Poland Today Business Review+ No. 051

No. 051 / 8th September 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Polish manufacturing new or-ders decline for third month running, PMI report shows page 2

BANKING & FINANCE

BNP Paribas obtains regulatory permission to acquire BGŻ and become Poland's 7th largest bank page 2 Dutch online broker Degiro eyeing 25% share in Polish market page 3

ENERGY & RESOURCES

Tauron, Enea and KGHM join PGE in Poland's first nuclear power plant project page 5

PROPERTY & CONSTRUCTION

PHN gets financing and partners for key investments page 6

SERVICES & BPO

State Street's Kraków unit hits 2,000 employee mark page 7

TRANSPORT & LOGISTICS

PKP Cargo mulling two major acquisitions page 9

RETAIL PROPERTIES

Dutch ECC to build EUR 50m shopping center in Warsaw's satellite town of Pruszków page 10

FOOD

Lithuanian owner seeks to delist Polish confectionery Mieszko page 11

POLITICS & ECONOMY

Parliament speaker Ewa Kopacz is PO's key candidate for next PM page 11 Interest rate cuts "very likely" says central bank governor Belka page 12

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 13-15

UPS has 1,700 delivery trucks in Poland, operated by subcontractors. Photo: UPS

UPS to create 300 jobs at two new unitsUPS to create 300 jobs at two new unitsUPS to create 300 jobs at two new unitsUPS to create 300 jobs at two new units US logistics giant UPS will spend a total of USD 25m on two new projects in Poland: a parcel sorting facility and shared services centre. Both are to launch next year in the Łódź area, adding 300 new employees to UPS's 2,300-strong Polish staff. page 8

ChineseChineseChineseChinese----Israeli JV Israeli JV Israeli JV Israeli JV acquiresacquiresacquiresacquires wind farmswind farmswind farmswind farms The China-CEE Fund and Israel-listed Enlight Renewable En-ergy will invest up to PLN 1.3bn to acquire majority interest in two large Polish wind farm projects with a total installed capaci-ty of 250.5 MW. page 4

weekly newsletter # 051 / 8th September 2014 / page 2

POLITICS & ECONOMY

Polish manufacturing Polish manufacturing Polish manufacturing Polish manufacturing new orders decline for new orders decline for new orders decline for new orders decline for third month runningthird month runningthird month runningthird month running, , , , PMI report showsPMI report showsPMI report showsPMI report shows

Poland's manufacturing sector purchasing managers' index PMI dropped to 49 points in August from 49.4% in July, marking the sixth consecutive month of de-clines, a survey of 300 industrial companies, prepared by Markit Economics for HSBC, showed. A PMI figure below 50 indicates contraction, while one above that level signals expansion. "The main positive finding from the latest survey re-sults was a further rise in Polish manufacturing em-ployment. This took the current sequence of job crea-tion to 13 months. That said, the rate of workforce growth slowed to the weakest over this period," the report said. New orders fell for the third consecutive month and the pace of decline increased, "leading to the first drop in output since June 2013," albeit marginal, the report reads. Purchasing activity declined for the fourth month running, "reflecting lower output require-ments." "Output prices declined for the twenty first consecu-tive month, albeit at a slower rate than in the past few months. On balance this is a negative survey pointing to extended weakness in the manufacturing sector and weak inflationary pressure. Compared to July indus-trial production and retail sales data that showed some headline improvement compared to the previous month the PMI survey reiterates that the underlying

trend is one of weakness," commented Agata Urbanska-Giner, Economist, Central & Eastern, Eu-rope at HSBC.

Purchasing Managers' Index (PMI) The 50 mark separates growth from contraction

45

50

55

60

Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14

Source: Markit & HSBC

BANKING & FINANCE

BNP Paribas obtains BNP Paribas obtains BNP Paribas obtains BNP Paribas obtains regulatory permission regulatory permission regulatory permission regulatory permission to to to to acquireacquireacquireacquire BGŻ and BGŻ and BGŻ and BGŻ and become become become become Poland's 7th Poland's 7th Poland's 7th Poland's 7th largest banklargest banklargest banklargest bank

After a lengthy wait, France's largest listed lender BNP Paribas has obtained permission from Poland's financial markets watchdog KNF to acquire BGŻ, Po-land's 11th largest bank by assets, from Dutch Rabobank. The PLN 4.2bn transaction will spring-board BNP Paribas to No. 7 position in Poland, where

it currently has 230 branches, less than 0.5m clients and total assets of PLN 20bn. By adding BGŻ's 440 units, 1m customers and PLN 37bn asset portfolio, BNP Paribas will become a worthy rival for the likes of Austrian Raiffeisen Bank, Polish Getin Noble, Por-tuguese Millennium Bank and even Dutch ING BSK. Since the financial crisis the KNF has grown increas-ingly critical of large bank mergers, introducing new, stricter rules for foreign investors. For instance, their shares have to be listed on the Warsaw Stock Ex-change with a free float of at least 15%, a requirement that forced BNP Paribas to carry out a PLN 231m share issue at its Polish arm earlier this year. The regulator is applying that requirement to all banks with foreign parents, because it is concerned about their ownership being concentrated in too few hands. The KNF has imposed a number of additional condi-tions on BNP Paribas. The name of the merged entity is to include BGŻ or Bank Gospodarki Żywnościowej, which one of the oldest brands in Poland's financial sector. The bank is to remain listed on the Warsaw Stock Exchange and achieve a free float of 25% by the end of 2018. Moreover, BNP's Polish consumer loans unit Sygma Bank is to cease existing as a separate enti-ty. The future of BGŻ Optima, a savings only online unit modeled after RaboDirect, which BGŻ launched three years ago, is yet to be decided. Foreign banks control about 70% of the Polish banking sector, but several have looked for an exit to boost cap-ital positions hit by the global economic crisis, with others being keen to strengthen their foothold in an economy which has outperformed much of the euro zone in recent years. Major recent exits from Poland's banking market included Belgium's KBC and Ireland's AIB which sold their Polish units to Spain's Santan-der, Greek Eurobank EFG (their Polbank EFG merged with Raiffeisen Polska), and Swedish Nordea


(their Polish arm was acquired by Poland's largest lender PKO BP for PLN 2.83m).

Following a number of failed attempts, BNP Paribas has finally found a way to boost its market position in Poland. Photo: BNP Paribas

The Polish unit of BNP Paribas posted net earnings of PLN 102.3m in 2013, up from PLN 30.8m in 2012. With 222 retail units and nine business centers, the bank serves 363,000 retail customers and 33,000 small and medium-sized companies. Globally, BNP Paribas has a presence in nearly 80 countries with 190,000 employ-ees, including 145,000 in Europe, focusing on retail banking, investment solutions as well as corporate & investment banking. With combined assets of more than PLN 57bn, the new BNP Paribas-BGŻ will remain far behind the top four lenders (PKO BP: PLN 200bn+Nordea's PLN 30bn; Pekao SA: PLN 150bn, mBank and BZ WBK (each with PLN 100bn in assets) but its place among the country's ten leading beans seems secure.

