Poland Today Business Review+ No. 016 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. 016 / 23rd December 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

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

Volkswagen's new 30,000 sq.m distribution hub will be built by SEGRO.

Image: JLL

VW building new distribution centre

Prompted by the impressive success of its Skoda and VW brands in Poland's passenger and commercial vehicle segments, German automotive giant Volkswagen will relocate to a new, larger, built-to-suit logistics centre near Poznań. page 7

Komfort flooring stores change owner

Private equity company Enterprise Investors has sold the chain of 100+ carpet & flooring outlets Komfort to Polish billionaire Michał Sołowow for an undisclosed amount. Sołowow controls Poland's top floorboard and ceramic tiles makers. page 10

tel. +48 881 650 600

MANUFACTURING & PROCESSING German electric motor maker ABM Greiffenberger launches production in Poland page 2

TRANSPORT & LOGISTICS PKP Cargo launches rail & road terminal in PoznańFranowo page 9

Pressure gauge experts Wika break ground on new Włocławek plant page 2

PLN 8bn Warsaw ring road contract is up for grabs page 9

BANKING & FINANCE Alior Bank & T-Mobile join forces on mobile banking project page 3

CONSUMER GOODS & RETAIL Cottonfield, Jackpot and Marionnaud to pull out of Poland page 11

ENERGY & RESOURCES PGNiG & FX Energy launch oil & gas production at Lisewo page 3 Electricity bills to go down, natural gas prices to grow in 2014 page 4

Local investor to build EUR 40m shopping centre near Warsaw page 11 POLITICS & ECONOMY Poland passes budget bill, gets praise from Moody's page 12

PROPERTY & CONSTRUCTION Capital Park's IPO sees disappointing proceeds and opening price page 4

Poland concerned about Russian nuclear missiles near its border page 13

Competition court confirms cement cartel verdict, reduces fine page 5

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

weekly newsletter # 016 / 23rd December 2013 / page 2

MANUFACTURING & PROCESSING

German electric motor maker ABM launches production in Poland ABM Greiffenberger, German developer and manufacturer of electric motors and gear boxes, is launching production at its first foreign factory in Lublin, Poland. The company is currently installing machinery at premises belonging to Ball Packaging Europe (BPE), which have stood idle for a couple of years after the aluminum can producer curtailed its ambitious investment plans due to crisis. Earlier this year ABM struck a deal for built-to-suite space at Lublin's Wikana Business Park, bit the latter's developer failed to deliver the project on time. "We are grateful to BPE for their help that enabled us to launch production according to schedule," said Olar Lewe, commercial director at ABM. "We have employed more than 90 staff in Lublin to-date and we are really pleased with the talents we have acquired so far." Most of the workforce has undergone extensive training at AMB's main unit in Marktredwitz. By early 2014 the total employment at the Lublin unit is to reach 120, most of them being full-time positions. ABM Greiffenberger is one of the world’s leading suppliers of sophisticated, high-performing solutions in drive technology, producing around 300,000 drive units per year. The company currently operates three production plants and has subsidiaries as well as partners in all important industrial nations. Besides segments such as hoisting technology and forklift trucks in which ABM has been active for several decades already, for the past 15 years special emphasis has been put on areas especially addressing environmental

technology and energy efficiency. Examples include emobility, warehousing logistics, drive solutions for bio-mass heating systems, and transmissions for wind power plants. Last year ABM Greiffenberger turned over EUR 96.6m with a workforce of 700 employees.

MANUFACTURING & PROCESSING

Pressure gauge experts Wika break ground on new Włocławek plant German Wika , the global market leader in pressure, temperature and level measurement technology, has broken ground on a brand new factory in Włocławek. With a price-tag of PLN 70m, the project is to be operational by mid-2014 and create some 300 jobs, mainly for welders and machinists.

The 25, 221 sq.m Ball Packaging Europe facility has been sitting idle since completion in 2009.Photo: Emmerson

"ABM aims at improving its global supply chain. Accordingly, the new plant in Lublin integrates services into our own value chain that previously had mainly been bought-in. It will also carry out a small electric motor assembly that so far has been done at our German site in Plauen as well as several selected production steps such as windings for electric motors to be supplied to our German plants," ABM's Thorsten Braun told Poland Today's Lech Kaczanowski earlier this year. ABM Greiffenberger is part of Greiffenberger AG, a family-led industrial holding company operating successfully worldwide in drive technology, metal band saw blades & precision strip steel, and pipeline renovation technology. Greiffenberger AG has been publicly quoted since 1986 and employs around 970 staff worldwide. In 2012, the Greiffenberger Group generated revenues of EUR 158m.

The Polish arm of Wika Alexander Wiegeand GmbH und Co seeks to build two production halls (each with a floor space of approx. 3,900 sq.m), and office building (2,000 sq.m) and as well as two additional buildings housing all the key infrastructure and machinery, such as compressors and tanks with technical gases, silicone, and glycerin. The project will be located in the Włocławek section of the Pomeranian special economic zone. Wika's subsidiary Wika SKF plans to manufacture stainless steel mechanical pressure gauges, which are currently being made in Germany, at the new site. According to company representatives, the relocation to Poland will not lead to any redundancies, as the German unit is to shift its focus to different, more advanced products. Wika Polska arrived in Włocławek 13 years ago and since 2005 it has been the sole owner of the pressure gauge producer formerly known as Kujawska Fabryka Manometrów, which dates back to 1916. The existing Włocławek plant produces 26m gauges per annum and employs 1,300 staff. With more than 7,300 employees 40 countries and annual revenues of EUR 730m, Wika delivers approximately 50m products annually to over 100 markets.

weekly newsletter # 016 / 23rd December 2013 / page 3

BANKING & FINANCE

Alior Bank & TT-Mobile join forces on mobile banking project As banks and mobile operators are both looking for new sources of revenue, Poland has seen a number of unusual alliances in recent weeks, all aiming at exploring the potential synergies between the two sectors. Besides the ongoing rebranding of Invest Bank (see PT Business Review+ No. 015 page 3), which marks the latter's alliance with mobile operator Polkomtel, another major telecom, T-Mobile has found a banking partner. The German-owned mobile firm has just inked a cooperation agreement with Alior Bank, one of the country's most dynamic lenders. According to the bank, the objective of this alliance is to offer Alior's banking products and services to TMobile Polska's clients, and ensuring access to them via several channels under the T-Mobile brand. Alior bank wants to attract a substantial number of the telco's 15m+ clients, equip them and existing holders of Alior Sync bank accounts with state-of-the-art technology in internet banking and to offer unique products combining the advantages of cooperation between a bank and a telecom. Alior Sync is Alior Bank's highly innovative mobile banking arm. The bank advertises the deal as "the first such comprehensive cooperation project between a bank and a telecommunications company in Europe." Pursuant to the concluded agreement, the clients will be offered e.g.: bank accounts, deposits, loans, overdraft facilities and credit limits as well as payment cards. The operator and the bank will provide services to individuals as well as to small and medium-sized

enterprises (SMEs). The products and services developed and implemented under the agreement will be available at T-Mobile points of sale, via mobile devices, website, contact center and virtual branch. Alior has established a dedicated team to the T-Mobile project, and a T-Mobile representative will be appointed a member of bank's Supervisory Board. For Alior Bank the cooperation with T-Mobile means, among other benefits, e.g. the substantial extension of its sales network, access to the most advanced mobile technologies ensuring substantial dynamics in client’s acquisition as well as growth of the bank's profitability.

