Poland Today Business Review+ No. 63

No. 063 / 1st December 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Train maker PESA to employ 500 at new factory in Byd-goszcz page 2

ENERGY & RESOURCES

PKN Orlen approves PLN 1.65bn combined cycle project in Płock page 2 PGNiG subsidiary seeking con-tractor for PLN 1.7bn heat and power unit in Warsaw page 3

PROPERTY & CONSTRUCTION

State bank BGK acquires first batch of flats for new rental housing fund page 4 Ghelamco plans new projects, issues bonds page 5 Echo Investment embarks on new office project in Wrocław page 6 Skanska to build second office project in Kraków page 6 Kraków office market enjoying its best year on record page 7

TRANSPORT & LOGISTICS

Polish shipyard building world's first methanol-powered ferry for Stena Line page 8 Prologis buys another Polish warehouse from Invesco page 8

ONLINE BUSINESS

Food ordering website PizzaPortal.pl acquires key competitor page 9

IT & TELECOMS

Six players place bids in LTE spectrum auction page 11

SERVICES & BPO

Poland moves up in A.T. Kearney's global services lo-cations list page 9

POLAND TODAY EVENTS Auto industry still engine of Polish economy, but must switch gears faster page 12

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

Consumer confidence improve as prices and unemployment go down. Photo: Nino Barbieri

GDP grows on domestic driversGDP grows on domestic driversGDP grows on domestic driversGDP grows on domestic drivers in Q3in Q3in Q3in Q3 Driven by improving private consumption and fixed investments, the Polish economy expanded by 3.3% in Q3 2014, beating most forecasts. According to analysts, improving conditions on Po-land's labor market will help sustain growth in the near future, but a revival of external demand is essential to ensure a more pronounced recovery in the long-term. page 12

weekly newsletter # 063 / 1st December 2014 / page 2

MANUFACTURING & PROCESSING

Train maker PESA to Train maker PESA to Train maker PESA to Train maker PESA to employ 500 at new employ 500 at new employ 500 at new employ 500 at new factory in Bydgoszczfactory in Bydgoszczfactory in Bydgoszczfactory in Bydgoszcz

Polish train manufacturer PESA will employ 500 staff at three new production buildings the company aims to build in Bydgoszcz by 2017, PESA's CEO Tomasz Zaboklicki announced last week. The capital expendi-tures are to total PLN 7.5m, including buildings and all fixed infrastructure, such as rails and cranes.

The investment will begin next year with the comple-tion of a 5,000 sq.m shop devoted exclusively to pro-duction of bogie frames for German clients. This has to do with a EUR 1.2bn framework contract for the deliv-ery of 470 new diesel-multiple units to Deutsche Bahn. The German carrier expects its suppliers to separate domestic and export-oriented production, a practice that is aimed at facilitating quality monitor-ing. Subsequently, PESA will add a 10,000 sq.m as-sembly hall with an exit to the Bydgoszcz Main sta-tion, as well as a 15,000-sq.m service building. The company has acquired a site near the city's main rail-ways station from the Polish rail giant PKP.

The privately-owned PESA has emerged in recent years as one of Poland's most successful exporters of transportation equipment. Besides the Deutsche Bahn deal, which was the German carrier's first ever order to a non-German manufacturer, PESA secured another order in Germany for the delivery of nine new LINK-type DMUs to NEB (Niederbarniemer Eisenbahn). Be-sides DB and NEB, PESA's German customers include private carrier Netinera.

In June 2013 the company signed a contract with UralTransMash for the delivery of 120 trams to the city of Moscow. The first vehicles from that order were introduced to the Moscow municipal transporta-tion system in June. By the end of the year PESA is to deliver a total of 70 and the entire contract is to be ful-filled by March 2015. Earlier this year PESA and Rus-sian industrial giant UralVagonZavod (UVZ) inked a letter of intent regarding the creation of a joint venture in Russia. UVZ is a Russian machine building company and the largest main battle tank manufacturer in the world. The company's main products include railway cars, tanks, road-building vehicles, agricultural vehicles, metallurgical products, tools and consumer goods. In recent years civilian production amounted to some 2/3 of UVZ's total output. PESA may need to put its coop-eration with UVZ on hold, however, due to its part-ner's military connection and Western sanctions on Russia.

PESA's biggest achievement to-date has been the EUR 1.2bn contract for the delivery of up to 470 trains to Germany's Deutsche Bahn. Image: DB

On the domestic market, one of PESA's largest orders in recent months was the PLN 1.3bn contract for the supply of 20 electric multiple units to PKP Intercity. Signed in May, the contract covers the vehicles them-

selves (approx. PLN1.3bn) as well as 15-years of maintenance services (PLN 312m). PESA supplies locomotives for the Italian, Ukrainian and Lithuanian railways as well as trams for munici-palities in Poland, Hungary, and Romania. The com-pany directly employs 3,000 staff with a further 1,000 being employed by its subsidiaries (of which the larg-est is ZNTK Mińsk Mazowiecki). In 2013 PESA turned over PLN 1.55bn and net-earned PLN 137m. The com-pany belongs to a number of Polish investors, includ-ing its top management.

ENERGY & RESOURCES

PKN Orlen approves PKN Orlen approves PKN Orlen approves PKN Orlen approves PLN 1.65bn heat and PLN 1.65bn heat and PLN 1.65bn heat and PLN 1.65bn heat and power project in Płockpower project in Płockpower project in Płockpower project in Płock

The supervisory board of Poland's top oil refiner PKN Orlen has approved the construction of a CCGT (combined cycle gas turbine) plant at its main site in Płock, the company announced last week. The new unit, to be delivered on a turnkey basis at the cost of approximately PLN 1.65bn, is expected to come on stream at the end of 2017 with a capacity of nearly 600 MWe. PKN Orlen has already secured all other necessary pa-perwork, including the building permit, the grid con-nection agreement with Polskie Sieci Elektroenergetyczne, and the gas system connection agreement with Gaz System. The execution phase is expected to span a period of 36 months. According to PKN Orlen, the new unit will significantly improve the energy efficiency of its refinery's production processes and will help support the optimum use of natural gas and reduction of CO2 emissions. The project, featuring


a top class gas turbine, will supply industrial steam to the Orlen production in Plock and electricity to the na-tional power grid.

Declining margins on global markets have undercut PKN Orlen's profitability in recenr years. Image: PKN Orlen

In April last year the company embarked on a similar project at its other site in Włocławek. With an in-stalled capacity of 436MWe and an estimated price tag of PLN 1.4bn, the Włocławek CCGT unit is to be oper-ational next year. The general contractor on that pro-ject is a consortium of General Electric and SNC Lavalin. "Having thoroughly reviewed the assumptions under-lying construction of another CCGT unit, we resolved to continue the development of our industrial power segment based on assets located in Włocławek and Płock. The profitability of our power sector projects depends on local conditions and synergies with the ex-isting production plants. Following project comple-tion, we will emerge as a leader of gas cogeneration strengthening our leading position in this segment of Poland’s power sector. In three years, the capacity of Orlen Group’s cogeneration assets will come close to 1.5 GWe, which is important to the energy security of

both PKN Orlen and of the country as a whole," com-mented PKN Orlen's CEO Jacek Krawiec.

PKN Orlen Group's key financials

0

20

40

60

80

10 0

120

2006 2007 20 08 2009 2010 2011 20 12 2013

-3

-2

-1

0

1

2

3

Revenues in PLNbn, left axis

Net result in PLNbn, right axis

Source: PKN Orlen

Besides developing energy assets, Orlen's investment efforts have been focused recently on securing access to crude production and reducing its dependence on Russian oil. The Polish company acquired Canada’s TriOil Resources for CAD 183.7m (PLN 508m) last year and Birchill Exploration for CAD 255.6m (PLN 708m) in 2014. Orlen's profitability was seriously dented in Q2, when the Warsaw-listed company wrote down PLN 4.2bn from the value of its unprofitable Lithuanian unit Orlen Lietuva and cut the value of its Czech subsidiary Unipetrol by PLN 711m. Orlen's Q2 2014 net loss wid-ened to PLN 5.2bn from PLN 207m in Q1 2014. PKN Orlen turned over PLN 114bn last year, some 5% less than in 2012. Its EBIDTA dropped 42% y/y to reach PLN 2.5bn, while its net earnings plunged by 96% and topped a mere PLN 90m. A leading producer and retailer of fuel in the CEE region, PKN Orlen op-erates three refineries (in Poland, Lithuania and Czech Republic) with a combined max-imum capacity of 32.4m tons a year. Last year the three sites processed 28.2m tons of oil, 90% of which was Russian Export Blend Crude Oil (REBCO).

