turnover in PLNbn

582.8

593.0

646.1

676.0

n/a

+4.3

+5.5

+11.6

+5.6

+2.3

-0.6

-0.2

-0.1

+0.2

-0.1

-1.0 +0.8

+1.3 +2.4 +2.6 +0.3 0.0

-1.5

0.0

+1.2 +3.9

+1.3

-0.2 -0.2

y/y (%) Aug 14

-0.4

-1.1

0% -1% Jun 14

-0.1

-2.7 +0.1

Apr 14

Transport

-5.1

0.0 +0.6

Feb 14

-4.9

Dec 13

-0.1 +0.6

Oct 13

-0.8

+1.6

Aug 13

-4.7

0.0

Jun 13

-0.1

-0.3 -0.4

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-Aug y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

(in '000 units)

Producer Prices

Industrial Output Ou tput

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

m/m (%)

-0.1

-0.2

-0.1

+0.3

y/y (%)

-1.4

-1.3

-0.7

-1.0

-1.8

-2.1

-1.5

Year

2007

2008

2009

2010

2011

2012

2013

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

2007 +7.4

-1.6 2008 +4.8

-0.1

-1.5 2009

0.0

-1.5

-1.4

2010

+0.2

0.0 -1.2

2011

-0.1

2012

+1.0

+0.2

0.0 -0.9 2013 -1.8

99.5

+16.5

-0.1

+2.0

-8.5

U. construction

670.3 692.7 723.0

713.1 694.0

701.7

-0.3

y/y (%)

+5.3

+5.4

+4.4

+1.7

+2.3

-1.9

Completed

160.0 135.7

152.5

88.7

-2.9

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product

Month

Period

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

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 (%)

+14.4

Year

2007

y/y (%)

+15.5

+17.4 2008 +12.1

+12.2 2009 +5.1

+14.0 +10.0 2010 +4.6

+16.9

+0.9

+8.0

+1.1

2011

2012

+11.8

-0.6

-5.4 -3.6 2013 -12.0

6,061

138

8,615

196 6,333

144 6,382 145

Manufacturing

3,625

158 3,690

161 3,663

160 3,743 163

Energy

6,021

183 6,736 205 6,358

193 6,020 183

-20

3,766 160 3,895

166 3,706

158 3,884 166

Retail & repairs

3,408 145 3,456

147 3,544

151 3,577 153

Transportation

3,589

127

3,913

138 3,666

IT, telecoms

6,654

173 6,695

174 6,987

181 6,835

177

Financial sector

6,109

137 6,602

148 6,747

152 6,738

151

National average 3,652 145 3,823

152 3,895

155 3,740 149

Source: Central Statistical Office (GUS)

130 3,650 129

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

May 14

Feb 14

Q2 2014

Current account def. in % of GDP

+3.3%

+3.2

Nov 13

Q1 2014

GDP in PLN bn current prices

+3.4%

+24.2

A ug 13

Q4 2013

146.1

Q1 2014

+18.7

M ay 13

Q3 2013

Growth y/y unadjusted

131.7

Q2 2014

m/m (%)

F eb 13

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

Coal mining

127.4

-1.7

Source: The Central Statistical Office of Poland, GUS

Gross Wages Sector

142.9

-2.3

Nov 12

y/y (%)

-1.7

-0.2

Commenced

+9.4

A ug 12

Year

-0.2

(%) +15.6

-1.8

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

M ay 1 2

y/y (%)

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

2014 105.8

m/m (%)

Month

Feb 12

m/m (%)

Permits

Construction Output

Construction Prices Month

+4.7

y/y (%)

+1.6

Month

Jul '14

+2.3

-4.6

Gross CPI

Apr '14 May '14 Jun '14

+12.5

-1.6

Housing

Communications

Mar '14

m/m (%)

m/m

-2.1

Clothing, shoes

-1.1

Apr 13

-1.7

Feb 13

+0.2 +4.0

-0.3

y/y

Aug 12

Alcohol, tobacco +3.9

-0.9

Month

Sector

-0.4

Retail Turnover

Dec 12

May '14

Oct 12

Data in (%)

