Poland Today Business Review+ No. 003

No. 003 / 16th September 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

1 year subscription: EUR 690 (PLN 2760)

Newsletter Editor: Lech Kaczanowski

[email protected]

tel. +48 607 079 547

Sales Contact: James Anderson-Hanney

[email protected]

tel. +48 881 650 600

MANUFACTURING & PROCESSING Sweden's Saab inks teaming agreement with top Polish arms producer page 2 Danish Rockwool continues expansion of Cigacice insulation plant page 3

BANKING & FINANCE

New blue chip index to include 30 stocks and replace WIG20 on Warsaw bourse page 3

ENERGY & RESOURCES Polish LNG terminal to be delivered six months later and cost EUR 70m extra page 5

Hopeful about Poland's nuclear ambitions, Areva and EDF seek local partners page 6

PROPERTY & CONSTRUCTION

SwedeCenter breaks ground on mixed-use complex Gdynia Waterfront page 7

Ghelamco closes EUR 121m sale of Mokotów Nova office project in Warsaw page 8

SERVICES & BPO

Poland's outsourcing sector growing faster than Asia's, report says page 9

TRANSPORT & LOGISTICS

Szczecin's North-West Logistic Park moves on to phase two page 10

Ryanair relocates Warsaw base back to Modlin from September 30th page 11

CONSUMER GOODS & RETAIL Poland is EU's 6th largest retail centre market by turnover page 12

POLITICS & ECONOMY

MP exodus cuts ruling coalition's majority down to one vote page 14

Special economic zones to offer investment incentives until 2026 page 14

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 16-18

US food giant Mars Inc has spent more than PLN 800m in Poland to-date. Photo: Mars Inc.

Mars to invest PLN 250m in PolandMars to invest PLN 250m in PolandMars to invest PLN 250m in PolandMars to invest PLN 250m in Poland One of the world's top FMCG producers, US Mars Inc. seeks to expand its Polish pet food and confectionery factories at the cost of PLN 250m. The investments are to create some 100 new jobs at the company's industrial complex near Warsaw. page 12

Union protesters descend on WarsawUnion protesters descend on WarsawUnion protesters descend on WarsawUnion protesters descend on Warsaw Up to 100,000 people took part in demonstrations in Warsaw organized jointly by Poland's three largest trade unions in a protest against government labor and pension policy. page 13

Join a senior-level audience from the corporate finance and private equity communities in the CEE region and contribute to in-depth discussions examining the current CEE M&A market and the opportunities for outbound cross-border activity. Expert speakers will also provide insight into the deal trends that are likely to be seen over the next year.

Key discussion topics for 2013

• What is driving CEE domiciled firms to look for international growth opportunities?

• What impact will external financing, such as China’s $10 billion credit line, have on the region?

• What are 2013’s prospects? Will deal rationale shift?

• Outlining an overview of the changing private equity landscape

• Will we see a revival in CEE IPO markets?

For more details about the event and to download the agenda, please visit http://mergermarketgroup.com/event/CEE2013 For any additional enquiries, please email [email protected]

Register your place today for £795Please enter the registration code CEEPT when booking

Lead strategic partner: Strategic partners:

CMS_LawTax_CMYK_over100.eps

In association with:

CEEMEA

24 SEPTEMBER 2013 THE WESTIN, WARSAW

CEE M&A AND PRIVATE EQUITY FORUM 2013

Part of the Financial Times Group

Confirmed Speakers include:

• Keynote speaker: Artur Tomala, Managing Director, Warsaw, Goldman Sachs

• Wojciech Mroczynski, Chief Strategy Officer, Amrest

• Nikola Jekic, Deputy Director of Function, NIS Gazprom

• George Kikvadze, Managing Director, Terra Food

• Adrzej Kondracki, Director for Strategy, M&A and Investor Relations, Netia

• Roland Haidner, Director M&A, Telekom Austria

• Chris Mruck, Managing Partner, Advent International

• Gierdius Pukas, Managing Partner, Quadro Capital Partners

• Grzegorz Czapski, Head of M&A, Corporate Development, GTS Central Europe

CEE Poland Today ad_V2_VC.indd 1 11/09/2013 16:37:22

weekly newsletter # 003 / 16th September 2013 / page 2

MANUFACTURING & PROCESSING

Saab inks teaming Saab inks teaming Saab inks teaming Saab inks teaming agreement with agreement with agreement with agreement with top top top top Polish arms producerPolish arms producerPolish arms producerPolish arms producer

During the annual International Defense Exhibition (MSPO), held in Kielce in early September, Swedish Defence and Security company Saab inked a teaming agreement with Polski Holding Obronny (Polish Defence Holding), Poland's largest manufacturer and supplier of arms, which had until recently operated under the Bumar brand. The agreement serves as fur-ther indication of the growing interest of global de-fense contractors in Poland, as the country's military gears up for massive investments in new equipment and technology. The deal was signed by Tobias Wennberg, Senior Vice President, Head of Central & Eastern Europe at Saab AB, Mariusz Andrzejczak, Vice President for R&D at Polish Defence Holding, and Andrzej Szortyka, CEO at Łabędy/OBRUM . "I am sure that this agreement is just the beginning of a long term business relation between our Groups," commented Mr. Andrzejczak, adding that the deal il-lustrates PHO's openness to cooperation with interna-tional partners. PHO's predecessor, Bumar, turned over PLN 3.2bn last year. The state-owned group includes some 40 com-panies producing missiles, ammunition, radar, detec-tion & combat management systems, as well as ar-mored vehicles. It employs close to 10,000 workers. Earlier this year PHO had signed a similar deal with BAE Systems Hägglunds, the Swedish unit of Eu-

ropean defense giant BAE Systems. The two partners are jointly working on a new tracked armored combat vehicles for a top-priority Polish military program un-der an exclusive teaming agreement. Poland seeks to buy some 600 vehicles of that kind by 2022. Poland's centre-right government, has put moderniz-ing the armed forces high on its agenda. This year's de-fense budget of USD 9.5bn has grown by 7% over 2012, bringing Poland close to the 2%-of-GDP NATO-recommended target. The Defense Ministry seeks to spend USD 43m over the coming decade to replace outdated weaponry, much of which dates back to the Communist times. Investments will include a missile-defense system, new ships for the navy, upgraded tanks, military training aircraft, 70 helicopters, un-manned aerial vehicles and better equipment for ground troops. Overall, the share of the defense budget going on equipment will rise from 15% to 33%.

Poland Today talks to: Tobias Wennberg, Senior Vice President, Head of Central & Eastern Europe at Saab AB Photo: SAAB

• PT: Can you tells us more about the scope of the re-cent SAAB/PHO teaming agreement? Tobias Wennberg: The most recent signing of the teaming agreement defines our short term objectives and creates a platform for Saab and PHO for more de-tailed product based cooperation in future. Saab have a strong and long history of cooperating with Bumar/PHO dating back more than ten years and had an ongoing cooperation long before the signing of the

teaming agreement. It has been important for both parties to maintain and strengthen that relationship, and as a result we have been working closely together for the last six to eight months. Together we have identified a few areas of cooperation, where Saab and PHO have complementary competencies for current and future development programs, primarily regard-ing land based platform technology. We complement each other very well on land side, and on product and sub-system level. • PT: Earlier this year PHO signed a teaming agree-ment with BAE Systems Hägglunds AB, regarding a major tracked armored vehicle project. Is SAAB in some way a part of that project? TW: The Saab-PHO cooperation is not driven by this specific program, but by complementary competencies in a broader perspective. But to show a good example of cooperation between PHO and Saab, both parties decided to showcase our Active Protection System [LEDS 150 – Saab's laser-based system that detects threats against armored vehicles; ed.] on the PL 01 Concept [a new Polish tank that is being developed in cooperation with BAE Systems; ed] which was un-veiled at the MSPO. Saab and Hägglunds as well have a long cooperation history, and we will of course eval-uate potential synergies going forward but our respec-tive cooperation are not related and do not form an al-liance. • PT: As you well know, the Polish military is gearing up for massive investments in new equipment, aim-ing to spend billions of EUR over the coming decade. Which products in particular does SAAB want to of-fer its Polish clients? TW: Our ambition is partnering up with Polish indus-try and authorities and to offer both our products and competence where it adds value, either in close coop-eration with local industry or by offering our specific products directly to the Polish customer. Our focus in Poland has traditionally been on the naval side, and


that will be a focus area going forward as well. But we are one of few full spectrum defense contractors, from infantry weapons to air power systems and we view Poland as a potential customer – directly or together with strong partners, for a broad range of our product portfolio. • PT: Is SAAB contemplating any manufacturing in-vestments in Poland, independently or together with PHO or other partners? TW: Saab serves the global market with highly ad-vanced products and systems for the defense and civil security sector and has a long tradition of deep in-volvement in industrial and community cooperation in the countries with which we do business. As men-tioned earlier, our ambition is partnering up with Polish industry and authorities and to offer both our products and competence where it adds value. It is therefore early to talk about other ways of coopera-tion.

MANUFACTURING & PROCESSING

Rockwool continues Rockwool continues Rockwool continues Rockwool continues expansion of Cigacice expansion of Cigacice expansion of Cigacice expansion of Cigacice insulation plantinsulation plantinsulation plantinsulation plant

After adding a new production line for Rockfon acous-tic ceiling panels at their factory in Cigacice (100km southwest of Poznań), Danish insulation giant Rock-wool has broken ground on a new high bay warehouse at the site. Together with a new reception and offices for Rockwool's logistics department, the project is to cost PLN 12.5m and reach completion by the end of the year. Rockwool embarked on a PLN 100m expansion of the Cigacice unit in October last year. The project were to

add some 100 jobs to the estimated 1,000 staff the Danish company has in Poland. Overall, Rockwool has invested close to PLN 1bn to-date at its two Polish production units in Cigacice and Małkinia (70km northeast of Warsaw). In 2011 the Danish giant took over a Polish external façade solutions company Fast to boost its competences in this booming segment of the Polish building insulation market.

