Warsaw Business Journal May 2018

WARSAW

BUSINESS JOURNAL S i n c e 1 9 9 4 Po l a n d ’ s l e a d i n g

MAY 2018 ~ No. 05 (45)

business magazine in English

For daily news visit us at wbj.pl

SPACE 4.0

Is Poland aiming in the right direction?

ENERGY SECURITY ŁÓDŹ OFFICE BOOM WELLNESS IN OFFICES

BLOCKCHAIN The latest technological revolution is unfolding

OIL MARKET | AUSTRALIAN CONNECTION | NEW IT PROFESSIONS | TECH GIANTS | BITCOIN ANONYMITY

MAY

IN REVIEW

News highlights from the previous month from wbj.pl

OPINION

Interview: Paul Wojciechowski.....................15 Family business & succession......................19 General contractor vs construction management....................................................20 Forward funding vs forward purchase........21

TECH INSIGHTS

Tech News.........................................................51 Tech view: Tech giants on the ropes............53 Tech view: CEE unicorns................................54 Tech view: Web and media monitoring.......55 Tech view: New IT professions.....................56 Tech view: Bitcoin anonymity........................57 Feature: Brave new world of blockchain....58 Interview: Coinfirm.........................................62

Space industry

Feature: All under one sky 23 Building microsatellites in Warsaw – Interview: ICEYE 29 Start small, think big – Interview: Polish Space Agency 30 Prepping for a big journey – Interview: Creotech 32 Gaining momentum – Interview: Astri Polska 34

LOKALE IMMOBILIA

Real estate news............................................ 65 Łódź office market boom ............................. 70 Wellness in office fit-out............................... 74 Interview: Terra Casa.................................... 80 Stylist services at No. 44............................... 82

EVENTS

CEEQA................................................................84 Fujitsu World Tour...........................................86 Banking and Insurance Leaders...................86

LAST WORD

Energy

Feature: Black gold 41 Redefining energy – Interview: Kochański, Zięba & Partners 46

A lonely phone booth......................................88

W B J MAY 2018

FROM OUR EDITOR Morten Lindholm Editor-in-Chief/Publisher mlindholm@valkea.com

Beata Socha

Managing Editor

bsocha@wbj.pl

Adam Zdrodowski

Managing Editor, Lokale Immobillia

azdrodowski@wbj.pl

Kevin Demaria Art Director

Michael Evans Copy Editor

Victor Epstein

Editorial Intern

ENTERING APRIL, most of us were longing for sunshine, vitamin D and business energy, and what a month it was! We went from the long, gloomy, cold winter nights to the redhot, bright summer days overnight, basically skipping spring altogether. Flowers and trees blossomed less than two weeks into April, and so did business sentiment and energy. With the latest official data showing another record-low unemployment figure and continued GDP growth – the forecast for 2018 now exceeds 4 percent – it seems we are in for an exciting few months, irrespective of whether it is already summer or still spring. A city that has recently been undergoing revival and blossoming is Łódź – in this issue we take a deeper look at how the 19th century “factory” of Poland is being transformed into a 21st century business magnet. Another sector where Poland is aiming high is the space industry. While still not a major player, Poland is catching up quickly with European leaders – read the interviews and analyses on pp. 23-35. The constantly growing global demand for energy is a challenge for Poland, one which is both economic and environmental, but the future does not need to be bleak, as we learned when we sat down with energy industry experts from Kochański, Zięba & Partners (see pp. 46-49). One of the most tantalizing buzzwords and economic “miracles” of 2017 was bitcoin. We discuss the technology behind it and delve into the opportunities related to blockchain, with input from several market experts. Last but not least, we look into trends in the real estate market: how office fit-out is evolving to keep employees healthy, and how the premium residential market is delivering attractive opportunities for buyers and for residents of fully-serviced rental apartments.

Contributors

Ewa Boniecka Karolina Papros Sergiusz Prokurat Alex Webber Sales

Magdalena Klimiuk mklimiuk@valkea.com Katarzyna Pomierna kpomierna@valkea.com PR & Marketing

Agata Wolny awolny@valkea.com Book of Lists

Monika Rozner mrozner@valkea.com Magdalena Czopur Subscriptions

mczopur@valkea.com Krzysztof Wiliński Print & Distribution

dystrybucja@valkea.com Magda Gajewska Event Director, Valkea Events

mgajewska@valkea.com Contact: phone: +48 22 257 75 00 fax: +48 22 257 75 99 e-mail: wbj@wbj.pl

WBJ.pl WarsawBusinessJournal

@wbjpl

Enjoy the read. MORTEN LINDHOLM

All photographs used in this issue are courtesy of partners and companies unless specified otherwise. All rights reserved. This publication or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permissionof the publisher.

Morten has been equipped by Reykjavik District – Warsaw’s unique menswear design shop on ul. Burakowska 15. Check out Reykjavik’s latest collection at reykjavikdistrict.com

MAY 2018 W B J

Published by

ul. Jerzego Ficowskiego 15

Valkea Media S.A.

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Tomasz Opiela, CEO

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www.valkea.com

To subscribe through RUCH SA: www.prenumerata.ruch.com.pl, prenumerata@ruch.com.pl, 801 800 803

PORTRAIT BY KEVIN DEMARIA

115 YEARS OF FREEDOM For 115 years, not without a cause people have been rushing forward seated on their Harley-Davidson motorcycle saddles. The need for freedom is deeply rooted in each one of us. The firmâ&#x20AC;&#x2122;s founders didnâ&#x20AC;&#x2122;t fit a motor into a frame in order to make a motorcycle. They did this in order to be able to go further and faster, looking for new adventures. They did this in the name of freedom. Everything that Harley-Davidson has done since those times was the result of the same reason. This is why Harley-Davidson motorcycles have always represented way more than just a means of transport. They give us the ability to express ourselves.

Photo courtesy of cuore.pl

LIBERATOR, THE FIRST HARLEYDAVIDSON DEALERSHIP IN POLAND

It may not seem like this, but Poland has actually had a very long history related to the Harley-Davidson brand. Thanks to enthusiasts such as Jan Kwilman, who has brought to us this symbol of freedom, we have today a very wide access to all types of motorcycles all around the country. Since the foundation of the firm in 1990 by Jan Kwilman, and thanks to focusing on the development of the Harley-Davidson bikers community, Liberator has become a name of international renown.

SOFTAIL – WHAT’S NEW FOR OUR CLIENTS? No other brand in the world has produced so many famous custom motorcycles as HarleyDavidson. The new models for 2018 are presented with a totally new Softail frame, able to subjugate the pulsing power of the new Milwaukee-Eight® 107 and 114 engines (1745 cm3 i 1868 cm3), designed exclusively for the Softail models. It is more rigid and way lighter than it’s predecessor, strongly affecting the quality of the ride. Find out about it by yourself ! Riding a 2018 Harley-Davidson Softail motorcycle brings totally new sensations. Benefit from a free test ride and you will be convinced that you are in front of the more powerful, agile and best reacting cruiser motorcycle. Feel those thrills through your own ride experience and regain your freedom. You can book your ride through our website : https://testrides.harley-davidson.com/pl_ PL/?d=6239 or by calling Adrian, one of our sales representatives, at 515 069 041 Don’t wait for some day to come – A new Harley is available already at PLN 31,900* * Price for the model Harley-Davidson Street Rod®

For more information we invite you to visit us at the store: Liberator Sp.z.o.o., ul. Górczewska 30, Warsaw, and on our website: www.liberator.pl

360˚

COMMUNICATION

We combine our expertise and use our experience in a holistic way. That is why we specialize in 360 degree communication. For our customers, we plan and conduct long-term activities in different forms. We create strong “big ideas”, which reach consumers effectively through successful creations and diverse tools. In our campaigns and day-to-day activities, we integrate traditional and interactive channels, creating efficient communication ecosystems. See our projects: www.valkea.com/projekty/360

NEWS HIGHLIGHTS OF THE PAST MONTH FROM WBJ.PL

Poland will likely remain the largest beneficiary of EU funds in the 20212027 perspective, due to its size and the fact that the country will strongly benefit from its two largest budget positions: the cohesion and agricultural policies” - Investment and Development Minister Jerzy Kwieciński said. He also added that declarations coming from the EC point to a 7 percent cut in EU cohesion funds and a 5 percent cut in agricultural policy funds, including direct subsidies that will be 4 percent lower than in the previous EU financial perspective.

RETAIL

BIEDRONKA SALES GROW by 15.6% y/y in Q1

SHUTTERSTOCK

Retailer Biedronka registered sales growth of 15.6 percent y/y to €2.9 billion for the first quarter of the year. Like-for-like sales rose by 8.6 percent, the company said. EBITDA amounted to PLN 198 million (up 15.7 percent), EBITDA margin was flat at 6.8 percent. In the first three months of 2018, the retailer opened 11 new stores, while nine stores were closed. In total, Biedronka plans to open 70-80 stores this year. RETAIL

Number of clients in SHOPPING CENTERS DECLINES by 5% in March The number of clients in shopping centers

in Poland declined by 5.1 percent in March, research company FootFall said. March was the first month when malls in Poland were closed on some Sundays due to the trade ban. According to the plan, from 2019 only one Sunday per month will be left for shopping in Poland. By 2020 shops will be closed on all Sundays with some exceptions before the Easter and Christmas holidays. AGRICULTURE

Six poultry producers certified to EXPORT TO SINGAPORE Singapore’s veterinary watchdog has issued health certificates for Polish poultry exported to Singapore, the Ministry of Agriculture informed. Six Polish poultry producers have been certified by the Singaporean veterinary

services. Poland was officially approved to export poultry to the Asian country back in December 2017, but actual exports could only commence after the health certificates had been issued. AUTOMOTIVE

AUTOMOTIVE EXPORTS to grow by 4-5% in 2018 Polish automotive exports could grow by 4-5 percent y/y to €26.2-26.5 billion in 2018 AutomotiveSuppliers.pl forecasts. In January, the exports amounted to €2 billion, which was a 0.7 percent y/y increase. “AutomotiveSuppliers.pl has lowered the earlier export forecast for the whole of 2018. Despite the lowering of the forecast, it will be, however, the highest value in the history

W B J MAY 2018

>>> 9

In Review TRENDING STATS

of this industry in our country,” the report said. According to forecasts, the export of parts and accessories continues to grow, both to European Union countries and to other markets. In 2017, Polish automotive exports reached a record-high level of €25.22 billion, beating 2016 figures by 9.75 percent. The car parts and accessories segment accounted for 44.59 percent of that figure.

53.9

points Poland’s PMI in April (Markit)

AUTOMOTIVE

DĘBICA’S sales revenue close to PLN 2 bln in 2017 Car tire producer Dębica reported PLN 119.57 million in net profit for 2017, against PLN 64.75 million a year earlier, the company stated. Operational profit stood at PLN 212.41 million, up from PLN 179.62 million in 2016. Sales revenue came in at PLN 1.963 billion last year, up from PLN 1.679 billion the year before.

FINANCE

BZ WBK net profit at PLN 438.73 mln in Q1 2018 Bank Zachodni WBK recorded a consolidated net profit of PLN 438.73 million in the first quarter of 2018 compared to PLN 453.04 million profit a year earlier, the bank reported. The total income of the BZ WBK capital group for the first quarter of 2018 amounted to PLN 2,002.3 million and was higher by 8.3 percent y/y, reported in the report. In unitary terms, net profit in Q1 2018 amounted to PLN 280.85 million compared to a PLN 353.95 million profit in the previous year. BZ WBK is the third largest bank in Poland in terms of assets (according to data for 2017). It is listed on the Warsaw Stock Exchange. Banco Santander SA has 69.34 percent of shares in BZ WBK. FUEL

PKN ORLEN will import more oil from Saudi Arabia TRANSPORT

Gdańsk with RECORD-HIGH TRANSSHIPMENT in Q1 2018 The Gdańsk sea port recorded a 43.8 percent increase in transshipment in Q1 2018, compared to the corresponding period of last year. Between January and March, 12.7 million metric tonnes of goods went through the ports, “a record high result,” the port’s president Łukasz Greinke stated. In March alone, 4.65 million tonnes of goods went through the port, marking a 63.6 percent increase y/y. He added that the port expects the figure for the entire year to come in at around 50 million tonnes. In 2017, 40.6 million tonnes of goods went through the Gdańsk port, which was also a record figure. The Gdańsk port is the second largest port in the Baltic Sea.

MAY 2018 W B J

PKN Orlen has signed an annex to the agreement with Saudi Aramco for an increase in oil supply for at least 100,000 metric tonnes per month. As a result, more than 20 percent of raw material supplied to PKN Orlen refineries will come from Saudi Arabia. Under the new conditions, the contract with Saudi Aramco will be valid from May 1 to December 31, 2018, with the possibility of an extension for subsequent years. PKN Orlen Group refineries will receive about 300,000 tonnes of oil from the Persian Gulf every month. PKN Orlen plans to use Saudi Arabian oil for its refineries in Poland, the Czech Republic and Lithuania, the company said.

9.2%

Retail sales growth in March (y/y, GUS)

1.8%

Industrial output growth in March (y/y, GUS)

1.6%

CPI inflation in April (y/y, GUS)

6.6%

Unemployment in March (GUS)

6.7%

Wage increase in March (y/y, GUS)

4.3%

2018 GDP growth forecast (European Commission)

1.4%

of GDP 2018 gov’t deficit forecast (European Commission)

Orlen receives Iranian oil shipment

49%

WSE-listed fuel group Orlen received the

(European Commission)

FUEL

of GDP 2018 public debt forecast

SHUTTERSTOCK

WBJ

In Review spot delivery of Iranian crude oil on 13 April, the company said in a market filing. “Delivery from Iran has become a fact. Oil from the Middle East gives us many opportunities. First of all, it enables diversification of delivery directions and increases the energy security of the state,” the company said. The 130,000 metric tonnes of oil arrived at the gas terminal in Gdańsk from the Kharg island. According to Orlen, the Iranian oil is lighter and contains less sulfur than its Russian equivalent.

planned Eastring gas pipeline. Gas transmission operator Gaz-System is responsible for transporting natural gas and managing the most important gas pipelines in Poland. ENERGY

MODUS ENERGY plans to launch 40 MW solar parks by end 2018 Modus Energy plans to launch photovoltaic power plants (also known as solar parks) in Poland with 40 MW capacity by the end of this year. By May 2019, the company expects to launch 50 MW photovoltaic plants, ISBnews reported citing company management. “Construction of the first photovoltaic power plant with a total capacity of 12 MW is going according to plan and will be completed by the end of July,” the company said. In February 2018, Modus Energy started construction of 12 photovoltaic plants for a total of €11 million. Modus Energy plans to build 50 such objects in Poland, investing a total of about €50 million.

ENERGY

PGNIG to extract 2.5-3.0 bln m3 of natural gas in Norway from 2023

PGE with PLN 2.2 bln EBITDA Energy giant PGE recorded EBITDA of PLN 2.214 billion in Q1 2018, and net profit of the parent company amounted to PLN 959 million (PLN 0.51 per share), according to the company’s preliminary calculations. In the same period of last year, EBITDA stood at PLN 1.948 billion, and net profit at PLN 964 million.

From 2023, gas giant PGNiG wants to extract 2.5-3.0 billion cubic meters of natural gas annually in Norway, the Ministry of Energy stated. “Over the past five years, GK PGNiG has increased the extraction of natural gas in Norway from 0.3 billion cubic meters to 0.5 cubic meters annually,” the ministry stated. ENERGY

Gaz-System finalizes agreement on POLAND-SLOVAKIA PIPELINE Gaz-System and Slovak Eustream have signed a connection agreement for the implementation of the gas pipeline between Poland and Slovakia, Gaz-System has reported. Construction work should start in the second half of 2018 and will run until the end of 2021. The new connection will allow for the diversification of gas sources for the entire Central and Eastern European region. The countries of the region will have direct access to new sources of gas supplies from the north, such as fully operational LNG terminals in the Baltic Sea and Norway (from the planned Baltic Pipe gas pipeline), as well as from the south through the Slovakia-Hungary interconnector and the

MAY 2018 W B J

points for electric cars in Poland over the next few years. “Our strategic plan for the coming years, or even by the end of 2019, is to have 150 charging points for electric cars at our stations,” a PKN Orlen board member said. He added that the first such point is already open in Płock. For now, it is a test version for employees, but the public should be able to use it soon. Earlier, PKN Orlen declared that it wanted to provide drivers of electric cars with charging points across Poland in 2019.

ENERGY

As of February, there were approx. 480 charging points for electric vehicles in Poland, counting each socket individually, and 87 electric buses in use across the country, Deputy Energy Minister Michał Kurtyka informed. The majority of the buses run in Kraków (26), Jaworzno (24) and Warsaw (21). By the end of 2019, another 333 electric buses will be operational in Poland, including 140 in Warsaw, 47 in Zielona Góra, 32 in Lublin, 20 in Jaworzno and in Szczecinek, and 10 each in Katowice, Stalowa Wola and Rzeszów.

Energy producer Tauron Polska Energia has posted its preliminary net profit for Q1 2018 at PLN 637 million, the company stated. Revenue from sales amounted to PLN 4.826 billion, and EBITDA came in at PLN 1.292 million. The company produced an estimated 1.42 million metric tonnes of coal and sold 1.43 million tonnes. It produced 3.94 TWh of electric energy and 5.68 PJ of heat in the first quarter.

ENERGY

Corporate Income Tax will be lowered from the current 15 percent to 9 percent for small and medium enterprises, said PM Mateusz Morawiecki at a convention of the ruling

Nearly 500 charging points for ELECTRIC VEHICLES across Poland

PKN ORLEN plans to open 150 charging points for electric cars PKN Orlen plans to open 150 charging

TAURON posts PLN 637 mln net profit for Q1

ECONOMY

Another CIT CUT under way, from 15% to 9% – PM SHUTTERSTOCK

WBJ

Law and Justice and the Allied Right. “All our social and economic actions are carried out thanks to the higher VAT enforceability and economic growth. As you remember, at the beginning of last year, we lowered CIT from 19 to 15 percent,” the PM said. He also added that in 2017, total revenue from CIT increased by 13 percent. ECONOMY

S&P boosts Poland’s outlook to ‘positive’ Ratings agency S&P has increased Poland’s outlook to “positive” from “stable” and affirmed its short- and long-term credit rating at “BBB+.” The increase in outlook means that the rating itself could be increased in the next 24 months. S&P expects Poland to continue economic expansion throughout 2018, underpinned by strong external demand, generous EU transfers and resilience of its large, diversified and open economy. The agency also said that its analysts believe Poland will be able to navigate the risks of overheating the economy, as well as its complicated relations with the EU. ECONOMY

CONSUMER LOANS exceed mortgage loans in 2017 The value of consumer loans granted by banks and bank-like entities (SKOK) stood at PLN 66.1 billion and significantly exceeded the value of mortgage loans, which came in at PLN 46.5 billion, according to the Credit Information Bureau (BIK). “25 percent of consumer loans were granted for a period exceeding five years. These loans accounted for 56 percent of the total value of consumer loans granted in 2017,” BIK stated. The average value of a consumer loan for a period exceeding five years stood at PLN 40,500, compared to PLN 17,900 in 2016. According to BIK, extending the payment period for consumer loans has led them to become medium-term loans. The average payment period of consumer loans granted last year was 44.9 months (3 years and 9 months).

QUOTE OF THE MONTH

FINANCE

IDEA BANK’S management calms investors after recent stock plunges The management of WSE-listed Idea Bank issued a statement in which it reiterated that the lender is in a stable condition and recent stock declines have “no fundamental grounds.” “There are no fundamental grounds justifying the recent stock price fluctuations. The bank’s situation is stable,” the bank wrote. The bank added that recent drops were not accompanied by increased trading volumes. Idea Bank stock has lost nearly 60 percent of its value since the beginning of the year, including a 7.7 percent drop in three days in April. Analysts link the recent declines to the troubled WSE-listed debt collector GetBack. Idea Bank and its subsidiary Lion’s Bank sold a significant number of GetBack’s bonds to its clients. The Financial Supervision Authority KNF is currently investigating whether investors were properly informed of the risks involved in purchasing corporate bonds. Idea Bank was also a former owner of GetBack, but sold the company in 2016. The value of outstanding bonds of debt collecting firm GetBack stood at PLN 2.6 billion at end-March.

“Barring any unforeseeable circumstances, such as a large scale trade war, the situation should remain unchanged for two years,” said NBP head Adam Glapiński said after the Monetary

Policy Council maintained interest rates unchanged and added that he does not expect any rate hikes in 2018 and even for some time beyond that.