T-Mobile teams up with Alior Bank to seek new Image: Alior Bank opportunities in mobile banking. "Banking services will evolve over the next five years due to the mobile revolution. Alliances between banks and telecommunications companies are a reaction to that challenge. They are the creators of future banking," commented Alior Bank's CEO Wojciech Sobieraj. "The cooperative undertaking of Alior Bank and the largest Polish mobile telephone operator will enable the introduction of solutions, products and services that are beyond sole capabilities of any other bank operating in Poland," he added. Founded shortly after the 2008 collapse of US investment bank Lehman Brothers by Italian group Carlo Tassara, controlled by Franco-Polish billionaire Romain Zalewski, who injected some EUR 450m into the Polish start-up, in less than four years Alior created Poland's third largest branch network and started generating profits. In 1H 2013 Alior's net earnings came to PLN 171.8m, up 29% y/y. The value of loans

extended to customers by Alior Bank reached PLN 17.7bn (+43.6% y/y) as at the end of 1H 2013, and the deposit base reached PLN 19.1bn (+40.2% y/y). The loan-to-deposit ratio at 93% remains one of the lowest in the market. In January-June Alior's customer base grew by 253,000 reaching 1.7m in mid-2013. Alior Bank hit the Warsaw Stock Exchange in December last year in an IPO that totaled PLN 2.1bn.

ENERGY & RESOURCES

PGNiG & FX Energy launch oil & gas production at Lisewo Poland’s gas & oil giant PGNiG and US independent FX Energy have brought their new Lisewo gas facility near Poznań online, and will be producing from three conventional wells at the site by the second half of next year. PGNiG operates the Fences concession containing the fields on a 51% stake with the Nasdaqlisted explorer on 49%. The Polish state player said that the Lisewo 1 well will be producing at an initial rate of around 50m cb.m per annum and it will remain in operation for 25 years. Discovered in 2011, the Lisewo field holds recoverable reserves of approximately 990m cb.m. Output is processed on site and fed via pipeline into the gas network near Grodzisk Wielkopolski in western Poland. The nearby Komorze-3 find (340m cb.m) uncovered last year is to enter production in the first quarter of next year at Lisewo, with Lisewo 2 in production testing and due online in the second half of 2014. Lisewo is the second production facility PGNiG launched this year. The crude oil and natural gas facility in Lubiatów - the largest recent investment pro-

weekly newsletter # 016 / 23rd December 2013 / page 4

ject in the Polish upstream sector - was officially opened on July 29th 2013. The Lubiatów facility's output will allow PGNiG to increase annual domestic crude oil and condensate production from approximately 0.5m tons to approximately 0.8m tons. In midNovember PGNiG signed a PLN 420m agreement on the sale of crude oil from the Lubiatów site to BP Europe SE. The agreement covers deliveries until the end of 2014. The BP deal follows an earlier agreement with TOTSA Total Oil Trading SA, which is to purchase PLN 1.4bn worth of crude from PGNiG's Lubiatów and Dębno facilities over the coming two years. The oil will be transported via pipeline by PERN Przyjaźń S.A.

tion facility in Lubiatów and the Skarv field on the Norwegian Continental Shelf were brought on stream. According to estimates, total domestic production of crude oil and condensate in the first three quarters of 2013 amounted to nearly 0.6m tons. In the same period, PGNiG Upstream International's production from foreign licenses amounted to approximately 189,000 tons. Revenue reported by the PGNiG Group for the first three quarters of 2013 was PLN 23bn, up 15% year on year, as sales of crude oil doubled and sales of gas also improved. At the operating level, the Group recorded strong EBITDA growth (up 215%) to PLN 4.8bn (compared with PLN 1.5bn in Q1-Q3 2012), on the back of improved results across all segments of its business.

While price cuts were fairly even across the board for Poland's power vendors at 6.2% to 6.5% for all major vendors, changes in maximum distribution fees varied widely between firms, singling out Enea for a cut in household distribution fees. URE has also approved a new retail gas tariff for gas group PGNiG for the January-July 2014 period with the average price growth around 1.5%. As far as the prices of natural gas for retail customers are concerned, a new schedule for the liberalization of this market segment will be presented at the beginning of 2014, URE said after the recent meeting with wholesale gas market participants.

PROPERTY & CONSTRUCTION ENERGY & RESOURCES

Electricity bills to go down, natural gas prices to grow in 2014 The Lubiatów facility will enable PGNiG to boost anPhoto: FX Energy nual oil production by 0.3m tons.

The estimated 100m cb.m of natural gas extracted every year at the Lubiatów site will be used to power-up the Gorzów Wielkopolski cogeneration plant. The Lubiatów-Międzychód-Grotów fields are among Poland's largest, with documented recoverable deposits of 7.25m tons of oil and 7.3bn cb.m of gas. In the first three quarters of 2013, the PGNiG Group posted over PLN 2bn in net profit, versus PLN 122m in the same period last year. This bottom-line improvement was driven by a substantial increase in the volumes of crude oil produced and sold after the produc-

Poland has approved new price and distribution tariffs for household electricity which should reduce average monthly bills by 2.5%, Poland's power regulatory office (URE) said last week. The 2.5% reduction in household bills comes on a 6.2% decline in power prices dictated by falling purchase prices on wholesale power markets, partially offset by a 2.1% increase in household distribution tariffs. Poland has previously freed power prices for most larger recipients, but still requires incumbent power firms seek regulatory approval every six months for household prices and fees.

Capital Park's IPO sees disappointing proceeds and opening price Shares in developer Capital Park debuted on the Warsaw Stock Exchange at PLN 6.35, about 2% below the forecasted IPO price. The company placed 21m new shares on the market, a 20% stake, in an effort to fund several projects currently underway in Warsaw, including the Eurocentrum Office Complex, Royal Wilanów and Art Norblin. Individual investors acquired 1.6m shares, while the rest went to institutions. Although Capital Park had initially sought to raise PLN 210m from the IPO (see PT Business Review+ No. 010 page 7), it ended up selling its shares much cheaper, with proceeds from the IPO reaching merely PLN 136m. Since the start of its operations in 2003, the Capital Park group has completed approximately 100 investment transactions and now comprises 76 projects of

weekly newsletter # 016 / 23rd December 2013 / page 5

approximately 247,560 sq.m of lettable area in 39 towns and cities, including office projects (93,030 sq.m), retail projects (26,700 sq.m), mixed-use projects (112,423 sq.m) and 13 other projects. The company describes itself as an active opportunistic investor with a track record of more than ten years in developing and managing real estate properties and projects in Poland. As of 30 June 2013 Capital Park's existing retail port-folio was worth PLN 1.3bn, with a target value amounting to more than PLN 3.2bn. Capital Park posted a net profit of PLN 46.3m in the first half of the year, with PLN 19.8m in sales for the period, down from PLN 22.2m in the same period last year. Net profit for H1 2012 hit PLN 6.4m. Capital Park has been investing jointly with London-based private equity fund Patron Capital Partners.

With a planned GLA of more than 70,000 sq.m

Eurocentrum is one of the largest office projects currently under construction in Warsaw.