BANKING & FINANCE

Dutch online broker Dutch online broker Dutch online broker Dutch online broker Degiro eyeing 25% Degiro eyeing 25% Degiro eyeing 25% Degiro eyeing 25% share in Polish marketshare in Polish marketshare in Polish marketshare in Polish market

Online stock broker Degiro, which in merely few years took the Dutch market by a storm, is hoping to repeat the same scenario in Poland by offering commissions which are up to 80% lower than elsewhere and direct access to the world's 100 top stock exchanges. Degiro cites a recent poll by Poland's Individual Inves-tor Association (SII), in which 33% respondents men-tioned high commissions as one of the main draw-backs of the Polish financial market. The current rates range between 0.19% and 0.39% per stock transaction, but in the case of very small orders the minimum commission stands at PLN 3. Additionally, clients are often charged monthly brokerage account fees. The Dutch newcomer claims their rates for individual clients are way lower than even the most competitive commission levels currently available on the Polish market, because they bundle orders placed by institu-tional and individual investors, taking advantage of economies of scale. Moreover, since its infrastructure is utilized by professional clients, Degiro is able to ne-gotiate wholesale fee structures with every exchange to which it connects. Furthermore, the business relies solely on a cost-effective online-only platform. Ac-cording to Degiro, its platform is underpinned by state-of-the-art connectivity and server infrastructure, making it perfect for investors of all sizes who manage their portfolios online. Besides the Netherlands, Degiro has so far introduced its brokerage platform to Belgium, France, Austria and

the Czech Republic. Degiro's target in each country is a market share of 25%. In the Netherlands, it took them merely 12 months to achieve that goal but al-ready after six months Degiro was the country's num-ber two online broker. Unlike its competitors, many of whom only offer ac-cess to European and US exchanges, Degiro also offers access to markets in Australia, Japan, Hong Kong, and many more across the globe. Besides its competitive pricing and a large selection of markets, Degiro is gearing up to allow its clients to engage in fractional trading (i.e. buy or sell fractions of shares). With frac-tional trading, managing smaller portfolios or trading for educational purposes can be done in a professional manner without worrying about large exposures. Based in Amsterdam, Degiro BV is authorized by the Netherlands Authority for Financial Markets (AFM) to act as an investment firm and holds a Dutch license. The regulatory capital requirements of Degiro are un-der supervision of the Dutch Central Bank.

Poland Today talks to: Niels Klok, Founder of Degiro

PT: Can you tell us what is the Degiro organization made up of the moment? Niels Klok: In the Netherlands we have all things re-lated to Assets & Payments as well as our IT Infra-


structure. In Sofia (Bulgaria) we have a service centre for the Eastern and southern parts of Europe. In this office we have employees from all European countries who speak the native language of the clients. We also have an office in Hong Kong that’s where we have our marketing department and from where we will set out to countries outside of Europe. PT: What about the Polish unit? Will there be any staff on the ground? Brokers in Poland have certain reporting obligations related to capital gains tax paid by investors etc. How will these be handled? NK: We will not have physical presence in Poland in the short term. At the end of the year we will supply clients with the data they need in order to file their taxes. PT: Bundling institutional and individual orders, which is the secret of your success, seems like such a simple idea. How come nobody else is doing it? And what if they start? NK: It's a good question, but I don’t know the answer. For us it is working out very well. If others start with fees comparable to ours, we expect to be so advanced on our growth path that we can lower our fees to stay the most competitive in the field. This way we will re-tain our clients. PT: Your success in the Netherlands has been impres-sive, but it's a market your team know best. How has the business been in the other markets you've entered so far? NK: We have only recently started in other countries so it is a too early to say. We can say that in the first market we started outside the Netherlands, Belgium, we are already profitable. So far we are growing faster than expected in almost all countries we launched. We do see big differences between them. PT: How long do you think it will take you to reach the 25% share in Poland?

NK: We communicate "a few years" because it is so hard to say. Personally, I believe it will take us 2-3 years from the moment our marketing campaign is launched.

ENERGY & RESOURCES

ChinaChinaChinaChina----CEE Fund & CEE Fund & CEE Fund & CEE Fund & Israeli Enlight to Israeli Enlight to Israeli Enlight to Israeli Enlight to invest PLN 1.3bn in invest PLN 1.3bn in invest PLN 1.3bn in invest PLN 1.3bn in Polish wind farmsPolish wind farmsPolish wind farmsPolish wind farms

The China-CEE Fund and Israel-listed Enlight Re-newable Energy will invest up to PLN 1.3bn (USD 406m) to acquire majority interest in two Polish wind projects with a combined installed capacity of 250.5 MW. A joint venture set up by the two partners is to buy the Wróblew and Project 2 farms, developed by GEO Renewables. China-CEE will hold 49.9% and Enlight 50.1% in the joint venture, which will allow the Israeli-based firm to include earnings and revenue from the venture into its results reports. Wróblew, valued at around PLN 200m, is to be com-pleted in November this year with a capacity of around 36 MW. Project 2 is forecast to reach a capacity of around 214 MW, with the first stage to be delivered at the end of 2015. The contract for this wind farm was still undergoing due diligence. The Warsaw-based re-newable energy developer GEO Renewables will re-tain minority ownership in the two farms. The deal is a second major investment by the Chinese fund in little more than a month. In July, CEE Equity Partners, which manages the China-CEE Fund, agreed to buy a 16% stake in Poland's largest private utility PEP/Polenergia for PLN 240m. The China-CEE

fund was set up and capitalized by The Export-Import Bank of China. To start, the fund has half a billion dol-lars to invest in the region, including the Central and Eastern European EU states as well as most of the Bal-kans. According to Rafał Andrzejewski, an investment director at CEE Equity Partners about half of the ini-tial funding will go to Poland. Once it spends 60% of its initial capital, CEE Equity Partners will receive a new tranche of funding to the tune of USD 1.5bn.

The Sieradz area in central Poland, home to the Wróblew farm, boasts some of the country's best wind conditions Photo: GEO Renewables

The fund's remit is to focus on opportunities in infra-structure, energy, telecom and specialized production. It will operate for 10 years, with the option of a two-year extension. It will invest between USD 20m and USD 70m per project in equity alone. Because the firm is looking for long-term deals and doesn't necessarily have to take a majority stake in its targets, it has had no trouble finding willing partners, said Andrzejewski. "Following two energy-related investments we are now going to shift our attention to different sectors.


We are hoping to close at least two more transactions by the end of the year," Rafał Andrzejewski tells Po-land Today. GEO Renewables is one of the largest independent wind developers in Poland with a portfolio of approx. 1,000 MW of wind project sites all with secured grid connection rights, of which some 750MW will be ready for construction in the next three years. The company is backed by the EnerCap Power Fund, a private equity fund focusing on the clean energy sector in Central and Eastern Europe. EnerCap has recently inked a deal with the Polish state investment vehicle PIR, under which the latter is to inject some EUR 30-40m into EnerCap's latest fund E3F that will focus on development of heat & power sources in Central and Eastern Europe. EnerCap intends to raise approxi-mately EUR 100m from global investors for the fund in Q3 2014 and boost the figure to EUR 350m by the end of 2015. According to the two partners, more than a half of the fund's total resources are to be invested in Poland.

Poland's installed wind energy capacity in MW

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

*2014

Source: URE *) as of end of H1

Poland's installed renewable energy capacity came to 5,878 MW as of end of 1H 2014 , up by over 1,400 MW compared to end-2012, according to energy market

regulator URE. Wind power capacity increased the most, reaching 3,727 MW as of June, followed by bio-mass-fueled plants with 995 MW and hydro-power capacity amounting to 974 MW, the data showed.