Rockwool employs more than 700 staff at the Cigacice plant. Photo: Rockwool "In the wake of the financial crisis public investments gained in relative importance and schools, hospitals etc. are the type of projects that typically use acoustic insulation," Rockwool's Group Communications Man-ager Lars Wodschow told Poland Today's Lech Kaczanowski when the Cigacice extension was first announced. "Moreover, the quality of construction in Central and Eastern Europe has improved which is why we see more demand for products like Rockfon - and this is also the reason why we have also added a production unit for this type of products in Russia." The Cigacice site became part of the Rockwool group in 1993, when the Danes acquired a local insulation manufacturer. With a staff of 730 it makes a range of

mineral wool-based thermal insulation products. The new line is a natural extension of the site, as Rockfon acoustic panels are produced from semi-finished goods made at the factory. Rockwool said its invest-ment responds to growing demand for ceiling panels in the EU, Russia, Middles East and Asia. Overall, the two Polish Rockwool plants produce 400,000 tons of mineral wool per annum. The Rockwool Group was founded in 1909, but in 1962 the owner families split the business in what is now Rockwool and the aeroconcrete maker H+H, both of which operate in Poland. Rockwool has been a brand since 1937 and from 1976 it is also the company name. With a head office in Hedehusene south of Copenha-gen, Rockwool has in excess of 9,800 employees in more than 40 countries. In 2012 the Group generated sales of DKK 14.7bn. The company is listed on the NASDAQ OMX Nordic Exchange Copenhagen, but the founding Kähler family's Rockwool Foundation is the largest shareholder with 23% of the shares. Chairman of the supervisory board is former CEO Tom Kähler.

BANKING & FINANCE

New blue chip index to New blue chip index to New blue chip index to New blue chip index to replace replace replace replace WIG20 on WIG20 on WIG20 on WIG20 on Warsaw bourseWarsaw bourseWarsaw bourseWarsaw bourse

The Warsaw Stock Exchange's blue chips index WIG20 will be replaced by a new indicator, featuring 10 additional companies, on 23 September. The move is seen as a step toward improving the index's liquidi-ty. The WSE says the new WIG30 indicator will help to diversify WSE's main index, which is currently dominated by the banking sector.


"Since the introduction of WIG20 in April 1994, Po-land’s economy has undergone a transformation and the Polish capital market as well as the WSE have rec-orded rapid growth. During this period the number of companies listed on the Main Market increased from 24 to 443, and the capitalization of domestic compa-nies increased from over PLN 8bn to nearly PLN 540bn. WSE is currently one of the fastest growing markets in Europe and the largest stock exchange in Central and Eastern Europe. Thus, this qualitative change needs to be reflected in an index that brings together the largest and most liquid companies listed on the WSE's Main Market. The changes are also set to stimulate the pace of growth of individual market sectors," WSE said in a statement. WIG30 will include the 20 companies from the cur-rent main WIG20 index and an additional ten: Alior Bank, Azoty Tarnow, Boryszew, CCC, Cyfrowy Polsat, Enea, ING BSK, LPP, Netia and TVN. Over-all, companies from 13 different sectors will make up the new blue-chip index, which is scheduled to fully replace the current WIG20 by the end of 2015, when WSE will cease publication of the old index. The WSE said that the reserve list includes Millennium, Getin Noble Bank, CEZ and AmRest. Although the decision did not come as a surprise to WSE's small and medium-sized companies, they con-sider it unnecessary, since apart from the WIG and WIG20 indexes, the market also includes the mWIG40 and sWIG80, as well as a number of other industry indexes. On the other hand, supporters point out that since its introduction in 1994, no changes have been made to WSE's major index, despite the immense growth the Warsaw bourse has seen over that period. "The changes to the main stock market indices are in-tended to better reflect the condition and size of our market and to stimulate its development. This should improve liquidity on the equities market and – in the

longer term – stimulate the derivatives market. We have carried out extensive domestic and international consultations, as making such historic changes re-quires particular attention and care for the interests of our stakeholders. We have approved a detailed time-table aimed at introducing the changes in a safe and transparent manner so that the entire market is ade-quately prepared for them," said Adam Maciejewski, President of the WSE Management Board. Naturally, the changes will affect all index-based de-rivatives. WSE said WIG30 will become the underly-ing for new futures contracts as well as options and will eventually replace currently listed WIG20 futures and options. A newly introduced mid-cap index WIG50 will become the underlying for new futures contracts and will eventually replace currently listed mWIG40 futures. The process of migration from the currently listed index based derivatives to the new ones will begin at the end of 2014 and it assumes a cer-tain period of parallel listing of derivatives based on current and new indices. The migration process of WIG30 derivatives (futures and options) may take un-til September 2015 and WIG50 derivates may take un-til June 2015, although the whole operation is likely to end earlier, WSE representatives said.

BANKING & FINANCE

PKO BP mulling PKO BP mulling PKO BP mulling PKO BP mulling alliance with PZUalliance with PZUalliance with PZUalliance with PZU

According to Reuters, Poland's top lender PKO BP is looking for a partner to buy 50% of its insurance busi-ness and could be interested in cooperating with PZU, the nation's biggest insurer. The search for an insur-ance partner follows PKO's first ever acquisition. In June the bank sealed a deal to take over Poland's

tenth-largest lender Nordea Bank Polska and its in-surance business from Sweden's Nordea for PLN 2.83bn. PKO BP estimates that the acquisition will help the bank increase its assets by 16%, at the same time boost-ing its network in Poland's largest cities by 25% and its portfolio of wealthy customers - by 8%. In short, the deal seals PKO's position as Poland's number one lender, expanding its share in the banking sector's to-tals asset from 15% to 18%. The Polish bank's key com-petitor, Italian-owned Pekao SA, comes second with an 11% share. PKO's share in retail loans will increase from 17.5% to 20.7%, as a result of the Nordea deal, the bank said. PKO BP earned PLN 3.78bn last year, down from PLN 3.8bn in 2011. "We are in the process of choosing our partner. We feel closest to PZU," PKO's CEO Zbigniew Jagiełło told a parliamentary committee. The two state-controlled market leaders seem like a natural match to both analysts and decision makers. PZU is the largest insurer in Central and Eastern Eu-rope, with a 43.1% share in Poland's life insurance market (as of 2012) and 32.2% share in the non-life segment. PKO has long been touted as a potential con-solidating force in Poland's financial services sector, where foreign players dominate and margins are un-der pressure because of record low interest rates. According to analysts quoted by Reuters, PKO's insur-ance joint-venture plans may be similar to a partner-ship between Banco Santander's Polish unit BZ WBK and British insurer Aviva, which included BZ WBK getting a 10% stake, worth PLN 500-600m, in Aviva's local business.


ENERGY & RESOURCES

Polish LNG terminal to Polish LNG terminal to Polish LNG terminal to Polish LNG terminal to be be be be delivered half a year delivered half a year delivered half a year delivered half a year late late late late and cost moreand cost moreand cost moreand cost more

Poland's much awaited LNG terminal in Świnoujście will be delivered later than initially planned, but still in time to receive the first shipments of liquefied natu-ral gas from the Persian Gulf under a contract with Qatargas. According to the updated schedule, the project is to be operational by the end of 2014. The operator Polskie LNG said in a statement it had signed an annex to the original agreement with the terminal's general contractor, which extends the dead-line for construction completion and increases the value of the contract by EUR 67.5m to a total of PLN 2.4bn. The state-controlled investor had earlier indi-cated that the terminal construction deadline would be postponed, among other factors due to financial problems of contractors. One of consortium members, PBG, has been in bankruptcy protection for debt re-structuring since June 2012. The annex raises the value of the remuneration of the general contractor, consortium of Italy's Saipem and Technit, and Polish builder PBG, as it will extend the scope of construction works, the guarantee period, as well as operating support after finishing construction, Polskie LNG said. According to the original order (worth EUR 714m), the system (comprising two liquid gas storage tanks, each 160,000 cubic meters and the LNG terminal itself) were to be completed and start-ed-up by 30 June 2014. The terminal will allow for importing 5bn cubic meters of liquefied natural gas annually (more than a third of Poland's annual con-sumption), with a possibility of increasing the capacity

to 7.5bn cubic meters. The running of the plant, which will significantly reduce Poland's dependence on Rus-sian gas imports, will be managed by the national gas network operator Gaz System through the company Polskie LNG. The end-2014 deadline constitutes a safe solution for natural gas firm PGNiG, which needs to receive the first shipment of LNG from Qatargas gas group on the basis of a take-or-pay contract around that period, Polskie LNG said said. Poland signed a deal with Qatargas for the import of 1bn cubic meters of LNG a year back in 2009. However, Qatar links its gas prices to oil prices, which have decreased significantly since the deal was signed. In November last year, Mikołaj Budzanowski, who was Poland’s treasury minister at the time, said that Poland wanted to renegotiate the deal. However, no attempt to do so has been made thus far.

Polskie LNG says the terminal will be ready toi re-ceive first shipments of Qatari gas by end-2014. Photo: Polskie LNG

Commenting on the deadline postponement, current Treasury Minister Wlodzimierz Karpinski said that while he is "not pleased" with the fact, "it will allow . . .

to attend to matters related with the [LNG] construc-tion such as the North-South corridor, allowing to transport gas from Świnoujście on the Baltic coast to our southern neighbors and to the Balkans, and PGNiG's contract with Qatargas."

