No. 007 / 14th October 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING Green light for Billfinger Berger's offshore structures factory in Szczecin page 2

BANKING & FINANCE

Moody's raises outlook for Polish banks page 3

Number of millionaires in Poland to double by 2018, report says page 4

ENERGY & RESOURCES

State investment vehicle co-finances Grupa Lotos' Baltic exploration project page 5

EDP Renewables opens third Polish wind farm page 6

PROPERTY & CONSTRUCTION

Land buyers in Poland still very cautious, says CBRE in new report page 7

CONSUMER GOODS & RETAIL GTC sells Kraków mall, signs key tenants for new Warsaw projects page 10

SERVICES & BPO

Staffing company Work Service acquires Polish arm of Antal International page 11

British Vue completes takeover of cinema operator Multikino page 12

TRANSPORT & LOGISTICS

Polish bus producer Autosan goes bankrupt page 13

POLITICS & ECONOMY

Government finalizes pension overhaul bill, asset transfer to take place in February 2014 page 14

Warsaw mayor keeps her job after too few voters turn up for recall referendum page 15

Liberal party Palikot Movement changes name, gets facelift page 16

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 17-19

PKP Cargo ranks as number two in Europe, behind Deutsche Bahn AG. Photo: PKP Cargo

PKP Cargo goes public in PLN 1.6bn IPOPKP Cargo goes public in PLN 1.6bn IPOPKP Cargo goes public in PLN 1.6bn IPOPKP Cargo goes public in PLN 1.6bn IPO Poland's leading rail freight operator PKP Cargo will be floated on the Warsaw Stock Exchange on 31st October in this year's largest initial public offering. By divesting a 50% stake in the cargo business, rail giant PKP aims to cut its huge debt. page 12

Liebrecht & wooD completeLiebrecht & wooD completeLiebrecht & wooD completeLiebrecht & wooD completessss Plac UniiPlac UniiPlac UniiPlac Unii Flemish developer Liebrecht & wooD and its Polish partner BBI have completed the PLN 600m retail & office complex Plac Unii in Warsaw's city centre. Buyers are said to be lining up. page 9

weekly newsletter # 007 / 14th October 2013 / page 2

MANUFACTURING & PROCESSING

Green light for Green light for Green light for Green light for BilBilBilBilfinger Berger's finger Berger's finger Berger's finger Berger's offshore structures offshore structures offshore structures offshore structures factory in Szczecinfactory in Szczecinfactory in Szczecinfactory in Szczecin

Bilfinger Crist Offshore (BCO), a joint venture of German construction and engineering company Bilfinger Berger, Gdańsk-based shipbuilder Crist and Mars FIZ, and investment fund belonging to the state industrial development agency, ARP has obtained permission to invest in the Szczecin section of the Eu-ro-Park Mielec special economic zone. The investor has pledged to build a factory of foundations and steel structures for offshore platforms and wind parks at the cost of PLN 326m and create 462 jobs at the site. Located at a plot of land formerly belonging to Szcze-cin's Gryfia shipyard, the project will include a 30,000 sq.m production building as well as a 4,200 sq.m paint shop. According to plans, it will be operational by the end of 2015, to achieve its target capacity and em-ployment three years later. As far as BCO's ownership structure is concerned, with its 62.5% share Bilfinger Berger is the majority investor, with Crist and Mars FIZ holding the respective 32.5% and 5% stakes. The state investment fund is to exit the joint venture after a certain period of time. Structures made in Szczecin will be exported mainly to Germany and the UK. The investors estimate demand for offshore wind tow-er structures to reach some 5,500 units over the com-ing decade and due to Szczecin's logistically favorable location and skilled workforce, the new plant aims to play a major role in this new market segment. The col-lapse of the Szczecin shipyard a few years ago left

some 5,000 staff, including many experienced weld-ers, without work. Although the city has seen some large investments since, it still has a sizeable pool of qualified employees for new projects to tap into. This explains ARP's involvement in the project. Established in 1990, ARP is a government-run business entity that oversees restructuring of former state-owned indus-trial giants, allocation of public aid and management of special economic zones. Dealing with the fallout of the Szczecin shipyard's collapse was one of ARP's most challenging tasks to-date.

Bilfinger Crist Offshore's plant will be located on an island in Szczecin, which by 2015 is to be connected with the mainland by a brand new bridge. Photo: Gryfia

"We strongly believe in the offshore market, and we are absolutely sure that offshore wind will play a sig-nificant role in the future energy market. Bilfinger Berger has large experience and a strong track record in the installation of offshore foundations. We believe that the extension of our portfolio by not only in-stalling but also producing foundations will give us significant advantage over our competitors," Josef Federl, Head of Bilfinger Berger Ingenieurbau GmbH, BB's Wiesbaden-based infrastructure development unit, told Poland Today's Lech Kaczanowski last year, when the JV deal was struck.

Crist is a private Polish ship-builder and producer of steel structures. With some 1,700 staff (most of them on temporary contracts), the company turned over PLN 1bn last year, with net earnings reaching PLN 80m. Crist acquired a dock and other key production assets from the closed-down Gdynia shipyard, where it has since restored production. Since its founding in 1990, the company has built some 300 vessels and completed a number of orders for the wind power in-dustry. Headquartered in Mannheim, Bilfinger Berger is a multinational German company specialized in civil & industrial construction, engineering and related ser-vices. In the recent years it has participated in many key infrastructure development projects in Poland. With approximately 60,000 employees globally, the company turned over EUR 8.6bn last year. Bilfinger Berger is one of Europe's leading builders of offshore wind farms. The Crist-ARP-Bilfinger Berger project is one of sev-eral investments in the Szczecin area that count on an impending boom in Europe's off-shore wind energy sector. For in-stance, Belgian company Teleskop seeks to build a factory of cranes for offshore applica-tions. The construction of their EUR 20m plant is to launch in November. Polish Tele-Fonika Kable is re-portedly mulling production of undersea cables at the former Gryfia yard, also with offshore wind parks in mind. "The Baltic and North Seas are the target markets for Bilfinger Berger when it comes to offshore wind foun-dations. Hence the upcoming offshore wind projects in Polish waters are of great interest to Bilfinger Ber-ger, especially since those will be very close located to our new production plant in Szczecin. From today’s perspective Bilfinger Berger is expecting a maximum realizable capacity of 500 to 1,000 MW of offshore wind energy in Polish waters until the year 2020,

weekly newsletter # 007 / 14th October 2013 / page 3

which equals 80-160 OWECs [Offshore Wind Energy Converter; ed] with an average size of 5-7 MW. Those OWECs could be arranged in 1-2 offshore wind parks. Since from our point of view there are still uncertain-ties regarding the general framework for off-shore wind energy in Poland, we cannot judge at the mo-ment when the first Polish offshore wind park will be operational," Mr. Federl said last year and considering that the situation on Poland's renewable energy mar-ket has since gotten even more complicated, Polish offshore wind parks still seem like a song of a very dis-tant future.

BANKING & FINANCE

Moody's raises outlook Moody's raises outlook Moody's raises outlook Moody's raises outlook for Polish banks for Polish banks for Polish banks for Polish banks

Moody's Investors Service has raised the outlook for Poland's banking system from 'negative' to 'stable' on the expectation of a recovery in economic growth and consequent stabilization in bank profitability. The rating agency said that stable outlook also reflects the banks' improved capitalization, increased risk-absorption capacity and largely self-sufficient funding profiles, which make the system resilient to the persis-tently challenging conditions in international whole-sale markets. Moody's expects that this recovery in growth will translate into a stable operating condition for banks, with improved demand for credit and other banking products, both of which will support core profitability. After relatively weak GDP growth during 2013, which Moody's estimates will not exceed 1.4%, stronger growth of around 2.5% is likely in 2014, the agency said.

Consequently, Moody's expects a recovery in interest income, the Polish banks' main revenue source. In the improving economic environment, Polish banks are better able to gradually re-price their liabilities and improve net interest margins, towards levels compa-rable to other regional peers, the rating agency said. In the first half of 2013 the Polish system has further improved its leverage and capital adequacy ratios, prompted by the Polish Banking Supervisor (KNF)'s recommendations on profit retention.

DATA BOX: BANKS IN 1H 2013 In the first half of 2013 Polish banks posted PLN 8.18bn

in net earnings, marking a slight improvement (+1.9%)

y/y. However, according to the financial markets regu-

lator KNF, most banks (530 institutions representing

56.2% of the sector's assets) saw their results weaken

against January-June 2012. The decline was particular-

ly severe among cooperative banks, which reported a

28.1% drop in profits.

The KNF points to a deepening consolidation of Po-

land's banking sector, with the top five players con-

trolling 46.4% of assets (up from 45% a year earlier)

while the top ten lenders holding a 70.2% (against

64.6% in mid-2012). Total lending increased by 3.4%

y/y in 1H 2013, with loans to households rising by 2.8%,

and loans to companies going up by 3.4%. Employ-

ment in the sector dropped by 1,400, even though the

number of bank branches increased by 43.

Source: KNF

Moody's believes that during the outlook horizon, Polish banks' capital resources will remain solid, main-ly driven by internal capital creation, with an aggre-gate capital adequacy ratio expected to rise 1 to 2 per-centage points above the ratio of 14.7% registered as at end-2012. The system's resiliency is also boosted by

granular funding sources featuring a domestic deposit customer base with limited reliance on wholesale markets. Corporate and retail deposits continue to account for a significant portion of total funding with a number of foreign-owned banks relying on medium-term FX loans from their parents. While Moody's expects that parental funding will be scaled-down, this process is likely to be gradual, similar to the trends seen in the past two years. However, the rating agency added that the current negative pressures on asset quality will continue, at least during the initial period of the outlook horizon, with the non-performing asset quality ratio moving up slightly and nearing the 10% mark on a system-wide basis.

