Poland Today Business Review+ No. 041 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. 041 / 30th June 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING France's Asquini to expand Lublin plant page 2

HOSPITALITY Huge new Hampton by Hilton opens in downtown Warsaw page 7

Chemicals firm PCC Rokita's completes Warsaw IPO page 2

SERVICES & BPO Capgemini expands Wrocław software unit page 8

Automotive exports up 5% in Q1 with full-year growth seen at 8% page 3 BANKING & FINANCE EBRD to buy up to 20% of shares in Altus TFI page 3 Getin Bank to sack 400 employees by Q3 page 4

The delaying completion of the Polish LNG terminal in Świnoujście also popped up in the recordings, but officials assure the project will be ready next year (see page 4). Photo: Polskie LNG

Government survives confidence vote

Prime Minister Donald Tusk and his government have survived a parliamentary vote of confidence amid an eavesdropping scandal involving prominent members of the ruling Civic Platform party and other key officials. Prosecutors have pressed charges against the first four suspects in the case. They include waitstaff at upscale restaurants and and influential businessman. page 13

tel. +48 881 650 600

ENERGY & RESOURCES LNG terminal is 90% complete, despite alarming revelations from secret recordings page 4 Alstom wins EUR 80m wind turbine order from PGE page 6 PROEPRTY & CONSTRUCTION Polimex-Mostostal creditors approve restructuring plan page 4 PKP seeks partners for train station retail projects page 7

TRANSPORT & LOGISTICS Łódź launches new commuter train service, Tri-city is next page 9 Goodman breaks ground on next phase of Kraków park page 10 RETAIL May retail sales data disappoint analysts page 11 Clothing & footwear market grows 3.6% in 2013 as consolidation continues page 12 POLITICS & ECONOMY Poland moves up in UNCTAD ranking page 13 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 15-17

weekly newsletter # 041 / 30th June 2014 / page 2

MANUFACTURING & PROCESSING

France's Asquini to expand Lublin plant

Chemicals firm PCC Rokita's completes Warsaw IPO

French aerospace components manufacturer Asquini Polska will expand its Polish business unit at the cost of PLN 41.8m, creating 40 new jobs in the Lublin area. The project will be implemented under the aegis of the Euro-Park Mielec special economic zone. "Asquini has been operating in Lublin since 2005. We decided to invest in the zone because Lublin is a great location not only for manufacturing, but also for R&D. We have been offered a perfectly prepared investment site and we have plans for fast-paced growth in Poland," Asquini Polska CEO Ludovic Asquini said in a statement released by the Lublin City Hall.

Polish chemical firm PCC Rokita made a successful landing on the Warsaw Stock Exchange last week as the 485th company listed on the Warsaw bourse and this year's 13th newcomer. Shares in the company opened at PLN 36 apiece, marking a 9.1% improvement on the issue price. The heavily oversubscribed offering included PLN 52.4m worth of newly issued shares as well as a PLN 45.9m stake sold by the company's main shareholder, Germany's PCC Group. Overall, new investors acquired an estimated 15% share in the business, corresponding to less than 10% of votes at the company's AGM.

The investor seeks to onboard some 30-40 new employees over the coming four years in order to reach a total headcount of 80-100. The company plans to build a new plant on a 2ha site and invest additional resources in production and quality assurance. Asquini Polska is Poland's only certified supplier of critical components to Airbus Helicopters, formerly known as Eurocopter. The Poland-based unit provides also machining of fuselage and landing gear parts used in the Airbus A320, A340, A350, A380 airliners, as well as steering, transmission and shock absorption components for helicopters. The Lublin section of the Euro-Park Mielec zone includes 116ha of investment land, of which close to two thirds are already occupied. It is home to 27 companies which declared total investments to the tune of PLN 750m and creation of 1,000 new jobs.

Based in Brzeg (40km south east of WrocĹ&#x201A;aw), PCC

Rokita is major producer of foams used by the furniture and upholstery industry. Photo: PCC Rokia Having reached sales of some EUR 262m and an operating result (EBITDA) of EUR 30m in fiscal 2013, PCC Rokita SA is the main source of revenues and earnings

for the PCC Group. The company's business activities include the production of chlorine and chlorine compounds as well as polyols and polyurethane systems. PCC Rokita will be the third company of the PCC Group to be listed in Warsaw, following the successful listings of its logistics unit PCC Intermodal in 2009, and PCC Exol SA, the surfactant producer from Brzeg Dolny, in 2012. The equity boost is meant to support the company's ambitious investment program. PCC Rokita seeks to spend PLN 35m on boosting its production capacity in polyols and polyurethane systems (total capex: PLN 45m), PLN 16m on increasing its polyoxypropylene output (total capex: PLN 30m), and PLN 5m on research & development (total capex: PLN 7m). The Duisburg-based German company PCC group focuses on chemicals, transportation, energy, coal & coke, plastics & metallurgy. With a total workforce of 2,800 people, it operates across 16 countries in Central and Eastern Europe. Besides PCC Rokita, its Polish assets include the Gdynia-based intermodal freight forwarder PCC Intermodal, which moved more than 125,000 TEU in 2013 between its inland terminals in Poland and seaports in Poland, Germany, and the Netherlands. In 2013 PCC Group turned over EUR 625m and posted net earnings of EUR 7.9m. PCC group CEO Waldemar Preussner told reporters last week that he may float other companies from the group on the Warsaw bourse over the coming two years, after reaching an adequate scale of activity. PCC Consumer Products Kosmet, a producer of domestic chemicals and cosmetics, is likely to be PCC's next IPO, Preussner said, adding that size and scale of operations would be decisive criteria for which firm to float.

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Automotive exports to grow 8% in 2014 MANUFACTURING & PROCESSING

Automotive Automotive exports up 5% in Q1 with fullfull-year growth seen at 8% According to the market research firm AutomotiSuppliers.pl, Poland's automotive industry exported EUR 4.66bn worth of products in Q1 2014, marking a 4.7% improvement y/y. In March alone the figure came to EUR 1.69bn – the best result in nearly three years, including a historic result in the parts and components category: EUR 702m. As a result, the country is likely to export a total of EUR 19.4bn worth of cars and components this year, up from EUR 17.9bn in 20013, Rafał Orłowski of AutomotiveSuppliers.pl told Poland Today. The improvement is mainly due to increasing orders from the EU countries, which receive the bulk of Poland's automotive exports. Exports to Germany, Poland's main trading partner, increased by 12% and totaled EUR 532m in March. Italian customers bought EUR 174.4m worth of Polish automotive production (+16.5%), whereas exports to the Czech Republic boosted by more than a half and topped EUR 122.7bn. Orders from the UK dropped 3.3%, down to EUR 130.3bn. In the first three months of the year Poland shipped out EUR 1.98bn worth of parts and components, EUR 1.28bn worth of passenger cars and light commercial vehicles and EUR 579.4m worth of diesel engines. The main recipients were Germany, with a 31% share in the total exports, followed by the UK (9.4%) and Italy (9.2%).

Automotive exports in EUR bn 20 19

up to PLN 50m in the forthcoming IPO of fund manager Altus TFI S.A. on the Warsaw Stock Exchange. Altus is a privately held mutual fund and asset management company in Poland with assets under management of more than PLN 5 billion across 36 funds. It is ranked 17th with a 1.5% market share.

18 17 16 15 14 200 8

200 9

2010

201 1

201 2

201 3

*20 14

Source: AutomotiveSuppliers.pl *) projected

"A few years ago Poland's main automotive exports were cars, but since mid-2001 the top spot belongs to parts and components, which represented more than 42% of the total figure in Q1 2014. We are expecting this segment to set more records this year," says Orłowski. "Many suppliers operating in Poland are expanding production, and new factories are being built. Inalfa Roof Systems has just opened in Września and next month BASF will launch production in Środa Śląska. It should be said that we owe the robust growth over the past months not only to Western European clients, but also factories in other CEE countries, such as the Czech Republic and Hungary, where car production is on the rise."