W B J MAY 2018

Opinion EXPERT VIEWS ON CURRENT BUSINESS AND SOCIAL TRENDS

SHUTTERSTOCK

A top league economy

Australia is deeply connected economically with Asia-Pacific, but the EU is also an important partner for the country. It also seems to have its migration issues worked out. WBJ sat down with the Ambassador of Australia, HE Paul Wojciechowski to talk about the lessons other developed economies can learn from the 13th largest world economy, which has enjoyed 27 consecutive years of growth >>>

W B J MAY 2018

WBJ

Opinion AUSTRALIA WBJ: Australia, while its own continent, is closely inte-

grated economically with Asia. How do the current trade frictions between the US and China, as well as the security tensions with North Korea impact Australia’s foreign policy, and what is Australia’s role? Paul Wojciechowski: Australia’s integration with Asia is both economic and political. We are members of all the major clubs like APEC, the East Asia Summit and the ASEAN Regional Forum. About 80 percent of Australia’s exports go to countries in the Indo-Pacific region, including China, Japan, Korea, India and the US. The region holds great potential for Australia’s future as it continues to develop rapidly. Asia’s middle-class consumers, who are expected to number 3 billion in a few decades, will represent the largest consumer market in the history of human civilization. So, the prospects are overwhelmingly positive for the region and for Australia as the main supplier of a diverse mix of commodities, food, education and leisure to the region’s consumers. But to make this positive scenario a reality, we need to guard against protectionism and build support for open economic settings based on the rules of international law. This is an important element of Australia’s foreign policy, as presented in our recently published 2017 Foreign Policy White Paper. Playing by the rules relates to both trade and hard security issues. We want to project active and determined diplomacy and strong partnerships, particularly with the US and countries in our region, to help advance a secure and prosperous Indo-Pacific region and strengthen the rules-based international order. Australia is the 13th largest economy in the world, open to international trade and foreign investment. What are the current drivers for Australia’s economy and trade? Australia’s economy has outperformed its peers for more than two

MAY 2018 W B J

decades and we have just entered our 27th consecutive year of growth – a world record for a developed economy. This accomplishment reflects our stable institutions, smart multicultural workforce, abundant natural resources, and a very large and sophisticated services sector. It also reflects Australia’s ability to adapt to changes in the global economy. Our proximity to Asia and its rapid rise has been a boon for our export industries over the past few decades, and we have grown our trade to become a globally significant player in a number of industries. These industries include mining and fuels (3rd largest in the world), education exports (3rd largest), investment funds (6th largest), agriculture (12th largest) and tourism (10th largest). Strong growth in these industries, as well as in construction – fueled by strong population growth supported by a large migration program – has kept our economy in the top league of OECD countries. But we’ll have to continue to work hard to maintain our position. Technological change, challenges to globalization and the rules-based international order, plus shifts in strategic power globally and climate change are some of the key challenges we’ll need to confront.

With over 300 languages spoken in Australian homes, and with over half of them Aboriginal languages, there is a lot to be proud of. Given our long experience with large migration programs, we have developed world-leading reception and social integration programs for newly arrived migrants. Such initiatives facilitate migrants’ transition to becoming highly contributing members of our society. But we also have a sovereign right to control our borders and decide who can arrive and settle in Australia. We are, on a per capita basis, the highest migrant-receiving country in the world, with one of the most generous humanitarian migration programs. To maintain our citizens’ trust in our migration program, we need to ensure that people smugglers cannot circumvent it and put people’s lives at risk by selling them a highly dangerous and illegal sea voyage to Australia. Our border security operations, including offshore processing of arrivals, over the past five years have put the people smugglers out of business and potentially saved thousands of lives by preventing drownings.

How are relations with the EU developing in the face of Brexit, particularly considering Australia is a member of the Commonwealth? The EU is our only large trading Australia is a multiethnic and mul- partner not yet covered by our netticultural nation, as well as a large work of free trade agreements. Deand powerful Western nation. How spite our focus on the Indo-Pacific does community integration play region, established markets like the out in Australia when the AusEU remain important to Australia’s tralian government is pursuing a economy, particularly as investment tough policy against unauthorized partners, as sophisticated export boat arrivals? markets and as a gateway to global With nearly 50 percent of Australia’s value chains. population being first or secondAustralia looks forward to launchgeneration migrants, community ing the Australia-EU FTA negotiacohesion and opportunity for all tions as soon as possible to reduce our citizens is at the forefront of our barriers to our two-way trade and minds. While still a young country, promote a more seamless regulatory we are one of the oldest democracies business environment. We have also and, we think, the most successful expressed an interest in concluding multicultural society in the world. an FTA with the UK as soon as posOur Aboriginal members of society sible after Brexit. are the custodians of the longest In terms of the Australia-EU FTA, continuing indigenous civilization we are grateful for the support from on earth. Poland and other central European

INTERVIEW BY EWA BONIECKA

EU members for an early start to the negotiations. As the largest non-eurozone economy after Brexit, Poland has the potential to become one of the strongest voices for open trade and investment arrangements in the EU.

PORTRAIT GORAJKA.PL

Does the friendly political relationship with Poland translate into increased trade and investment? As like-minded countries, we continue to explore opportunities to expand our trade and investment relationship. Trade is growing at double-digit rates and there’s much more we can do. There are over 50 Australian companies represented in Poland. Australian superannuation (pension) funds continue to look at Poland as an attractive investment destination which combines strong legal protection with high economic growth. The Deepwater Container Terminal in Gdańsk (DCT Gdańsk SA) is Australia’s largest single investment in Poland and a great example of “patient capital” which reinvests its earnings, with a positive multiplier effect on Poland’s logistics industry. Australian companies are active in many sectors in Poland, from mining and gas to transport security solutions. The defense sector is of particular interest to us, given both Poland and Australia are investing heavily in their defense forces and there’s plenty of opportunity to increase defense industry cooperation. For consumers however, Australian wine remains the single most visible Australian product, with the range and quality of available wine increasing rapidly. You are a highly experienced Australian diplomat with a Polish background, does it have a significant meaning for you to serve in Poland? It has been a great honor for me to represent Australia in several countries and organizations over the past 20 years. But the privilege of being appointed to Warsaw for my first Ambassadorial posting has been a tremendously moving experience. It also speaks volumes about Austra-

Asia’s middle-class consumers, who are expected to number 3 billion in a few decades, will represent the largest consumer market in the history of human civilization Ambassador of Australia, HE Paul Wojciechowski

lia’s society and government, where first generation migrants face no obstacles to pursuing their careers in any chosen field. I’m grateful to all my Polish friends and colleagues for their

support for my work and I feel a great reservoir of goodwill from all members of the Polish government and society as I go about my mission to strengthen and deepen the Australian-Polish relationship.

W B J MAY 2018

Best gift from Poland handmade silverware

Kraków, ul. Wielopole 3 • Warszawa, ul. Mokotowska 43, ul. Ogrodowa 7 • Wrocław, Dom Handlowy Renoma ul. Świdnicka 40 • Gdańsk, ul. Podwale Staromiejskie 89/1 • Legnica, ul. Żeglarska 8 sztucce.hefra www.hefra.pl

antibacterial properties

WBJ

Opinion BUSINESS

Challenges for family businesses

SHUTTERSTOCK

ccording to the Polish Institute of Family Business (IFB), 90 percent of Polish companies surveyed are owned by families and private individuals. But only 36 percent of that 90 percent recognize themselves as a Family Owned Business (FOB). In Poland, the definition of a family business is relatively new and not yet well defined. This is the result of the fact that the boom in family businesses started around 1989, when political changes and the drive of private owners to achieve success enabled them to create prosperous businesses. That is why in the Polish economy nowadays we only have the first generation of founders of family businesses. They have

They may sometimes be reluctant to accept the risk of scaling up the business to enter into big-player territory, but often familyowned businesses are the key players in their market

become forerunners in passing their businesses onto successors. It is worth noting that every fifth company listed on the Warsaw Stock Exchange began as a family business. FOBs have great potential and should not be viewed as small, non-innovative and non-competitive. They may sometimes be reluctant to accept the risk of scaling up the business to enter into big-player territory, but

often family-owned businesses are the key players in their market. The difficulty of the process is amplified if the FOB founders do not have successors or the successors are not interested in running the business, as they see their life taking a different direction rather than following in their parentsâ&#x20AC;&#x2122; footsteps. In our experience, it is a very common situation and also the main threat to FOBs established in the early 1990s. There is a great number of prosperous FOBs who are forced to look for an alternative to succession. They neednâ&#x20AC;&#x2122;t worry, however, because they have multiple options. The owner can sell the business to a competitor or a strategical investor by selling part or the entire enterprise. One can also develop a strategy where they are partially involved in the business and the majority of shares are in the hands of private equity or another investor, making the family passive shareholders living off dividends. These and other options are available to FOB founders/owners who are interested in alternatives to succession. In order to select the right path of how to deal with their own business, it is highly recommended to find a good and trusted advisor who specializes in mergers and acquisitions, understands succession issues and who can help the owner to prepare the business for sale in all respects, find an investor and support the owner throughout each stage of the transaction. Working closely with FOBs on a daily basis, we see how valuable they are. They are one of the most important gears of the Polish economy, with a strong base and huge potential. They are flourishing businesses built on quality, tradition, trust and values. Thatâ&#x20AC;&#x2122;s why they represent viable investment opportunities, allowing them to further prosper and grow in a market that they know well.

Katarzyna Buda Transaction Advisory Manager at RSM Poland

W B J MAY 2018

WBJ

Opinion REAL ESTATE

General contractor vs construction management

Every investor aiming to execute a construction project successfully and effectively has a long list of decisions to make; one of which is the choice between a general contractor and construction management, which determines the method used to complete the project.

Anna Flaga-Martynek Legal counsel, partner, Co-head of the Infrastructure & PPP practice, WKB Wierciński, Kwieciński, Baehr

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n a general contractor contract there is one main contractor (or a consortium) who is obliged to perform all construction work necessary to complete the project. In construction management the work is divided into parcels (for example regarding design, foundations, construction, electrical installation, finishing works etc.) and they are assigned to different contractors. We can observe that investors are increasingly turning to contract management as an alternative to the general contractor model for construction projects. The important issue regarding these two different methods of investing mostly concerns the responsibility for the procurement and coordination of all work. With a general contractor, the contractor is obliged to procure and coordinate the work performed by him and his subcon-

Aneta Citko Lawyer, Infrastructure & PPP practice, WKB Wierciński, Kwieciński, Baehr

tractors and is liable toward the investor. In construction management, the person responsible for the procurement and coordination of all work is the investor itself. Accordingly, in construction management the investor is obliged to put more time and effort into the development of the project and to secure appropriate human resources, adequate to the given investment. The investor must be ready to design and schedule the entire investment process, and coordinate and manage all problems related to the cooperation between different entities on the construction site, concerning, for example, the division of work or the responsibility for any damage. Another problem can occur if the contractor is delayed and it affects the work of other entities. These risks can, however, be minimized at least to some extent through well-prepared contractual documentation and risk management. It is also worth emphasizing that the investor can profit from the services of project supervision performed by a professional third party who manages the work and provides protection from excessive costs and delays. During a construction boom it is also faster to find an available contractor at short notice to perform part of the work than to find a new general contractor. In construction management the work related to the design and construction can to some extent be undertaken simultaneously, which can shorten the total construction schedule. An investor who negotiates contracts personally, without the intermediary of the general contractor, can also usually get better prices for the same services and is able to react faster once there are some obstacles during the performance of the work. As a project is divided into the parcels under construction management, separate procedures to grant a contract are necessary for each part of the work. For entities obliged to apply Public Procurement Law, this is a significant point (conducting several procurement procedures instead of just one is more costly and time-consuming). To sum up, there are a lot of issues to consider when making this choice and the particularities of the individual project must be taken into account, but in our opinion both models are worth considering.

Forward funding vs forward purchase For the developer, this model has the advantage of less need for additional financing and a shared development risk with the investor

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n times of shrinking offers for attractive real estate and rising prices, investors’ acceptance of less conservative project structures such as forward funding and forward purchase is increasing. Both forms of project financing are similar – the developer is granted project financing, while the investor becomes involved in the project at an earlier stage and in greater depth than in a traditional acquisition process. The major difference is the timing of the investor’s involvement, which determines the moment of ownership transfer, the payment schedule and the legal framework necessary to balance the interests of the partners. In the forward funding model, the property is acquired before completion of the development, often at a very early stage of development, and the purchase agreement is often complemented by a project development agreement, a management agreement and/or a general constructor agreement. This early involvement exposes the investor to a number of risks which must be addressed and mitigated in the legal framework of the transaction. The assessment of these risks

will be reflected in the purchase price installments, which will in most cases be correlated with the construction progress. Final price installments will reflect i.a. the progress of the commercialization. From the investor’s point of view this model requires in-depth due diligence, which will confirm the feasibility of the project and the validity of permits obtained. The parties will have to agree in detail about the scope of works and provide for a flexible mechanism to allow for the necessary amendments of this scope. Finally, the investor will need to address the developer’s insolvency risk through step-in rights in contracts of major importance.

Małgorzata Dankowska, Partner, TPA Poland

For the developer, this model has the advantage of less need for additional financing and a shared development risk with the investor. The investor, on the other hand, realizes a better yield and can influence the shape of the project. In the forward purchase model, the transfer of ownership is delayed until the completion of the development and payments are performed as advance payments towards the purchase price. The investor is exposed to less risk and his focus will be on a precise description of the project and the security for potential repayments of price installments. In tax terms, both cases seem very similar, but the main difference relates to the taxation of the acquisition itself, in particular with VAT, as different regulations apply to the purchase of a plot of land versus the acquisition of developed land. This aspect plays a crucial role in the case of residential projects for rent, as long-term leases remain VAT exempt for the investor and taxation of the acquisition phase determines the value of nonrefundable VAT.

Katarzyna Woroszylska Managing partner, Baker Tilly Woroszylska Legal

W B J MAY 2018

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SPACE INDUSTRY

ALL UNDER ONE SKY

BY BEATA SOCHA

On April 2, the Falcon 9 rocket was launched by Space X from Cape Canaveral in Florida. Unlike the rocket launches of the 1960s, few people even registered the event and even fewer knew that Poland was involved in manufacturing its components. Polandâ&#x20AC;&#x2122;s space exploits are not something you read about every day. But just as space is vast, so is the potential for development, and Poland, among other European countries, is ready to take advantage of that

>>> W B J MAY 2018

IN FOCUS SPACE INDUSTRY

ou wouldn’t readily associate the space industry with Poland. Automotive, heavy machinery, electronics, even aviation – sure, but space technologies have long been thought to be out of Poland’s reach. That may no longer be the case, though. The Polish Space Agency was established as a national body closely cooperating with the European Space Agency. As a member of the ESA, Poland pays a contribution fee, and in return receives a lot of support, both financial and as knowledge transfer from the European agency.

Space 4.0

The ESA is not an EU agency, as some may think, but it does work together with the European Commission in many ways. It was the ESA that coined the term Space 4.0, a stage in the global space industry development that we are presumably living in right now. What the term signifies is, unsurprisingly, that there have already been three previous stages in space exploration history and now another phase is starting. Space 1.0 refers to the studying of astronomical objects, going back as far as the first civilizations and the ancient study of astronomy, later aided by the construction of telescopes. Space 2.0 signifies the 1950s-1980s space race between the US and the USSR that resulted

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in the first man landing on the Moon. The space race played a big role in ending the Cold War, both through public perception and sentiment as well as through purely economic factors: it was an enormous financial cash drain and the US was clearly better equipped to handle that burden than a socialist economy. Once the Cold War ended, the space race slowed down significantly. Instead, a new initiative of joint international space missions was born which led to the construction of the International Space Station, whose first module was launched into orbit in 1998. This stage has been dubbed Space 3.0 and precedes the era of space exploration that we are living in now. Space 4.0 stands for global involvement in space exploration, with access to space becoming cheaper, easier and increasingly egalitarian. It is no longer the domain of a few privileged countries, but a level playing field, where even those new to the game, like Poland, can find a place at the table.

A group effort

And there are very good reasons why they should get in on the game. “In 2014, when Elżbieta Bieńkowska was appointed as a European commissioner, it was said that every €1 invested in space would bring €8 in return. Now we are talking about €15 for every €1 put in,” said Tomasz Husak, Head

of Cabinet of the European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, during the 2017 EFNI conference in Sopot. The European Union prepared its own space strategy that involves all EU countries willing to participate and is more ambitious than any national program could be individually. “No European country could have a proper space policy. Yes, Germany and France have their individual undertakings, but a proper space policy can only be achieved for the EU as a whole,” stated Husak and added that out of all EU policies, the space program enjoys the most support from individual EU countries. One could ask, how the EU, or any European country for that matter, could become a real player in an industry that took the US and Russia decades to develop and which took China billions of dollars to acquire the know-how and improve it – as the Asian giant tends to do with all technologies it comes across. It appears that the EU has its own strategy on how to catch up in the space race. “We are in no way lagging behind. In fact, in some areas we are even more innovative and forwardlooking (e.g. in the next 20-year timeframe) than the US, Russia or China,” Husak said.

Galileo, Copernicus and other endeavors

The EU’s space strategy involves

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here’s no shame in being the “ Tworld’s space garbageman

three large-scale programs: Galileo, Copernicus and EGNOS. Galileo is a Global Navigation Satellite System (GNSS) that is set to be fully operational in 2020, with 30 satellites orbiting Earth (currently we are 60 percent through their deployment). The first data services based on Galileo were launched in 2016. “At the moment, the time it takes to locate a person lost at sea or in the mountains is two hours. With the use of Galileo, it will be cut down to 10 minutes. The system will also be capable of notifying the person in need of rescue that help is on its way, which

in many instances can be of crucial importance,” explained Marta Krywanis-Brzostowska, Market Innovation Officer, European GNSS Supervisory Authority (GSA). The Galileo navigation system can also be tremendously useful in cities, where the standard GPS signal often bounces off tall buildings and gets distorted. This can become very handy when autonomous cars driving in our streets become a reality. It is also extremely accurate in time measurement (up to 30 nanoseconds), which is important for securing financial transactions. Another

service it offers is the Public Regulated Service (PRS), which is an encrypted signal that cannot be jammed, used by the police, fire department and other public authorities. Smartphone producers are already outfitting their new models with chipsets integrated with Galileo, like the new iPhone models (iPhone 8 and iPhone X), as well latest roll-outs by Samsung, Sony, Huawei and other major players. Apart from being newer and more precise, one thing that sets the European system apart from other GNSSs is that unlike the Ameri-

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IN FOCUS SPACE INDUSTRY

“ At the moment, the time it takes to locate a person

lost at sea or in the mountains is two hours. With the use of Galileo, it will be cut down to 10 minutes

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or the earthquake in Nepal. They tell rescue teams where there are groups of people that need help. The satellites also collect huge amounts of data, e.g. on the temperature of the oceans, CO2 levels in the atmosphere, which has a multitude of uses, e.g. in agriculture and weather forecasting. The third system – EGNOS (The European Geostationary Navigation Overlay Service) is used by airports and ensures that there can be no gaps in airplane tracking. Polish airports are already among those using it, further increasing air traffic safety.

There is another, fourth system, in the works – the so-called GovSatCom. It’s still in the early stages of development, and its goal is to provide secure, hack-proof communication on a European scale. For instance, if a drone was sent to track a terrorist moving from France to, say, Poland, it would currently drop at the French-German border, as there is no direct communication between the systems that individual countries use.

Upstream and downstream

As one can imagine, it takes immense capabilities to store,

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can GPS, the Russian GLONASS, and the Chinese Beidou, Galileo is entirely civilian. “While there has been widespread civilian use of these military systems, you can imagine that in case of a conflict, it is rather easy to switch these services off,” remarked KrywanisBrzostowska. The second European initiative is called Copernicus and it is a constellation of six satellites with the capability to take the most accurate photos of the planet’s surface. These pictures are used by search and rescue teams, like during hurricanes Harvey and Irma last year,

Ghosts and elves

process and make use of the vast swathes of data that comes in from all these satellite systems. And that is also where Poland, with its 200,000 IT engineers, has found its niche. A Piaseczno-based company, Creotech Instruments, launched less than a decade ago and currently one of FT1000 fastest growing tech firms in Europe, has been working with the ESA to provide cloud computing services for SMEs looking to make commercial use of the data coming from satellites. “Until recently, you had to pay to get access to the data from Earth satellite monitoring, which was done by massive satellites owned by major corporations and the governments of space race leaders. Then a breakthrough happened when the first satellites from the Sentinel family were launched in 2014,” explained Jacek Kosiec, head of the space program at Creotech Instruments. Sentinel satellites are part of the Earth observation system built within the Copernicus Program. The EU, together with ESA and its member countries, finances the program in order to provide satellite data to all users free of charge, for private, scientific and commercial uses. The goal of the policy is to stimulate the growth of the satellite data services market. Since 2014, more Sentinel satellites have been built and deployed in orbit and once they become oper-

ational, they will start collecting data. Current estimates put the volume of data collected by the entire Sentinel constellation at 10 petabytes annually. There is a significant bottleneck in the process, namely the inflexible infrastructure which limits access to current and historic data and the limited number of services offered by companies involved in the program, Kosiec said. In order to increase the accessibility of satellite data, the EC, together with the ESA, prepared a project called Copernicus Data and Information Access Service (CDIAS), whose aim is to create four data hubs across Europe that would render access services to satellite data from the Sentinel constellation and other sources within the Copernicus program. “These centers will not only store all the current and historic data, but also provide users with access to the cloud’s computing power, thus allowing European companies to offer services without having to carry out massive investments in their own infrastructure,” Kosiec added.