BANKING & FINANCE

Rate setter resigns but Rate setter resigns but Rate setter resigns but Rate setter resigns but monetary policy to monetary policy to monetary policy to monetary policy to remain stable in 2014remain stable in 2014remain stable in 2014remain stable in 2014

Polish President Bronislaw Komorowski has accepted a resignation by Monetary Policy Council (RPP) mem-ber Zyta Gilowska. According to unofficial sources, health problems were behind Gilowska's resignation from Poland's interest rate setting body. President Komorowski will have three months to name a re-placement for Gilowska, but his spokesperson said a nomination would likely come sooner. Appointed by the late President Lech Kaczyński, Gilowska had missed council sittings in early 2013 and mid 2012, but records place her on the council's hawk-ish wing during her term. In the easing cycle just closed, she supported only the December 2012 rate cut

weekly newsletter # 007 / 14th October 2013 / page 4

and has voted against every cut in 2013 for which she was present for voting. The RPP is made up of: Coun-cil Leader, who is the governor of the central bank NBP, and nine other members, selected in equal parts by the President, the Sejm and the Senate. Members of the MPC are chosen to serve for six-year terms. As for Poland's monetary policy, it should remain sta-ble throughout H1 2014, central bank NBP governor Marek Belka said on Tuesday. In an earlier interview, for Polish news agency PAP rate setter Elżbieta Chojna-Duch said that the RPP should maintain inter-est rates at the current level to end-H1 2014, as infla-tion will stay below target level and economic recov-ery will be gradual, and could even consider cuts were that outlook to notably worsen. Another rate setter, Jerzy Hausner, said during last week's debate orga-nized by enterprise development agency PARP that the Polish economy has entered a recovery stage and therefore a GDP growth rate of 3% may be attainable next year.

BANKING & FINANCE

Number of millionaires Number of millionaires Number of millionaires Number of millionaires in Poland to double by in Poland to double by in Poland to double by in Poland to double by 2018, report says 2018, report says 2018, report says 2018, report says

The next five years are expected to see the number of Polish millionaires grow by 89% to 85,000, according to the 2013 edition of the Global Wealth Report pre-pared by Credit Suisse. Currently there are an esti-mated 45,000 people with assets of USD 1 million or more in the country. Among 15 individual countries listed by Credit Suisse, Poland will likely be the largest gainer in relative terms, ahead of Brazil, Korea, and Malaysia (see table) and in 2018 the country's million-aire population will catch up with the current number

of Russian millionaires. A millionaire is classified ac-cording to US dollars in the report, and Credit Suisse believes that in spite of the credit crunch, Poland's sit-uation echoes a global trend. According to Credit Suisse, from mid-2012 to mid-2013 aggregate global household wealth increased by 4.9% in current dollar terms to USD 241 trillion, or USD 51,600 per adult in the world, an all-time high for average net worth, despite the continuing challenges posed by the economic environment. Inequality re-mains a huge issue as the top 1% controls 46% of global wealth.

More millionaires in the making Number of millionaires in '000 in selected countries in 2013 and 2018

2013 2018 Change (%)

US 13,216 18.618 +41%

France 2,211 3,224 +46%

UK 1,529 2,377 +55%

Germany 1,735 2,537 +46%

Brazil 221 407 +84%

Korea 251 449 +79%

Mexico 186 273 +47%

Singapore 174 235 +35%

Indonesia 123 194 +58%

Russia 84 133 +58%

Hong Kong 103 168 +63%

Turkey 102 158 +55%

Poland 45 85 +89%

Malaysia 38 67 +76%

Chile 54 86 +59%

Source: Credit Suisse Global Wealth Report 2013

"Our research shows that global wealth has doubled since 2000, quite compelling given some of the eco-nomic challenges of the last decade. We expect this trend to continue in the foreseeable future, driven largely by Emerging Markets' strong economic growth

and rising population levels," said Credit Suisse Re-search Institute's Michael O'Sullivan. Wealth is expected to rise by nearly 40% in the next five years, reaching USD 334 trillion by 2018. Credit Suisse expects that the pace of wealth generation in emerging markets will continue to be greater than that of developed markets. The share of wealth of emerg-ing markets will likely reach 23% by 2018 at USD 76.9 trillion, an increase of 0.5% on average each year. The annual rate of increase is projected to be 9.1% for emerging markets against 6.1% for developed markets. Estimates by Credit Suisse suggest that the number of global millionaires could exceed 47 million in 2018, a rise of nearly 16 million. While the number of million-aires in emerging economies is still far below the levels in the US (18.6 million) or Europe (15.0 million), it is expected to increase substantially in the next few years. China could see its number almost doubling by 2018, raising the total to 2.1 million. Pushed by Brazil (an extra 186,000) and Mexico (an extra 87,000), Credit Suisse also expects a substantial increase in the number of millionaires in Latin America. Credit Suisse says its analysis comprises the wealth holdings of 4.7 billion adults across 200 countries – from billionaires in the top echelon to the middle and bottom sections of the wealth pyramid, which other studies often overlook.

IN BRIEF: Poland's top insurer PZU is bidding on a 51.5% stake of Croatian insurer Croatia Osiguranje at EUR 900.9 per share and additionally offers a EUR 50m capital in-

crease of the company, Croatian government wrote on

Twitter. PZU's rival in the bid, local tobacco and tourism

group Adris, is bidding on a 43% stake, offering EUR 790.27 per share plus EUR 130m capital injection, the

weekly newsletter # 007 / 14th October 2013 / page 5

government said. Croatia currently holds 80.2% in Croa-

tia Osiguranje and plans to retain "a minimum of 25%

plus one share" and a "maximum share of 30%," the

country's Finance Ministry said back in August.

ENERGY & RESOURCES

State investment fund State investment fund State investment fund State investment fund supports Lotos' Baltic supports Lotos' Baltic supports Lotos' Baltic supports Lotos' Baltic exploration projectexploration projectexploration projectexploration project

Poland's state investment vehicle Polskie Inwestycje Rozwojowe (PIR) is to co-finance an oil exploration project operated by Polish oil refiner Grupa Lotos. Created last year as part of the government's "Polish Investments" program to stimulate economic recovery by investing future privatization proceeds into pro-jects of strategic importance, PIR has agreed to inject up to PLN 563m in Lotos Petrobaltic's B8 explora-tion project in the Baltic Sea. "The investment in the B8 development project has an average risk exposure profile, as PIR only invests in low- or medium-risk projects, which usually fall with-in the realms of infrastructure or private equity funds. The kinds of high-risk projects that are typical of ven-ture capital, are out of question," said PIR President Mariusz Grendowicz. The Lotos Petrobaltic project is PIR's first ever investment. Registered in June, PIR will manage about PLN 10bn in assets that are acquired through the privatization of state-owned companies. Later this year Poland plans to sell stakes in its rail freight operator PKP Cargo and utility Energa. The fund acts as a capital investor and a mezzanine finance provider for government-approved infrastructural investments. All investments undergo detailed feasibility studies as PIR takes part

only in profitable projects, operating on market terms, as an entity supplementing the debt market with addi-tional services.

Poland's only domestic oil producer

Lotos Petrobaltic's crude oil production in '000 tons

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010 2011 2012

Poland Lithuania

Source: Grupa Lotos

At present, Lotos Petrobaltic holds four production and nine exploration licenses in the Baltic Sea. Last year, the company produced nearly 190 thousand tons of crude oil and 21m cb.m of natural gas from under the Baltic. The B3 field, which is currently in produc-tion, will be operational until 2026 and, thanks to the launch of the unmanned PG-1 platform, production in the period is expected to remain stable at 100 thou-sand tons annually. As far as the B8 field is concerned, Lotos has so far fi-nanced all development from its own coffers. The agreement with PIR provides for the establishment of a special purpose vehicle, a wholly-owned subsidiary of Lotos Petrobaltic, to carry out the remaining work on the B8 field. This includes the conversion of Lotos Petrobaltic's drilling platform into a production unit, the preparation of subsea infrastructure, and the drill-ing of the last injection wells before the field comes on-stream.

"The launch of commercial production from the B8 field is planned for the end of 2015. We estimate the field's reserves at 3.5m tons of crude oil. Lotos Petrobaltic expects to produce approximately 220,000 tons of crude oil per annum from the field," said Zbigniew Paszkowicz, President of Lotos Petrobaltic and Vice-President, Chief Exploration and Production Officer, at Grupa Lotos.

Lotos Petrobaltic's Baltic Beta rig extracts oil from the B3 field. Photo: Grupa Lotos The project will be worth about PLN 1.6bn, with PLN 750m provided by Lotos and the remaining PLN 900m coming from PIR and commercial banks. The govern-ment will provide PIR with funds before the final deal with Lotos is signed in Q1 2014, Mr. Grendowicz told reporters. The two companies have to yet to arrange bank funding, he said. "The upstream segment is viewed by Lotos as its stra-tegic priority until 2015. As part of the 'Effective and Rising 2013-2015' program, the Baltic Sea will be the focus of Lotos Petrobaltic’s operations. According to available geological data, potential crude oil reserves in the company’s Baltic license areas are estimated at 30m tons, and making optimum use of these assets will

weekly newsletter # 007 / 14th October 2013 / page 6

allow us to improve Poland's energy security," com-mented Paweł Olechnowicz, CEO of Grupa Lotos. In addition to the B3 and B8 fields, Lotos Petrobaltic and its US-owned partner CalEnergy Resources Po-land are working together to establish the feasibility of developing and beginning production from the Baltic B4 and B6 natural gas fields. If the results are positive, commercial production is expected to commence in 2016/2017. The estimated aggregate production output of both fields is approximately 250m cb.m. Further-more, as part of their work with PGNiG, the company is involved in development of onshore licenses in Kamień Pomorski and Górowo Iławieckie..