ENERGY & RESOURCES

PGNiG subsidiary PGNiG subsidiary PGNiG subsidiary PGNiG subsidiary seeking contractor for seeking contractor for seeking contractor for seeking contractor for PLN 1.7bn heat and PLN 1.7bn heat and PLN 1.7bn heat and PLN 1.7bn heat and power unit in Warsaw power unit in Warsaw power unit in Warsaw power unit in Warsaw

Warsaw heat & power operator PGNiG Termika has just announced a tender for the construction of a new gas and steam combined cycle unit at the Żerań CHP in northern Warsaw. The contractor, to be selected via negotiations, is expected to develop the new unit (with a capacity of 420-490MWe and more than 250MWt), including turbines, boiler and all additional infrastruc-ture, as well as train the staff and provide long-term servicing of the plant's selected components. Accord-ing to earlier declarations by Termika's CEO Andrzej Gajewski, the total capex on the project, which is to reach completion in 2018, may come to PLN 1.7bn.

The investment is part of broader efforts by the War-saw heat & energy producer, aimed at the replacement of its older, less reliable and, more importantly, less environmentally friendly facilities with efficient mod-ern units. Next year PGNiG Termika plans to launch a gas & oil-fired peaker unit in Żerań, to be used at times of high demand, with a thermal capacity of 390 MWt, to replace the oldest heat generators, dating back to 1960s. The unit will consume some 20m cb.m a year, to be delivered by Polska Spółka Gazownictwa (PSG) un-til 2018 when the national gas pipeline operator Gaz-System connects Żerań with the Rembelszczyzna pumping station via a 10km high pressure pipeline, enabling the launch of the new gas & steam combined cycle plant.


PGNiG is about to commission a very similar power unit (400MWe & 240 MWt) together with Tauron in the southern town of Stalowa Wola at the cost of PLN 1.13bn. A second such unit may be developed in anoth-er location in Warsaw around 2020.

Keeping the capital warmKeeping the capital warmKeeping the capital warmKeeping the capital warm PGNiG Termika's Warsaw heat & power units: capacity

Facility MWt (heat) MWe (power)

Siekierki 2,081 622

Żerań 1,560 364

Pruszków 186 9

Kawęczyn (seasonal) 512 -

Wola (seasonal) 465 -

Source: PGNiG Termika

Besides the new project in Żerań, PGNiG Termika seeks to convert one of the existing coal-fired boilers at its Siekierki plant in south of Warsaw into a biomass unit, with commissioning expected in Q4 2014, as well as modernize its CHP in the suburban town of Pruszków, which is nearly 100 years old, by replacing some of the oldest coal-fired boilers with new ones that run on gas. With a capacity of 11 MWe (electrici-ty) and 11 MWt (heat) the small plant will use 21m cb.m of natural gas annually. PSG has agreed to build a 1.7km medium-capacity pipeline to the facility. Both PSG and PGNiG Termika belong to the listed Polish gas company PGNiG, which acquired the War-saw heat & power plants three years ago from Swe-den's Vattenfall. The French-owned Dalkia Warszawa, which oper-ates the Polish capital's 1,700km-long district heating network that delivers heat and hot water to some 80% of the city's buildings, is also contemplating the con-struction of a cogeneration unit in the Warsaw area. The French have zoned in on the rapidly expanding suburb of Ursus where they intend to build a gas-fired

heat & power plant (80 MWt and 110 MWe). PGNiG Termika and Dalkia, who are respectively responsible for producing and delivering heat and hot water to Warsaw residents, are currently working on a joint plan, outlining the key priorities for the development of Warsaw's district heating infrastructure.


State bank BGK State bank BGK State bank BGK State bank BGK acquires first batch of acquires first batch of acquires first batch of acquires first batch of flats for new rental flats for new rental flats for new rental flats for new rental housing fundhousing fundhousing fundhousing fund

Poland’s special purpose bank BGK has acquired its first residential project with 124 housing units from local developer Wechta for an undisclosed amount. The flats, located in Poznań, will be included into BGK’s rental housing fund Fundusz Mieszkań na Wynajem and will be placed on the Poznań rental market in January and the first tenants will be able to move into their flats in March. With flats ranging in size from 23 sq.m to 72 sq.m project is located in the Wilda district, 6km from Poznań’s city center BGK launched its PLN 5bn rental housing fund a few months ago, seeking to buy up to 20,000 residential units in Poland’s major urban markets in a move to stimulate social mobility and provide an alternative to mortgage-backed home buying. Based on MOUs signed over the past months, BGK is currently eyeing another 34 housing projects, totaling 3,400 flats. The projects are located in Warsaw, TriCity, Wrocław, Łódź, Poznań and Katowice. "Our offer will be aimed at individuals who do not wish to take out mortgage loans for decades but do

want to feel at home at their rented apartments," BGK CEO Dariusz Kacprzyk explained the logic behind the scheme. "We want to convince the Poles that they can live at good-quality rented homes for their entire life, being able to decide about the size and location de-pending on their immediate needs."

Residential construction in Poland Completed dwellings

60,000

80,000

100,000

120,000

140,000

160,000

180,000

199

1

199

2

199

3

199

419

95

199

6

199

7

199

8

199

9

20

0

20

01

20

02

20

03

20

0

20

05

20

06

20

07

20

08

20

09

20

10

20

1120

12

20

13

*20

1

Source: GUS *) Jan-Oct 2014

According to various estimates, Poland needs some 700,000 housing units in order to catch up with EU standards. Currently, with 365 homes per 1,000 people it ranks among Europe's least developed residential markets. The BGK initiative aims at all individuals who can afford to pay the rent, with no additional conditions. The tenants will all be dealing with a single landlord – an entity controlled by BGK, which will of-fer apartments with furnished kitchens and bath-rooms, in newly-built buildings. "In programs like this the devil is always in the details. Solutions of this kind are functioning quite well in Eu-rope, including in Scandinavia. A lot depends on whether this model will be accepted in purely cultural terms, meaning whether people will be ready to take rental over ownership. If the Poles become more mo-


bile, then perhaps this might work, but it’s too early to say. It’s also too early to assess what the BGK initiative will mean for commercial developers," Roman Wieczorek, executive vice president of Skanska AB, the Swedish construction giant, which has a residen-tial unit in Poland, told Poland Today. Considering the shortage of housing in Poland, the BGK initiative alone is unlikely to make a huge impact on the market, but it should serve as a benchmark for commercial investors, who are said to be looking at the country's residential sector with increasing interest. "Poland is in a similar situation as the UK. The scale of the residential investment market needs to grow. Cas-es need to be built up to show successful track records. The BGK investment scheme may provide meaningful benchmarks. However, other rental investment port-folios must also be built up to provide a compelling al-ternative market for institutional investors to Europe-an potentates like Germany, France or Sweden. Be-sides the prospects of attractive yields, there is overall confidence in long-term capital growth in Poland due to the European convergence process," property con-sultancy REAS said in a recent report.


Ghelamco Ghelamco Ghelamco Ghelamco plans new plans new plans new plans new projects, issues bonds projects, issues bonds projects, issues bonds projects, issues bonds

Developer Ghelamco has recently started selling new bonds worth a total of PLN 50m that are expected to be issued on December 16 and will start to be traded on the Catalyst bond market of the Warsaw Stock Ex-change by the end of the month. The issue, which will help the company finance its development activity in Poland in the coming years, is targeted at individual

investors, with Ghelamco having previously offered bonds to institutional bond holders. "This is a natural step for Ghelamco which does not want to only rely on banks and institutional investors for its financing. More bonds targeted at individual in-vestors will probably be issued next year," said Jarosław Jukiel, financial director at Ghelamco Po-land. Jukiel added that the capital raised through the latest bond issue would mostly be used to co-finance the development of pipeline projects and the acquisi-tion of land for future schemes in Poland.