BANKING & FINANCE

EBRD to buy up to 20% of shares in Altus TFI The European Bank for Reconstruction & Development (EBRD) is considering an investment of

Following a successful book building, in which demand exceeded supply three times, Altus set the price at PLN 9.5, bringing the value of the entire offering to PLN 175m. The IPO includes 16.4m new shares and 2m existing shares in Altus TFI. New shareholders will end up with just over 30% of the company. In its listing prospectus the company said it will use the resources to finance investments and boost the scale of its business mainly via acquisitions of other Polish fund managers. Altus said it was analyzing two potential transactions at the moment. Altus TFI was established in 2008 by Piotr Osiecki, former Deputy CEO and CIO of PZU Asset Management, who is currently the CEO of Altus with a 59% ownership. The remaining shares are owned by managers of the fund and founding shareholders. "The EBRD’s investment will support Altus TFI in its transformation from a private to a publicly listed company with enhanced governance and transparency requirements. The EBRD plans to appoint an independent experienced board member to assist in institutionalizing the business and provide guidance on corporate governance," the EBRD said. "Furthermore, the EBRD's investment will represent its continued commitment to supporting the development of Poland's capital markets where asset management companies are expected to play an increasingly important role, particularly in the context of the recent pension reforms," it added.

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BANKING & FINANCE

Getin Bank sacks 400 employees as part of broader downsizing trend in banking sector Polish Getin Bank will lay off 400 employees by Q3, in a move to "cut ineffective sales channels," as its press office euphemistically announced last week. Getin Bank is a retail brand of Getin Noble Bank, a Warsaw-listed financial services group belonging to billionaire Leszek Czarnecki. Last year Getin Noble Bank boosted its net earnings by 20% to reach of PLN 400m, whereas its total assets increased by 9% and came to PLN 63.6bn. In recent years Getin Noble Bank has made a number of small acquisitions in the banking sector in Poland (GMAC, Allianz Bank, Dexia, parts of DNB Nord and DZ Bank) and other CEE countries (most recently Romania). Now, the billionaire's attention is said to be shifting to the leasing segment, with the recent purchase of VB-Leasing International's operations in Poland and Romania. With PLN 6.4bn worth of assets, Czarnecki is one of Poland's five wealthiest individuals. His portfolio includes a 55.8% share in Getin Holding, 55.7% in Getin Noble Bank, 51.3% in LC Corp (property developer) as well as 54.2% in Open Finance (financial intermediation firm). To-date, he has completed seven listings on the Warsaw Stock Exchange and in recent interviews he hinted that another IPO is likely to take place by the end of the year. Analysts are betting on Idea Bank.

The redundancies at Getin are part of a broader trend in the Polish and global banking industry, as customers grow more accustomed to online and mobile banking. According to Poland's financial markets regulator KNF, some 7,000 banking jobs were lost in Poland over the past four years and at the end of April the sector employed approximately 173,100 people - the lowest number since 2009, when KNF began publishing the data. The layoffs affect primarily banking branches, where staff numbers dropped from the all-time-high of 107,012 in April 2010 down to a historic low of 100,868 four years later. Positions at head offices seem to be more stable, as they employ close to 72,000, only 1,000 down on the December 2012 record. Further redundancies are likely as the sector consolidates. For instance, the coming BNP Paribas-BGŻ and PKO BPNordea mergers will almost certainly trim some overlapping functions. Not all layoffs are as spectacular as sudden as the one at Getin, however, as most banks choose to cut staff gradually and quietly. Although the downsizing trend is clear, it is yet to affect the number of branches, which remains relatively stable. In April there were 15,383 banking units in the country, including 7,330 proprietary ones. A year earlier the total figure stood at 15,446 and majority of the closures that have taken place since that time have impacted banking agencies/franchise-based units.

ENERGY & RESOURCES

LNG terminal is 90% complete, despite alarming revelations from secret recordings Poland's natural gas giant PGNiG suspended deputy CEO for corporate affairs Andrzej Parafianowicz, following the publication of a secretly taped conversation with former Transport Minister Sławomir Nowak, in which the two discuss, among others, the likely delays in the completion of Poland's LNG terminal in Świnoujście. During the same tete-â-tete Parafianowicz, a former deputy Finance Minister, also seemingly offered to help tone down a tax investigation into Nowak's wife. The tapes, published by the weekly Wprost, are part of a larger eavesdropping scandal that in the past two weeks has engulfed Poland's ruling party and the government in the worst crisis since it came to power in 2007. In the recordings, Parafianowicz tells Nowak that the 2010 contract with Italy's Saipem, for the construction of the terminal, puts Poland at a major disadvantage, and enables the contractor to draw out the construction process without any sanctions. According to original plans, the terminal was supposed to launch in 2014, but its opening has since been pushed back to mid-2015. In the recordings, PGNIG executive expresses doubts about the new deadline and mentions a 2017 completion as a possible scenario. According to the most recent official statement from Economy Minister Janusz Piechociński, the terminal will go online in May/June 2015, while testing should begin by the end of this year.

weekly newsletter # 041 / 30th June 2014 / page 5

Poland's Today asked Polskie LNG, the special purpose company in charge of the project, about the current status of the latter. According to the information we received from communications director Maciej Mazur, the terminal was 89.5% complete as of June 26, 2014 nearing the much anticipated finale at the average monthly rate of two percentage points since the beginning of this year. Approximately 1,500 workers are currently employed at the site. According to earlier plans, the project, which is of strategic importance for Poland's energy security, were to reach completion in mid-2014, but the Saipem-Techint-PBG consortium has been given an additional six months to deliver the facility. The construction of the Świnoujście terminal will cost state-controlled Polskie LNG a total of about PLN 3bn. Another PLN 4.5bn is expected to be spent on all the related infrastructure.

its energy security, Poland seeks to integrate the domestic transmission system with those of neighboring countries (see more on that in PT Business Review + No. 022 page 5). Particular focus has been placed on the north-south pipeline and the integration of connections in the Baltic Sea region. These connections, together with the expansion of the LNG terminal and the national transmission network, are to create a common regional gas market. The first supplier of LNG to Świnoujście will be Qatargas, under an agreement signed in 2009, which stipulates that starting from July 2014 the Qatar company is to deliver 1m cb.m of the fuel annually over a period of 20 years. However, PGNiG s it would seek to renegotiate the deal with Qatargas. PGNiG would like to reschedule the timetable of future deliveries, as well as the price of the Qatar gas, because of the delayer completion of the terminal as well as significant drop in global gas prices over the past years. The prices in the initial agreement, while competitive five years ago, are now seen as too steep.

scheduled for commissioning at the end of 2015, Lotnisko is one of the largest project in the Polish wind power industry, and the first wind power project implemented by Alstom in Poland. The new farm in Kopaniewo is part of PGE strategy to reach at least 234 MW of power from wind farms by 2016. The scope of the contract covers the project management, supply, erection and commissioning of 30 Alstom ECO110 3 MW wind turbines equipped with a 110 m diameter rotor, a 90 meter high steel tower, and a SCADA remote control system. Alstom will also provide turbines operation and maintenance for 2 years. So far Alstom has installed more than 130 turbines of the ECO100 type throughout Europe, including Spain, Great Britain, Turkey and Finland.