ENERGY & RESOURCES

EDP Renewables opens EDP Renewables opens EDP Renewables opens EDP Renewables opens third Polish wind farmthird Polish wind farmthird Polish wind farmthird Polish wind farm

Portugal's EDP Renewables (EDPR), the world’s third-largest wind energy producer, has launched a new wind farm in Pawłowo near Gołańcz, some 70km north of Poznań. With a target capacity of 80 MW, Pawłowo is EDPR's third Polish wind farm after Margonin (also near Gołańcz) and Korsze (60km northeast of Olsztyn, near the Russian border). The new wind farm features 53 wind turbines, each with a capacity of 1.5 MW. According to EDPR, the farm's expected electricity output will be able to sup-ply some 70,000 to 80,000 households. As part of the project, the investor has improved some 27km of local roads in the Pawłowo area. Besides contributing to lo-cal infrastructure, the investment will be a long-term source of revenue for the commune as well as land-owners.

"Our current installed capacity is 320 MW, which places us on the top of the Polish wind energy sector. We have installed 130 MW of new capacity so far this year and we are currently constructing additional wind farms with a 60 MW installed capacity. We have a diversified portfolio of projects that are on different stages of development totaling more than 1,000 MW," EDPR's Rafael Solís Hernández tells Poland Today.

EDPR's wind farm in Margonin. Photo: EDPR The Madrid-based EDPR has seen exceptional devel-opment in recent years and is currently present in 11 markets (Belgium, Brazil, Canada, Spain, the US, France, Italy, Poland, Portugal, the UK and Romania). Its key shareholder, Energias de Portugal is Portu-gal's largest industrial group and the only Portuguese company to form part of the Dow Jones Sustainability Indices (World and STOXX). EDPR is one of merely a handful of foreign investors (the other active ones being Germany's RWE and France's EDF) that seem determined to grab a share in Poland's wind farm market. Earlier this year Den-mark's DONG Energy Wind Power and Spain's Iberdrola Renewables sold their wind energy pro-jects in the country to Polish utilities PGE and Energa Hydro. As part of the DONG deal, PGE has taken over 60.5 MW in operating wind farms and a

portfolio of 555 MW in projects, including 130 MW in advanced projects, while Energa Hydro has acquired a 51 MW wind farm and 220 MW in wind farm projects under development. In the subsequent transaction with Iberdrola (worth PLN 840m), PGE and Energa purchased operating wind farms with installed capaci-ty of 70.5 MW, with contracted off-take of electricity as well as certificates and pipeline of projects with planned capacity of 36 MW at an advanced stage of development.

Poland's installed wind energy capacity in MW

0

500

1,000

1,500

2,000

2,500

3,000

2005

2006

2007

2008

2009

2010

2011

2012

*2013

Source: URE *) as of end of June

"EDPR is committed to Poland and the Polish wind energy market. We believe that wind energy is a com-petitive source of energy and we look forward to exe-cute additional projects. However, the regulatory un-certainty in the Polish energy market results in lower availability of finance for wind power projects, thus limiting the number of new investments. The intro-duction of the new law on renewable energy sources, which is currently being postponed, will potentially al-low EDPR to move forward with additional invest-ments," says Rafael Solís Hernández. "The regulatory changes are a key risk and play a vital role in decision making. We detest lack of stability and transparency as far as regulations are concerned, and according to the

weekly newsletter # 007 / 14th October 2013 / page 7

current new draft the latter are likely to change quite seriously, resulting in more risk aversion among inves-tors." Poland's installed renewable energy capacity came to 4,858 MW in mid-2013 , up by over 1,800 MW com-pared to end-2011, according to energy market regula-tor URE. Wind power capacity increased the most, reaching 2,807 MW as of June, followed by hydro-power capacity amounting to 966 MW and biomass-fueled plants with 941 MW, the data showed. Renew-able energy currently represents slightly over 10% of Poland's energy supply. The country seems to be way on its way to reach its 15% target for the share of re-newable sources in gross final consumption of energy in 2020.

ENERGY & RESOURCES

EBRD supports wind EBRD supports wind EBRD supports wind EBRD supports wind farm projects in Polandfarm projects in Polandfarm projects in Polandfarm projects in Poland

Polish Energy Partners (PEP), a Warsaw-listed re-newable energy developer, majority-owned by Kulczyk Investments, has inked a major loan agreement with the European Bank for Recon-struction and Development (EBRD). The London-based institution is to lend up to PLN 292m (EUR 69.5m) to a group of three special-purpose companies fully owned by PEP for the construction of three wind farms in Poland. The EBRD finance will support the construction and operation of three wind farms in northern and north-eastern Poland - Gawłowice with a capacity of 41.4 MW, Rajgród with 25.3 MW and Skurpie with 36.8 MW, adding up to a combined a capacity of 103.5MW. According to estimates, the resulting reduction in

CO2 emissions in Poland should come to approximate-ly 179,000 tons per annum. The total capex on the three projects is to reach PLN 835m (EUR 198.8m). This includes an EBRD commit-ment of PLN 242.7m for phase one (creating a capacity of 66.7MW) which can, with the bank’s consent, be in-creased by an additional PLN 49.3 million to be used for the third wind farm (phase two). The first phase of the project should be completed by the end of 2014 and the second by September 2016, the EBRD said. "Today’s signing represents a milestone for the financ-ing of renewable energy investments in Poland. Given the challenging regulatory and financial environment in the sector the loan is expected to give a boost to PEP's ambitious initiatives. The EBRD is proud to be associated with this effort to increase renewable ener-gy production, which we consider very important for Poland to meet the EU target for the renewable energy share in the country’s energy mix," commented Lucyna Stańczak, EBRD Director for Poland.

PEP develops and sells wind farms. Photo: PEP

To date the London-based institution has invested more than EUR 6.3bn in all sectors of the Polish econ-omy with a combined project value exceeding EUR 33bn. The energy sector is one of the EBRD's top pri-orities in Poland and according to the bank the loan to PEP illustrates its commitment to the decarbonization of the Polish economy. The EBRD has invested over

EUR 1.1bn in nearly 50 renewable energy projects across its region so far. Besides development, management, and sales of wind farms, PEP specializes in outsourcing of industrial en-ergy, particularly in the paper industry, as well as pro-duction of pellets from agricultural biomass. The com-pany had sales revenues of PLN 132m last year (down from PLN 147m in 2011) with an EBITDA of PLN 45.7m (against PLN 59.8m in the prior year.

PROPERTY & CONSTRUCTION

Land buyers in Poland Land buyers in Poland Land buyers in Poland Land buyers in Poland still very cautious says still very cautious says still very cautious says still very cautious says CBRE in new reportCBRE in new reportCBRE in new reportCBRE in new report

According to the latest Expert’s View report by prop-erty consultancy CBRE, after years of slowdown, the number of transactions involving land lots is gradually on the rise, although it remains below the 2005-2008 level. According to CBRE experts, investors are much more prudent as far as site selection is concerned, and tend to put more effort into analyzing its development potential. Unlike during the boom years, developers are interested chiefly in the most attractive plots of land for medium-sized projects. Very large parcels of land sell rarely, as making proper use of them would require substantial capital expenditures. "When determining the attractiveness of a property, investors have two ways of looking at it, focusing ei-ther on the value of each sq.m of the plot, or, more im-portantly, on its value per sq.m of residential or lettable space that can be developed there. This factor is critical when determining the feasibility of an in-vestment," said Grzegorz Woźniakowski, Associate Director at Valuation Team in CBRE Warsaw office.

weekly newsletter # 007 / 14th October 2013 / page 8

The most attractive areas for office developers are the centers of large cities, mainly Warsaw and the most dynamic regional capitals, such as Kraków and Wrocław. The highest rents can be obtained in the centre of Warsaw, but land prices per sq.m tend to vary depending on its characteristics. Retail centre de-velopers look mainly for sites in areas where competi-tion is weak and the amount of available modern retail space remains low. A deciding factor for this investor group are often valid planning permissions. Those purchasing land for industrial facilities are mainly in-terests in locations in the vicinity of both existing and planned major highway junctions near large cities, such as Stryków near Łódź, Gądki near Poznań, Upper Silesia, and the greater Warsaw area (Ożarów, Pruszków).

Land prices in Poland Prices of land per sq.m of possible GLA (offices, retail, warehouses)

or usable floor space of a dwelling (residential)

Parcel use Warsaw

central

Warsaw

non-central

Major

regional

cities

Smaller

cities

Offices (EUR) 700-1500 150-400 100-300 <100

Retail (EUR) >500 400-500 300-400 *200-300

**100-250

Warehouses (EUR) - <100 ***20-50 <20

Residential (PLN) >1,500 600-1,500 400-1,000 <500

*) over 300,000 inhabitants **) other cities ***also areas of large cit-

ies or near transport junctions ****) prime locations in city centre or in

best non-central areas Source: CBRE

The most attractive sites for housing projects are those situated in well-known or dynamically developing res-idential districts – in Warsaw these are Mokotów, Żoliborz or Wola. Other key factors include proximity to parks and other green areas, good transport connec-tions to the city centre and relative distance from ma-jor transportation arteries. Although developers are still interested in land for housing projects in Kraków

and Tri-City, the potential of the sector in other Polish cities is being assessed more critically, CBRE said. The price discrepancy between very good and medi-um-quality parcels of land has increased considerably since the boom years. While the best plots in the cen-ters of large cities have managed to maintain their val-ue, discounts on less attractive parcels happen to reach even as much as several dozen percent. The recent drop in construction prices may positively affect the demand for land, but restricted access to financing remains a major factor inhibiting growth in the sector, as apart from meeting strict credit criteria, investors have to finance the purchase of land themselves, since loans typically cover only the construction costs. "At the same time we are observing an increase in sup-ply prompted by sale of properties by large State Treasury companies, such as PKP and Poczta Polska, and by perpetual lessees who run unprofitable busi-ness at high quality land and are unable to pay the fees for perpetual usufruct after the latter have gone up significantly in the years 2011-2012," added Grzegorz Woźniakowski.