Ghelamco said it may start building the giant Sienna Towers complex near Rondo Daszyńskiego subway station in Warsaw's Wola district already next year.

Image: Ghelamco

According to Jukiel, the offering of the bonds to a new group of investors will also help further strengthen the Ghelamco brand and increase its recognizability. To date, Ghelamco has conducted 17 bond issues targeted at institutional investors. They allowed the company to raise a total of more than PLN 1bn and helped fi-nance several major office projects in Warsaw, includ-ing Senator, Mokotów Nova, T-Mobile Office Park and Warsaw Spire. The latter scheme, which is located in

the Wola district of the Polish capital and will com-prise approximately 100,000 sqm of leasable space, is Ghelamco's largest ongoing office scheme in Poland. Ghelamco is one of the most active players on Poland's commercial property market. Over the past 22 years it has built nearly 0.5m sq.m of offices and warehouses in Poland. The company is now also developing an of-fice investment located on Wołoska St. in the Mokotów district of Warsaw which will deliver around 20,000 sq.m of space. Earlier this year Ghelamco was selected by the Polish railways giant PKP SA to build a large mixed-use pro-ject at the site of the Warszawa Gdańska suburban railway station. According to PKP, the estimated total capex on the scheme will come to PLN 1.5bn. The whole complex will be constructed in stages, with the new train station to be delivered first. Next year, Ghelamco Poland could start developing the planned Sienna Towers office and retail scheme that will be located close to the Warsaw Spire site and which will deliver around 100,000 sq.m of leasable space. The company has already secured a building permit for the development. Ghelamco Poland wants to launch construction on the investment when at least 50% of the space in the Warsaw Spire project has been leased, which is expected to happen in a few months, Jukiel said. Outside of Warsaw, Ghelamco is developing a 60,000 sq.m. class A project Synergy Business Park in Wro-cław. The Belgians have also made inroads into the residential segment with and upscale Warsaw project Woronicza Qbik (350 soft lofts), and they are about to break ground on their first retail projects in Warsaw.

by Adam Zdrodowski



Echo Investment Echo Investment Echo Investment Echo Investment embarks on new office embarks on new office embarks on new office embarks on new office project in Wrocławproject in Wrocławproject in Wrocławproject in Wrocław

Poland's leading property developer Echo Invest-ment is breaking ground another office project in Wrocław. Nobilis Business House - a modern A-class office building - is to emerge near Pasaż Grunwaldzki in the centre of the city, offering 16,000 sq.m and a single level underground car park. "We are in talks with a number of significant potential tenants," Katarzyna Kubicka, Senior Leasing Manager at Echo Investment tells Poland Today. "Wrocław and Kraków are Poland's most important regional office markets both in terms of available space as well as growth prospects. Wrocław is already a well-developed market, but still a very dynamic one. En-couraged by the success of our previous developments in Wrocław, we are planning further office projects in the city." Echo Investment, which to-date has delivered more than 430,000 sq.m GLA in retail centers, 250,000sq.m in office buildings, 245,000 sq.m of usable housing space, and 89,000 sq.m in hotels, has recently obtained a key tenant (Deloitte) as well as financing (EUR 112m) for its 155-m-tall office building Q22 in Warsaw. The project will offer 50,000 sq,m of office space and 348 parking spaces in a 5-level underground garage. The company has another office project under con-struction in Warsaw, the 34,000 sq.m Park Rozwoju in the Mokotów district. It has also acquired a 4.5ha former site of Browary Warszawskie brewery close to Warsaw's city centre, where it intends to develop

more than 100,000 sq.m of offices and apartments over the coming 5-7 years at the cost of more than PLN 1bn. Outside of Warsaw, Echo is building offices in Kraków, Katowice, and Wrocław.

Nobilis will offer 16,000 sq.m of centrally-located, class-A office space. Image: Echo Investment

The developer saw its consolidated net income come to PLN 331m last year, down from PLN 373m in 2012, whereas the respective revenue totals came to PLN 528m and PLN 584m. Rumors have it that Echo's founder, billionaire Michał Sołowow is seeking buyers for his 45% stake in the company, which may be worth between PLN 1.2bn and PLN 1.5bn.


Skanska to build Skanska to build Skanska to build Skanska to build second office project in second office project in second office project in second office project in KrakówKrakówKrakówKraków

Merely days after Skanska Property Poland offi-cially completed its first ever office project in Kraków, the Swedish-owned developer is embarking on anoth-er project in this vibrant southern Polish city. Located only a few minutes from the city center and scheduled

for completion in Q4 2016, Skanska's Axis building will offer ca. 20,000 sq.m of modern office space. Skanska will seek a LEED Gold sustainable building certificate for the project, which will include nine floors and three underground levels. Axis will be lo-cated near the Mogilskie Roundabout, one of the most important transport hubs in Kraków. Numerous tram and bus lines in the area offer quick and easy access to Kraków Railway Station and the Old Town. Further-more, Krakow's second ringroad is directly accessible from the roundabout.

Axis will be Skanska's 2nd office project in Kraków. Image: Skanska Proeprty Poland

"Kraków is first and foremost a very attractive location for business services centers, ranked among the global Top 10 in the Tholons ranking Top 100 Outsourcing Destinations 2014. The BPO/SSC sector is a very im-portant business partner for Skanska and business ser-vices providers represent a majority of tenants at our regional projects. Choosing locations for new invest-ments, we pay attention to factors that matter to our potential future tenants," Mariusz Krzak, regional di-rector at Skanska Property Poland tells Poland Today. Axis is Skanska Property Poland’s second Kraków-based project. The commencement of its construction


coincided with the official opening of the company’s first investment – Kapelanka 42 located in the Podgórze district. The latter's first phase, almost en-tirely leased mainly to companies from the business services sector, was purchased by Polish fund REINO Dywidenda FIZ at the beginning of November. Skanska Property Poland is very active in Poland's re-gional markets, with investments in Wrocław, Łódź, Poznań, Kraków and Katowice, where its largest Polish office project to-date, the 46,000 sq.m Silesia Business Park, is currently under construction. In Warsaw, Skanska has recently broken ground on Atri-um 2, a 20,000 sq.m office tower in the heart of the city's central business district. Later this year the de-veloper hopes to start working on the 80,000-sq.m Generation Park, Skanska's largest project in Warsaw to-date. Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world's leading project development and construction groups, which currently has 57,000 employees in se-lected home markets in Europe, the US and Latin America. Skanska’s revenue in 2013 totaled SEK 136bn (EUR 15.8bn).


Kraków office market Kraków office market Kraków office market Kraków office market enjoying its best year enjoying its best year enjoying its best year enjoying its best year on recordon recordon recordon record

It's no wonder Sweden's Skanska Property Poland were in such a hurry to break ground on their second project in Kraków, as according to a recent report by property consultancy JLL, the 2014 will be a record-breaking year for the southern Polish city's office mar-

ket, amid the highest tenant and developer activity in years. Although the 2012 and 2013 were already excep-tional in terms of tenant activity, with net take-up reaching 80,000 sq.m per annum, in the first three quarters of 2014 the figure came in excess of 85,000 sq.m (with gross take-up, including renewals, at 107,000 sq.m) signaling growing investor interest in the Kraków market.

Kraków's office vacancy rate is 6%

Stock (sq.m) and Vacancy Rate (%) outside Warsaw

Source: JLL, Q3 2014

"Kraków remains a key location for the business ser-vices sector. According to ABSL, business services centers with foreign capital employ ca. 30,600 people in Kraków, which is the highest number of any Polish city. This is the place where new investors locate their businesses, and where companies that are already ac-tive on the market expand their structures and con-duct vast recruitment processes. The development of this sector translates into a high office space take-up, which in turn generates the activity of developers who answer the growing demand with new investments. The business services tenants’ share of occupied office space in Kraków is 55%. It is also worth noting that 70% of all registered take-up in 2013 was down to companies from this segment of the economy," said Rafał Oprocha, Head of Kraków Office, JLL.

