Poland Today Business Review+ No. 021

No. 021 / 3rd February 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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HEALTHCARE British firm McKinlay Development open their first Polish retail park page 11

MANUFACTURING & PROCESSING

Japan's Rohto acquires Polish Dax Cosmetics to establish foothold in Europe page 2 Sweden's Rosti to create 100 jobs at new factory in Białystok page 2

BANKING & FINACE

Standard & Poor's ratings agency opens Warsaw office page 3

Government imposes new investment limits on OFE pension funds page 4

ENERGY & RESOURCES

Slovakia's GGE hoping to raise EUR 40m from Warsaw listing page 6

PROPERTY & CONSTRUCTION PHN is luring investors with its PLN 2.2bn real estate portfolio page 6 Jones Lang LaSalle confirms revival on residential land market page 7

SERVICES & BPO

PwC to move Katowice service delivery centre to Silesia Business Park page 8

TRANSPORT & LOGISTICS

Panattoni unveils details of its historic EUR 160m built-to-suit contract with Amazon page 9 Shipping firm OT Logistics completes strategic takeover page 10

IT & TELECOM

Wind Mobile expands global footprint with strategic acquisitions page 10

POLITICS & ECONOMY

Złoty takes a beating on emerging market worries, but analysts emphasize strong fundamentals page 13

KEY FIGURES

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

Poland seeks to replace its coal-fired stations with nuclear power plants. Photo: PGE

Green light for nuclear Green light for nuclear Green light for nuclear Green light for nuclear energyenergyenergyenergy The government has adopted the Polish nuclear power program, giving its blessing to construction of the country's first nuclear-power plant. The project, estimated at PLN 40-60bn, will be managed by the energy giant PGE. page 4

GDP growth tops 1.6% in 2013GDP growth tops 1.6% in 2013GDP growth tops 1.6% in 2013GDP growth tops 1.6% in 2013 Poland's economy has beaten average expectations by having grown 1.6% in 2013. According to economists, growth picked up significantly in the final months of last year. page 12

weekly newsletter # 021 / 3rd February 2014 / page 2


Japanese giant Rohto Japanese giant Rohto Japanese giant Rohto Japanese giant Rohto acquires Polish Dax acquires Polish Dax acquires Polish Dax acquires Polish Dax Cosmetics to establish Cosmetics to establish Cosmetics to establish Cosmetics to establish foothold in Europefoothold in Europefoothold in Europefoothold in Europe

US producer of non-prescription health care products, The Mentholatum Company, has asked the Polish competition watchdog UOKiK for permission to ac-quire Dax Cosmetics, a Polish manufacturer of skin care products. Since the buyer has no business in Po-land at the moment, the procedure should be a mere formality and the transaction is likely to be sealed in the coming months. "In January the two parties signed a preliminary agreement according to which Metholatum is to take over a majority stake in Dax Cosmetics," Poland Today learnt from Jagna Dyżakowska, PR Manager at Dax Cosmetics. Mentholatum was founded in 1889 in Wichita, Kansas. Starting out as small purveyor of soaps and toiletries, Mentholatum grew into a global maker of non-prescription health care products. The Mentholatum Company is widely associated with its top three prod-ucts, the Mentholatum Ointment, Mentholatum Deep Heating Rub, and Mentholatum Lip Care. The company was bought out by Japan's Rohto Pharmaceutical Co. in 1988. The Osaka-based firm is the 2nd largest consumer health company in Japan, with a strong position in OTC health care products, skin care, lip balms, and dietary supplements. Rohto is the world's number one maker of eye drops and its best-known skin care brand in Asia is Hada Labo.

With more than 5,500 employees globally, Rohto has annual sales of close to JPY 130bn (EUR 925m). Rohto has operations in 12 major markets, with marketing and distribution agreements in more than 130 coun-tries globally.

Dax Cosmetics, introduced its products to US cus-tomers via the TJ Maxx and Ross chains. Source: Dax Cosmetics

Established three decades ago by Polish entrepre-neurs, Dax Cosmetics specializes in face, skin, and sun care cosmetics as well as make up products. Their key brands include: Perfecta, Yoskine, Dax Sun, Cashmere, and Celia. Following a period of rapid expansion in the middle of the last decade, its growth stalled a couple of years ago, although the company has remained profit-able. Most recently, Dax Cosmetics saw its net earnings reach PLN 4.2m on PLN 41m turnover in the first half of 2013. The respective full-year figures had come to at PLN 6.7m (down 23% y/y) and PLN 84.8m (down 4% y/y) in 2011, the latest data we were able to access.

Faced with declining sales in Poland, Dax Cosmetics sought to boost exports, but despite some success in the US, Turkey and Jordan, overseas sales still repre-sent less than a tenth of its revenues. Located in Duchnów, just east of Warsaw, Dax Cosmetics em-ploys more than 200 staff. "The alliance with Dax Cosmetics will give Rohto Pharmaceutical access to our modern laboratories and production capacities, as well as the Polish market, where our brands are widely available. Poland will serve as the base for Rohto's expansion in Europe. As for Dax Cosmetics, thanks to Rohto we will gain access to foreign markets and advanced Japanese technolo-gy," says Jagna Dyżakowska.


Sweden's Rosti to Sweden's Rosti to Sweden's Rosti to Sweden's Rosti to create 100 jobs at new create 100 jobs at new create 100 jobs at new create 100 jobs at new factory in Białystokfactory in Białystokfactory in Białystokfactory in Białystok

Swedish injection moulding specialists Rosti Group are gearing up for a major expansion of their manufac-turing capabilities in Poland. The company has recent-ly acquired a 3.5ha site in the Białystok section of the Suwałki special economic zone, where it will build a new production unit at the cost of some PLN 46-69m, creating approximately 100 new jobs. With a combined turnover of approximately EUR 350m, Rosti is a global plastics injection moulding company offering contract manufacturing services to the automotive, packaging, domestic appliances, busi-ness machine, and medical/life sciences markets. Rosti has 11 facilities in eight countries (the UK, Poland, Sweden, Germany, China, India, Turkey, and Malay-sia) that employ approximately 2,600 staff and operate


550 moulding machines. The company, which seeks to boost its turnover in excess of EUR 600m by 2016, belongs to the Swedish investment group Nordstjernan. Poland Today has repeatedly approached Rosti execu-tives in Sweden and Poland, seeking additional infor-mation about the Polish project, however, to no avail. Rosti has been operating in Białystok since 1999, pro-ducing plastic parts and components of home appli-ance and electronic products. The existing factory has approximately 700 employees. The planned new unit, which is to reach completion by the end of 2017, will include highly automated production and assembly lines as well as a high-bay storage facility. One of Rosti's key clients is the Dutch appliance maker Phillips, for whom the Białystok plant makes kettles and coffee maker assemblies. Last year, Rosti's Białystok plant launched production of a new house-hold product on behalf of one of its customers, a global name in the paper towel & soap dispenser market, who already sources soap pumps & dispensers from Rosti's other facilities in Sweden and China. The Suwałki special economic zones offers investment incentives to companies setting up business in the Suwałki, Grajewo, Białystok, Ełk, Gołdap and Małkinia Górna regions of northeastern Poland. So far seven companies have obtained permits to operate in the Białystok subzone where only one 3.3ha site is still available for development.