IN BRIEF: Dutch real estate investment trust firm Meridian Prop-erties is cancelling its IPO on the Warsaw Stock Ex-

change (see PT Business Review No. 005, page 6) due

to adverse market conditions, the firm said in a press

statement. Meridian Properties planned to issue 18m

shares plus up to 900,000 papers in optional additional

pool with bookbuilding to be held on October 1-8, ex-

pecting some EUR 170.1m in gross receipts from the of-

fering. The debut was slated for around October 24.

weekly newsletter # 007 / 14th October 2013 / page 9

CONSUMER GOODS & RETAIL

Liebrecht & wooD's Liebrecht & wooD's Liebrecht & wooD's Liebrecht & wooD's Plac Unii shopping Plac Unii shopping Plac Unii shopping Plac Unii shopping center opens in center opens in center opens in center opens in WarsawWarsawWarsawWarsaw

Plac Unii City Shopping, the latest addition to War-saw's retail centre market, opened on Saturday 12th October just off the Plac Unii Lubelskiej roundabout in the city centre. Developed by Belgium's Liebrecht & wooD (majority investor with a 60% share) and Polish BBI Development, the 15,500 sq.m shopping center is part of PLN 600m mixed use development Plac Unii that comprises three buildings with a total GLA of 56,800 sq.m, and includes also 41,300 sq.m of class A+ office. In 2012, both the office and retail sec-tions of Plac Unii were awarded a coveted BREEAM certificate with a "very good" grade. Spread across three levels, the retail part of the project is almost fully rented to dozens of fashion and lifestyle brands, some of which are debuting on the Warsaw market. Tenants include Armani Jeans, ZARA, Massi-mo Dutti, Deni Cler, Liu Jo, Liu Jo Accessories, Ma-nila Grace, E-go’, Stradivarius, Cubus, Furla, Marella, and United Colors of Benetton. The centre houses also a drugstore, bookstore, interior design shop, along with numerous service points, cafes and restaurants. Level -1 is occupied by Supersam delicatessen, operat-ed by a local cooperative grocer which used to occupy the Plac Unii site for more than half a century. One of Plac Unii's strongest point is its location, at a key transit point at the border of Warsaw's Śródmieście and Mokotów districts. A number of tram and bus lines stop directly by the building and the

Politechnika station of the Warsaw subway is just a short walk away. Designed by Warsaw's APA Kuryłowicz & Associates and Prof. Stefan Kuryłowicz, an award-winning Polish architect, the black & white complex with a characteristic triangular tower, can be easily spotted from different areas of the city.

Plac Unii benefits from a great location at one of Warsaw's key intersections. Photo: Liebrecht & wooD "The retail section of Plac Unii is 96% occupied at the moment. We are still negotiating leases of retail units with a combined floor area of 700 sq.m," Kamila Zębik, managing partner at Liebrecht & wooD tells Poland Today. "As for the office section, its first tenants will start moving in already this month. The project is 60%-leased, with key tenants including ING Group companies, Dalkia Polska, HRS, and WeCare." Asked whether the project is for sale, Ms. Zębik re-plies. "I can confirm that we are being approached by prospective buyers so a transaction is possible." A few weeks ago Liebrecht &wooD struck a deal with BBI on another major office & retail project in War-saw, the Koneser project in the Praga district. Located on a 5ha site between Ząbkowska, Nieporęcka, Białostocka and Markowska streets, the project will

comprise over 300 housing units, 22,500 sq.m of retail and service space and 22,000 sq.m of offices. Liebrecht & wooD joins forces with BBI Development to develop the retail & office section of Koneser, which consti-tutes around 59% of the total space at the complex. The investment value is set at PLN 450m, and the completion of the project is planned for 2017. The Flemish investor has acquired close to a 50% share in the commercial section of Koneser. Over the past two decades the Liebrecht & wooD group has delivered over 440,000 sq.m of commercial space in Central Europe and Russia, and its current portfolio totals 274,000 sq.m and includes Jerozolimskie Business Park, Kopernik Office Build-ings, Manhattan Business & Distribution Centre, Flan-ders Business Park and Batory Office Buildings in Warsaw as well as retail projects, such the Morski Shopping Centre in Gdańsk. The Liebrecht & wooD Group also includes a real estate management compa-ny WeCare, and the Fashion House Group, one of the pioneers of Poland's outlet centre sector. Besides the giant Plac Unii development in the city centre and Koneser in Praga, BBI Development's pipe-line includes a number of other, attractively located projects in Warsaw. The company seeks to develop an office and retail building Nowy Sezam at the junction of Marszałkowska and Świętokrzyska streets, at the site of the rundown communist era Sezam department store. Their other major future undertaking will be a 180-metre class A office skyscraper in the very centre of Warsaw, at the corner of Emilii Plater and Nowogrodzka streets. In the residential segment, BBI is developing luxury condos as part of its Rezydencja Foksal project near Warsaw's high street Nowy Świat.

weekly newsletter # 007 / 14th October 2013 / page 10

CONSUMER GOODS & RETAIL

GTC sells Kraków mall, GTC sells Kraków mall, GTC sells Kraków mall, GTC sells Kraków mall, signssignssignssigns key tenants for key tenants for key tenants for key tenants for new Warsaw projectsnew Warsaw projectsnew Warsaw projectsnew Warsaw projects

Warsaw-listed property developer Globe Trade Centre (GTC) and European real estate private equity firm Avestus Capital have sold their Galeria Kazimierz shopping mall in Krakow, Poland, to a sub-sidiary of Invesco Group for EUR 180m. Each of the sellers will receive EUR 90m, according to a GTC stock exchange filing, and the transaction will gener-ate EUR 50m in net cash proceeds for the Polish de-veloper. Located in historic centre of Kraków at Podgórska St., Galeria Kazimierz is one of the city's most popular shopping centers. The mall offers almost 40,000 sq.m of leasable area with its key tenants including Cinema City, Alma, EMPiK and Reserved. GTC, which owns real estate in central, southern and eastern Europe, said the sale is in line with its strategy to sell mature assets and generate additional net cash through strate-gic divestments. The deal is subject to regulatory ap-provals and other standard closing conditions and is expected to be completed later this year or in early 2014. Avestus is a private European real estate invest-ment manager with offices in Warsaw, Prague and Dublin. The firm focuses primarily on three sectors of the real estate market: commercial, retail and hotels. "Every investment we decide to sell immediately finds renowned buyers, proving that GTC is a company that develops top quality shopping malls," said Alain Ickovics, President of Management Board of GTC. "The decision to divest Galeria Kazimierz is also in line with our policy of refreshing the company's port-

folio by selling maturing regional assets and replacing them with new developments that offer attractive re-turn."

GTC's new shopping center in Warsaw's Białołęka district is set to open in 2015. Image: GTC

GTC, which developed one of Warsaw's most popular shopping centers Galeria Mokotów, is getting ready to break ground on two new massive retail projects in the Polish capital's fastest growing residential districts of Wilanów and Białołęka. GTC estimates that phase one of Galeria Białołęka will open its doors in 2015 with a GLA of 64,000 sq.m, whereas Galeria Wilanów is to welcome its first customers in 2016 with an initial GLA of 61,000 sq.m. "As far as the Wilanów project is concerned, GTC owns the entire project site, whereas in Białołęka we are in the process of acquiring a few outstanding par-cels of land that belong to the city," Małgorzata Czaplicka, investor relations director at GTC tells Po-land Today. "We plan to apply for building permits shortly, hoping to obtain them without delay. We will break ground on both projects immediately after get-ting green light from the authorities, aiming to com-plete them in approximately 22 months. The capital expenditures, including land purchase costs will reach some EUR 170-180m in each case."

In September GTC signed letters of intent with Po-land's top fashion retailer LPP S.A. and Cinema City International, the largest cinema operator in Central and Eastern Europe and Israel, which secured a com-bined 16,700 sq.m of retail space in the Warsaw pro-jects. Cinema City is to rent more than 4,000 sq.m in Galeria Wilanów for a 12-screen cinema, and more than 3,300 sq.m in Galeria Białołęka, where the opera-tor will have 11 screens. LPP, the owner of popular chains: Reserved, House, Cropp, Mohito, Sinsay and Home&You will take up 4,600 sq.m in Galeria Wilanów and over 4,700 sq.m in Galeria Białołęka. Established in 1994 in Warsaw, GTC currently oper-ates in Poland, Hungary, the Czech Republic, Roma-nia, Serbia, Croatia, Slovakia, Bulgaria, Russia and Ukraine. The company develops new projects and manages completed properties in three key sectors of real estate: office buildings and parks, retail and enter-tainment centers and residential. To date, GTC has developed approximately 950,000 sq.m of net com-mercial space and 300,000 sq.m of residential units. The company currently manages a combined 602,000 net sq.m of completed and operational commercial space and holds a large portfolio of investment pro-jects at various stages of development that will enable it to develop of 1.1m sq.m of commercial space and 615,000 sq.m of residential space. GTC's total assets exceed EUR 1.9bn. Israeli-owned Kardan N.V., which holds a 27.75% share in GTC through its investment vehicle GTC Real Estate Holding B.V., has confirmed recently that it is seeking a new strategic investor for the Polish developer. The company, which is linked to GTC's founders, has hired Citigroup Global Markets Lim-ited to help them find a buyer for the 27.75% stake.

weekly newsletter # 007 / 14th October 2013 / page 11

SERVICES & BPO

Staffing company Staffing company Staffing company Staffing company Work Service acquires Work Service acquires Work Service acquires Work Service acquires Antal's Polish Antal's Polish Antal's Polish Antal's Polish armarmarmarm