Russia dominates Poland's gas supply The 14.9bn cb.m of gas sold by Poland's PGNiG last year came from:

Domestic

26%

*Czech Rep.

4%Russia

61%

*Germany

9%

*) the Czech and German imports are largely comprised of Russian

gas Source: PGNiG

Poland seeks to better connect its gas pipeline network with those of its neighbors, hoping to offer the termi-nal's regasification services to other countries in the region that seek alternatives to Russian gas. Back in June, during his visit to Washington, DC, Polish For-eign Minister Radosław Sikorski said Poland is inter-ested in importing natural gas from the United States. Mr. Sikorski met with US Energy Secretary Ernest Moniz to discuss the possibility. In recent years, thanks to technological developments that allow for the extraction of gas trapped in shale rock, the US has become the world’s largest producer of natural gas. As a result, the fuel has become much cheaper in the US than in other countries. A thousand cubic feet of natural gas costs USD 3-4 in the US, while in Europe the same amount costs around USD 12.Over


70% of the gas Poland consumes is imported from Russia, and a few months ago Polish state-controlled gas firm PGNiG renegotiated a deal with Gazprom to reduce the price of the gas it buys from the Russian state-owned giant by some 15%. Nevertheless, Poland would like to further reduce its dependence on Rus-sian gas. Hence the country's recent efforts to boost domestic production, particularly from shale gas de-posits, but according to most market observers it will take years before Polish shale gas can be extracted commercially.

ENERGY & RESOURCES

Areva and EDF hopeful Areva and EDF hopeful Areva and EDF hopeful Areva and EDF hopeful aaaabout Poland's nuclear bout Poland's nuclear bout Poland's nuclear bout Poland's nuclear ambitions,ambitions,ambitions,ambitions, secure more secure more secure more secure more local contractors local contractors local contractors local contractors

Despite growing rumors that the Polish government may be losing its heart for the country's nuclear energy program, leaning towards the less capital-intensive shale gas and clean coal technologies, the world's top suppliers of nuclear reactors keep up their lobbying ef-forts. Only weeks after Japanese Prime Minister Shinzo Abe arrived in Poland to promote Japan's nu-clear energy expertise, France's Areva and EDF held the third joint-edition of 'Supplier Days,' as part of France's campaign to export its nuclear energy to Po-land. More than 50 companies specialized in manufactur-ing, construction and engineering services attended the Supplier Day, alongside senior Areva and EDF ex-ecutives. According to the companies, the event un-derlines Areva and EDF’s ambition to create an ex-tended network of Polish suppliers to participate in fu-

ture nuclear projects in Poland, and their commitment to support the industrial and technical development of local Polish contractors. Four new Memoranda of Un-derstanding (MoUs) were signed during the event, with Polish companies Grupa Powen-Wafapomp, Elektrobudowa, Tele-Fonika Kable and Rafako. "Today’s event and the signature of these MoU agree-ments will help to strengthen the supply chain imple-mented by Areva and EDF, and will enable us to make the best possible offer for the construction and opera-tion of nuclear reactors in Poland," commented Tarik Choho, Areva’s Chief Commercial Executive Officer. "Approximately 25 Polish companies are already working at the Olkiluoto 3 construction site in Finland, demonstrating first-hand their capabilities to become a significant part of the future reactor project work in Poland." Areva's Jérôme Rosso told Poland Today the company had earlier inked MoUs with Polish construction and engineering firms Polimex Mostostal and Energoprojekt Warszawa. "In total six MoUs have so far been signed with Polish companies," said Rosso, confirming that the agree-ments are not exclusive. "We are planning other sup-plier days in the future, for instance in the Pomeranian region." Poland, which currently relies on its vast coal reserves to produce about 90% of its electricity, is scrambling to find alternative energy sources - including nuclear and shale gas - to meet European Union greenhouse gas emission limits by 2020. According to government plans, the first Polish nuclear power unit is to be oper-ational around 2024 and the second similar one a few years later. However, besides protests from local resi-dents at the proposed sites of the planned stations, Po-land's nuclear ambitions are facing another, perhaps even larger, challenge – financing. The cost of the nu-

clear power station will most certainly be higher than the entire capitalization of Poland's leading energy utility PGE, which tops some PLN 31.5bn. Hoping to establish a consortium with a foreign partner for the project, PGE is also counting on government guaran-tees.

PGE listed Żarnowiec, Choczewo and Gąski on the Polish Baltic coast as the most likely locations of the country's first nuclear plant. Source: PGE "Associating the skills and knowledge of companies who know the local context to the expertise and know-how of experienced nuclear companies is a con-dition for the success of the Polish nuclear program, in particular to ensure the quality and industrial safety for future operations. The signing of these four new MoUs strengthens the link between EDF and the hun-dreds of Polish suppliers that EDF Polska already works with for its power generation plants, and demonstrates our willingness to share our skills and knowledge with partners over the longer term, said Dominique Lagarde, Executive Vice-President of EDF's New Nuclear Engineering Division. Power utility PGE's fledgling nuclear unit is currently collecting bids for the contract engineer deal for Po-land's first power plant. PGE may launch procedure of


selecting the technology provider by the end of the year, as long as the government approves the national program for nuclear energy by the end of the year. Earlier this year, PGE awarded a PLN 252m contract for assistance in the delivery of Poland's first nuclear power plant to WorleyParsons, a major Australian provider of professional services to the energy, re-source, and complex process industries. The company will provide services related to site characterization, licensing and permitting for the development of the plant, which will have a power output of about 3,000 MW. Crucially, over the coming two years Worley Parsons is to help PGE's nuclear power subsidiary PGE EJ 1 se-lect a suitable site for the project. The services will be provided by WorleyParsons' nuclear hubs in Europe (Sofia, Bulgaria) and the United States (Reading, Pennsylvania) and will involve work on two potential sites on the Baltic coast: Choczewo and Żarnowiec. Should these two locations prove unsuitable, the Aus-tralian contractor may be asked to look into another two sites, according to the contract. PGE EJ 1 is a spe-cial purpose company responsible for preparing the investment process and construction of the first nucle-ar power plant in Poland. It operates as part of Nucle-ar Power business line of PGE Capital Group.


SwedeCenter breaks SwedeCenter breaks SwedeCenter breaks SwedeCenter breaks ground on mixedground on mixedground on mixedground on mixed----use use use use complex in Gdyniacomplex in Gdyniacomplex in Gdyniacomplex in Gdynia

Shortly after completing phase one of their giant Busi-ness Garden office park in Warsaw, and breaking ground on a similar development in Poznań, Swedish developer SwedeCenter, part of the Inter IKEA

Group, has officially launched the construction of an office and hotel complex Gdynia Waterfront. Located in one of Gdynia's most attractive spots, next to the landmark SeaTowers building and near the busy Kościuszki square, phase one the LEED certified de-velopment is to reach completion in 2015. Gdynia Waterfront is a mixed-use project with a

floor area of 90,000 sq.m, featuring offices, residential, retail, and hospitality space accompanied by cultural and leisure facilities. The general contractor is Austri-an-owned PORR Polska, which has cooperated with SwedeCenter on a number of other projects. The first stage of the project (21,100 sq.m) will comprise a Mariott Courtyard hotel and conference center (to be managed by Scandinavian Hospitality Manage-ment) and an office building that will serve as the new headquarters of Nordea Bank Polska.

Gdynia Waterfront is to house the new headquarters of Nordea Bank Polska, which is facing a takeover by the Warsaw-based PKO BP. Source: SwedeCenter Although the latter is to become part of the Warsaw-based Poland's largest lender PKO BP, under a PLN 2.83bn takeover announced earlier this year, Nordea's spokesperson Joanna Krawczyk-Golba tells Poland Today the ownership reshuffle will have no impact on the Gdynia lease.

"We signed a long-term lease in Gdynia Waterfront back in June, but since the building will be delivered in 2015 it is hard to determine what use it will be to us by then or how many jobs will be created at the site. Our original intention, dating back to 2009, was to group together three separate units that are currently scattered across Gdynia," Ms. Krawczyk-Golba tells Poland Today's Lech Kaczanowski. Besides Gdynia Waterfront, SwedeCenter is develop-ing three business parks under the Business Garden logo – in Warsaw, Poznań, and Wrocław. Before the summer, the company laid a cornerstone for the one in Poznań - a class A office complex of nine buildings with a planned area of 80,000 sq.m. Phase one of the project will feature 42,000 sq.m of leasable space. In addition to offices, the buildings will also accommo-date a restaurant and retail space. Located on Marcelińska and Bułgarska streets, the first stage of the LEED Gold-certified Business Garden Poznań, is to be opened in the beginning of 2015. Over the coming two years, the Austrian general contractor PORR will have some 200 people working at the site. Unlike in Business Garden Warsaw, which includes a hotel, no hospitality facilities are being planned in Poznań. Later this year, the developer plans to launch the construction of its third business park, this time in Wrocław. "In Poznań we are not planning any hospitality facili-ties as part of the Business Garden complex, whereas in Wrocław there will be a convention center and business hotel," SwedeCenter's CEO Roger Andersson told Poland Today's Lech Kaczanowski earlier this year. Although SwedeCenter is primarily a real estate in-vestment and development company, it also manages its own portfolio of commercial properties. Estab-lished two decades ago in a move to back the commer-


cial real estate operations of Inter IKEA Group's prop-erty division in Poland, it has since developed a portfo-lio of 600,000 sq.m in completed and pipeline pro-jects. Their developments include the SwedeCenter, Uni-versity Business Center and N21 office buildings in Warsaw and Cracovia Business Center in Krakow (the latter three have been sold), Brama Portowa in Szcze-cin (13,000 sq.m with tenants that include Deloitte, LUX MED, Genpact, and Starbucks) as well as Mera Hotel & Spa in Sopot. The company's largest project to-date is Warsaw's Business Garden (90,000 sq.m), the first installment of which was delivered in July, nearly 13 years after the investor first got hold of the site. "We hope to brak ground on phase two of Business Garden Warsaw by the end of the year," says Ewa Łydkowska, Head of Marketing & PR at SwedeCenter. "It will comprise three of the remaining five office buildings we are yet to deliver at the site."