Small satellites and components

The downstream segment, which means collecting data from space and streaming it down to the planet’s ground centers – albeit important and growing rapidly – is not the only

Another European project that Creotech has been involved in is The Atmosphere-Space Interactions Monitor (ASIM), a science experiment whose goal is to examine the mysterious phenomena and discharges that happen in the upper layers of the Earth’s atmosphere. It will study these phenomena during strong storms in the stratosphere and mesosphere, dozens of thousands of meters above ground. In the past these spectacles were interpreted as aliens visiting earth. They have been called “blue jets,” “ghosts” and “elves” by scientists. They cannot be observed from earth because the sky is overcast during storms. There are strong indications that they influence the Earth’s weather system and studying them will allow us to perfect climate models for our planet. The project was ordered by the ESA and carried out by the ASIM consortium, led by Danish company Terma – as the chief technical contractor. ASIM is the largest space instrument ever built under the Danish firm’s leadership. It took 10 years and nearly €40 million, with 100 specialists from Denmark, Norway, Spain, Italy, the Netherlands, Canada, the US and Poland working side by side. The consortium included: the DTU Institute from Copenhagen (science lead), the University of Bergen, the University of Valencia, OHB Italia and the Space Research Centre of the Polish Academy of Sciences. The latter was responsible for creating the design and the early models for power supply and distribution for the Gamma-ray detector MXGS (Modular X – and Gamma-ray Sensor), part of the ASIM instrument. Creotech, as the contractor of the Space Research Centre, was responsible for fitting the final models (qualifying and aerial) of the Polish device, which consisted of 30 blocks of electronics that had to meet the highest requirements for space tech. On April 2, the Falcon 9 rocket was launched from Cape Canaveral in Florida, US, which carried the instrument into orbit. There, a cargo capsule Dragon separated from the rocket and set out on a journey to the ISS that lasted days. Then the instrument was successfully mounted with a mechanical arm on the ISS’ European module called Columbus. The device will soon start transmitting data to earth.

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IN FOCUS SPACE INDUSTRY

“ If a drone was sent to track a terrorist moving

from France to, say, Poland, it would currently drop at the French-German border, as there is no direct communication between the systems that individual countries use

area where Polish space companies have been successful. Polish companies, including Astri Polska, the only Polish firm whose entire revenue comes from space technologies, is strongly focused on designing and delivering systems for satellite testing, as well as applications and satellite services. And while Poland will probably never be a leader in building rockets, it has already gained recognition for its space drills. In late 2014, a Polish drilling instrument took samples of the Churyumov-Gerasimenko comet, as part of the ESA’s Rosetta mission, thus becoming the first country to “poke” a comet.

Space garbageman

As the satellite industry is developing, at some point there might come a time when insurers will want to step in and they will require data on what risks will be involved in launching them. Given that we currently have about 1,000 satellites orbiting Earth and that within the next 10 years the number will approach 9,00010,000, the amount of data necessary to navigate them safely and avoid collisions will increase substantially. That is also where Polish firms, including Creotech, see potential for growth. And what happens with all the satellites that are constantly being launched into space? Going one step further, there

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are already several Polish startups that are coming up with solutions for the space trash problem. Because the real threat is not the 10,000 satellites that will be monitored and capable of making maneuvers to avoid collision. “It is with the 300,000 pieces of space trash that are already out there in the planet’s orbit,” said Piotr Orleański, Deputy Director for Technology, Center for Space Research, Polish Academy of Sciences, Poland. The issue is high on the list of priorities for the EU. The ISS, for example, was designed to have a life span of 30 years (it is planned to remain operational until 2028). Then, it will be decommissioned and will have to be deorbited safely. Few people outside the space community registered the fact that during Easter this year, a Chinse space station deorbited and mostly burnt up in the atmosphere before falling into the Pacific. Small satellites are often no bigger than a 10 cm cube and seem innocuous enough when you hold one in your hand. It doesn’t pose any risk on its own, but as space debris, it could potentially do a lot of damage, creating an avalanche of space trash as smaller fragments hit larger pieces destabilizing their orbits. It seems clear that at some point someone will have to clean it up. Poland could very well grab that piece of the cake too. “There’s no shame in being the world’s space garbageman,”

said Orleański. There is another area where Poles have been excelling: a group of Polish students have repeatedly won the global University Rover Challenge. Even though they are not actually space rovers, these inventions can and are being used e.g. in desert exploration or for disarming explosives. According to Husak, there are other niches that have yet to be appropriated and Poland could play a role there, e.g. machinery for space mining or preparing food for space travel, which, given that the first space tourists are set to travel within the next two years, could become a valuable market.

Poland can into space

There’s an old internet meme that uses an anthropomorphized ball-shaped upside-down Polish flag that continues to undertake a series of ventures into space which always inevitably end in failure. The running gag always ends with the “Poland cannot into space” line. Until recently it could have been the case. Even five years ago no one would have believed Poland would actually have space tech companies. Now, as the space industry is becoming more and more egalitarian, Poland’s chances of actually making a mark are increasing. After six years of learning from the best of the best at the ESA, it is time for Polish firms to show the world what they can do.

E X P E RT O P I N I O N

Building microsatellites in Warsaw

Finnish space company ICEYE has recently launched its first international office and has chosen to do so in Warsaw. WBJ asked Robert Wagemann, Member of the Management Board for ICEYE Poland, why the leader in SAR technology has chosen Poland as the first stop in its expansion

WBJ: ICEYE is the leader in synthetic-aperture radar (SAR) technology for microsatellites. What exactly does that involve? What technologies is the company currently developing? Robert Wagemann: ICEYE enables better decision-making in a wide variety of industries through synthetic-aperture radar (SAR) satellites and commercial access to satellite imagery. ICEYE has pursued miniaturized SAR technology specifically because of the ability to acquire satellite imagery regardless of clouds, weather or darkness. Optical systems are hindered from imaging the world about two-thirds of the time since that technology is restricted by weather and light; without sunlight illumination, optical systems do not cover industry needs sufficiently. ICEYE is developing a global radar satellite imaging service, available at any time and with revisit times of just a few hours, to help clients resolve challenges in sectors such as maritime, disaster management, insurance, finance, and security and intelligence. In January 2018, ICEYE became the first orga-

nization in the world to successfully launch synthetic-aperture radar (SAR) microsatellites. Why did ICEYE decide to open an office in Poland? ICEYE is expanding rapidly on a global scale. Like Finland, Poland has a great amount of untapped aerospace potential in the talent available. How is the cooperation with other Polish companies developing? In what areas of the space industry are Polish companies strong? ICEYE approaches aerospace with a New Space model. This means many things, and in the case of ICEYE’s Poland operations, exploring off-the-shelf components (COTS) for hardware and other manufacturing partnerships show potential. Do you think that Poland has a chance of developing a space tech cluster? Is there enough interest in the space industry here and enough financing to create a “critical mass”? ICEYE is a forerunner in aerospace in Finland, and in Poland. We have good reason to believe that us pushing the critical mass forward is

valuable for everyone involved. Warsaw is the first office the company has launched outside Finland. What are the company’s further plans for Poland? As ICEYE operations grow, we’re expanding our resources globally overall. Our Poland office is expected to deliver a growing amount of services and will house a Mission Operations Center to control communications with the satellite constellation. A customer service team will also be incorporated into the Poland office to provide technical assistance, access to information and image requests for clients.

Robert Wagemann Member of the Management Board for ICEYE Poland

W B J MAY 2018

SPACE INDUSTRY INTERVIEW

WBJ:

Start small,

think big

While not yet a major league player, Poland has found its place in the European space industry and is quickly catching up. It can already boast some of the most advanced ground penetration systems in the world. Satellite data processing, space trash tracking, and even space mining could one day become major Polish export industries. WBJ sat down with Grzegorz Brona, recently appointed as the president of the Polish Space Agency, to talk about the present state and the future of the Polish space industry

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How will the space industry in Poland develop within the cooperation with the European Space Agency, and on its own? Grzegorz Brona: Currently, the Polish space industry is developing exclusively through cooperation with the Agency (ESA). Poland has been an active member of the ESA since 2012 and national agencies are encouraged to take part in ESA missions. What is more, a major part of the contributions that members pay to the ESA return to the countries in the form of orders. That is the ESA’s policy and that is the case in Poland as well. During the first few years there is always a risk that national agencies are not technologically advanced enough and for that reason the ESA introduced a special transitory period, which ends in 2019, with development programs exclusively for Poland. The goal is to increase the level of competence of Polish companies and develop products that could be delivered to the ESA in the future. The transitory period is coming to an end soon and we can see that that our companies are becoming more active and effective in procuring contracts on the ESA’s open market, which proves that they have developed successfully. A set of Polish specializations and niches have emerged, including optoelectronics, ground systems for satellite testing, onboard computers, power supply systems, planetary ground penetrators, satellite image processing systems, robotic systems and others. That said, cooperation with the ESA alone has not led to creating a stable space industry in any of the member countries. That is why state support in the form of a national space program, both civilian and military, is necessary. The Polish Space Agency is responsible for creating such a program. I hope it will accelerate the development of companies and R&D centers in the Polish space industry and allow them to think realistically about reaching the furthest corners of our Solar System.

“Our domestic companies are building worldclass systems for detecting and tracking space trash

What products and services will be created in the future in the space industry? Where could Poland find its niche? The answer to this question depends on the time perspective we consider. In the next few years it will be important to focus on satellite data services: observation and navigation. This requires significant investment and together with programs Copernicus and Galileo – the flagship endeavors of the European Commission and the ESA – it receives a lot of promotion and support from the European Union. Given that Poland can boast excellent, well educated programmers, it is also worth considering the ground support for the space industry, the so-called “downstream.” Further down the line, Polish companies could venture into the Space 4.0 market, which means faster, cheaper and more flexible commercial space exploration with small satellites, satellite constellations and small rockets – not necessarily orbital, but used for testing equipment in microgravity. We are also seeing increased demand for securing space missions and detecting threats from space trash (elements of old satellite systems, rockets etc. that still remain in orbit). This nascent market could become largely dominated by Polish companies, both in terms of observation (our domestic companies are building world-class systems for detect-

INTERVIEW BY BEATA SOCHA

ing and tracking space trash), as well as in the trash removal segment (we have organizations specializing in delivering robotic components that can be fitted on future cleaning and servicing satellites). But that is a more distant perspective. If we want to look even further into the future, 3050 years from now, space mining seems very promising for our space industry: procuring material from other stellar objects and processing it e.g. to build space habitats. Even though it may seem distant, we already have small Polish firms developing rapidly in that direction. What should be our priority be for the next few years? I see three main priorities for the Polish Space Agency. First, utilizing as much of the funds available for development of Polish companies as possible. We are talking about financing from the ESA, funds available within the EUMETSAT (European Organisation for the Exploitation of Meteorological Satellites), of which we are a member, as well as funding within the EU’s Horizon2020 program. These programs offer a lot of funding and yet in many of them, Polish companies still play a marginal role. Our second priority is to enter consortia that will be involved in future space projects carried out in Europe in the upcoming financial perspective, such as the SST consortium, which is active in detecting and tracking space trash. And finally, it is important to prepare a realistic and feasible national space program. We could of course consider building an orbital rocket, but finding a budget, specialists and the client for the product would be difficult. That’s why our program needs to be composed of smaller-scale projects, at least at first, that will be complementary and will contribute to building national space potential. Only then can we think of major challenges. The national space program needs to meet the demands of the industry, science, military and administration. It is a broad and varied group of stakeholders, which makes the challenge even greater. We need to define the program, find funds (preferably from existing schemes, without creating a new budget position) and the right people. Then we need to implement the program so that it leads to creating products and services that will prove to be a good fit for the market.

“Right now, the lander ‘Insight’ launched by NASA is flying to Mars and it is equipped with a Polish system for ground penetration designed to explore the Red Planet larly since 2012. With the growing number of Polish space projects, the perception is also slowly changing – both among the older and younger generations. More and more students look at the developing industry with growing curiosity. Unfortunately, at the moment we don’t have enough specialists that could teach space technology at a sufficient level. That is where the European Space Agency with its internship and educational programs comes in. Increasingly, young Poles go to study at ESA centers for a few months or longer. They come back with invaluable knowledge, which is immediately absorbed by Polish companies. The learning process will take many years, but we can accelerate it by organizing internships at space companies, which is what the Industrial Development Agency (ARP) has been doing. Of course, the ambitions of the domestic space program need to correspond to staff availability, which is doable. There is a threat, however, just as in any high-tech industry: the brain drain to foreign companies. And the threat will grow as the space industry develops worldwide, increasing the demand for new staff. In some European countries the demand for space technology specialists over the next few years will exceed 50,000 people!

How much does the young generation know about the space industry in Poland and its potential? Does our educational system provide the right competencies? Most Poles have no idea that Poland has a space industry. When thinking about space they think of Nicolaus Copernicus and Hermaszewski [the only Polish national in space to date – ed.]. Naturally, our experience and Which Polish successes in the potential are nowhere near that of the US, France or space industry do you consider Germany, but it has been developing rapidly, particuthe most important? Is it the

awards that Polish students won for their Martian rover prototypes, or maybe some of the ESA missions that Polish firms have participated in? The success of the Polish rovers (or to be more precise rover analogs, because these vehicles were not designed for actual space missions) is a fantastic achievement for our students. But while they show the potential for excellent staff, for now they don’t directly translate into the space industry as such. As one of Poland’s world-class successes I would name ground penetration systems, where our technological ingenuity is unparalleled. Right now, the lander “Insight” launched by NASA is flying to Mars and it is equipped with a Polish system for ground penetration designed to explore the Red Planet. Another great example is the system that stores and makes available the data from EU’s Earth observation satellites. The system is currently being created in Poland. We also have systems spread all over the globe to track space trash. These systems belong to Polish companies and institutes. No other country in Europe has such widespread systems. We are beginning to get noticed in the international space community. We are still far from reaching top league, but we do have concrete achievements and we are boldly going where no man has gone before.

W B J MAY 2018

SPACE INDUSTRY INTERVIEW

Prepping for a big journey

From a science-business cooperation project, Creotech Instruments has grown into a major player in the space industry and one of the fastest-developing companies in Europe in just a handful of years. Currently, the firm employs 70 people, operating as a joint stock company since 2012. It has been part of a number of high-caliber space projects, from searching for life on Mars, studying the mysterious Gamma radiation flashes in the upper atmosphere through to tracking potentially dangerous objects in Earth’s vicinity and the so-called space trash in the planet’s orbit. WBJ talked to Jacek Kosiec, head of the Space Program at Creotech Instruments, about the company’s current and future endeavors

WBJ:

Creotech was one of 20 Polish companies that made it into the FT1000 ranking – the list of the top 1,000 fastest developing European companies. Given that the company is relatively young (since 2012 it has been operating as a joint stock company) how have you managed to cover such a distance so quickly in an industry that just a few years ago seemed out of reach? Jacek Kosiec: The space industry has traditionally been reserved for large corporations originating from state-owned aviation-defense conglomerates. Designing, constructing and launching a large telecom satellite costs hundreds of millions of euros and requires a major industrial supply network. Reaching a level where space projects are possible takes years. However, the industry has been changing rapidly over the past few years. Thanks to the technological revolution we are currently witnessing, sending cargo into space is now much cheaper and the ongoing miniaturization of electronics allows for the same tasks to be performed with much smaller devices. This has lowered the threshold for new space companies to enter the market. Creotech’s rapid growth has also been facilitated by the ever-growing revenue in upstream projects, that is undertakings resulting in something being launched into space. Our company has grown from a niche of advanced measuring equipment, to now being used by the biggest labs in the world. Another important component of our business is the use of satellite data. Thanks to two

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large projects carried out for the European Space Agency, Creotech is becoming one of European leaders in designing and developing modern IT environments for efficient satellite data storage and processing. Are Creotech’s products already out there in space? The energy supply and distribution systems our company manufactured are right now powering the camera doing the imaging of Mars’ surface in the ExoMars mission. We also created a sensor installed on the ASIM instrument, which was fitted on the International Space Station a few weeks ago. The ASIM project was the first space order for our company. If it wasn’t for the trust that the Space Research Centre (part of a Danishled consortium responsible for the project) placed in the young and inexperienced company from Piaseczno back in 2012 when ordering it to manufacture the power

supply system for the MXGS instrument for the ASIM mission, Creotech would not be where it is today. This goes to show how important it is to stimulate innovative businesses in high-tech industries at the early stages of their development. In December 2017, Creotech signed a contract with the ESA for PLN 60 million – the largest deal for a Polish space company to date. What is the agreement for? Until recently, you had to pay to get access to the data from satellite Earth monitoring, which was done by massive satellites owned by major corporations and the governments of space race leaders. Then a breakthrough happened when the first satellites from the Sentinel family were launched in 2014. The tender for four hubs that would store the data from the Sentinel satellite constelation concluded in the second half of 2017 and on December 14, 2017, four consortia signed agreements at the European Commission’s HQ in Brussels. One of the winning consortia was our company. The value of the deal is PLN 60 million and the project spans four years. The system will be fully operational within six months of signing the deal. The Creotech-led consortium, which is responsible for the EO DIAS project, includes: CloudFerro, Geomatys, Outsourcing Partner, Sinergise and The Wroclaw

INTERVIEW BY BEATA SOCHA

“Sending cargo into space is now much cheaper and the ongoing miniaturization of electronics allows for the same tasks to be performed with much smaller devices

Institute of Spatial Information and Artificial Intelligence (WIZIPISI). Several months ago, Creotech also signed a contract with Finnish company ICEYE. What technologies will it deliver? About a year ago, Creotech signed a deal with ICEYE to fit electronics onto the first SAR (Synthetic Aperture Radar) satellite. The Finnish company is the world leader in SAR technology applications for microsatellites. It has designed a cutting-edge Synthetic Aperture Radar as well as an array of electronic systems for the entire satellite constellation, which will allow for fast and reliable access to Earth observation data. Creotech was responsible for the fitting of electronic modules onto the first satellite in the series. The cooperation was going so well that the Finnish firm decided to take it to the next level. For the past few months we have been manufacturing cable harnesses designed specifically for space deployment. There are several dozens of these harnesses and each is a separate project with different types of connectors, both for power supply and data transmission, both digital and

radio-analog. They are designed to connect individual subsystems onboard the satellite. Creotech is also responsible for thermal insulation of the satellites in the ICEYE constellation. Each multi-layered insulation element, designed specifically for satellite parts, is formed from special materials that meet the highest quality standards. They are expensive to produce and they need to fit each satellite element perfectly while maintaining the necessary elasticity. Space tech is not the only groundbreaking technology that Creotech is developing. You are also working on quantum computers. What are they and when can we expect to see them put to widespread use? The needs of the nascent “quantum industry” are well aligned with the demands of high-reliability electronics that we manufacture for our clients. In quantum computers of the future, precise control and gauging circuits will play a major role in verifying the state of the spin and controlling the entire device. Our company has a lot of experience in designing this type of circuit for high energy physics and the

space industry. Building our competence in quantum computing is an important direction for our company’s development. What other projects is Creotech involved in? One of the endeavors we have high hopes for is the HyperSat project, which is a modular, universal platform, equipped with specialized instruments allowing for a wide spectrum of space missions: from radio and telecommunications through optoelectronic and radar observation. We plan to sell HyperSat satellites to both domestic and international clients. The project is slated to take three years, which means that we could see the first HyperSat satellites in orbit by the end of 2020. The HyperSat system will be an open one. The platform will be compatible with the most common modules for pico- and nano-class satellites, and most importantly it will also be able to communicate with larger instruments. This will create an opportunity for other players in the Polish space industry. We want the project to facilitate the development of not only our company, but also provide a stimulus for the entire Polish space sector and – more broadly – the Polish innovative industry. What are the next big steps for Creotech? Space projects are complex endeavors that take many companies and many years to implement. Creotech aims to become the integrator of entire space missions, which means combining all the components for a space instrument, testing its systems and prepping it for the intrepid journey into orbit. This is something only the most experienced companies can do, with all the proper equipment, industrial infrastructure and excellent staff.