BANKING & FINANCE

Standard & Poor's Standard & Poor's Standard & Poor's Standard & Poor's ratings agency ratings agency ratings agency ratings agency opens opens opens opens Warsaw officeWarsaw officeWarsaw officeWarsaw office

US ratings agency Standard & Poor's Ratings Ser-vices (S&P) last week expanded its European network with the opening of a new office in Warsaw and the appointment of Marcin Petrykowski, a former J.P. Morgan and Citi executive, as Regional Head for Cen-tral and Eastern Europe and Managing Director of the Poland office. The Warsaw unit will serve as a hub for S&P's operations, serving financial markets across Central and Eastern Europe, the company said. "We had indirect presence in the CEE region, where already many entities are S&P rated, particularly in Poland, both among financial institutions and corpora-tions. We've concluded it was the right time to become an active local player with direct market presence," Mr. Petrykowski tells Poland Today. S&P's decision follows a similar move by another top ratings agency, Moody's, which set up a Warsaw of-fice in July last year. Although each agency has only a single permanent staff member in Warsaw (in S&P's case - Mr. Petrykowski), their presence is a major boost to the city's ambition of becoming Central Eu-rope's key financial hub. The EMEA network of Standard & Poor's offices now comprises 12 locations including London, Paris, Frankfurt, Moscow, Stock-holm, Milan, Madrid, Warsaw, Istanbul, Tel Aviv, Jo-hannesburg, and Dubai. Approximately 450 analysts are based in the region, covering about 2,500 issuers. "Global financial markets and investors already per-ceive Poland and Warsaw as the region's leading and

most important capital market. This is not only due to macroeconomic data, which alone would suffice to give Warsaw that position, but also the business di-mension, with growing internationalization of Polish companies, diversification of their export markets and financing models. Consequently, we have witnessed a dynamic and lasting expansion of the Polish capital market and the Warsaw stock exchange as well as growing interest in bond issues - in Poland, Europe, and America - among Polish companies. We expect economic growth to accelerate to between 2.5% and 3% over the next four years and we believe that Poland will continue to attract foreign investors over the long term, particularly considering that its growing domes-tic and foreign debt markets are the most developed in the CEE region," says Marcin Petrykowski.

Marcin Petrykowski joins S&P from J.P. Morgan Corporate and Investment Bank, where he was Executive Director, Head of Coverage for Central and East-ern Europe, Russia, CIS, and Israel for the Investor Services di-vision. In this role, Mr. Petrykowski also served as the Deputy General Manager for the J.P. Morgan branch office in Po-land. Source: S&P

S&P first upgraded Poland to investment grade in April 1996, and currently the country has a long-term foreign currency rating of 'A-'. Standard & Poor's Rat-ings Services is part of McGraw Hill Financial, a NYSE-listed provider of independent credit risk re-


search and benchmarks. With over 1,400 credit ana-lysts in 23 countries, S&P publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. S&P already holds a strong position in the CEE region, with over 70 entities rated. "Although building a local team is our long-term goal, we want the Warsaw office to be a place where S&P analysts from Poland and the region can work and en-gage in direct dialogue with our clients and market participants, building S&P's image as CEE's best rat-ings agency. We are committed to fostering the devel-opment of deep and efficient capital markets across the region, linking local market participants with the global economy, and enhancing transparency for in-vestors," says Mr. Petrykowski.

BANKING & FINANCE

Government imposes Government imposes Government imposes Government imposes new investment limits new investment limits new investment limits new investment limits on OFE pension fundson OFE pension fundson OFE pension fundson OFE pension funds

In a move to mitigate the impact of the recent pension system overhaul on the country's financial markets, the government is introducing additional brakes on private pension funds (OFE) and their investment ac-tivity from 1st February. The OFE pension funds, to which Polish workers have been sending a portion of their social security premi-ums since a 1999 reform, are to transfer all treasury bonds in their portfolios (51.5% of their total assets) to the state pension vehicle ZUS on 3rd February this year, after which they will be banned from investing in treasury debt and state-guaranteed bonds starting 2016. Initial plans to set a lasting 75% equity allocation

floor were dropped by the government, and under the resolution passed last week an equity allocation floor will be phased out to 2018. According to the resolution, OFEs will have to invest at least 75% of all their assets in the stock market until the end of 2014, 55% throughout 2015, 35% until the end of 2016, and 15% until the end of 2017. "The purpose of the limits for private pension funds is to ensure the reform causes as little turbulence on the stock exchange market as possible,” commented Fi-nance Minister Mateusz Szczurek, adding that "the government does not want to see a mass sell-off of shares." The government has also ordered the creation of a guarantee fund for protection of OFE savers, to which OFE will contribute 0.3% of net assets, the govern-ment's press office wrote in a statement following the cabinet sitting. The ministers have also set a number of additional limits aimed at ensuring the safety of OFEs’ investments. No pension fund will be able to buy more than 20% of a single share issue and if the fund is al-ready a major investor in the issuing company (i.e. the latter shares constitute more than 2% of the fund’s as-sets) the ceiling has been set at 10%. According to government estimates, the pension re-form will lower Poland's public debt by 9.2 percentage points from its current level of 55% of GDP and re-duce annual borrowing needs by PLN 20-25bn in the years 2014-2017. Polish president signed the reform bill on 27th December but decided to send it to the Constitutional Tribunal for review (see PT Business Review+ No. 017 page 13). Pension funds in the mandatory system held PLN 303.4bn of assets, including PLN 131.1bn of stocks and PLN 125.8bn of bonds as of 31st October, data from Po-land's financial markets regulator show. The owners of

companies running the funds include Dutch Aegon and ING, German Allianz, US MetLife, British Aviva, French AXA, Italian Assicurazioni Generali, and Swedish Nordea.

