poland today business review+ no. 036

No. 036 / 26th May 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Amica to triple turnover under new strategy page 2

Investors needed for Poland's oldest bus manufacturer Autosan page 2

Industrial output data beats expectations page 3

BANKING & FINANCE Billionaire Leszek Czarnecki regains top spot in Poland's leasing sector page 4 Polish ITCard to roll out Eu-rope's first network of finger vein ID cash machines page 4

PROPERTY & CONSTRUCTION

Austria's S+B Gruppe breaks ground on boutique office project in downtown Warsaw page 5

Echo gets green light to build a 57,000 sq.m office project in Kraków page 6

Europa Capital to give Warsaw high rise a EUR 8m makeover page 7

SERVICES & BPO

Infosys to create 500 new jobs at Łódź center this year page 7

TRANSPORT & LOGISTICSDCT Gdańsk improves railway access with brand new terminal page 8

RETAIL PROPERTIES

elbfonds Development completes Kutno mall; will open three more retail centers this year page 10 Świnoujście to get its first shopping centre next year page 11

POLITICS & ECONOMY

Ukraine crisis: Poland is preparing for the worst page 12

KEY FIGURES

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

The Polish park will be modeled after Germany's Therme Erding. Image: Therme Erding

Park of Poland to open in October 2016Park of Poland to open in October 2016Park of Poland to open in October 2016Park of Poland to open in October 2016 Global City Holdings, an investment company set up by the former owners of Cinema City, plans to break ground on its flagship amusement park project Park of Poland next year. Phase one will comprise a EUR 100m water park. page 9

Key rivals tie in European electionsKey rivals tie in European electionsKey rivals tie in European electionsKey rivals tie in European elections The ruling centrist party Civic Platform (PO) and its main rival, conservative Law & Justice (PiS) each took 19 seats in the European parliament, according to preliminary results. page 12

Celebrating

25 years of economic transformation

Join leading opinion formers including George Friedman, Founder and Chairman of Stratfor,

Edward Lucas, Senior Editor of The Economist, top international journalists from 50 countries around the world,

and key figures from the domestic and international business community.

www.poland-today.pl

Conference & Cocktail Party Poland Transformed 28 May 2014 | Endorfina Foksal | ul. Foksal 2, Warsaw

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10:30 am – 11:00 amRegistration & refreshments 11:00 am – 11:05 amWelcome Speaker Richard Stephens, Founder and Editor in Chief of Poland Today

11:05 am – 11:15 amOpening speech Speaker: Jan Krzysztof Bielecki, Head of the Prime Minister’s Economic Council, former Prime Minister

11:15 am – 11:25 amPresentation: Poland’s economy – an overview Speaker Professor Witold Orłowski, Member of the Prime Minister’s Economic Council and Chief Economic Advisor at PwC

11:25 am – 12:15 pmPanel discussion: Defining Poland’s success What were the drivers behind Poland’s successful economic transformation? Moderator: Edward Lucas, Senior Editor, The Economist Panelists: Jan Krzysztof Bielecki (Head of the Prime Minister’s Economic Council, former Prime Minister), Henryka Bochniarz (President of Polish Confederation Lewiatan, former Presidential Candidate, President for Central and Eastern Europe Region of Boeing Co.), Jacek Socha (Partner in the Advisory Department and the Deputy Chairman of PwC in Poland, Former Treasury Minister), Xavier Devictor (World Bank Country Manager for Poland and the Baltic Countries), Adam Maciejewski (President of the Management Board at the Warsaw Stock Exchange)

12:15 pm – 1:30 pmPanel discussion: 25 years of Poland’s economic transformation How unleashing business helped write Europe’s biggest success story Moderators: Andrew Kureth, Editor, Poland Today & Lech Kaczanowski, Business Editor, Poland Today

Panelists: Joanna Nicińska (Head of Leasing, ECHO Investment) Beata Stelmach (CEO, GE, Fabio Pomello, CEO, Indesit Poland), Marek Podstawa (Board Member, PKN Orlen), Adam Purwin (PKP Cargo)

1:30 pm – 2:30 pmNetworking Lunch

2:30 pm – 3:15 pmPanel discussion: Facing the future What are the opportunities and challenges for the new generation of Polish business leaders? Moderator: Mirella Panek-Owsiańska Panelists: Rossen Hadjiev (Member of the Management Board at Integer.pl Group), Julian Kozankiewicz (Managing Director at COMP Centrum Innowacji), Łukasz Wejchert (CEO and Founder of Dirlango), Katarzyna Zawodna (President of Skanska Property Poland)

3:15 pm – 3:30 pmDiscussion: Poland 2039, a tale of two countries What must Poland do to fulfill its economic potential and avoid future economic stagnation? Poland Today senior writer Jan Cienski discusses the positive and negative scenarios set out in his article for Poland Today about the country’s economic future.

3:30 pm – 4:30 pmBreakout sessions & networking Participants can contribute their own thoughts and arguments on the in smaller, more informal, networking breakout sessions. These sessions will also present an excellent networking opportunity.

4:30 pm – 5 pmPanel discussion: Myth and reality – how is Poland perceived abroad? What is Poland’s image around the world, and has the message of its success filtered through in foreign media? Moderator: Richard Stephens, Founder and Editor in Chief of Poland Today Panelists: Rick Lyman (Central and Eastern European, Bureau Chief, The New York Times), Marie Charrel (Economic Correspondent, Le Monde, France), Lily Galili (i24News, Israel), Derek Scally (The Irish Times, Ireland)

5 pm – 6 pmPanel discussion: Poland in the global context What Poland’s past can teach us about its future? Moderator: Andrew Kureth, Editor, Poland Today Panelists: George Friedman (Founder and Chairman of Stratfor), Edward Lucas (Senior Editor, The Economist)

6 pm – lateGarden Cocktail Party

weekly newsletter # 036/ 26 May 2014 / page 2


Amica to triple Amica to triple Amica to triple Amica to triple turnover in 10 years turnover in 10 years turnover in 10 years turnover in 10 years under new strategyunder new strategyunder new strategyunder new strategy

Polish appliance manufacturer Amica seeks to triple the scale of its business under an ambitious strategy for the years 2014-2013. Amica's turnover, which at the moment totals some EUR 400m, is to grow to EUR 900m in 2018 and EUR 1.2bn in 2012, while over the same period of time its EBITDA is to increase from EUR 30m to EUR 107m.

Amica's turnover by region in 2023

Outside Europe

1%

Central & South

Europe5%

Poland17%East Europe

33%

West & North

Europe44%

Source: Amica Strategy 2014-2023

Amica's capital expenditures over the coming decade are set to reach EUR 400m and will include both or-ganic growth as well as acquisitions. The company continues to expand its cooker plant in Wronki near Poznań, which can currently produce some 1.35-1.4m units. By 2018, its capacity is to be extended to reach 1.7m, and in 2013 the figure will top 2.2m. On the ac-quisition front, the Polish firm is eyeing a minority stake in a French appliance distributor, which is to be

put up for sale by an Italian firm. Should Amica suc-ceed at introducing its products to the French distrib-utor's vast network, its position on that market would improve significantly, Amica said. Regardless of that transaction, Amica's 2014 sales in France are expected to total PLN 20m. According to the strategy, Amica is to focus on the Eu-ropean market, with Poland, Russia and Germany be-ing its core countries. Its sales are to grow the fastest in the UK, Turkey, and France, where Amica is already present, as well as new markets, such as Italy and Spain. Unlike most of its competitors, who prioritize a single brand, Amica will stick to its multi-brand strat-egy, which currently includes, among others, Amica in Poland, Gram in Scandinavia and Hansa in Eastern Europe. The Polish manufacturer will seek to expand its portfolio by acquiring local brands in new markets, mainly in France, Italy, and Spain. By 2023 Western and Northern Europe is to generate 44% of Amica's sales.

Amica key figures

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2006 200 7 200 8 20 09 2010 2011 20 12 20 13

0

10

20

30

4 0

50

60

70

80

90

100

Turnover, in P LNbn, left axis

Net res ult in PLN m, rig ht axis

Source: Amica

On the Polish, French and Spanish markets, Amica is hoping to grab a solid chunk of the cooker segment,

left abandoned by the bankrupt Spanish producer FagorMastercook, which used to sell some 200,000 units per annum in Poland alone. Amica nearly doubled its net profit last year, reaching PLN 89.4m on PLN 1.66bn revenues. The company's sales in Russia, which totaled PLN 434.2m in 2013, so far have not been impacted by the Ukraine crisis, ac-cording to Amica representatives, and continue to grow. In Q1 2014 Amica's turnover rose 23% and came to PLN 427.6m, while its net earnings increased by less than 2% and topped PLN 13.1m. Poland-based home appliance manufacturers as a whole, boosted their large and small appliance output by 15% y/y and 25% respectively In Q1 2014, reported the industry organi-zation CECED.