ENERGY & RESOURCES

Alstom wins EUR 80m wind turbine contract from PGE group According to Polskie LNG and government ministers the Świnoujście terminal is very close to completion. Photo: Polskie LNG

Its large-scale investments in gas transmission infrastructure will enable Poland to import significant amounts of gas from directions other than Russia, which currently supplies close to two thirds of Polish gas. As part of the ongoing efforts aimed at improving

PGE Energia Odnawialna, the renewable energy arm of Poland's top power utility firm PGE has awarded a EUR 80m contract for the supply of 30 wind turbines to PGE's "Lotnisko 90MW" wing farm, which will be based in Kopaniewo. The French engineering giant beat Danish Vestas and Germany's Siemens, which offered to deliver turbines with the same total capacity for EUR 87.9m and EUR 90.5m (net) respectively. With a total output of 90MW and

Alstom's ECO110 3MW turbines in operation at a wind farm in Bretagne, France. Photo: Alstom "A contract for 30 wind turbines delivery opens a new range in a long-term co-operation between our companies. We are convinced that Alstom competences in Poland in the conventional energy sector, combined with the proven technology represented by ECO110 turbines, will translate into an efficient execution of the contract and guarantee Alstom a successful debut

weekly newsletter # 041 / 30th June 2014 / page 6

on the Polish wind market," said Krzysztof Müller, Investments Department Director, PGE Energia Odnawialna. Alstom builds and operates wind farms globally – more than 2,600 turbines are currently installed or under construction in more than 200 wind farms, delivering over 5,000 MW. Alstom designs and manufactures onshore and offshore wind turbines in a range from 1.67 MW to 6 MW.

Poland's installed renewable energy capacity came to 5,823 MW as of end of Q1 2014 , up by over 1,400 MW compared to end-2012, according to energy market regulator URE. Wind power capacity increased the most, reaching 3,677 MW as of March, followed by hydro-power capacity amounting to 974 MW and biomass-fueled plants with 9995 MW, the data showed. Renewable energy currently represents slightly over 10% of Poland's energy supply. The country seems to be way on its way to reach its 15% target for the share of renewable sources in gross final consumption of energy in 2020.

Additionally, Polimex is to issue PLN 140m worth of bonds (some of them convertible) to finance its day-today activities. It will also get access to PLN 60m worth of bank guarantees that will enable the company to take part in new tenders. Polimex will become a holding company divided into two units providing services to the energy and petrochemicals segments. Shares in the said two units will serve as a collateral for the new bonds and guarantees.

Polimex-Mostostal key financial figures

Poland's installed wind energy capacity in MW 4,000

Turno ver in P LNbn, left axis Net pro fit in P LNbn, right axis

PROPERTY & CONSTRUCTION

3,500

PolimexPolimex-Mostostal creditors approve restructuring plan

3,000 2,500 2,000 1,500 1,000 500

Source: URE

*2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

*) as of end of Q1

Alstom employs more than 3,200 people in Poland in power generation, grid, and transport sectors. Its Polish operations include a turbine factory and foundries in Elbląg, generator plant in Wrocław, rolling stock factory in Chorzów, EPC project implementation in Łódź and Warsaw as well as switchgear unit in Katowice, specializing in grid solutions. Earlier this year Alstom signed contracts worth approximately EUR 1.25 billion with Polimex, Rafako and Mostostal Warsawa, members of the consortium in charge of the supply of two 900 MW units for PGE's new ultrasupercritical coal-fired power plant in Opole, southwestern Poland. It is also delivering the new highspeed Pendolino trains to Poland's PKP Intercity.

Poland's largest construction company PolimexMostostal, which ended up on the verge of bankruptcy due to poor risk assessment on a number of huge infrastructure projects in the run-up to the 2012 European football championships, has finally reached an agreement with creditors and bondholders that ensures survival of its business. According to a term sheet signed by the builder and its creditors (mainly the PKO BP and Pekao SA banks), a large portion of Polimex's debt (at least PLN 470m) is to be converted into shares, whereas repayment of the outstanding dues is to be pushed back until the end of 2019. Although no exact figures were provided at this time, Polimex had earlier estimated its dues to creditors and bondholders at some PLN 900m. Its creditors are to receive 2.69bn newly issued shares in Polimex, whose equity currently includes 1.47bn shares.

0.25

0.00

-0.25

-0.50

-0.75

-1.00

-1.25 2006

2007

2008

2009

2010

2011

2012

2013

Source: Polimex-Mostostal

An annex to the original restructuring agreement from December 2012 is to be signed in July and its covenants will give the company more flexibility, the company said. Polimex estimates the value of its order book at some PLN 9bn at the moment. The company participates in the largest two projects in Poland's energy sector: the PLN 11.5bn expansion of Opole power station and PLN 6.4bn Kozienice power plant investment. Polimex's share in each of the two contracts tops 42%. Its creditors have also approved a further sell-off of Polimex assets, including the 100% stake in rail engineering company Torpol, which is currently being floated on the Warsaw Stock Exchange. The Torpol

weekly newsletter # 041 / 30th June 2014 / page 7

IPO, which includes also newly issued shares, is expected to generate some PLN 105-125m worth of proceeds for Polimex. Last year Polimex-Mostostal posted a PLN 262m net loss on PLN 2.36bn turnover. In 2012 its net loss totaled a massive PLN -1.24bn while its revenues came to PLN 4.11bn.

"We are analyzing another 130 properties throughout the country, with varying sizes and potential. From that pool we intend to select further locations that may be suitable for development," Bator adds. Typically, PKP takes possession of the newly built train stations along with the adjacent railway infrastructure, whereas the commercial premises are being sold.

Although the "Small Development Projects" initiative is unlikely to attract such big names, PKP should be able to find local partners for most investments. With retail chains seeking ways to get closer and closer to their clients, and amid shortage of suitable retail units outside of shopping centers, newly-developed commercial space at railway stations is likely to attract tenants pretty quickly.

PROPERTY & CONSTRUCTION

HOSPITALITY

Railway giant PKP seeks seeks developers for train station projects

Huge new Hampton by Hilton opens in downtown Warsaw

Poland's state railways operator PKP is inviting property companies to join its new initiative that will focus on development of retail and service facilities at selected train stations across the country. The pilot of PKP's "Small Development Projects" program encompasses seven stations: Mińsk Mazowiecki, Warszawa Włochy, Oświęcim, Konin, Włocławek, Dębica and Katowice.

Hampton by Hilton announced the official opening of its latest property in Poland, the 300-guestroom Hampton by Hilton Warsaw City Centre. The property is Hampton's largest hotel outside the US and one of the biggest hotels to open in the city centre in the last few years. Last year, the hotel was the first in Warsaw to receive the prestigious LEED Gold Certification, in recognition for its eco-friendly construction and energy efficiency.

"Commercial investments at railway stations are beneficial both for investors and local communities. Train stations make very good locations for retail and we hope the projects will liven up the areas around train stations," says Jarosłąw Bator, Managing Director Real Estate at PKP. Developers selected by PKP will be able to build commercial projects measuring between 700 sq.m and 7,500 sq.m, which means that the largest may reach several tens of million euros. The first investments are likely to launch as early as next year.

Galeria Katowicka, is a joint project of PKP and Spanish developer Neiver. Image: Neinver Polska So far, PKP has completed two large mixed-use projects under a similar formula: Galeria Katowicka (with Spanish developer Neinver) and Poznań City Center (with Hungary's TriGranit), with a combined floor space of some 108,000 sq.m. PKP also contributed sites to major retail projects such as Złote Tarasy (66,200 sq.m GLA) and Warszawa Wileńska (34,000 sq.ma GLA) in Warsaw and Galeria Krakowska (58,000 sq.m) in Kraków. The coming months are to see Slovakian developer HB Reavis break ground on the new Warszawa Zachodnia station, which will be accompanied by an office park. PKP has also named a partner (Belgium's Ghelamco) for the redevelopment of the Warszawa Gdańska station.