ENERGY & RESOURCES

Tauron, Enea and Tauron, Enea and Tauron, Enea and Tauron, Enea and KGHM join PGE in KGHM join PGE in KGHM join PGE in KGHM join PGE in Poland's first nuclear Poland's first nuclear Poland's first nuclear Poland's first nuclear power plant projectpower plant projectpower plant projectpower plant project

Poland's top utility PGE has inked final agreements with three other state-controlled giants, which are to acquire a combined 30% of the shares in Poland's first nuclear power project. PGE will sell stakes of 10% each in its nuclear energy SPV PGE EJ 1 to listed pow-er groups Tauron, Enea and copper miner KGHM. Each of the three partners is expected to contribute PLN 107m to the project by 2016. As the project's lead-er, PGE will retain a 70% stake in the SPV, and pitch-ing in an estimated PLN 700m. By getting other top Polish companies onboard PGE is trying to share risk involved in the development of Poland's own nuclear energy program, the cost of which may add up to PLN 40-60bn. During the initial stage of preparations, PGE EJ 1 will have to name a strategic partner for the project as well as choose suppliers of technology and fuel. PGE has signed non-exclusive agreements with reactor vendors to investigate Areva's EPR, GE-Hitachi's ABWR and ESBWR, and Westinghouse's AP1000 as potential technology choices for the project. A timeline issued earlier this year by the Polish government foresees se-lection of the location and reactor technology for the

first plant by the end of 2016, with all the necessary construction approvals in place by the end of 2018. According to government plans, Poland's first nuclear power unit is to go online by 2025 and have a capacity of 3,000 MW, with a second unit starting up by the end of 2030. A second nuclear power plant is sched-uled for operation around 2035, adding a further 3,000 MW. In July PGE chose British engineering firm Amec as the technical adviser for its nuclear power plant project, under a bid worth just over PLN 1.3bn, with PLN 205m of that for "required work" and PLN 1.1bn for optional services. Last year, Australian com-pany Worley Parsons was recruited to carry out site characterization work under a contract worth PLN 252m.

Energy generation in Poland in 2035 By source, government plans

Gas

11%

RES*

14%

Nuclear

36%

Coal

39%

Source: PGE *) renewable sources

A recent survey showed 64% support development of nuclear energy in Poland. The country, which current-ly relies on its vast coal reserves to produce about 90% of its electricity, is scrambling to find alternative ener-gy sources - including nuclear and shale gas - to meet European Union greenhouse gas emission limits by 2020. Faced with growing pressure from the EU,


which expects Poland to gradually decommission its coal-fired power stations, the government has been keen to find a viable long-term alternative, albeit one that would not increase the country's dependence on Russian gas. According to plans, by 2035 nuclear pow-er plants are to generate 36% of the country's electrici-ty. At the same time, the highly polluting lignite-fired stations are to see their share drop from 66% as of end of 2010 down to 34%. The current power generation capacity of Poland's energy sector totals at 38,000 MW.

PROPERTY & CONSTRUCTION

PHN gets financing PHN gets financing PHN gets financing PHN gets financing and partners for key and partners for key and partners for key and partners for key investmentsinvestmentsinvestmentsinvestments

The Warsaw-listed, state-controlled real estate group Polski Holding Nieruchomości (PHN), has ob-tained financing for a key office project in Warsaw and unveiled its first partner for a mixed-use waterfront complex in Gdynia. PHN's Domaniewska Office Hub office development in Warsaw's Mokotów district is currently under con-struction with completion being expected in mid-2015. The construction will be financed by Pekao Group, the Polish arm of Italy's Unicredit. The initial con-struction loan (worth PLN 68m and EUR 23m) is to be later transformed into an investment loan (PLN 68m and EUR 29m). A separate PLN 13.4m credit line will enable the company to finance VAT-related payments. The project will include two class-A office buildings with a combined GLA of 27,000 sq.m, of which PHN has so far pre-leased approximately 50%.

PHN's subsidiary Dalmor, which owns an artificial pier located in the centre of Gdynia, on the Baltic coast, directly next to the landmark Sea Towers resi-dential complex and Gemini shopping center, has teamed up with residential property developer mLocum (formerly BRE.locum) on phase one of the large mixed-use complex Port Rybacki. The two part-ners are to build six residential buildings at the site, which according to local zoning plans, can be used to develop some 70,000 sq.m of commercial space and 120,000 sq.m of residential space. PHN and its partner are to prepare detailed documentation for the invest-ment.

Domaniewska Office Hub will be completed in Q3 2015 delivering a GLA of 27,000 sq.m. Image: PHN

PHN was created in 2011 when the Polish government pooled together some 180 different real estate and land holdings, to raise funds to help it reduce borrowing. The business was subsequently floated on the Warsaw Stock Exchange and currently the Treasury Ministry is seeking a strategic investor for the company. In October last year PHN sealed a joint venture agreement with Germany's Hochtief Group for its flag-ship development, the office tower on 36 Świętokrzyska St., vis-à-vis Warsaw's most prestigious office project Rondo 1. The two partners are to create a 50/50 SPV, with PHN contributing one of Warsaw's

most attractive sites, and Hochtief Development Po-land taking on responsibility for the overall implemen-tation of the project. According to PHN's preliminary plans, the building were to reach some 150m in height and 45,000 sq.m in GLA, but all final details, both fi-nancial as well as architectural, are yet to be ham-mered out together by the two companies. PHN rep-resentatives told Poland Today they are in the process of selecting the most suitable design for the planned office complex, with Hochtief being responsible for coordinating all preparatory work.

In the first week of September PHN sold its small boutique office project Rakowiecka City (1,820 sq.m GLA) to the Embassy of Turkey. Image: PHN

The company is also building a 40,000 sq.m logistic park (SEGRO Industrial Park Wrocław) in coopera-tion with British developer SEGRO, and preparing for a similar project in Parzniew near Pruszków, just out-side of Warsaw, close to the Konotopa and Pruszków junctions on the A2 Berlin-Warsaw highway, an area that is particularly popular with logistics tenants. PHN and an unnamed industrial proper signed a letter of in-tent in connection with the latter project back in Feb-ruary and they are currently hammering out details of their future cooperation.


According to property consultancy CBRE, PHN's portfolio comprising 171 properties, including 123 built-up areas with office, retail, residential, hotel and industrial buildings and 48 investment sites (over 1,100 ha) throughout the country was worth PLN 2.2bn as of end of 2013. PHN has been listed on the Warsaw Stock Exchange since 13 February 2013. Its net earnings came to PLN 13.4m in 1H 2014, against a PLN 17.6m loss in the corresponding period of last year. According to PHN, its non-core asset portfolio, of which the company has gradually disposing, is worth approximately PLN 800m. In 1H 2014 it sold five properties for a combined PLN 26m, and the disposal of a further PLN 13m (worth 70m) is currently under-way. Its portfolio currently includes 144 assets.

SERVICES & BPO

State Street's KrakóState Street's KrakóState Street's KrakóState Street's Kraków w w w unit hits 2,000 unit hits 2,000 unit hits 2,000 unit hits 2,000 employee markemployee markemployee markemployee mark

Back in April 2012, when I last spoke to US company State Street, their Kraków operations had 1,000 em-ployees, providing a range of complex investment ser-vicing solutions including end-to-end investment fund accounting, derivatives processing, securities pricing, financial reporting and hedge fund administration. Little more than two years later, as of end of August 2014, State Street had three locations in Kraków with 2,000 employees and the company is aiming to onboard another 200 by year's end. State Street Corporation, known as State Street, is a US-based international financial services holding company. State Street was founded in 1792 and is the second oldest financial institution in the United States. The Boston-based company has offices in 25 countries

around the world, including 11 in Europe, where it had EUR 2.4 trillion in assets under custody and admin-istration as well as EUR 406bn in assets under man-agement as of December 31, 2013. Globally, State Street is organized into three main divi-sions. The Global Services business is a custodian bank with USD 27.5 trillion of assets under custody and ad-ministration, as of end of March 2014. The Global Ad-visors business provides investment management ser-vices and has USD 2.4 trillion of assets under man-agement. The Global Markets business offers invest-ment research and trading services to institutional in-vestors.