Image: Capital Park

As far as its development pipeline is concerned, Capital Park is working on three large projects in Warsaw. Its flagship development is the Eurocentrum, a 15floor building housing more that 69,578 sq.m of office and more than 2,400 sq.m of retail-service space as

well as more than 770 parking spaces. Phase one (42,337 sq.m) of Eurocentrum, which is located in Warsaw's Ochota district, is to reach completion in June 2014. In August 2013 Capital Park Group broke ground on its latest office project in Warsaw – Royal Wilanów. Located at the corner of Klimczaka and Przyczółkowa streets in Warsaw's up-scale suburb of Wilanów, the five-storey building will offer close to 36,707 sq.m of office space as well as some 7,000 sq.m of retail space. Their third key Warsaw project is the mixed-use development Art Norblin in Wola district, with a total lettable area of 64,164 sq.m.

PROPERTY & CONSTRUCTION

Competition court confirms cement cartel verdict, reduces reduces fine

the institution concluded in December 2009 that the cartel has been operating at least since 1998. Its participants decided to freeze the market shares of each company, fix minimum prices and consult each other on any changes in their pricing policies. "To this end, during numerous multilateral and bilateral meetings the producers were exchanging confidential commercial information, inter alia on the sales volumes," UOKiK spokesperson Małgorzata Cieloch told Poland Today's Lech Kaczanowski back in 2009. "The investigation showed, that the cartelists did realize that the practices they were engaged in were illegal. They selected a limited number of persons directly taking part in the information exchange, as well as a coordinator of the information exchange. The coordinator was responsible for passing on the data to the cement producers and contacting selected employees of the cement mills via a pre-paid telephone." The two whistleblowers in this case were Lafarge Cement and Górażdże Cement.

Four years after the Polish competition watchdog UOKiK had imposed the highest fine in its twodecade history on Poland's largest cement producers, the decision was upheld by the Court of Competition and Consumer Protection. However, total amount of fines imposed on cartel members was reduced from over PLN 412m (nearly EUR 100m) to EUR 339m (over EUR 81m). The decision of the Court rendered on 13 December 2013 is not yet final, however as the parties can still appeal to the Polish Court of Appeals.

"In 2006 we conducted an internal audit which revealed certain irregularities and led to replacement of an executive," Lafarge's Jolanta Ciesielska told us following the original verdict. "We believe competition is necessary to achieve economic effectiveness and it is a crucial condition for development of entrepreneurship. It should be emphasized, however, that the practices that were subject of the UOKiK investigation did not influence the market, which remains competitive."

UOKiK launched antimonopoly proceedings against grey cement makers Lafarge Cement, Górażdże Cement, Grupa Ożarów, Cemex, Dyckerhoff, Cementownia Warta and Cementownia Odra, together controlling close to 100% of the market in December 2006, following numerous signals from the market. As a result of the three-year long investigation, as well as the biggest dawn-raid in UOKiK's history,

Upon the provisions of the Polish antimonopoly law, the maximum fine that can be imposed on those found guilty of price fixing amounts to 10% percent of the revenue earned in the accounting year prior to the year within which the penalty is imposed. Since two leniency applications were filed in this case, UOKiK refrained from imposing a fine on the Lafarge Cement and imposed a fine amounting to only 5% of the reve-

weekly newsletter # 016 / 23rd December 2013 / page 6

nue earned in 2008 on Górażdże Cement. The remaining cartelists – Grupa Ożarów, Cemex, Dyckerhoff, Cementownia Warta and Cementownia Odra – were fined with the maximum penalties possible, totaling to PLN 412m, now reduced to PLN 339m.

business services sector companies searching for new space in relation to their companies’ development. Business services sector tenants dominate Krakow's office market occupying 50% of the city's office stock," says Rafał Oprocha, Head of Kraków Office, Jones Lang LaSalle.

Over the first 11 months of the year cement sales in Poland totaled 13.5m tons, which represents a 10.5% drop y/y, according to data compiled by the SPC lobby, which expects the full-year figure to reach some PLN 14.2-14.3m tons. The 2014 is to see a 2-4% growth, to be followed by a more significant upturn in 2015, when large infrastructure developments financed from the new EU budget will get underway. There are 13 cement mills in Poland, owned by nine international groups.

Kraków office market Key indicators as of end of Q3 2013

Kraków's modern office stock will go up by 20% next year, making the southern Polish city one of Poland's fastest-growing office markets, according to a brand new study by property consultancy Jones Lang LaSalle. The total modern office stock in Kraków is estimated at approximately 563,000 sq.m, second only to Warsaw. At the end of Q3 2013, more than 124,800 sq.m of modern offices were under construction in the city. "The upcoming year will be record-breaking in terms of new demand. Developers are planning to commission for use approx. 100,000 sq.m of office space, which is an almost 20% increase on 2012. We are expecting a continuation of strong demand generated by

12 month

Value

y/y

Gross take-up Q1-Q3 (sq.m),

84,300

-4,050

→

Net take-up* Q1-Q3 (sq.m)*

64,800

+450

→

4.4%

-2.7pp

↑

Vacancy Q3 (sq.m)

24,800

-13,500

↑

Completions full year est. (sq.m)

34,600

-13,600

↑

Under construction (sq.m)

124,800

+87,700

→

Prime rent (EUR/sq.m/month)

13.5-14.5

→

Vacancy rate Q3 (%)

outlook

*) net take-up=letting transactions excl. renewals

PROPERTY & CONSTRUCTION

Kraków's office stock to increase by 20% next year

Prime headline rents are between EUR 13.5 and EUR 14.5/sq.m/month and remain stable. According to Jones Lang LaSalle, more attractive rents can be found, especially in existing buildings offering large vacant spaces and in pipeline developments.

Source: Jones Lang LaSalle Q3 2012

Austria's UBM Polska is applying finishing touches to its 10,000 sq.m Alma Tower building in Kraków, half of which has been pre-leased by Polish retail Image: UBM group Alma Market.

The demand for modern office space in Kraków remains robust with net take-up reaching approximately 65,000 sq.m in Q1–Q3 2013. The low volume of new deliveries in 2013 has caused a supply gap and large tenants have to sign pre-let agreements in developments under construction in order to secure space. The lack of immediate available office space on the market is resulting in a low vacancy rate; currently just 4.4% (Q3 2013). Jones Lang LaSalle expects the situation to be more balanced in 2014, as a large amount of supply in the pipeline is scheduled to enter the Kraków office market next year.

"The majority of new projects are located in the southwest part of Kraków, where currently around 40,000 sq.m of office space is under construction, and in the north-west part of the city, where developers are building an additional 36,000 sq.m of office space. Such a distribution of new office projects is determined by a number of factors, including investment plots availability. The large number of historical buildings in the heart of the city does not allow for the location of major office projects. Therefore, investment plots are purchased mainly in proximity to the city centre, for instance in the Grzegorzki and Podgórze areas, or further afield," says Krzysztof Jarocki, Associate Director, Valuation Department, Jones Land LaSalle. Some of the largest projects currently underway in Kraków include phase two of Hungarian TriGranit's Bonarka 4 Business complex, and the Kapelanka project from Skanska, each with a GLA of approxi-

weekly newsletter # 016 / 23rd December 2013 / page 7

mately 30,000 sq.m, and UBM Polska's Alma Tower building (10,000 sq.m).

will continue to develop positively in the coming years in Poland, one of the most vibrant economies in Europe," said Christoph Härle, CEO Continental Europe, Jones Lang LaSalle Hotels & Hospitality Group.