Investors needed for Investors needed for Investors needed for Investors needed for Poland's oldest bus Poland's oldest bus Poland's oldest bus Poland's oldest bus manufacturer Autosanmanufacturer Autosanmanufacturer Autosanmanufacturer Autosan Polish bus manufacturer Autosan, which went bank-rupt in October last year, is now up for grabs. A court-appointed receiver has invited interested parties to place their bids by June 13th, with the asking price be-ing set at PLN 56m. Autosan is one of the oldest factories in Poland, with its beginnings dating back to 1832. Prior to its bank-ruptcy the business had belonged to Polish entrepre-neur Sobiesław Zasada. The factory had an estimated 500 workers at the time it went bankrupt, of whom the receiver has since reemployed nearly 360 to work on completion of old and new contracts. In Q1 2014 Autosan completed seven buses and a handful of oth-ers are currently in the making.


Autosan's troubles began in 2009 when second-hand bus imports to Poland and tough competition from other bus makers forced the factory to cut salaries by 10%. While new contracts lifted the company's finan-cial burden, the relief was only temporary. Autosan went into receivership with an outstanding debt due to arrears in land tax to the town of Sanok amounting to PLN 1.3m. Its total liabilities have not been disclosed. Trade unions at the company, who had long been dis-satisfied with its management, have welcomed the bankruptcy. Besides buses, since 2001 Autosan has been producing bodies for trains and trams, cooperat-ing with top rail stock producers such as PESA Byd-goszcz, NEWAG and Poznań's ZNTK.

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

0

1,000

2,000

3,000

4,000

5,000

2007 2008 2009 2010 2011 2012 2013

Exports Domestic sales

Source: JMK Analizy Rynku Autobusow

With skilled labor at a fraction of the Western Europe-an costs, Poland has emerged as one of Europe's key bus exporters over the past decade, thanks to investors from Germany (MAN) and Sweden (Volvo & Scania), as well as the domestic player Solaris Bus & Coach. In 2001 Polish factories exported merely 373 buses, but in little more than a decade the figure grew nearly tenfold, making Poland number three in Europe after Germany and Sweden. After reaching its lowest level in more than five years in 2012 (3,560 units), Poland's bust production bot-

tomed out last year and topped 3,715 vehicles (+4.3% y/y), of which 3,303 were exported, mainly to Germa-ny, Sweden, and Norway according to market re-searcher JMK Analizy Rynku Transportowego. The two key categories were city buses (3,025 units; +10.6% y/y) and long-distance buses (543; +10.6% y/y). With 1,512 vehicles completed last year Germany's MAN remains the leading bus producer and exporter in Poland, followed by Polish Solaris (1,229), Volvo (699), and Scania (96). In addition to complete buses, Polish factories made 700 chassis and 250 bus bodies as well as 75 trolleybuses. Domestic carriers purchased 1,389 buses last year, marking an 8.6% improvement over 2012. The number one seller in Poland was Mercedes Benz with 542 ve-hicles registered in 2013 (including bodies from other manufacturers mounted on Mercedes chassis), mark-ing a 19.6% increase against 2012. Polish Solaris came second with 318 units (+23.7%), followed by MAN (63) and Autosan (62).


Industrial output data Industrial output data Industrial output data Industrial output data beats expectationsbeats expectationsbeats expectationsbeats expectations

Industrial output growth in April remained unchanged from March at 5.4% y/y, vs. 4.9% y/y growth expected in the PAP Polish news agency consensus survey, as output declined 2.3% from the prior month, Poland's central statistical office GUS said, confirming stable improvement in the Polish economy. According to the Economy Ministry, the growth should accelerate to some 6% in May. "There are two clear tendencies arising from detailed data. Manufacturing recorded strong results in April

(growth above 7% y/y, especially in coke and petrole-um products, construction materials, furniture, and other transport equipment). On the other hand, the manufacturing output growth contrasts sharply with poor results in energy and mining sectors. Although a contraction in energy sector (by 5.6% y/y) can be at-tributed to temporary factors (mild weather translated into a lower demand on heat and its lower produc-tion), the mining output recorded a substantial decline due to a structural weakness (sharp decrease in coal production – by 20.5% y/y in April – a consequence of a substitution of domestically extracted coal with cheaper imports). The results of mining can weigh on the industrial output in the coming months," PKO BP analysts commented on the April data in their weekly wrap-up.

Industrial output & producer prices

-12%

-8%

-4%

0%

4%

8%

Jul12

Sep12

Nov12

Jan13

Mar13

May13

Jul13

Sep13

Nov13

Jan14

Mar14

Industry output, y/y change

Producer Price Index, y/y change

Source: GUS, the central statistical office

As for Poland's construction sector, it saw production decelerate to 12.2% y/y in April (vs. 17.4% y/y in March), which according to PKO BP analysts points at a normalization of construction output growth amid fading effects of an early start of the construction sea-son in 2014. Construction output should continue to grow at a double-digit pace in May, Economy Ministry experts said.


BANKING & FINANCE

Billionaire Leszek Billionaire Leszek Billionaire Leszek Billionaire Leszek CzarneckiCzarneckiCzarneckiCzarnecki regains top regains top regains top regains top spot in Poland's leasing spot in Poland's leasing spot in Poland's leasing spot in Poland's leasing sectorsectorsectorsector Polish entrepreneur Leszek Czarnecki is once again the number one player in the country's leasing indus-try following the recent agreement with VB-Leasing International (VBLI), a joint venture of Austria's Volksbanken AG and Germany's DZ Bank, under which Czarnecki's Getin Holding is to acquire their leasing operations in Poland and Romania. The trans-action is to total an estimated PLN 163m. Volksbanken has to sell its 50% stake in the vehicle and machinery leasing company by the end of the year under terms of a bailout agreement approved by the European Commission. VB Leasing Poland, which made PLN 85m profit last year, is one of the top ten players in that country and the single largest unit within VBLI, the bank said in a statement. The Roma-nian unit, which is to be added to the Romanian Inter-national Bank Getin bought last year, is among the top six players in Romania with a net profit of almost PLN 100m in 2013. "The transaction should be finalized in the next three months and the units should be consolidated in the third quarter," Getin Holding's Chief Executive Officer Rafal Juszczak said. Getin plans to finance the purchase partly with debt. It also agreed to secure PLN 3.2bnfor the two units to repay VB Leasing's financing.

Czarnecki's two existing Polish leasing firms Idea Leasing and Getin Leasing financed PLN 2.13bn worth of vehicles and machinery last year. Together with VB Leasing Polska, the figure came to PLN 3.63bn – some 15% more than the current leader Europejski Fundusz Leasingowy (EFL), which Czarnecki sold in 2001 to France's Societe Generale for PLN 900m. The number three player in the sector is Austria's Raiffeisen Leasing. Getin Leasing and Idea Leasing specialize in vehicle leasing while VB Leasing focuses mainly on trucks, trailers, and farming machinery.

Poland's largest leasing firms Assets leased in Q1 2014 in PLN bn

0.0 0.2 0.4 0.6 0.8 1.0 1.2

BZ WBK Leasing

Millennium Leasing

PKO Leasing

Raiffeisen Leasing

EFL

*Getin+Idea+VB

Source: ZPL *) controlled by Leszek Czarnecki

Opportunistic acquisitions have been something of Czarnecki's specialty in recent years. His Getin No-ble Bank has made a number of small acquisitions in the banking sector in Poland (GMAC, Allianz Bank, Dexia, parts of DNB Nord and DZ Bank) and other CEE countries (most recently in Belarus and Roma-nia). Now, the billionaire is said to be zoning in on the leasing segment. With PLN 6.4bn worth of assets, Czarnecki is one of Poland's five wealthiest individuals. His portfolio in-cludes a 55.8% share in Getin Holding, 55.7% in Getin

Noble Bank, 51.3% in LC Corp (property developer) as well as 54.2% in Open Finance (financial inter-mediation firm). To-date, he has completed seven list-ings on the Warsaw Stock Exchange and in recent in-terviews he hinted that another IPO is likely to take place by the end of the year. Analysts are betting on Idea Bank.