ENERGY & RESOURCES

Government gives goGovernment gives goGovernment gives goGovernment gives go----ahead for ahead for ahead for ahead for first first first first Polish Polish Polish Polish nuclear energy projectnuclear energy projectnuclear energy projectnuclear energy project

Poland's first nuclear power unit is to go online by 2025, according to the national nuclear power pro-gram the Polish government adopted last week. The officials are hoping to begin assessment of the poten-tial sites and technology by the end of this year, but market insiders believe no crucial decisions will be made before the 2015 general election. "The Program sets forth, among others, the schedule of building two nuclear power plants and preparing regulatory and organization framework for those in-vestments," reads a statement issued by the economy ministry following last week's cabinet sitting. "The document also determines the roles and scope of lia-bility of institutions responsible for the implementa-tion of the program as well as matters of nuclear secu-rity and radiological protection." Other key issues ad-dressed in the document pertain to the economic ra-tionale behind the project, financing options, and ways of handling nuclear waste. The government had entrusted the country's top pow-er utility PGE with the task of developing two nuclear power units ( 3,000 MW each) over the coming dec-ade. The company has set up a separate business unit PGE EJ1 to handle the project, which according to various estimates may cost between PLN 40bn and


PLN 60bn to complete. The construction of the first power plant is expected to be completed in 2019 and go online in 2024. The second power plant is planned for 2035. Following the adoption of a national nuclear energy strategy by the government, PGE EJ1, led by former Treasury Minister Aleksander Grad, will begin the search for strategic partners, hoping to be able to name them, together with the plant's location, by the end of 2016. A contract engineer for the plant is to be selected by 17th February 2014. Last year, PGE awarded a PLN 252m contract for assistance in the delivery of Po-land's first nuclear power plant to WorleyParsons, a major Australian provider of professional services to the energy, re-source, and complex process industries.

Energy generation in Poland in 2012 By source, actual data

Other

2%

Gas

4%

Coal

84%

RES*

11%

Source: Economy Ministry *) renewable sources

"We are now focusing on finding a partner to provide the technology and a partner to participate financial-ly," PGE's Marek Woszczyk told a press conference last week, adding that Poland may follow the British model when it comes to technology. PGE wants to keep a 70% stake in its nuclear power unit PGE EJ 1 until it decides about the final shape of financing for

the project and will later look for both sector and fi-nancial partners, Woszczyk also said. Poland, which currently relies on its vast coal reserves to produce about 90% of its electricity, is scrambling to find alternative energy sources - including nuclear and shale gas - to meet European Union greenhouse gas emission limits by 2020. Faced with growing pres-sure from the EU, which expects Poland to gradually do away with its coal-fired power stations, the gov-ernment has been keen to find a viable long-term al-ternative, albeit one that would not increase the coun-try's dependence on Russian gas. According to plans, by 3035 nuclear power plants are to generate 36% of the country's electricity. At the same time, the highly polluting lignite-fired stations are to see their share drop from 66% as of end of 2010 down to 34% (see pie charts).

Energy generation in Poland in 2035 By source, government plans

Gas

11%

RES*

14%

Nuclear

36%

Coal

39%

Source: PGE *) renewable sources

Poland's nuclear project has had a series of setbacks in the wake of the global financial crisis and the Fuku-shima disaster in Japan. However, besides protests from local residents at the proposed sites of the planned stations (see map), Poland's nuclear ambitions are facing another, perhaps even larger, challenge – fi-

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

PGE listed Żarnowiec, Choczewo and Gąski on the Polish Baltic coast as the most likely locations of the country's first nuclear plant, with Żarnowiec being the most likely candidate. Source: PGE Unsurprisingly, Poland's plans have attracted the at-tention of global energy giants. Japan's Prime Minister Shinzo Abe made nuclear energy one of the key topics of his recent visit to Poland, as Hitachi and Toshiba are both hoping to take part in the Polish investment. France's Areva and EDF have held a series of "suppli-er days" in Poland, as part of their lobbying efforts. Even Russia's Rosatom signalled its interest in the project, but one can hardly imagine any Polish politi-cian taking the responsibility for Russia's participation in a power project of such strategic importance. Ac-cording to recent surveys, 50% of Poles support the development of nuclear energy in the country and 42% oppose it.


ENERGY & RESOURCES

Slovakia's GGE hopSlovakia's GGE hopSlovakia's GGE hopSlovakia's GGE hopinginginging to raise EUR 40m from to raise EUR 40m from to raise EUR 40m from to raise EUR 40m from Warsaw listingWarsaw listingWarsaw listingWarsaw listing

Slovak energy company GGE is gearing up for an IPO on the Warsaw Stock Exchange, with book building set to launch on 7 February, the company announced. GGE plans to spend the expected PLN 190m (EUR 40m) worth of proceeds from the IPO on an invest-ment program that is aimed at doubling its EBIDTA in two to three years. "Over the past seven years we have achieved a strong position on the power, heat and gas markets of Slo-vakia, Serbia, and the Czech Republic. In order to keep up that momentum we need to keep on investing not only in these three countries but also in Poland, Ukraine and Hungary," says CEO Roland Toth. "In total we are analyzing about 14 potential projects at the moment. The IPO proceeds would enable us to execute about 1/3 of them. The most advanced ones, which we believe, we will be able to acquire over next 1-2 years are not located in Poland. As we are in the IPO process we prefer not to go into details of the pro-jects we are looking at," Mr Toth tells Poland Today. "We are analyzing opportunities mainly in the cogen-eration (CHP) segment, as we have the know-how on investing in this type of projects with the aim of in-creasing their efficiency. Of course we plan to build our new local alternative energy trader – Elgas Po-land. As to the capex of targeted projects, it's too early to comment on that," Although production of power and heat from gas and renewable sources is GGE's core business, its other ar-