Poland Today talks to: Scott Newman, Senior Vice President, Managing Director State Street Bank GmbH, Poland Branch

PT: The last time we spoke in April 2012 State Street had 1,000 staff in Kraków and plans for 600 more. I hear you've just hit the 2,000 mark but you're far from done. Where is all this growth coming from? Is the investment fund market developing so rapidly or are you realigning processes within the global State Street organization? SN: We currently have around 200 open vacancies, which is primarily driven by business growth and a shift in strategy to service higher complexity activity from our Krakow office. Obviously, operational cost is important but this is no longer the driver in determin-ing what activities to service in Poland. Many new

business wins at State Street are now launched and serviced from our Krakow operation from day one. This is a remarkable achievement as our previous practice was to establish new business in our more ex-perienced locations and then transfer them to Poland once in a business as usual environment. Today, the more basic and routine activities are serviced from other locations, mostly in Asia. Servicing higher complexity activity in Poland includ-ing hedge funds and Risk & Analytics is now possible due to the quality and availability of suitable candi-dates along with increasing experience levels of our employees in Poland. We also seek to hire experienced industry professionals, although the market here is limited. The quality of work delivered by our Polish employees along with a strong work ethic is highly ap-preciated by our international customers. PT: The Kraków unit were to play a key role in State Street's plan to double revenues from markets out-side the United States. Have you met your objectives in this respect? SN: We continue to work towards this goal. From a Kraków perspective, we are certainly meeting our ob-jectives by creating capacity for State Street to service new business mandates in the EMEA region. PT: Have you added any new capabilities Kraków over the past two years? Which units within the cen-tre are currently developing the fastest? SN: In 2013, State Street in Kraków became a branch of State Street Bank GmbH. As a branch of a foreign bank, we are able to perform a broader range of activi-ties from our Kraków office. The scope of services has been extended to more than 15 functions and in the last two years we have established Risk & Analytics, Investment Compliance, Anti Money Laundering (AML), Tax Reporting, Collateral Management and Securities Lending, Middle Office and Transfer Agen-cy services.


Another significant development during 2014 has been the migration of activities from our Italian office in Milan which includes administration of individual managed accounts and in the future will expand to in-clude fund accounting. Existing services, which have expanded, include Fund Accounting, Financial Reporting, Hedge Fund Admin-istration, Securities Valuation and Derivatives servic-ing. Currently, we are seeing strong inflows into our funds in Europe which drives further growth of our Fund Accounting operations. PT: It's been reported that State Street aims to grow at the current pace (approx. 400 new placements per annum) in the coming years. Is there a limit? How big can you grow? SN: State Street is committed to our business in Kra-kow and we have secured long term lease arrange-ments on our office facilities. We plan to grow our business and continue to recruit over the coming years. We are observing that the quality of the candi-date pipeline is often inconsistent and it is important that candidates continue to demonstrate that they are motivated, have strong English language and analytical skills and are good team players. This is necessary because in Poland we develop ad-vanced services to support investment activity where analytical thinking outside of the box is sometimes fundamental. The characteristics we most value in-clude a natural drive, enthusiasm and strong motiva-tion. PT: We hear increasingly often from Kraków-based BPO/SSC/ITO firms that the market is becoming too competitive for employers and candidate’s expecta-tions are too elevated. What is your experience in this respect? Have you considered venturing out of Kraków, to other Polish towns, in a move to broaden your potential talent pool?

SN: We believe that we have a strong value proposi-tion for potential candidates as we are not operating a typical BPO/SSC. As a branch of a bank and a provider of investment servicing solutions to global institution-al investors, the positions offered by State Street in Po-land are in core financial services and are mostly the same roles as available in any other State Street office across the globe including in London, Frankfurt, Bos-ton or Hong Kong. Kraków must be careful not to repeat the mistakes made 10 years ago in places like Dublin which devel-oped so quickly that the market eventually overheated. This resulted in an artificial spike in salaries and a de-crease in the overall quality of services, which conse-quently discouraged customers. There is an increase in competition for candidates and it is important that companies work together to promote the interests of companies and candidates alike by exchanging infor-mation and not creating unsustainable salary inflation. We constantly review our location strategy and it is prudent to consider alternative cities in Poland as we expand. During this assessment, we look at such crite-ria as infrastructure and the availability of suitable candidates. This availability is much more important to us than for smaller companies employing 100-200 people. We must identify locations where we can swiftly expand and develop through the recruitment of appropriate talent without challenging the local labor market. PT: Back in 2012 this is how you described your re-cruitment approach: "We are looking for university graduates and students of faculties such as finance and accounting, mathematics or economics, as well as students of humanities with analytic skills, who speak English fluently. We are looking for senior managers and professionals experienced in the area of finance, accounting, audit and consulting too. The-se employees will be involved in managing activities

and teams dedicated to servicing global clients." Does this description still remain valid or have you changed your strategy? SN: This description remains accurate. We recruit en-try level employees who are usually recent graduates or young professionals with a few years of relevant ex-perience as well as industry professionals from Poland and abroad. We offer our employees an extensive training program which includes technical as well as soft skills trainings in areas such as communication, time management, and public speaking. This is why the personal motivation of candidates is so crucial for us during the recruitment process. We invest in each and every employee in order to build a strong team. It is challenging to recruit seasoned industry profession-als as the custody and investment fund market in Po-land is still in the early stages of development. Howev-er, we have had some good success in hiring Polish na-tionals working as industry professionals abroad who have been looking to return home.


UPS to create 300 jobs UPS to create 300 jobs UPS to create 300 jobs UPS to create 300 jobs at two new Polish sitesat two new Polish sitesat two new Polish sitesat two new Polish sites

US logistics giant UPS has announced plans for two new units in central Poland – a parcel sorting facility and a shared services centre – representing a total in-vestment of USD 25m. "Both facilities are scheduled to be operational in the first half of 2015 and combined will create more than 300 new UPS jobs in Poland. We are currently not in a position to share specific employment figures for each facility," Małgorzata Matusiewicz, marketing director at UPS Polska tells Poland Today.


UPS's new parcel sorting hub and center, the compa-ny's largest facility of this kind in Poland, will be locat-ed in the town of Strykow near Łódź. The area has at-tracted a lot of logistic investments in recent years due to its location at the junction of Poland's two key mo-torways: A1 (Warsaw-Berlin)) and A2 (Gdańsk-Czech border). Two years ago French-owned parcel delivery company DPD launched its central sorting hub in the area, creating more than 400 jobs.