W B J MAY 2018

SPACE INDUSTRY INTERVIEW

Gaining momentum

All innovative endeavors require an injection of know-how and people with vision and ambition. Astri Polska is no different. Over the course of eight years it has evolved from a small research unit into the ESA’s partner in its own right. Deriving all of its revenue exclusively from space tech, the company is testament to Poland’s potential in the space race. Jacek Mandas, CEO of Astri Polska, explains how the company managed to find its niche in space tech

“We would really like to see our know-how used to build Polish satellites in the future

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INTERVIEW BY BEATA SOCHA

“The 5G technology will offer much higher precision, pinpointing the location within 1 meter, also inside buildings

WBJ:

Astri Polska is the first Polish company whose entire revenue comes from space tech. What exactly do you specialize in? Jacek Mandas: In short, we design and deliver systems for satellite testing, as well as space applications and services. But it’s important to clarify that the space industry can be divided into two main categories: the development of space technologies – the so-called “upstream,” and creating solutions utilizing space tech, the so-called “downstream.” The three main types of space tech are: navigation, telecommunication and satellite Earth observation. Astri Polska is active in all three. That includes devices used for testing satellites, particularly their electronic and optic systems. We deliver solutions for the main missions carried out by the (ESA) and the European Commission. We also test GNSS satellite navigation receivers used in space. We ensure that the specific systems in satellites launched into space will work properly. Apart from creating space technologies, Astri also specializes in developing our own applications. We design dedicated applications and services using data from Earth observation satellites for land and water management as well as crisis management. We also design devices and services using satellite navigation for geolocation. The European Space Agency has recently approved the FLIGhT and TEcHNO projects, where Astri Polska is also involved. What is the FLIGhT project and when is it scheduled to be completed? The purpose of the FLIGhT project

is creating a test environment that will allow the European Navigation Laboratory, part of the European Space Research and Technology Centre, to integrate its research instruments. Our test environment will be used to test the ESA’s satellite navigation receivers. They will be installed in satellites and launch vehicles. The ESA has already approved the design stage and now we are entering the production phase of the test environment. Astri Polska is responsible for the entire project. We are planning on delivering the testing environment in Q4 2018. It will become a vital component of the ESA’s testing infrastructure. The TEcHNO project can be used for improving the global positioning system. How is it done now and what will change in the future (e.g. once the 5G technology is introduced)? How precise can geolocation become? The TEcHNO project aims to cut down on the time necessary to locate an object with increased precision, while improving the reliability of navigation systems. Most smartphones contain navigation satellite receivers using the global satellite navigation systems (GNSS). To some degree, cell phones already use the LTE technology to speed up pinpointing a phone’s position, which allows the device to “know” which satellites to communicate with. LTE technology has the capability to determine the device’s location using telecommunication signals, but it is rarely used, because base stations are not equipped for it. That is what our project will do: check whether a standard LTE telecommunication

signal can be used for positioning. What will happen once 5G is introduced? LTE allows us to locate a device with a margin of a few meters. The 5G technology will offer much higher precision, pinpointing the location within 1 meter, also inside buildings – something that is impossible with only satellite navigation. What other space projects is the company involved in? We are currently working on 20 projects. We are designing and manufacturing testing equipment for the JUICE probe, which will study Jupiter; for the European meteorological satellites: the Sentinel-5 and MetOp-SG missions; as well as for Eurostar Neo telecommunication satellites. We also deliver dedicated applications and services utilizing data collected by Earth observation satellites, which will be used to analyze the ice cover on Polish rivers and monitor the condition of flood banks. In satellite navigation, we are currently performing radiation tests of the highly advanced AGGA-4 intergrated circuit that will be used in the space receivers of satellite navigation systems. While the circuit is exposed to heavy ions and protons, simulating space radiation, our devices are monitoring its performance. What are the company’s origins and how quickly is it developing? The company was created by a handful of visionaries working together with major stakeholders experienced in the space industry: the key space institute in Poland: the Space Research Centre of the Polish Academy of Sciences and Airbus Defence and Space – a world leader in the sector. For the first few years, we basically worked on R&D projects to gain experience. But over the past couple of years, Astri has become a fully-fledged partner for the European Space Agency and other important players. The firm’s growth accelerated once we’d joined key ESA programs such as Neosat, MetOp, Juice, Euclid and AGGA-4 as a supplier of specific products. Astri’s growth is evidenced by the fact that we have doubled our workforce over the past two years, reaching a staff of 80 and we are still looking for more employees. Over the eight years since inception, we’ve participated in a total of 50 projects, becoming the ESA’s trusted partner. We look forward to the implementation of the Polish Space Program and we would really like to see our know-how used to build Polish satellites in the future.

W B J MAY 2018

WBJ PRESENTS

BROUGHT TO YOU BY ZĹ OTA 44

UP-AND-COMING MARKET Warsaw is still an emerging penthouse market, but it already offers some of the highest apartments in |Europe. Luxury residential real estate in the city is moderately valued as global standards go, with upward pressure on prices forecast for the coming years BY ADAM ZDRODOWSKI

MAY 2018 W B J

BROUGHT TO YOU BY TÉTRIS

US-POLISH JOINT VENTURE

Established in 1987 and headquartered in Denver, Colorado, Amstar is an American investment fund that acquires, develops and manages office, residential, retail, industrial and hotel real estate in the US and selected other countries. To date it has invested a total of around €4.9 billion in property around the world and bought or built more than 8,400 apartments. Amstar claims to be a unique investment fund in that it offers its clients direct access to decision-makers, has its own funds for new investments and takes decisions very quickly. BBI Development is a Warsawfocused developer that is now working on several large-scale projects in the city, including Centrum Praskie Koneser and Centrum Marszałkowska

W B J MAY 2018

PRESENTS

BROUGHT TO YOU BY ZŁOTA 44

ne of the biggest single-asset transactions to have closed in Poland’s housing market in recent months took place at the Złota 44 tower in Warsaw earlier this year. An anonymous buyer acquired an apartment of over 240 sqm located on one of the top floors of the skyscraper. Its exact price and location within the building have not been disclosed, but the value of the investment is estimated at almost PLN 11 million. The price per sqm is believed to have amounted to approximately PLN 46,000. In 2017, average apartment prices in Złota 44 – a luxury project designed by star architect Daniel Libeskind and completed by US investor Amstar (for whom it marked the entry into the Polish market) and WSE-listed developer BBI Develop-

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400 MILLION DOLLARS

the value of the most expensive penthouse in the world

ment – stood at PLN 30,000. The scheme’s owners have now put up for sale an almost 600-sqm, three-level penthouse accommodated on floors 52,53 and 54 of the tower. According to the investors, this is the highest apartment in the European Union – it includes a bedroom at 190 meters. The total value of the penthouse has not been revealed; however, judging by the size and location of the apartment, its price will, in all likelihood, be more than twice as high as the price of the recently sold 240-sqm unit. Such prices may seem prohibitive for the average home buyer in Poland, but BBI Development and Amstar are not worried about the commercialization of the Złota 44 investment. They claim that sales are proceeding according to schedule. “We have better results than the competition. Demand for luxury apartments is not dwindling,” argued Michał Skotnicki, the management board

IMAGES BY MOKAA ARCHITEKCI

WBJ

GROWTH PROSPECTS

president at BBI Development. He added that this is also because of the numerous amenities that the building offers. Złota 44 – whose inhabitants include Robert Lewandowski, Poland’s best soccer player – houses a recreational floor that accommodates such amenities as a 25-meter swimming pool, a gym, a screening room with a golf simulator, a spa and a 400-sqm terrace with a Jacuzzi. Christopher Zeuner, head of Europe at Amstar, pointed out that the number of affluent Poles has been growing and thus there are more and more potential buyers of luxury residential real estate in the country. KPMG data shows that in 2017 the number of high-earning Poles reached 1.1 million. “Wealthy Poles prefer to invest their capital in the real estate market – 76 percent of them, according to KPMG, have a second flat or house,” Zeuner said.

The prices in Warsaw could potentially match the current prices in Berlin and Amsterdam within the next three to five years

The recent record deal at Złota 44 says something about Poland’s residential market. Paweł Sztejter, vice president of the management board at Reas, said that until recently transactions valued at several or even more than PLN 10 million only involved the sale of well located houses. Today, due to the growing buyer interest in upmarket apartments, such deals are also closed by developers building in the centers of large cities. This often pertains to high-rise projects, Sztejter said. He added that while Poles were initially skeptical about residential towers, they are increasingly convinced that the luxury apartments in them are not only a good investment, but also an attractive place to live. Yet such apartments are, by definition, characterized by their limited availability and those which are located on the top floors are truly unique, on the city or even national scale, said Jolanta Matuszewska, a senior property advisor at Poland Sotheby’s International Realty. Penthouses tend to be much more expensive than other apartments located within the same building. As for the supply, in the primary market there are usually just a few such units on offer across Poland at any given time and most of them are sold relatively quickly, she added. Around ten are usually on sale in the secondary market. Of course, the Polish penthouse market is still nascent and the prices of such products in Warsaw cannot compare with the prices found in such cities as London, New York or Moscow. According to Sotheby’s International Realty data, the most expensive penthouse in the world is in Monaco and is valued at $400 million. “Standard” global prices of such apartments are lower – on New York’s Fifth Avenue they can be bought for approximately $30-40 million. In Poland, by contrast, the prices usually range between PLN 10-20 million. However, Matuszewska warned against focusing solely on the price – when it comes to such unique properties, comparing them by looking at any single parameter is unfair, she claimed. On the other hand, experts predict that the prices of luxury apartments in Warsaw will continue to rise in the near future. According to a recent report by EY, the Polish capital is a city with a relatively low premium for luxury and can thus expect rapid price growth. The prices of luxury residential real estate in Warsaw could potentially match the current prices in Berlin and Amsterdam within the next three to five years, and the current prices in Paris and London within the next ten to eleven years, the report said.

W B J MAY 2018

OIL INDUSTRY

The drill of it all

Despite Polandâ&#x20AC;&#x2122;s head start, it has long lost its position on the worldâ&#x20AC;&#x2122;s crude oil map. Today, oil is a cost for the economy, and given the shortterm volatility and long-term trends, sourcing it is a serious issue

>>>

BY SERGIUSZ PROKURAT

W B J MAY 2018

INVESTMENT MARKET

t all started when a Pole, Ig-

nacy Łukasiewicz, first distilled kerosene and then invented the kerosene lamp in a modest laboratory at Mikolascha pharmacy in Lviv on July 31, 1853. The year 1854 marks the establishment of the world’s first oil mine in Bóbrka (eastern Poland) and in 1856 – the world’s first oil distillery in Ulaszowice. Thus, Poland gave rise to an industry that changed the face of the world, leading to unprecedented economic and civilizational progress, generating enormous threats to the natural environment and creating a whole army of billionaires, turning nomadic tribes of the Middle East into the world’s wealthiest societies. Crude oil has changed the world, arguably in more ways than any other previous discovery. It is used mainly for the production of fuel. Petrol and diesel represent around 50 percent of global oil consumption. This is accompanied by jet fuel and heating oil and the chemical industry and various types of chemicals. Oil and its derivatives has had a huge impact on technological progress: central heating, electricity, transportation – a world without these services is unimaginable. GLOBAL TURMOIL The past century has been a period of numerous shocks caused by oil – both leaks as well as numerous conflicts. Some of those conflicts are low-strain internal confrontations, while others occurred on the international arena and turned into struggles lasting for decades, such as the

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We could see a third wave of price hikes that could mean we will be buying fuel for well above PLN 5 per liter

one in the Middle East. In 1973, when Arab producers imposed an embargo on some countries, oil consumption expressed as a percentage of the consumption of energy sources was close to the largest. Crude oil then accounted for 46 percent of the global energy supply. In the 21st century the dominance of oil is less firmly grounded. In 2014 it generated 21 percent of energy, while coal generated 29 percent and natural gas 21 percent. Renewable energy sources such as wind, solar and geothermal energy altogether accounted for a little more than 1 percent. The process of decreasing fuel consumption is constantly being optimized. Taking into account absolute values in developed countries, the demand for fuel decreases. The demand for liquid fuels in Europe has been falling continuously since 2008. In 2009, there were 98 refineries in EU countries, now there are 87 and by 2020 we are expecting a further decrease of nearly 30 percent in the processing of crude oil within the European Union. However, in developing countries, the automotive market is not yet saturated, and China, India and Indonesia are consuming increasing amounts of energy. DIVERSIFYING SOURCES From the point of view of the Polish economy, oil is primarily a cost. The share of imports of this raw commodity in the Polish GDP is more than 3 percent. There are two state-controlled oil companies in Poland – Orlen and Lotos, which are in fact currently looking to join forces through an acquisition. Both have modern

processing plants. The production capacity of Orlen’s refinery in Płock amounts to more than 16 million metric tonnes of crude oil per year. In the case of Lotos, its refinery in Gdańsk is able to process approximately 10 million tonnes per year. Both refineries are located in a favorable geographical position that offers the possibility of supplying raw material through two other independent channels – the Russian “Friendship” pipeline and various types of oil delivered by sea. Recently, Orlen’s first import of oil from Iran made quite a splash in the media, and more shipments from the country are on the cards. The Gdańsk oil giant also wants to increase its imports from Saudi Arabia to at least 100,000 metric tonnes per month, which means that more than 20 percent of raw material supplied to PKN Orlen refineries will come from Saudi Arabia. Both companies have petrol station networks, totaling about 35 percent of all such facilities in Poland. The traditional problem of oil companies in Poland is a lack of their own sources of raw materials. Remedial action taken by these companies, including the search for oil deposits (including in the Baltic Sea), have not yet brought satisfactory results. RECENT HIKES The past few months have brought several increases in fuel prices in Poland. Since mid-March, we’ve seen three price hikes: the first one caused by higher oil prices in global markets, the second one by the weakening złoty against the dollar. Now, as US President Donald Trump refuses

to sign the nuclear treaty with Iran, we may be facing another surge. At the end of April, a liter of diesel cost PLN 4.80 in Poland and was the most expensive since November 2014, according to data published by the European Commission. Similarly, prices for lead-free petrol reached a level of PLN 4.88 per liter, the highest since July 2015. “Average prices for these fuels could become even higher, by up to PLN 0.10 per liter. But that is not the end of the bad news. We could see a third wave of price hikes that could mean we will be buying fuel for well above PLN 5 per liter,” said Marcin Lipka, chief analyst at Cinkciarz.pl. He also added that the continually decreasing output from Venezuela is a fundamental risk factor. “According to the April report of the International Energy Agency, extraction in the country could drop to 1.38 million barrels daily, the lowest level since the 1940s and one million barrels below the levels from only two years ago,” Lipka said. In terms of Poland’s energy security, it seems strategically important to establish new paths of oil supply. The Polish political discourse has for many years seen the proposal of building new trade relations or connections allowing for oil import directions other than from Russia. Such options are possible with the infrastructure of Gdansk’s Naftoport. Unfortunately, reception of oil other than Russian constitutes a problem because of its unique composition. Polish oil plants, designed primarily for the reprocessing of Russian fuel, have to keep investing in the modern-

W B J MAY 2018

FEATURE OIL INDUSTRY

ization of their production lines in order to be able to reprocess other types of oil in the future. It is also necessary to retrofit installations. Currently, approximately 35 percent of all oil pipelines in Poland are over 40 years old, and another 35 percent are 35 to 40 years old. UP IN FLAMES What happened to oil resources in Poland? At the beginning of the 20th century, the area of Galicia, located on the territory of Poland, was one of the largest oil hubs in the world. In 1909 there were 2.75 million tonnes of oil extracted there, which earned the region third place in terms of global production. In the mid 1920s, Poland was the European leader in the exploration of natural gas and held the third position in producing oil. This made Poland a crude oil powerhouse – for European conditions of course. Nevertheless, the deposits in Borysław and Drohobycz, where most Polish oil was extracted, were becoming depleted, while in other countries, new, much larger sources were found. The sad finale of the Polish oil region was the bombing of the shafts during World War II in 1939. A dozen German airplanes was enough to destroy them. The oil wells were ablaze for a dozen days.

Oil reserves expanding? In 1980 there were 23 million barrels of crude oil extracted in the world and the resources in deposits (683 million barrels) were intended to be sufficient for 30 years. Nearly 40 years have passed since those forecasts and the estimates proved to be largely unrealistic. By the end of last year there were already nearly 1 billion barrels of crude oil pumped out in the world, while its resources in deposits are estimated to be more than 2 trillion barrels, which should be sufficient for 70 years. It could seem that the global resources of oil are growing faster than their extraction. This is primarily due to the progress in the technology of exploration and extraction, which enables us to reach oil in thus-far inaccessible areas, such as host rocks (oil shales, tar sands) and deep-water deposits.

Going places The modern world consumes 96 million barrels of crude oil every day. Road freight alone consumes over 17 million barrels of crude oil each day globally, 20 percent of the entire current extraction. Passenger cars consume more than 23 million barrels a day. Altogether, transportation soaks up 52 million barrels a day.

Bigger needs

Orlen wants to increase its imports from Saudi Arabia to at least 100,000 metric tonnes per month, which means that more than 20 percent of its oil will come from the Arab country 44

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The state of energy resources in Poland is studied by the Polish Geological Institute. Poland has documented exploitable energy natural resources (latest data available for 2015): natural gas – 139.84 billion m3; crude oil – 23.22 million metric tonnes; lignite – 27.04 billion tonnes; coal – 59.79 billion tonnes. In the case of crude oil, the extraction in 2015 amounted to 898,870 tonnes and the demand for this raw material exceeds 25 million tonnes per year (there are 7.14 barrels of crude oil in a metric tonne), which means that domestic extraction covers slightly more than 3.5 percent of the country’s needs.

W B J MAY 2018

INTERVIEW ENERGY

REDEFINING ENERGY

Our reliance on fossil fuels may be difficult to overcome and has thus far met with a lot of resistance. But change is happening: growing power consumption, increasing awareness of the smog problem and environmental regulations will inevitably make coal and oil energy less attractive, both economically and politically. Where does the country stand on the path to cleaner and more efficient energy? What options are available and what can we expect over the next few years and decades? WBJ sat down with two experts from Kochański, Zięba & Partners to discuss the future of the energy market

MAY 2018 W B J

WBJ:

Which global challenges is the world energy market about to face? Aleksander Galos: Our lives depend more and more on modern technologies, which require a stable power supply. They influence our comfort and quality of living – and therefore determine the functioning of entire societies. Imagine that suddenly, for some reason, we have no access to the electronic databases containing our personal data or estate registers. It would make it very hard for us to prove our identity or family relations. This example shows that we are increasingly dependent on stable supplies of high-quality energy. Another important trend, which we have witnessed for many years, is the reduced importance of energy produced from fossil fuels, mainly crude oil and coal. The importance of utilizing one energy source at the cost of another is changing. Supposedly, energy is always energy, but it exists in different forms: we have solar sources, heat pumps or gas, wind, water and nuclear energy. Wojciech Wrochna: Each year the global consumption of electric energy increases. Moreover, the demand for energy in Asia is rising dramatically and will continue to do so. In India alone, nearly 300 million people have no instant access to electricity. At the same time, our civilization’s advancement makes people want to use modern technologies, even if it means using a portable energy

INTERVIEW BY SERGIUSZ PROKURAT

generator for 15 minutes in the evening in a remote village. Asian societies would like to use energy just like Western societies do. We cannot halt this process. How long can the current model, with fossil fuels being the main source of energy, be sustained? W.W.: If we assume that the economic development in Asia alone is based on producing energy from crude oil and coal, with the current scale of energy consumption, in 2200 there would be no glaciers anywhere in the world. Paradoxically, despite the fact that the deposits are shrinking, even if the production of energy from fossil fuels increases, there will still be plenty of them. The problem is the emission of carbon dioxide emitted by each fossil fuel. Fortunately, the extraction techniques and the use of natural fuels are constantly changing. A.G.: Exactly. We expect a certain reduction of energy production involving intentional combustion. The scale of the challenge is so huge that if over the coming centuries we intend to burn anything just to produce electrical energy, our planet will suffocate in smog. The development of technology will enable deeper penetration of the planet – where sources of energy are also present. But extraction from deeper deposits carries higher costs, doesn’t it? A.G.: We shouldn’t apply current economic conditions to future situations. If we look at the cost of coal mining in the 19th century or at the beginning of the 20th century, currently we extract coal from deposits 10 times deeper underground and the cost is acceptable. There are ideas to create smart coal mines, which will run without the need for human labor. Of course, the cost of energy is not negligible and everyone wants it to be as low as possible. But when we talk about the future of the energy market, we need to realize that combustion will at some point be eliminated once and for all. After all, we have so much sunlight that we do not use and it is being wasted. W.W.: Using non-combustible sources of energy must mean more liberalization and more widespread access, as well as greater diversification of sources. This means the transition from a model of a large energy producer with an industrial network of many plants to a model of more individual power producers.

The demand for energy in Asia is rising dramatically and will continue to do so. In India alone, nearly 300 million people have no instant access to electricity. How does that model address the common problem of countries’ energy security? W.W.: Energy security is a very important topic. On the one hand, the energy supply is treated as a superior good, similar to health for example. On the other hand, access to energy is indispensable for industry. If a factory faces a problem with energy supplies, it stops producing. It incurs losses. Securing energy supplies for industry is essential for every state. If an investor were to build a factory in a country where blackouts occur, they would prefer just to move to another country. A.G.: A state should create regulations motivating people to invest money wisely. One example is the development of wind energy. A little over a decade ago it was among the most expensive energy sources. The European Commission has been very supportive in terms of wind power, which was developed with private money, but it was state subsidies that allowed money to be channeled into it. The EC, currently creating a regulatory package (also known as the winter package), has departed from supporting wind energy, because it has already become sufficiently competitive and available. In a few years, it will be a much cheaper source of energy than the fossil fuels we know today. Another issue is how a state should take care of energy security. Dispersed energy brings higher security, which is of great importance when dealing with natural disasters. For example, an industrial network destroyed by a windstorm will not impact security as there will be autonomous power sources. Decentralization provides security. This is the path that Germany is following. In fact, Germany’s power output from renewable sources exceeds Poland’s entire energy consumption. At the same

time, because Germany is producing such quantities of renewable energy, it has the most expensive energy in Europe. Can Poland afford to follow the same path? W.W.: Germany certainly generates a lot of energy from renewable energy sources (RES), nevertheless, at the same time it also relies on fossil fuel technologies. The country is still building new plants powered by lignite, the dirtiest fuel of all. But energy obtained from renewable sources today couldn’t meet the entire demand, because its output levels vary. We can rely on wind energy as long as there’s wind, but when it stops, we need to produce power from a stable source. The problem is how to store energy in case of a power shortage. We spend billions on research, but we still don’t have efficient batteries. The most efficient energy storage is lithium-ion batteries or a pumped-storage power plant, which, in fact, is no different to a mill powered by a flowing river. This means that we still have to sustain the old, traditional model of energy production. Progress cannot be realized without state support and support from corporations, which control capital. Is nuclear energy an alternative? A.G.: The nature of producing energy from the atom has been familiar to all of us for decades. We have been aware of its dangers since the Chernobyl accident. Nevertheless, there are still countries which, despite the more recent problems in the Fukushima plant, are pushing to develop nuclear power. Why is that? States are aware of the risks, but they weigh them against the profits, which include the cost of energy production, security of energy supply and the quality of energy. There is always politics behind such decisions.