Ghelamco Ghelamco Ghelamco Ghelamco closes EUR closes EUR closes EUR closes EUR 121m sale of121m sale of121m sale of121m sale of MokoMokoMokoMokotów tów tów tów Nova office projectNova office projectNova office projectNova office project

Flemish developer Ghelamco has finalized the sale of its Mokotów Nova office project to Curzon Capital Partners III core plus real estate fund for EUR 121m. This is Ghelamco's second major deal this year follow-ing the May sale of the Senator office building to Un-ion Investment for EUR 120m.

Located in the Mokotów district, Warsaw's largest non-central office zone, Mokotów Nova was complet-ed in January 2012 and is currently 95% occupied. Aside from Ghelamco itself, its tenants include Oriflame, Hyundai Motor Poland, BMW, Cargill, Medicover, Emitel, LG Electronics Polska, CEGEDIM, Reckitt Benckiser, CBG International, Svenska Handelsbanken, Lego Poland, as well as PRIMA PASTA restaurant on the ground floor. The U-shaped complex is comprised of two main buildings, which have been divided to create four sep-arate sections providing 43,750 sq.m of class A office space. Three underground levels and the adjacent area offer more than 1,000 parking spaces. The project has recently received the BREEAM European ecological certificate with a "very good" grade.

Mokotów Nova is part of the estimated 0.5m sq,m of office and warehouse space Ghelamco has delivered in Poland to-date. In August the Flemish developer secured a record-breaking PLN 904m.financing for its flagship project Warsaw Spire Photo: Ghelamco Curzon Capital Partners III were represented by Tris-tan Capital Partners, an investment management company specializing in the public and private proper-ty market in United Kingdom and continental Europe.

Ghelamco's advisors in this transaction were Hogan Lovells and Jones Lang LaSalle. "Poland has been a favorite market for the fund and we are delighted to have acquired this asset at an attrac-tive price in one of Europe's most prestigious and larg-est business districts located outside a city centre. This takes the CCPIII fund closer to being fully invested," commented Daniel Harris, Managing Director at Tris-tan Capital Partners. Investment volume to hit EUR 3bn According to real estate consultants Savills, the 2013 property investment volume in Poland is likely to hit EUR 3bn, the highest result since 2006. In 2012 Poland accounted for ca. 80% by volume of investment sales in the core CEE markets (Poland, Czech Republic, Slovakia and Hungary). Investment volume in the first half of 2013 came to approximately EUR 1.26bn, 47% of the total 2012 volume and ca. 48% more than in H1 2012. Additionally, five preliminary sale and purchase agreements were signed during H1 2013 and the first half of July for more than EUR 850m (including Silesia City Center, Galeria Dominikańska, Wola Park, Mokotów Nova and Le Palais). The office sector accounted for 51% of activity by vol-ume in H1 2013 with ca. EUR 644m from 14 transac-tions (11 in Warsaw, two in Wroclaw and one in Tricity). Warsaw clearly remains the leading location in the office sector, however, investor activity outside Warsaw is rising, Savills analysts said in their August report. In terms of Warsaw locations, the city centre is still the most sought after among risk averse investors. This is reflected in yield expectations of 6.00% for prime buildings. In the first half of this year four office properties located in Warsaw city centre were sold. The Mokotów district, the largest non-central office zone in Warsaw, has lately received slightly less atten-


tion, since most investors targeting the office sector al-ready have assets in this area. Lighter investor appetite for office buildings located in this part of the city re-sulted in the easing of prime yields by ca. 75 bps over the last 18 months from 6.75% to 7.50%. The yield gap between prime CBD and non-central lo-cations has widened recently to ca. 150 bps, but ac-cording to Savills this is likely to compress over the coming months as the long-term sustainable gap should be around 50-75bps. A bit more investor inter-est was also noticed in other Warsaw non-central loca-tions, in particular in the western part of the city, however, in H1 2013 these were mainly distressed sales and opportunistic acquisitions.

DATA BOX: CEMENT SALES Cement production edged down 1.9% y/y to 1.576m

tons in August, while August sales fell 3.9% y/y to

1.616m tons, Poland's Cement Producer Association

SPC said in a statement. Year-to-date production

dropped by 15.2% y/y to 9.092m tons, while January-

August sales declined by 14.8% to 9.295m tons.

SERVICES & BPO

Poland's BPO sector Poland's BPO sector Poland's BPO sector Poland's BPO sector growing faster than growing faster than growing faster than growing faster than AsiaAsiaAsiaAsia's's's's, report says, report says, report says, report says

Poland has maintained its position as the European destination of choice for companies operating in the business process outsourcing sector, confirms the lat-est edition of Jones Lang LaSalle's "Onshore, Nearshore, Offshore: Unsure?" report on modern business services opportunities in Poland prepared in

cooperation with recruitment company Hays, the Polish Information and Foreign Investment Agency (PAIiIZ), and Association of Business Service Leaders in Poland (ABSL). According to ABSL, as of mid- 2013, Poland's 400 for-eign-owned business centers employed more than 110,000 people which represented approximately 40% of the total BPO workforce in Central and Eastern Eu-rope. The market has been growing steadily by over 20% annually since 2008 and ABSL experts expect the figure to reach between 115,000 and 120,000 by the end of 2013. Over the past year Poland outpaced India in the rate of job creation and project expansions in the BPO sector. Poland has 3.4% of all global outsourcing/offshoring jobs, ranking 1st in CEE, 2nd in Europe and 6th global-ly, according to estimates by fDi Markets and Financial Times). It is also 3rd in the Hackett Group's ranking of destinations for global service centers. Together with China and India, Poland was chosen as one of the best places for Business Services investment projects. Po-land was the only CEE country to be described as a "mature market," together with Brazil, China and In-dia, in the latest report from the Everest Group. Recently, a growing number of European companies have shifted from ‘far-shoring’ in Asia to ‘near-shoring’ in Central Europe, which shares the same time zone, similar culture and regulatory environment, and can be easily accessed by air from all major cities on the continent. The range of services that are being delivered by the Polish nearshoring centers is also ex-panding at a faster pace than in Asia, and includes in-creasingly complex functions such as R&D, software development, HR, as well as more advanced finance and accounting processes. "Centres operating in Poland are now competing for contracts in the highly-advanced services sector. This

process started several years ago when these units be-gan to extend their service portfolio to include tasks that required experience, knowledge and foreign lan-guage proficiency," says Jacek Levernes, President of ABSL. "At the moment, we are aiming at a wide range of middle office processes - with a particular focus on services for investment funds. In addition, we are tar-geting contracts concerning financial analysis, finan-cial instruments, tax services, transfer pricing, and fi-nancial risk management. Within the next few years, Poland will have the opportunity to acquire a consid-erable number of financial services from Western Eu-rope. This will generate a further 100,000 well-paid jobs for specialists."

Key locations of business services centers in Poland. Source: Jones Lang LaSalle

Many investors enter Poland attracted by its estimated half a million university graduates who enter the job market every year. As the sector matures, the supply of experienced BPO staff also increases. "According to a


Hays survey, over 30% of respondents have more than five years' experience in the service centre environ-ment. Also, Poland has a low attrition rate which cur-rently stands at 15%. However, the rate can be as low as 5% for centers with more advanced processes," says Małgorzata Jasińska, Corporate Accounts Director Central Eastern Europe at Hays. In May 2013 there were 25,400 jobs in the sector lo-cated in 43 centers in Kraków, Poland’s top outsourc-ing destination (growth of almost 31% since January 2012). Warsaw had 18,900 jobs (33% increase over the same period) in 55 centers, while Wrocław had 18,400 jobs in 38 centers (46% increase). While leading Polish regional cities attract the largest numbers of investors, new destinations in smaller cities are emerging as sig-nificant locations. The growing office stock in smaller cities such as Olsztyn, Bydgoszcz, Opole and Rzeszów means that over the past four years they have been able to meet BPO requirements from international companies across diverse sectors. "The office market is developing quickly, with 1m sq.m of space currently under construction across Poland showing that this is one of the most dynamic markets in Europe and the largest in CEE. Poland offers the widest range of office locations in the region, which is key for companies that want to expand or are looking to diversify. The high level of construction activity in-dicates that more quality space will come onto the market in the short to medium term, resulting in an even broader choice of available space both in Warsaw and other major cities. It is also worth mentioning that modern business services drive the growth of Poland's office market, especially on the markets outside the capital city. A prime example is Kraków, where ten-ants from the sector occupy almost a half of the total stock. Jones Lang LaSalle estimates that business ser-vices sector tenants occupy approximately 1m sq.m of office space," says Julita Spychalska, National Direc-tor, Corporate Advisory, Jones Lang LaSalle.

The government, on its part, is also supportive of the sector, which provides entry level jobs to graduates, helping reduce unemployment. Large or innovative business services projects may receive public aid in the form of tax breaks or training grants. BPO projects worth in excess of PLN 2m or vowing to employ more than 250 staff may be eligible for investment grants on the basis of job creation. In the case of R&D projects, an investor is required to create a minimum of 35 new jobs for university graduates and to spend a minimum of PLN 3m. The maximum amount of support varies from PLN 3,200 to PLN 15,600 per job created and is dependent on a number of factors, including the per-centage of university educated personnel, location, type of processes offered etc. Currently one in four in-vestments handled by PAIiIZ are service outsourcing projects.