The scheme was delivered by Austria's S+B Gruppe, which acquired an unfinished 55-tall edifice a few years ago from the original investors who had sought to fill its 12,500 sq.m of floor space with offices, before going bust. S+B decided to turn the project into a hotel at the cost of approximately EUR 40m. Located on 72 Wspólna St., close to the Marriott hotel and the central station, Hampton by Hilton Warsaw City Centre offers easy access to a number of Warsaw key tourist attractions as well as a wide range of shopping and dining venues.

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Hampton by Hilton Warsaw City Centre features 300 guestrooms across 17 floors, parking, fitness centre and 24/7 snack area. A separate business zone equipped with computers and printers also caters to business guests. Complimentary high-speed Wi-Fi is available throughout the hotel. The new hotel is the second Hampton by Hilton in Warsaw following the recently completed property near the Chopin airport, and number four in Poland, alongside hotels in Gdańsk and Świnoujście. Other Hilton brands available in Poland are Hilton Garden Inn (Kraków, Rzeszów), DoubleTree by Hilton (Warsaw, Łódź) and Hilton (Warsaw, Gdańsk). The latest opening, prior to Hampton by Hilton Warsaw City Centre, was the 360-room DoubleTree by Hilton Hotel & Conference Center in Warsaw, developed by Polaris Hospitality Enterprises, which welcomed first guests in May.

"Poland continues to be a strategic development market for Hilton Worldwide. In 2013, over 23 million tourists chose to visit Poland. The number of guests booking hotels increased by nearly one million versus the previous year, with Warsaw as the top destination. Hampton by Hilton Warsaw City Centre is in a prime location to welcome these guests and provide the value offering for which Hampton is internationally known," said Simon Vincent, president, Europe, Middle East & Africa, Hilton Worldwide.

Hilton Worldwide – Polish hotels Property Hilton Warsaw

No of rooms

Opening

314

2007

Hilton Gdansk

152

2010

Hilton Wroclaw

255

TBA

Hampton by Hilton Swinoujscie

104

2012

Hampton by Hilton Warsaw Airport

116

2013

Hampton by Hilton Gdansk Airport

116

2013

Hampton by Hilton Bydgoszcz

130

2014

DoubleTree by Hilton Lodz

200

2013

Doubletree by Hilton Warsaw

365

2013

Hilton Garden Inn Krakow

155

2010

Hilton Garden Inn Rzeszow

102

2012

Hilton Garden Inn Krakow Airport

150

2013

Hilton Garden Inn Wroclaw

150

TBA

Source: Hilton Worldwide / archives

Hampton by Hilton Warsaw City Centre is Hampton's largest hotel outside the USA and one of the biggest hotels to open in the city centre in the last few years. Image: Hampton Hotels

The Hilton brand is yet to appear in Wrocław, where two projects (Hilton and Hilton Graden Inn) experienced serious delays due to financing problems on the part of investors, but according to recent reports they are about to take off. A Hampton by Hilton property is also under construction in Bydgoszcz.

Hilton Worldwide is the leading global hospitality company, spanning the lodging sector from luxurious full-service hotels and resorts to extended-stay suites and mid-priced hotels. Its brands are comprised of more than 4,100 hotels and timeshare properties, with 685,000 rooms in 92 countries and include Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts, DoubleTree by Hilton, Embassy Suites Hotels, Hilton Garden Inn, Hampton Hotels, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations..

SERVICES & BPO

Capgemini expands Wrocław software unit Global technology outsourcing and consultancy giant Capgemini seeks to create 100 jobs at its Software Solutions Center in Wrocław by the end of the year, in addition to the estimated 100 positions it has created there over the past six months. The company's rapid growth in Wrocław is partly due to a recent launch of a dedicated testing unit within the Software Solutions Centre. Created from latter's existing employees as well as specialists from Capgemini's subsidiary Sogeti, the new unit focuses on software testing solutions, for instance testing automation and mobile testing. Capgemini currently employs 600 professionals in Wrocław, who work on 80 business projects for 30 global clients. In a move to accommodate its growing staff numbers Capgemini will relocate to new offices in Millennium Tower IV, part of an office park developed by a local company Descont. "Our Wrocław centre is handling a growing number of projects for our current and new clients," Capgemini's Joanna Nowocień told Poland Today in November last year. "We have signed a framework agreement with Poland's social security administration ZUS regarding development and upgrade of their IT system KSI, one of Europe's largest." The company is recruiting both experienced staff as well as IT graduates for the software solutions unit in Wrocław, which cooperates closely with Capgemini centers in Germany and provides services to many German clients, such as Daimler, BMW, and ZDF. The centre specializes in change management, business

weekly newsletter # 041 / 30th June 2014 / page 9

process outsourcing, IT infrastructure management services and tailored software solutions. Its clients include top brands from the automotive, finance, logistics and media sectors. One of its best-known implementations in Poland is the Express Elixir system for Poland's national clearing house KIR, which enables immediate transfers between banks.

Employment at BPO/SSC centers in Poland

TRANSPORT & LOGISTICS

Łódź launches new commuter commuter train service, service, TriTri-city is next Łódzka Kolej Aglomeracyjna (ŁKA) a local commuter train operator owned by the Łódź region, officially launched passenger services in mid-June, connecting the central Polish city with the nearby town of Sieradz. Other routes (to Zgierz, Koluszki, Łowicz, and Kutno) are to be introduced gradually over the coming year.

175,000 150,000 125,000 100,000 75,000 50,000 25,000

*) as of April

**2015

*2014

*2013

2012

2011

2010

2009

2008

Source: ABSL

are underway to integrate other means on public transport in the (train, tram, bus) with the ŁKA network.

**) projected year-end

With more than 130,000 people in 40 countries, Capgemini is one of the world's foremost providers of consulting, technology and outsourcing services. The group reported 2013 global revenues of EUR 10.1bn. Capgemini has five centers in Poland (Kraków, Katowice, Warsaw, Wrocław, and Opole) that employ 5,800 staff and deliver a whole range of applications services, business process outsourcing, and infrastructure services in nearly 30 languages. "We are already Poland's number two BPO employer, and considering our growth pace to-date, we are on track to pass the 6,000 employment mark in 2015," Ms. Nowocień told Poland Today a few months ago, and now it seems like they might hit that milestone already this year.

In December 2012, ŁKA ordered 20 FLIRT3 twocarriage electrical trains from the Swiss-owned train maker Stadler Polska Sp. z o.o. The first six vehicles have already been put into service, and the remaining ones are to be delivered by February 2015. After commissioning the vehicles, Stadler Polska will be responsible for the technical maintenance of the vehicles for 15 years in a new depot to be built in the Widzew district of Łódź. This solution allows the new railway to concentrate on transport management while Stadler will be responsible for the everyday availability of the vehicles. The new depot is to be commissioned in September. The vehicles and the new depot are part of the regional "System Łódzka Kolej Aglomeracyjna" transport project, one of the largest infrastructure developments in the region. The capital expenditures on ŁKA has come to PLN 457m, of which PLN 193m was contributed by the European Union's cohesion fund. As part of this investment, 24 platforms at 14 stops and three train stations (Stryków, Głowno and Chociszew) have been modernized or developed from scratch. Works