eas of operation include also marketing and delivery of electricity and gas, supply of heat to households and businesses, construction and operation of energy dis-tribution systems, and other energy-related services. The company was founded in 2007 and is based in Bratislava, Slovakia. GGE owns several heat & power plants in Slovakia. Its subsidiary Elgas is the number two gas supplier in Serbia and number three in Slo-vakia. In 2012 GGE turned over EUR 109.3m, with an EBIDTA of EUR 16.4m and net earnings of EUR 5.4m. The respective Q1-Q3 2013 figures stood at EUR 117.8m, EUR 15.3m, and EUR 5.9m. "What makes our business predictable are fixed, long-term tariffs on electricity and regulated prices of heat. Since the effects of every efficiency improvement and investment can be easily translated into additional revenues and profits, we can finance up to 75% of capex with debt, leading to a much higher return on equity, which in the case of GGE tops 22-24%. This, in turn, enables us to pay out a generous dividend," says Mr. Toth. "The pace of growth of GGE, and opportuni-ties in the project pipeline, require also financing from other sources besides bank credits. All proceeds from the IPO will be invested into new projects." According to GGE's management, some 60-70% of the group's net profit over the coming half a decade should be earmarked for dividend. GGE operates as a subsidiary of Grafobal Group, which is to see its stake in the business drop from the current 80% down to 53.7% as a result of the IPO. The company will offer up to 5m new shares with a maxi-mum price set at PLN 38. Following the end of sub-scriptions on 14th February, the allocation of shares has been scheduled for 10th March, with the listing set to take place by 21st March at the latest. "Grafobal Group is a strategic, long-term investor in GGE. It is a large company with a combined turnover

of more than EUR 800m, active in the printing and distribution sector, to name just a few. All current shareholders have agreed on a one year IPO lock-up period," GGE's CEO says.

PROPERTY & CONSTRUCTION

PHN is luring investors PHN is luring investors PHN is luring investors PHN is luring investors wwwwith ith ith ith its its its its PLN 2.2bn PLN 2.2bn PLN 2.2bn PLN 2.2bn real real real real estate portfoliestate portfoliestate portfoliestate portfolioooo

The property portfolio of the Warsaw-listed, state-controlled real estate group Polski Holding Nieruchomości S.A. (PHN), was worth PLN 2.2bn as of end of 2013, according to a valuation published last week by CBRE. The valuation covered 171 proper-ties, including 123 built-up areas with office, retail, residential, hotel and industrial buildings and 48 in-vestment lands, located across Poland. The govern-ment will seek to sell its remaining 73% stake in PHN by mid-2014, deputy treasury minister Paweł Tamborski said in December last year. Last week PHN launched a Virtual Data Room con-taining information about the company and current asset valuation, which is supposed to encourage inves-tors to participate in the second stage of privatization, the Treasury Ministry announced. The virtual data room will be accessible until the end of March 2014 af-ter which the ministry will most likely call on inves-tors to bid on its shares in PHN. "We are happy to see interest from potential inves-tors," deputy Treasury Minister Pawel Tamborski said as cited in the press statement. "We hope that the cur-rent interest will translate into a concrete bid and a tender offer."


PHN was created in 2011 when the Polish government pooled together some 180 different real estate and land holdings, to raise funds to help it reduce borrowing. In October last year PHN sealed a joint venture agree-ment with Germany's Hochtief Group for its flag-ship development, the office tower on 36 Świętokrzyska St., vis-à-vis Warsaw's most prestigious office project Rondo 1. The two partners are to create a 50/50 SPV, with PHN contributing one of Warsaw's most attractive sites, and Hochtief Development Po-land taking on responsibility for the overall implemen-tation of the project. According to PHN's preliminary plans, the building were to reach some 150m in height and 45,000 sq.m in GLA, but all final details, both fi-nancial as well as architectural, are yet to be ham-mered out together by the two companies. A project of similar size that is currently being developed by Echo Investment just a stone's throw from PHN's Świętokrzyska site, is set to cost some PLN 500m to build.

The image shows PHN's vision of Dalmor Port Rybacki, a waterfront project the company seeks to develop with a partner in Gdynia. Image: PHN Besides 36 Świętokrzyska St., the group's main assets include a commercial and services centre at 26 Bartycka St. (a popular spot close to the city centre where some 350 retailers sell home improvement goods and services), high rise Intraco, office building Kaskada and waterfront project Dalmor Port Rybacki in Gdynia. Moreover, PHN group is currently develop-ing an office building at Foksal 10A in Warsaw, and in

Wrocław – SEGRO Industrial Park Wrocław, devel-oped in a joint venture with the British developer SEGRO. The company is also in charge of some 60 mansions and 41 blocks of flats with 800 apartments, which it took over with Dipservice, a state-owned firm providing housing services to diplomats. Overall, PHN's portfolio comprises some 150 real properties and over 1,100 ha of land throughout the country. The company has been listed on the Warsaw Stock Ex-change since 13 February 2013. Its net earnings came to PLN 96.6m in Q1-Q3 2013.

PROPERTY & CONSTRUCTION

Jones Lang LaSalle Jones Lang LaSalle Jones Lang LaSalle Jones Lang LaSalle confirms revival on confirms revival on confirms revival on confirms revival on residential land marketresidential land marketresidential land marketresidential land market

Poland's investment land market rebounded last year and the positive trend is likely to continue in 2014, says property consultancy Jones Lang LaSalle in a recent report. "In comparison to the years 2009-2012, 2013 saw a significant revival in the investment land market in Poland, combined with an increase in developer activi-ty, who moved from the negotiations phase to the ac-tual execution of sales and acquisition transactions. This trend is going to continue into 2014 and market growth will be driven mostly by the residential land market sector, supported by numerous transactions in the office land segment. We estimate that, in the next 12-18 months, investors could spend approximately PLN 1.5bn on office, retail and residential land," com-mented Daniel Puchalski, Head of Land Advisory Ser-vices at Jones Lang LaSalle.

The upturn on the residential land market was partic-ularly pronounced in Q3, when developers started to run out of apartments for sale. The robust demand for new apartments last year was driven in part by record-low interest rates, which encouraged some to take out home loans, and other to put their savings into real es-tate, as well as certain new regulatory restrictions (the so-called SIII Recommendation) that prompted buy-ers to seal deals when the rules had been more re-laxed. With a new government subsidy program "Mieszkanie dla Młodych" in place for the 2014-18 pe-riod, developers began seeking sites for lower and me-dium-standard residential schemes, contributing to the increased demand.