Szczecin's NorthSzczecin's NorthSzczecin's NorthSzczecin's North----West West West West Logistic Park moves on Logistic Park moves on Logistic Park moves on Logistic Park moves on to phase twoto phase twoto phase twoto phase two

Encouraged by the huge success of its North-West Lo-gistic Park in Szczecin, the first section of which has been fully-leased since it reached completion in July, the Cyprus-based property investment company Waimea Holdings Limited wasted no time breaking ground on phase two of the project. Offering twice as much space as the recently delivered building one, the 13,380 sq.m new section of the project likewise targets logistics and light manufacturing tenants. With an estimated total capex of PLN 110m and planned leasable area of 64,000 sq.m, North-West Lo-gistic Park is Szczecin's first class-A warehouse and industrial complex. Located on a 14ha site in the city's

south-eastern Dąbie district, the project benefits from direct access to the A6 highway (Szczecin-Berlin) and the S3 expressway (Szczecin-Świnoujście port), and proximity to the Goleniow airport (30km), the German border and ferry connections to Scandinavia.

Once fully completed, North-West Logistic Park will have a leasable area of 64,000 sq.m. Photo: North-West Logistic Park

The 6,850 sq.m phase one of the project attracted three tenants (InCom Polska, Premium Distributors, and IQ Metal Polska) which employ 110 staff at the site. North-West Logistic Park targets especially com-panies from Scandinavia and northern Europe. Thanks to its strategic location Szczecin represents an attrac-tive warehouse and manufacturing destination for northern European companies seeking to expand in Germany and the CEE region. After all, it takes merely 1½ hours to get from Szczecin to Berlin by car, which makes the Polish port town a natural logistics hub for the German capital. Financing for the first two stages of North-West Lo-gistic Park was provided by BOŚ Bank, with Trasko-Invest being the general contractor. Besides the Szczecin investment, Waimea Holdings Limited is working on a similar logistics project in southeastern Poland. Located by the A4 highway near the Poland-


Ukraine border crossing in Korczowa, Waimea's East A4 Logistic Park is currently at the predevelopment stage. The investor is no stranger to this area, where its only Polish project to-date, the giant 45,000-sq.m Korczowa Dolina shopping centre is currently under construction.

Poland is CEE's industrial property giant Modern industrial property stock in million sq.m as of end of 2012

0 1 2 3 4 5 6 7 8

Romania

Slovakia

Hungary

Czech Rep.

Poland

Source: Cushman & Wakefield

"Until recently companies looking for warehouse space in Szczecin were forced to buy or even build their own logistics properties. The recently completed North-West Logistic Park was 100% leased from the start, part of that even before construction had been completed. This indicates that there is unmet demand for quality warehouse space. There is a large area to be developed along the S10 express road or West Pomer-anian Logistic Centre of around 20ha located in the former Port of Szczecin. Nevertheless no new plans for such developments have been announced," com-mented Aleksander Kuźniewski, Senior Property Ne-gotiator, Industrial and Logistics at CBRE in Poland. Szczecin is one of Poland's smallest regional logistics and warehouse markets. According to CBRE, ware-

houses located in the Szczecin area serve mainly the local, market, due to the city's considerable distance from the A2 highway connecting Berlin and Warsaw. However, the region is exceptionally attractive in terms of logistics, since it is conveniently located close to the German border and to Scandinavian countries and offers sea connections. Szczecin's industrial stock amounts to nearly 50,000 sq.m while the vacancy rate is close to zero. Effective rents range between EUR 2.50-2.90/month/sq.m. The rates are competitive in relation to other Polish regional markets and might encourage tenants to locate their resources in schemes situated the region, argues the property consultancy.


Ryanair moves Warsaw Ryanair moves Warsaw Ryanair moves Warsaw Ryanair moves Warsaw base back to Modlin base back to Modlin base back to Modlin base back to Modlin from September 30thfrom September 30thfrom September 30thfrom September 30th

From 30 September, Irish no-frills carrier Ryanair is to return to Warsaw’s Modlin airport following an al-most year-long absence, Ryanair deputy head Michael Cawley and Modlin airport CEO Piotr Okienczyc an-nounced at a joint press conference. Neither Modlin airport nor Ryanair have disclosed the details of their agreement. Ryanair is the first budget airline to return to the trou-bled airport since it reopened at the beginning of July. Cawley said that Modlin will become an important base for Ryanair, with the airline expected to fly to 26 destinations during the winter months. Furthermore, Ryanair hopes to carry some 1.3m passengers in and out of Modlin in 2014. In the first half of 2013 the Irish low-cost carried 731,000 on routes to and from the Polish capital.

Ryanair's announcement is of crucial importance for Modlin airport's management, who have been in talks with both Wizz Air and Ryanair to rekindle business after runway problems at the airport forced it to close just months after opening in December 2012. Both Ryanair and Wizz Air transferred their flights to War-saw’s Chopin Airport, as a result, even though Ryanair had earlier refused to fly there due to "elevated" fees. Modlin, which had been designed as a low-cost alter-native to the Chopin Airport, reopened a few weeks ago, after being closed for repairs for more than half a year. Besides the necessary runway upgrades, the air-port has been equipped with landing systems (ILS), the lack of which was a major issue last year, when heavy autumn fog made approach difficult for many pilots, causing them to detour to the Chopin Airport. While the first Ryanair planes in almost a year will start landing at Modlin in two weeks, Wizz Air stated that it will be expanding its presence at the Chopin airport, with a fourth aircraft and additional flights to Greece, Sweden, Israel, s well as the UK, among other destinations. József Váradi, CEO of the Hungarian carrier, said Modlin still remains too risky a destina-tion for Wizz Air, due to potential landing problems. He alluded to the fact that Modlin's new ILS system will initially operate in the lowest category (I), provid-ing guidance only in conditions of slightly reduced vis-ibility. A more advanced version (Category II), better suited for Modlin's riverside setting, is to be intro-duced in the autumn of 2014. According to some observers, WizzAir seeks to be-come the airline of choice for passengers who don't mind paying a little extra to avoid the hassle of having to add an extra hour to their travel time to get to and from Modlin, which is located some 30km north of Warsaw. Unlike Modlin, which is out in the sticks, the Chopin Airport is situated very conveniently just out-side Warsaw's city centre.


CONSUMER GOODS & RETAIL

Poland is EU's 6th Poland is EU's 6th Poland is EU's 6th Poland is EU's 6th largest retail centre largest retail centre largest retail centre largest retail centre market by turnovermarket by turnovermarket by turnovermarket by turnover

Gross sales in Polish malls came to EUR 26.3bn last year, making the country Europe's 6th largest retail center market, according to a fresh estimate by the Polish Council of Shopping Centers (PRCH). The cal-culation takes into consideration the average turnover in all shopping centers in the country. "This means that in 2012 an average Pole spent some PLN 2,860 on shopping in modern retail centers," says Radosław Knap, New Business & Market Research Manager at PRCH. "In the past few years Poland has caught up with other European markets and currently it ranks just behind France, Great Britain, Germany, Spain and Italy. There are an estimated 400 shopping centers in Poland with a combined turnover corre-sponding to some 7% of the country's Gross Domestic Product."

Growth of Poland's retail center stock Number of properties & total GLA, estimates by PRCH

2008 2009 2010 2011 2012

No. of retail centers 295 318 339 363 391

Gross leasing area

(million sq.m) 7.13 7.69 8.14 8.67 9.21

Source: PRCH

According to data from the International Council of Shopping Centers (ICSC), shopping center sales in 27 EU member states represented approximately 19% of total retail sales, on the average. In Poland the figure stood at 16%, which means the country may still have

some catching up to do as far as growth of its shopping center segment is concerned. Last year, the main focus of shopping centre develop-ment activity in Poland was on smaller urban areas. These accounted for 75% of the total shopping centre floor space delivered, according to the spring edition of Cushman & Wakefield's MarketBeat report. Shopping centre provision increased by 400,000 sq.m of GLA, as 20 new schemes and a number of exten-sions came on stream. The largest schemes completed were Galeria Rzeszów (42,000 sq.m of GLA), NoVa Park in Gorzów Wielkopolski (32,400 sq.m) and Korona Kielce (34,100 sq.m). Extensions accounted for 21% of this total GLA. At the end of 2012, Poland's total shopping centre GLA stood at 8.1m sq.m.

Sales turnover in Polish retail centers Estimates by Polish Council of Shopping Centers, in PLNbn

80

85

90

95

100

105

110

115

2008 2009 2010 2011 2012

Source: PRCH

In 2013, the shopping centre development pipeline is expected to deliver a further 750,000 sq.m of GLA, with large cities accounting for 45% of all newly com-pleted space as development focus shifts towards the-se areas. The Katowice conurbation has seen the open-ing of Helical's Europa Centralna retail park in Gliwi-ce to be followed by Neinver's Galeria Katowicka. Galeria Bronowice will open to the public in Krakow. In Gdynia, Mayland's Wzgórze shopping centre ex-

tension will complete, while in Poznań, Poznań City Center being developed by TriGranit. In Warsaw's Mokotów district the 16,000 sq.m Galeria Miejska (part of office and retail complex Plac Unii currently under construction) is to open shortly. As of 1H 2013, there was around 850,000 sq.m of GLA under con-struction throughout the country. Occupier demand for shopping centre space is modest and shows variations between both regions and indi-vidual schemes. Lublin, Częstochowa and Szczecin posted the lowest vacancy rate (respectively – 0.97%, 1.76%, 1.89%), while the highest vacancy was in Toruń (5.93%), Kielce (5.37%) and greater Krakow area (4.61%). The highest rents in Warsaw’s prime shop-ping centers stood at EUR 75–85/sq.m/month and in other key metropolitan areas they came to EUR 35–40/sq.m/month. Shopping centers in medium-sized cities fetch average rents of EUR 20–25/sq.m/month, reported Cushman & Wakefield.