ŁKA ordered 20 two-carriage FLIRT3 trains from Stadler. Image: Stadler Stadler Rail, which employs 500 staff at its Polish assembly plant in Siedlce near Warsaw, has sold over 960 units based on the FLIRT concept over the past 10 years to many markets, including Hungary, Serbia, Norway, and Estonia. In August last year the Swiss train maker, working in a consortium with Polish rail vehicle manufacturer Newag, won an international invitation to tender from Polish State Railways PKP Intercity for 20 long-distance trains. The contract relates to eight-carriage FLIRT3 trains with a high-quality interior to allow comfortable long-distance travel. The FLIRT3 is the latest generation of Stadler's bestselling train, made up of various modular sub-ranges. Stadler had earlier sold 10 four-unit low-floor FLIRTS to the Mazowieckie region operator Koleje Mazowieckie as well as four similar vehicles to Silesia's Koleje Śląskie. "Between September 2007 and the end of April 2014 the Siedlce plant completed 180 trains. Besides the ŁKA contract, we are currently working on orders

weekly newsletter # 041 / 30th June 2014 / page 10

from Austrian-Hungarian GYSEV, Germany BeNEX GmbH as well as GTW vehicles for Arriva," Tomasz Prejs, COO of Stadler Polska tells Poland Today. "Recently we have completed deliveries of wide-gauge FLIRTs for Estonia's Elektriraudtee and Belorussian Railways. Stadler Polska is also providing maintenance services to Koleje Śląskie, Koleje Mazowieckie and LEO Express. Our factory will also fulfill a portion of PKP Intercity's order of 20 FLIRT trains." "Stadler set up the Siedlce plant in order to carry out orders from Poland. Over the 2007-2013 period we acquired only two contracts from this market, but since the Stadler group decided to produce trains from some of their other contracts in Poland, we became the country's largest exporter of rail vehicles in the country. Our further growth depends on the kid of new tenders are being announced in Poland and whether we succeed at winning those deals," says Tomasz Prejs. Indeed, over the past years a lot of lucrative contracts landed with Polish-owned firms, such as the Bydgoszcz-based train maker PESA which has just obtained a PLN 114m contract for the delivery of 10 electric multiple units to Pomorska Kolej Metropolitalna (in Polish abbreviated into PKM) – a brand new 20km commuter line that will connect the Gdańsk city centre with the city's airport and the Kashubia region. PESA's rival in the tender was Stadler's partner in the PKP Intercity project, Polish Newag.

Brand new railway line for Tri-city

Scheduled to reach completion in 2H 2015, PKM is being currently developed by a Polish-Spanish consortium of Budimex and its strategic investor Ferrovial Agroman at the cost of PLN 716m. The investor behind PKM is a special purpose company established by the regional authorities, which are counting on the new railway line to significantly greatly improve pas-

senger transportation between the airport, downtown Gdańsk, Gdynia as well as a number of towns in the region. In 2011 the EU assigned PLN 612m funding for the project, which was at the time expected to cost PLN 914m. The eight-station line will branch off the Gdansk – Gdynia line west of Gdansk Wrzeszcz station, turning south through Bretowo and Jasień, crossing the S6 highway to reach a park-and-ride station at Matarnia. From here the line will continue west to the airport, before joining the existing Kościerzyna – Gdynia line at a triangular junction south of Osowa station.

The Gdańsk authorities are counting on PKM to stimulate economic growth in the region.

Osowa, which will also enable the operation of Gdansk - Kościerzyna regional services. According to plans, PKM train will operate a 15minute interval service, with a journey time of 18 minutes between Gdańsk Wrzeszcz and the Lech Wałęsa Airport. It should provide a welcome growth stimulus to the area, with investment sites located near PKM stations being highly sought after. "The PKM will undoubtedly increase Tricity's investment attractiveness," Marcin Piątkowski, director of the regional investment support agency Invest in Pomerania told Poland Today's Lech Kaczanowski. "PKM will represent a vital factor for investors who decide on the location of their projects and, in a consequence will contribute to the economic recovery of the areas located along Metropolitan Railway. So far investors looking for a compromise between convenient access to the workplace and cost effectiveness have been choosing locations situated along main transportation road or in the vicinity of the commuter train. PMR, which will link the southern part of the agglomeration with the city centers of Gdańsk and Gdynia, will particularly boost development of service centers in the suburbs, which until now were accessible only by car or bus."

Image: PKM

Phase one of the entire undertaking involved electrification of the existing Gdynia - Gdańsk Osowa route, which is being handled by the railway infrastructure operator PKP PLK under a separate budget. The second stage is reinstatement of a 14 km line from Gdańsk to Kokoszki, near the airport. The line was severely damaged in World War II and was subsequently used to train soldiers in the destruction of rail infrastructure, and as a result needs to be completely rebuilt. The third stage is a new alignment of around 4km connecting Gdańsk Airport with a triangular junction to the Gdynia - Koscierzyna line south of

TRANSPORT & LOGISTICS

Goodman breaks ground on next phase of Kraków park park Although the slightly weaker-than-expected macroeconomic figures in recent weeks have somewhat dampened widespread hopes for a rapid recovery, there is at least one sector where confidence in the

weekly newsletter # 041 / 30th June 2014 / page 11

Polish economy seems stronger than ever. After a few years of relying almost exclusively on built-to-suit projects, since the beginning of 2014 Polish warehouse and industrial property developers have all gone speculative. We have already written about new speculative schemes from the leading warehouse developers Panattoni and ProLogis and last week another major player, Goodman, said it had commenced the construction of its fifth warehouse at Kraków Airport Logistics Centre. The 11,000 sq.m facility is also being built on a speculative and its completion is scheduled for November 2014. According to Goodman, the building can be split into smaller units to meet customer requirements, and will also feature office and social space.

Ciesielczak, Regional Director Central and Eastern Europe. The new warehouse is Goodman's fourth speculative development at Kraków Airport Logistics Centre, which is a 50/50 joint venture between Goodman Group and Goodman European Logistics Fund (GELF). The existing four warehouses have a combined area of 55,230 sq.m, all of which had been leased prior to delivery. The entire project has a target lease area of over 150,000 sq.m and on completion will comprise nine warehouses with additional office space, staff and technical areas.

CONSUMER GOODS & RETAIL

May retail sales data disappoint analysts Polish retail sales advanced in May by 3.8% y/y as compared to 8.4% y/y in April and 3.1% y/y in March. This result was considerably lower than market expectations (6.2% y/y). The surprise was significant but it was caused mostly by weak sales in usually volatile categories. Excluding car, food and fuel, retail sales increased by 8.4% in real terms and 7.1% y/y in nominal terms.

Retail sales in Poland (y/y) Warehouse market as of end of 2013 Region

Existing stock

Warsaw Inner City

563,000

3.6-5.1

2,063,000

2.1-2.8

780,000

3.4-3.9

Warsaw suburbs Wrocław Kraków Łódź Central Poland (excl. Łódź) Poznań Szczecin Upper Silesia Tri-City

15%

Effective rents

141,000

3.3-4

300,000

2.75-3.7

721,000

2.1-2.8

1,023,000

2.5-3.15

48,000

2.8-3.4

1,431,000

2.4-3.3

184,000

2.8-3.3

10% 5%

Kraków Airport Logistics Centre is located in Modliniczka near Kraków, 4 km from Kraków-Balice International Airport and close to the A4 expressway linking Kraków and Wrocław. Its current tenants include Farutex, KMC Services, Valeo Autosystemy, DS Smith, Royal Canin, Logfarma, Schenker and Bonito.pl. Image: Goodman

Source: Jones Lang LaSalle, warehousefinder.pl Q4 2013

"The decision to build this new facility in Kraków was made in response to the needs of our potential customers and the substantial demand in the local market for small warehouse facilities with immediate availability. We have the capability to develop this type of project given the strong capital backing from Goodman Group and our managed funds," said Błażej

Due to limited availability of suitable investment sites and reluctance of local companies to cooperate with large industrial developers, the Kraków market sees very few new high-quality industrial and warehouse projects. Last year only 9,000 sq.m of industrial space was delivered in the Kraków area compared o 56,000 sq.m in Upper Silesia and 129,000 sq.m in Wrocław, according to Cushman & Wakefield figures.