Average prices of land in Poland in 2013 In PLN per sq.m of usable area of the planned project

Project type/

Location Warsaw CBD

Warsaw

outside CBD

Other key

cities**

Office 2,000 – 4,000 600 – 2,000 400 – 1,100

Retail 2,000 – 2,500 1,500 – 2,000 600 – 1,700

Residential 1,500 – 4,000 400 – 2,500 400– ,300

*) Central Business District **) of more than 0.4m inhabitants

Source: Jones Lang LaSalle

Jones Lang LaSalle notes that in recent months many land deals have been concluded in a matter of weeks and covered also properties with unclear legal status – something that used to be rare even prior to the finan-cial crisis, when negotiations typically lasted 6-12 months and their success often depended on availabil-ity of building permits and in-depth legal audits. "The exceptionally short process of finalizing a sales deal, as well as a more flexible approach to properties of unclear legal status, are the most distinctive features of the transactions concluded in Poland's residential land market at the end of 2013. This was because the record sales of apartments in the primary market meant that developers and investors were encouraged


to conclude new land purchase transactions and se-cure conveniently located investment properties for future residential projects regardless of the legal status of the properties”, Daniel Puchalski explained. With residential and office sites at the centre of atten-tion, Warsaw remained the number one destination for investors, with Wrocław, Kraków and Poznań be-ing the remaining top locations, Jones Lang LaSalle said. According to the consultancy, there are three main types of investors seeking opportunities to start residential projects in Warsaw. The first type includes companies interested in development of projects com-prising 30 to 100 apartments in prime locations (City Center, Mokotów, Powiśle, Szczęśliwice). The second type are investors focused on single phase projects comprising 100 to 300 apartments in all residential ar-eas of the city and preferably in proximity to the se-cond underground line. The third type of investors are companies interested in the development of large in-vestment schemes (30,000 sq.m of residential usable space or more). The office sector is searching for plots that would ac-commodate schemes of 5,000 – 15,000 sq.m of office GLA in one phase, although investors willing to build 60,000-100,000 sq.m of offices in a single project are not uncommon. The most popular area remains the Central Business District, close to Wola and Powiśle districts. Jones Lang LaSalle is reporting renewed in-terest in land, both for residential and office invest-ments, in Wrocław and Kraków, as well as Łódź, Ka-towice and the Tri-City. Warsaw is also the main mag-net for retail investments, despite a number of large shopping centers already in the pipeline. Outside of the capital, the most attractive locations are those with relatively low retail space density, those where out-dated projects can be replaced with new ones or where new projects can be added to the existing ob-jects. In addition, there is a sustained interest in land designated for large format retail facilities.

Jones Lang LaSalle expects the demand for office and retail investment land to remain stable in 2014 with in-terest in residential land, including less attractive sites designated for lower class residential buildings, set to increase. In the next 12 months, land prices will re-main stable in both the office and retail sectors. In the residential sector, there is a clear upward trend, which, however, is not expected to exceed 5-10% per year.

SERVICES & BPO

PwC to move KatowicePwC to move KatowicePwC to move KatowicePwC to move Katowice service delivery centre service delivery centre service delivery centre service delivery centre to Silesia Business Parkto Silesia Business Parkto Silesia Business Parkto Silesia Business Park

Business consultancy PwC will take up 6,800 sq.m at building one of Silesia Business Park, a brand new of-fice complex the Swedish developer Skanska Prop-erty Poland is currently building in Katowice. The new offices will house the 600-strong personnel of PwC's Service Delivery Center (SDC), which supports the company's audit units in the UK, Germany, and Central and Eastern Europe. Established in 2009, by mid-2011 the SDC had grown to 180 employees, and since then its headcount has more than tripled. "The SDC has seen rapid growth, which we owe to an expanding customer base, higher volume within exist-ing processes as well as constant introduction of new products and solutions. Initially, the center served on-ly Poland, Hungary, Sloavakia and the Czech Repub-lic, but its footprint has since expanded to include 14 CEE markets as well as a number of countries in Western Europe, most notably Germany and the UK," Paweł Mleczko, director at the PwC Service Delivery Center in Katowice, tells Poland Today. "We have fur-

ther expansion plans for the SDC, which should trans-late into more new positions," he adds. The planned relocation of SDC is great news for Skanska Property Poland, as PwC alone will occupy 55% of building one in their first development in Ka-towice. Silesia Business Park is a modern office com-plex offering a total of 46,000 sq.m of office space in four buildings, the first of which will be delivered in Q4 2014. PwC will move into its new premises on in November 2014.

With a combined GLA of 46,000 sq.m, Silesia Busi-ness Park will be Skanska Property Poland's largest office project to-date. Image: Skanska Property Poland

Located on Chorzowska Street, Silesia Business Park will include four 11-storey office towers and 600 park-ing spaces. Similar to Skanska's other recent projects, the Park will hold LEED Gold and EU GreenBuilding certificates to emphasize the wide range of energy-saving solutions implemented by the investor. Skanska argues that besides being environmentally-friendly, its "green" buildings offer substantial cost savings to tenants.


"There is a robust demand for well-located, modern offices in Katowice at the moment and we believe this is the right moment to speed up construction," Bartosz Kalinowski, regional director at Skanska Property Po-land, told Poland Today in a recent interview. "Kato-wice is a business centre with enormous potential. Its well-developed industry and talent pool keep attract-ing new investors. Conveniently located between Wrocław and Kraków, both of which are mature out-sourcing markets, it has direct air, road, an rail links to key cities in Poland and Europe. We strongly believe in Katowice's prospects, especially since the city allo-cates more than 30% of its budget to investments." Besides PwC, other major outsourcing firms operating in Katowice include Capgemini, Unilever, Ericsson, Oracle, and IBM, which is to recruit some 2,000 staff at A4 Business Park, developed by Polish Echo In-vestment (see PT Business Review+ No. 006 page 8). As for PwC, it employs approximately 1,800 specialists at its offices in Warsaw, Gdańsk, Katowice, Kraków, Łódź, Poznań and Wrocław. "Our team continues to expand, both within existing services as well as new areas. In the advisory segment new positions are usually the result of a growing de-mand for new services, which led to the creation of our legal services unit PwC Legal, brokerage house, or the training arm PwC Academy. We are also expand-ing teams that specialize in particular industries, for instance energy, fuels, finance, telecommunications, real estate, healthcare or public sector," PwC's Paweł Mleczko tells Poland Today.