W B J MAY 2018

INTERVIEW ENERGY

I am in favor of nuclear power and I believe that it can be a good technological solution for Poland. I am afraid, however, that despite the government's declarations, the decision-making window on this matter has already closed. This is due to several factors. There are no support mechanisms, and without those such a project – like any project in today’s energy industry – cannot be carried out. Any solution involving state aid will be challenged by the European Commission more than ever. There is no control over the timing and cost increase in current benchmark EU projects such as Olkiluoto-3 in Finland, Flamanville in France or even Hinkley Point C in the UK. This discourages commercial investors. Secondly, the construction of a new nuclear power plant is a process that takes up to 20 years, the investment will require a further 30 years to pay off, and if we add the working life of such a technology, i.e. 60 years, we can see that these are processes that last 60-80 years. But nowadays we can have technologies that are quicker to implement and that pay off more rapidly, such as gas technologies, not to mention renewable energy sources. And they can be replaced every year with more modern and efficient ones. The development of energy storage and the dispersion of power generation, including prosumer technologies, will be a revolution. As a result, the fondness for the atom, which in the 1950s and the 1960s played the same role as the RES today, is disappearing. This is a great technology for countries such as China where there are vast spaces, no social, regulatory or financial barriers, and a clear anti-smog effect, yet it is becoming increasingly difficult to implement “within the budget and on schedule” in EU countries. The security concerns, on the other hand, are heavily exaggerated. There are more than 400 reactors in the world of which many are in the EU, and disproportionately few incidents have been caused by technology and not by man. Even Patrick Moore, a former opponent of this technology and Greenpeace's leader, is today a strong supporter. It is now possible to generate electricity from nuclear sources in a secure manner. The failure at the Fukushima plant is proof of that. Few people know that in Fukushima all safety protocols worked perfectly. The catastrophe was triggered by human error; the project itself. Instead of placing emergency power sources in the upper part of the facility, they were placed below it, next to the ocean. Once the tsunami

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Cars may have a variety of functions: not only getting us from point A to B, but also acting as energy storage and grid stabilizers.

Aleksander Galos, Partner and Head of Energy, Natural Resources & Chemicals Practice

flooded them, emergency mechanisms were inoperable when the aborted reactors needed to be cooled down. On top of that, the tsunami, which had been predicted to be eight meters high, was in fact twice that high. If the entire system had been designed differently, the catastrophe would not have happened. The aftermath of the disaster prompted the Japanese public to demand that the plant be closed down. In the atmosphere of fear, we stop acting rationally. What about the other controversial energy source – coal – a raw material of particular importance in Poland? W.W.: As a country we are now dependent on fossil fuels, especially fossil carbon and lignite. If Poland continues to focus on fossil fuels, its power generation system will become obsolete. On the other hand, we cannot close mines overnight. This is a social and a political problem. Since the EU climate policy has evidently stigmatized production from carbon-intensive sources such as coal, the question arises if should we even try to maintain carbon sources as an energy backup? The EC has proposed such a solution: You can keep the capacity payments, but only for sources whose emission standard does not exceed 550 grams of CO2 per 1 MWh of power. It is a standard that gas sources meet, but carbon sources do not. This may result in the situation where we will have huge problems maintaining coal reserves and will have to switch to gas sources. In other words, we may be heading towards a RES economy with gas as a backup, which is cleaner and globally considered a transition fuel, enabling the switch to a low-carbon economy. The costs of building a gas-fired power plant are much lower compared to a coal-fired power station. It is also more flexible. For example, it can be easily activated and deactivated. What do Poles think of moving away from coal? A.G.: During the last parliamentary elections in Poland no political party included the issue of fighting smog in their election campaign. Today this topic has become very popular and wins supporters, from the left and the right. Education makes societies more mature. Poland has more than just coal. We also have sun and wind. It is true that current technology, no matter where we are in the world, cannot guarantee continuity of en-

ergy supplies from these sources. It is also still more expensive than producing energy from fossil fuels. That’s where subsidies are necessary. If it is possible to install an energy source on the roof, why not do it? Such a situation would mean that the energy industry would change under the influence of consumers. Today, the Polish energy industry is defending itself against consumers gaining too much capacity to produce energy, because it sees certain risks. All you need to do is look at what happened to telecommunications companies relying on land lines when mobile phones appeared.

forced to evolve as well. Everything will change: the entire market, value chain, method of production and access to this type of energy. W.W.: This type of energy network can be extremely beneficial. One of the basic tasks of energy supply operators is to maintain appropriate working parameters of the grid, for example, a fixed operation frequency. Meanwhile, everyone who has any source of electricity generation at home, such as roof panels, and additionally has a storage device, e.g. a car plugged into the grid, can provide such a service. When the grid becomes overtaxed, individual homes can Roof panels are already appearing in feed the grid with their energy and help many places across Poland. Is the shift to stabilize its operation. And the individual photovoltaics going to pick up speed? recipient receives remuneration just for W.W.: Today, photovoltaics has become having their car plugged to the grid. more interesting, because it uses regulatory solutions, such as exporting electricity Does that mean, despite their price, that to the grid at a feed-in tariff. It is and will we will all soon have electric cars? For continue to be a subsidized sector at least example, in Norway 20 percent of cars until solar energy production becomes sold this year are electric. Can we expect competitive. What is also important is how the same figures in Poland? quickly the technology will develop to W.W.: Unfortunately, the question of afflubring the performance of photovoltaic cells ence is key in this case. In this respect, Poles to a higher level. Efficiency is still relatively cannot afford a revolution in transportalow, but it has significant potential. tion. Moreover, electric cars still have A.G.: Photovoltaics does seem to be one of certain shortcomings: for larger distances the most interesting solutions, because we you would have problems with recharghave sunlight everywhere and most of it is ing. Infrastructure is key for electric cars wasted. The technology has become much to become more common. When talking more widespread and powerful through about charging cars, it is also a challenge to miniaturization, and it will continue to feed the infrastructure to charging stations. do so. At some point, it may become the Charging a car quickly through a highprimary energy source for households. performance charger means huge energy They will be able to meet their basic needs consumption over a short period of time. with solar power and will connect to the Old-fashioned power grids cannot meet the grid only when they want to go premium. necessary energy supply. Just like watching TV online – it’s there for A.G.: In a year or two we can expect the free, but if you want high quality, you need share of electric cars to still be at a fraction Netflix or cable TV. If we add miniaturized of a percent. This does not mean, however, energy storage, e.g. the batteries of our car, that this is not a trend, especially in wealthy it may suddenly be the case that we have societies. We talked about cars which may found a solution which makes us indepen- have a variety of functions, not only getting dent from the energy industry. us from point A to B, but also acting as Today, we look at the energy industry energy storage and grid stabilizers. It is a from one perspective – the perspective of change in lifestyle which creates an opporcompanies producing energy, instead of tunity for new business models to emerge. the perspective of the user. And users will Mass car rental maybe? Maybe we won’t always seek solutions to satisfy their basic need to own cars any more. First, we need needs. New business models will appear; I to start from building infrastructure and can imagine that at some point any device redefining our understanding of energy. we purchase will have its energy-supply This will trigger the appearance of other cost included in the price. Energy distribu- investments and solutions. Rather than tion will run in both directions because sponsoring sheiks from the Arab states, we consumers are also becoming producers could be subsidizing the development of and traditional energy suppliers will be infrastructure in the country.

Wojciech Wrochna, Counsel and Head of the European Law and European Business Regulations practice

If an investor were to build a factory in a country where blackouts occur, they would prefer just to move to another country.

W B J MAY 2018

TECH i n s i g h t s TECH NEWS

SHUTTERSTOCK

Deloitte: 3 Polish banks at forefront of European digital revolution Three Polish banks have ranked in the top 20 of the EMEA Digital Banking Maturity 2018 survey, but to maintain their leading position they should focus on open banking and the development of non-banking services. Deloitte surveyed 238 banks and 10 FinTechs that offer banking services from 38 countries from Europe and the Middle East. According to the survey, among the 15 Polish banks surveyed, three leaders deserve the title of digital leaders: ING, mBank and Millennium. Out of 248 analyzed institutions, they were in the top 20. Polish banks achieved better than average results in the

region of Europe and the Middle East on all six assessment stages of customer interaction – gathering information about the bank, opening an account, customer onboarding, day-to-day banking, expanding relationships and terminating the client's relationship with the bank. “Banks in Poland are at the forefront of the digital revolution, while in Central Europe there are 11 million, and in Europe 60 million customers who can be described as being ‘attached to the brick-and-mortar branches.’ They would like to use digital channels, but still consider online or mobile banking to be too troublesome. This is the group of clients for which the fight will take place," said Grzegorz Cimochowski, the leader of the financial institutions sector in Poland, Deloitte.

>>>

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TECH

which will be presented at the UN summit in December to be held in Katowice.

Inea with PLN 900 mln financing for fiberoptic network Asseco International mulls takeovers, potential IPO Asseco International, a subsidy of WSE-listed IT giant Asseco, could enter a Western stock exchange to finance a prospective major acquisition, its CEO Józef Klein said. “We are planning to make further acquisitions, and we need capital for it. We have the opportunity to enter the stock exchange, but it all depends on market conditions. In a very short time we want to finish the preparation of our strategy and maybe then we will decide on an IPO,” he explained. “We will look for an exchange where companies such as ours obtain higher valuations in relation to profit than is the case with the Warsaw Stock Exchange,” Asseco CEO Adam Góral explained, adding that at this moment the company has sufficient funds to finance potential investments. Klein added that Asseco International is currently conducting talks on acquisitions with three entities, from Slovakia, Hungary and Germany. The CEO assessed that the acquisition of the smallest of these companies could occur this year. Talks with the other two larger entities are at an early stage. He added that the aforementioned companies deal with virtual reality solutions, banking and enterprise management (ERP).

Smog meter network for city buses wins Smart City competition Mobile smog meters for city buses was the winning tech idea at the Katowice Smart City forum. The solution was proposed by students from the Silesian University of Technology. The mobile gauges would be installed on city buses and allow for more precise smog detection and measurement, while a system using Artificial Intelligence would be able to make predictions based on the meters’ readings and weather patterns. The competition was an opportunity to prepare the best ideas for environmental solutions

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Broadband network provider Inea, owned by Macquarie European Infrastructure Fund 5 (MEIF5), has secured PLN 930 million financing from a consortium of eight financial institutions, the company stated. The funds are earmarked for the construction of fiberoptic network within the “Digital Poland” Operational Program. Inea is one of the four largest cable networks in Poland. It provides broadband internet connection, TV, mobile and landline telecommunications and well as data center services.

Ten Square Games IPO share price at PLN 46 Games design studio Ten Square Games has received declarations from investors for the purchase of all the shares offered in the IPO at the price of PLN 46 per share. The value of the IPO is PLN 94 million, with 2,043,750 shares issued (28.1 percent of the company’s share capital). This bring the firm’s total capitalization to PLN 335 million at the moment of the WSE debut.

BZ WBK launches blockchain foreign transfers Lender BZ WBK, whose main shareholder is Santander, has launched its quick international payment service based on blockchain technology. The pilot implementation includes both individual and business clients transferring funds to the UK. The bank is also planning on allowing blockchain-based quick transfers to Spain. Banco Santander announced that it is launching the new service in Poland, Spain, the UK and Brazil. It is the first bank to launch blockchain payments in several countries at once. Clients will receive funds on the same or the following day of the transfer and will be informed of the exact value in local currency before the transfer is made. “Blockchain gives us many opportunities to optimize our services, with Santander One Pay FX the first of many such applications,” head of Banco Santander Ana Botin said. The new ser-

vice uses the xCurrent application based on the distributed ledger technology, developed by California-based Ripple, one of whose investors is InnoVntures VC fund, part of Santander.

KGHM selects 5 start-ups in Scale UP competition Mining firm KGHM has selected five startups which prepared high-tech solutions for the copper giant as art of its Scale UP competition The winning start-ups are: Drying Process, LGM, Instytut Formy, AliaTechnics and Hospicare, which prepared technologies for cost reduction in industrial drying, heat consumption, ore mining efficiency, mobile underground structures and new magnetic materials. The start-ups will receive PLN 200,000 in seed money and PLN 50,000 in services. The program is conducted in cooperation with KGHM Cuprum and MIT Enterprise Forum Poland, within the framework of the government program “Start in Poland.”

HealthTech firm InventionMed plans move to WSE main market HealthTech company InventionMed wants to move its shares to the WSE main market in 2018/2019, the firm’s CEO Tomasz Kierul told ISBnews. The company has no plans for another share issue, as it has sufficient funds for its current projects and will also apply for EU grants for R&D investments, the CEO stated. InventionMed produces AR/VR medical simulators. According to Kierul, the market for VR and AR technology in medicine is growing at a rate of 29 percent annually. The company was launched in January 2018 and is currently listed on NewConnect.

New biomed R&D center to be built in Łodź for PLN 63 mln A modern R&D center called “BRaln” with 20 biomedical research labs will be constructed on the premises of the Medical University in Łódź. The investment will cost PLN 63.3 million, out of which PLN 38.3 million will be financed from EU funds. The project will be launched in September 2018 and is scheduled for completion in November 2021. It involves the construction of a 5,000-sqm building and the modernization of two existing ones.

TECH NEWS/VIEW

EXPERT OPINION

Expect more volatility I would say the troubles of tech companies are temporary. It is evidenced by Facebook – despite the controversies surrounding the company, its Q1 results were very good. While Facebook’s strife relates to its image, other companies do have structural problems, like the threat of imposing taxes on Alphabet in the EU or the uneasy position Amazon has found itself in its domestic market. However, I believe that these companies have such a strong competitive advantage and competencies that they will be able to remodel their business to avoid or minimize the negative effects. In the short run, further media reports could cause more or less justified uneasiness among investors. In the mid-term, I wouldn’t expect a major correction, even though some of these companies’ share prices are quite inflated. That said, increased volatility could accompany us for the next few months. - Kamil Hajdamowicz, investment advisor, Vienna Life, Vienna Insurance Group

SHUTTERSTOCK

TECH GIANTS ON THE ROPES

The tech world has been

buzzing with headlines in the past few months. Alphabet (Google) was fined in 2017 by the European Commission and is facing more anti-trust litigation. Its Q1 results also leave a lot to be desired. The same goes for Microsoft. Meanwhile, Facebook has come under a barrage of criticism in view of the Cambridge Analytica scandal, and despite Mark Zuckerberg holding his own during his Congress appearance and distancing the social network from the crimes of the now-bankrupt advisory firm, Facebook’s stock price has a long recovery ahead of it. Famously bearish investor Jim Mellon, a UK national, told CNBC that, “These fatted calves are now ripe for the plucking by governments everywhere,” and added that major tech companies could be “pillaged” by national administrations all over the world. Amazon is no better, either. President Trump has been openly critical of the retail giant’s tax avoidance and the fact that subsidizing each parcel delivered by the Post Office totals billions of dollars in costs to the US economy. The online retailer’s stock price took a dive in the second half of March, from which it has not yet fully recovered. Tesla is facing financing difficulties and its stock price has also taken a hit following the California crash where an autonomous Tesla car operated by Uber crashed and killed a woman while on autopilot. The incident didn’t help Uber either, which had had an abysmal year all through 2017, including a security breech that led to hackers gaining access to sensitive information about 57 million people. Could 2018 be the year when other tech giants face similar strife? We asked experts whether they think that the trouble with giants will spill over to the rest of the tech world.

Giants vs pioneers I think it’s not right to put Alphabet, Microsoft, Amazon and even Facebook, on the one hand, and Tesla and Uber, on the other, in one basket. The former set of companies are in some kind of trouble, which they will overcome one way or another. Privacy, anti-trust issues, legal, tax issues, continental government battles, etc. always come with new technological wave. Especially right now, when it is getting harder for societies, governments and international relations to keep up with new technological developments. But I wouldn’t expect to see a crash. Tesla and Uber are different. They are pioneers of new technologies and they are pushing the frontiers. It seems certain that at some point most of us will be driving electric cars. It is also clear that the sharing economy will take over global marketplaces. I would like to say that these companies have a bright future ahead of them, but sometimes – more often than not actually – pioneers do not survive the change they are hoping to make. - Alexander Galitsky, EETT President, co-founder & managing partner, Almaz Capital

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Alexander Galitsky is the EETT President, co-founder & managing partner at Almaz Capital

WHEN WILL THE CEE REGION PRODUCE ITS FIRST UNICORN? In business, a unicorn is a company that achieves a valuation

in excess of $1 billion in less than three years. With this in mind, we need to be honest with ourselves. We will not get a massive stream of unicorns in the near future coming out of the CEE region. Instead, we will be able to foster many great tech companies with a valuation of over $200-300 million. The reason for this is that most unicorns are B2C companies focused on local markets. It is almost an impossible mission to build a large B2C company in such a fragmented region such as CEE, where populations and the resulting marketplaces are small. Poland could possibly be a good place for B2C unicorns, but it requires a local ecosystem and entrepreneurs willing and ready for cross-border expansion into their culturally similar neighbor countries. I think that CEE, with its engineering talent, is better positioned for the B2B deep tech market, and companies in this sector need to be global from day one. However, building a B2B unicorn is somewhat challenging, since any deep tech company requires much more time to prove its technology and grow as a result. For example, some of my colleagues consider UiPath to be a CEE unicorn. UiPath is a global

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software company that developed a platform for Robotic Process Automation. In March 2018, UiPath received a $153 million investment from top tier VCs Accel and Kleiner Perkins Caufield & Byers, valuing the company at over $1 billion. UiPath was founded in 2005 by Romanian entrepreneur Daniel Dines. It is lucky that Danielâ&#x20AC;&#x2122;s technology was able to maintain its leadership for so long, since only in 2015, with the help of seed funding, UiPath started its international expansion. In 2017, the company had 590 employees and moved its headquarters to New York to be closer to its international corporate base and rose to 700 customers from only 100 previously. Itâ&#x20AC;&#x2122;s a great story, but is it a unicorn? I have a different conclusion: B2B companies need to move to the global market much earlier rather than focusing on competing in the local market. Finally, I want to emphasize that CEE has potential, not only because of its engineering talent pool, but also since the investment and start-up ecosystem in the region has matured during the last decade. Take as an example our experience at Almaz Capital. We are a global venture fund. Our mission is to bring CEE companies to the global marketplace via Silicon Valley, where our HQ is based. We have almost 1,000 CEE investment candidates in our pipeline to choose from. Furthermore, as evidence of our commitment to the region, we decided to organize and run the CEE Tech Tour event. It is an exciting time and the CEE region is poised to take its place on the global innovation map.

I T J OTBE CMHA RV KI EEWT

1. Public relations

What makes public relations effective is the awareness of a problem and fast reactions. Web and media monitoring tools seem to be the natural weapon of choice for PR specialists — real time notifications, email reports, or mobile app notifications about buzz increases or negative mentions ensure that no online publication escapes the attention of the PR department. .

2. Brand reputation management

Web and social media monitoring tools are nicely cut out for brand reputation management. Since the tools collect all online mentions of any keywords, be it a company or service name, it gives the opportunity to see what customers, communities, media or influencers are saying about a brand or a product online. Such insight provides an idea of how a brand is perceived by customers.

Tomasz Zietek is a content manager at Brand24, a social media monitoring tool. In his free time he cycles, travels and reads a lot. A real peanut butter fanatic!

3. Customer insights

By monitoring keywords and phrases connected to an industry, a niche, a product type or similar products you can discover your target audience and get to know them better. Not only does it provide customer insights, such as who your potential customers are, how they use a product or what their needs are, but it also reveals trends about their online habits – on which social media platforms and websites they hang out, what type of content they engage in and more.

4. S ocial media performance

6 USES OF WEB AND MEDIA MONITORING IN BUSINESS The idea of web and social media monitoring is pretty simple — to identify online content with predefined keywords and phrases in real time. This mechanism seems simple, yet in combination with analytics and appropriate use, web and social media monitoring can become an effective marketing all-rounder. Even though web and social media monitoring tools find many applications, it’s important to remember that most of all they fall into the category of data analytics tools – they offer plenty of insight that can later be used in various contexts and different areas of business such as public relations, brand reputation management, customer insights, social media performance and influencer marketing.

Web and social media monitoring tools all offer analytics. They differ in terms of capabilities, but the most essential social media metrics analyze the volume of mentions, the volume of interactions, social media reach and sentiment analysis. However, there’s more to analytics than these tools offer. Other social media monitoring tools, for example Brand24, also identify the most active and influential social media profiles and authors mentioning a keyword or hashtag and more. All such data can be used to measure the performance of social media profiles, engagement, hashtags or marketing campaigns.

5. Influencer marketing

Influencer marketing seems to be the thing these days. Web and social media monitoring tools also identify the most influential social media influencers who attract massive communities. Their influence is based on the numbers of followers or fans – people who might have come across the content they put out. Web and social media monitoring tools list the most influential authors talking about the keywords one tracks – products, service types, needs, or anything relevant to one’s business. That is how companies can spot influencers to cooperate and engage with.