FOOD & AGRICULTURE

US Mars to invest PLN US Mars to invest PLN US Mars to invest PLN US Mars to invest PLN 250m in Polish pet food 250m in Polish pet food 250m in Polish pet food 250m in Polish pet food & chocolate & chocolate & chocolate & chocolate factoriesfactoriesfactoriesfactories

One of the world's top producers of fast moving con-sumer goods, US Mars, Inc. will spend PLN 250m on expansion of its production capacities in Poland. Scheduled for completion in 2014, the investment will lead to creation of some 100 new jobs at the company's manufacturing and office cluster near Warsaw. "The recruitment is already underway," says Elżbieta Tomczuk, Talent Development Manager, Mars Polska. "We are looking for engineers, shift managers, as well as line workers."


Mars built its first Polish factory, focusing on dry pet food, back in 1992, near Sochaczew (50km west of Warsaw). Three years later a second plant was com-pleted in the area, this time for chocolate products, while the original petcare unit extended its product portfolio to include wet canned food. In 1996 Mars started making chocolate bars near Sochaczew, and in 1999 also the popular candy range M&M's. In 2004 the US food giant opened its 4th Polish production plant near Sochaczew, and its only global unit that makes special milk-based nutritional products for cats.

Mars has invested more than PLN 800m at its pro-duction cluster near Sochaczew. Photo: Mars Polska "Our investments follow growing demand for Mars chocolate and petcare products. As far as the growth in pet food sales is concerned, it has to do with in-creasing awareness among pet owners of the health benefits of balanced nutrition. This is a market with a substantial growth potential, both in short- and long term and we expect it to evolve into one of the largest FMCG categories in Poland," says Aku Vikström, Managing Director, Mars Polska Petcare.

Mr. Vikström's statement echoes an assessment we heard from Giorgio Vesprini, Country Manager Nestlè Purina Poland & Baltics, whose company an-nounced a PLN 300m investment in a brand new pet food factory in Wrocław only a few weeks ago (see PT

Business Review+ No. 001, page 12). With Poland's es-timated 7.4m dogs and 5.7m cats (according to Euromonitor), pet nutrition remains one of the fastest growing segments of the country's food sector. Ac-cording to estimates, its value is likely to come in ex-cess of EUR 0.5bn next year, which is still way behind France (EUR 2.4bn) and Germany (EUR 2bn). Mars, with its Pedigree, Whiskas, Chappi, Kitekat, and Royal Canin brands, remains the undisputed leader in Poland's pet food segment, with close to a 50% market share. The number two player is Nestlè Purina, with slightly less than 10%. Overall, Mars, Inc. has invested in excess of PLN 800m in Poland, where its local unit currently employs 1,400 people and turns over PLN 1.5bn annually. More than 50% of Mars Polska's pro-duction is being exported to more than 30 markets worldwide. With the planned expansion, Mars' in-vestment outlays in Poland will pass the PLN 1bn mark in the near future. "The ongoing investments encompass expansion and modernization of our factory cluster near Sochaczew and applies to both buildings as well as production lines," Marzena Ignaczak, Corporate Communications Director at Mars Polska tells Poland Today. "The re-sulting capacity increase may lead to a potential ex-pansion of our product portfolio in Poland."

DATA BOX: UNEMPLOYMENT

Poland's registered unemployment likely fell in

August to 13.0% from 13.1% in July, the Labor Ministry

said in a statement. The number of unemployed was at

2.085m at end-August, down by 8,400 from July.

Employers filed 74,400 job offers in August, up by 16%

m/m. According to the ministry, Polish registered

unemployment is likely to hold below 14% by year-end.

POLITICS & ECONOMY

Trade union protesteTrade union protesteTrade union protesteTrade union protesters rs rs rs descend on Warsawdescend on Warsawdescend on Warsawdescend on Warsaw

Up to 100,000 people took part in the antigovernment demonstrations on Saturday in Warsaw organized jointly by Poland's three largest trade unions - Solidar-ity, the All-Poland Alliance of Trade Unions (OPZZ) and the Trade Unions Forum in a protest against gov-ernment labor policy, pension system reform and to call for higher pay. The Saturday event marked the end of a unions-inspired "week of protest" that began on Wednesday with rallies in front of eight ministries (the Treasury, Labor, Transport, Economy, Health, Interior Affairs, Agriculture and Justice) where the protesters left lists of their demands, and subsequently marched to the parliament building, in front of which they pitched tents. The protesters called on the government to abandon its plans for the introduction of the so-called flexible working arrangements, that would enable employers to adjust working hours depending on current condi-tions, making staff work longer hours when companies have more orders, and shorter when the business is bad. Designed as part of the government's anti-crisis measures, the draft bill seeks to help businesses weather tough economic times without resorting to layoffs, but according to the unionists the planned regulations are "scandalous and will not help increase employment." Other demands voiced during last week's rallies in-cluded a higher minimum wage, improvements to the healthcare system, and a ban on the so-called junk


employment contracts, short-time agreements without social security that have become a plague in many in-dustries. Last but not least, the employee organiza-tions want the reversal of a raise in the retirement age to 67 years from the previous 60 for women and 65 for men, and demand government support for certain types of industry. After six year in power, Prime Minister Donald Tusk sees public support for his centre-right government ebb away. The ruling coalition was overtaken recently in opinion polls by the country's conservative opposi-tion Law and Justice (PiS) after making a series of un-popular policy moves and its parliament majority has shrunk to one vote after three MPs left the ruling Civic Platform (PO). Prime Minister Donald Tusk asserted that the appro-priate place for debate remained the Trilateral Com-mission, that comprises of the government, labor un-ions and business organizations. He added that the protests were "political," and aimed at “bringing down the government." According to a poll by MillwardBrown, commissioned by a private broad-caster TVN, 59% of Poles were in favor of antigovern-ment rallies and 31% against.

POLITICS & ECONOMY

MP exodus cuts ruling MP exodus cuts ruling MP exodus cuts ruling MP exodus cuts ruling coalition's majority coalition's majority coalition's majority coalition's majority down to one vote down to one vote down to one vote down to one vote

The Polish government is left with a one seat majority in parliament following the departure of three law-makers in less than two weeks. Although this exodus does not pose an immediate threat to Prime Minister Donald Tusk's rule, his position seems to be at its

weakest since the centrist coalition of Civic Platform (PO) and its agrarian junior partner Polish People's Party (PSL) came to power six years ago. The first to leave was John Godson, the Nigerian-born Poland's first black member of parliament. Mr. God-son, an evangelical pastor, had been one of PO's most conservative MPs and often differed with the party's official line on social issues. For example, earlier this year he opposed Prime Minister Donald Tusk's efforts to sanction civil unions, which he viewed as a prelude to legalizing gay marriage. Godson was followed by Jarosław Gowin, one of PO's most senior figures, regarded as the unofficial leader of the party's conservative wing. Gowin, who unsuc-cessfully challenged Tusk for the party's leadership in a contest last month, also believes the Premier is too liberal on issues such as abortion and same-sex part-nerships. A first test for Tusk's reduced majority will come when the 460-seat parliament votes on a government law on transferring Treasury bonds held by private pension funds to the state in an effort to curb the country's rapidly growing public debt (see No. 002 of PT Business Review+, page 14). Gowin said it was the pension reform that triggered his departure, which was preceded by a prolonged tug of war between Tusk and his in-party rival. "Today we have reached a threshold, beyond which loyalty to the party will be in conflict with loyalty to the Polish people," Gowin told reporters. "Remaining in the party would be contrary to my conscience." The third MP to abandon PO was Jacek Żalek, another member of the informal conservative camp, who to-gether with Godson and Gowin was facing disciplinary action for abstaining from voting on the ruling party's

proposal to suspend fiscal rules and thus allow for the public debt-to-GDP ratio to exceed a threshold of 50%. It remains to be seen whether the three renegades have any political plans for the future. According to rumors, Mr. Gowin is mulling the creation of a new political entity called Republikanie (The Republicans), and both Mr. Żalek and Mr. Godson will join him, to-gether with a handful of right-wing politicians who have left the opposition party Law and Justice (PiS) in the past few years. Although Tusk's rule may not be under immediate threat, any further erosion of his support in parliament could lead to the collapse of his coalition and early elections, with hard-to-predict consequences. The general election is scheduled for 2015. Although ac-cording to political analysts PO usually manages to persuade a handful of independents to back the gov-ernment, a defeat on an important vote could encour-age more dissenters to leave the party, and in conse-quence, bring down the government. The first big test for the weakened PO will be sometime within the next two or three months, when the pension reform comes before parliament.