Panattoni Panattoni Panattoni Panattoni unveilsunveilsunveilsunveils details of its historic details of its historic details of its historic details of its historic EUR 160m builtEUR 160m builtEUR 160m builtEUR 160m built----totototo----suit suit suit suit contract with Amazon contract with Amazon contract with Amazon contract with Amazon

US-owned industrial space developer Panattoni Eu-rope is to deliver 201,000 sq.m of modern warehouse space for e-commerce mogul Amazon in what is re-garded as the largest ever deal in Central and Eastern Europe's real estate market. The two centers, each with more than 100,000 sq.m of logistics space, will be located near Wrocław and Poznań. The contract fol-lows Amazon's earlier agreement with Goodman for a 95,000 sq.m distribution facility near Wrocław, which is to reach completion in 2H 2014 (see PT Busi-ness Review+ No. 12 page 9). The Seattle-based e-commerce giant is to create 2,000 permanent jobs at each of the three logistics centers in Poland, going up to 3,000 in the run-up to the holiday season – between 6,000 and 9,000 jobs in total. "It is a momentous transaction not only for the devel-opment industry, but also for the economy, and defi-nitely a landmark event in the market. With an esti-mated capex of EUR 80m each, the distribution cen-ters for Amazon constitute the biggest contract in the history of the real estate market in Poland and in CEE," Robert Dobrzycki, Managing Partner for Panattoni Europe told Poland Today. The first of the warehouses is under development in Sady near Poznań, approx. 2.5km from the S11 ex-pressway and 16 km from the A2 motorway. The facili-ty will take up close to 100,700 sq.m, including 91,837 sq.m of warehouse space and 8,816 sq.m of office and

staff facilities. The property will feature 2,154 car parking spaces, 97 truck spaces, 32 handicapped spac-es, 16 motorcycle spaces, and 60 reloading docks. Due to the high headcount and to facilitate commuting by public transport, two bus stops will be built in the vi-cinity of the investment. The facility was the first to start construction works and it will also be the first to be commissioned, as soon as mid-August 2014.

In Wrocłąw, where Amazon, is developing two dis-tribution centers, the one built by Panattoni will be delivered in 2015. Photo: Panattoni The other facility will be built in Wrocław's suburb of Bielany Wrocławskie (which is also home to the Goodman project), in the direct vicinity of the Nowa Wieś junction linking the A4 and A8 motorways. With exactly the same dimensions as the Poznań distribu-tion hub, the centre will feature 1,942 car parking spaces (including those for disabled drivers), 111 truck spaces, 16 motorcycle spaces and 60 reloading docks. Additionally, Panattoni Europe will improve road in-frastructure around the facility by putting in place three exits and two access roads. Construction works are set to start as early as December, while planned completion and commissioning are expected in Sep-tember next year.


Poland's central location in Europe, proximity to Am-azon’s European clients and access to a skilled work-force were among the reasons for Amazon's invest-ment decision, Tim Collins, director of retailer's Euro-pean operations, told reporters at news conference in Warsaw in October last year, adding that. Amazon does not intend to close any of its existing European logistic infrastructure. The three Polish sites will be integrated into the network of 25 centers in Europe as part of an expansion strategy to serve customers in every European country, including Russia and Ukraine, Collins added. Amazon will be the owner of its Polish distribution centers, which are being devel-oped under the built-to-suit formula. "We are currently developing more than 343,000 sq.m in Poland and the Czech Republic, including the two warehouse facilities for Amazon. We are also expand-ing our own park in Łódź. Some 90% of our pipeline at the moment are pre-let, BTS projects, the rest being speculative developments," says Mr. Dobrzycki. Be-sides the Amazon hubs, Panattoni's largest ongoing BTS projects in Poland include a 50,000 sq.m distribu-tion centre for DIY retailer Castorama Polska and 33,000 sq.m production facility for all-terrain vehicle maker Polaris. Since 2005, when Panattoni entered Central Europe, the developer has built more than 1.9m sq.m of modern industrial space.


Shipping firm OT Shipping firm OT Shipping firm OT Shipping firm OT Logistics completes Logistics completes Logistics completes Logistics completes strategic takeover strategic takeover strategic takeover strategic takeover

The Warsaw-listed logistics company OT Logistics (formerly known as Odratrans), which controls 80% of Poland's inland waterway transport, has recently final-

ized the acquisition of C.Hartwig Gdynia, one of the country's oldest forwarders. Established more than 150 years ago, C.Hartwig Gdynia specializes in inter-national sea, land, and air shipments as well as logis-tics services. The company turned over PLN 246m in 2012. As a result of the transaction, which saw OT Lo-gistics pay Hass Holding Limited and Morska Agencja Gdynia a total of PLN 15m for 75% of shares in C.Hartwig Gdynia, the pro-forma revenues of the Szczecin-based group increase a half. OT Logistics had EBITDA of PLN 66.3m on revenues of PLN 466.7m in 2012. The group includes more than a dozen companies, and its key business area has tradi-tionally been the transportation of bulk goods on the Odra river, mainly between Gliwice and Wrocław and in the Szczecin area. The company owns some 300 vessels with a combined capacity of 100,000 tons. Through contracts with Węglokoks and Vattenfall OT Logistics is responsible for some 50% of coal deliv-eries to Berlin power stations and it is the main sup-plier of coal to Wrocław's combined heat & power plant operator Kogeneracja. Besides coal, it trans-ports a range of bulk cargo, for instance ore, fertilizer and aggregates. Although the Odra river business remains the core of OT Logistics' operations, in recent years the company has seen the most dynamic growth in sea and rail shipping as well as transshipment of goods in seaports. The takeover of C.Hartwig Gdynia and other ongoing investments are aimed at consolidating its position as a provider of door-to-door logistics services to major in-dustrial clients. With a network of proprietary ports & terminals (including Poland's deepest and largest bulk cargo facility Port Handlowy Świnoujście), OT Logis-tics provides services to the likes of US Steel Corpo-ration, ArcelorMittal, EDF Polska, PGE, Węglokoks. It also ships oversized goods (for clients that include Siemens, Airbus and Bundeswehra), and containers (approx. 150,000 per annum, mainly

between Hamburg and inland ports in central and eastern Germany). OT Logistics entered the Warsaw Stock Exchange in July last year, raising PLN 30m. The IPO, together with an earlier PLN 60m bond issue, provided the Szczecin-based company with financing for new lo-gistic and port investments. Besides the C.Hartwig deal, the key project OT Logistics is working on at the moment is the acquisition of the Baltic General Car-go Terminal Gdynia (BTDG). The latter's owner, the Gdynia Port Authority, inked an exclusive negotia-tion agreement with OT Logistics in July 2013 and the deal is to be sealed by the end of Q1 2014, giving the company presence in another key Polish seaport.