Poland's largest banks Total assets as of end of 2013

0 50 100 150 200

*Getin Noble Bank

ING BSK

mBank

BZ WBK

Pekao

PKO BP

Source: banks *) controlled by Leszek Czarnecki

BANKING & FINANCE

Polish ITCard to roll Polish ITCard to roll Polish ITCard to roll Polish ITCard to roll out Europe's first out Europe's first out Europe's first out Europe's first networnetwornetwornetwork of finger vein k of finger vein k of finger vein k of finger vein ID cash machinesID cash machinesID cash machinesID cash machines Poland's number two cash machine operator ITCard is to deploy a network of more than 1,700 devices that use biometric authentication to validate customers' identities by the end of this year. Poland has become the first country in Europe to introduce an independ-ent network of "finger vein ID" cash machines, with 2,000 of the new ATMs opening in bank branches and supermarkets across the country this year, backed by a


marketing campaign that promises "cash within your finger". The new network will operate under ITCard's "Planet Cash" logo and will be equipped with biometric read-ers supplied by Hitachi. The technology, which is said to be more accurate than fingerprinting devices, and as reliable as iris-reading technology, is currently most widely used in Japan. "Near-infra-red light is trans-mitted through the finger and partially absorbed by hemoglobin in the veins to capture a unique finger vein pattern profile, which is then matched with a pre-registered profile to verify individual identity," Hitachi explains. Since the scanners detects the actual blood flow in the veins, criminals would not be able to access a person's savings using his or hers severed finger. Ac-cording to Hitachi, vein patterns are established in the womb and are remarkably stable throughout the rest of a person's life.

An ATM that identifies customers by the pattern of veins in their finger. Image: ITCard/Hitachi

"ITCard is a strategic partner who has cooperated with us since 2010. The Planet Cash project is the big-gest step so far for ATMs in Europe that utilizes finger vein technology to create a new standard for secure, quick and convenient banking transactions for socie-ty," Tadeusz Woszczyński, Regional Manager for the

Central Eastern Europe in the Information Systems Group of Hitachi Europe said. The Japanese technology giant had earlier agreed to deliver finger vein ID ATMs to Polish banks BPH and Getin. Some Polish banks have already installed lim-ited numbers of machines that allow customers to make withdrawals using fingers rather than cards, while one institution uses finger-vein recognition to allow customers to sign documents at selected client service points. Those were just pilot projects, howev-er, used by banks as a marketing gimmick rather than core technology. Planet Cash, on the other hand, is an independent operator, meaning any bank can sign up to join the scheme and offer the vein-recognition withdrawals to their customers. Besides Japan the finger vein technology is being used Russia, and Turkey. According to Hitachi, talks are under way to link the Polish network to the Turkish one "to create the world’s first international network of biometric ATMs." No further details on this project and its time frame have been provided, however. According to ITCard, this most recent ATM deploy-ment will give the company an 11% share of the Polish ATM market. It is currently the second-largest ATM shared network in the country after Euronet, with each company running more than 3,200 cash ma-chines throughout Poland. ITCard belongs to a num-ber of Polish cooperative banks, as well as other indi-vidual and corporate shareholders. Besides services for banks, ITCard has recently struck a deal with the Polish city of Łomża allowing for the use of public ser-vices using biometric authentication. The program, which is partly sponsored by the EU, will enable citi-zens to access public swimming pools and public transport.


AustrAustrAustrAustria's S+B Gruppe ia's S+B Gruppe ia's S+B Gruppe ia's S+B Gruppe breaks ground on breaks ground on breaks ground on breaks ground on boutique office project boutique office project boutique office project boutique office project in downtown Warsawin downtown Warsawin downtown Warsawin downtown Warsaw

Austrian developer S+B Gruppe has broken ground on its newest Polish project, an office building króLEWska, at the junction of Królewska and Graniczna Streets in Warsaw's city centre. The build-ing will be comprised of two sections, a nine storey (32m) one at the corner of the two streets as well as a six storey (20.8m) one along Królewska St., offering 5,430 sq.m of offices and 570 sq.m of service space as well as 44 underground parking spaces. The project is to reach completion in late 2015 or early 2016 with LEED sustainable building certification at the Gold level. króLEWska will occupy an attractively located 1,847 sq.m site that used to belong to an American-Swedish investor Stellar, which many years ago had sought to build offices and later had plans for a luxury apart-ment complex in the very same location. After S+B Gruppe acquired the plot, they returned to the original plans for an office development. S+B Gruppe is perhaps best known in Warsaw for its 18,2180 sq.m Zebra Tower office building by the Politechnika subway station, which was sold to Ger-many's Union Investment for EUR 76m – the largest single transaction in the developer's history. Complet-ed in 2010, the building is home to Samsung's R&D centre, among other prestigious tenants.


Izabella Kieler, head of leasing and marketing at S+B Gruppe, said that the company is already in talks with potential investors interested in buying the newly launched króLEWska project. Meanwhile, the compa-ny is working on the acquisition of another office site in downtown Warsaw. S+B Gruppe should finalize the purchase of a plot for a much larger scheme than the króLEWska development within the next few months, Kieler said.

króLEWska will take up one of the last remaining in-vestment sites in this part of Warsaw. Image: S+B Gruppe

The developer is currently applying finishing touches to its other Warsaw investment, the Hampton by Hil-ton Warsaw City Centre hotel on 72 Wspólna Street. Construction activity on this 12,500 sq.m tower, locat-ed close to the Marriott hotel and the central station, had proceeded at pace until spring 2009, when lack of funds brought building work to a halt. The site was closed and a group of more than 90 creditors filed claims, forcing the project (then an office building) to a complete standstill, and pushing the original owners to the brink of bankruptcy. The Austrians acquired the scheme and turned it into a hotel, which will open in the middle of June. According to initial plans, the capex on this project were to reach EUR 40m and it is expected to be sold to an investment fund in the com-ing months. With offices in Austria, the Czech Republic, Poland and Ro-mania, S+B Gruppe has been executing pro-

jects for over 25 years, acting as both an investor and general contractor. The team headed by joint CEO Reinhard Schertler and Viennese architect Alfred Mi-chael Beck specializes in architectural design, con-tracting, financial management and marketing for top-quality construction projects. So far, the Group has in-vested over EUR 2.5bn in developing a total of 850,000 sq.m of usable space.


Echo Investment gets Echo Investment gets Echo Investment gets Echo Investment gets green light to build a green light to build a green light to build a green light to build a 57,000 sq.m office 57,000 sq.m office 57,000 sq.m office 57,000 sq.m office project in Krakówproject in Krakówproject in Krakówproject in Kraków Warsaw Stock Exchange-listed developer Echo In-vestment has secured a building permit for its Opolska Business Park office project in Kraków. The scheme will deliver a total of 57,000 sq.m of leasable space. Located at the intersection of Opolska and 29 Listopada Streets in the north of Kraków, the Opolska Business Park development will comprise three build-ings, each of which will feature 12 floors. The investment will be developed in three phases. Construction on the first phase, which will deliver more than 18,000 sqm of leasable office space, is scheduled to finish in Q4 2015. Echo Investment has already developed several projects in Kraków which include the Novotel-Ibis and Qubus hotel schemes, the Avatar office development, as well as a number of res-idential investments. Echo's flagship office project at the moment is the 155-metre Q22 office tower in Warsaw the company is building at the intersection of Jana Pawła II Avenue

and Grzybowska Street. Estimated at PLN 500m, Echo's new Q22 building is to reach completion in Q1 2016, delivering nearly 50,000 sq.m of class-A office space to Warsaw's central business district. Another major office project in Warsaw, the 34,000 sq.m Park Rozwoju on Konstruktorska St. in the Mokotów dis-trict, near the Chopin Airport and the recently opened southern section of the Warsaw ring road, is currently under construction. Phase one of the project was de-livered in Q1 2014, whereas phase two is scheduled for completion in Q2 2015. Its key tenants include Schneider Electric Polska and Ericsson.