Poland's leading temporary staffing and personnel outsourcing company Work Service has inked an agreement to acquire the Polish arm of global recruit-ment consultancy Antal International. The PLN 27.1m deal will see Work Service, take over the man-agement of Antal International operations in Warsaw, Wroclaw and Kraków. The Polish operation will con-tinue to trade under the same brand name and will have access to the global network of the Antal Interna-tional Group. "When I first got on a plane twenty years ago and flew out to Poland to set up a solid brand, it was with the intention of creating a sustainable, long term company which is valuable to the local business and start up community. This is testament to our success in what many would agree has been a tough economy," com-mented Antal's CEO and founder CEO Tony Goodwin, who secured a similar deal in Russia five years ago. "By joining Work Service we are diversifying the group portfolio within professional services of mid and high level staff recruitment, based on 17 years of experience and the in depth specialization of our con-sultants. I'm proud that we are joining such a dynamic and ambitious company with Polish origin. Together we will continue to build a strong Polish brand in the CEE Region," said Artur Skiba, Managing Director of Antal International Poland. Besides the Antal deal, Work Service has confirmed that it is negotiating the acquisition of an 80% stake in

a Katowice-based staffing company Work Express. Recently, Work Service has taken over IT staffing company IT Kontrakt. From IPO to regional expansion Work Service has been listed on the Warsaw Stock Exchange since May 2012. The company is the mar-ket leader in Poland, has a strong presence in Russia and continues to increase its market share in the Czech Republic, Slovakia, Germany and Turkey, boast-ing a market share of 15.4% in the CEE region. Earlier this year global private equity firm PineBridge In-vestments took a 20% stake in Work Service for EUR 26m to support the company's ambitious investment pipeline. "We seek to focus our foreign expansion on Germany – Europe's largest economy, Russia with its giant popu-lation of 140m people, and Turkey – another very promising market with 80m people. We want to de-velop our temporary staffing business there as well as recruit of IT professionals and factory employees, for example," Work Service CEO Tomasz Hanczarek told Poland Today's Lech Kaczanowski back in February. "Our goals is to solidify our leading position in the Polish HR services market and speed up our expan-sion into Central European markets," Hanczarek said. "We seek to grow organically and via acquisitions. This year alone we hope to seal at least three takeo-vers." The final number of acquisitions may in fact be higher. Company representatives said recently they hope to end the 2013 with a turnover of PLN 1bn, but thanks to the ongoing and planned acquisitions next year the figure is likely to reach PLN 1.8bn. In the first half of 2013 the group posted a consolidated net profit of PLN 10m (+8% y/y) on sales revenues of PLN 410m (+16% y/y). The long-term plan is to make Work Service one of Poland's 100 largest companies in a couple of years and with PineBridge's help its management team is

way on its way to achieving that goal. The private eq-uity fund confirmed it was ready for further capital in-jections, should Work Service indentify more attrac-tive takeover targets. With approximately 27,000 employees on a monthly basis, Work Service provides its services to more than 1,000 clients through several business lines: recruit-ment and personnel consultancy; temporary staffing; short-term specialist contracting for the IT, financial and medical sectors; quality control outsourcing; and merchandising processes. PineBridge is an independent asset manager with over 60 years of experience in developed and emerging markets. The company manages USD 69.4bn as of 30 September 2012. Their global platform for institutional and individual offers solutions across asset allocation, equities, fixed income, private equity and hedge funds. The company belongs to Hong-Kong billionaire Rich-ard Li, son of the world's 9th richest person Li Ka-shing, whose wealth Forbes estimates at some USD 25.5bn. Thru Hutchison Whampoa Limited and Cheung Kong Holdings, Li Ka-shing is the world's largest operator of container terminals and the world's leading health and beauty retailer. Last year PineBridge agreed to invest EUR 50m into a EUR 108m roll-out of an EasyPack parcel machine network developed by the Warsaw-listed postal services firm Integer.pl. Work Service's key competitors include global and re-gional giants: Addecco, Randstad, Manpower and Trenkwalder, but their rivalry has been relatively peaceful because the market itself has been expanding. Temporary staff represents merely 0.6% of all work-ers, compared to the European average of 2%. In times of austerity and crisis such flexible employment mod-els gain even more popularity. As for the Polish tem-porary staffing market, the latter has not been left un-

weekly newsletter # 007 / 14th October 2013 / page 12

scarred by the slowing economy, but forecasts for 2013 remain positive. Polish HR Forum, the country's fed-eration of staffing firms, said that sales in the tempo-rary staffing industry will increase by some 10% this year.

SERVICES & BPO

British Vue completes British Vue completes British Vue completes British Vue completes takeovertakeovertakeovertakeover of cinema of cinema of cinema of cinema operator Multikino operator Multikino operator Multikino operator Multikino

At the beginning of October Britain's Vue Enter-tainment completed the acquisition of Poland's num-ber two multiplex cinema operator Multikino from the media group ITI (which held an 86% interest in the business) and its long-time partner Ares Manegement (14%). The transaction totaled EUR 48m, according to ITI's official statement. Multikino opened the first multiplex cinema in Poland in Poznan in 1998 and it currently operates a circuit of 28 cinemas with 231 screens across 22 Polish cities and 2 cinemas with 15 screens in the Baltics. The entire Multikino circuit was fully digitalized in 2011. Its main rivals include Warsaw-listed Cinema City and pub-lisher Agora, which runs the Helios cinema chain. Multikino sold 9.86m tickets last year, marking a 12% increase y/y. The leader, Cinema City International, posted box office sales of 13.5m, while Helios, which focuses on smaller cities – 7.7m. On the European market, Vue ranks as number two, and the Multikino deal strengthens its lead over Israeli Cinema City, which is fourth. Vue was formed in May 2003 with the acquisition of the Warner Village Cinemas in the UK. Over the last three years, it has doubled the number of cinemas

under its ownership from 70 to 146 and nearly doubled its screens from 678 to 1,321. Besides Multikino, Vue's recent acquisitions included Apollo Cinemas in the UK in May 2012 and CinemaxX, Germany’s second largest operator in July 2012. Following the Multikino deal Vue's geographic footprint covers the UK, Ire-land, Germany, Denmark, Portugal, Poland, Lithuania, Latvia and Taiwan. In August 2013 OMERS Private Equity, the private equity investment arm of the OMERS pension plan, in equal partnership with Al-berta Investment Management Corporation ac-quired Vue Entertainment for an enterprise value of GBP 935m.

Multikino is Poland's number 2 cinema operator Millions of cinema tickets sold in Poland 2012

0 5 10 15

Helios

Multikino

Cinema City

Source: operators

"The acquisition of Multikino is anther exciting and strategic addition to the Vue Entertainment Group and part of our continued growth into continental Europe through the identification and acquisition of the high-est quality assets in each market. With its state of the art multiplex cinemas with 100% stadium seating and strong management team, Multikino perfectly com-plements our existing business in Europe," Tim Rich-ards, CEO of Vue Entertainment commented on the Polish investment. Vue's investment in Poland is not entirely a surprise, as some of its executives used to sit on Multikino's board a few years ago, representing one of the chain's

past shareholders United Cinemas International. The ITI group, owner of Poland's private TV broad-caster TVN, has been gradually divesting its non-core as-sets in the recent years. At the end of 2011 it sold Poland's top online portal Onet.pl to Germany's Ringer Axel Springer and "n" digital-to-home pro-vider to France's Vivendi.

TRANSPORT & LOGISTICS

PKP Cargo's PLN 1.6bn PKP Cargo's PLN 1.6bn PKP Cargo's PLN 1.6bn PKP Cargo's PLN 1.6bn October listing will be October listing will be October listing will be October listing will be this year's this year's this year's this year's largestlargestlargestlargest IPOIPOIPOIPO

Polish PKP Cargo, the European Union's second largest railway freight company after Deutsche Bahn AG, will hit the Warsaw Stock Exchange on 31st Octo-ber in one of Poland's biggest initial public offerings in almost a year. With the maximum price set at PLN at 74, the floatation may total PLN 1.6bn. Poland's state-owned railroad operator PKP, which seeks to use the proceeds to cut its debt and finance investments, plans to sell 50% minus one share of its cargo unit. The European Bank for Reconstruction and Develop-ment announced on 8th October that it would acquire up to 7.5% of shares in PKP Cargo as part of the IPO. The institution said the Polish privatization should encourage other European countries to float their state-controlled railway businesses. To date the EBRD has invested more than EUR 6.3bn in all sectors of the Polish economy with a combined project value ex-ceeding EUR 33bn. Warsaw-based PKP Cargo had a 60.3% share in the Polish market in 2012 and controlled 8.5% of total rail freight in the EU, the company said in a statement. That compares with DB Schenker's 28% and 5.4%

weekly newsletter # 007 / 14th October 2013 / page 13

shares in the EU and Poland, respectively. The Polish carrier is set to be the EU's first public rail freight company when its stock starts trading on the Warsaw bourse. The book building will end on 22nd October, according to a prospectus published on the company's website last week. PKP Cargo's IPO is the largest in Poland since December last year when Alior Bank de-buted on the WSE with a PLN 2.1bn floatation.