PROPERTY & CONSTRUCTION

Two top hotels in Warsaw and Kraków change owners It's been a busy December in Poland for the Jones Lang LaSalle Hotels & Hospitality Group. The property consultancy has announced two major hotels deals in the past weeks, one involving the Luxury Collection Bristol Warsaw hotel, and the other – the Sheraton Kraków. Arguably Warsaw's most upscale hotel, the 206-room Luxury Collection Bristol Warsaw was sold for an undisclosed amount to "a consortium of international private investors who have existing luxury hotel interests," as described in the official communique. Located adjacent to Warsaw’s Presidential Palace and a few minutes away from the Old Town and the main tourist and business districts of Warsaw, the Bristol underwent a EUR 13m refurbishment and was rebranded to Luxury Collection in 2013. The renovation works were conducted in 206 rooms and suites as well as in the common areas, such as the lobby, the Marconi restaurant, the Column Bar, the Słowacki Salon, halls, swimming pool and gym. One of the main aims of the renovation works was to restore the hotel’s exquisite historical decor, dating back to the beginning of the 20th century. Jones Lang LaSalle’s Project and Development Services team oversaw the renovation process. "This deal underlines the strong investor appetite we are currently seeing for hotels in Central and Eastern Europe. We are confident that the transaction markets

circa EUR 38m, representing a price per key of approximately EUR 164,000. "These sales represent the first large corporate hotel transactions in the CEE region for approximately 3 years. Increased interest in this region has been triggered by a mismatch in pricing with core Western European markets and we expect 2014 to be an interesting year for investors looking for secure investments in CEE. Our experience in this sale puts Jones Lang LaSalle Hotels & Hospitality Group in a strong position to dominate these types of sales in the region," commented Angus Wade, Executive Vice President at Jones Lang LaSalle Hotels & Hospitality Group London.

TRANSPORT & LOGISTICS

Located next to the Presidential Palace The Luxury Collection Bristol is Poland's top hotel property. Photo: Jones Lang LaSalle

The CEE Investment Team at Jones Lang LaSalle Hotels & Hospitality Group has also acted as the exclusive sales agents and advisors to Quinn Insurance and its administrators at Grant Thornton Dublin in the sale of the Sheraton Kraków and Hilton Sofia hotels achieving a combined price of EUR 62m. CMS acted as legal advisors to Quinn Insurance throughout the sales process. The Sheraton Kraków hotel is a modern 232 bedroom hotel that opened in 2004 and is located in a prominent spot on the banks of the river Vistula, close to the historic Wawel castle in Poland's second largest city and top tourist destination. The French specialist hotel company Algonquin acquired the Sheraton hotel for

SEGRO to build new distribution centre for VW near Poznań Volkswagen Group Polska, the official importer of VW, Audi, Seat, Skoda, Porsche passenger cars and VW commercial vehicles for the Polish market will establish a brand new distribution centre in Komorniki near Poznań. Last week the company signed an agreement with the European industrial space developer SEGRO for the construction of a 30,000 sq.m logistics centre at the latter's SEGRO Logistics Park Poznań. The deal, brokered by property consultancy Jones Lang LaSalle, is the second largest industrial investment project in the Poznań region and the seventh largest in Poland this year by floor space. "The new logistics centre will exceed the existing storage capacity by 6,000 sq.m, which will result in a substantial growth of productivity and significantly in-

weekly newsletter # 016 / 23rd December 2013 / page 8

creased efficiency of the logistic process," said Ralf Jochen Berckhan, Chairman of the Board of VW Group Polska.

large number of recipients," said Stanislav Pekar, Group After Sale Director at VW Group Polska. SEGRO Logistics Park Poznań is designed to accommodate warehousing and production activity and is intended to eventually provide 250,000 sq.m of space on over 56 ha of land. The UK-based SEGRO is a leading owner, asset manager and developer of modern warehousing, light industrial and data centre properties, with GBP 4.7bn of assets in the UK, France, Germany and Poland. The group serves over 1,400 customers spread across a diverse range of industry sectors. It has 5.2m sq.m of built space and a passing rent roll of GBP 311m. SEGRO started its operation in Central Europe at the beginning of 2006. Currently the company runs investments in such strategic locations as: Gdańsk, Gliwice, Lodz, Ostrava, Poznań, Prague, Stryków, Tychy, Warsaw and Wrocław.

SEGRO Logistics Park Poznań will one day offer 250,000 sq.m of industrial and warehousing. Image: SEGRO

VW is Poland's No. 2 carmaker Car production in Poland by maker in '000 units

Fiat

Opel

2009 2010 2011

600

400

300

200

100

500

2012

SEGRO Logistics Park Poznań is located in the direct vicinity of the A2 motorway between Poznań and Świecko, on the border with Germany. Besides improved capacity and efficiency, VW's relocation from its existing warehouse on Krańcowa St. will bring about a significant reduction of the traffic volume created by heavy goods vehicles in Poznań's city centre. The current distribution centre receives 4,000 trucks and dispatches some 3,500 heavy goods vehicles annually. The new logistics centre will also enable VW to enhance the quality of services provided and allow for expansion of their range.

Source: Samar

"We are preparing for the introduction of the so-called Same Day Delivery service which involves the fulfillment of a commissioned order during the same day on which the order was submitted. Consequently, VW Group Polska will be likely to become the first company in Poland to provide this type of service to such a

ers registered 33,399 new Skodas, 23,773 new VWs, and 5,010 Audis, which gives the German carmaker a 23.6% share in new passenger car registrations. Volkswagen sold also 3,084 light commercial vehicles (<3.5tons) and 3,261 larger commercial vehicles (<6tons) during the same period. Moreover, a total of 11,795 used VW vans were imported to Poland, making the German carmaker the number one choice in this segment. These impressive figures explains why the company needs to ramp up its aftersales capabilities. VW's Polish factory in Poznań, turned out 162,000 units last year, mainly the Caddy line of delivery vans.

DATA BOX: POZNAŃ INDUSTRIAL PROPERTY MARKET IN 1H 2013 The total warehouse stock in the Poznań region currently stands at 1.041m sq.m. Most warehouses are located along the A2 motorway, in the city’s suburbs and the S11 expressway. In the first half of 2013 some 13,600 sq.m of warehouse space came to market (phase II of Panattoni Faurecia BTS in Gorzów Wielkopolski). Around 50,000 sq.m is currently under construction. The largest project is the extension to Doxler Business Park (32,500 sq.m). Warehouse takeup in the region totaled 66,000 sq.m in 1H 2013, 25% less than that in the preceding six months. Despite relatively modest occupier interest, the vacancy rate stands at 3.6%, one of the lowest in the country. Rents remained at the same level. Existing stock (sq.m)

1,041,000

Stock under construction (sq.m)

50,000

Take-up (sq.m)

66,000

Vacancy rate (%)

In the past year the Volkswagen group has become the leading player in Poland's automotive sector, largely due to the huge popularity of its Skoda brand as well as massive imports of second-hand VWs from Western Europe. In the first 11 months of 2013, Polish custom-

Major landlords

3.6 Panattoni, Prologis, SEGRO

Headline rent (EUR/sq.m/month)

3-3.6

Effective rent (EUR/sq.m/month)