Building one (18,000 sq.m) of Opolska Business Park is to reach completion in Q4 2015. Image: Echo Investment

The company is also working on a large office devel-opment in Katowice, A4 Business Park. The first of its three buildings reached completion in Q1, with IBM taking up the entire 9,000 sq.m. In April Echo secured a EUR 30m loan from BNP Paribas Bank Polska for the subsequent two stages of the investment. Accord-ing to the developer, building two of A4 Business Park as well as a separate multi-story garage for 560 vehi-cles, will reach completion in Q4 2014. In September last year, Echo Investment broke ground on a 16,000-sq.m class-A office project in Wrocław. The West Gate building will be Echo's fourth devel-opment in the city, following the shopping centre


Pasaż Grunwaldzki, office project Aquarius Business House, and residential complex Przy Słowiańskim Wzgórzu. The company has invested more than PLN 1.2bn in Wrocław to-date, having delivered some 80,000 sq.m of floor space across its three finished projects in the city. Phase one of Echo's first office project in Wrocław, Aquarius Business House, was sold in July 2013 to Spain's Azora Europe for EUR 41.9m. To-date, Echo Investment has delivered more than 430,000 sq.m GLA in retail centers, 250,000sq.m in of-fice buildings, 245,000 sq.m of usable housing space, and 89,000 sq.m in hotels. Besides Poland, the Kielce-based developer manages investments in Romania, Hungary and in Ukraine. Its consolidated net income came to PLN 331m last year, down from PLN 373m in 2012, whereas the respective revenue totals came to PLN 528m and PLN 584m.


Europa Capital to give Europa Capital to give Europa Capital to give Europa Capital to give Warsaw high rise Warsaw high rise Warsaw high rise Warsaw high rise a a a a EUR 8m makeoverEUR 8m makeoverEUR 8m makeoverEUR 8m makeover The Spektrum Tower high-rise office building in downtown Warsaw, known to many Varsovians as the former headquarters of the telecom giant TPSA, has obtained a building permit for an extensive refurbish-ment. The renovation work, which has already started and is scheduled to finish by October this year, will in-clude changing the facade of the podium part of the building and modernizing its entrance and lobby areas. "The capital expenditure related to this will be in the region of EUR 7-8m, and it does not include office fit-out for our tenants. Besides the lobby and façade

facelift, we will modernize all systems in the building, such as air conditioning, fire protection, access con-trol, and escalators, as well as make the project BREEAM-compliant," says Katarzyna Woźna, Leasing and Marketing Director at WX Management Sp. z o.o., the company in charge of coordinating the refur-bishment and well as leasing of office space in the building. "We expect the building to be leased in 12-14 months with rents at some 5-10% below Warsaw's top rental levels. So far we have signed our first tenant – Becker Energy – which will occupy the entire 28th floor. We are targeting small and medium-sized tenants with units starting at 80 sq.m," Ms. Woźna tells Poland To-day.

Spektrum Tower (Pre-viously known as Twarda Tower) was completed in 2003. The original tenant TPSA sold the building to Danish fund Baltic Property Trust in 2008 for EUR 168m. Four years later it was ac-quired by Europa Capi-tal LLC. Image: WX Management Services

The Spektrum Tower building is located on Twarda Street in Warsaw's Central Business District and stands 122 meters tall. It offers more than 28,000 sq.m of leasable office space on 28 floors. Besides office space the building offers 314 parking spaces, a number of green terraces, rooftop helipad, as well as an audito-rium that can fit up to 214 guests.

The Spektrum Tower high-rise is owned and managed by an eponymous entity which was established in 2012 and in which Europa Fund IV, managed by Europa Capital LPP, is the majority shareholder. Since 1995, Europa Capital's principals have collectively raised seven real estate funds and committed to over 80 transactions totaling some EUR 8bn across 18 Europe-an countries. In Poland, one of their funds has recently sold the 58,000 sq.m GLA mixed use project Poznań City Center (together with its joint-venture partners TriGranit Development Corporation and PKP) to ECE and Resolution. Europa Capital is a member of The Rockefeller Group. As for WX Management Services, the company was set up by the Warsaw & Vienna-listed property firm Warimpex Finanz- und Beteiligungs AG as well as its former executive Christian Fojtl. It focuses on services for property owners, mainly investment funds: facility & asset management, space letting, de-velopment and renovation. Besides the Spektrum Tower project, it is involved in redevelopment of the K1 office building in Kraków. "We are expecting to take part in further refurbish-ment projects in Warsaw in the near future. A growing number of buildings completed shortly after 1989, es-pecially in Warsaw, are becoming outdated and will require full-scale makeovers," says Katarzyna Woźna.

SERVICES & BPO

Infosys to create 500 Infosys to create 500 Infosys to create 500 Infosys to create 500 new jobs at Łódź new jobs at Łódź new jobs at Łódź new jobs at Łódź center this yearcenter this yearcenter this yearcenter this year A year ago, when we last spoke to Krystian Bestry, head of Infosys BPO Europe, the Indian outsourc-


ing giant had some 1,500 employees in Łódź and plans to pass the 2,000 mark within a year. As expected, the company reached that milestone in April 2014. Having recruited some 800 new staff last year, Infosys BPO seeks to create a further 400-500 new jobs in 2014. Infosys landed in Łódź in 2007 with the acquisition of a Philips shared services centre in the city. The com-pany has since seen remarkable growth both in terms of size as well as the range of supported processes, gradually shifting its profile from transactional ser-vices provided in the English language (mainly bookkeeping) to a broad array of multi-language con-sulting services.

Infosys offices in Łódź are located in the Green Hori-zon complex, developed by Skanska. Image: archive

"Infosys BPO Poland serves clients in nearly 50 copuntries in 24 languages. Some 9% of all our staff are foreigners, representing some 40 nationalities," Wojciech Karpiński, operations manager at Infosys BPO Poland. "We continue to expand our client base, on a project and well as long-term cooperation basis. They are mainly global corporations from sectors that span retail & services, property, chemicals, machinery and mining, but we do have some Polish clients as well." Infosys has taken up 16,000 sq.m at building A of the Green Horizon complex, developed by Skanska Prop-erty Poland. Part of the growth is taking place under the aegis of the Łódź special economic zone, which has approved the company's plan to create 260 fi-

nance, bookkeeping, IT, and R&D jobs in the city be-fore the end of September 2015. In order to meet the zone's public aid rules, Infosys has to maintain sepa-rate reporting for its in-zone and out-of-zone activi-ties, even though they concern a single organizational unit. Although Philips remains one of the centre's key cli-ents, it has since signed many other global names such as Rio Tinto, P&G, Adidas, Daimler and Atlas Copco. Infosys BPO Łódź is already the company's key unit in Europe, supervising virtually all processes on the con-tinent. The Infosys SAP Hub in Łódź, for instance, manages all of Infosys' European nearshoring SAP services. At first it had taken a bit on convincing on the part of Infosys, to have its prospective clients hand over ad-vanced processes, such as hedging, financial state-ment consolidation, internal audit, business process and strategic consulting, management systems imple-mentation, purchasing and products database man-agement, to an external provider, but once that initial phobia was overcome, orders started pouring in, forc-ing the company to recruit staff for the centre as far as South Africa. "Poland's service outsourcing sector has seen intense expansion in recent years, and as it is shifting towards more complex processes, the demand for experienced employees increases, which may lead to shortages on local labor markets. At Infosys BPO we are currently redefining our existing training and recruitment mod-els to continue selecting the most talented students and graduates, at the same time investing in their soft and hard skills though series of lectures, workshops, and internships as well as tightening cooperations with local universities. One example is the "Linguistics for Business" major at the Łódź University, launched last year, which combines language skills with busi-ness studies," Wojciech Karpiński tells Poland Today.

TRANSPORT & LOGISTICS

DCT Gdańsk improves DCT Gdańsk improves DCT Gdańsk improves DCT Gdańsk improves railway access with railway access with railway access with railway access with branbranbranbrand new terminald new terminald new terminald new terminal Poland's leading container terminal, the Australian-owned DCT Gdańsk, has completed a brand new four-track railway siding with an annual capacity of 700,000 TEU. The PLN 10m investment was financed nearly in half by the European Union. Each of the four tracks can fit a full-sized train and offers ample storage space for containers on the platforms. "Rail freight represents some 35% of all land ship-ments handled by DCT Gdańsk, which is the EU-recommended level but our goal is to keep increasing the share of goods shipped by rail over those trans-ported by road," DCT Gdańsk CEO Maciek Kwiatkow-ski said at the opening ceremony. "Rail is a key link in supply chain, especially on distances of more than 300km, when it is more cost effective than trucks. Rail transport is less prone to accidents, more environmen-tally friendly and reduces truck and trailer traffic in the cities." DCT Gdańsk currently receives some 100 trains per month but the figure is expected to increase signifi-cantly once the terminal launches cooperation with the world's top three sea forwarders: Maersk Line, CMA CGM and MSC, whose alliance is to materialize in the autumn. Traffic at DCT Gdańsk will also go up following the completion of a second deepwater quay. DCT Gdańsk's position as a key Baltic hub received a considerable boost in 2011, when Maersk decided to establish the first direct deep-sea container service from China to the Baltic Sea, serviced by the Danish


company's first E-class type vessel Emma Maersk. Last year the terminal joined the prestigious group of mere-ly 14 ports worldwide that regularly receive the giant Triple E fleet.