Poland's top rail freight operators

2012 market shares based on freight volume

Other, 13.8%

PKP LHS,

4.5%

Lotos Kolej,

4.5%

CTL Group,

6.5%

DB

Schenker,

20.2%

PKP Cargo,

50.5%

Source: Rail Market Regulator UTK

PKP Cargo, which holds licenses to provide services in Slovakia, the Czech Republic, Germany, Austria, Bel-gium and Hungary, will continue expansion abroad and may consider takeovers of foreign competitors to speed up growth, Chief Executive Officer Łukasz Boroń said a few weeks ago. Currently only 2% of the company's revenue comes from outside Poland. For-eign expansion seems like the only way forward for the firm as due to its dominant position on the Polish market, regulators are unlikely to approve any at-tempts by PKP Cargo at taking over other local com-petitors. Besides PKP Cargo and DB Schenker, the Polish rail freight market is divided among several dozen smaller players, including carriers owned by oil refiners PKN Orlen and Grupa Lotos as well as cop-

per giant KGHM. Grupa Lotos has recently confirmed it is analyzing scenarios for its rail freight unit. PKP Cargo saw its revenues drop 9.2% to 2.29bn, in the first half of the year, due to economic slowdown, while its net income slumped 44% to PLN 76.8m. Last year the company carried around 116m tons of freight (mainly hard coal and building materials) and generat-ed net profits of PLN 267m on PLN 5.2bn worth of revenues, down from its record net result of PLN 400m in 2011. PKP Cargo's management will propose spending 35% to 50% of consolidated profits on divi-dends, according to the prospectus. The PKP Group, which has sped up asset sell-off in recent years to cut its PLN 4bn debt, pledged not sell further shares in PKP Cargo within 180 days after the latter's IPO. The railway will have the right to sell a further stake to a strategic investor if the price offered isn’t lower than in the IPO.

PKP Cargo is Europe's number two rail freight carri-er but only a tiny fraction of its revenues come from abroad. Photo: PKP Cargo The rail freight operator's 24,000 employees will get PLN 165m of new shares after the IPO free of charge together with a four-year employment guarantee, and

more favorable employee benefit package as part of last month's settlement deal with unions. Goldman Sachs Group Inc., Morgan Stanley and PKO Bank Polski SA are joint global coordinators and joint bookrunners in the IPO. Ipopema Securities SA, Raiffeisen Centrobank AG and UniCredit SpA are joint bookrunners, while Dom Inwestycyjny Investors SA and Mercurius Dom Maklerski SA are acting as do-mestic co-bookrunners.

TRANSPORT & LOGISTICS

Polish bus producer Polish bus producer Polish bus producer Polish bus producer Autosan goes bankruptAutosan goes bankruptAutosan goes bankruptAutosan goes bankrupt

Polish bus manufacturer Autosan was declared bank-rupt on 7th October by a court in the southeastern town of Krosno. The factory, which belongs to Polish entrepreneur Sobiesław Zasada, has been struggling for years and finally its management filed for bank-ruptcy in mid-September 2013. In 2009, second-hand bus imports to Poland and tough competition from other bus makers forced the factory to cut salaries by 10%. While new contracts lifted the company's financial burden, the relief was only temporary. Now Autosan has been forced to go into receivership with an outstanding debt due to ar-rears in land tax to the town of Sanok amounting to PLN 1.3m. Its total liabilities are unknown. Autosan's 500 employees took home only a half of their salaries in June and July, and received no money at all in August. They picketed the Sobiesław Zasada Group headquarters in Kraków last week, demanding they be paid in full. Autosan is one of the oldest facto-ries in Poland, with its beginnings dating back to 1832.

weekly newsletter # 007 / 14th October 2013 / page 14

Shrinking domestic bus sales Buses made in Poland: domestic sales vs. exports

0

1,000

2,000

3,000

4,000

5,000

2007 2008 2009 2010 2011 2012

Exports Domestic sales

Source: JMK Analizy Rynku Autobusow

Trade unions at the company, who had long been dis-satisfied with its management, have welcomed the bankruptcy, and are now hoping the receiver will be able to find a way to keep at least a portion of the workforce. Besides buses, since 2001 Autosan has been producing bodies for trains and trams, cooperating with top rail stock producers such as PESA Byd-goszcz, NEWAG and Poznań's ZNTK. Production will continue as long as there are orders, while a court-appointed receiver will be seeking an investor for the business. Crisis hits bus makers As austerity spreads across Europe, Polish bus produc-tion dropped nearly by a fifth last year, reaching the lowest level in more than five years. According to market researcher JMK Analizy Rynku Transportowego, Polish factories completed 3,838 buses and coaches in 2012, some 938 fewer than in 2011. Domestic carriers purchased merely 1,279 vehi-cles, 282 fewer than in the year prior. With skilled labor at a fraction of the Western Europe-an costs, Poland has emerged as one of Europe's key bus exporters over the past decade, thanks to investors

from Germany (MAN) and Sweden (Volvo & Scania), as well as domestic Solaris Bus & Coach. In 2001 Polish factories exported merely 373 buses, but by the end of the decade the figure grew nearly ten times, making Poland number three in Europe after Germany and Sweden. In 2012, however, exports plunged 16%, down to some 3,210 units although it's worth mentioning that in ad-dition to complete buses, Polish factories exported 700 chassis and 300 bus bodies as well as 45 trolleybuses. Still, summer production breaks at Polish bus factories were longer than usual last year, and some producers (most notably MAN in Starachowice and Scania in Słupsk) cut their staff. Volvo relocated more produc-tion from Sweden to Poland but added no new jobs there.

Bus production down 20% in 2012 Leading makers & bus output figures

Maker 2012 2011 2010

Units Share Units Share Units Share

MAN 1,342 35.0% 1,566 33.8% 1,267 30.4%

Solaris 939 24.5% 1,140 24.6% 1,022 24.5%

Volvo 699 18.2% 922 19.9% 855 20.5%

Scania 341 8.9% 500 10.8% 658 15.8%

Other 516 13.4% 504 10.9% 366 8.8%

TOTAL 3,838 100.0% 4,632 100.0% 4,168 100.0%

Source: JMK Analizy Rynku Autobusow

With 1,343 vehicles completed last year Germany's MAN remains the leading bus producer and exporter in Poland, followed by Polish Solaris (939), Volvo (699), and Scania (341). The strategic market for So-laris is Germany, where the Polish producer sold 263 buses and coaches in 2012. The company has recently won a contract to deliver 40 buses to Prague as well as a handful of new orders from Lithuania, Bulgaria, Fin-land, Spain, and Romania.

The number one player in Poland was Mercedes Benz with 453 vehicles registered last year (including bodies from other manufacturers mounted on Mer-cedes chassis), followed by Solaris (257), Autosan (83) and MAN (70). City bus sales dropped from 938 in 2011 down to 559 last year, due to lack of EU-subsidized contracts.

IN BRIEF: US e-commerce giant Amazon has officially confirmed

plans to build three logistics centers in western Poland

by mid-2015 (see PT Business Review+ No. 006, page

10). The project will create 6,000 permanent jobs and

9,000 seasonal jobs in an investment worth "hundreds

of millions euros," Amazon operating director for Eu-

rope Tim Colling said during a press conference last

week. Two of the centers will be opened by August

2014 and the third by mid-2015. Amazon will employ

2,000 persons on a permanent basis in each facility and

will also create 3,000 seasonal jobs ahead of the

Christmas season.

POLITICS & ECONOMY

Government Government Government Government finalfinalfinalfinalizizizizes es es es pension overhaul bill, pension overhaul bill, pension overhaul bill, pension overhaul bill, asset transfer to take asset transfer to take asset transfer to take asset transfer to take place in February 2014place in February 2014place in February 2014place in February 2014

Prepared at an express pace, the draft legislation on of the government pension reform, outlining key details of the planned changes, saw the light of day on 10th October. Under the new law, Poland's state-guaranteed private pension funds (OFE) are to trans-fer 51.5% of their assets to the state pension vehicle

weekly newsletter # 007 / 14th October 2013 / page 15

ZUS on 3rd February next year, after which they will be banned from investing in treasury debt and state-guaranteed bonds. The state pension institution will be also responsible for distributing the pensions, and therefore the funds will also be required to gradually transfer employee assets to ZUS starting 10 years prior to retirement. According to the draft bill, the changes will lower Poland's public debt by 9.2 percentage points from its current level of 55% of GDP and reduce annual borrowing needs by PLN 20-25bnin the years 2014-2017. The funds held assets worth PLN 292bn in September, corresponding to some 18% of the country's gross do-mestic product last year. Of that, PLN 124bn was in Polish treasury debt and PLN 18bn in state-backed bonds. Following the partial transfer of assets to ZUS, the pension fund managers will be required to hold 75% of their assets in stocks until 1st July 1, 2014, when their investment policy guidelines will be loos-ened, the draft legislation also showed. However, the funds will not be allowed to invest more than 10% of the assets in foreign-currency denominated assets, up from 5% currently. This limit will be raised to 20% in 2015 and to 30% in 2016, in line with a ruling of the Court of Justice of the European Union. What is more, participation in the OFE system has been made optional. While every OFE account re-mains in place with its rump equity assets, Poles will have three months to determine if the portion of their future social security premium - 2.9% - should contin-ue to go to the OFE funds. Should they fail to declare, their premiums go to a virtual individual account at the ZUS. They will be allowed to review their decision in 2016 and every four years afterward, according to the document posted on the Labor Ministry’s website. Although the legislation is yet to be approved by the parliament, that should pose little problem as the rul-ing coalition still enjoys a majority there, and the left-

ist opposition has vowed to support the pension bill. Theoretically, the president could send the bill back to parliament or submit it to the constitutional tribunal, a move which at least would slow the legislative pro-cess. Some lobbyists, including the creators of Poland's current hybrid pension systems, have been trying to exert pressure on President Bronisław Komorowski to question the bill, but due to the crucial role the reform plays in the government's budgetary planning, it seems rather unlikely. For the past 14 years, Poland has had a hybrid pension system, with part of workers' contributions diverted from the state pay-as-you-go system to private pension funds, known collectively as the second pension pillar. Shortly after the new system was introduced, the gov-ernment found itself in a pickle, forced to finance pay-outs for pensioners covered by the old system at the same time contributing to OFE accounts for would-be pensioners belonging to the new system. Poland ended up borrowing left and right and its debt skyrocketed as a result, from PLN 273bn in 1999 to PLN 888bn in mid-2013, with the pension system being responsible for roughly a half of the new liabilities. In the end, the government admitted the system was too costly for public finances and failed to deliver additional benefits for future pensioners. Poland will likely reduce its general government defi-cit from 4.6% of GDP in 2013 to 3.4% in 2014 and to 2.8% in 2015, the International Monetary Fund wrote in the newest set of forecasts, which takes into account the 2013 budget amendment as well as the effects of the planned private pension funds reform.