2.3-2.9

Source: Cushman & Wakefield Valuation & Advisory July 2013

weekly newsletter # 016 / 23rd December 2013 / page 9

TRANSPORT & LOGISTICS

PKP Cargo launches rail & road terminal in PoznańPoznań-Franowo Polish rail freight giant PKP Cargo has opened its most important intermodal project, the PoznańFranowo container terminal, which represents phase one of the Poznań Franowo Logistics Center. Developed at the cost of PLN 25m, of which PLN 9m was contributed by the European Union under the "Infrastructure and Environment" program, the 20,000 sq.m facility will initially handle 11,000 containers per annum, and over time its capacity is to be extended to 26,000 containers. "The opening of our terminal at the Poznań-Franowo station is an important step for the development of Poland's intermodal freight market. It is the and most technologically advanced terminal operated by PKP Cargo Group and it is situated on the East-West transportation corridor, close to the A2 Berlin-Warsaw motorway, the Poznań airport as well as the huge logistic centers in the vicinity. Moreover, the economic strength of the region is quite significant, offering many opportunities to investors who are our potential clients," commented Adam Purwin, CFO, acting CEO of PKP Cargo. The terminal is capable of transshipping loads between rail and road, and it is equipped with two Kalmar reloading forklift trucks that can handle loads of up to 45 tons. The general contractor was Sweden's Skanska, whereas the equipment was provided by Finnish Cargotec, which has a large manufacturing plant in Stargard Szczeciński near Szczecin.

PKP Cargo, which controls approximately two thirds of Poland's intermodal transport services segment, is one of many companies expecting a boom in this method of transportation. Currently, only an estimated 6% of the total transport volume in Poland relies on intermodal shipping, compared to 30% in Germany and 60% in Norway. As the movement of goods between Poland and the rest of Europe continues to increase, and cost and environmental benefits of intermodal shipping are becoming more obvious, the segment is looking at years of robust growth.

PKP Cargo is Europe's number two rail freight carrier but only a tiny fraction of its revenues come from Photo: PKP Cargo abroad. PKP Cargo is the European Union's second largest railway freight company after Deutsche Bahn AG and the first listed one, following its recent PLN 1.42bn IPO on the Warsaw Stock Exchange, which saw the state-owned Polish railway operator PKP sell 20.9m shares in the business. PKP Cargo saw its revenues drop 9.2% to 2.29bn, in 1H 2013, due to economic slowdown, while its net income slumped 44% to PLN 76.8m. Last year the company carried around 116m tons of freight (mainly hard coal and building materials) and generated net profits of PLN 267m on PLN

5.2bn worth of revenues, down from its record net result of PLN 400m in 2011. Warsaw-based PKP Cargo had a 60.3% share in the Polish market in 2012 and controlled 8.5% of total rail freight in the EU. That compares with DB Schenker's 28% and 5.4% shares in the EU and Poland, respectively.

TRANSPORT & LOGISTICS

PLN 8bn Warsaw ring road contract is up for grabs Poland's roads authority GDDKiA has announced a long-awaited tender for the design and construction of a new crucial segment of the Warsaw beltway. Estimated at PLN 8bn, the project is part of a larger program to close the ring of expressways around Warsaw by 2019, announced by Prime Minister Donald Tusk at the break of September. The ring road is of strategic importance for the Polish capital and its completion is vital to reducing congestion in certain key areas and funneling transit traffic out of the city. The first southern section of the beltway (S2), linking the Konotopa junction (where the A2 highway from Berlin reaches Warsaw) with the Chopin airport and Ursynów (Puławska) was opened in September, at the cost of approximately PLN 4.3bn. Although its completion brought relief to many commuters and helped distribute some through traffic, it also created massive jams on Puławska street, one of Warsaw's key arteries. This is where the ring road ends at the moment, although according to plans it should be extended further east, cutting though the residential areas of Ursynów and Wilanów and across the Vistula river to connect with the S17 Warsaw-Lublin road.

weekly newsletter # 016 / 23rd December 2013 / page 10

The new tender, announced last week, concerns precisely this 18.5km piece of motorway, which will be divided into three sections, each posing a different challenge, such as a 2.7km tunnel under Ursynów, new bridge over the Vistula river, and a chain of overpasses in the Mazowiecki nature park. Contractors can submit their initial applications until the end of February, after which the GDDKiA will shortlist 20 parties, each of whom will be allowed to place a bid on a single section of the project. The whole investment to reach completion in 2018-19.

jects. A separate procedure is currently underway for a bypass of the notoriously congested suburb of Marki in the north east of Warsaw. In approximately three years, once the Marki bypass as well as the S8 fork near Raszyn and Janki in the south west reach completion, drivers should be able to easily get around the western and northern outskirts of the Polish capital.

terprise Investors, who is responsible for this investment.

CONSUMER GOODS & RETAIL

Enterprise Investors sell carpet and flooring retailer Komfort Two private equity funds managed by Enterprise Investors (EI), have sold their 100% stake in Polish flooring retail chain Sklepy Komfort, to Barcocapital Investment Ltd., a company controlled by one of Poland's wealthiest Polish entrepreneurs Michał Sołowow. The value of the transaction, which requires approval by competition authorities, was not disclosed.

The planned sections of the Warsaw beltway are marked with dotted lines, whereas green and red lines indicate sections that are opened to traffic. Image: Wikipedia CC

Besides the design & build tender mentioned above, the GDDKiA has asked engineering firms interested in designing the next section of the S2 motorway, east of the planned junction with the S17 towards the Mińsk Mazowiecki beltway, to submit their offers. The subsequent tenders for the eastern sections of the Warsaw ring are expected in 2015 and 2016, as the road authority is yet to get environmental permits for those pro-

Sklepy Komfort manages Poland’s largest network of stores selling wall-to-wall carpets, rugs, laminate and hardwood floors as well as other interior design goods. The company was established in the early 1990s and was originally based in Szczecin. EI’s investment has strengthened the company, which now runs an extensive network of over 100 stores throughout Poland, with headquarters in Łódź and a modern logistics base with a central warehouse in Stryków. "Komfort’s strong brand recognition and leading market position have brought us an offer from a renowned and experienced investor who plans to develop the company further," said Jacek Siwicki, President of En-

Komfort operates more than 100 outlets throughout Poland, including at top retail parks and shopping Phptp: Komfort centers. "After completion of the transaction I plan to continue the company's business operations and further development. Komfort will build on its competencies and offer customers multi-brand and multifunctional flooring solutions, which will become its sole focus. My aim is for Komfort to become the first choice for customers purchasing new floors," said Michał Sołowow. "The acquisition of Komfort is not my first transaction with the former owner of this company, as we met during the merger of two major Polish tile producers, Opoczno and Cersanit. I highly appreciate professionalism and effectiveness of Enterprise Investors in building the value of their portfolio companies. In the case of Sklepy Komfort, the quality of organization achieved during EI's investment period had a significant impact on my interest in the project," he added.

weekly newsletter # 016 / 23rd December 2013 / page 11

Based on the value of his share portfolio, Mr. Sołowow is the wealthiest investor on the Warsaw Stock Exchange. With controlling stakes in the listed floor board producer Barlinek, ceramic tile maker Rovese, and chemicals group Synthos, the billionaire will most likely seek to utilize the Komfort chain as an effective sales channel for his flooring products. Enterprise Investors is one of the largest private equity and venture capital firms in Central and Eastern Europe. Active since 1990, the firm has raised eight funds with total capital exceeding EUR 2bn. To date the funds have invested EUR 1.6bn in 131 companies across a range of sectors and exited 105 companies with total gross proceeds of EUR 2.1bn.