DCT Gdańsk handled more than 1m TEU last year. Image: DCT Gdańsk

Last year DCT Gdańsk handled more than 1m TEU. Up from nearly 0.9m in 2012. Amid record-breaking transshipment volumes, DCT Gdansk has embarked on large-scale investments that will see its capacity nearly triple by 2016, responding to market demand for higher capacities and larger vessel sizes. Following utilization of addition storage area, DCT expanded its capacity by a half, to approx. 1.5m TEU in 2012 and 2013. Estimated at some EUR 250m, the planned phase two of DCT's construction, which is to begin this year and reach completion in 2016, will to boost the terminal's annual handling capacity up to 4m TEU. The facility will be able to receive the world's largest container vessels, including the kinds that are still on drawing boards. According to the plans, the draught of DCT 2 will be 16.5m, with a 600-m quay. The top service at the terminal will be provided by seven Super-Post-Panamax gantry cranes with overhang of 25 rows of containers. The target annual capacity of DCT 2 ter-

minal is esti-mated to be 2.5m TEU. This, together with the existing DCT terminal, will add up to an an-nual handling capacity of 4m TEU once the terminal is fully operational. According to estimates, in a couple of years Gdańsk will be able to handle a half of the vol-ume that currently gets transshipped in Hamburg.

Poland's key container terminals Handling capacity (million TEU)

0.00 0.25 0.50 0.75 1.00 1.25

GCT Gdańsk

DB Port Szczecin

GCT Gdynia

BCT Gdynia

DCT Gdańsk

Source: terminal operators

Unlike the existing DCT1 terminal, which is an artifi-cial box pier protruding into the sea, DCT2 will be po-sitioned along the waterfront, reducing costs and of-fering better access to larger ships. As far as additional infrastructure is concerned, Australian developer Goodman has recently completed phase one of its Pomeranian Logistics Center, a giant warehouse & dis-tribution project located at a 100ha site directly by the DCT. DCT Gdansk belongs to Global Infrastructure Fund II, managed by the Australia-based Macquarie Group. The construction of DCT1 began in 2005 and the ter-minal welcomed its first ship in June 2007. Total in-vestments to-date have come in excess of EUR 200m. The terminal offers year-round ice-free access with a 17.0m deep approach channel and up to 16.5m depth along the berth. The adjacent rail terminal, 4 x 1000m long is also operated by DCT Gdansk.

ENTERTAINMENT & LEISURE

Cinema City founders Cinema City founders Cinema City founders Cinema City founders announce phase one of announce phase one of announce phase one of announce phase one of Park of PolandPark of PolandPark of PolandPark of Poland The Warsaw-listed Global City Holdings (formerly known as Cinema City International) has officially an-nounced the start of phase one of their flagship amusement park project Park of Poland. The investor has entered a strategic partnership with Germany's WUND Industriebau GmbH under which they plan to develop a water park in the town of Mszczonów, some 40km south of Warsaw. The partners plan to start construction in February 2015 and the opening of the aquapark is scheduled for October 2016. Spread across some 20ha, the water park project will cost an estimated EUR 100m to build, and will be fi-nanced in 70-75% with loans, Peter Dudolenski execu-tive director of Global City Holdings told a news con-ference last week, adding that negotiations with banks are already under way and should be completed within 30-45 days. WUND Industriebau GmbH will manage the construction and development the Aqua Park us-ing its know-how from existing projects in Germany. Subsequently, WUND Industriebau GmbH will be re-sponsible for operating the facility. Led by German entrepreneur, Josef Wund, Unternehmensgruppe WUND operates four water parks in Germany, including the Therme Erding park near Munich, which will be a reference project for the new aquapark in Mszczonów, also in terms of its pro-jected impact on the regional economy. According to Global City Holdings, in Erding, following opening of Therme Erding total revenue of the city increased by nearly EUR 100m and the number of hotels and guest


houses increased from 7 to over 50. Therme Erding di-rectly create some 600 jobs with a further 1,000 posts being affiliated to the aqua park.

Global City Holdings has teamed up with the crea-

tors of Germany's Therme Erding to develop phase one of their new brainchild Park of Poland. Image: Therme Erding

Open year-round, the venue will be comprised of a large indoor pool facility with movable roof allowing guests to enjoy natural light and fresh air as well as a large spa/wellness zone and a Galaxy center with wa-ter slides for thrill-seekers. The aquapark will be the first phase of the Park of Po-land, located on a 250ha site in the village of Wręcza near Mszczonów, between the A2 highway and S8 ex-press road at a distance of 40 km from Warsaw and 70 km from Łódź. Designed by Forrec, a major player in the global theme park industry, besides the water park it will comprise also an amusement park, and roller coasters, as well as a range of additional attractions to eventually become the second biggest theme park in Europe after France's Disneyland, creating 3,000-3,500 jobs in total. The investor is counting on 4m visi-tors a year. The Greidinger family, who a few months ago decided to merge their Warsaw-listed movie theater chain

Cinema City International (CCI) with UK-based giant Cineworld (see BR+ No. 018 page 12) said they would invest the proceeds from the transaction in other pro-jects, most importantly Park of Poland. CCI sold its cinema business in Central Europe and Israel in a cash and equity deal valuing the enterprise at some GBP 503m. Global City Holdings is present through its subsidiar-ies in three comprehensive segments: cinemas, leisure and real estate. Following the sale of CCI, the compa-ny owns a 25.1% in the latter's new owner, the Lon-don-listed Cineworld which operates 102 cinemas and 1,852 screens across nine countries. It also controls a 39.8% stake in Ronson Europe, a Warsaw-listed property developer operating in the CEE and Israel. The Park of Poland project is the Greidingers' debut in the amusement park industry. The amusement park industry in Poland has seen a number of spectacular flops. Arguably the biggest one was Adventure Park Warsaw, the brainchild of a little known Dutch entrepreneur Peter Mulder, who sought to develop a 240-hectare theme park and resort with hotels, restaurants and 25 attractions as well as a whole range of accompanying renewable energy facili-ties, including a waste incinerator, water purification installations, biogas plant etc. Conceived as the first large-scale adventure park in Central Europe, the pro-ject were to emerge in the Warsaw satellite town of Grodzisk Mazowiecki and attract millions of visitors annually. Mulder's company Las Palm awarded contracts with a combined value of nearly EUR 760m to Dutch infra-structure giant Imtech. The latter announced in 2012 that the Polish deal was its largest order ever, only to realize a few months later that Adventure Park War-saw would never see the light of day due to lack of fi-nancing. The group of wealthy global investors, whose identity Mulder did not reveal and who were supposed

to back Adventure Park Warsaw, failed to materialize, causing Imtech to write down more than EUR 100m on the project. The company's shares fell as much as 50% when the news broke in February last year, the biggest intraday decline since at least October 1989, reducing Imtech's value to less than EUR 1bn.