UPS delivers 16.9m packages every day. Photo: UPS

"Stryków was selected by UPS because of its central location and proximity to many national business cen-ters. In addition, the site offers an excellent transport infrastructure, which allows for further refinement of UPS network connections," the company said in an of-ficial communiqué. UPS will break ground on the Stryków hub as early as this month, and once completed, the facility will oper-ate simultaneously as a package sorting center and a distribution hub for parcels of all sizes to meet the growing needs of the market. It will have a total oper-ating area of nearly 13,000 sq.m, the equivalent of two football fields and will be equipped with sorting tech-nology that can process up to 15,000 packages per hour. The new hub is being built to UPS specifications

by a local developer, UPS representatives told Poland Today. The second investment announced last week will be a new UPS Global Business Services (GBS) center in Łódź. It will be located in University Business Park on Wólczańska St, developed by the Warsaw-listed prop-erty firm GTC. GBS is a UPS division which provides shared international services, including information services, customer service, and accounting. UPS opened its first GBS center in Poland in Wroclaw in 2006, where more than 600 people are employed to-day. After launching services at the center in Łódź, the company will ultimately employ more than 900 people at both GBS sites combined, UPS said. "UPS already has very good experience with our GBS center in Wrocław. We have closely considered differ-ent options before making this proposal and Łódź of-fers us excellent infrastructure, support of the city au-thorities and availability of a talented and motivated workforce who know foreign languages. Those are the main factors that have determined the choice of Łódź in Poland for our new location of GBS," says Małgorzata Matusiewicz. "Currently we are still in the process of deciding on the exact services which will be available at the centre. We can only reveal that the services will include a wide range of administrative roles. Further details will be announced at the time when all final decisions in that respect are made." Globally UPS delivers over 16.9m packages every day which adds up to 4.3bn parcels and documents per an-num. Its global revenue for 2013 was USD 55.4bn and net income totaled USD 4.37bn. UPS first entered the Polish market in 1992 through a service partner PPS Polkurier," which UPS acquired in March 2001. In 2005, UPS acquired Messenger Service Stolica S.A. to further strengthen its capabilities on the Polish mar-ket, where it currently has 2,300 employees, a delivery fleet of 1,700 vehicles (operated by subcontractors)

and a national network of 40 depots with a combined warehouse space of 38,000 sq.m. The company does not disclose any operational data with regard to its in-dividual markets. "Poland is a very important market for UPS in Europe and our new investments clearly demonstrate UPS’s commitment to the Polish market. UPS grew its export volume in Europe nearly 15% in the first six months of 2014, compared to the first six months of 2013, and our operations in Poland contributed to this result," Ms. Matusiewicz says.


PKP Cargo mulling two PKP Cargo mulling two PKP Cargo mulling two PKP Cargo mulling two major major major major acquisitionsacquisitionsacquisitionsacquisitions

Polish PKP Cargo, the European Union’s largest listed rail freight company, has announced plans to take over two competitors as part of its expansion strategy in eastern and central Europe. Shares in PKP Cargo rose 2.6% on the news, reaching a two-month high and valuing the company at PLN 3.45bn. PKP Cargo signed a letter of intent to purchase 100% in Warsaw-based CTL Logistics and entered into ex-clusive talks to buy the Amsterdam-based Advanced World Transport BV (AWT), the company an-nounced last week. According to unofficial estimates, the combined price tag on both firms could come to PLN 900-950m. CTL Logistics is Poland’s leading private rail logistics company and one of the largest private rail operators in Europe. It provides tailor-made logistics solutions focusing on long distance national and international rail logistics, siding management and corporate waste disposal for the coal & coke, fuels & oil, chemicals,


construction material and steel industries. A majority stake in CTL, which had PLN 726.6m of sales last year, was sold by its founder Jarosław Pawluk to the UK private-equity fund Bridgepoint in 2007 for an un-disclosed sum. The fund is in talks with Cargo as well as other companies and plans to find a buyer "within a month," Khai Tan, a Bridgepoint partner in Warsaw, told Bloomberg last week.

PKP Cargo 's CEO Adam Purwin (holding the micro-phone) was one of the panelists at Poland Today's recent conference "Poland Transformed." Photo: PT

The Netherlands-based AWT group holds a 8% share in the Czech market and operations in other CEE countries, specializing in transport of coal, steel, and car parts. With EUR 282m in sales revenues and 2,000 employees, the company realized freight transport of 2.72m ton-kilometers gross in 2013. The agreement al-lows PKP Cargo to conduct a due diligence of AWT and gives it exclusive negotiation rights for the period of ten weeks since due diligence is launched, PKP Car-go said. The agreement also opens the door to talks on terms of binding deals with AWT, the filing stated. Apart from the Czech Republic, the firm operates in Slovakia, Slovenia, Hungary, Poland, Germany, Roma-nia, Bulgaria, and Croatia.

PKP Cargo, which had PLN 339.4 m of cash at the end of June, will finance the potential takeover mainly from its own cash and may sell Eurobonds as well, Chief Executive Officer Adam Purwin said at the Krynica Economic Forum, Poland last week. Cargo’s net income rose 66% y/y to PLN 126.7m in the first half of 2014.

PKP Cargo key figures

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013

0

100

200

300

400

500

600

Turnover, in PLNbn, left axis

Net result in PLNm, right axis

Source: PKP Cargo

PKP Cargo is the European Union's second largest railway freight company after Deutsche Bahn AG and the first publicly listed one, following its recent PLN 1.42bn IPO on the Warsaw Stock Exchange, which saw the state-owned Polish railway operator PKP sell 20.9m shares in the business. A few weeks ago PKP reduced its stake in the business by a further 7.63m shares, down to 33%. The 17% stake in PKP Cargo was sold for PLN 580m. PKP Cargo saw its revenues top PLN 4.72bn in 2013, down from PLN 5.16bn in 2012, while its net earnings slumped to PLN 74m from PLN 268m, due to econom-ic slowdown. Last year the company carried around 114m tons of freight, mainly hard coal and building materials. Warsaw-based PKP Cargo had a 60.3% share in the Polish market in 2012 and controlled 8.5% of total rail freight in the EU. That compares with DB Schenker's 28% and 5.4% shares in the EU and Poland, respectively.

The company has emerged from the brink of bank-ruptcy caused by the economic crisis at the end of the last decade. In 2008 and 2009 it posted net losses of PLN 179m and PLN 498m, which prompted an in-depth restructuring that saw some 20,000 positions cut, and many redundant side businesses and regional units closed down. The overhaul proved effective as the business is back in the black and expanding abroad. PKP Cargo has obtained licenses to inde-pendently operate in Germany, Czech Republic, Slo-vakia, Hungary, Austria, and Belgium and it is current-ly seeking a Dutch permit.

RETAIL PROPERTIES

Dutch ECC to build Dutch ECC to build Dutch ECC to build Dutch ECC to build large shopping center large shopping center large shopping center large shopping center in Warsaw's satellite in Warsaw's satellite in Warsaw's satellite in Warsaw's satellite town of Pruszkówtown of Pruszkówtown of Pruszkówtown of Pruszków

Dutch developer ECC Property Management, best known in Poland as the creators of Warsaw's Promenada shopping centre, is embarking on a new retail investment in Pruszków, just outside the Polish capital. Nowa Stacja will include some 120 retail units, fitness club and a six-screen cinema, the city's first. They will be spread across 25,000 sq.m of GLA. "The scheme was designed by IMB Asymetria, in line with the local zoning plan. We are currently in talks with the potential tenants and we hope to obtain per-mits shortly, in order to begin constgruction in spring 2015 and launch in fall 2016 on the 100 th anniversary of Pruszków's city status. The total capex on the pro-ject is EUR 50m," Maciej Krzewiński, CEO of ECC's Central and Eastern European arm, tells Poland To-day.


Besides Promenada, a 120,000 sq.m shopping an d lei-sure center in Warsaw that currently belongs to Atri-um European Real Estate, ECC's Polish projects include a 6,000 sq.m office building Green House, de-livered in mid-1990s, Puławska 111 apartment building in Warsaw's Mokotów district, and an upscale residen-tial project Podkowa Estate in Koninko near Poznań with 160 homes. The company was also providing fa-cility management services to a number of client,s in-cluding Carpathian (formerly Dawnay Day), to whom ECC sold Promenada. Carpathian sold the project in 2010 to Atrium for a reported USD 222m.