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 # 053 / 22nd September 2014 / page 15

100 DKK

56.22 ↓

100 SEK

45.67 ↑

350

300

298.61 ↓ 15.19 ↑

100 CZK 10,000 HUF

USD EUR

4 Oct 13

10,000 JPY

400

51.29 ↑

100 NOK

as of 19 September 2014

WIG-20 stocks Price Change Change in alphabetical 19 Sep 12 Sep end of order '14 '14 '13

WIG Total index

134.51 ↑

Money Supply

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%

↑ Asseco Pol.

PLN (total)

4.7%

↑ Bogdanka

EUR (up to 1m EUR) 2.0%

1.9%

2.0%

1.9%

1.7%

↑ BZ WBK

EUR (over 1m EUR) 3.4%

3.3%

3.0%

2.7%

3.4%

3.1%

↓ Eurocash

Overnight

1 week

1 month

3 months

6 months

2.62%

2.56%

2.51%

2.44%

2.43%

in PLN m

May '14

Jun '14

Jul '14

Aug '14

162,246

173,096

164,008

167,008

2.59%

557,651 119,649

572,376

570,507

120,828

122,209

574,529 124,986

975,001 980,090

985,769 1,003,128

- Time deposits

435,386

434,256

↓ Grupa Lotos ↑ JSW

Central Bank (NBP) Base Rates

Monetary base - Currency outside banks

↑ Alior Bank

Warsaw Inter Bank Offered Rate (WIBOR) as of 19 Sept 2014

Reference

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

991,120

426,351

448,037

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

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

Lombard

NBP deposit

Rediscount

4.00%

1.00%

2.75%

+3%

+7%

55,636. 636.77

44.85

+3%

-2%

Change 1 week

+3% ↓

114

+4%

-9%

Change end of '13

+8% ↑

407.1

+5%

-9%

-33%

WIG-20 blue chip index

29.4

-2%

-17%

32.37

+6%

-39%

2,539 2,539. 539.60

→ Kernel

-34%

Change 1 week

+2% ↓

↑ KGHM

131.6

+3%

+12%

Change end of '

+6% ↑

9,930

+5%

+10%

↑ mBank

512.3

+4%

+2%

WIG Total closing index

↑ Orange Pol.

11.89

+4%

+21%

last three months

↑ LPP

Credit

↑ Pekao

194.8

+4%

+9%

The financial sector's net lending in PLN bn,

→ PGE

21.78

+34%

loan stock at the end of period Type of loan

↑ PGNiG

5.16

+1%

53,000

+7%

+6%

52,000

39.95

+2%

+1%

50,000

-5%

+6%

49,000

+2%

-14%

Jun' 14

Jul' 14

Aug' 14

930,652

940,703

939,641

950,774

↑ PKO BP

- to private companies

273,360

276,709

274,549

277,482

↓ PZU

475.95

- to households

574,800

578,639

581,447

587,136

↑ Synthos

4.73

1,660,583 1,667,783

1,678,129

1,718,251

↑ Tauron

5.26

+1%

+20%

Loans to customers

Total assets of banks

Source: Central Bank NBP

55,000 54,000

43.6

May' 14

↑ PKN Orlen

56,000

51,000

19 Sep 14

346.82 ↓

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

5 Aug 14

532.57 ↑

100 CHF

19 Sep 14

100 GBP

14 Jul 14

418.60 ↓

6 May 14

100 EUR

Key indices

Term / currency

450

25 Feb 14

325.07 ↑

13 Dec 13

100 USD

Stock Exchange

Average weighted annual interest rates

28 Aug 14

as of 19 September 2014

Interest rates

14 Jul 14

100 USD/EUR against PLN

Central Bank average rates

20 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