IT & TELECOM

Wind Mobile expands Wind Mobile expands Wind Mobile expands Wind Mobile expands global footprintglobal footprintglobal footprintglobal footprint with with with with strategic acquisitionsstrategic acquisitionsstrategic acquisitionsstrategic acquisitions

Polish mobile integrator Wind Mobile announced two IT acquisitions in January and confirmed plans to migrate from the New Connect alternative trading platform to the main market of the Warsaw Stock Ex-change. Wind Mobile believes its new investments will help the company multiply revenues and profits by entry into new markets in Western Europe, the US, Middle East and Africa. Based in Kraków, Wind Mobile delivers end-to-end mobile entertainment, mobile marketing and mobile infrastructure solutions to telecommunications opera-tors. Its flagship product is a state-of-the-art ringback tones platform and related services provided by Wind Mobile's service management unit VAS Force. The Wind Mobile ringback tone service has been imple-


mented by Orange and T-Mobile groups worldwide and its clients include all of Poland's top mobile com-panies as well as the Icelandic operator Nova. In the first of the two transactions, Wind Mobile has agreed to pay an equivalent of PLN 50m for Software Mind, a Polish developer of software solutions for the finance, telecommunications and multimedia sectors, for instance mobile banking & video branch banking platforms, and IPTV multimedia platforms for hotel operators. Wind Mobile said the acquisition will be fi-nanced with debt and shares. Last year Software Mind posted an EBIDTA of PLN 5m on revenues of PLN 45m.

Wind Mobile key figures & projections

0

25

50

75

100

125

150

2010 2011 2012 2013 *2013 *2014 *2015 *2016

0

4

8

12

16

20

24

Turnover in PLNm, left axis

Net profit in PLNm, right axis

*) combined projections for Wind Mobile, Software Mind and the

emerging markets acquisition

Source: Wind Mobile

"The acquisition of Software Mind is a milestone for our company, as it enables Wind Mobile to penetrate the finance, banking, and multimedia sectors at the same time strengthening our position in the telecom-munications industry. It will expand our geographic footprint to include Western Europe and the US," says

Rafał Styczeń, V-ce President Business Development and Acquisitions at Wind Mobile. In addition to the Software Mind deal, Wind Mobile has sealed a preliminary agreement to take over a company that offers a range of services to 45 mobile operators in the Middle East and Africa. "We have achieved unprecedented success in the Polish digital music market and with millions of paid users of our ringback tones we are among the leading players in Europe. Thanks to the planned acquisition we will boost our coverage from four to more than 40 mobile companies operating in emerging markets. This deal makes Wind Mobile a global player and opens up new distribution channels for Software Mind's products," says Tomasz Kiser, V-ce President Sales & Marketing at Wind Mobile. According to estimates, Wind Mobile turned over PLN 14.5m last year (up from PLN 13.1m in 2012) with net earnings of PLN 3.78m (against PLN 3.1m in the prior year). Following the two new acquisitions, the en-larged entity is to achieve sales revenues of PLN 140m and post-tax profit of PLN 22m in 2016. Company rep-resentatives have confirmed they intend to move Wind Mobile's shares to Warsaw's bourse's main trading floor in 2H 2014. Intel Capital and IIF, the current investors behind Wind Mobile, will maintain majority control of the company. IIF is a Kraków-based early-stage technolo-gy fund, which engages in Internet, software, media, finance and e-commerce projects. The IIF team stands behind the success of companies such as Comarch, Wind Mobile, Moje Rachunki - BillBird SA, Soft-ware Mind and Inteligo.

IT & TELECOM

Regulator gives green Regulator gives green Regulator gives green Regulator gives green light light light light totototo Wirtualna Wirtualna Wirtualna Wirtualna Polska salePolska salePolska salePolska sale

Telecommunications company Orange Polska (for-merly TPSA) can sell its internet unit Wirtualna Polska to internet services firm o2, Poland's anti-monopoly office UOKiK said last week, paving the way for the creation of Poland's top horizontal portal. Or-ange Polska agreed to sell Wirtualna Polska for PLN 375m to o2 and its private equity backer Innova Capi-tal in October 2013 (see PT Business Review No. 009 page 13), expecting to book PLN 180m in pre-tax profit gain in 2014. "The proceedings carried out have shown that the concentration will not lead to limitation of competi-tion," the regulator’s statement reads. The transaction is expected to be finalized in February 2014, o2 Group said in a press statement, after which o2 is to merge Wirtualna Polska, establishing Grupa Wirtualna Polska, offering the most comprehensive content on the market, with news, sports, entertain-ment and lifestyle, as well as other services available via mobile applications or e-mail. Innova will own ap-proximately 70% of the merged entity, with o2 Group founders holding a minority stake. The private equity company will seek to float the business on the Warsaw Stock Exchange in three years' time, before exiting the investment some two years later. "The merger will be a complex, multi-stage undertak-ing, something no-one has ever done in Poland. Our plans for further acquisitions all stem out of an ambi-tion to create Poland's number one portal not only by


user numbers by also based on quality of content," Jacek Świderski, board member at Grupa o2, told Po-land Today back in October. "o2 and WP are comple-mentary product-wise. The merger will give the new group the scale of operations and the audience re-quired to accelerate organic growth. We will gain the ability to offer advertising agencies and viewers attrac-tive video content, interesting vortals and mobile apps. We believe that given the double investment effort, we will also strengthen the leadership position in the email market in Poland."

Grupa Wirtualna Polska will be the umbrella brand for Wirtualna Polska and o2 online services. Image: o2, WP

Until now, Poland's number one internet portal has been Onet.pl, sold by the TVN media group to Ger-many's Ringier Axel Springer in June 2012 for a re-ported PLN 1.275bn (RAS paid PLN 960m for a 70% stake in the business). With 11.65m users and 1.75bn hits as of July 2013 (or 13.08m and 2.39bn including al-so other Orange sites), WP was the leading Polish pro-vider of e-mail services, and the top provider of infor-mation and journalistic content among internet por-tals. It ranked as number two in entertainment, life-style, and sports-related content and third in business

and travel. The o2 Group, on its part, boasted 9.94m users as of mid-2013 and it is the most popular enter-tainment portal with dozens of thematic services in-cluding Pudelek, Wrzuta, and Kafeteria as well as in-stant communicator Tlen. Innova Capital is of the leading private equity funds in Central and Eastern Europe investing in mid-sized companies. Since its foundation in 1994 Innova Capital has invested almost EUR 500m in forty companies op-erating in 10 countries in the region. Their current Polish portfolio includes financial services firms Meritum Bank and Expander, telecoms companies GTS and Emitel, paving stone maker Libet, marble bathroom fittings producer Marmite, as well as hospi-tal operator Ujastek.