Kraków remains the biggest office market in Poland outside of Warsaw. Total modern office stock in the city is estimated at approximately 648,000 sq m and looks set to exceed 671,000 sq m this year. Q3 of 2014 saw the completion of five buildings in Kraków, nota-bly Kapelanka A (17,300 sq.m), Enterprise Park II C (13,600 sq.m), Quattro Business Park D (12,200 sq.m), Orange Office Park I (8,100 sq m) and Futuro (1,100 sq m). In addition, Avia will come onto the market in Q4 2014 along with the refurbished K1 office block and Kapelanka B. In total, around 105,000 sq.m will be commissioned for use in 2014 and this will be the highest new supply in the history of Kraków's office market. Currently, there is over 106,000 sq.m of office space under construction. If the developers’ plans re-main unchanged, the office market in Kraków will in-crease by a further 83,000 sq.m in 2015 and 93,000 sq.m in 2016. The largest lease transaction in Q3 was AON Hewitt’s renewal in Diamante Plaza (4,400 sq.m), and the larg-est new deals were signed by a confidential tenant in Kapelanka 42B (4,200 sq.m); Luxoft Poland (2,900 sq.m) and Google (2,600 sq.m) in Quattro Business Park D; as well as Getinge (2,300 sq.m) in Orange Of-fice Park I. Prime headline rents in Kraków remain relatively stable and vary between EUR 13.9 and EUR 14.5 / sq.m / month. The average headline rents range from EUR 13.5 to EUR 14 / sq.m / month. Crucially, despite robust level of new supply, Kraków boasts the lowest vacancy rate in Poland (6%). Accord-ing to JLL, this rate is likely to remain stable until the first half of 2015. Currently, companies looking for ready-to-use space over 3,000 sq.m may have a prob-lem with finding a proper module in an A class build-ing. The majority of vacant office space is concentrat-ed in B class offices. The consultancy expects Kraków's office vacancy rate to go up due to the large volume of new space scheduled to enter the market in 2H 2015.



Polish shipyard Polish shipyard Polish shipyard Polish shipyard building world's first building world's first building world's first building world's first methanolmethanolmethanolmethanol----powered powered powered powered ferry for Stena Lineferry for Stena Lineferry for Stena Lineferry for Stena Line

Sweden's Stena Line has awarded a EUR 22m con-tract for the conversion of its Stena Germanica vessel into the world's first methanol-powered ferry, to Polish Remontowa shipyard, the company has an-nounced. The 240-metre is to enter Remontowa's dry dock in Gdynia in January 2015. The conversion work will last six weeks and is supported by "Motorways of the Seas," project of the European Union. Contributors to the project include Wartsila, Methanex Corpora-tion, the port of Gothenburg and the port of Kiel. "We are constantly evaluating different fuels for the future and to be first in the world with a methanol conversion is a big step towards sustainable transpor-tation," commented Stena Line's chief executive, Carl-Johan Hagman. From early 2015, vessels in the area around the Baltic and North Sea will have to use fuel with very low sul-phur content of 0.1%. Due to high cost of the low-sulphur oil, operators are seeking alternative ways of dealing with the new EU rules. Currently Stena Line is working on a number of pro-jects regarding methods for reducing emissions, in-cluding alternative fuels (LNG), scrubbers and electric propulsion. Stena will decide whether to convert more ferries to methanol upon the completion of Stena Germanica project.

"Due to our size we have a broad perspective on han-dling the new sulphur regulations and it is likely we will use some different types of solutions in the com-ing years," Hangman added.

Gdynia's Remontowa shipyard is to convert Stena Germanica in merely six weeks. Photo: Stena Line

Compared to today's fuel, it was estimated that the use of methanol will reduce the emissions of sulphur by 99%, particles by 95%, nitrogen – 60%and carbon di-oxide – 12%. Stena Lina AB belongs to the Gothenburg-based fami-ly-owned conglomerate Stena AB whose interests in-volve recycling, shipping and real estate. Stena Lina is one of the largest passenger ferry companies in the world - it operates 38 vessels, employs 6,000 staff across nine countries and turns over SEK 10bn. From Poland, the company operates the Gdynia-Karlskrona route, with three ferries (Stena Baltica, Stena Vision and Stena Spirit) and three daily cross-ings. Last year the company carried 103,000 freight units, 92,900 cars and 509,300 passengers on that crossing. According to Tony Michaelsen, who is re-sponsible for Stena Line's Baltic Sea routes, the re-spective full year figures in 2014 are likely to reach

117,500 freight units, 93,000 cars, and 563,000 passen-gers, marking a solid double digit improvement in cargo and passenger traffic. Stena Line and the Gdynia Port Authority have been in talks on a new passenger terminal, which is to be de-veloped in Gdynia by 2016 at the estimated cost of PLN 120m. A PLN 3m contract for the design of the new facility was awarded last yearto Dutch engineer-ing company Tebodin. "The process continues with design works and permit applications still going on. In March/April next year all documentation will be in place and time for deci-sion to go into construction will be reached," Tony Michaelsen tells Pland Today. Located much closer to the city center, the new termi-nal will make it easier for ferries and their passengers to access Gdynia, freeing up space for expansion of the Baltic Container Terminal (BCT). It will enable Stena Line to use larger, 240m-long vessels that can carry some 250 trucks and 1,300 passengers, and cut the crossing time by up to 30 minutes, thus reducing fuel usage and emissions.


Prologis buys another Prologis buys another Prologis buys another Prologis buys another Polish warehouse from Polish warehouse from Polish warehouse from Polish warehouse from InvescoInvescoInvescoInvesco

US industrial property giant Prologis has further strengthened its position in Poland with the acquisi-tion of a 50,000 sq.m logistics facility from Invesco Real Estate. The project, 100% leased to Castorama, will be included in Prologis European Properties Fund II (PEPF II) under the name of


Prologis Park Stryków II. The property is located 18km southwest of Łódź city centre and 2km from the intersection of the A1/E75 highway (Gdańsk-Vienna) and the A2/E30 highway (Warsaw-Berlin). "This acquisition is a unique opportunity to purchase a premium-quality asset," said Ben Bannatyne, manag-ing director, Prologis Central and Eastern Europe. 'This facility complements PEPF II’s existing portfolio and meets rising demand for well-located logistics in-frastructure in Poland.” Prologis has been on a bit of shopping spree across the CEE in recent months. A few weeks ago it added 23 class-A distribution centers (230,000 sq.m) in the Czech Republic, Poland and Slovakia to PEPF II, in-cluding four properties totaling 55,400 sq.m in War-saw, Poland. In July, PEPF II took over two logistics facilities in Poland and Hungary from Invesco Real Es-tate, including a 56,700 sq.m building in Gliwice, Po-land, leased to Tesco. In recent months Prologis broke ground on two specu-lative projects (27,000 sq.m and 28,240 sq.m) in the Wrocław area. Other ongoing projects from Prologis in Poland include a 11,200 sq.m BTS scheme for Dan-ish forwarder Prime Cargo in Prologis Park Szczecin as well as a 27,000 sq.m speculative development in Prologis Park Wrocław V. Prologis owned 26% of Poland's entire modern ware-house stock as of mid-2014 according to figures from JLL, the property advisory, followed by SEGRO (13%) and Blackstone (12%). In terms of the ownership structure of the Polish industrial market, more than half of existing floor space is in the hands of the three largest market players and their partners. Despite be-ing the most active on the development front, Panattoni owns merely 5% of the existing stock, as the company's strategy is to dispose completed pro-jects.

PEPF II, which was established in August 2007, owned 253 properties, for a total of 5.9m sq.m with a net market value of EUR 3,595.4m as of March 31, 2014. Globally, Prologis owned or had investments in, properties and development projects expected to total approximately 53.3m sq.m in 21 countries including 3.7 sq.m in Central and Eastern Europe as of end of Q1 2014.The company leases modern distribution facili-ties to more than 4,700 customers, including manufac-turers, retailers, transportation companies, third-party logistics providers and other enterprises. Last year alone, the company leased 1.15m sq.m of industrial dis-tribution space in Central and Eastern Europe, includ-ing 595,000 sq.m in renewals and 363,000 sq.m in new leases. Prologis’ occupancy in the CEE was 89.5% as of December 31, 2013.