0% -5% Nov 11

May 12

Nov 12

May 13

Nov 13

May 14

Source: GUS

"Sales were dragged lower mainly by declining purchases of cars – after very strong gains in the first quarter due to expiring tax allowances on purchases of commercial vehicles," BZ WBK analysts said in a comment. "Sales of cars declined strongly for the second month in a row (this time by 12.2%MoM), stronger than we expected. Additionally, as compared with April, food sales weakened considerably but this was no surprise as it was due to Easter effect in April. Other categories showed upward tendencies."

weekly newsletter # 041 / 30th June 2014 / page 12

"The slower retail sales growth comes after disappointing industrial output and therefore the signal shouldn’t be easily dismissed. Our economic growth momentum indicator (see Figure 3) suggests the economy lost some of its impressive momentum in recent months and therefore we look for a slowdown in GDP growth will around 3% y/y in Q2 2014. However, given the strength of the labor market (continued decline in unemployment rate and quick rise in real wages) as well as accelerating lending growth we believe the slowdown is only temporary and probably partly driven by weaker exports to Russia and Ukraine," CitiBank economists added.

CONSUMER GOODS & RETAIL

Clothing & footwear market grows grows 3.6% in 2013 as consolidation continues Poland's clothing and footwear sales expanded by 3.6% last year, reaching PLN 22.2bn, according to a new report by market research company PMR, which expects further growth in 2014 and 2015 as the economic situation in the country improves. The 2013 was overall a rather challenging year for clothing retailers, due to a mixture of unfavorable factors, including economic slowdown, late arrival of spring and mild winter. "This year will be even better for clothing and footwear retailers in Poland, as indicated in figures from the past few months. A gradual improvement of macroeconomic indicators should translate into better consumer mood and higher spending, although customers will continue to buy smart, expecting good val-

ue for money," PMR's retail analyst Patrycja Nalepa commented on the report's findings. PMR analysts argue that the consolidation of Poland's clothing & footwear market is likewise likely to pick up speed, as data shows that the key market players: LPP, Inditex, and H&M continue to strengthen their position vis-à-vis smaller chains. Their strength is particularly evident in shopping centers, where they can count on more attractive rents than their competitors, who take up less space in total. "This leads to consolidation. In 2010 the top ten clothing retailers were responsible for 31% of total sales in the market, whereas by 2013 their share rose to 42%. Other companies were focused mainly on optimizing their chains last year," PMR said. The most impressive growth was recorded by clothing discounters, which, similar to their grocery counterparts, took advantage of the economic slowdown to strengthen their position. According to PMR, Poland's three largest discount textile retailers boosted their turnover by 17% and their store numbers by 12%. The leading player in this segment is South Africa's PEPCO, which expands at the pace of 70-80 new stores per annum. In April PEPCO launched its 500th store in Poland.

RETAIL PROPERTIES

Newly opened retail centre centre in Ostrołęka to be expanded The northeastern Polish city of Ostrołęka has recently seen the opening of the largest shopping centre in the region. Developed by Polish Narev Inwestycje and

located close to the city centre, the newly built Galeria Bursztynowa offers 27,000 sq.m of GLA and due to high interest the investor is already planning an extension. Ostrołęka is a city of 54,000 inhabitants situated some 110km north east of Warsaw. "We’ve completed the largest retail development in Ostrołęka and within a 110 km radius. We are confident that Galeria Bursztynowa will drive our region’s growth further with its broad retail and cultural offer, and new jobs,” said Roman Tomczak, President of Narev Inwestycje. Upon its opening in the last week of May the project was 93% let to tenants that include Tesco, OBI, RTV EURO AGD, H&M and LPP’s fashion stores (Reserved, Sinsay, Mohito, House and Cropp). "Galeria Bursztynowa is a regional shopping centre with stores leased by both well-known international retailers and local entrepreneurs. Its occupancy level is high given the current market conditions. There are only a few vacant small stores which could appeal to local businesses. The developer already plans to extend the shopping centre before it is even fully opened, which proves that the region has a huge potential and the investor was right in his decision," said Tomasz Górski, a senior negotiator from the Retail Department of Cushman & Wakefield. The property consultancy is responsible for commercialization of the centre and its project management team helped architect Jacek Zub with preparation of technical documentation for the investment. The development was financed by Bank BPS and a consortium of cooperative banks.

weekly newsletter # 041 / 30th June 2014 / page 13

POLITICS & ECONOMY

Polish gov't gov't wins vote of confidence amid eavesdropping scandal Poland’s government has survived a parliamentary vote of confidence amid a wire-tapping scandal involving prominent members of the ruling Civic Platform (PO) party and other key officials. The coalition government of Civic Platform (PO) and Polish People’s Republic (PSL) secured a vote of confidence on Wednesday, receiving backing from 237 MPs, with 203 against in the 460-member parliament. The PM needed a simple majority of 231 for the vote of confidence to pass. Prime Minister Donald Tusk said he wanted to make sure his government still enjoyed majority support before heading to the EU summit in Brussels, where crucial structural and personnel decision were to be made, with Poland seeking a number of high positions. "I need to be certain that I have a majority that allows me to continue work in the parliament and in the government," Tusk had said calling for the vote. "Without this mandate, I will not be effective, the government will not be able to clarify the eavesdropping scandal in a satisfactory manner state interests in mind," he said. By calling for the vote, Tusk also outmaneuvered the opposition, which had earlier hinted it would seek a constructive vote of no-confidence against his government. On Thursday, only one day Tusk won the vote, the PM's key opponent Jarosław Kaczyński said his party Law & Justice (PiS) had indeed filed a motion for a constructive vote of no confidence against the cabinet. Since the opposition can replace the current government in a constructive vote of no-

confidence on an absolute majority, the scenario seems very unlikely to materialize according to the current parliamentary arithmetic. The scandal erupted over two weeks ago after a weekly Wprost published secret recordings containing private conversations by senior Polish officials, including the central bank governor and foreign minister as well as a number of high profile businesspeople. In the most controversial such recording, central bank chief Marek Belka is heard discussing possibilities for central bank help in financing the budget should the economy fail to accelerate sufficiently to ensure governing party victory in the next elections. The secret recordings were made over a year and a half at various locations including three Warsaw restaurants. By the end of last week prosecutors had pressed charges against four people allegedly involved in the bugging. The first two to hear charges were Łukasz N. - manager of the restaurant where illegal recordings took place - and Konrad L. - waiter at another such location. Wednesday night the prosecutor's office said that charges were also pressed against business Marek Falenta - shareholder of several companies including coal distribution firm skladywegla.pl and telecom infrastructure firm Hawe - and Krzysztof R. Hawe's deputy CEO. A number of media outlets implied that with its recent crackdown on illegal distribution of Russian coal to Poland, the government has may have upset vested interests in the coal trading industry in Poland and Russia. Appealing for the vote of confidence, PM Tusk called on MPs not to act according to the scenarios orchestrated by criminals standing behind the recordings. Although the contents of the recordings (many of which have not yet been made public) have been a PR disaster for the ruling party as well as Central Bank chief Marek Belka, it seems like the government and the parliament may survive the scandal in the end, es-

pecially if evidence is found to back the "coal mafia" hypothesis. Winning next year's general election will be a much more difficult task, however. According to the most recent poll conducted by TNS Polska for the public broadcaster TVP1 after the outbreak of the tape scandal PO enjoys 24% voter support in, 7 pps behind its chief rival PiS. The far-right grouping Kongres Nowej Prawicy, which won seats in the European Parliament in May, came third with 10% support, the poll showed.