Nowa Stacja will be located near the Pruszków train station, at the site of a former machine factory, which has just been demolished, Image: ECC

"We have indeed scaled down our Polish operations in recent year due to our focus on Thailand, where in Oc-tober 2013 we launched a shopping center in Chiang Main with a GLA of 62,000 sq.m. Around the same time we completed the luxury apartment building Puławska 111 in Warsaw with 10,000 sq.m of usable floor space. We have also changed the overall concept for our residential complex in Koninko near Poznań where together with our partner Novaform we are planning to deliver the first batch of homes by the end of this year. Currently we are working on a couple of projects but it's too early for revealing any details," says Krzewiński.

FOOD

Lithuanian owner Lithuanian owner Lithuanian owner Lithuanian owner seeks to delist Polish seeks to delist Polish seeks to delist Polish seeks to delist Polish confectionery Mieszko confectionery Mieszko confectionery Mieszko confectionery Mieszko

Lithuanian millionaire Vladas Numavičius, the majori-ty owner of Polish confectionery company ZPC Mieszko has placed a buyout bid on the outstanding 34% of shares in the company. Numavičius, who oper-ates via his Cyprus-based venture Bisantio Invest-ment Limited, is paying PLN 3.69 per share, a notch above the average price from the past three months (PLN 3.47) and last year (PLN 3.5). The Lithuanian in-vestor is hoping to delist Mieszko from the Warsaw Stock Exchange, where it debuted back in 1997. According to analysts, the price offered by Bisantio is far from attractive and the Lithuanian will almost cer-tainly have to raise it in order to take full control of Mieszko. In a June report DM PKO BP brokerage val-ued Mieszko shares at PLN 4.6. The largest share-holder in the company, besides Bisantio Investments, is Noble Funds TFI with a 95% stake. The Mieszko group posted PLN 15.2m in net earnings last year (up from PLN 14m in 2012) on PLN 486m turnover (+1% y/y). The company is one of Poland's leading makers of pralines (4.8% share), chocolate gifts (5.4%), hard candy (6%, and crackers (12.4%). According to consultancy KPMG, Poland's confection-ery market is worth an estimated PLN 12.7bn and over the past half a decade it has seen an average annual growth rate of 2.3%. The sector's performance mirrors consumer sentiment as during economic downturn customers cut down on sweets. With no prospects for fast-paced economic growth in sight, market analysts are not expecting the confectionery segment to pick

up speed anytime soon, with gradual recovery being seen as the most probable scenario.

POLITICS & ECONOMY

Parliament speaker Parliament speaker Parliament speaker Parliament speaker Ewa Kopacz is PO's key Ewa Kopacz is PO's key Ewa Kopacz is PO's key Ewa Kopacz is PO's key candidate for next PMcandidate for next PMcandidate for next PMcandidate for next PM

As we already hinted in the last issue of BR+, the per-son most likely to succeed Donald Tusk as Prime Min-ister of Poland is parliamentary speaker and former health minister Ewa Kopacz. Her candidature re-ceived unanimous support from senior members of the ruling Civic Platform (PO) last week. Mr. Tusk was se-lected for the new European Council president and is expected take over from the current holder of the post, Herman Van Rompuy, on December 1. Government spokeswoman Małgorzata Kidawa-Blońska has said that Poland is likely to have a new prime minister by the end of September.

Ewa Kopacz is likely to become Poland's second fe-male Prime Minister Photo: Rafał Zambrzycki


Poland's Deputy Prime Minister and Infrastructure Minister Elżbieta Bieńkowska, whom many Poles would like to see at the helm of the cabinet, will follow Tusk to Brussels, becoming the new EU commissioner for the internal market, a post currently held by Michel Barnier. The portfolio concerns the develop-ment of the 480m strong European single market, promoting free movement of people, goods, services and capital. Bieńkowska has been very successful in managing the distribution of EU funding in Poland and is widely regarded as a very effective public official, but Mr. Tusk reportedly wanted to take her to Brussels with him as a trusted ally.

Poland's deputy PM Elżbieta Bieńkowska, who will succeed Michel Barnier as the EU's commissioner for internal market, was among the distinguished guests at Poland Today's Primetime Warsaw II event last spring. Photo: Poland Today

Kopacz's nomination "is not a binding decision," how-ever, according to Poland's President Bronisław Komorowski, who reminded the MPs that under the Polish constitution it is the head of state who desig-nates a candidate for prime minister. Analysts said Komorowski's comments signaled his annoyance at the fact that the PO party, from which he hails, had preempted him in choosing a candidate to replace Tusk. Public reception of Kopacz's candidacy has been

less than lukewarm, with many observers expressing doubt whether the speaker has got what it takes to lead PO to a victory in next year's general elections. So far, Tusk's appointment as the new European Council president seems to have given the public sup-port for his party a substantial boost, narrowing the gap separating PO from the opposition Law and Jus-tice (PiS) party to just one percentage point. PO has been trailing far behind PiS in recent months. But the new poll by Millward Brown for the TVN24 channel shows PO is now backed by 31% of voters, while PiS is supported by 32%. The poll for TVN24 put the left-wing Democratic Left Alliance (SLD) on 9%, the far-right New Right on 7%, and the Polish People's Party (PSL), the junior partner in the coalition government, on 5%.

POLITICS & ECONOMY

Interest rate cuts "very Interest rate cuts "very Interest rate cuts "very Interest rate cuts "very likely" likely" likely" likely" says central says central says central says central bank governor Belkabank governor Belkabank governor Belkabank governor Belka

Poland's Monetary Policy Council will "very likely" cut the cost of borrowing in the coming months, with more than one cut possible, central bank chief Marek Belka said last week, after rate-setters decided to keep rates on hold. Poland's key reference rate thus remains at an all-time low of 2.50%. Although most observers agree that the Polish economy needs cheaper credit to support its sluggish growth, some found Belka's decla-ration problematic. "Today’s decision is a double policy error, by not only not cutting rates, but also damaging its credibility through its communications," Nomura's Peter Attard Montalto commented last Wednesday. "Marek Belka

seemed to all but pre-commit to cut rates at the Octo-ber meeting, saying that the hurdle not to cut rates then was very high. We think there are few reasons to wait for another month. This suggests to us that Mr. Belka maybe trying to strong arm the rest of the MPC at the next meeting into a cut, getting the market to move, cutting on his behalf, and in our view this points to him possibly being in the minority backing a cut to-day. However, we think the likelihood of rates NOT being cut at the next meeting is high because of this, assuming no particular additional negative shock to the data." The Monetary Policy Council held rates unchanged at its September sitting, but signaled that it was willing to begin adjusting rates if incoming data confirms recent signs that the economy is slowing and that inflation may not return to target mid-term. "We expect a negative print for the next CPI, but in-dustrial production and labor market data to be broad-ly in line with the latest figures. Marek Belka (oddly) suggested today that that would be sufficient for rates to be cut at the next meeting, but we think the key risk is that there will still be not enough evidence of a dra-matic domestic demand shock to get more hawks on board. However, we recognize that it may well only take one extra vote to tip the balance vs. today's meet-ing," Montalto added, saying the likelihood of a 25bp cut at the next meeting is now 50:50. Poland's economic growth slowed to 3.3% in Q2 from 3.4% in Q1, with consumer prices sliding into deflation in July, amid continuing eurozone weakness and un-certainty over the Russia-Ukraine conflict. The manu-facturing PMI has been in negative territory for the past two months, signaling contraction.