RETAIL PROPERTIES

elbfonds Development elbfonds Development elbfonds Development elbfonds Development completes Kutno mallcompletes Kutno mallcompletes Kutno mallcompletes Kutno mall;;;; will open three more will open three more will open three more will open three more retail centers this year retail centers this year retail centers this year retail centers this year A new retail project marcredo Center will open for business in the central Polish town of Kutno on May 28, delivering 16,000 sq.m of leasable space across nearly 40 stores. Located one and a half kilometers from the town center, the marcredo Center Kutno de-velopment will be the first modern regional mall in the city. Major tenants at the investment will include H&M, Reserved, CCC, Rossmann, Jysk, Mediaexpert and MarcPol. The developer and investor of the marcredo Center Kutno project is the German real estate firm elbfonds Development which is focused on the shopping cen-tre and retail park markets in Poland. Since 2007, the entity has already delivered eight retail schemes in the country. On September 30 h, elbfonds Development will launch an investment in Piekary Śląskie with a GLA of 8,000 sq.m and 382 parking spaces. "It will be a retail park anchored by a Intermarche su-permarket and Bricomarche DIY store and currently we are in talks with other prospective tenants," Anna Spychalska-Grzeszek, Marketing Director at elbfonds


Development tells Poland Today. "We are about to break ground on further marcredo schemes in Kołobrzeg, Myslibórz, Głógów and Zawiercie, with Myślibórz and phase one of Kołobrzeg to open by the end of this year." According to its earlier announcements, elbfonds seeks to develop some 40 retail properties in Poland under the marcredo Center logo. They will be located in towns of more than 20,000 people and range from 2,000 to 30,000 sq.m in terms of GLA. The idea is sim-ple: good location, preferably in close proximity to town centre with easy pedestrian access and visibility, good tenant mix with supermarket, DIY, and electron-ics anchors, some fashion and local retailers, and am-ple supply of parking space. The goal is to make the centers an everyday shopping destination. This seg-ment of Poland's retail property market is the hottest at the moment, with many local and foreign investors pouring money into mini-malls and neighborhood shopping plazas.

marcredo Center Kutno opens on May 28. Image: elbfonds Development

In Piekary Śląskie near Katowice, the investor envis-ages a 9,000 sq.m property, whereas in the tiny town of Myślibórz (population: 12,000) a small 2,500 sq.m shopping center is to be developed. In Głogów, the marcredo mall will be located in the city centre, right by the city hall, and it will feature a two floors of shops

and a rooftop parking lot, with a GLA of some 23,000 sq.m. Last year elbfonds said it would spend up to EUR 600m over the coming years on development of its neighborhood shopping center concept marcredo Center in Poland. The company opened its first marcredo center in Ciechanow (80km north of War-saw) in November 2012, and a year later it completed a 10.200 sq.m marcredo Center Szczecin, a retail park. The company raises financing from private investors via its German property funds, while development of the Polish properties is being handled by a Warsaw-based unit Elbfonds Development. Elbfonds has been operating on the Polish market since 2006 and besides marcredo Ciechanów, its existing portfolio includes a handful of small properties housing super-markets. "We have been creating closed-ended property funds in Germany since 2006 and so far we have acquired 5,000 clients with an average contribution of approx-imately EUR 20,000 per person – some EUR 100m in total. Our investors in Germany put money in elbfonds property funds for four to six years, depending on a fund, and the projected return is 11%. Our funds are structured in a way that enables us to invest the capital twice – via an initial investment followed by reinvest-ment. This means that by keeping our own contribu-tion at 30%, we need to make investments to the tune of EUR 600m with our current capital. Since we are currently in the process of placing another two funds, and more will surely follow, the amount is bound to increase in the coming years. Although at the moment we are a short-term investor, since mid-2012 we have been contemplating creation of a long-term fund," elbfonds founder and managing director Stephan Groht told Poland Today's Lech Kaczanowski last year.

"elbfonds aims to continue expanding the marcredo brand dynamically on the Polish market and maintain it over long term and we are putting together a new fund dedicated to this," confirms Anna Spychalska-Grzeszek.

RETAIL PROPERTIES

Świnoujście to get its Świnoujście to get its Świnoujście to get its Świnoujście to get its first shopping centre first shopping centre first shopping centre first shopping centre next yearnext yearnext yearnext year The northwestern Polish seaside town of Świnoujście, on the border with Germany, will get a large new shopping center next year with the opening of Galeria Świnoujście. Located in the very center of the city, the project will include 45 retail outlets and a four-screen cinema, spread across a GLA of approximately 10,000 sq.m. The investor behind Galeria Świnoujście is Win-ston Sp. z o.o. – a 50/50 SPV created by a Szczecin-based entrepreneur Marcin Woźniak and construction company Przedsiębiorstwo Budowlane Calbud, which also happens to be the general contractor. "This is the first project of this kind in Świnoujście, an investment the local folk have been waiting for. Many investors had attempted to build something here be-fore us, but no-one succeeded. We are the first. More-over, a year prior to opening some 70% of the project has been pre-leased, and we hope to find tenants for the remaining space by the end of the year," Marcin Woźniak tells Poland Today. Confident about their project, Winston Sp. z o.o. is handling the leasing in-house. So far, the project has attracted a number of fashion tenants, including H&M, CCC, Deichmann, and the LPP group (with its Cropp, Mohito, Reserved, House


and Sinsay brands), as well as a drugstore (Hebe – op-erated by Jeronimo Martins, the Portuguese owners of Poland's top discount supermarket chain Biedronka) and electronics outlets (Neonet). The project is to open in Q2 2015 and besides retail space it will include a rooftop parking lot with 100 spaces.

The investors behind Galeria Świnoujście are target-ing both Polish and German shoppers. Image: Winston Sp. z o.o.

Świnoujście, a town of 70,000 inhabitants, is a popular seaside destination for Poles and Germans alike, re-ceiving 2.5m visitors ever year. The entire region, in-cluding a handful of towns across the border, whose residents often visit Poland for shopping and leisure, has a population of 126,700 people.

POLITICS & ECONOMY

PO and PiS each get 19 PO and PiS each get 19 PO and PiS each get 19 PO and PiS each get 19 seats iseats iseats iseats in EU parliamentn EU parliamentn EU parliamentn EU parliament As this issue of BR+ was going to the press the result of elections to the European Parliament in Poland looked like a tie between the ruling center-right party Civic Platform (PO) and its key rival, conservative Law &

Justice (PiS), with each party expected to get 19 seats out of the total of 51 Poland has in the European Un-ion's legislature. The voter turnout reached a mere 22.7%, according to initial estimates. According to exit polls, PO won 32.8% of the vote, with PiS getting 31.8%. However, preliminary results from 91% of polling stations, showed PiS receive 32.4% of the vote, just ahead of PO with 31.3%. Since the missing 9% of votes represent the largest cities, the balance may still tilt in PO's favor. The Democratic Left Alliance, the heir to Poland's communist party, won 9.6% of the vote (5 seats) and the junior coalition member, agrarian Polish People's Party (PSL) came in fourth with a 7.2% support and 4 seats. The biggest surprise is the emergence of the libertari-an Congress of the New Right, which almost matched PSL's result and also earned 4 seats in the European Parliament. The party's eccentric leader Janusz Korwin-Mikke, who unsuccessfully ran for Poland's president four times, calls the European Union a so-cialist experiment which he will try to destroy from within. He has also said women and other social groups shouldn't have the right to vote, and taxes should be minimal. His other ideas included turning Poland into an absolute monarchy. Mr. Korwin-Mikke served as a member of parliament in 1991-1993, but has since remained at the fringes of Polish politics.

POLITICS & ECONOMY

Ukraine crisis: Ukraine crisis: Ukraine crisis: Ukraine crisis: Poland is pPoland is pPoland is pPoland is preparing for reparing for reparing for reparing for the worstthe worstthe worstthe worst Violence in Ukraine reached a new apex in May. The beginning of the month saw forces controlled by the

country’s interim government on an offensive in sev-eral eastern cities. Clashes between pro-government and pro-separatist groups were becoming increasingly common and brutal. On May 2, fire in Odessa killed over 40 people, mostly Russia-aligned activists who had barricaded themselves inside a building after run-ins with pro-government groups. Poland looked on in dismay. “These dramatic events,” said Polish Prime Minister Donald Tusk, “show that we are, in fact, deal-ing with a war. It is perhaps somewhat of a different type of war; it is a war without a declaration, but in re-ality we are dealing with a de facto war.” Poland, along with the US and several other countries, believes Moscow has been working to destabilise the country to deprive the new, Western-leaning govern-ment, of legitimacy. After annexing Crimea in March, Russia has repeatedly threatened to take action in eastern Ukraine, holding military exercises just across the border. The West accuses Moscow of inciting – if not directly supporting – the separatist movements in Ukraine. For its part Russia says the ousting of former President Viktor Yanukovych in February and the in-stallation of the interim government, led by Prime Minister Arseniy Yatsenyuk, is a US-backed plot to bring NATO to its doorstep. Although in recent weeks Russia seemed to be sending signals it would not engage in military action, Moscow has repeatedly called on the Ukrainian government to halt its military operations in the east, saying they they put roundtable negotiations meant to de-escalate the crisis in jeopardy. For its part, the Yatsenyuk govern-ment faces calls at home to bring the country under control following last Sunday's presidential and mu-nicipal elections. With those elections under threat and a lack of agreement on how to resolve the crisis, instability looks set to reign right next door to Poland for the foreseeable future. Poland has therefore begun moving to do what it can to insulate itself if worse comes to worst.