Largest warehouse owners in Poland As of 1H 2014, in % of total stock

Other

44%

Panattoni

5%

Blackstone

12%

Prologis

26%SEGRO

13%

Source: JLL

According to JLL, with 539,000 sq.m of warehouse space under construction in Poland as of end of Q3 2014, the market is showing its best performance since 2008. In Q1-Q3 2014, gross take-up stood at 1.2m sq.m, of which 787,000 sq.m was in new contracts. During that same period, developers delivered 734,000 sq.m

of new supply, bringing Poland's total modern indus-trial stock up to 8.2m sq.m.

ONLINE BUSINESS

Food orderFood orderFood orderFood ordering ing ing ing websitewebsitewebsitewebsite PizzaPortal.pl acquires PizzaPortal.pl acquires PizzaPortal.pl acquires PizzaPortal.pl acquires key competitor key competitor key competitor key competitor

PizzaPortal.pl, the Polish arm of the international online food-ordering service Delivery Hero, has ac-quired its main competitor, foodpanda.pl, part of the Berlin-based online food delivery marketplace foodpanda. The transaction, the financial details of which have not been disclosed, significantly strength-ens PizzaPortal's leading position in Poland's online food-ordering market, which is said to be worth close to PLN 150m. According to the agreement between the two firms, all of foodpanda's restaurant partners will automatically migrate to PizzaPortal. PizzaPortal (which acquired competitors: NetKelner.pl and Szama.pl in 2011) has so far cooper-ated only with restaurants that offer their own deliv-ery services, whereas foodpanda has an independent team of couriers who pick up food from restaurants and deliver it to clients. As part of the transaction, PizzaPortal will take on foodpanda's delivery unit, thus expanding its own capabilities. "This transaction is of strategic importance to us," says Lech Kaniuk, CEO of Restaurant Partner Polska, the company behind PizzaPortal.pl. "It not only strength-ens our leading position on the market but also ex-pands our business to include delivery services. In theory, this enables us to cooperate with any restaurant on the market."


Mr. Kaniuk, who was born in Warsaw but had grown up in Sweden, was one of the original founders of an online pizza booking and delivery service called Onlinepizza, established 12 years ago in the Swedish town of Lidköping. Relatively rapidly, the business took off and expanded to Finland, Poland and Austria until the three entrepreneurs sold it in April 2012 to Germany's Delivery Hero for an estimated PLN 120m. As for Delivery Hero, the Berlin-based business was set up by German financiers Team Europe together with some German entrepreneurs who took the Onlinepizza concept to Germany under the name of Lieferheld and got the license to use the technology and know-how from the original Swedish company. One of the Swedish founders, Niklas Östberg - now Delivery Hero's CEO, soon teamed up with some part-ners at Team Europe to set up Delivery Hero in Berlin in October 2010. The company received backing from a number of German investors and managed to raise more than USD 100m of capital during its first 24 months. The financing enabled them to to pay big money for Onlinepizza Norden, the original Swedish business. Delivery Hero has since expanded the original Onlinepizza concept organically and now operates in 22 international markets on five continents, and is to-day one of the largest global platforms for online food ordering with 75,000+ local restaurants in its network. Delivery Hero has more than 1,000 employees around the world with 440 staff working from its Berlin head-quarters. Investors include Insight Venture Partners, Kite Ventures, Team Europe, ru-Net, Tengelmann Ventures, Holtzbrinck Ventures, Point Nine Capital and Phenomen Ventures.

Poland Today talks to: Lech Kaniuk, CEO at PizzaPortal.pl

• PT: What will be the impact of the foodpanda ac-quisition on your business? Lech Kaniuk: In terms of order numbers our business will grow by 5%, but there are many other reasons why we found this acquisition in Poland interesting. The big added value for us has been foodpanda's proprie-tary delivery unit, which will enable us to expand our offer and improve the quality of deliveries. This is not only about well-trained and polite couriers, but also about optimization of deliveries, and - consequently - shorter deliver times. Our goal is to change the entire dining sector, first by making restaurant meals availa-ble online, and then introducing more deliveries that are more effective than the ones run by restaurants themselves. • PT: How big is foodpanda's delivery team at the moment and how big of a challenge is it going to be for PizzaPortal to incorporate the new service into your organization? LK: Due to the new delivery set-up we are going to ex-pand our team by 20 people. It's a crucial change be-cause so far we haven't been handling deliveries our-selves. Moreover, we have to create the entire delivery unit in merely two weeks, whiuch is quite a challenge. This is just a beginning, however, of the second wave of changes in Poland's foodservice sector that I plan to

initiate. I am convinced that the current delivery times can be shortened by 50% in one year, at least for our partner restaurants in Warsaw. • PT: How many staff are you employing at the mo-ment and how many will there be after the merger? LK: We have 30 employees as of now and we are ex-pecting to double that number following our merger with foodpanda.pl. • PT: Based on the selection of restaurants in War-saw that cooperate with PizzaPortal, Poland's take-away sector seems to be still in its infancy. What are your impressions and predictions? LK: I agree that there's still a lot to be done, not only on the part of restaurants, which have to be convinced to accept online orders, but also on the part of the us-ers themselves. The Polish market is some 3-4 years behind its European peers from the Delivery Hero portfolio, especially when it comes to ordering via mo-bile applications. In Poland, only some 15% of users place orders in this way, whereas the average in Eu-rope is 50% and in South Korea: 95%. • PT: Doesn't the PizzaPortal brand limit your devel-opment, by suggesting just one type of food? • LK: Not at all. The best restaurant in our Top Take-away ranking is a sushi place, Oto!Sushi.

IT & TELECOMS

Six players place bids in Six players place bids in Six players place bids in Six players place bids in LTE LTE LTE LTE spectrumspectrumspectrumspectrum auction auction auction auction

Six companies placed preliminary bids in Poland's lat-est LTE frequency auction, confirmed the country's telecommunications watchdog UKE. They include all of Poland's four mobile operators (Orange Polska, T-


Mobile Polska, P4, and Polkomtel, as well as telecoms company Emitel and a little known venture NetNet). Acquired last December by the private equity fund Alinda Capital Partners for an estimated EUR 840m, Emitel is Poland's leading broadcast tower operator. NetNet belongs to Szymon Ruta, son of Hieronim Ruta, a long-time business partner of Polish billionaire Zygmunt Solorz-Żak, the investor behind Polkomtel and Cyfrowy Polsat. Through the planned sale of 800 MHz and 2.6 GHz bands, UKE seeks to support the further development of LTE networks, which have already started in Po-land in the 1.8 GHz band. The auction includes five lots or 50 MHz total in the 800 MHz band and 14 lots or 140 MHz total in the 2.6 GHz band. UKE, which has not disclosed any details of the bids it received, had earlier said it was hoping to raise PLN 1.8bn from the auction. The ongoing tender is UKE's second attempt at the sale of the additional LTE frequency bands, the first auction, announced in December 2013, was cancelled a few months later, after Polkomtel, one of Poland's top three mobile operators, questioned the legality of the proceedings. In order to avoid any legal uncertainty, UKE decided to repeat the tender.

SERVICES & BPO

Poland moves up in Poland moves up in Poland moves up in Poland moves up in A.T. Kearney's global A.T. Kearney's global A.T. Kearney's global A.T. Kearney's global services locations listservices locations listservices locations listservices locations list

Poland has moved up an impressive 13 places in A.T. Kearney's "Global Services Location Index" since the previous version of the report was published two years

ago and currently ranks as number 11 worldwide. The report takes into consideration financial attractive-ness, skills and availability of human resources, as well as business environment. The top ten includes mainly Asian countries (with India, China and Malaysia main-taining their respective top three positions), but also Mexico, Brazil, Bulgaria and Egypt. In short, the per-formers are countries that offer plenty of competitive-ly priced employees. According to the report, Central Europe offers a ma-ture industry and highly skilled players and although it is relatively expensive compared to offshore locations in other regions, there is still "substantial arbitrage" to be had. "The biggest country in Central and Eastern Europe, [Poland] boasts a large labor force and a multitude of city options. With industry dispersed across Warsaw, Kraków, Łódź, Katowice and other cities, the country has a reasonable cost profile that, while slowly con-verging with Western Europe, is still lower by several magnitudes," A.T. Kearney says. Poland's immediate CEE competitors are much less attractive to business services firms, with Hungary ranking as 31st, Czech Republic 33rd, and Slovakia 35th. Over the past 2½ years Poland's modern business ser-vices sector has grown by a half and currently employs close to 130,000 people in foreign-owned centers alone, shows a brand new report by the industry's or-ganization ABSL. Including domestic centers and out-sourcing firms, the sector boasts more than 200,000 employees and will create a further 30,000 jobs by the end of next year, according to projections. There are more than 325 foreign business services center opera-tors from 28 countries in Poland, mainly from the US, France, UK, and Germany, with over 470 centers. Although investors continue to choose mainly Poland's largest cities: Kraków, Wrocław, Warsaw, Tri-City,

Łódź and Poznań, recently one has seen growing in-terest in smaller towns, for instance Bydgoszcz, Ra-dom, Lublin, Opole or Szczecin. Poland is the only CEE country that offers as many as 11 cities of more than 300,000 residents with a substantial supply of talents and offices.