6. C ompetitor monitoring

What’s great about social media monitoring is that one can track competitors – company names, products, services, marketing campaigns, announcements or updates to see what they do and what their customers say about them online. The benefits here are clear: the ability to spot emerging threats, predict competitors’ moves or identify market opportunities. These are the most popular uses of web and social media monitoring. There are many more applications that make these tools super useful for marketers, community managers, CEOs, or even sales people for any business with an online presence.

W B J MAY 2018

TECH IT JOBS OF THE FUTURE Machine Learning Specialists

They know their way around Artificial Intelligence. At the intersection of IT, robotics and statistics, they create systems that can improve its own performance using the learning data sets it has been fed.

Hadoop Specialists Paweł Pełtak, IT Manager, People

They are experts in Hadoop platforms, which are used for managing large data sets. Huge swathes of data are divided into smaller portions, which are then stored and processed on multiple servers. Hadoop allows for analyzing data coming from e.g. social networks.

DevOps Engineers

NEW IT PROFESSIONS

A Blockchain engineer secures cryptocurrency transactions, a Machine Learning Specialist teaches machines to perform tasks, and a DevOps Engineer combines the roles of developer and system administrator – these are some of the jobs that have appeared in the job market over the past few years and are becoming increasingly popular. They may soon become as much in demand as Java programmers Just a few years ago, no one had heard of jobs such as blockchain engineer, DevOps engineer, pentester or scrum master, at least not in Poland. Now, large corporations and international companies are increasingly on the lookout for top-notch IT people, with job titles such as Hadoop specialist, cloud architect or ML specialist becoming commonplace. Polish programmers, who have long enjoyed a very high rank among world leaders, surpassed only by China and Russia, can cherry pick their employers, as the shortage of specialists in some of the most cutting-edge technologies is already very acute in Poland and across Europe.

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The name comes from the portmanteau of development and operations. An engineer in this position carries out the duties of both a developer, who programs applications and those of a systems administrator, who maintains the environment the applications function in. A DevOps Engineer is a link facilitating communication between different teams within one company.

Blockchain Engineers

They work at the intersection of technology and finance. Currently, blockchain is being used to create mobile payment platforms, upgrade banking infrastructure as well as to ensure transaction security.

Scrum Masters

Scrum is a methodology for agile programming. It is a way of making complex problems simpler, redefining roles and tasks and making sure the software development process runs smoothly and all the bases are covered. The Scrum Master is responsible for making sure the Scrum method is understood and operational.

Pentesters

Also called legal hackers (the name is short for penetration test) are hired to attempt an attack on a company’s security systems. They look for weaknesses, diagnose errors and show how to correct them. Given the growing number of cyberthreats and the ever more frequent hacker attacks, they are very much in demand these days. These are just some of the examples of new professions that follow rapid technological development. For many of these job, there are still no pay scales and salaries are being adjusted “on the go.” One thing is certain, though; those who catch up to the changing reality quickly will enjoy some of the highest salaries in the business.

I T J OTBE CMHA RV KI EEWT

Bartosz Grejner, market analyst at Cinkciarz.pl

BITCOIN ANONYMITY DEBUNKED It has been revealed that the US National Secu-

rity Agency can identify those sending and receiving bitcoins and collect data from their computers. Once this information leaked, bitcoin’s domination in the cryptocurrencies market is no longer certain The prices of cryptocurrencies are no longer growing as quickly as in late 2017. Bitcoin, which still has a 40 percent share of the market, costs over $9,000, which is still $11,000 below its mid-December peak, but also $3,000 above the low it recorded in February. To some extent this could be traced back to the limited coverage of the cryptocurrencies in the media, Facebook’s ban on cryptocurrency advertising and the expected ban from Google scheduled for June. Tightened regulations on cryptocurrency trading in many countries have also played their part.

What does the NSA know? For many of those dealing in cryptocurrency, their inherent volatility has thus far been offset by their promise of anonymity. But that has been put into question too. The Intercept, known for publishing the top secret documents provided by the CIA’s former agent Edward Snowden, informed that one government agency was capable of tracing bitcoin users as far back as five years ago. According to the published documents, which were leaked by Snowden, the NSA could identify some of the senders and recipients of bitcoin in March 2013. And although the agency had plans to monitor other cryptocurrencies as well, the memos created in March 2013 name bitcoin as its No. 1 priority. The leaked documents also show that the monitoring didn’t just end at identifying users. The agency had the capacity to procure a lot more information from some bitcoin users’ computers, including passwords, payment information, internet activity and MAC addresses (the unique identity number of each device). The NSA can collect data from physical connections that the global network is made from. To monitor communications, including those sent via fiberoptic cables, it allegedly used OAKSTAR software. For bitcoin, the NSA created a separate subroutine, called MONETROCKET, which was capable of intercepting data from South America, Asia, the Middle East and Europe. Will others benefit? Even though the classified NSA memos that were made public indicate that the agency was targeting terrorism, international crime and drug trade, the agency’s actions may affect the price and the position of the most popular cryptocurrency. Is this the beginning of the end for bitcoin? Probably not. We could, however, see a dip in demand as some users start looking for cryptocurrencies that guarantee better anonymity. This could lower the upward pressure on bitcoin’s price to the benefit of other cryptocurrencies. It could also affect bitcoin’s dominant position in the market, which could soon drop below 40 percent.

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TECH

BRAVE NEW WORLD OF BLOCKCHAIN

BLOCKCHAIN IS TAKING THE WORLD BY STORM. NEW INNOVATIVE SOLUTIONS ARE ANNOUNCED EVERY WEEK. BUT FOR A LAYMAN THE TECHNOLOGY REMAINS LITTLE MORE THAN A BUZZWORD, WITH MORE QUESTIONS SURROUNDING IT THAT ACTUAL ANSWERS. CAN BLOCKCHAIN REALLY CHANGE THE WORLD AS WE KNOW IT AND WHERE WILL WE SEE IT IN ACTION? BY BEATA SOCHA

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BLOCKCHAIN

lockchain has become the tech catchphrase of 2017 and is shaping to be even more so in 2018. Just as Machine Learning, sharing economy, crowdsourcing and crowdfunding made waves a few years back and the Internet of Things is hoping to gain the status of universally accepted standard in the electronics market, blockchain is quickly taking over the layer of tech that underpins many of the systems we know and use on a daily basis. It has been touted as the greatest achievement since the invention of the internet (some even say since the invention of print). But unlike the internet, which we all took to in mid-1990s, it is hard to actually see the results that blockchain is producing. “As a consumer, you won’t realize it’s happening. Blockchain will underpin the applications you use but, like any protocol, it will be invisible,” explained Paweł Kuskowski, CEO of Coinfirm.

A new gold rush

How does it work then? There’s been a number of explanations and definitions of blockchain (see box on p. 59). But those who understand it don’t need one, while non-tech people find it hard to understand the concept behind blockchain no matter how much it is simplified. And no wonder. The HTTP protocol that the current internet is built on has been with us for decades, but who – outside of the tech industry – really knows how it works? One could very well argue that the difficulty in grasping the concept led to the dot com bubble, which infamously burst in 2001. It was back when any company that utilized “the internet” in its business model, got millions in funding, no questions asked. Could the same be happening here? Is the “blockchain” buzzword so powerful that it will open any wallet no matter how flimsy and patchy the company’s business model is? For now, investors seem to be holding their own and avoiding obvious honey traps. They have also become much more tech savvy compared to the hyper-enthusiasts of the early internet companies. Still, money seems to by laying in the streets for start-ups that manage to build some actual value on blockchain technology. The number of job openings for the position of “blockchain engineer” is growing rapidly. MarketsandMarkets analysts claimed in 2017 that the blockchain market was valued at $415.5 million. By 2022 it will be worth $7.5 billion, marking nearly an 80-percent annual growth rate.

What will change?

Even if we can’t really see it, it would be good to know where blockchain is developing and how it is changing the world as we know it. So, we read about new implementations, we go to tech conferences to learn as much as we can before the world moves to the next level and

EXPERT OPINION

No central authority Blockchain technologies can be implemented in all areas where the information that is stored and transmitted needs to be protected from deletion or unauthorized alteration. The first time that the world heard about blockchain was back in 2009, when the first block of bitcoin was created. Now, there are thousands of different blockchains, with a variety of applications. Implementing blockchain technologies for data administration has a lot of advantages that current databases cannot offer. This is certainly revolutionary technology. The construction of this ledger and the specific nature of data storage mean it is distributed, open and public, thus minimizing the risk of hacker attacks and uncontrolled data manipulation. Blockchain is also decentralized, which means that data is available all over the world, regardless of national borders and without the need for a central authority. The industry where blockchain application is natural and necessary is finance. It will bring down the cost of maintaining the payment and settlement system. It will also allow for transactions to become faster and more efficient. Today, we need intermediaries who verify each transaction. Blockchain makes them obsolete. The technology can also be useful in keeping court and administrative registers, making them less susceptible to hacker attacks. Another area where blockchain can make a real difference – and which is a problem in practically every country in the world – is keeping medical records of all lab results, vaccinations, appointments, consultations, surgeries etc. Right now, each medical center has its own register and information exchange is difficult. - Tomasz Pawul, co-founder, infoShare

we are left behind. Indeed, there’s been some really impressive headlines lately, even in Poland, which fancies itself as a sort of powerhouse of blockchain and fintech. According to Kuskowski, one of the visible effects for the customer could be lower prices and better access to some existing services, as one of the values of blockchain is cutting out third-party intermediaries from the value chain. Another positive effect is limiting the chances of fraud, especially the use of falsified documents. The first obvious field where this advantage is crucial is finance. A few weeks ago, lender BZ WBK, whose main shareholder is Santander, launched its quick international payment service based on blockchain technology for

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TECH EXPERT OPINION

A secure and durable medium Any picture, PDF document or passport can be saved in an efficient blockchain network. Data is saved in so-called blocks connected by mathematic formulas, thus creating a chain, with each element immutably connected to the others by control sums, which ensures that the data cannot be changed. No attempt to replace a block or to falsify data is possible, because once a fragment of the chain is saved, it cannot be overwritten. This opens up tremendous possibilities. In the near future, everyone will be given a single place on the internet where they will be able to check price lists or terms of an agreement, without any fear that the details could have been altered without their consent. Until now, we haven’t been able to overcome the barriers created by hermetically separated central databases. A democratic, blockchain-based internet guarantees each user’s privacy. Document storage, tax settlements and land registers are just some of the most basic uses. Blockchain has a lot of applications in every area that deals with processing information, particularly sensitive data. The insurance industry is a perfect example where this technology can be used to register and verify contracts and claims, increasing security by eliminating the risk of multiple claims for the same damages. Blockchain also enables automatic payments of damages by using so-called smart contracts – legal processes transferred into the digital world, entirely automated without the need for an intermediary, e.g. a notary public. It also helps insurers implement the Insurance Distribution Directive. By using blockchain technology to save documents that are made available to their clients, insurers fulfill the definition of a “durable medium.” Energy companies can also use blockchain to sell energy, measure consumption, for invoicing and settlements, as well as for processing emission rights and renewable energy certificates. In cooperation with Microsoft and PGNiG, we have launched a project aimed at creating a blockchain-based platform for individual clients that will facilitate gas and energy sales as well as handling payments in electromobility systems. Healthcare is another sector that can benefit from blockchain as it ensures patients’ sensitive personal data and medical histories are safe and secure. The technology will allow for secure data storage and facilitate feeding it directly into specialist medical equipment. Robert Kałuża, COO & Founder, Billon

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clients transferring funds to the UK. The bank is planning on allowing blockchain-based quick transfers to Spain as well. Banco Santander informed that it is launching the new service in Poland, Spain, the UK and Brazil, as the first bank to launch blockchain payments in several countries at once. Clients will receive funds on the same or the following day of the transfer and will be informed of the exact value in local currency before the transfer is made. “Blockchain gives us many opportunities to optimize our services, with Santander One Pay FX the first of many such applications,” head of Banco Santander Ana Botin said. The new service uses the xCurrent application based on the distributed ledger technology, developed by California-based Ripple, one of whose investors is InnoVntures VC fund, part of Santander.

Smart contracts and grids

For similar reasons, blockchain may also be very useful in the insurance industry as a way of ensuring that all claims are filed once and damages are paid out automatically through so-called smart contracts. The energy sector could be another beneficiary of the technology. With more and more talk about smart grids and the need to integrate renewable energy sources (such as roof panels) into the grid, one of the main difficulties is keeping track of how much energy is consumed and produced by individual households (see interview on pp. 44-46). Keeping data secure is a growing challenge these days. Security issues are particularly important in the case of sensitive information, e.g. medical data. Hospitals with centralized data storage have proven vulnerable to ransomware attacks. Keeping data distributed via blockchain not only keeps it from being hijacked, but also from being altered, as well as ensuring it is instantly accessible in case of a medical emergency. Combined with the growing popularity of wearables and their use for medical purposes (monitoring heart and breathing, detecting early signs of e.g. epileptic shocks), it could improve response times and the standard of care immensely.

Democratizing data

Finally, in the aftermath of the Cambridge Analytica scandal, there is a growing awareness of the fallibility in data protection by major data collecting services. A Polish project called IOVO (Internet of value omni-ledger) has recently announced it was going to democratize the internet and the way data is being used. It is based on Directed Acyclic Graph (DAG) technology, which allows for secure data storage and enables micropayments. In other words, “now every internet user will be able to decide who – and to what extent – has access to their data, and they will receive compensation each time it is accessed,” explained Krzysztof Gagacki, founder of IOVO. The idea behind the endeavor, launched in early 2017, is

BLOCKCHAIN

to stop global corporations from being the sole beneficiaries of our own data. The company has some big names behind it too. Brittany Kaiser, former business development director at Cambridge Analytica, who had left the company even before the scandal broke out to search for solutions that would allow internet users to protect their data, has recently joined IOVO’s data democracy movement. “Corporations put a lot of effort into monitoring our online activity, gathering as much personal information as possible and monetizing our data behind our backs while making millions,” she said at a press conference in April. During her speech, Kaiser mentioned that this abuse can be stopped. “IOVO has the potential to fix the problem with online data, one that the whole world is now talking about, but nobody knows how to resolve it. IOVO is a game changer in this field,” she added.

A bleak scenario

Detractors of blockchain technology say that what it is trying to solve are non-existent problems, and that its true value would only be seen in a post-apocalyptic future, when there are no authorities left and trust in the business and economic sphere has to be built on decentralized, mathematical models, rather than on communities and people. Take notary public. Should societies as we know them collapse and we wanted to re-establish the notion of ownership (we’re assuming of course, that electricity and computer networks remain intact in this scenario), a blockchain register would be an ideal tool for keeping score of who owns what. In a bleak future where there are no central banks and no governments, blockchain-based currencies could indeed prove to be the only viable method of payment and value storage (assuming their inherent volatility is no longer an issue). Also, critics are in no short supply of ammunition where bitcoin – the first widespread implementation of blockchain – is concerned. From creating a bubble and causing financial instability, through to the enormous power use of bitcoin mining (some estimates put is as high as 30 TWh of power annually, which can be equated to powering Morocco for a year, according to Bitcoin Energy Consumption Index), not to mention the cost of equipment that is necessary to mine bitcoins. Meanwhile, blockchain remains an invisible force that is driving change in the tech world and a growing number of industries. As long as there is money behind it, the wheel will keep on turning. No doubt, some blockchain implementations make a lot of sense and will improve the security and speed of transactions, maybe even democratize data. But there will also likely be a host of projects that fail to deliver the added value they promised, leaving many investors wondering whether the emperor was naked all along.

WE ALL KNOW IT TO BE TRUE

recently published book by Michał Grzybkowski and Szczepan Bentyn titled “Kryptwaluty. Dlaczego jeden bitcoin wart będzie million dolarów?” (Eng.: “Cryptocurrencies. Why a single bitcoin will be worth a million dollars?”), offers a rather colorful explanation of how blockchain works. The authors tell a story of a dwarf kingdom, where the ledger keeper maintains a record of all the transactions made in the entire kingdom, but the ledger keeps getting destroyed by gnomes (hackers stealing and corrupting data). One day the dwarves come up with a new method of keeping the ledger. They appoint a number of scribes (also called miners in reference to bitcoin mining) who travel from village to village and take an account of every single transaction made in the kingdom’s villages. Every hour they meet at a crossroads and play dice to determine whose account of the transactions from the past hour will become the official one. All other scribes then copy the official ledger and add the same set of numbers (dice outcomes) at the end of it as the control sum (also called hash) that certified the ledger’s authenticity. Then they carry on with their jobs. That is more or less the mechanism behind bitcoin mining. And also how blockchain works in general. Everything is copied and signed with a hash so that everyone has access to it and can be absolutely certain that the document is authentic and has not been altered by an outsider.

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TECH

CUTTING OUT THE MIDDLE MAN

BLOCKCHAIN IS ALREADY MAKING A MARK ON THE FINANCIAL INDUSTRY, AND EVEN THOUGH ITS EFFECTS WILL BE HIDDEN FROM END-CONSUMERS, IT WILL NO DOUBT REVOLUTIONIZE A LOT OF INDUSTRIES. WBJ TALKED TO PAWEŁ KUSKOWSKI, CEO OF COINFIRM, ABOUT THE APPLICATIONS OF BLOCKCHAIN AND THE FUTURE OF CRYPTOCURRENCIES INTERVIEW BY BEATA SOCHA

WBJ:

Blockchain has been called the biggest technological breakthrough since the invention of the internet. What is so revolutionary about it? Pawel Kuskowski: A blockchain is a distributed, immutable ledger. That means it provides a digital record of any asset or transaction that can’t be unwritten, and that can be verified. It is revolutionary because there is no single authority behind it. Unlike a centralized system, there can be no single point of failure. What’s more, blockchain cuts out the need for a third party, which presents the potential to revolutionize any industry: payment providers, estate agents or even new radical platforms like Uber – they could all be replaced by new blockchain-based solutions. How does it work? It can be used in anything that involves an asset or a transaction – or both. Wherever value is perceived, the blockchain is invaluable because it can log ownership, then log the movement of value from one party to another. The provenance of food, clothes, precious gems and metals; ownership and possession of property; decentralized payments, credit, foreign exchange. You can build so-called “smart contracts” on the blockchain – a virtual contract that runs a set of rules – which opens up huge opportunities, like the ability to get paid for sharing your data, automated (and decentralized) trading, gaming and open-source supercomputing.

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A good example of a blockchain solution that creates new value for all stakeholders is the recently announced implementation of our Trudatum platform by PKO BP. Thanks to Trudatum, PKO BP could use the blockchain infrastructure for all its documents – tens of millions of documents a year. Every document recorded in the blockchain (e.g. proof of a transaction or the bank’s terms and conditions for a given product) will be issued in the form of an irreversible abbreviation (“hash”) signed with the bank’s private key. This will allow a client to verify remotely if the files received from a business partner or from the bank are genuine or if a modification of the document has been attempted.

What can we do with blockchain now? How far is it from widespread implementation? There are companies doing all of the above already. Most of them are still at the proofof-concept stage, but you should expect to see widespread implementation within the next two years. The point of widespread implementation, however, is that, as a consumer, you won’t realize it’s happening. Blockchain will underpin the applications you use but, like any protocol, it will be invisible. One of the effects visible for the customer could be better access to some existing services and lower prices, as one of the values of blockchain is cutting out third-party intermediaries from the value chain.

BLOCKCHAIN

Another positive effect is limiting the chances of fraud, especially the use of falsified documents. Which industries do you think will use it first? The financial services industry is already using the technology via private blockchains that companies and consortiums like R3, which was financed by some major banks, are building themselves. These blockchains use the same technology but are permission-based – not open to anyone to view or transact on. Banks have already built these systems – the PKO BP implementation mentioned above is the first such broad application of the blockchain globally, but we are just months away from seeing at-scale implementation. Blockchain is also very quickly changing other industries – media, advertising, gaming, IP rights protection and monetization, e-commerce and travel. Additionally, some private institutions like banks or big e-commerce businesses are at quite an advanced stage in the creation of their own digital currencies, which will revolutionize how we pay for things and exchange value.

ONE OF THE EFFECTS VISIBLE FOR THE CUSTOMER COULD BE BETTER ACCESS TO SOME EXISTING SERVICES AND LOWER PRICES ment compared to even two years ago. Once the global regulatory framework emerges, the whole market will become much more stable globally. Do you think national cryptocurrencies will become a reality anytime soon? At the moment it’s very difficult to predict the future of national currencies, but we can already see governments watching this space very closely and some of them are

experimenting with accepting cryptocurrency payments. We strongly believe that governments will at some point implement a digital version of their own currency as it provides a lot of efficiency, is much more transparent and is much better suited to preventing money laundering and illegal activities in financing. We have already seen big players such as huge e-commerce businesses or big banks creating their own digital coins, and some of them are our clients.