POLITICS & ECONOMY

Warsaw mayor keeps Warsaw mayor keeps Warsaw mayor keeps Warsaw mayor keeps her job her job her job her job after too few after too few after too few after too few voters turn up for voters turn up for voters turn up for voters turn up for recallrecallrecallrecall referendumreferendumreferendumreferendum

Although 95% of those who took part in yesterday's referendum in Warsaw voted in favor of recalling the Polish capital's mayor Hanna Gronkiewicz-Waltz, ac-cording to exit polls it looks like the latter will keep her job as the voter turnout was too low to make the whole procedure worthwhile. For the referendum to be valid, three-fifths of the number who turned out for the mayoral elections in 2010, or some 29% of resi-dents had to participate. However, according to exit polls the figure came to 26.8%. Gronkiewicz-Waltz took over as mayor in December 2006. She then secured reelection in 2010 after win-ning nearly 54% of the vote in the first round. The key driving force behind the campaign to recall the current mayor, who is a senior member of the governing PO, is Piotr Guział, the mayor of Warsaw's southern Ursynów district. Also, a group of city councilors wanted Gronkiewicz-Waltz out. Parties that have sup-ported the referendum campaign include main opposi-tion Law and Justice (PiS) and the liberal Palikot's Movement (which recently changed the name to Twój Ruch – see next story). As many as 166,726 valid signa-tures were gathered in favor of the referendum being held, surpassing the requirement of 130,000 signa-tures. The referendum was seen as a key test of the populari-ty of Tusk's governing PO party, which has fallen be-hind the opposition Law and Justice (PiS) in the opin-

weekly newsletter # 007 / 14th October 2013 / page 16

ion polls. PO saw its voter support decline by 3 pps to 22% in October, the lowest level in several years, while the main opposition party, conservative Law and Jus-tice (PiS) gained 5 pps and took the lead in the poll with 28% support, the latest survey from the CBOS in-stitute shows. Support for junior coalition Polish Peo-ple’s Party (PSL) remained stable at 6%. Left-wing Democratic Left Alliance (SLD) lost 2 ppt to 8%. The liberal Palikot Movement saw its voter support decline by 3 ppt to 4%, below the 5% threshold required to en-ter the parliament. The survey was conducted on Oc-tober 3-9 on a sample of 1066 Poles.

POLITICS & ECONOMY

Liberal party Palikot Liberal party Palikot Liberal party Palikot Liberal party Palikot Movement changes Movement changes Movement changes Movement changes nnnnameameameame, gets , gets , gets , gets new alliesnew alliesnew alliesnew allies

Poland's fringe liberal party Palikot Movement (RP), which surprised many a commentator during the 2011 elections when it gained 10% support and 40 seats in the parliament, has evolved into a new political group-ing Twój Ruch (which in Polish means both Your Move and Your Movement). According to many ob-servers, the transformation seems like a PR stunt de-signed to reignite interest in the party, which has failed to deliver on many of its promises and become a serious political force in Poland. The new party will be composed, apart from the RP, of several partners, including the Europa Plus movement led by former Democratic Left Alliance (SLD) member Marek Siwiec and a number of small left wing parties. Siwiec will be Your Move's deputy leader. The RP at-tracted some 1.4m votes in the last elections with its libertarian and anti-clerical rhetoric. Its ranks include Anna Grodzka, Europe's first transsexual member of

parliament and Robert Biedroń, Poland's country's first openly gay legislator, "We need this change now," the party's flamboyant leader Janusz Palikot said at the founding congress, as Poland was facing a "gigantic challenge" as well as a unique opportunity to make a developmental and technological leap due to the PLN 300bn in EU funds allocated to Poland for years 2014-2020. In his view, these funds need to be spent on "modern jobs" and the development of knowledge-based economy. The poli-tician also said that the new party was set to create a five-year development plan for the Polish economy. He pointed to the need to abolish ZUS social insurance board and create a new pension system. According to Palikot neither PM Donald Tusk nor the main opposi-tion leader Jarosław Kaczyński nor the leader of SLD Leszek Miller will be able to make these changes.

POLITICS & ECONOMY

Archbishop's comment Archbishop's comment Archbishop's comment Archbishop's comment on pedophilia sparkon pedophilia sparkon pedophilia sparkon pedophilia sparkssss nationwide outragenationwide outragenationwide outragenationwide outrage

Poland's Roman Catholic Church was featured in all key global media outlets last week due to comments by a top cleric who implied that parents and children share the blame for certain cases of pedophilia, includ-ing those involving Catholic priests. The comment comes amid mounting allegations of child molestation involving Polish priests. "Many of these cases of (sexual) molestation could be avoided given a healthy relationship between parents," Archbishop Józef Michalik, head of Poland's Episco-pate told the Polish PAP news agency in Warsaw. "We often hear that this inappropriate attitude (pedophil-

ia), or abuse, manifests itself when a child is looking for love," he continued, adding that a child from a troubled family "seeks closeness with others and may get lost and may get the other person involved, too."

Michalik also spoke out against divorce as being harm-ful to children. "How many wounds are there in chil-dren's hearts, in children's lives, when their parents go their separate ways," he told the PAP. "Today nobody talks about divorce doing great harm to a child. It's ob-vious that sex abuse does great harm, one can't forget about it, but it's not the only thing" causing harm, he added.

The comments, for which the Archbishop later apolo-gized, calling them a "misunderstanding", sparked widespread public outcry, even among some of Po-land's ultra-Catholic commentators. Unlike the United States, Australia or Ireland, child sex abuse by priests in Poland, one of Europe's most heavily Catholic coun-tries, has been a largely taboo subject, but as the loyal-ty to the church is beginning to wane, a growing num-ber of cases are being unveiled in the press.

In an unprecedented move, Polish Church leaders apologized earlier this month over alleged pedophile priests, as prosecutors in Poland and the Caribbean began probes against two high-profile suspects. Arch-bishop Józef Wesołowski, a 65-year-old Pole who served as a papal envoy in the Dominican Republic's Santo Domingo for around five years, is being investi-gated for allegedly having sex with teenage boys. Au-thorities on the Caribbean island nation are also inves-tigating Wojciech Gil, a 36-year-old priest suspected of raping several young boys while serving there. Despite the apology, Church leaders in Poland insist they will not be offering victims any material compensation.

weekly newsletter # 007 / 14th October 2013 / page 17

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%

Au

g 1

1

Oc

t 11

De

c 1

1

Fe

b 1

2

Ap

r 12

Ju

n 1

2

Au

g 1

2

Oc

t 12

De

c 1

2

Fe

b 1

3

Ap

r 13

Ju

n 1

3

Au

g 1

3

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Apr '13 May '13 Jun '13 Jul '13 Aug '13

m/m (%) -2.7 +1.6 +1.5 +3.8 -0.7

y/y (%) -0.2 +0.5 +1.8 +4.3 +3.4

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-Aug

2013

y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 91.6 -20.6

Commenced 174.7 142.9 158.1 162.2 141.8 85.4 -18.2

U. construction 687.4 670.3 692.7 723.0 713.1 707.0 -3.9

Completed 165.2 160.0 135.7 131.7 152.5 91.1 -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 -1.9%

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% 1,522,736 -3.5%

2011 +4.5% 1,462,734 -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% +1.2% +2.7%

Consumer inflation +2.6% +4.3% +3.7% +1.2% +2.2%

Producer inflation +2.1% +7.6% +3.4% -1.2% 0.6%

CA balance, % of GDP -5.1% -4.9% -3.5% -0.6% 0.3%

Nominal gross wage +3.9% +5.2% +3.7% +3.2% +4.5%

Unemployment** 12.4% 12.5% 13.4% 13.7% 13.2%

EUR/PLN 3.99 4.12 4.19 4.20 4.06

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

GrosGrosGrosGross Wagess Wagess Wagess 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 Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13 Aug '13

m/m (%) -0.3 +20.9 +7.9 +16.1 +19.1 +7.8 -0.8

y/y (%) -11.4 -18.5 -23.1 -27.5 -18.3 -5.2 -11.1

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

De

c 1

0

Ma

r 11

Ju

n 1

1

Se

p 1

1

De

c 1

1

Ma

r 1

2

Jun

12

Sep

12

De

c 1

2

Ma

r 13

Jun

13

Se

p 1

3

60

80

100

120 Co nsumer confid ence (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 Feb '13 Mar '13 Apr '13 May'13 Jun '13 Jul'13 Aug'13

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

y/y (%) -0.4 -0.7 -2.1% -2.5 -1.3 -0.8 -1.1

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 Feb '13 Mar '13 Apr '13 May'13 Jun '13 Jul'13 Aug'13

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

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

Industrial Industrial Industrial Industrial OutputOutputOutputOutput

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

m/m (%) +0.3 -0.2 -2.3 -0.7 +2.6 +1.5 -4.5

y/y (%) -2.7 -0.6 +2.7 -1.8 +2.8 +6.3 +2.2

Year 2006 2007 2008 2009 2010 2011 2012

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

weekly newsletter # 007 / 14th October 2013 / page 18

TTTTraderaderaderade

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

EXPORTS in PLN bn IMPORTS in PLN bn

Jan- Jul

2013 y/y (%)

share (%)

2012 share (%)