The exit from Poland follows the May sale of the Jackpot and Cottonfield brands by the Danish owner IC Companys to retailer Coop. The news came after IC Companys said it was looking to sell off the two brands and restructure its business into three divisions after reporting a decline in first-half sales earlier this year. Under the agreement, Jackpot and Cottonfield will become part of Coop's new textile venture. Some existing employees, including those working within design, production and sourcing in the two brands, will transfer to Coop, one of Denmark's leading consumer goods retailers. The new owner has decided to shut down all business outside the Nordic markets.

Cottonfield, Jackpot and Marionnaud to pull out of Poland

Jackpot & Cottonfield debuted in Poland back in 1991 with a store in Łódź, which was followed two years later by the Bracka 25 outlet in Warsaw. The Danish brands were among the first western-style casual fashion stores to open in Poland, which made them an instant hit, despite relatively elevated prices. At the moment there are 30 stores under the Jackpot and Cottonfield logos across Poland, including five in top Warsaw shopping malls.

CONSUMER GOODS & RETAIL

Local investor to build EUR 40m shopping centre near Warsaw Warsaw suburbs look set to become a hotbed of retail property development in the coming years, as customers increasingly often prioritize convenience over selection by choosing to shop locally, and developers try to keep up with that trend. Besides Flemish Ghelamco, which is to build three small retail centers in the southern and northern suburbs of the Polish capital, and France's Mayland, which has secured locations to the east, a group of investors have zoned in on the town of Wołomin, north east of Warsaw.

CONSUMER GOODS & RETAIL

The coming months see three well-known retailers, Danish fashion brands Jackpot and Cottonfield and French perfumery chain Marrionnaud pull out of the Polish market, freeing attractive units at major shopping centers.

down the Polish unit by 27 December. Established in 1984, Marionnaud belongs to the AS Watson Group, controlled by Hong-Kong billionaire Li Ka-shing. AS Watson owns a 40% stake in the German drugstore chain Rossmann, which is also the market leader in Poland.

Marionnaud has failed to achieve the scale of operations that would enable the chain to compete with Photo: Marionnaud the likes of Sephora and Douglas.

The exit from Poland will leave some 200 employees redundant, including the staff of the online store, which has already been closed down. Marionnaud, the French perfumery and cosmetics retailer, has reduced its Polish store numbers from 40 at the end of 2011, down to the current 21. Unable to beat its way more agile competitors Sephora of France and German Douglas, the retailer has decided to close

Next year will see local investors break ground on Fabryka Wołomin, a hypermarket-anchored, mediumsized shopping and entertainment centre that is scheduled to reach completion in 2015. The project will include a hypermarket, 80 fashion and service outlets, and multiplex cinema, with a combined GLA of 25,000 sq.m as well as a 6,000 sq.m retail park. The parking lot will offer 1,000 spaces. Located on a 10ha site on Geodetów St. by the commuter train station and the road to Radzymin, Fabryka Wołomin seeks to become the main shopping destinations for the Warsaw satellite towns of Wołomin, Kobyłka, and Zielonka.

weekly newsletter # 016 / 23rd December 2013 / page 12

POLITICS & ECONOMY

Poland passes budget bill, gets praise from Moody's Fabryka Wołomin is to open in 2015.

Image: CBRE

The investor behind the project is a local developer BJM, operating via an SPV Park Handlowy Wołomin. Poland Today has approached the developer behind Fabryka Wołomin with questions about the investment, but we were told the project was still at too early a stage for any further details to be disclosed. According to unconfirmed reports, the estimated capex on the mall will total EUR 41m. One of the first tenants at Fabryka Wołomin is the Polish footwear retailer CCC, which secured a 585 sq.m unit at the centre. Other tenants have so-far booked 120 sq.m. The investment and leasing advisor on the project is the global property consultancy CBRE.

Poland's lower house of parliament Sejm adopted the 2014 budget bill allowing a deficit of no more than PLN 47.6bn and predicting a 2.5% GDP growth and 2.4% average annual inflation. On the revenue side the government plans to raise PLN 276.98bn, while budget spending is capped at PLN 324.63bn. VAT rates will remain unchanged from 2013, excise on tobacco and alcoholic drinks will go up 5 and 15% respectively. Of the 448 MPs present, 235 voted for and 213 voted against, with no-one abstaining. "We estimate that the budget projects an underlying fiscal deficit (excluding pension transfers) of 3.6% of GDP in 2014 on the basis of economic growth of 2.5%, which is in line with our GDP forecast. Given a more favorable economic outlook and recent data indicating better-than-anticipated expected fiscal revenues in the second half of 2013, we see an increasing likelihood of budgetary outperformance in 2014," ratings agency Moody's commented on Poland's 2014 budget. "Given the nascent domestic demand-driven recovery in the second half of the year, we recognize that fiscal slippage in 2013 is likely to be less significant than expected, increasing the probability that the deficit could end the year below 4.5% of GDP," Moody's added. Prime Minister Donald Tusk said that Poland is still a country that must save on expenses and the 2014 budget is fairly conservative. At the same time the budget offers room for economic development, he added. The Polish PM also said that Poland's GDP growth in 2014 will likely exceed 2.5% envisaged in

2014 budget. According to brand new, revised projections by World Bank, the Polish economy is on course to expand 1.5% in 2013, and growth is likely to accelerate to 2.8% in 2014. The World Bank had previously forecast 1% growth in 2013 and 2% in 2014. "We believe that risks to next year’s economic performance are skewed toward the upside. The main upside risk stems from domestic demand strengthening beyond expectations, boosted by a buoyant employment market and rising real wages. Firmer domestic demand growth would have a strong impact on the budget balance, as we believe that consumption tax arrears would decrease substantially," said Moody's analysts. Meanwhile, Polish Finance Minister Mateusz Szczurek said that the government faces a lower risk of a budget amendment in 2014 than in 2013. Poland needed to amend its 2013 budget, hiking the initial maximum deficit of PLN 35.6bn by PLN 16bn. However, according to most recent reports from the Finance Ministry, Poland will likely record a PLN 8-9bn lower budget deficit in 2013 than PLN 51.56bn envisaged in the amended budget act. At end-November Poland's budget deficit stood at approximately PLN 38.5bn, i.e. 74.7% of the annual plan. According to Moody's, fiscal outperformance would help Poland put the goal of exiting the European Commission’s excessive deficit procedure (EDP) within reach. "The Council extended Poland’s deadline to bring the deficit back below the EU reference level of 3% of GDP by one year (until 2015). We believe that the extension allows the authorities more fiscal space to strike a balance between supporting the recovery and resuming the consolidation effort. Moreover, the government balance sheet will only incur minor deterioration as a result of these dynamics, as opposed to a

weekly newsletter # 016 / 23rd December 2013 / page 13

potentially significant output loss that could have resulted from more forceful consolidation at a time when Polandâ&#x20AC;&#x2122;s output gap is still negative," the agency concluded.

DATA BOX: INDUSTRIAL OUTPUT Poland's industrial output rose 2.9% y/y in November, while falling 6.2% from October, according to the Central Statistical Office. Analysts surveyed by the PAP news agency had expected 1.7% y/y growth and a monthly decline of 5.5%. Seasonally adjusted industrial output in November was up 4.4% on a 0.3% monthly decrease. There were two working days fewer in November than during the same month a year earlier. Polish producer prices fell 1.5% y/y in November and went down by 0.3% m/m.