Is Poland going to play a big role in the blockchain revolution? Poland is already playing a role in the revolution. On one hand, our country has over a quarter of a million software engineers, who are winning global competitions. On the other hand, we also have a very innovative banking sector, which continues to be at the forefront of innovation and is very agile in testing new technologies – like PKO BP and Trudatum. Given the instability of bitcoin that we’ve observed this year, do you think the cryptocurrency market will continue to grow? Yes. Volatility is natural in any market that is as nascent as this one. Investors and innovators who are operating in this ecosystem usually don’t make their decisions with a short-term perspective in mind, though. The interesting question is how stable this new market will be in five or ten years’ time. What we observe now is that individual countries such as Japan, Switzerland, Singapore, or even smaller ones like Gibraltar, are releasing regulations and guidelines around cryptocurrencies, while other countries or forums such as G20 are calling for global regulation. This is a very significant achieve-

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Office Green light for YAREAL'S LIXA OFFICES in Warsaw Developer Yareal has secured a building permit for the first phase of its planned Lixa office project in Warsaw, which will be the biggest office scheme in the company's history. The development will be located in the Rondo Daszyńskiego area of the Wola district of the Polish capital and will comprise a total of 65,000 sqm of space in four buildings. In the first phase of the investment, which is scheduled to be completed in mid-2020, Yareal will deliver a combined 28,000 sqm in two buildings. The bigger of them, offering 22,000 sqm, will be occupied by bank BGŻ BNP Paribas. The third (20,000 sqm) and fourth (17,000 sqm) buildings should be ready in 2021 and 2022 respectively. The Lixa project was designed by the HRA Architekci architectural studio and will be certified in the BREEAM system. >>>

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Office (continued)

BRIEFS

AVESTUS and TRISTAN to launch joint Wrocław scheme

IMMOBEL TO START BUILDING CENTRAL POINT IN WARSAW

Developer and investor Avestus Real Estate and a fund managed by investor Tristan Capital Partners have finalized the acquisition of a plot of land in downtown Wrocław on which they plan to build an office project comprising more than 22,000 sqm of space. Called Infinity, the seven-floor scheme has already received a building permit with construction work scheduled to launch in May and finish in the third quarter of 2020. The development, which was designed by the AHR Architects studio and is being commercialized by JLL, is expected to obtain a BREEAM certificate for energy efficiency and environmental performance at the “Excellent” level. Avestus Real Estate and Tristan Capital Partners earlier jointly developed the 61,600-sqm Enterprise Park office complex in Kraków, whose final phase was completed towards the end of 2017.

Developer Immobel Poland will soon launch construction work on its planned Central Point office project in downtown Warsaw. The company has just contracted builder Warbud to build diaphragm walls for the technically challenging scheme, which will be located near the intersection of ul. Marszałkowska and ul. Świętokrzyska above the Świętokrzyska subway stop where the Polish capital’s two subway lines meet. The first phase of construction will be completed by the end of August with Immobel Poland planning to select a general contractor for the development by that time. The 21-story Central Point investment, which should be ready in the second quarter of 2020, will comprise 19,100 sqm of space.

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Over

200,000

sqm

the amount of office space leased in Warsaw in Q1 2018 Source: JLL

Residential BRIEFS ERBUD TO BUILD FOXTROT DORMITORY PROJECT IN WARSAW

Warsaw Stock Exchange-listed construction company Erbud has been selected as the general contractor of the planned Foxtrot dormitory project in the Polish capital, which will be part of the Student Depot student housing platform of investment manager Griffin Real Estate. The value of the contract amounts to PLN 39.5 million with the scheme scheduled to be completed in September 2019.

Ronson to buy back NOVA KRÓLIKARNIA in Warsaw Warsaw Stock Exchange-listed developer Ronson Development plans to purchase back the first two phases of the Nova Królikarnia residential project located in the Mokotów district of the Polish capital from Global City Holdings for a combined PLN 83.8 million. The company will also have the option to buy the remaining phases of the scheme for a total of PLN 78.9 million. Ronson Development sold Nova Królikarnia to Global City Holdings – its shareholder at that time – at the end of 2016 for over PLN 175 million. The transaction involved Global City Holdings’ exiting the shareholder structure of Ronson Development. The latter company remained the manager of the investment and has been responsible for its development and commercialization. With Global City Holdings now intending to focus on its core cinema business, Ronson Development has decided to use the opportunity to expand its project portfolio and buy back Nova Królikarnia, which it knows very well, at an attractive price, said the developer’s CEO Nir Netzer. Already completed and under-construction units within the Nova Królikarnia scheme comprise a total of around 16,300 sqm of usable space. A further 24,400 sqm of usable space can be built in the future phases of the development.

MAYLAND plans to debut in residential sector Retail space developer Mayland Real Estate and residential and commercial space developer Developres will soon launch construction work on their joint Bella Dolina housing project in Rzeszów. The companies have just received bank financing for the first phase of the scheme that is scheduled for completion in the second quarter of next year and will offer approximately 160 apartments. The entire development will comprise a total of around 2,000 units in 20 buildings. Developres is the biggest developer in Rzeszów and has to date sold some 2,500 homes. Mayland Real Estate has completed several large shopping centers in Poland in recent years and the Bella Dolina investment marks its debut in the residential market in the country. Retail remains the core business of Mayland Real Estate, said Marcin Chołodziński, a project manager at the company.

GOLUB BUYS MORE LAND FOR RENTAL APARTMENTS

Developer and investor Golub GetHouse has acquired over 11,500 sqm of land in the Mokotów district of Warsaw where it plans a rental apartment project with approximately 360 units. The scheme will be located in the Służewiec area of Mokotów, which houses the biggest office hub in the Polish capital. Earlier this year, Golub GetHouse also bought land for a rental apartment development in Warsaw’s Wola district. The company will build a 140-meter tower on the more than 5,300-sqm site that is located at the intersection of ul. Żelazna and ul. Grzybowska.

DOM DEVELOPMENT LAUNCHES UPSCALE WARSAW PROJECT

Warsaw Stock Exchange-listed developer Dom Development has launched sales of units in its Apartamenty Dolny Mokotów upmarket residential project in the Polish capital. The scheme, which was designed by the HRA Architekci studio and will be located on ul. Jana III Sobieskiego in the Mokotów district of the city, will comprise two buildings offering a total of 148 apartments, including nine penthouses. Their prices range from PLN 12,800 to PLN 22,000 per sqm. The development is scheduled to be completed in the final quarter of next year.

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Investment market

€2.05

BRIEFS bn

the value of investment transactions closed in the commercial property market in Poland in Q1 2018 Source: Savills

SKANSKA SELLS WROCŁAW OFFICES FOR €51 MLN

Developer Skanska Commercial Development Europe has sold the Green2Day office building in Wrocław to real estate fund manager Niam for €51 million. The property is scheduled to be transferred to the buyer in Q3 2018. Completed in the final quarter of last year, Green2Day offers approximately 18,000 sqm of leasable space with its tenants including Ultimo, Tieto, Business Link and KPMG.

SAVILLS TO HELP CHINESE INVESTORS IN POLAND

Savills has set up a China desk within its Warsaw-based corporate finance and valuation department, which is meant to support Chinese investors interested in the commercial real estate market in Poland. The new dedicated unit is managed by Piotr Klapkowski, who joined Savills in October 2016 and earlier worked in Beijing as a manager in the valuation and advisory department of Cushman & Wakefield's China office.

Madison acquires 50% stake in Warsaw Spire skyscraper Investor Madison International Realty has acquired a 50-percent stake in the Warsaw Spire office tower in the Polish capital from developer Ghelamco. This is one of the biggest investment transactions to have been signed in the Polish office property market, with the value of the skyscraper having been estimated at approximately €350 million. The flagship project of Ghelamco Poland, Warsaw Spire was completed in 2016 and comprises 64,500 sqm of space that is currently over 95-percent leased out. The 220-meter skyscraper is located in the new office hub in Warsaw’s Wola district and is the tallest office building in central Europe. Its tenants include Samsung, JLL, MasterCard, Shire, The Heart, Daftcode, Panattoni and Ghelamco.

“In 2016, Chinese investment volumes on the global real estate market hit approximately $33 billion, a 55-percent increase on the previous year's level” – Piotr Klapkowski, China desk leader, senior consultant, corporate finance and valuation, Savills

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CPI ACQUIRES HOPSTOP RETAIL PARK PORTFOLIO

Czech investor CPI Property Group has finalized its acquisition of a portfolio of five HopStop-branded retail parks across Poland from developer Katharsis Development. The portfolio includes four existing properties – located in Radom (opened in 2013), Zamość (two parks, opened in 2015 and 2016) and Warsaw’s Rembertów district (opened in 2017) – and one pipeline project in Siedlce that has already been 90-percent commercialized. In total, the transacted assets comprise more than 19,000 sqm of GLA.

Mixed-use WARBUD to build ArtN project in Warsaw Investor ArtN, a special-purpose vehicle of Capital Park, has selected builder Warbud as the main contractor for its eponymous mixed-use project in Warsaw. The scheme will be developed in the design and build system with Warbud responsible for carrying out the bulk of the construction work and coordinating the work of the three other contractors – Soletanche Polska, TKT Engineering and Maat4 – with which it will cooperate on the more than PLN 500-million contract. Preparatory work was launched in November last year with the development scheduled to be completed in the final quarter of 2020. The ArtN investment will involve the revitalization of a twohectare post-industrial site located in the Wola district of the Polish capital. Designed by the PRC Architekci architectural studio, the project will comprise more than 64,000 sqm of usable space, including 40,000 sqm of office space and 24,000 sqm of entertainment, service, retail and cultural areas. The scheme is being financed with Capital Park's own funds and a loan granted by bank Pekao. It has been BREEAM pre-certified at the “Very Good” level.

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MAY 2018 W B J

RIDING ON A WAVE

A record amount of office space was completed in Łódź in 2017 with several new large projects having been launched and announced in the city in recent months. The regional market is set to continue to gain in significance in the near future, experts say BY ADAM ZDRODOWSKI

During this year’s MIPIM property fair in Cannes, France, another large developer – Ghelamco Poland – officially presented the details of the first phase of a planned mixed-use development that it will build in central Łódź. The project will be The scale and part of the New Center of Łódź nature of the urban renewal urban regeneration scheme, processes are which covers some 100 hectares making Łódź of land and was launched in the more and more city a decade ago. It will include recognizable an 18,000-sqm office buildabroad. ing with construction scheduled to launch in the second half of 2018. For its part, Virako has recently launched construction work on the first phase of its Monopolis mixed-use development, which will involve the revitalization and he office property market in redevelopment of a historic postŁódź (meaning “boat” in Polish) seems to have industrial site that previously got wind in its sails with a new wave of develophoused a vodka distillery. The ment activity expected to lead the existing stock investment will see the renovato grow by approximately 20 percent within the tion of the historic properties sitnext two years. The third largest city in Poland, ting on the site and the construcwhich had been getting relatively little developer tion of two new buildings within attention in previous years, is now – due to its the complex. The entire project new transport infrastructure and ongoing urban will offer 24,000 sqm of office revitalization program – becoming an increasspace and 5,400 sqm of service ingly attractive location for real estate investors. areas. Also, Avestus Real Estate started building its Imagine ACTIVE DEVELOPERS scheme a few weeks ago. The HB Reavis, which in Poland has to date been only development will include two active in Warsaw, is now preparing to launch office buildings and an aboveits first office project in Łódź. The company has ground, multi-level parking recently acquired a one-hectare site located lot able to accommodate 356 near the Łódź Fabryczna railway station in the cars. The Imagine project will downtown of the city. The planned scheme will comprise 14,800 sqm of office comprise approximately 30,000 sqm of leasspace and 2,400 sqm of retail able space. The developer wants to apply for a and service areas, with complebuilding permit for the investment in the autumn tion expected in the second or of this year and launch construction work at the the third quarter of next year. beginning of 2019. Avestus Real Estate plans to

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LOKALE IMMOBILIA | OFFICE “THE OFFICE MARKET IN ŁÓDŹ IS DEVELOPING VERY DYNAMICALLY AND WILL, WITHIN THE NEXT TWO YEARS, GROW BY APPROXIMATELY 20 PERCENT.

obtain a BREEAM Excellent certificate for the investment. Meanwhile, Skanska Property Poland is now developing the Brama Miasta office scheme in downtown Łódź, which will deliver more than 40,000 sqm of space in two buildings. The first of them is scheduled to be completed in the second quarter of 2019. Other major developers currently active in the office property market in the city include Warimpex, whose 26,000-sqm Ogrodowa Office investment is expected to be delivered in the coming weeks. Last but not least, agencies have also recognized the potential of the Łódź office market, with tenant-only commercial real estate firm Cresa having just opened a new regional office in the city. Peers including JLL and Cushman & Wakefield have been present there for some time now. Łódź is Cresa’s fourth location in Poland. Apart from the city, the company – which entered the Polish property market last year – currently also has offices in Warsaw, Wrocław and the Tri-City.

STRENGTHENING LOCATIONS

A record 74,000 sqm of new office space was completed in Łódź – the sixth biggest regional office market in Poland – last year, which brought the aggregate modern existing office stock in the city to 437,770 sqm, according to Cresa data. Nine projects were delivered to the market in 2017 with the largest of them including Przystanek mBank (24,700 sqm, Ghelamco Poland), Nowa Fabryczna A and B (19,500 sqm, Skanska Property Poland) and Symetris Business Park II (9,500 sqm, Echo Investment). Almost 124,000 sqm of new space was under construction at

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74,000 SQM

the amount of new office space completed in Łódź in 2017 Source: Cresa

the end of last year. JLL data shows that the volume of existing office space in Łódź has more than doubled since 2010. As the market continues to mature, a number of locations are strengthening as major office hubs. Many new investments are located along the WZ route, the main thoroughfare of the city. Approximately 120,000 sqm of office space has already been developed there with a further 110,000 sqm likely to be completed by 2020. The ongoing revitalization of the downtown has created new opportunities for office developers, with the area gaining in significance as a business destination. An office cluster has been emerging near the Łódź Fabryczna railway station within the New Center of Łódź. The area currently features around 44,000 sqm of office space, a figure that has the potential to grow by some 130,000 sqm in the next few years, argued Tomasz Czuba, national director, office leasing at JLL. Karol Klin, commercial director at investor Globalworth Poland – the owner of the Green Horizon office building in Łódź – maintained that the scale and nature of the urban renewal processes are making Łódź more and more recognizable abroad. Importantly, the municipal authorities have been responsive to the rising tenant and developer interest and have prepared plots for new developments in some of the key parts of the city, pointed out Zuzanna Krech, a negotiator in the office department of Cushman & Wakefield.

TENANT INTEREST

Real estate experts say that Łódź is now at an interesting stage of its development, with the substantial investments in transport infrastructure and urban regeneration which the city has seen in recent years

having boosted its attractiveness in the eyes of investors. Besides, “competitive labor costs and the availability of a qualified labor force are making Łódź an excellent place for doing business, especially when it comes to the business services sector,” Klin claimed. The city is increasingly seen as a good place to live and work.

the attractiveness of life in the city would allow Łódź to attract more BPO/SSC sector companies and see the expansion of local IT and SSC firms, which are and will remain the main drivers of demand for office space. Labor shortages could become a challenge. However, as Czuba pointed out, Łódź will not be alone here as the decreasing number of specialists is already a problem in several other large agglomerations in Poland. According to Krech, it is crucial that Łódź continues to develop in a sustainable way. As the office market booms and developers keep launching construction work on new office schemes, it is important that the city offers room for new residential developments, too.

Indeed, according to JLL data, tenants from the business services sector last year accounted for approximately 80 percent of the demand for modern office space in Łódź, which reached the level of more than 58,000 sqm. The vacancy rate stood at around 9.5 percent at the end of 2017. Krech argued that the strong demand for office areas in the Łódź market is evidenced by the fact that a sizable portion of new office space in the city is commercialized at an early stage of the construction process. Could Łódź become a serious competitor for the two biggest regional office markets in Poland – Kraków and Wrocław – when it comes to the size of its existing modern office stock? Potentially yes, but catching up with the leaders will take some time. “The office market in Łódź is developing very dynamically and will, within the next two years, grow by approximately 20 percent compared to the existing stock of around 440,000 sqm,” said Marta Pyziak, head of the Łódź office of Cresa. If the market continued to grow that fast, it could possibly reach the scale of today’s markets in Kraków and Wrocław in over ten years, Pyziak noted. Of course, whether the pace of growth will be maintained depends on factors such as the economic situation in the region. Also, the further growth of the education potential and

LARGEST OFFICE LEASE TRANSACTIONS IN ŁÓDŹ IN 2017 TENANT Fujitsu Technology Services Confidential McCormick Confidential Source: Cresa

TYPE OF TRANSACTION Renewal/extension New New Renewal

PROPERTY Textorial Park Ogrodowa Office Nowa Fabryczna A Sterlinga Business Centre

AREA (SQM) 10,000 6,600 3,600 3,400

All signs seem to indicate that Łódź is on the right track, Pyziak concluded. Czuba said that the potential of the city has not been fully tapped into yet and the market is likely to move up the ranking list of the biggest office locations in Poland in the coming years. Of a similar opinion was Krech, who was convinced that if asked in two years’ time about the office property market in Łódź, she would be able to start her comment by stating that the city “has finally been appreciated.”

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LOKALE IMMOBILIA | FIT OUT Fit-out by Office Plus

GREEN ON THE OUTSIDE, GREEN ON THE INSIDE

Times when a green-certified class-A office scheme would turn heads are long gone. Investors want assurances that the building will not only look good on paper but also attract the best tenants, who are increasingly interested in how well their offices fit their employeesâ&#x20AC;&#x2122; needs and how productive they will be while working there BY KAROLINA PAPROS

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he first wave of green certifications that came to Poland shortly after the financial crash of 2008 was a way of making schemes more attractive in the eyes of wary investors. The iconic Rondo 1 office building in Warsaw, delivered just before the downturn, was only later retrofitted with LEED Gold specs to bring down occupancy costs and protect the value of the investment. Today, there are well over 550 certified buildings in Poland, with the vast majority in the office segment. The two dominant certification systems are BREEAM, developed by the British Research Establishment (BRE), and its US-counterpart LEED (Leadership in Energy and Environmental Design) Green Building Rating System â&#x20AC;&#x201C; a certification program developed by the US Green Buildings Council. They both focus predominantly on energy efficiency, which has been their main selling point for developers: a modest additional investment can bring sizable savings that will easily offset costs within a few years. Green certificates, while still an important part of an investment, are no longer in any way a dis-

tinguishing feature. Practically all new projects have them now. Also, the current state of the labor market, with a talent shortage affecting over half of all companies, is pushing tenants to seek office space that will not only be well situated and connected to the public transport system but will also offer a “home-like” feel. That is particularly important for the youngest generation of employees, who – as studies have shown – have a stronger need to feel comfortable in their office environment, are more health-oriented and spend more time at the gym that all the previous generations combined. They are also much more environmentally aware thanks to decades of education initiatives finally bearing fruit, and they are more interested in aspects such as energy and water consumption and waste generation. That is probably why a new type of certification is slowly making its way into Poland: the Delos’ WELL Building Standard focuses fully on human health and well-being and combines best practices in design and construction with medical and scientific research. Even if not yet commonplace, some standards are becoming quite popular. Companies fitting out their new offices are well aware of how important certain aspects of their design are: most notably acoustics and air quality. The WELL Building Standard has been developed based on the fact that people spend up to 30 percent of their waking hours at work. Therefore, they expect to spend this time in comfortable and healthy surroundings. Among the key factors that guarantee comfort and boost productivity are proper acoustics and adequate ventilation. There are also some newer trends making waves, with biophilia and fitness being the two most widespread innovations. >>>

The wave is rising. Who will get on board? A good surfer knows which waves to catch, just as a smart leader knows which global trends to pursue. One of them is picking up rapidly – those who get on board first will come out on top.

Biophilia Furniture manufactured in line with environmental standards is nothing extraordinary these days. But things that used to be commonplace are now standing out from the crowd: nature has become a rare commodity. Architects whose designs incorporate plant life and elements of inanimate nature into interiors are becoming an inspiration to a growing number of followers. Biophilia is one of the strongest design trends right now.

Furniture New offices are increasingly equipped with furniture made from natural materials. Conference tables and worktops made from real wood are gaining in popularity. Arrangements with unprocessed stone are also popping up here and there. Vertical gardens, moss walls, even green partitions made from plants are taking offices by storm. Water is also becoming more commonplace: glass walls with water trickling make for an aesthetically pleasing interior but also improve air quality by increasing humidity.

The rising Biophilia in architecture and interior design is clearly here to stay. For now the wave is still rising, as it is predominantly industry leaders who turn to nature in office design: Google’s new London office is a good example. The wave will spill over really soon, though. Smaller organizations are increasingly aware of how important modern interiors are in maintaining company image and attracting the best talent. It won’t be long before nature becomes a must in all offices and those who fail to get on board will risk being washed ashore. - Mikołaj Foks, Office Plus

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LOKALE IMMOBILIA | FIT OUT EVERY BREATH YOU TAKE

In light of current discussions about smog and deteriorating air quality in the majority of Polish cities, the quality of office air is a topic that cannot be ignored, particularly since most office schemes are located in city centers, where smog concentration is the highest. Poor ventilation exposes people to different kinds of pollutants such as volatile organic compounds (VOCs), combustion byproducts or high levels of carbon dioxide. They may trigger nausea, headaches, asthma, respiratory problems, allergies, reduce cognitive functions or cause so-called “sick building” symptoms. These health issues result in absenteeism and reduced employee productivity. Therefore, it is important to increase workplace ventilation in order to improve office air quality. Research conducted by Harvard’s Healthy Buildings program indicates that employees working in green-certified buildings that ensure proper ventilation perform better on cognitive tests.