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Apr '14 May '14 Jun '14 Jul '14

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

Food & bev +0.3 -0.5 -0.8 -0.4 -0.9 -0.3 -1.7 -1.1

Alcohol, tobacco +3.9 +0.3 +3.9 +0.2 +4.0 +0.1 +4.0 0.0

Clothing, shoes -4.4 +2.8 -4.6 -0.1 -4.7 -0.8 -4.9 -2.8

Housing +1.7 0.0 +1.6 0.0 +1.6 -0.1 +0.6 0.0

Transport -2.1 -0.1 -0.1 -0.4 -0.6 -0.2 -1.0 +0.8

Communications -1.7 -1.5 -1.1 -0.1 +1.3 +2.4 +2.6 +1.2

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

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

Jan 14

Mar 14

May 14

Jul 14

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Mar '14 Apr '14 May '14 Jun '14 Jul '14

m/m (%) +12.5 +2.3 -2.7 -1.1 +4.7

y/y (%) +3.1 +8.4 +3.8 +1.2 +2.1

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 n/a

y/y (%) +4.3 +5.5 +11.6 +5.6 +2.3

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2009 2010 2011 2012 2013 Jan-Jul

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 92.2 +18.9

Commenced 142.9 158.1 162.2 141.8 127.4 85.5 +18.9

U. construction 670.3 692.7 723.0 713.1 694.0 701.7 -0.3

Completed 160.0 135.7 131.7 152.5 146.1 78.8 -2.7

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 2014 +3.3% 413,457 n/a

Q1 2014 +3.4% 397,429 -1.1%

Q4 2013 +2.7% 455,528 -1.3%

Q3 2013 +2.0% 405,554 -1.9%

2013 +1.6% 1,635,746 -1.3%

2012 +1.9% 1,596,379 -3.7%

2011 +4.5% 1,528,127 -5.0%

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

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% +1.6% +3.5%

Consumer inflation +2.6% +4.3% +3.7% +0.9% +0.3%

Producer inflation +2.1% +7.6% +3.4% -1.3% -1.4%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.3% -0.6%

Nominal gross wage +3.9% +5.2% +3.7% +3.4% +4.3%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.2%

EUR/PLN 3.99 4.12 4.19 4.20 4.12

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

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

Sector Q2 2013 Q3 2013 Q4 2013 Q1 2014

A B A B A B A B

Coal mining 6,290 143 6,061 138 8,615 196 6,333 144

Manufacturing 3,560 155 3,625 158 3,690 161 3,663 160

Energy 5,828 177 6,021 183 6,736 205 6,358 193

Construction 3,693 157 3,766 160 3,895 166 3,706 158

Retail & repairs 3,421 146 3,408 145 3,456 147 3,544 151

Transportation 3,547 125 3,589 127 3,913 138 3,666 130

IT, telecoms 6,707 174 6,654 173 6,695 174 6,986 181

Financial sector 6,702 151 6,109 137 6,602 148 6,749 152

National average 3,613 144 3,652 145 3,823 152 3,895 155


Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jan '14 Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

m/m (%) -64.0 +18.7 +24.2 +3.2 +14.0 +16.9 +0.9

y/y (%) -3.9 +14.4 +17.4 +12.2 +10.0 +8.0 +1.1

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +15.5 +12.1 +5.1 +4.6 +11.8 -0.6 -12.0

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Nov 11

Feb 12

May 12

Aug 12

Nov 12

Feb

13

May 13

Aug 13

Nov 13

Feb 14

May 14

Aug 14

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'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14

m/m (%) 0.0 -0.1 -0.2 -0.2 -0.2 -0.1 0.0

y/y (%) -1.0 -1.4 -1.3 -0.7 -1.0 -1.8 -2.0

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +2.0 +2.2 +3.4 +2.1 +7.6 +3.3 -1.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 Jul'14

m/m (%) -0.2 -0.2 -0.1 -0.1 0.0 0.0 0.0

y/y (%) -1.7 -1.6 -1.5 -1.5 -1.4 -1.3 -1.2

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +7.4 +4.8 +0.2 -0.1 +1.0 +0.2 -1.8

Industrial OutputIndustrial OutputIndustrial OutputIndustrial Output

Month Jan '14 Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

m/m (%) +2.9 -1.8 +9.4 -2.3 -1.7 -0.1 +2.0

y/y (%) +4.1 +5.3 +5.4 +5.4 +4.4 +1.7 +2.3

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +10.7 +3.6 -3.5 +9.8 +7.7 +1.0 +2.2


TTTTraderaderaderade

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

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Jun 2014

y/y (%)

share (%)

2013 share (%)

Jan-Jun 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 36,142 +7.5 10.8 69,304 10.9 24,588 +5.4 7.3 47,906 7.4

Beverages and tobacco 4,613 +12.3 1.3 8,624 1.4 1,994 +4.2 0.6 4,150 0.6

Crude materials except fuels 8,277 +3.1 2.6 15,744 2.5 10,695 -1.4 3.2 21,585 3.3

Fuels etc 14,094 -4.5 4.7 30,013 4.7 37,188 +5.3 11.1 75,539 11.7

Animal and vegetable oils 980 +18.0 0.3 1,864 0.2 1,299 +1.5 0.4 2,646 0.4

Chemical products 30,614 +4.5 9.3 59,103 9.3 50,051 +7.8 14.9 92,917 14.3

Manufactured goods by material 66,704 +3.5 20.6 129,915 20.3 60,007 +8.1 17.9 112,392 17.3

Machinery, transport equip. 128,331 +8.2 37.7 239,434 37.5 110,703 +4.2 33.0 216,608 33.4

Other manufactured articles 44,520 +11.9 12.7 82,816 13.0 31,898 +14.4 9.5 58,210 9.0

Not classified 430 n/a 0.0 1,782 0.2 7,042 n/a 2.1 16,242 2.6

TOTAL 334,705 +6.5 100 638,599 100 335,465 +6.1 100 648,195 100

Poland's ten largest trading partners, ranked according to 2013

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Jun 2014

share 2013 share No Country Jan-Jun 2014

share 2013 share

1 Germany 86,686 25.9% 162,548 25.1% 1 Germany 72,536 21.6% 142,161 21.7%

2 UK 20,918 6.2% 42,138 6.5% 2 Russia 38,637 11.5% 79,578 12.1%

3 Czech Rep. 20,265 6.1% 40,110 6.2% 3 China 32,589 9.7% 61,127 9.3%

4 France 19,152 5.7% 36,367 5.6% 4 Italy 17,731 5.3% 34,940 5.3%

5 Russia 14,707 4.4% 34,069 5.3% 5 Netherlands 12,512 3.7% 25,409 3.9%

6 Italy 15,552 4.6% 27,958 4.3% 6 France 13,152 3.9% 25,041 3.8%

7 Netherlands 13,366 4.0% 25,707 4.0% 7 Czech Rep. 11,451 3.4% 24,054 3.7%

8 Ukraine 6,174 1.8% 18,020 2.8% 8 USA 8,142 2.4% 17,431 2.7%

9 Sweden 9,661 2.9% 17,581 2.7% 9 UK 8,746 2.6% 17,184 2.6%

10 Slovakia 8,371 2.5% 17,099 2.6% 10 Belgium 8,319 2.5% 15,137 2.3%


CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 5 September 2014

100 USD 419.08 ↓

100 EUR 423.54 ↑

100 GBP 527.84 ↓

100 CHF 347.48 ↓

100 DKK 56.29 ↓

100 SEK 45.68 ↓

100 NOK 51.55 ↓

10,000 JPY 307.42 ↓

100 CZK 15.18 ↑

10,000 HUF 133.67 ↓

100 USD/EUR against PLN

300

350

400

450

20 Sep 13

29 N

ov 13

11 Feb 14

18 A

pr 14

30 Jun 14

5 Sep 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Apr '14 May '14 Jun '14 Jul '14

Monetary base 168,511 162,246 173,096 164,008

M1 548,394 557,651 572,376 570,507

- Currency outside banks 119,261 119,649 120,828 122,209

M2 969,754 975,001 980,090 985,769

- Time deposits 439,137 435,386 426,351 434,256

M3 986,142 991,120 996,171 1,002,137

- Net foreign assets 126,943 142,260 144,033 152,864 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' 14 May' 14 Jun' 14 Jul' 14