Employment at BPO/SSC centers in Poland

025,00050,00075,000

100,000125,000150,000175,000

20

08

20

09

20

10

20

11

20

12

*20

13

*20

14

**20

15

Source: ABSL *) as of April **) projected year-end

As far as the centers' key focus is concerned, 29% of their employees manage IT processes and a further 22% provide financial and bookkeeping services. Most centers cover a number of different processes and a vast majority have been expanding their competences and will continue doing so in the future. When it comes to their geographic coverage, the Poland-based centers serve mainly customers in Western Europe (90% of centers), Poland (63%) and the CEE region (60%) in as many as 40 different languages. However, there is one new EU member state that ranks higher than Poland in he A.T. Kearney ranking. This country is Bulgaria at no 9, home to advanced IT centers serving both multinationals and local compa-nies, focused mostly on traditional software develop-ment for captive players such as CSC and SAP. the one drawback, according to A.T. Kearney, is that Bulgaria has not yet implemented EU data security directives and therefore may not be suitable to handle sensitive customer information for clients with a European cus-tomer base.


POLITICS & ECONOMY

Investments and Investments and Investments and Investments and consumption driving consumption driving consumption driving consumption driving GDP growthGDP growthGDP growthGDP growth

Two weeks ago, when Poland's statistical office GUS published its flash estimate of GDP growth in Q3 2014, most analysts welcomed the 3.3% reading with raised eyebrows. After all, the expectations had been much more pessimistic, with the median forecast of 29 econ-omists compiled by Bloomberg at a mere 2.7%. The full set of GDP data released by GUS on Friday not only confirmed their earlier estimate, proving that the slowdown from Q2, when the economy expanded by 3.5%, was only minor, but also provided a very encour-aging picture of the growth's components.

Y/y GDP growth in Poland, by quarter

0%

1%

2%

3%

4%

Q1'12

Q2'12

Q3

'12

Q4

'12

Q1'13

Q2'13

Q3

'13

Q4

'13

Q1'14

Q2'14

Q3

'14

Source: GUS *) year-on-year; ESA 2010

Fixed investments increased 9.9%, from 8.7% in Q2, as companies expanded their production capacities to keep up with domestic and foreign orders, and munic-

ipalities implemented last-minute projects ahead of November's local elections. The net exports' contribu-tion to GDP growth was negative and reached -1.6pp (vs -1.9pp in Q2). Crucially, however, private con-sumption increased to 3.2%, marking the fastest growth since Q2 2011. "The GDP data confirmed the strength of domestic demand, which is mitigating the negative impact of the slowing external demand on the Polish economic growth. Apparently, neither entrepreneurs nor con-sumers were afraid of the deteriorating business cli-mate abroad; the former kept expanding, probably an-ticipating that the slowdown in the euro zone would be short-lived, while the latter kept spending money as their purchasing power is rising thanks to the booming labor market and falling prices. This may continue for a while, implying that GDP growth in the nearest quarters will probably be higher than we had assumed earlier. However, domestic demand will not be able to keep the economy growing if it is the only engine run-ning. Thus, a revival of external demand (from the eu-ro zone in particular) is crucial for maintaining GDP growth in the medium run," commented BZ WBK.

IN BRIEF:

Retail sales growth accelerated in October to 2.3% y/y

from 1.6% in September, which was slightly above mar-

ket consensus (2.2% y/y). Sales of clothing and foot-

wear rebounded sharply (17.5% m/m, 8.5% m/m) after

weather-related slump in September. According to BZ

WBK bank's estimates, retail sales growth excluding au-

tos and fuels accelerated to 5.1%YoY, highest since May

2014.

Polish registered unemployment rate decreased to

11.3% in October from the prior-month level of 11.5%, ac-

cording to Central Statistical Office (GUS)..The number

of registered jobless at end-October measured 1.785m.

PPPPoland Today Eventsoland Today Eventsoland Today Eventsoland Today Events

For more information about Poland Today events, please visit: www.poland-today.pl/events

RecentRecentRecentRecent events:events:events:events:

Auto industry still Auto industry still Auto industry still Auto industry still engine of Polish engine of Polish engine of Polish engine of Polish economy, but must economy, but must economy, but must economy, but must switch gears fasterswitch gears fasterswitch gears fasterswitch gears faster

DNB Bank Polska S.A. and Poland Today recently co-organised a meet-ing of leaders from Poland’s automo-tive sector in the city of Kielce. Can the industry shift into higher gear to meet the fast-changing conditions of the global economy? Leading off the conference was Anders Grevstad, ex-ecutive vice president and head of the international corporate division at the Norwegian DNB Bank ASA. Finance is at the heart of any industry, and Grevstad explained how the political and economic trends that are changing the financial world will also affect the au-tomotive sector. Pointing to a disparate group of influ-ences like ISIS, Russian aggression in the Ukraine, and new regulations on the banking sector, Grevstad ex-plained how an unstable environment in the economy demands flexibility. “Be aware – the world is chang-ing, and you have to adapt to it,” he said. Using the ex-


ample of the electric car company Tesla, which has achieved great success in Norway by capitalising on new consumer preferences and favourable tax incen-tives, Grevstad showed that the automotive sector can turn challenges into opportunities.

DnB Bank Polska President Artur Tomaszewski. Photo: PT

On top of global trends, the Polish auto industry faces particular country- and region-specific challenges. DNB president Artur Tomaszewski and Deloitte member of the board Rafał Antczak provided this con-text in their presentation of a joint report on the Polish automotive sector. Antczak showed how the industry has an enormous impact on other sectors of the econ-omy, like manufacturing, transportation, and real es-tate – in some instances, creating nearly 20% of added value. Tomaszewski went even farther: “This is why we are still competitive,” he said, emphasising the Polish economy’s dependence on the auto sector. Wading through the details of the report, Antczak ex-plained how trends in labour costs, exports, and con-sumer preferences will affect Polish and European in-dustry. This last question emerged as a theme of all the speak-ers: how can the industry adapt to the new kinds cars

that drivers will demand? Krzysztof Hauk, of Kongs-berg Automotive, gave some ideas for what consumers will want in the not-too-distant future. The car of to-morrow must be more environmentally friendly, safer, more comfortable, and more automated. Increasingly, as the technology becomes viable, consumers may well demand that their cars be as connected to their lives – and as hands-off – as a smartphone. But innovation, and the dreams of auto engineers, will always be grounded in the possible. At the confer-ence’s final talk, five panelists brought the audience down to earth from the world of self-driving, fossil fuel-free, and internet-equipped cars. “Everything is connected to innovation,” said Adam Małecki, of the Polish Information and Foreign Investment Agency, “but also to external influences – like new contracts and EU regulations.” Several panelists mentioned the importance of the weight of materials, and whether electric cars could be light enough and powerful enough to drive long distances without recharging. The infrastructure needed to support electric cars (as well as driverless cars), they said, is not well devel-oped in Poland, and won’t be for the foreseeable fu-ture. After all this sober talk of the limits of the Polish auto sector, one final flourish made the conference unfor-gettable. Sent to the nearby Kielce Racing Track, par-ticipants got a chance to drive away their worries in style, in two of the biggest brands in the business: Lamborghini and Ferrari.

by Yoni Wilkenfeld

Upcoming events:Upcoming events:Upcoming events:Upcoming events:

Through December 3, 2014 Warsaw & Wrocław

BELGIAN DAYS This is the 16th year in a row that the Belgian Busi-ness Chamber has organised and invited visitors to the Belgian Days. Until December 3, in Warsaw and Wroclaw, it will be possible to learn more about the culture, culinary traditions and film art of the coun-try. The planned events will also provide plenty of opportunities to share business experiences. Remain-ing highlights include a film festival in Wrocław on December 2 and 3, as well as the CEO Forum in War-saw and a business lunch in Wrocław, both on De-cember 2. For more information, visit www.belgium.pl or call: +48 22 456 40 09. Poland Today is a media patron of the event.