Fit-out by Office Plus

NOISY NEIGHBORS

Noise is considered to be a distraction that affects all employees’ efficiency and focus levels. It is particularly noticeable in open spaces and can lead to increased dissatisfaction and heightened stress levels combined with productivity loss. According to Harvard Business Review, the number of people who claim that they have problems with concentrating at their desk has increased by 16 percent since 2008, which correlates with the rise of open space offices. However, perfect silence does not help either. Good acoustics is therefore a key element in every office space. It is believed that the intensity of background noise in an open space should not exceed 45dB. Some ideas about how to guarantee the perfect levels of background noise include acoustically absorptive materials, e.g. acoustic ceilings, wall panels and carpets. Installing a Sound Masking System is a good idea as well. The system is made of speakers which emit radio waves at frequencies similar to human speech. They reduce the distracting noise of conversations at other desks and allow workers to concentrate. >>>

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Fit-out by Armstrong Building Products

E X P E RT O P I N I O N

A matter of acoustics N O I S E is the no. 1 problem employees complain about in the office environment. Soundproofing offices is not as hard as one might think and the increase in productivity definitely makes it worth it. Companies are paying increasing attention to employees’ wellbeing when designing and fitting out their offices. Why is it so important? You could say that we are finally catching on. Poland has seen a revolution over the past few years when it comes to office design. The classic layout of desks lined up in rows and subdued colors have been replaced by creative, colorful designs. This is the answer to the changing style of office work, which increasingly requires teams to carry out conceptual work in smaller or larger groups. And the interiors are supposed to inspire this kind of activity through their design. However, it is not only the “wow” effect that matters. The key is the well-being of workers, which was previously overlooked. Fortunately, this is now changing. Office buildings were the first to begin seeking green certificates, and today they excel in eco- and userfriendliness by introducing, among others, the Well Building Standard. Tenants, and above all young employees in companies, expect comfortable fittings and equipment. Generation Y workers do not want to work in noisy, poorly lit and badly ventilated offices. How does the fit-out impact employee productivity? One of the major problems of modern societies is the noise in offices – 90 percent of employees point

this out. This is confirmed by research, and by data collected by one of the world’s leading authorities in the field of sound, Julian Treasure. He carried out an educational initiative in collaboration with Armstrong aimed at making companies aware that noise is the number one problem in offices. The efficiency of cognitive processes decreases by up to 20 percent in noisy environments (above 65dB), and the efficiency of performing tasks that require logical thinking is reduced by about a half. The World Health Organization indicates a range of health disorders resulting from everyday exposure to unwanted, disruptive sounds: chronic fatigue, arrhythmia, headaches, neuroses. The same applies to a lack of access to light or fresh air. This translated into an increase in the number of employees on sick leave. Therefore, comprehensive fit-out projects for office space should take into account not only the design, but above all the elements invisible to the eye: appropriate technical systems – from installation and including maintenance, and professionally planned room acoustics. How can companies limit noise in an office? For existing spaces, one can start from the education and introduction of the right acoustic culture – that means, among others, compliance with policy that loud conversations and discussions should be held in separated areas – socalled phone booths – or meeting rooms, and not in the common part of the open space.

In new office projects or in retrofitted buildings the planning of the sound environment should take place at the initial design stage. Three steps are necessary: separation from the sounds coming from outside the room, for example windows offering adequate sound protection from street noise. The second and third step is to limit the spread of unwanted sounds within the building – it is necessary to absorb excessive noise, but equally important is an appropriate level of noise-blocking so that sounds are not transmitted between rooms. Acoustic ceilings are one of the most effective “helpers” in planning friendly interior acoustics. Their wide range in terms of color, shapes and textures makes them suitable for successful installation not only as an element that fills the entire surface under the structural ceiling, i.e. a classic modular system. Ceiling producers, responding to the trends towards industrialization in interior design, have also introduced so-called floating ceilings or vertical baffles – these improve room acoustics, but they also enable designers to highlight the exposed ceilings that are so fashionable in today’s offices.

Maciej Sobolewski Sales manager, Central Europe North & Scandinavia at Armstrong Building Products

W B J MAY 2018

LOKALE IMMOBILIA | FIT OUT A GREEN THUMB

Apart from good ventilation and low noise levels, companies collaborate closely with interior designers to create a sustainable fit-out and engaging work areas where people are healthy, happy and productive. The newest fit-out trend is biophilia, in other words, the love of nature. This design is the answer to the inherent need of every human being to be close to nature, a need that is not satisfied by traditional office settings. Adding natural elements such as plants and water fountains into the office space and using natural colors, textures and lighting can increase productivity levels. Not every company can afford to install a living wall in their office; therefore, the same function can be performed by potted plants or moss. Moreover, greenery in the office seems to have benefits for employees’ physical and psychological health. It is said to reduce stress and mental fatigue, improve the ability to re-focus attention and enhance performance on cognitive tasks.

Fit-out by Office Plus

UP AND ABOUT

In August 2016, JLL’s offices in Warsaw Spire were awarded a BREEAM Fit-Out certificate. The firm’s employees have focus rooms, creative rooms, large well-equipped kitchens and quiet zones at their disposal. They can watch sports events or host internal parties in the Town Hall area – a large chill-out space. There is also a dedicated client zone with a dozen conference rooms equipped with the state-of-the-art technological solutions. Other large employers with brand-new offices are also interested in fitting out their offices with work-out equipment, stationary bikes and treadmills next to bean bags and hammocks to provide their employees with the perfect fitness/leisure blend to keep them healthy. Office design is supposed to reflect the core values of a company. Office location and its fit-out signify the company’s brand and values to its employees, clients and visitors. That is why “green” buildings and fit-outs are gaining popularity in Poland. Employers are well aware that in order to retain employees they need to make them healthy and happy in the workplace. Not to mention that a happy employee is a productive employee.

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Fit-out by Tétris Polska

E X P E RT O P I N I O N

Fitnessing it out O T T O M A N S and exercise balls next to chairs, wastepaper baskets far away from desks, splitlevel offices – modern workspaces are becoming increasingly similar to home interiors. What looks just like a neat design is also underpinned by a more strategic goal of keeping employees healthy and fit. You could say that employers these days are more in tune with their employees’ social and personal needs and that’s why they invest in fancy office design. You couldn’t be more wrong. These decisions are based on solid, cool calculation. Our country’s demography means employees are getting older. Soon, the vast majority of the workforce will be over 50. It’s becoming increasingly difficult to find talent in the market. Over half of all entrepreneurs are acutely aware of that. According to analysis carried out by Tétris, good working conditions are a strong argument to retain employees. Interior designers even go one step further: by offering solutions that are not only attractive and visually pleasing but also keep employees healthy. That’s where the Active Design concept stems from: it aims to keep employees healthy and motivated with… physical excercises.

There is solid medical evidence supporting the idea that physical activity stimulates the human brain to create new neurons and nerve cells. Exercise increases grey and white matter, which is responsible for good memory. It influences cognitive and learning processes, sharpens memory and focus, heightens emotions, and increases the capacity to multitask. It stimulates circulation, which helps keep the brain well oxygenated. This translates into efficiency – healthy, relaxed people are more productive and thus more valuable to employers. How do you encourage employees to do simple, light exercise at work? One way is to place wastepaper baskets some distance away from the desks, for instance in the kitchen. Locating supply storage with office and kitchen equipment in separate locations serves a similar purpose. It is a common trend to replace printers on individual desks with a single technical room called a copy point, which not only lowers the amount of harmful dust in the air but also motivates employees to get up from their chairs. There is also another interesting trend aimed at making working space “healthy” by combining

so-called hot desking with furniture that stimulates leg muscles and maintains a healthy posture while sitting. Hot desking means mobile work stations, including high worktops and comfort zones. Studies suggest that a large number of desks are occupied only sporadically because employees are working in the field or use flexible working time. It is therefore a very practical solution how to use space efficiently. Tétris designs also include fitness equipment, which is becoming increasingly popular in offices, such as training bicycles which can charge a laptop, or special treadmills with laptop holders. They allow employees, even when dressed in suits and ties, to unwind through a simple and short exercise routine.

Danuta Barańska Creative Director, Tétris

W B J MAY 2018

LOKALE IMMOBILIA | REAL ESTATE

BRINGING BACK WARSAW’S SPLENDOR

WBJ sat down with Artur Tlustochowski, the CEO at developer Terra Casa, to talk about the inspiration for the company’s Art Deco – Wola Apartments project in Warsaw and its further plans in the housing property market INTERVIEW BY ADAM ZDRODOWSKI

WBJ:

You have just completed the Art Deco – Wola Apartments scheme in Warsaw, whose architecture – as the name suggests – was inspired by the architecture of the 1920s and 1930s. Why did you choose to make reference to that particular style? Artur Tlustochowski: We wanted to reference the historic heritage of the Wola district, especially since the site houses a pre-war building that has now been renovated and is an integral part of our project, and there are other historic properties in the area. There

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were many examples of Art Deco architecture in Warsaw before WWII, but very few have survived. In addition, I was inspired by the Art Deco-style buildings of Chicago, and I thought we could build something similar here. Interestingly, another developer is now completing an office scheme located on an adjacent plot. It will involve the renovation of modernist buildings, so this part of Wola will soon feature new developments inspired by two architectural styles that were typical for inter-war Warsaw.

Are there any other new Art Deco-inspired residential projects in Poland? We have visited Gdynia, which has rich Art Deco traditions – after all, the city was built from scratch in the inter-war period – to see a number of interesting schemes. However, in some places the inspiration was actually only reflected in the name of the investment. Do buyers appreciate such original architectural solutions in new residential projects? Yes, very much. The commercialization of Art Deco – Wola Apartments has been very successful – more than 90 percent of the 71 apartments available in the scheme have already been sold. We have just put the most attractive units in the development up for sale. Why did you wait with that until the very end of the construction process?

We used a similar strategy as in Chicago. Clients prefer to see and touch what they are actually buying, and Art Deco – Wola Apartments are now ready. Moreover, the prices of apartments in Wola have been going up and they have also grown significantly in our project. The residential boom in Wola has largely been driven by the recent emergence of the district as one of the biggest office locations in Warsaw. Do many of the buyers of your apartments indeed work in the new office towers in Wola? We targeted the project at the managerial staff of the companies leasing space in the office buildings in Wola. We selected Strabag as a general contractor due to their extensive expertise in revitalization as Terra Casa has always been focused on the sustainable development of cities. We knew that the office boom in the district would generate significant demand for housing.

There were many examples of Art Deco architecture in Warsaw before WWII, but very few have survived

However, now that the investment is almost complete, we can see that many of our buyers are actually people who have lived in Wola for many years and wanted to move to an attractive investment. Definitely, the construction of the second subway line has given a boost to the area – the existing Rondo Daszyńskiego stop is located within walking distance of our project and another subway stop – Płocka, set to be completed next year – will be just 200 meters away.

NY Residence Wrocławska 33 project in Kraków, which is scheduled to be delivered in six months and in which more than 70 percent of the apartments have already been sold. As for future schemes, we are now preparing to launch an investment that is located near Al. Niepodległości in the Mokotów district of Warsaw and is similar in size to Art Deco – Wola Apartments. We expect that construction work on the development will be started in early 2019.

Investors are increasingly interested in Wola apartments, too… There were many investors interested in buying ten or twenty units in our project for investment purposes, but we did not agree to that as package sales are not in line with our business model.

Is there any interesting architectural inspiration for the Mokotów investment? Our new Mokotów investment is specifically inspired by the architecture of California and Los Angeles motifs and lifestyle based on the work of the American architect Richard Meier. We are looking for sunshine there, so the scheme will have huge windows and lots of balconies, terraces, all in white.

What are your current plans in the housing sector? At the moment, we are strongly focused on the completion of our

W B J MAY 2018

ENTRANCE TO A LUXURIOUS LIFESTYLE Residents of No.44 in Warsaw will soon get access to a unique additional service

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eal estate investor Catella – the owner of the No.44 Luxury Rental brand offering apartments located in the iconic Złota 44 residential skyscraper in downtown Warsaw – is now in the process of launching a new exclusive service that will only be available for the units' tenants. Called No.44 Prestige Club, the service will provide clients with round-the-clock on-demand professional assistance with regard to buying top-notch fashion items and preparing for all kinds of private and business meetings. Many foreigners in Poland are interested in visiting boutiques selling exclusive clothes, footwear and accessories, but do not really know where to look for them. No.44 is thus meant to be their gateway to the world of premium fashion in the country. Additionally, many foreign CEOs – who are among the tenants of No.44 – seek advice regarding the latest fashion trends in Poland. They pay close attention to their appearance as they need to look good

PHOTOGRAPH THIS PAGE MACIEJ CIOCH, OPPOSITE PAGE AGNIESZKA KARA

LOKALE IMMOBILIA | LUXURY RENTALS

in front of the camera and at important business meetings. The No.44 Prestige Club program is designed to address those needs by taking care of clients’ professional look and helping them build their image. No.44 residents will be able to consult a stylist who will advise them on creating an appropriate outfit for any occasion. The stylist will take them to luxury ateliers of some of the most esteemed tailors, shoemakers and jewelry designers in Poland. All the partner boutiques of No.44 will offer the highest-quality products from Polish producers exclusively. No.44 will cooperate with such well-known brands and designers as Zack Roman, Monika Kamińska and Aga Prus, with more names to be announced in the near future. Make-up and hairstyle services will also be on offer. Catella’s experts believe that a luxurious lifestyle is a state of mind and refers to both living and being – besides living in luxury interiors and in a prestigious location, it also entails being surrounded by beautiful products and enjoying access to personalized services.

No.44 is far more than a luxury apartment in a prestigious location

Knowledgeable about successful people’s needs, Catella wants to ensure that its clients have exactly this kind of lifestyle. No.44 apartments are meant to be the first place on the real estate map of Poland where a whole range of additional tailor-made solutions are available. Viktoria Hoffmann, head of asset management European residential at Catella, explained that while launching the No.44 long-term luxury rental service in Złota 44 a year ago, the company wanted to offer its clients much more than just top-quality apartments in a landmark building. Indeed, it aimed to ensure that the units’ tenants – demanding people from a whole range of countries and cultures – will be able to experience Warsaw’s dynamic lifestyle and will have access to the best selection of unique and beautiful products that Poland has to offer. “No.44 is far more than a luxury apartment in a prestigious location. Thanks to our new service, we will become an entrance to a new experience and an extremely sophisticated way of living and being for those who look for the most sublime taste of life,” Hoffman said.

W B J MAY 2018

EVENTS

Warsaw Business Journal relives the most important recent business and industry events

15TH ANNUAL CEEQA GALA – PRESTIGIOUS AWARDS, TOP-NOTCH ENTERTAINMENT The post-industrial setting of the Praska Drukarnia complex on Warsaw’s east bank hosted the 15th edition of the annual CEEQA Gala – arguably one of the region’s most important real estate industry events – on April 25. The Gala, which focuses on celebrating the success stories of the New Europe property markets across 18 countries in the CEE/SEE region, brought together hundreds of top-tier investors, developers, financiers and advisors active in the sector. It included presentations of the year’s awards in 23 categories and featured world-class entertainment. This year’s winners in the Grand Awards categories are Portland Trust’s Oregon Park - Building B in Bucharest (Overall Building of the Year SEE), Skanska Commercial Development Europe (Overall Company of the Year and Green Leadership Company of the Year), Unibail-Rodamco’s Wroclavia Shopping Centre in Wrocław (Overall Building of the Year CEE), Skanska Commercial Development Europe’s Five in Prague (Green Leadership Building of the Year), Heitman’s Gordon Black (Lifetime Achievement in Real Estate) and Ghelamco’s Jeroen van der Toolen (Industry Professional of the Year). Popular Polish broacaster Monika Zamachowska, who has been with CEEQA for precisely a decade now, led the award presentations. The nearly 900 guests of the 2018 CEEQA Gala were entertained by such performers as the Inkcubeko Arts & Culture gospel choir from Cape Town, South Africa and the UK trip hop band Morcheeba. They were also treated to a pep talk by the South African rugby legend Percy Montgomery.

MAY 2018 W B J

W B J MAY 2018

EVENTS

Warsaw Business Journal relives the most important recent business and industry events

BANKS, INSURERS, FINTECHS – THE MEETING OF BANKING AND INSURANCE LEADERS 2018 The Meeting of Banking and Insurance Leaders took place on April 10-11 at the Westin Warsaw Hotel in the Polish capital. The prestigious event – which was composed of the 15th Banking Forum, the 11th Insurance Forum and the 7th Grand Gala - Leaders of the Banking and Insurance World – was an occasion to exchange knowledge, experience and discuss the future of the financial market. The conference was attended by key representatives of the banking and insurance sectors, the most important service and solution providers in these sectors and representatives of the central administration. More than 650 participants took part in 14 discussion panels, four firechats and 18 individual presentations. During the first part of the Meeting of Banking and Insurance Leaders, speakers discussed the possibility of cooperation between banks, insurers and fintechs. With Poland celebrating 100 years of independence in 2018, experts from the three sectors summarized

what banking and insurance look like in the country at the moment and how they can change in the near future. Later on, the Banking Forum discussed new regulations in the market and the prospects of entering a cashless era. The topics focused on during the Insurance Forum included bancassurance, the impact of new legislation and the possibility of deregulating the market. The second day was about topics such as the consolidation of the banking sector and the threats posed to banks by technological giants and fintechs. The insurance part of the forum started with a debate on the modern retirement system and comparisons between PPK and PPE. Also discussed were the practical aspects of cooperation between insurers and start-ups. The day ended with a discussion about the latest technological trends in the sector.

FUJITSU WORLD TOUR IN WARSAW SHOWCASES CO-CREATION FOR DIGITAL TRANSFORMATION Fujitsu World Tour 2018 took place in Warsaw on April 10. The event – which will be held in over 20 countries on six continents – was devoted to IT innovations that serve both businesses and societies. Fujitsu World Tour 2018 spotlights co-creation with customers that brings together the necessary expertise about technology and its application to make rapid progress. It translates into a collaborative approach, teamwork and in-depth knowledge. In order to keep up with the pace of changes, co-creation needs to be a transformative act for a company. The digital revolution will influence all industries, from transportation, manufacturing and retail to finances. It will have a major impact on each country’s administration. The time when such solutions are implemented is crucial and will leave its mark on the system’s operations. Reckless actions, a bad diagnosis or premature implementation can even paralyze the whole process. 86

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“Digital transformation affects small, medium-sized and large businesses. All companies need it. Our research shows that over 80 percent of all companies in the world want to go through digital transformation,” said Juan Maria Porcar, Vice President, Eastern Europe, Russia & CIS, and Africa, at Fujitsu. He added that Fujitsu’s experience gives clear directions for the future: the right diagnosis and solutions can be worked out by using the rule of co-creation. Fujitsu World Tour 2018 is also a place for future IT leaders. During the event, Fujitsu experts chose the most promising start-up among other competitors: Skriware. The company, currently under the wings of MIT Enterprise Forum Poland, strives to promote interdisciplinary skills from the fields of science, technology, engineering and mathematics through the process of developing and programming 3D-printable robots. As a reward, Skriware will be invited to Fujitsu Forum in Munich – Fujitsu’s flagship event that is held annually in November.

THE NATURE OF LUXURY Welcome to our world

Ciekocinko 9, 84-210 Choczewo

hotel@palacciekocinko.pl

+48 608 002 220

www.palacciekocinko.pl

LAST WORD

LOOKING AT CUTTING-EDGE firms with their polished, immaculate, perfectly balanced interiors makes the simple grey-floored, white-walled offices most companies still occupy seem miserable and even a bit dehumanizing. No wonder then that employers all across the board have begun to look for ways to bring in at least a whiff of modernity and originality into their office design. Some of them throw in bean bags in common areas, some play around with color, or hang posters and paintings on walls (I would be reluctant to call them art, but some of them can be pleasing to the eye). But what puzzles me most is the newfound use for phonebooths in hallways. Not the funky glass and metal kind, let alone the stylish British red ones, but simple boxes, some with seats in them that can fit four people in total. While I was visiting one particular company office recently, I came across one such phone booth. It looked perplexing out there alone in a long corridor, as out of place as a swivel chair in the bathroom. For a second there I wondered if the company was perhaps in the process of installing some weird new cubicles and this one was broken and had to be returned. I decided to go inside to check for myself what the buzz

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was all about. As it happens, it was a recent purchase and still had a very pungent aroma of a hardboard – the smell you find in the wood aisle at DIY stores, but stronger. I learnt that it wasn’t really brand new, as it had been installed a few weeks back, and that it wasn’t just a simple box, either. It was equipped with a ventilation system! Unfortunately, the hallway did not offer an electric socket within reach, so the booth’s power cord lay out there on the floor unplugged. The reason for placing phone booths in office corridors is to give people working in open-plan offices at least a taste of privacy. The official tag line is that these phone booths are for employees to be able to make business calls uninterrupted and without disturbing other people at work. The reality is probably quite different. If you want to take a personal call, talk to a headhunter trying to poach you for a competing company, or even exchange some gossip and complain about your boss – what better place to do it than the only sound-proof place in the building? Funny how the phone booth – an invention that in its heyday was meant to connect people – has got its second lease on life as a means of separating them from one another. - Beata Socha

MARIA MILEŃKO

A lonely phone booth

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