Loans to customers 928,450 930,652 940,703 939,641

- to private companies 270,886 273,360 276,709 274,549

- to households 573,332 574,800 578,639 581,447

Total assets of banks 1,639,359 1,660,583 1,667,783 1,678,129

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Feb '14 Mar '14 Apr '14 May '14 Jun '14 Jul '14

PLN (up to 1 year) 4.5% 4.5% 4.4% 4.4% 4.5% 4.4%

PLN (up to 5 y ) 4.8% 4.9% 4.8% 4.8% 4.8% 4.7%

PLN (over 5 y) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

PLN (total) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

EUR (up to 1m EUR) 2.0% 1.9% 2.0% 2.0% 1.9% 1.7%

EUR (over 1m EUR) 3.4% 3.3% 3.0% 2.7% 3.4% 3.1%

Warsaw Inter Bank Offered Rate (WIBOR) as of 5 Sept 2014

Overnight 1 week 1 month 3 months 6 months

2.61% 2.57% 2.56% 2.53% 2.53%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.59% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 5 Sep '14

Change 29 Aug

'14

Change end of '13

↑ Alior Bank 85.05 +12% +4%

↑ Asseco Pol. 43.64 +3% -5%

↑ Bogdanka 118.95 +2% -5%

↑ BZ WBK 403 +9% +4%

↑ Eurocash 35.7 +3% -25%

↓ Grupa Lotos 29.88 -1% -16%

↓ JSW 33 -1% -38%

↑ Kernel 26.02 +1% -32%

↑ KGHM 136 +3% +15%

↑ LPP 10,000 +18% +11%

↑ mBank 507.5 +9% +2%

→ Orange Pol. 10.78 0% +10%

↑ Pekao 191 +6% +6%

↑ PGE 22.35 +2% +37%

↑ PGNiG 5.06 +4% -2%

↑ PKN Orlen 40.71 +3% -1%

↑ PKO BP 40.26 +5% +2%

↑ PZU 493 +5% +10%

↑ Synthos 4.7 +2% -14%

↑ Tauron 5.23 +5% +20%

Source: Warsaw Stock Exchange

Key indices

as of 5 September 2014

WIG Total index

55554444,,,,412412412412....52525252 Change 1 week +5% ↑

Change end of '13 +6% ↑

WIG-20 blue chip index

2,2,2,2,541541541541....42424242 Change 1 week +5% ↑

Change end of '13 +6% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

5 Jun 14

30 Jun 14

22 Jul 14

13 A

ug 14

5 Sep 14


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New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Jul 2014 *

Monthly wages (PLN)

Jan-Jul 2014**

Unemploy-ment

Jul 2014

New dwellings Jan-Jul 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 102.6 118.3 4,375 4,200 131.4 11.5 7,600 80.8

Kujawsko-Pomorskie (Bydgoszcz) 105.2 112.5 3,447 3,273 129.6 16.0 3,520 95.9

Lubelskie (Lublin) 104.0 82.7 3,739 3,053 117.3 12.8 2,816 85.6

Lubuskie (Zielona Góra) 115.3 114.0 3,469 3,072 49.5 13.3 1,607 87.9

Łódzkie (Łódź) 101.7 113.1 3,723 3,306 134.5 12.6 3,795 102.0

Małopolskie (Kraków) 101.6 107.8 3,833 3,379 142.5 10.2 8,971 98.3

Mazowieckie (Warszawa) 101.3 113.4 4,647 5,116 259.6 10.2 16,703 106.0

Opolskie (Opole) 106.8 124.6 3,655 3,529 44.5 12.5 1,061 117.5

Podkarpackie (Rzeszów) 104.0 107.7 3,429 3,085 135.8 14.7 3,821 112.9

Podlaskie (Białystok) 107.7 122.8 3,338 3,837 62.0 13.4 2,259 120.7

Pomorskie (Gdańsk-Gdynia) 109.9 124.7 4,035 3,457 97.1 11.5 5,355 80.9

Śląskie (Katowice) 101.1 109.0 4,589 3,538 184.9 10.0 5,867 94.1

Świętokrzyskie (Kielce) 110.4 103.1 3,443 3,287 78.5 14.6 1,675 121.3

Warmińsko-Mazurskie (Olsztyn) 105.9 104.0 3,301 3,134 96.6 18.6 2,455 102.1

Wielkopolskie (Poznań) 108.4 103.2 3,772 3,704 122.6 8.2 7,909 99.2

Zachodniopomorskie (Szczecin) 103.1 106.3 3,551 3,447 92.2 15.3 3,355 100.1

National average 104.2 110.8 4,020 3,822 1,878.5 11.9 78,769 97.3

*) 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 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14

in Poland 2,886 175 -3,020 1,885 -2,899 2,771

Polish DI -1,203 957 2,588 -1,449 1,575 562

Year 2008 2009 2010 2011 2012 2013

in Poland 10,128 9,343 10,507 14,896 4,763 -4,574

Polish DI -3,072 -3,335 5,484 -5,935 -607 3,684

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

Period 2011 2012 2013 Q3 '13 Q4 '13 Q1 '14

Trade balance -10,059 -5,175 2,309 1,094 151 1,159

Services, net 4,048 4,642 5,249 1,032 1,257 1,245

CA balance -18,519 -14,191 -4,984 -2,086 -1,415 -766

CA balance vs GDP -5.0% -3.7% -1.3% -1.9% -1.3% -1.1%

Source: NBP, BZ WBK, PKO BP

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

Q4 13

Q2 14

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, Q4 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 563,000 17,000

22.3% 3.6–5.1

Warsaw suburbs 2,063,000 12.5% 2.1–2.8

Central Poland 1,021,000 80,000 15.2% 2.1–3.3

Poznań 1,023,000 215,000 4.4% 2.5–3.15

Upper Silesia 1,431,000 37,000 9.3% 2.4–3.3

Wrocław 780,000 259,000 11.7% 2.6–3.1

Tri-city 184,000 46,000 9.2% 2.8–3.3

Kraków 141,000 0 4.0% 3.3-4.0

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 2H'13 Retail rents**2H'13

Q1 '14

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 8,005 -0.1% 11.5-25.5 11.75% 80-90 85

Kraków 6,419 +1.8% 13-15 4.90% 35-45 78

Katowice 5,531 0.0% 13-14 7.30% 35-45 56

Poznań 6,666 +4.0% 14-16 14.20% 35-45 55

Łódź 4,808 -1.8% 12-14 14.40% 35-45 25

Wrocław 5,928 -0.2% 13-15.5 11.75% 35-45 40

Gdańsk 6,031 -5.7% 13-15 11.20% 35-45 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

Jul10

Mar11

Nov11

Jul12

Mar13

Nov13

Jul14

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

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