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

Poland concerned about Russian nuclear missiles near its border Poland and Lithuania expressed concern over reports in Russian and German media that Moscow has placed nuclear-capable missiles in its Baltic territory of Kaliningrad, which lies between the two countries. Polish Ministry of Foreign Affairs called the news "disturbing" and said it had expected consultations between NATO and European Union partners on the issue. "Plans to deploy Iskander-M missiles in the Kaliningrad district are disturbing and Poland has said so many times," the statement said. It added that such a deployment "would contradict effective PolishRussian co-operation, in particular with respect to this region, and undermine constructive dialog between NATO and Russia. We will raise this topic in our bilateral contacts with the Russian side." "Further militarization of this region, bordering the Baltic states and NATO, creates further anxiety, and we will be watching the situation there closely," Lithuania's Defense Minister Juozas Olekas said.

4% 0% -4% -8% -12% Mar May 12 12

POLITICS & ECONOMY

Jul 12

Sep Nov Jan 12 12 13

Mar May 13 13

Source: GUS, the central statistical office

Jul 13

Sep Nov 13 13

Russia has not explicitly confirmed the reports but insists it has every right to station missiles in its western-most region. Moscow has long threatened to move Iskander short-range missile systems to Kaliningrad in response to the United States' own European missile shield, which Russia sees as a threat to its nuclear deterrent. The US insists that the missile shield is not aimed at Russia but designed to defend Europe from attack from "rogue states" - assumed to include Iran.

"Iskander operational-tactical missile systems have indeed been commissioned by the Western Military District's missile and artillery forces," Russian news agencies quoted Maj. Gen. Igor Konashenkov, head of the Russian Defense Ministry's press service. He added that Russia's deployment "does not violate any international treaties or agreements" and should therefore not be subject to protests from the West." The Western Military District that Mr. Konashenkov refers to, covers parts of western and north-western Russia, including the Kaliningrad exclave. The advanced version of the Iskander missile has a range of about 500km, which means those in Kaliningrad could reach Poland, Lithuania and Latvia. "Rocket and artillery units of the Western Military District are already armed with Iskander tactical missile systems," Russian Defense Ministry spokesperson told reporters, without specifying whether they include the ones stationed near the Polish border. Germany's Bild newspaper first reported over the weekend that Russia had deployed about ten Iskander systems in its Kaliningrad exclave at some point in the past year. The Russian newspaper Izvestia reported last Monday that the missiles had already been stationed in the area for more than a year.

DATA BOX: WAGES Poland's average corporate gross wage stood at PLN 3,897 a month in November, after rising 3.1% y/y and 1.7% m/m, according to the country's Central Statistical Office. Economists surveyed by the PAP news agency had expected a 3.1% rise y/y, on a monthly increase of 1.4%..

weekly newsletter # 016 / 23rd December 2013 / page 14

KEY STATISTICS Consumer Prices Prices

+0.1 +3.6

+0.1

Clothing, shoes

-4.8

-2.7

-4.7 +0.7

-4.8 +3.5

-4.9

-0.2

Housing

+2.0

+0.1

+1.8

+1.8 +0.2

+1.8

+0.1

-1.4

+0.5

-1.4 +0.8

-2.3

-1.0

-2.3

-1.2

Communications -9.7

0.0

-9.7

-7.2 +2.8

-11.7

-4.9

Transport

Gross CPI

+1.1

-0.3

+0.1

0.0

y/y

m/m

Jun '13

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

Jul '13

Aug '13 Sep '13 Oct '13

m/m (%)

+1.5

+3.8

-0.7

-0.9

y/y (%)

+1.8

+4.3

+3.4

+3.9

+3.2

Year

2008

2009

2010

2011

2012

Turnover in PLNbn

564.7

582.8

593.0

646.1

676.0

+13.3

+4.3

+5.5

+11.6

+5.6

y/y (%) Nov 13

+1.9 +0.3

Sep 13

+0.2 +3.7 +0.2 +3.6

-0.1

Jul 13

+1.9

May 13

Alcohol, tobacco +3.6

0.0

Mar 13

-1.2 +2.6

Jan 13

2.5

Nov 12

Food & bev

Month

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

Sep 12

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

Retail Turnover

Jul 12

Nov '13

May 12

Oct '13

Mar 12

Sep '13

Jan 12

Sector

Inflation

Aug '13

Nov 11

Data in (%)

Residential Construction Dwellings

2008 2009 2010

2011

2012 Jan-Nov y/y

230.1

178.8

174.9

184.1

165.1

142.9

158.1

(in '000 units)

Producer Prices Prices

Industrial Output

+3.6

Permits

2013

(%)

126.3

-17.6 -11.2

Commenced

174.7

162.2

141.8

121.0

m/m (%)

+0.1

+0.7

+0.2

-0.3

+0.1

-0.7

-0.3

m/m (%)

-0.7

+2.6

+1.5

-4.5

+9.6

+6.0

-6.2

U. construction

687.4 670.3 692.7 723.0

713.1

706.7

-3.3

y/y (%)

-2.5

-1.3

-0.8

-1.1

-1.4

-1.5

y/y (%)

-1.8

+2.8

+6.3

+2.2

+6.2

+4.4

+2.9

Completed

165.2 160.0 135.7

152.5

129.6

-4.6

Year

2006

2007

2008

2009

2010

2011

2012

Year

2006

2007

2008

2009

2010

2011

2012

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

y/y (%)

+11.6

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

Gross Domestic Product

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

2006 +3.2

-2.0 2007 +7.4

-0.1

-0.2

-1.9 2008

-0.1

-1.9

-1.8

2009

+4.8

-0.1 -1.8

2010

+0.2

-0.1

2011 +1.0

-0.2 -1.8 2012 +0.2

y/y (%)

-27.5

Year

2006

y/y (%)

+18.1

+19.1 -18.3 2007 +15.5

+7.8 -5.2 2008 +12.1

-0.8 -11.1 2009 +5.1

+9.4

+14.3

-4.8

-3.2

2010

2011

+4.6

+11.8

-2.9 -8.9 2012 -0.6

138 6,290

143 6,061 138

Manufacturing

3,522

154

3,491

152 3,560

155 3,625 158

Energy

6,535

198 6,196

188 5,828

177

152 3,693

157 3,766 160

Construction

3,829

163 3,556

Retail & repairs

3,365

143 3,432 146

Transportation

3,816

135 3,439

IT, telecoms

6,379

Financial sector 6,044 National average 3,878

6,021 183

3,421

146 3,408 145

122 3,547

125 3,589 127

166 6,685

174 6,707

174 6,654 173

136 6,356

143 6,702

151 6,109 137

154

3,741 149

Source: Central Statistical Office (GUS)