December 2, 2014 InterContinental Hotel, Warsaw

WEALTHPRO 2014 Main topics at the conference will include interna-tional taxation, wealth management, asset protection, banking and citizenship, and will be discussed by leading consultants and professionals from Europe, CIS and the Middle East. Discussions will cover the following jurisdictions: Austria, Cyprus, Georgia, Hungary, Malta, Poland, Saint Kitts and Nevis, Sey-chelles, Singapore, Switzerland, the US and UAE. For more information, visit www.bosco-conference.com. Poland Today is a media patron of the event.


KEY STATISTICS

Consumer PricesConsumer PricesConsumer PricesConsumer Prices

Data in (%) Jul '14 Aug '14 Sep '14 Oct '14

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

Food & bev -1.7 -1.1 -2.1 -1.6 -2,0 +0.1 -2.2 -0.2

Alcohol, tobacco +4.0 0.0 +3.8 0.0 +3.6 0.0 +3.6 0.0

Clothing, shoes -4.9 -2.8 -5.1 -2.7 -4.7 +1.1 -4.6 +3.4

Housing +0.6 0.0 +0.6 +0.1 +0.5 +0.1 +0.5 +0.1

Transport -1.0 +0.8 -1.5 0.0 -3.2 -1.0 -3.0 -0.8

Communications +2.6 +1.2 +3.9 +1.3 +4.0 0.0 -0.4 -0.3

Gross CPI -0.2 -0.2 -0.3 -0.4 -0.3 0.0 -0.6 0.0

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

Oc

t 12

De

c 1

2

Fe

b 1

3

Ap

r 13

Ju

n 1

3

Au

g 1

3

Oc

t 13

De

c 1

3

Fe

b 1

4

Ap

r 14

Ju

n 1

4

Au

g 1

4

Oc

t 14

y/y m/m

Retail TurnoverRetail TurnoverRetail TurnoverRetail Turnover

Month Jun '14 Jul '14 Aug '14 Sep '14 Oct '14

m/m (%) -1.1 +4.7 -1.1 -0.9 +4.2

y/y (%) +1.2 +2.1 +1.7 +1.6 +2.3

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 685.7

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-Oct

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 133.6 +14.2

Commenced 142.9 158.1 162.2 141.8 127.4 129.0 +15.6

U. construction 670.3 692.7 723.0 713.1 694.0 709.7 +0.3

Completed 160.0 135.7 131.7 152.5 146.1 114.2 -2.0

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product (ESA2010)

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q3 2014 +3.3% 426.836 n/a

Q2 2014 +3.5% 418,317 -1.2%

Q1 2014 +3.4% 403,121 -1.2%

Q4 2013 +3.0% 463,855 -1.3%

2013 +1.7% 1,662,052 -1.3%

2012 +1.8% 1,615,894 -3.6%

2011 +4.8% 1,553,582 -5.0%

2010 +3.7% 1,437,357 -5.1%

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

Indicator 2011 2012 2013 *2014 *2015

GDP change +4.5% +1.9% +1.6% +3.1% +3.1%

Consumer inflation +4.3% +3.7% +0.9% +0.1% +0.6%

Producer inflation +7.6% +3.4% -1.3% -1.2% +0.7%

CA balance, % of GDP -5.0% -3.7% -1.4% -1.6% -2.6%

Nominal gross wage +5.2% +3.7% +3.4% +3.5% +4.0%

Unemployment** 12.5% 13.4% 13.4% 11.8% 11.5%

EUR/PLN 4.12 4.19 4.20 4.18 4.13

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

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

Sector Q3 2013 Q4 2013 Q1 2014 Q2 2014

A B A B A B A B

Coal mining 6,061 138 8,615 196 6,333 144 6,382 145

Manufacturing 3,625 158 3,690 161 3,663 160 3,743 163

Energy 6,021 183 6,736 205 6,358 193 6,020 183

Construction 3,766 160 3,895 166 3,706 158 3,884 166

Retail & repairs 3,408 145 3,456 147 3,544 151 3,577 153

Transportation 3,589 127 3,913 138 3,666 130 3,650 129

IT, telecoms 6,654 173 6,695 174 6,987 181 6,835 177

Financial sector 6,109 137 6,602 148 6,747 152 6,738 151

National average 3,652 145 3,823 152 3,895 155 3,740 149


Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14 Oct '14

m/m (%) +3.2 +14.0 +16.9 +0.9 -5.4 +19.8 +7.2

y/y (%) +12.2 +10.0 +8.0 +1.1 -3.6 +5.6 -1.0

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

Fe

b 1

2

Ma

y 1

2

Au

g 1

2

No

v 1

2

Fe

b 1

3

Ma

y 1

3

Au

g 1

3

No

v 1

3

Fe

b 1

4

Ma

y 1

4

Au

g 1

4

No

v 1

460

80

100

120 C onsumer confidenc e (le ft a xis)

Economic se ntiment (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 PricesProducer PricesProducer PricesProducer Prices

Month Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14

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

y/y (%) -0.7 -1.0 -1.8 -2.1 -1.5 -1.6 -1.2

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 PricesConstruction PricesConstruction PricesConstruction Prices

Month Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14

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

y/y (%) -1.5 -1.5 -1.4 -1.2 -0.9 -0.8 -0.7

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 OuIndustrial OuIndustrial OuIndustrial Outputtputtputtput

Month Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep'14 Oct'14

m/m (%) -2.3 -1.7 -0.1 +2.0 -8.5 +16.5 +3.5

y/y (%) +5.4 +4.4 +1.7 +2.3 -1.9 +4.2 +1.6

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-Sep

2014 y/y (%)

share (%)

2013 share (%)

Jan-Sep 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 54,009 +4.3 10.7 69,304 10.9 36,296 +3.9 7.2 47,906 7.4

Beverages and tobacco 7,729 +19.9 1.5 8,624 1.4 3,158 +5.8 0.6 4,150 0.6

Crude materials except fuels 12,459 +2.1 2.5 15,744 2.5 16,368 +07 3.2 21,585 3.3

Fuels etc 21,003 -6.1 4.2 30,013 4.7 55,523 -0.5 11.0 75,539 11.7

Animal and vegetable oils 1,471 +4.7 0.3 1,864 0.2 1,985 -0.6 0.4 2,646 0.4

Chemical products 46,392 +4.3 9.2 59,103 9.3 75,454 +6.7 14.9 92,917 14.3

Manufactured goods by material 101,308 +2.8 20.1 129,915 20.3 90,508 +6.9 17.8 112,392 17.3

Machinery, transport equip. 190,119 +5.1 37.8 239,434 37.5 167,104 +4.0 32.9 216,608 33.4

Other manufactured articles 68,030 +10.3 13.5 82,816 13.0 51,133 +16.6 10.1 58,210 9.0

Not classified 678 n/a 0.2 1,782 0.2 9,714 n/a 1.9 16,242 2.6

TOTAL 503.198 +4.6 100 638,599 100 507,243 +4.8 100 648,195 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Sep