NATO needed The first step was to request a beefed-up NATO con-tingent on Polish soil. The logic goes that greater numbers of NATO troops could potentially deter Rus-sia from entering Ukraine, but more importantly, would give Poland added security if Moscow felt it needed to consolidate any gains it makes in Ukraine by moving its military further west. Foreign Minister Radosław Sikorski called for 10,000 NATO troops to be deployed on Polish soil. Instead, he got a total of 600 NATO soldiers sent for training exercises in Po-land, Latvia, Lithuania and Estonia. The first of these arrived on April 23, when 150 paratroopers from the US’s 173 Airborne Brigade Combat Team landed in Po-land. Pentagon press secretary John Kirby said that the troops would rotate in and out of all four countries, and that the rotation could continue for the rest of this year. The exercises could expand to include more countries, he added. “If there’s a message to Moscow … it’s that we take our obligations” to defend NATO members “very, very seriously,” Kirby said. The deployment was necessary to send a message to Vladimir Putin that “NATO territory is sacrosanct,” Foreign Minister Sikorski said in an interview with Canada’s The Globe and Mail. He added that the mili-tary alliance needed to “get back to basics” in response to events in Ukraine which “have proved that whereas it’s still true that conflict inside the European Union is unthinkable, conflict outside the European Union is not only thinkable, but seems to be growing.” Fifty more Canadian troops were set to arrive in Po-land for the exercises in May, while NATO also ex-panded Baltic airspace patrols – increasing the num-ber of jets from the usual four to 16. EU = Energy Union However for Poland security doesn’t simply mean a more robust military presence. Energy security is even the more pressing need. Poland receives around 60%

of the 16bn cubic metres of gas it uses every year from Russia. Moscow has signalled its willingness to turn off the taps when it disagrees with the political deci-sions of its customers – particularly Ukraine – before. Now it appears ready to do so again. Since the new government in Kiev took power, Russian state-owned Gazprom has raised gas prices to Ukraine dramatically – by 80% – and claims that Kiev owes it $3.5 billion in unpaid bills. Gazprom now says that if advance pay-ment on the debt is not made by May 31, it will cut off gas supplies to Ukraine starting June 1. That could dis-rupt flow to several EU countries that get their gas from pipelines that go through Ukraine, including Bulgaria, the Czech Republic, Hungary, Romania and Slovakia. Poland has long been at the mercy of Russia’s whims when it comes to gas, and already pays some of the highest prices for Russian gas in Europe. But in recent years Poland has worked hard to diversify its sources. By next year, an LNG terminal in Świnoujście, in the country’s north-west, should be operational, allowing Poland to import gas from places like Qatar. It contin-ues to work on legislation that would make extraction of shale gas – of which it may have some of Europe’s largest reserves – easier. In April, Polish gas pipelines to Germany reversed their flow for the first time, al-lowing for Poland to receive gas from Germany (and possibly push it all the way to Ukraine), for the first time. But all of that together would still leave Poland relatively vulnerable to gas cut-offs and price hikes from Moscow. In April Prime Minister Tusk laid out a plan for what he calls a European Energy Union, which would es-sentially allow the European Union to negotiate gas prices collectively and would allow gas infrastructure projects to be financed by up to 75% from EU funds. Tusk visited the EU’s centres of power in late April, promoting the plan. He met with EU President Her-

man Van Rompuy in Brussels, French President François Hollande in Paris and German Chancellor Angela Merkel, urging them to get on board. The plan is contentious however: one of its six points calls for the “rehabilitation of coal as a source of energy”. Moreover, relationships with Russia throughout the bloc vary. Germany, for instance, doesn’t want to risk its firms’ significant investments in Russia by angering Moscow. But deeper integration of the bloc’s energy infrastructure is key to future energy security for Po-land. Where events turn next in Ukraine is anyone’s guess. Poland isn’t taking any chances. But the country’s se-curity depends on the cooperation of its allies and neighbours. The world will be hoping the increased security measures never have to be used.

by Andrew Kureth

IN BRIEF: Poland's last Communist leader General Wojciech

Jaruzelski died last week aged 90 after a long illness.

He led the country from 1981, when he declared martial

law and ordered the arrest of opposition activists, in-

cluding Solidarity leader Lech Wałęsa. Dozens of peo-

ple died in the military crackdown, which the general in-

sisted he ordered to avert invasion by Moscow. The

martial law was lifted in 1983 and six years later

Jaruzelski was forced to negotiate with the opposition,

which paved the way for economic and political re-

forms. General Jaruzelski resigned as president in 1990

and was succeeded by Lech Wałesa, who commented

on Jaruzelski's death that a "great man from a genera-

tion of betrayers has passed away." Although many

Poles consider Jaruzelski a traitor and a Russian stooge

but others give him the benefit of the doubt.

weekly newsletter # 036 / 26th May 2014 / page 14

KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Jan '14 Feb '14 Mar '14 Apr '14

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

Food & bev +1.8 +1.6 +1.6 -0.2 +1.2 -0.3 +0.3 -0.5

Alcohol, tobacco +3.4 +0.8 +2.2 +1.4 +3.7 +0.7 +3.9 +0.3

Clothing, shoes -5.0 -3.7 -4.7 -1.7 -4.3 +0.8 -4.4 +2.8

Housing +1.9 +0.2 +1.9 +0.1 +1.8 -0.1 +1.7 0.0

Transport -1.2 -1.5 -1.1 +0.4 -2.7 +0.1 -2.1 -0.1

Communications -7.8 -0.3 -3.2 +0.4 -0.3 +0.6 -1.7 -1.5

Gross CPI +0.5 +0.1 +0.7 +0.1 +0.7 +0.1 +0.3 0.0

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Apr 12

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

Oct 13

Dec 13

Feb 14

Apr 14

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Nov '13 Dec '13 Jan '14 Feb '14 Mar '14

m/m (%) -5.8 +17.3 -21.3 -0.6 +12.5

y/y (%) +3.8 +5.8 +4.8 +7.0 +3.1

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-Apr

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 48.8 +15.9

Commenced 142.9 158.1 162.2 141.8 127.4 45.1 +27.7

U. construction 670.3 692.7 723.0 713.1 694.0 691.3 -0.8

Completed 160.0 135.7 131.7 152.5 146.1 46.9 -1.8

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

Q1 2014 +3.3% n/a n/a

Q4 2013 +2.7% 442,167 -1.5%

Q3 2013 +1.9% 393,725 -1.9%

Q2 2013 +0.8% 389,244 -2.3%

2013 +1.6% 1,635,746 -1.5%

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% +1.0%

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% +5.2%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.3%

EUR/PLN 3.99 4.12 4.19 4.20 4.12

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

GroGroGroGross Wagesss Wagesss Wagesss Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q1 2013 Q2 2013 Q3 2013 Q4 2013

A B A B A B A B

Coal mining 6,060 138 6,290 143 6,061 138 8,615 196

Manufacturing 3,491 152 3,560 155 3,625 158 3,690 161

Energy 6,196 188 5,828 177 6,021 183 6,736 205

Construction 3,556 152 3,693 157 3,766 160 3,895 166

Retail & repairs 3,432 146 3,421 146 3,408 145 3,456 147

Transportation 3,439 122 3,547 125 3,589 127 3,913 138

IT, telecoms 6,685 174 6,707 174 6,654 173 6,695 174

Financial sector 6,356 143 6,702 151 6,109 137 6,602 148

National average 3,741 149 3,613 144 3,652 145 3,823 152

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14

m/m (%) +14.3 -2.9 +21.5 -64.0 +18.7 +24.2 +3.2

y/y (%) -3.2 -8.9 +5.8 -3.9 +14.4 +17.4 +12.2

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

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Jul 13

Oct 13

Jan 14

Apr 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 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14

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

y/y (%) -1.4 -1.5 -1.0 -1.0 -1.4 -1.3 -0.7

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 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14

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

y/y (%) -1.8 -1.7 -1.7 -1.7 -1.6 -1.5 -1.5

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 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14

m/m (%) +6.0 -6.2 -9.7 +2.9 -1.8 +9.4 -2.3

y/y (%) +4.4 +2.9 +6.6 +4.1 +5.3 +5.4 +5.4

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-Feb 2014

y/y (%)

share (%)

2013 share (%)

Jan-Feb 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 11,425 +7.0 10.6 69,304 10.9 7,921 +2.4 7.6 47,906 7.4