3,613

144 3,652 145

-2.0%

395,657

-2.3%

Q1 2013

+0.5%

377,815

-3.1%

Q4 2012

+0.7%

442,231

-3.5% -3.5% -4.9%

Sentiment Indicators

2010

+3.9%

1,416,585

-5.1%

Economic sentiment and consumer confidence indicators

2009

+1.6%

1,344,384

-3.9%

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

120

Key Economic Data & Projections

100

Indicator

-20

GDP change

+3.9% +4.5%

+1.9%

+1.5%

+3.1%

Consumer inflation

+2.6% +4.3%

+3.7%

+0.9%

+1.8%

Producer inflation

+2.1% +7.6%

+3.4%

-1.2%

0.7%

CA balance, % of GDP

-5.1%

-4.9%

-3.5%

-1.5%

-0.4%

Nominal gross wage

+3.9%

+5.2%

+3.7%

+3.2%

+4.4%

Unemployment**

12.4%

12.5%

13.4%

13.5%

12.7%

3.99

4.12

4.19

4.20

4.06

-40

60 No v 1 3

192 6,060

404,310

+0.8%

1,522,736

Aug 13

A 8,427

+1.9%

Q2 2013

1,462,734

M ay 1 3

Q3 2013

+1.9%

Feb 13

Q2 2013

Current account def. in % of GDP

+4.5%

N ov 12

Q1 2013

GDP in PLN bn current prices

2011

Aug 1 2

Q4 2012

Growth y/y unadjusted

131.7

2012

M ay 12

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

Coal mining

+16.1

Source: The Central Statistical Office of Poland, GUS

Gross Wages Sector

m/m (%)

Feb 1 2

y/y (%)

-2.0

-0.1

Period

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

N ov 11

Year

-0.2

Month

Aug 1 1

y/y (%)

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

May 11

m/m (%)

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

Construction Output

Construction Prices Price s Month

Month

Feb 1 1

Month

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

EUR/PLN

*2010

*2011

*2012

2013

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

2014

weekly newsletter # 016 / 23rd December 2013 / page 15

55.84 ↓

100 SEK

46.39 ↑

100 NOK

49.58 ↑

10,000 JPY 10,000 HUF

400

USD EUR

350

300

292.20 ↓ 15.08 ↓

100 CZK

139.58 ↑

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

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

WIG Total index

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

5.0%

4.7%

PLN (up to 5 y )

5.7%

5.4%

PLN (over 5 y)

5.6%

5.3%

PLN (total)

5.6%

5.3%

5.0%

EUR (up to 1m EUR) 2.3%

1.9%

2.3%

EUR (over 1m EUR) 3.2%

2.9%

3.5%

153,867 531,124 114,083 928,359

Sep '13

Oct '13

166,620 540,873

154,967 536,237

113,223 931,042

113,174 935,095

934,713

- Time deposits

412,407 405,703

414,941

412,469

949,988

955,419

953,446

947,228

- Net foreign assets 154,035 147,978 150,517 148,702 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

51,097. 097.75

127

Change 1 week

380

-1%

+57%

5.1%

4.9%

4.8%

↓ Bogdanka

4.9%

4.8%

↓ BZ WBK

1.9%

1.8%

2.0%

→ Eurocash

46.37

+6%

3.5%

3.2%

2.5%

↓ Grupa Lotos

35.44

-3%

-14%

WIG-20 blue chip index

↓ GTC

7.53

-5%

-24%

↓ Handlowy

101.6

-10%

+3%

2,4 2,408. 08.84

Overnight

1 week

1 month

3 months

6 months

2.59%%

2.58%

2.61%

2.70%

2.72%

↓ Asseco Pol.

↓ JSW ↑ Kernel

-11%

-42%

Change 1 week

-1% ↓

+3%

-43%

Change end of '12

-7% ↓

114

-1%

-40%

2.75%

↓ mBank

493.1

-2%

+51%

→ Pekao

178.2

+6%

Credit

↑ PGE

17.27

+2%

-5%

The financial sector's net lending in PLN bn,

↑ PGNiG

5.29

+2%

↓ PKN Orlen

40.5

-9%

-18%

53000

↑ PKO BP

40.2

+2%

+9%

52000

454.1

+4%

50000 49000

2.50%

NBP deposit

4.00%

1.00%

loan stock at the end of period Type of loan Loans to customers

Jul '13

Aug '13

Sep '13

Nov '13

901,863

908,106

901,288

906,298

→ PZU

- to private companies

263,491

262,963

559,965

262,396

↑ Synthos

5.45

+7%

+1%

- to households

556,027

560,608

260,585

563,157

→ Tauron

4.58

-4%

Total assets of banks

1,627,182 1,626,489

1,612,836

1,627,119

↑ TP SA

9.72

+1%

-21%

Source: Central Bank NBP

+8% ↑

38.05

↓ KGHM

Lombard

-1% ↓

Change end of '12

Rediscount

Reference

153,672 113,718

0% -7%

4.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 20 Dec 2013

Nov '13 538,837

-5% -6%

4.5%

Central Bank (NBP) Base Rates Aug '13

45.3

4.6%

WIG Total closing index last three months 56000 55000 54000

51000

20 Dec 13

100 DKK

as of 20 December 2013

28 Nov 13

339.28 ↓

20 Dec 13

498.89 ↑

100 CHF

11 Oct 13

100 GBP

Warsaw Stock Exchange, rates in PLN

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

5 Aug 13

416.52 ↓

28 May 13

100 EUR

Key indices

Term / currency

450

18 Mar 13

305.25 ↑

9 Jan 13

100 USD

Stock Exchange

Average weighted annual interest rates

11 Oct 13

as of 20 December 2013

Interest rates

5 Nov 13

100 USD/EUR against PLN

Central Bank average rates

19 Sep 13

Currency

Source: Warsaw Stock Exchange

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

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

y/y (%)

share (%)

2012

IMPORTS in PLN bn share (%)

Jan-Sep 2013

y/y (%)

share (%)

2012

share (%)

EXPORTS in PLNbn JanNo Country Oct share 2013

*2012

Share No

IMPORTS in PLN bn JanCountry Oct share *2012 2013

49,806

+9.4

10.6

61,694

10.3

34,538

+4.5

7.3

44,287

6.9

1 Germany

133,127 25.0% 150,046 25.1%

1 Germany

Beverages and tobacco

6,405

+6.7

1.4

7,967

1.3

2,995

+1.2

0.6

3,989

0.6

2 UK

34,789

6.5%

40,184

2 Russia

66,670 12.4%

Crude materials except fuels

11,947

+9.9

2.5

14,024

2.4

15,917

-7.4

3.4

22,053

3.5

3 Czech Rep.

32,706

6.1%

37,475 6.3%

3 China

50,619 9.4% 57,235 9.0%

4 Italy

27,799

5.2% 32,782

5 France

20,573

3.8% 25,303 4.0%

Food and live animals

6.7%

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

22,200

+0.7

4.7

29,389

4.9

55,502

-11.7

11.6

85,280

13.4

4 France

30,127

5.7%

34,862

1,267

+46.7

0.3

1,342

0.2

1,955

-9.4

0.4

2,887

0.5

5 Russia

28,841

5.4%

32,290 5.4%

Chemical products

43,903

+7.0

9.3

54,295

9.1

69,490

+1.9

14.6

89,140

14.0

6 Italy

22,997

4.3% 29,067 4.9%

6 Netherlands

20,271

3.8% 24,543

Manufactured goods by material

97,528

+1.0

20.7

126,161

21.1

82,985

-3.2

17.5

110,773

17.4

7 Netherlands

20,950

3.9%

7 Czech Rep.

19,660

3.7% 23,327

3.7%

Machinery, transport equip.

176,544

+5.0

37.5

223,646

37.5

156,992

+2.4

33.1

203,718

31.9

8 Ukraine

15,017

2.8%