Jan- Jul 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 37,974 +9.9 10.5 61,694 10.3 26,750 +3.6 7.4 44,287 6.9

Beverages and tobacco 4,910 +5.9 1.4 7,967 1.3 2,271 -0.1 0.6 3,989 0.6

Crude materials except fuels 9,077 +5.1 2.5 14,024 2.4 12,302 -7.6 3.5 22,053 3.5

Fuels etc 17,106 +0.1 4.7 29,389 4.9 41,400 -14.3 11.4 85,280 13.4

Animal and vegetable oils 920 +62.1 0.3 1,342 0.2 1,492 -8.7 0.4 2,887 0.5

Chemical products 33,929 +6.5 9.4 54,295 9.1 53,686 +0.3 14.8 89,140 14.0

Manufactured goods by material 74,733 -0.5 20.7 126,161 21.1 63,760 -6.0 17.5 110,773 17.4

Machinery, transport equip. 136,236 +3.3 37.7 223,646 37.5 120,298 -0.5 33.1 203,718 31.9

Other manufactured articles 45,323 +3.8 12.6 75,925 12.7 31,609 -8.6 8.7 57,646 9.0

Not classified 901 n/a 0.2 2,653 0.5 10,201 n/a 2.6 18,515 2.8

TOTAL 361,109 +3.4 100 597,096 100 363,769 -4.3 100 638,288 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan- Aug 2013

share *2012 Share No Country Jan- Aug 2013

share *2012 Share

1 Germany 103,223 25.0% 150,046 25.1% 1 Germany 88,967 21.3% 134,933 21.1%

2 UK 26,788 6.5% 40,184 6.7% 2 Russia 52,447 12.6% 91,033 14.3%

3 Czech Rep. 25,260 6.1% 37,475 6.3% 3 China 38,360 9.2% 57,235 9.0%

4 France 23,321 5.68% 34,862 5.8% 4 Italy 21,213 5.1% 32,782 5.1%

5 Russia 22,508 5.4% 32,290 5.4% 5 France 16,034 3.8% 25,303 4.0%

6 Italy 17,805 4.3% 29,067 4.9% 6 Netherlands 15,726 3.8% 24,543 3.8%

7 Netherlands 16,321 4.0% 26,678 4.5% 7 Czech Rep. 15,426 3.7% 23,327 3.7%

8 Ukraine 11,709 2.8% 17,213 2.9% 8 USA 11,909 2.9% 16,436 2.6%

9 Sweden 11,339 2.7% 15,811 2.6% 9 UK 11,030 2.6% 15,509 2.4%

10 Slovakia 10,673 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 11 October 2013

100 USD 308.50 ↓

100 EUR 418.61 ↓

100 GBP 492.89 ↓

100 CHF 339.77 ↓

100 DKK 56.12 ↓

100 SEK 47.54 ↓

100 NOK 51.30 ↓

10,000 JPY 313.85 ↓

100 CZK 16.41 ↓

10,000 HUF 142.03 ↑

100 USD/EUR against PLN

300

350

400

450

29 O

ct 12

9 Jan 13

18 M

ar 13

28 M

ay 13

5 A

ug 13

11 O

ct 13

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

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

Monetary base 150,475 144,260 155,767 153,867

M1 508,299 523,783 530,666 531,124

- Currency outside banks 109,312 112,815 112,565 114,083

M2 920,112 927,345 921,662 928,359

- Time deposits 425,740 418,252 405,900 412,407

M3 941,791 946,586 945,077 949,988

- Net foreign assets 176,278 160,267 159,749 154,035 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 May '13 Jun'13 Jul '13 Aug '13

Loans to customers 887,960 900,999 896,635 901,863

- to private companies 259,593 263,453 261,000 263,491

- to households 549,117 553,055 552,503 556,027

Total assets of banks 1,622,666 1,634,587 1,616,221 1,627,182

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

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

PLN (up to 1 year) 5.6% 5.4% 5.3% 5.0% 4.7% 4.6%

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

PLN (over 5 y) 6.0% 5.7% 5.6% 5.3% 4.9% 4.9%

PLN (total) 6.0% 5.8% 5.6% 5.3% 5.0% 4.9%

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

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

Warsaw Inter Bank Offered Rate (WIBOR) as of 11 Oct 2013

Overnight 1 week 1 month 3 months 6 months

2.58%% 2.55% 2.60% 2.68% 2.71%

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 11 Oct

'13

Change 4 Oct

'13

Change end of

'12

↑ Asseco Pol. 49 +3% +8%

↑ Bogdanka 112.1 +1% -18%

↑ BRE 514 +9% +58%

↑ BZ WBK 374.6 +9% +55%

↑ Eurocash 48 +7% +10%

↑ GTC 7.91 +6% -20%

↑ Handlowy 118 +8% +20%

↑ JSW 74.34 +3% -20%

↑ Kernel 53.42 +6% -20%

↑ KGHM 123 +2% -35%

↑ Lotos 37.13 +3% -10%

↑ Pekao 193 +5% +15%

↑ PGE 17.45 +3% -4%

↑ PGNiG 5.98 +1% +15%

↑ PKN Orlen 45.4 +5% -8%

↑ PKO BP 39.01 +4% +6%

↑ PZU 433 +2% -1%

↑ Synthos 5.08 +4% -6%

↑ Tauron 4.92 +3% +4%

↑TP SA 8.75 +2% -28%

Source: Warsaw Stock Exchange

Key indices

as of 11 October 2013

WIG Total index

55552222,,,,230230230230....47474747 Change 1 week +3% ↑

Change end of '12 +10% ↑

WIG-20 blue chip index

2,2,2,2,489489489489....64646464 Change 1 week +4% ↑

Change end of '12 -4% ↓

WIG Total closing index

last three months

45,000

46,000

47,000

48,000

49,000

50,000

51,000

52,000

53,000

12 Jul 13

5 A

ug 13

28 A

ug 13

19 Sep 13

11 O

ct 13

weekly newsletter # 007 / 14th October 2013 / page 19

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RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Aug 2013 *

Monthly wages (PLN)

Jan-Aug 2013 **

Unemploy-ment

Aug 2013

New dwellings Jan-Aug 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 98.2 87.5 4,169 3,907 149.7 12.9 10,403 115.2

Kujawsko-Pomorskie (Bydgoszcz) 101.3 94.7 3,314 3,239 142.7 17.3 4,138 111.6

Lubelskie (Lublin) 99.5 96.0 3,628 2,999 127.4 13.7 4,021 89.1

Lubuskie (Zielona Góra) 94.3 85.4 3,351 2,974 58.3 15.2 2,020 99.0

Łódzkie (Łódź) 103.7 87.5 3,604 3,000 148.8 13.7 4,150 94.9

Małopolskie (Kraków) 97.6 90.8 3,740 3,295 158.5 11.3 10,314 110.3

Mazowieckie (Warszawa) 107.0 81.1 4,482 4,761 282.0 11.1 17,638 91.6

Opolskie (Opole) 96.0 97.3 3,469 3,128 49.2 13.5 1,093 109.6

Podkarpackie (Rzeszów) 107.6 93.6 3,234 3,024 146.2 15.5 3,991 100.4

Podlaskie (Białystok) 105.4 88.7 3,175 3,754 68.3 14.5 2,230 80.8

Pomorskie (Gdańsk-Gdynia) 101.6 92.2 3,866 3,471 109.7 12.8 7,331 91.4

Śląskie (Katowice) 96.0 87.6 4,445 3,477 205.3 11.1 6,907 116.4

Świętokrzyskie (Kielce) 98.9 87.2 3,339 3,163 85.5 15.6 1,597 87.9

Warmińsko-Mazurskie (Olsztyn) 98.1 85.1 3,163 3,055 107.1 20.2 2,697 88.3

Wielkopolskie (Poznań) 102.7 88.4 3,638 3,584 142.5 9.5 8,905 98.2

Zachodniopomorskie (Szczecin) 110.1 84.7 3,398 3,230 102.1 16.6 3,667 76.5

National average 100.8 86.7 3,873 3,658 2,083.2 13.0 91,102 98.3

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 Q1'12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13

in Poland -1,365 1,861 1,381 2,886 175 -2,883

Polish DI 836 310 -550 -1,203 957 2,719

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 Q4 '12 Q1 '13 Q2 '13

Trade balance -8,893 -10,059 -5,313 -1,050 -139 1,194

Services, net 2,334 4,048 4,816 1,032 1,274 1,652

CA balance -18,129 -17,977 -13,332 -3,368 -2,313 362

CA balance vs GDP -5.1% -4.9% -3.5% -3.5% -2.8% -2.8%

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, 1H 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 2,728,000 41,000 15.9%

3.5–5.0

Warsaw suburbs 1.9–3.2

Central Poland 1,021,000 8,000 16.5% 1.9–3.1

Poznań 1,041,000 50,000 3.6% 2.3–2.9

Upper Silesia 1,478,000 33,000 5.8% 2.5–3.1

Wrocław 795,000 84,000 5.5% 2.4–3.0

Gdańsk 192,000 n/a 9.6% 3.2–4.0

Kraków 149,000 n/a 7.6% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'13 Retail rents**1H'13

Q1 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,076 -5.9% 11.5-25.5 10.5% 85 85

Kraków 6,305 -12.1% 13-15 2.71% 41 78

Katowice 5,526 -5.0% 13-14 8.29% 48 56

Poznań 6,412 -13.3% 14-16 14.66% 44 55

Łódź 4,898 -9.2% 12-14 14.97% 31 26

Wrocław 6,031 -13.5% 13-16 12.37% 38 41

Tricity 6,453 -8.1% 13-15 11.24% 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

Aug09

Apr10

Dec10

Aug11

Apr12

Dec12

Aug13

Wage CPI

Index 100 = Jan 2005. Source: GUS