2014 share 2013 share No Country

Jan-Sep 2014

share 2013 share

1 Germany 130,588 26.0% 162,548 25.1% 1 Germany 110,259 21.8% 142,161 21.7%

2 UK 31,921 6.3% 42,138 6.5% 2 Russia 56,611 11.2% 79,578 12.1%

3 Czech Rep. 31,337 6.2% 40,110 6.2% 3 China 51,722 10.2% 61,127 9.3%

4 France 28,306 5.6% 36,367 5.6% 4 Italy 27,064 5.3% 34,940 5.3%

5 Russia 22,273 4.4% 34,069 5.3% 5 Netherlands 18,914 3.7% 25,409 3.9%

6 Italy 22,732 4.5% 27,958 4.3% 6 France 19,371 3.8% 25,041 3.8%

7 Netherlands 20,689 4.1% 25,707 4.0% 7 Czech Rep. 17,731 3.5% 24,054 3.7%

8 Ukraine n/a n/a 18,020 2.8% 8 USA 12,109 2.4% 17,431 2.7%

9 Sweden 14,417 2.9% 17,581 2.7% 9 UK 13,008 2.6% 17,184 2.6%

10 Slovakia 12,655 2.5% 17,099 2.6% 10 Belgium 12,581 2.5% 15,137 2.3%


CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 28 November 2014

100 USD 336.05 ↓

100 EUR 418.14 ↓

100 GBP 528.05 ↓

100 CHF 347.88 ↓

100 DKK 56.20 ↓

100 SEK 45.16 ↓

100 NOK 48.07 ↓

10,000 JPY 284.58 ↓

100 CZK 15.12 ↓

10,000 HUF 136.00 ↓

100 USD/EUR against PLN

300

350

400

450

16 D

ec 13

26 F

eb 14

7 M

ay 14

15 J

ul 14

22 S

ep 14

28 N

ov 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Jul '14 Aug '14 Sep '14 Oct '14

Monetary base 164,008 167,008 166,104 171,649

M1 570,507 574,529 578,485 574,606

- Currency outside banks 122,209 124,986 124,389 125,902

M2 985,769 1,003,128 1,003,354 1,011,930

- Time deposits 415,261 428,597 424,867 437.323

M3 1,002,137 1,020,561 1,021,824 1028,665

- Net foreign assets 301,207 304,359 310,172 311,298 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 Jul' 14 Aug' 14 Sep' 14 Oct' 14

Loans to customers 939,641 950,774 954,978 958,641

- to private companies 274,549 277,482 280,248 279,124

- to households 581,447 587,136 590,208 592,068

Total assets of banks 1,678,129 1,718,251 1,737,728 1,742,288

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14

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

PLN (up to 5 y ) 4.8% 4.8% 4.8% 4.7% 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% 2.0% 1.9% 1.7% 1.6% 1.6%

EUR (over 1m EUR) 3.0% 2.7% 3.4% 3.1% 2.5% 2.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 28 Nov 2014

Overnight 1 week 1 month 3 months 6 months

2.13% 2.08% 2.08% 2.06% 2.05%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.00% 3.00% 1.00% 2.25%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 28 Nov

'14

Change 21 Nov

'14

Change end of

'13

↑ Alior Bank 79 +3% -3%

↑ Asseco Pol. 53.8 +1% +17%

↑ Bogdanka 109.3 +2% -13%

↑ BZ WBK 391.35 +1% +1%

→ Eurocash 37.2 0% -22%

↓ Grupa Lotos 27 -2% -24%

↓ JSW 20.9 -2% -61%

↑ Kernel 29.15 +19% -23%

↓ KGHM 122.9 -3% +4%

↓ LPP 8,840 -2% -2%

↑ mBank 504 +1% +1%

↑ Orange Pol. 9.49 +1% -3%

↑ Pekao 184.85 +4% +3%

↓ PGE 19.36 -6% +19%

↓ PGNiG 4.86 -2% -6%

↓ PKN Orlen 45.17 -1% +10%

↑ PKO BP 37.55 +2% -5%

→ PZU 480 0% 7%

↓ Synthos 4.16 -3% -24%

↓ Tauron 5.18 -5% +19%

Source: Warsaw Stock Exchange

Key indices

as of 28 November 2014

WIG Total index

55553333,,,,222247474747....00007777 Change 1 week 0% →

Change end of '13 +4% ↑

WIG-20 blue chip index

2,2,2,2,444411116666....93939393 Change 1 week 0% →

Change end of ' +1% ↑

WIG Total closing index

last three months

51,000

52,000

53,000

54,000

55,000

56,000

29 A

ug 14

22 S

ep 14

14 O

ct 14

5 N

ov 14

28 N

ov 14


Poland Today Sp. z o. o.

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today.pl

Publisher Richard Stephens

Financial Director Arkadiusz Jamski

Creative Director Bartosz Stefaniak

New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Oct 2014 *

Monthly wages (PLN)

Jan-Oct 2014**

Unemploy-ment

Oct 2014

New dwellings Jan-Oct 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 102.6 109.3 4,367 4,219 121.6 10.6 11,000 81.1

Kujawsko-Pomorskie (Bydgoszcz) 104.4 99.2 3,462 3,343 123.1 15.3 5,046 99.0

Lubelskie (Lublin) 101.7 84.2 3,756 3,135 111.9 12.2 4,534 86.8

Lubuskie (Zielona Góra) 115.9 105.3 3,492 3,099 46.3 12.6 2,432 93.6

Łódzkie (Łódź) 100.9 110.2 3,736 3,336 124.4 11.8 5,226 101.8

Małopolskie (Kraków) 100.4 101.0 3,846 3,415 134.8 9.6 12,466 101.5

Mazowieckie (Warszawa) 100.1 110.3 4,630 5,081 248.6 9.8 25,056 107.6

Opolskie (Opole) 105.7 122.4 3,662 3,597 41.3 11.7 1,636 113.1

Podkarpackie (Rzeszów) 100.9 107.6 3,437 3,131 131.7 14.2 5,163 105.2

Podlaskie (Białystok) 106.8 114.9 3,341 3,937 58.9 12.8 3,454 112.9

Pomorskie (Gdańsk-Gdynia) 109.2 116.4 4,048 3,498 94.3 11.1 7,982 81.2

Śląskie (Katowice) 100.6 105.9 4,580 3,575 174.9 9.6 8,209 93.3

Świętokrzyskie (Kielce) 107.3 101.2 3,453 3,362 73.8 13.9 2,693 123.8

Warmińsko-Mazurskie (Olsztyn) 104.6 109.1 3,307 3,213 93.3 18.1 3,608 108.5

Wielkopolskie (Poznań) 106.2 102.2 3,771 3,829 115.3 7.7 11,136 99.4

Zachodniopomorskie (Szczecin) 103.5 100.0 3,569 3,506 90.6 15.1 4,594 100.0

National average 103.3 106.7 4,021 3,859 1,784.8 11.3 114,235 98.0

*) 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 Q4 '13 Q1 '14 Q2 '14

Trade balance -10,059 -5,175 2,309 138 159 71

Services, net 4,048 4,642 5,249 1,941 1,684 2,013

CA balance -18,519 -14,191 -4,984 -1,324 -1,403 -553

CA balance vs GDP -5.0% -3.7% -1.3% -1.3% -1.1% n/a

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

Q3 1

1

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3 1

4

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2014

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 617,000 8,000 14.7% 1–5.0

Warsaw suburbs 2,137,000 14,000 11.3% 1.9–3.2

Central Poland 1,107,000 59,000 11.7% 1.9-3.1

Poznań 1,100,000 316,000 1.9% 2.3–2.9

Upper Silesia 1,576,000 57,000 7.9% 2.3–3.1

Wrocław 939,000 315,000 6.2% 2.4–3.0

Tri-city 215,000 45,000 4.2% 2.2–3.7

Kraków 159,000 11,000 1.9% 3.5-4.0

Homes & CHomes & CHomes & CHomes & Commercialommercialommercialommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'14 Retail rents**1H'14

Q2 '14

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 7,924 -2.0% 11 -25 13.35% 100-120 148

Kraków 6,389 +6.0% 13.5-14.5 3.6% 35-40 78

Katowice 5,602 -3.7% 11.5-13.8 5.4% 35-40 50

Poznań 6,552 +3.3% 14-15 11.5% 35-40 62

Łódź 4,936 +2.6% 11.5-12.5 10.6% 35-40 78

Wrocław 6,092 +2.0% 14.15 10.9% 35-40 45

Tricity 6,092 -4.9% 12.8-13.5 11.5% 35-40 40

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

Country Credit Country Credit Country Credit Country Credit RatingsRatingsRatingsRatings

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

Oct10

Jun11

Feb12

Oct12

Jun13

Feb14

Oct14

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

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