POLITICS & ECONOMY

Special economic zones Special economic zones Special economic zones Special economic zones to offer investment to offer investment to offer investment to offer investment incentives until 2026incentives until 2026incentives until 2026incentives until 2026

A government ruling extending the life of Poland's special economic zones (SEZ) by six years entered into force in early September. The cabinet of Prime Minis-ter Donald Tusk has decided that the SEZ, which offer incentives to investors and play a crucial role in re-


gional economic development, will continue to be op-erational through to the end of 2026. Ministers had originally planned to shut down the zones by the end of 2020. While the shutdown will eventually cause investors operating production facili-ties in the zones to lose preferential tax treatment, the six-year postponement is seen as a good move for those looking to put money into the region's econo-mies. "The extension of the functioning of the zones is a very positive signal sent to investors who are currently evaluating the possibility of investing in Central and Eastern Europe," said Rafał Prusakowski, senior man-ager in the public aid unit of consultants PwC Poland. "This will allow the investors to take advantage of tax exemption on revenues generated in the SEZ until 2026." Since 1995, a total of 14 special economic zones have been launched in Poland, offering Corporate Income Tax (CIT) and property tax exemptions to investors and stimulating economic development. According to Ministry of Economy figures, companies have so far invested some PLN 86bn in the SEZ, creating approx-imately 186,000 jobs. Recently, investor activity in the zones has slowed quite a bit, partly due to their declin-ing attractiveness ahead of the original 2020 expira-tion date. Now that the government has given inves-tors a few extra years, the ministry is counting on a further PLN 30bn in capital expenditures and 20,000 new jobs across the SEZ. Experts from tax consultancy KPMG point out that the new ruling lacks transitional regulations explain-ing how this extension of SEZ operations applies to current holders of SEZ permits. According to infor-mation obtained by the consultancy, companies that have permits with no specified date of validity will be able to use those until 2026.

The maximum amount of state aid (including tax ex-emptions) that can be granted to an investor varies be-tween regions, depending on economic situation. Ac-cording to new directives of the European Commis-sion, the current map that outlines the aid ceiling in different parts of Poland is to be replaced with a new one in mid-2014. In a number of regions the new limits will be considerably lower, reflecting improving con-ditions.

The regional aid map for Poland covering the period 2007-2013 and 2014-2020. Source: KPMG "Bearing in mind the above, if you are planning in-vestments in an SEZ located in a region where the state aid ceiling will be reduced, it is worth to obtain an SEZ permit before the end of 2013. This would al-low permit holders to enjoy the regional aid limits specified on the map for 2007-2013 even if the permit

for an investment relates to 2014 or beyond," suggest-ed KPMG experts in a recent commentary.

DATA BOX: INFLATION

Poland's consumer price inflation stayed unchanged in

August, in line with economists' forecast, latest data

showed Friday. The consumer price index moved up

1.1% on an annual basis in August, as they did in the

previous month, the Central Statistical Office GUS said.

The outcome was in line with average projections.

Data showed that inflation was influenced by a 2.5%

growth in food and non-alcoholic beverages prices,

and a 2% gain in housing costs. The negative

contributions came from a 4.8% fall in prices of

clothing and footwear and a 1.4% decline in

transportation expenses. Consumer prices dropped

0.3% on a monthly basis, as expected by economists.

In July, prices had recorded a 0.3% increase.

CPI inflation in Poland (y/y)

0%

1%

2%

3%

4%

5%

Feb 11 Aug 11 Feb 12 Aug 12 Feb 13 Aug 13

Source: GUS, the central statistical office


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) May '13 Jun '13 Jul '13 Aug '13

Sector y/y m/m y/y m/m y/y m/m y/y m/m

Food & bev +1.6 +0.7 +0.7 -0.3 2.5 -0.3 2.5 -1.2

Alcohol, tobacco +3.5 +0.2 +3.7 +0.2 +3.6 +0.1 +3.6 +0.2

Clothing, shoes -4.8 +0.1 -4.7 -0.8 -5.0 -2.7 -4.8 -2.7

Housing +1.1 +0.1 +0.9 0.0 +2.0 +1.2 +2.0 +0.1

Transport -4.2 -2.3 -3.5 +0.4 -1.2 +1.1 -1.4 +0.5

Communications -9.7 -2.6 -9.7 0.0 -9.7 0.0 -9.7 0.0

Gross CPI +0.5 -0.1 +0.2 0.0 +1.1 +0.3 +1.1 -0.3

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Aug 11

Oct 11

Dec 11

Feb 12

Apr 12

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Mar '13 Apr '13 May '13 Jun '13 Jul '13

m/m (%) +16.8 -2.7 +1.6 +1.5 +3.8

y/y (%) +0.1 -0.2 +0.5 +1.8 +4.3

Year 2008 2009 2010 2011 2012

Turnover in PLNbn 564.7 582.8 593.0 646.1 n/a

y/y (%) +13.3 +4.3 +5.5 +11.6 +5.6

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2008 2009 2010 2011 2012 Jan-Jul

2013

y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 79.7 -22.3

Commenced 174.7 142.9 158.1 162.2 141.8 71.9 -21.8

U. construction 687.4 670.3 692.7 723.0 713.1 703.5 -4.4

Completed 165.2 160.0 135.7 131.7 152.5 81.1 +1.7

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q2 2013 +0.8% 395,507 n/a

Q1 2013 +0.5% 377,815 -2.8%

Q4 2012 +0.7% 442,231 -3.5%

Q3 2012 +1.3% 393,792 -4.1%

2012 +1.9% 1,595,264 -3.5%

2011 +4.5% 1,528,127 -4.9%

2010 +3.9% 1,416,585 -5.1%

2009 +1.6% 1,344,384 -3.9%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator *2010 *2011 *2012 2013 2014

GDP change +3.9% +4.5% +1.9% +1.0% +2.5%

Consumer inflation +2.6% +4.3% +3.7% +1.0% +1.9%

Producer inflation +2.1% +7.6% +3.4% -1.4% 1.0%

CA balance, % of GDP -5.1% -4.9% -3.5% -1.0% -0.1%

Nominal gross wage +3.9% +5.2% +3.7% +2.6% +4.0%

Unemployment** 12.4% 12.5% 13.4% 13.9% 13.5%

EUR/PLN 3.99 4.12 4.19 4.22 4.06

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

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

Sector Q3 2012 Q4 2012 Q1 2013 Q2 2013

A B A B A B A B

Coal mining 5,920 135 8,427 192 6,060 138 6,290 143

Manufacturing 3,463 151 3,522 154 3,491 152 3,560 155

Energy 5,790 176 6,535 198 6,196 188 5,828 177

Construction 3,709 158 3,829 163 3,556 152 3,693 157

Retail & repairs 3,322 142 3,365 143 3,432 146 3,421 146

Transportation 3,543 125 3,816 135 3,439 122 3,547 125

IT, telecoms 6,493 169 6,379 166 6,685 174 6,707 174

Financial sector 5,875 132 6,044 136 6,356 143 6,712 151

National average 3,690 147 3,878 154 3,741 149 3,613 144

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jan '13 Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13

m/m (%) -60.3 -0.3 +20.9 +7.9 +16.1 +19.1 +7.8

y/y (%) -26.1 -11.4 -18.5 -23.1 -27.5 -18.3 -5.2

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +18.1 +15.5 +12.1 +5.1 +4.6 +11.8 -0.6

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Nov 10

Feb 11

May 11

Aug 11

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb 13

May 13

Aug 13

60

80

100

120 Co nsumer confidence (left axis)

Economic sentiment (right axis)

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

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month Jan '13 Feb '13 Mar '13 Apr '13 May'13 Jun '13 Jul'13

m/m (%) 0.0 +0.3 -0.3 -0.7% +0.1 +0.7 +0.2

y/y (%) -1.2 -0.4 -0.7 -2.1% -2.5 -1.3 -0.8

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +2.0 +2.0 +2.2 +3.4 +2.1 +7.6 +3.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Jan '13 Feb '13 Mar '13 Apr '13 May'13 Jun '13 Jul'13

m/m (%) -0.2 -0.2 -0.2 -0.1 -0.2 -0.1 -0.1

y/y (%) -1.4 -1.6 -1.8 -1.9 -2.0 -2.0 -1.9

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +3.2 +7.4 +4.8 +0.2 -0.1 +1.0 +0.2

IndustrIndustrIndustrIndustrial Outputial Outputial Outputial Output

Month Jan '13 Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13

m/m (%) +5.4 +0.3 -0.2 -2.3 -0.7 +2.6 +1.5

y/y (%) +0.3 -2.7 -0.6 +2.7 -1.8 +2.8 +6.3

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +11.6 +10.7 +3.6 -3.5 +9.8 +7.7 +1.0


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Jun 2013

y/y (%)

share (%)

2012 share (%)

Jan-Jun 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 32,226 +9.7 10.5 61,694 10.3 22,938 +3.1 7.4 44,287 6.9

Beverages and tobacco 4,077 +5.7 1.3 7,967 1.3 1,911 -0.7 0.6 3,989 0.6

Crude materials except fuels 7,842 +5.4 2.6 14,024 2.4 10,539 -8.7 3.4 22,053 3.5

Fuels etc 14,708 +1.4 4.8 29,389 4.9 35,257 -16.4 11.4 85,280 13.4

Animal and vegetable oils 739 +54 0.2 1,342 0.2 1,247 -12.2 0.4 2,887 0.5

Chemical products 28,890 +5.5 9.4 54,295 9.1 45,247 -11.1 14.6 89,140 14.0

Manufactured goods by material 63,359 -1.4 20.6 126,161 21.1 54,120 -7.1 17.5 110,773 17.4

Machinery, transport equip. 115,762 +2.7 37.7 223,646 37.5 102,109 -0.9 33.0 203,718 31.9

Other manufactured articles 38,694 +2.8 12.6 75,925 12.7 26,749 -10.0 8.7 57,646 9.0