Beverages and tobacco 1,296 +22 1.3 8,624 1.4 564 -8.9 0.6 4,150 0.6

Crude materials except fuels 2,799 +0.9 2.8 15,744 2.5 3,551 -2.3 3.6 21,585 3.3

Fuels etc 5,001 -7.8 5.4 30,013 4.7 13,046 +7.5 11.9 75,539 11.7

Animal and vegetable oils 321 +49.7 0.2 1,864 0.2 397 -4.4 0.4 2,646 0.4

Chemical products 9,592 +4.1 9.2 59,103 9.3 15,616 +3.2 14.8 92,917 14.3

Manufactured goods by material 20,989 +0.7 20.7 129,915 20.3 18,664 +4.2 17.6 112,392 17.3

Machinery, transport equip. 40,068 +7.8 37.0 239,434 37.5 33,679 +4.5 31.6 216,608 33.4

Other manufactured articles 13,873 +8.8 12.7 82,816 13.0 9,508 +5.5 8.8 58,210 9.0

Not classified 163 n/a 0.1 1,782 0.2 2,455 n/a 3.1 16,242 2.6

TOTAL 105,527 +4.9 100 638,599 100 105,401 +3.3 100 648,195 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Mar 2014

share *2013 share No Country Jan-Mar 2014

share *2013 share

1 Germany 43,408 26.3% 159,622 25.0% 1 Germany 35,357 21.6% 139,334 21.5%

2 UK 10,511 6.4% 41,503 6.5% 2 Russia 19,708 12.0% 79,601 12.3%

3 Czech Rep. 10,119 6.1% 39,421 6.2% 3 China 16,346 10.0% 60,914 9.4%

4 France 9,958 6.0% 35,745 5.6% 4 Italy 8,339 5.1% 33,703 5.2%

5 Russia 7,200 4.4% 34,058 5.3% 5 Netherlands 5,973 3.6% 25,005 3.9%

6 Italy 7,409 4.5% 27,450 4.3% 6 France 6,523 4.0% 24,533 3.8%

7 Netherlands 6,715 4.1% 25,292 4.0% 7 Czech Rep. 5,709 3.5% 23,778 3.7%

8 Ukraine n/a n/a 18,037 2.8% 8 USA 3,647 2.2% 17,350 2.7%

9 Sweden 4,843 2.9% 17,498 2.7% 9 UK 4,496 2.7% 16,861 2.6%

10 Slovakia n/a n/a 16,795 2.6% 10 Belgium 4,060 2.5% 14,913 2.3%

Source: Central Statistical Office (GUS) *) preliminary estimates

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 23 May 2014

100 USD 304.90 ↓

100 EUR 415.24 ↓

100 GBP 513.69 ↓

100 CHF 340.03 ↓

100 DKK 55.63 ↓

100 SEK 45.96 ↓

100 NOK 51.10 ↓

10,000 JPY 299.53 ↓

100 CZK 15.14 ↓

10,000 HUF 137.01 ↓

100 USD/EUR against PLN

300

350

400

450

10 Jun 13

16 A

ug 13

23 O

ct 13

7 Jan 14

14 M

ar 14

23 M

ay 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Jan '14 Feb '14 Mar '14 Apr '14

Monetary base 161,544 158,330 173,213 168,511

M1 546,487 548,033 558,954 548,394

- Currency outside banks 113,455 114,680 116,657 119,261

M2 947,443 954,284 964,624 969,754

- Time deposits 418,259 423,296 422,990 439,137

M3 962,416 968,442 980,377 986,142

- Net foreign assets 140,617 135,759 132,849 126,943 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 Jan '14 Feb '14 Mar' 14 Apr' 14

Loans to customers 914,189 914,068 923,709 928,450

- to private companies 263,063 263,941 267,553 270,886

- to households 567,984 567,257 569,334 573,332

Total assets of banks 1,628,197 1,616,891 1,628,519 1,639,359

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14

PLN (up to 1 year) 4.5% 4.5% 4.3% 4.2% 4.5% 4.5%

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

PLN (over 5 y) 4.8% 4.8% 4.7% 4.8% 4.7% 4.7%

PLN (total) 4.8% 4.8% 4.7% 4.8% 4.7% 4.7%

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

EUR (over 1m EUR) 2.5% 3.0% 2.9% 3.6% 3.4% 3.3%

Warsaw Inter Bank Offered Rate (WIBOR) as of 23May 2014

Overnight 1 week 1 month 3 months 6 months

2.60%% 2.60% 2.62% 2.72% 2.74%

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 23 May '14

Change 16 May

'14

Change end of '13

↑ Alior Bank 81.9 +6 +1

↓ Asseco Pol. 41.1 -7 -11

↑ Bogdanka 117 +1 -7

↑ BZ WBK 382.95 +9 -1

↑ Eurocash 42.91 +8 -10

↑ Grupa Lotos 38.69 +2 +9

↑ JSW 46.75 +1 -12

↑ Kernel 26.85 +1 -29

↑ KGHM 116.8 +3 -1

↑ LPP 8360.1 +7 -7

↑ mBank 514.9 +3 +3

→ Orange Pol. 10.4 0 +6

↑ Pekao 185.3 +3 +3

↑ PGE 21.5 +2 +32

↓ PGNiG 4.82 -1 -6

↑ PKN Orlen 44.63 +1 +9

↑ PKO BP 41.05 +6 +4

↑ PZU 445.9 +2 -1

↑ Synthos 4.7 +1 -14

↑ Tauron 5.47 +4 +25

Source: Warsaw Stock Exchange

Key indices

as of 23 May 2014

WIG Total index

55552222,,,,413413413413....33338888 Change 1 week +3% ↑

Change end of '13 +2% ↑

WIG-20 blue chip index

2,2,2,2,465465465465....52525252 Change 1 week +3% ↑

Change end of '13 +3% ↑

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

6 Feb 14

28 Feb 14

24 M

ar 14

15 A

pr 14

23 M

ay 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-Mar 2014 *

Monthly wages (PLN)

Jan-Mar 2014**

Unemploy-ment

Mar 2014

New dwellings Jan-Mar 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 101.4 108.3 4,130 3,970 155.3 13.3 3,940 103.4

Kujawsko-Pomorskie (Bydgoszcz) 109.4 123.4 3,392 3,170 151.7 18.2 1,725 87.8

Lubelskie (Lublin) 106.0 77.5 3,778 3,018 136.4 14.6 1,135 84.0

Lubuskie (Zielona Góra) 116.8 115.2 3,425 3,005 59.7 15.6 965 105.6

Łódzkie (Łódź) 102.0 110.8 3,732 3,151 153.9 14.2 1,860 127.9

Małopolskie (Kraków) 96.6 105.9 3,841 3,293 167.1 11.7 4,506 99.2

Mazowieckie (Warszawa) 106.9 104.7 4,562 4,903 287.4 11.1 6,906 86.9

Opolskie (Opole) 108.3 144.1 3,573 3,461 52.2 14.3 522 116.8

Podkarpackie (Rzeszów) 106.6 112.0 3,367 3,024 155.3 16.4 1,625 103.4

Podlaskie (Białystok) 104.6 114.0 3,280 3,672 71.0 15.1 868 126.0

Pomorskie (Gdańsk-Gdynia) 105.0 108.8 4,052 3,428 116.2 13.4 2,043 69.3

Śląskie (Katowice) 100.2 112.3 4,647 3,495 212.7 11.4 2,628 94.4

Świętokrzyskie (Kielce) 116.9 75.2 3,395 3,151 90.6 16.5 803 134.1

Warmińsko-Mazurskie (Olsztyn) 106.1 115.1 3,294 3,063 115.7 21.5 1,342 104.4

Wielkopolskie (Poznań) 109.4 106.8 3,729 3,590 145.9 9.6 3,453 106.0

Zachodniopomorskie (Szczecin) 112.6 90.2 3,525 3,363 111.0 17.9 1,348 86.7

National average 104.8 106.3 3,983 3,705 2,182.2 13.5 35,669 96.1

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

in Poland 1,381 2,886 175 -3,020 1,885 -3,614

Polish DI -550 -1,203 957 2,588 -1,449 1,588

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 Q2 '13 Q3 '13 Q4 '13

Trade balance -10,059 -5,175 2,309 1,203 1,094 151

Services, net 4,048 4,642 5,249 1,686 1,032 1,257

CA balance -18,519 -14,191 -4,984 486 -2,086 -1,071

CA balance vs GDP -5.0% -3.7% -1.5% -2.3% -1.9% -1.5%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

Q3 13

Q1 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

Apr10

Dec10

Aug11

Apr12

Dec12

Aug13

Apr14

Wage CPI

Index 100 = Jan 2005. Source: GUS

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