POLITICS & ECONOMY

Poland moves up in UNCTAD ranking Poland is the 5th most attractive destination for foreign direct investment (FDI) in Europe and no. 13 worldwide, shows a brand new report by UNCTAD, the UN trade and development body UNCTAD. The institution carries out an annual survey among companies, asking about the best global locations for greenfield projects. In this year's edition, which refers to projects to be implemented over the 2014-2016 period, the top 20 list includes only five European countries and only one CEE economy – Poland. Last year, Poland ranked as number six in Europe and No. 14 worldwide. According to the official FDI figures published by the Central bank as part of their balance of payments data, Poland experienced a significant outflow of FDI resources last year (USD 6bn), but the result is largely misleading due to the bank's methodology. Besides actual investments in fixed assets, such as factories and machinery, NBP statistics include capital in transit, and therefore also investments and divestments that are purely financial in nature, such as sales of banking

weekly newsletter # 041 / 30th June 2014 / page 14

share etc. Greenfield investments, according to UNCTAD data, totaled USD 7.960bn last year, down from USD 11.891bn in 2013 and the 2005-2007 precrisis average of USD 16.236bn.

Greenfield investments in USDm Poland As destination As source

20052007*

2011

2012

2013

16,236

13,024

11,891

7,960

1,389

850

1,409

855

Source: UNCTAD *)pre-crisis average

Global FDI inflows rose by 9% last year to USD 1.45 trillion, UNCTAD said. FDI inflows increased in all major economic groupings − developed, developing, and transition economies. Global FDI stock rose by 9%, reaching USD 25.5 trillion. UNCTAD projects that global FDI flows could rise to USD 1.6 trillion in 2014, USD 1.75 trillion in 2015 and USD 1.85 trillion in 2016. The rise will be mainly driven by investments in developed economies as their economic recovery starts to take hold and spread wider, the UN agency said.

DZP established the Spanish Desk with the aim of providing specialized legal advice to Spanish-speaking investors doing business in Poland. At the moment, the team comprises ten people and is headed by Katarzyna Kuźma, partner at DZP. Since its establishment in 2006, the Spanish Desk of DZP has been involved in a significant number of projects for almost 200 of the Spanish entities present, directly or indirectly, in the Polish market. Spanish companies remain very active in Poland. While some withdrew from the country following the outbreak of the global economic crisis, many others have stayed and continue to do business in Poland, Kuźma said.

According to Kuźma, the Spanish companies which are doing business in Poland are these days much better organized and involved in more interesting and better thought-out projects than before the crisis. Spanish investors, like all the other foreign investors active in the Polish market, are faced with the same legal and administrative problems as Polish investors. Additionally, they often have to cope with problems which are specific for them. These result from differences in the legal systems and business culture in Poland and Spain. “Spanish investors sometimes joke that in Poland the employment of good lawyers is much more important than the employment of good engineers,” Kuźma said. She added that Spanish companies in Poland often seek assistance with their participation in tender procedures and then with the conclusion of public contracts (not only with regards to infrastructure projects). They also ask about tax issues, as well as assistance with M&A transactions or litigation cases. Jose Luis Villacampa Varea, a senior associate at DZP, said that Spanish investors also complain about the bureaucracy in Poland. In Spain, many issues are dealt with in a less formal way than in Poland, he said. by Adam Zdrodowski

FROM OUR PARTNERS

DZP law firm distinguished in prestigious global ranking

Jose Luis Villacampa Varea, senior associate at DZP & Katarzyna Kuźma, partner at DZP. Image: DZP

The Spanish Desk of the Domański Zakrzewski Palinka (DZP) law firm has recently been distinguished in the Corporate/M&A – Foreign Desks category of the prestigious Chambers Global: The World’s Leading Lawyers for Business 2014 ranking.

Before the crisis, Spanish developers had been among the key players in the Polish real estate market. Nowadays, Spanish companies in Poland are particularly active in the infrastructure and energy sectors, she added.

IN BRIEF: Poland's GDP growth will recover to 3.3% in 2014 and then edge up to 3.5% in 2015, the International Monetary Fund Executive Council said. The IMF thus raised its former 2014 GDP growth forecast for Poland by 0.2 ppt and the 2015 forecast by 0.1 ppt.

weekly newsletter # 041 / 30th June 2014 / page 15

KEY STATISTICS Consumer Prices Prices

Inflation

+3.7 +0.7 +3.9 +0.3 +3.9 +0.2

-4.7

-1.7

-4.3 +0.8

-4.4 +2.8

-4.6

-0.1

Housing

+1.9

+0.1

+1.8

-0.1

+1.7

0.0

+1.6

0.0

-0.1 -0.4

Transport

-1.1

+0.4

-2.7

+0.1

-2.1

-0.1

Communications -3.2

+0.4

-0.3 +0.6

-1.7

-1.5

Gross CPI

+0.1 +0.7 +0.1 +0.3

0.0

+0.7

-0.8 -0.4

-1.1

Jan '14

-0.1

+0.2 -0.1

Feb '14 Mar '14

Apr '14 May '14

m/m (%)

-21.3

-0.6

+12.5

+2.3

-2.7

y/y (%)

+4.8

+7.0

+3.1

+8.4

+3.8 2013

Year

2009

2010

2011

2012

Turnover in PLNbn

582.8

593.0

646.1

676.0

n/a

+4.3

+5.5

+11.6

+5.6

+2.3

y/y (%) May 14

+1.4

Clothing, shoes

-0.5

Mar 14

Alcohol, tobacco +2.2

-0.3 +0.3

Jan 14

+1.2

m/m

Nov 13

-0.2

Sep 13

+1.6

y/y

Jul 13

Food & bev

Month

5% 4% 3% 2% 1% 0% -1% May 13

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

Mar 13

Sector

Retail Turnover

Jan 13

May '14

Nov 12

Apr '14

Sep 12

Mar '14

Jul 12

Feb '14

May 12

Data in (%)

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-May y/y

178.8

174.9

184.1

165.1

138.7

Commenced

142.9

158.1

162.2

141.8

127.4

U. construction

670.3 692.7 723.0

713.1 694.0

Completed

160.0 135.7

152.5

(in '000 units)

Producer Prices Prices Month

Industrial Output Outpu t

Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14 May'14

Month

Permits

Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14 May '14

m/m (%)

-0.3

-0.1

0.0

-0.1

-0.2

m/m (%)

-6.2

-9.7

+2.9

-1.8

+9.4

-2.3

-1.7

y/y (%)

-1.5

-1.0

-1.4

-1.3

-0.7

-1.0

y/y (%)

+2.9

+6.6

+4.1

+5.3

+5.4

+4.4

Year

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product

Construction Output

Construction Prices Price s -0.2

-0.1

0.0

-1.7

-1.6

-1.5

-1.4

2007

2008

2009

2010

2011

2012

2013

+7.4

+4.8

+0.2

-0.1

+1.0

+0.2

-1.8

n/a

Q3 2013

+2.0%

405,554

-1.9%

Q2 2013

+0.8%

296,314

-2.3%

2013

+1.6%

1,635,746

-1.5%

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 (%) Year y/y (%)

+14.0

-8.9

+5.8

-3.9

+14.4

+17.4

+12.2

+10.0

2007

2008

2009

2010

2011

2012

2013

+15.5

+12.1

+5.1

+4.6

+11.8

-0.6

-12.0

6,060

138 6,290

143 6,061

B 138

8,615 196

Manufacturing

3,491

152 3,560

155 3,625

158 3,690

161

Energy

6,196

188 5,828

177 6,021

183 6,736 205

-20

3,556

Retail & repairs

3,432 146

157 3,766

160 3,895 166

3,421 146 3,408

145 3,456 147

152 3,693

3,913 138

Transportation

3,439

122 3,547

125 3,589

127

IT, telecoms

6,685

174 6,707

174 6,654

173 6,695 174

Financial sector 6,356

143 6,702

151 6,109

137 6,602 148

3,613 144 3,652

145 3,823 152

National average 3,741 149

Source: Central Statistical Office (GUS)