Not classified 739 n/a 0.3 2,653 0.5 8,973 n/a 3.0 18,515 2.8

TOTAL 307,036 +2.8 100 597,096 100 309,090 -5.3 100 638,288 100

Poland's ten largest trading partners, ranked according to 2012

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Jul 2013

share *2012 Share No Country Jan-Jul 2013

share *2012 Share

1 Germany 89,862 24.9% 150,046 25.1% 1 Germany 77,335 21.3% 134,933 21.1%

2 UK 23,427 6.5% 40,184 6.7% 2 Russia 45,944 12.6% 91,033 14.3%

3 Czech Rep. 21,951 6.1% 37,475 6.3% 3 China 32,785 9.0% 57,235 9.0%

4 France 21,017 5.8% 34,862 5.8% 4 Italy 19,010 5.2% 32,782 5.1%

5 Russia 19,345 5.4% 32,290 5.4% 5 France 14,267 3.9% 25,303 4.0%

6 Italy 16,368 4.5% 29,067 4.9% 6 Netherlands 13,837 3.8% 24,543 3.8%

7 Netherlands 14,129 3.9% 26,678 4.5% 7 Czech Rep. 13,374 3.7% 23,327 3.7%

8 Ukraine 9,940 2.8% 17,213 2.9% 8 USA 10,628 2.9% 16,436 2.6%

9 Sweden 9,729 2.7% 15,811 2.6% 9 UK 9,314 2.6% 15,509 2.4%

10 Slovakia 9,370 2.6% 15,288 2.6% 10 South Korea n/a n/a 14,619 2.3%

Source: Central Statistical Office (GUS) *) preliminary estimates, full year

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 13 September 2013

100 USD 316.96 ↓

100 EUR 421.10 ↓

100 GBP 501.04 ↓

100 CHF 340.24 ↓

100 DKK 56.47 ↓

100 SEK 48.45 ↓

100 NOK 53.65 ↓

10,000 JPY 317.96 ↓

100 CZK 16.34 ↓

10,000 HUF 139.96 ↓

100 USD/EUR against PLN

300

350

400

450

1 Oct 12

7 D

ec 12

18 Feb 13

26 A

pr 13

8 Jul 13

13 Sep 13

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Apr '13 May '13 Jun '13 Jul '13

Monetary base 150,295 150,475 144,260 155,767

M1 493,721 508,299 523,783 530,666

- Currency outside banks 107,468 109,312 112,815 112,565

M2 914,732 920,112 927,345 921,662

- Time deposits 433,840 425,740 418,252 405,900

M3 935,231 941,791 946,586 945,077

- Net foreign assets 161,880 176,278 160,267 159,749 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Apr '13 May '13 Jun'13 Jul '13

Loans to customers 880,213 887,960 900,999 896,635

- to private companies 257,956 259,593 263,453 261,000

- to households 542,130 549,117 553,055 552,503

Total assets of banks 1,588,750 1,622,666 1,634,587 1,616,221

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13

PLN (up to 1 year) 5.9% 5.6% 5.4% 5.3% 5.0% 4.7%

PLN (up to 5 y ) 6.4% 6.2% 5.9% 5.7% 5.4% 5.1%

PLN (over 5 y) 6.3% 6.0% 5.7% 5.6% 5.3% 5.3%

PLN (total) 6.3% 6.0% 5.8% 5.6% 5.3% 4.9%

EUR (up to 1m EUR) 2.1% 2.3% 2.1% 2.3% 1.9% 2.3%

EUR (over 1m EUR) 2.8% 3.6% 2.9% 3.2% 2.9% 3.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 13 Sep 2013

Overnight 1 week 1 month 3 months 6 months

2.57%% 2.60% 2.61% 2.70% 2.73%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 13 Sep '13

Change 6 Sep '13

Change end of '12

↑ Asseco Pol. 47.1 +5% +4%

↑ Bogdanka 110.2 +1% -19%

↑ BRE 431.4 +3% +32%

↑ BZ WBK 320.55 +5% +33%

↑ Eurocash 50.95 +12% +17%

↑ GTC 7.22 +7% -27%

↑ Handlowy 105.3 +5% +7%

↑ JSW 76.85 +16% -17%

↑ Kernel 52.4 +11% -21%

↑ KGHM 124 +3% -35%

↑ Lotos 36.5 +1% -11%

↑ Pekao 171 +5% +2%

↑ PGE 17.04 +6% -6%

↑ PGNiG 6.15 +8% +18%

↑ PKN Orlen 43.1 +5% -13%

↑ PKO BP 37.85 +7% +3%

↑ PZU 422.3 +6% -3%

↑ Synthos 5.22 +19% -4%

↑ Tauron 4.66 +10% -2%

↑TP SA 7.80 +7% -36%

Source: Warsaw Stock Exchange

Key indices

as of 13 September 2013

WIG Total index

44449999,,,,348348348348....61616161 Change 1 week +6% ↑

Change end of '12 +4% ↑

WIG-20 blue chip index

2,2,2,2,375375375375....44444444 Change 1 week +6% ↑

Change end of '12 -8% ↓

WIG Total closing index

last three months

42000

44000

46000

48000

50000

52000

14 Jun 13

8 Jul 13

30 Jul 13

22 A

ug 13

13 Sep 13


Poland Today Sp. z o. o.

ul. Złota 61 lok. 100,

00–819 Warsaw, Poland

tel/fax: +48 22 464 82 69

mobile: +48 694 922 898,

+48 602 214 603

www.poland-today.pl

Business Review+ Editor

Lech Kaczanowski

office: +48 22 412 41 69

mobile: +48 607 079 547

[email protected]

Business Review+ Subscription

1 year- EUR 690 (PLN 2760)

6 months- EUR 375 (PLN 1480)

3 months- EUR 245 (PLN 980)

Sales Director

James Anderson-Hanney

mobile: +48 881 650 600

james.anderson-hanney@poland-

today.pl

Publisher Richard Stephens

Financial Director Arkadiusz Jamski

Creative Director Bartosz Stefaniak

New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Jul 2013 *

Monthly wages (PLN)

Jan-Jul 2013 **

Unemploy-ment

Jul 2013

New dwellings Jan-Jul 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 98.7 84.1 4,177 3,910 151.1 13.0 9,219 117.5

Kujawsko-Pomorskie (Bydgoszcz) 101.0 94.6 3,313 3,207 143.8 17.4 3,683 112.4

Lubelskie (Lublin) 98.7 98.2 3,626 2,974 128.4 13.8 3,284 83.6

Lubuskie (Zielona Góra) 95.1 83.1 3,336 2,940 57.9 15.1 1,830 97.0

Łódzkie (Łódź) 103.9 88.2 3,588 2,980 150.7 13.9 3,724 98.4

Małopolskie (Kraków) 97.4 93.6 3,738 3,265 159.6 11.4 9,087 114.0

Mazowieckie (Warszawa) 106.9 74.5 4,494 4,741 281.8 11.1 16,014 97.5

Opolskie (Opole) 96.4 93.4 3,464 3,112 49.6 13.6 916 106.0

Podkarpackie (Rzeszów) 107.8 98.2 3,228 3,012 146.2 15.5 3,379 95.1

Podlaskie (Białystok) 106.1 89.1 3,171 3,690 68.1 14.5 1,954 88.0

Pomorskie (Gdańsk-Gdynia) 101.0 88.7 3,871 3,444 110.9 13.0 6,665 101.1

Śląskie (Katowice) 96.0 86.3 4,501 3,471 206.2 11.1 6,235 122.5

Świętokrzyskie (Kielce) 97.9 84.9 3,313 3,140 85.0 15.5 1,397 86.8

Warmińsko-Mazurskie (Olsztyn) 97.0 86.7 3,163 3,037 107.3 20.2 2,397 97.0

Wielkopolskie (Poznań) 101.5 85.8 3,633 3,580 143.5 9.6 7,960 101.4

Zachodniopomorskie (Szczecin) 110.7 90.7 3,389 3,222 103.1 16.8 3,337 76.6

National average 100.5 84.0 3,882 3,641 2,093.1 13.1 81,081 101.7

Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q4 '11 Q1'12 Q2 '12 Q3 '12 Q4 '12 Q1 '13

in Poland 2,917 -1,808 1,131 1,084 2,048 360

Polish DI -929 1,090 883 -401 -1,197 329

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 13,646 2,455

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2010 2011 2012 Q3 '12 Q4 '12 Q1 '13

Trade balance -8,893 -10,059 -5,313 -445 -1,113 -139

Services, net 2,334 4,048 4,816 1,122 1,073 1,239

CA balance -18,129 -17,977 -13,332 -3,285 -3,329 -2,055

CA balance vs GDP -5.1% -4.9% -3.5% -4.1% -3.5% -3.0%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1800

2000

2200

2400

2600

Q2 10

Q4 10

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 2H 2012

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 2,710,000 44,000 15.2%

3.9–5.0

Warsaw suburbs 1.9–3.2

Central Poland 1,000,000 15,000 12.2% 1.9–3.1

Poznań 1,027,000 30,000 5.0% 2.3–2.9

Upper Silesia 1,470,000 22,000 4.2% 2.6–3.1

Wrocław 730,000 56,000 7.6% 2.4–3.0

Gdańsk 178,000 14,000 16.0% 3.2–4.0

Kraków 143,000 n/a 8.7% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 2H'12 Retail rents** '12

Q1 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,076 -5.9% 12-26.5 9.0% 85 83

Kraków 6,305 -12.1% 13-15 3.95% 41 78

Katowice 5,526 -5.0% 13-14 6.85% 48 56

Poznań 6,412 -13.3% 14-16 14.35% 44 55

Łódź 4,898 -9.2% 12-14 11.99% 31 26

Wrocław 6,031 -13.5% 13-16 8.01% 38 41

Tricity 6,453 -8.1% 13-15 9.44% 39 31

*avg, offer-based ** EUR/sq.m/month; Retail units 100-150 sq.m

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Jul09

Mar10

Nov10

Jul11

Mar12

Nov12

Jul13

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

Poland Today Business Review+ No. 003