120

-40

Key Economic Data & Projections

100

Indicator

2010

GDP change

+3.9% +4.5%

+1.9%

+1.6%

+3.5%

Consumer inflation

+2.6% +4.3%

+3.7%

+0.9%

+0.5%

Producer inflation

+2.1% +7.6%

+3.4%

-1.3%

CA balance, % of GDP

-5.1%

-5.0%

-3.7%

-1.3%

-0.8%

Nominal gross wage

+3.9%

+5.2%

+3.7%

+3.4%

+4.5%

Unemployment**

12.4%

12.5%

13.4%

12.2%

3.99

4.12

4.19

4.20

4.11

60 Aug 1 1

Construction

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

M ay 1 4

Q4 2013

Current account def. in % of GDP

-1.5%

+3.2

Feb 14

Q3 2013

-3.0

455,528

+24.2

No v 1 3

Q2 2013

-0.7

55.8

397,429

+18.7

Aug 1 3

Coal mining

Q1 2013

+23.8

+2.7%

-64.0

M ay 13

Sector

58.7 697.9

+3.4%

+21.5

Feb 13

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

GDP in PLN bn current prices

+14.9

Q4 2013

-2.9

Source: The Central Statistical Office of Poland, GUS

Gross Wages

Growth y/y unadjusted

146.1

(%)

61.9

Q1 2014

m/m (%)

N ov 12

y/y (%)

-0.2

Aug 1 2

Year

-0.1

Period

Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14 May '14

M ay 12

y/y (%)

-0.1

Month

Feb 1 2

m/m (%)

Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14 May'14

Nov 11

Month

131.7

2014

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

2011

2012

2013

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

*2014

weekly newsletter # 041 / 30th June 2014 / page 16

55.69 ↑

100 SEK

45.15 ↓

100 NOK

49.77 ↑

10,000 JPY

USD EUR 350

300

15.12 ↑

100 CZK 10,000 HUF

400

300.63 ↑ 134.64 ↓

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

as of 27 June 2014

WIG-20 stocks Price Change Change in alphabetical 27 June 20 June end of order '14 '14 '13

WIG Total index

Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14

PLN (up to 1 year)

4.5%

4.3%

4.2%

4.5%

4.4%

PLN (up to 5 y )

4.9%

4.8%

4.9%

4.8%

PLN (over 5 y)

4.8%

4.7%

4.8%

4.7%

↓ Asseco Pol.

PLN (total)

4.8%

4.7%

4.8%

4.7%

↓ Bogdanka

EUR (up to 1m EUR) 1.9%

1.9%

2.0%

1.9%

2.0%

EUR (over 1m EUR) 3.0%

2.9%

3.6%

3.4%

3.3%

3.0%

Warsaw Inter Bank Offered Rate (WIBOR) as of 27 June 2014 Overnight

1 week

1 month

3 months

6 months

2.74%%

2.60%

2.61%

2.68%

2.69%

Central Bank (NBP) Base Rates Feb '14 158,330 548,033 114,680 954,284

Mar '14

Apr '14

173,213 558,954

168,511 548,394

116,657 964,624

119,261 969,754

Reference

May '14

2.59%

162,246 557,651 119,649 975,001

- Time deposits

423,296

422,990

439,137

435,386

968,442

980,377

986,142

991,120

- Net foreign assets 135,759 132,849 126,943 142,260 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

4.00%

1.00%

-3%

40.65

-3%

-12%

116.5

-5%

-7%

↓ BZ WBK

363

-4%

-6%

↓ Eurocash

-7%

-16%

WIG-20 blue chip index

↓ Grupa Lotos

36.73

-4%

+4%

↓ JSW

46.65

-1%

-12%

2,572 2,572. 572.84

33.6

-12%

Change 1 week

-2% ↓

-1%

+5%

Change end of '13

+7% ↑

8305.1

-2%

-8%

497

-4%

-1%

WIG Total closing index

9.7

-6%

-1%

last three months

171.5

-4%

54,000

21.74

-1%

+34%

53,000

5.18

+1%

52,000

→ PKN Orlen

40.95

51,000

37.72

-3%

-4%

50,000 49,000

Credit

↓ Pekao

The financial sector's net lending in PLN bn,

↓ PGE

loan stock at the end of period

→ PGNiG

Loans to customers

Feb '14

Mar' 14

Apr' 14

May' 14

914,068

923,709

928,450

930,652

↓ PKO BP

- to private companies

263,941

267,553

270,886

273,360

↓ PZU

445

-1%

- to households

567,257

569,334

573,332

574,800

↓ Synthos

4.37

-4%

-20%

Total assets of banks

1,616,891

1,628,519 1,639,359 1,660,583

↓ Tauron

5.39

-3%

23%

Source: Central Bank NBP

+1% ↑

124.3

↓ Orange Pol.

Type of loan

-2% ↓

Change end of '13

↓ KGHM

↓ mBank

2.75%

Change 1 week

→ Kernel

↓ LPP

Rediscount

51,713. 713.44

81.5

↓ Alior Bank

27 Jun 14

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

4 Jun 14

341.37 ↑

27 Jun 14

519.00 ↓

100 CHF

17 Apr 14

100 GBP

10 Feb 14

415.28↑

28 Nov 13

100 EUR

Key indices

Term / currency

450

19 Sep 13

304.85 ↓

12 Jul 13

100 USD

Stock Exchange

Average weighted annual interest rates

13 May 14

as of 27 June 2014

Interest rates

3 Apr 14

100 USD/EUR against PLN

Central Bank average rates

12 Mar 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-Apr 2014

y/y (%)

share (%)

2013

EXPORTS in PLNbn

IMPORTS in PLN bn share (%)

Jan-Apr 2014

y/y (%)

share (%)

2013

share (%)

No Country

Jan-Apr share 2014

IMPORTS in PLN bn *2013

share No

Country

Jan-Apr share 2014

*2013

24,353

+9.8

10.9

69,304

10.9

16,611

+4.9

7.5

47,906

7.4

1 Germany

47,765 21.7% 139,334 21.5%

Beverages and tobacco

2,874

+9.8

1.3

8,624

1.4

1,223

-5.0

0.6

4,150

0.6

2 UK

14,109

6.3%

41,503

6.5%

2 Russia

26,387 12.0%

Crude materials except fuels

5,642

+1.1

2.5

15,744

2.5

7,290

-0.3

3.3

21,585

3.3

3 Czech Rep.

13,475

6.0%

39,421

6.2%

3 China

21,405 9.7% 60,914 9.4%

Fuels etc

9,750

-3.8

4.4

30,013

4.7

25,443

+2.9

11.6

75,539

11.7

4 France

13,093

5.9%

11,303

639

+35.8

0.3

1,864

0.2

866

+2.3

0.4

2,646

0.4

5 Russia

9,809

Food and live animals

Animal and vegetable oils

58,734 26.3% 159,622 25.0%

79,601 12.3%

5.1% 33,703 5.2%

35,745

5.6%

4 Italy

4.4% 34,058

5.3%

5 Netherlands

10,033

4.5%

27,450

4.3%

6 France

9,048

4.1%

25,292 4.0%

7 Czech Rep.

7,648 3.5% 23,778 3.7%

8,172 3.7% 25,005 3.9% 8,705 4.0% 24,533 3.8%

Chemical products

20,370

+5.1

9.1

59,103

9.3

33,213

+6.9

15.1

92,917

14.3

6 Italy

Manufactured goods by material

43,767

+2.4

19.6

129,915

20.3

38,999

+6.6

17.7

112,392

17.3

7 Netherlands

Machinery, transport equip.

85,634

+11.0

38.4

239,434

37.5

71,343

+3.9

32.4

216,608

33.4

8 Ukraine

n/a

18,037

2.8%

8 USA

5,028 2.3%

17,350