POLITICS & ECONOMY

Polish economy beats Polish economy beats Polish economy beats Polish economy beats projections, expands projections, expands projections, expands projections, expands by 1.6% in 2013by 1.6% in 2013by 1.6% in 2013by 1.6% in 2013

Poland's GDP grew an estimated 1.6% y/y in 2013, beating average projections for 1.5% increase, the Cen-tral Statistical Office (GUS) said last week citing pre-liminary estimates. Although the flash figure indicates that growth picked up sharply in the second half of last year, it remains 0.3 pps lower than in 2012 and matches an 11-year low reached in 2009. Private con-sumption slowed to 0.8% from 1.2%, while fixed in-vestment fell 0.4% from a year earlier, improved from a 1.7% decline in 2012, GUS said. The Polish statistical office published only full-year data without releasing detailed Q4 numbers, but based on this and already available data for the first three quarters, it seems that growth accelerated substantial-

ly in the final three months of the year. A first estimate of Q4 GDP will be published by the statistics office on 14th February. "The news is excellent indeed. It suggests that the re-bound in Q4 was a sharp one, as GDP must have ex-panded by 3% y/y. This acceleration is probably most-ly driven by a resumption of domestic demand: the pick-up in household consumption largely contributed to this improvement, but it seems as well that invest-ment has come out of its recent slump. Looking ahead, there are some reasons to be upbeat about the Polish economy, as prospects for the German economy are favorable, which will support Poland’s export-led in-dustrial sector," Alexandre Vincent, country risk sen-ior economist at BNP Paribas in Paris told Poland Today.

GDP growth in Poland (y/y)

0%

1%

2%

3%

4%

5%

6%

7%

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: GUS

According to Piotr Kalisz, Citi's chief economist in Po-land, the surprise came mostly from a stronger-than-expected contribution from net exports, while domes-tic demand surprised on the downside.


"However, the breakdown shows that the downward surprise in domestic demand was due mostly to a slower restocking process. We stick to our above-consensus view, expecting at least 3.1% growth in 2014. We believe also that risks are skewed to the up-side and possibly the economy could expand by around 3.5% if positive trends in Germany and the eu-ro zone continue. This would imply substantial nar-rowing – if not closing – of the output gap within the next 12 months," Mr. Kalisz commented. Poland's 2014 budget is built on 2.5% GDP growth as-sumption but the country is likely to see a higher ex-pansion rate, possibly neighboring 3% in 2014, Finance Minister Mateusz Szczurek told reporters. He referred to the 2013 GDP growth reading as "a nice surprise" but in his opinion the 2014 growth will be higher as unemployment has stopped increasing. Last year’s budget, which was based on a 2.2% GDP growth pro-jection, had to be amended to account for a larger than expected spending gap. A recession in the 18-nation euro area, which buys more than half of Poland’s exports, forced companies to cut jobs and wages. Consumer demand, which ac-counts for 62% of the country’s GDP, stalled in Q1 2013 and grew 0.2% in Q2 as unemployment hovered near a six-year high and pay increases stayed below inflation. Poland’s jobless rate rose to 13.4% in December, while wages grew 2.7% from a year earlier, compared with a 0.7% gain in consumer-price growth. Monetary-policy makers cut their benchmark interest rate by 2.25 percentage points since November to help spur a recovery from the country's worst slowdown in more than a decade. The central bank plans to leave borrowing costs at a record low until at least mid-2014 because inflation may hold below the target of 2.5% through 2015.

POLITICS & ECONOMY

Złoty takes a beating Złoty takes a beating Złoty takes a beating Złoty takes a beating on emerging markeon emerging markeon emerging markeon emerging market t t t worries, but analysts worries, but analysts worries, but analysts worries, but analysts emphasizeemphasizeemphasizeemphasize strong strong strong strong fundamentalsfundamentalsfundamentalsfundamentals

The large-scale selloff in emerging-market currencies that swept across the global markets over the past week, triggered by worries over global growth, did not leave the złoty unscathed, but despite having dropped to a 10-week low the Polish currency performed better than most of its peers. Developing-nation currencies started selling off after a report from HSBC Holdings Plc and Markit Econom-ics indicated that China’s manufacturing may contract for the first time in six months. The Turkish lira plunged to a record, while South Africa's rand fell to the weakest level since October 2008. The złoty lost 1.2% on the news, compared with a 4.5% loss of the li-ra and 3.7% of the rand, and continued to trade low over the past 10 days or so. The Federal Reserve's de-cision to cut quantitative easing by further USD 10bn to USD 65bn a month only added to the pressure. "Although the emerging markets sell-off increases the uncertainty and could negatively affect business confi-dence, at this stage we don’t think this should stop the robust recovery in Poland. Domestic demand seems resilient, while any currency depreciation seems to be supportive for Poland’s competitiveness on foreign markets. In our view, the country would be negatively affected only if EM developments led to a significant weakening of economic activity in Germany," com-mented Piotr Kalisz at Citi Research.

According to the central bank, there are no fundamen-tal reasons behind the recent weakening of the złoty. "We are monitoring the situation on the market close-ly," NBP management board member Eugeniusz Gatnar told reporters. "Excessive volatility of the zloty rate would be a negative phenomenon. However, for the time being we see no reason to worry." Government representatives spoke in a similar tone, saying they were not worried by the recent outflow of funds from emerging markets. Shortly before the cur-rent turmoil began, the Finance Ministry sold PLN 12.1bn of bonds, the most on record, enabling the gov-ernment to raise more than 50% of its full-year fund-ing needs, amounting to PLN 132.5bn. "We are prepared for this situation we are calmly monitoring the way it unfolds," head of Finance Minis-try's debt department Piotr Marczak told a news con-ference. "It’s worth noting that while some EM central banks have been forced to raise interest rates to shore up tumbling currencies over the past few days, the złoty has avoided the worst of the sell-off. And even if the exchange rate were to weaken substantially, policy-makers may even welcome this as it would boost ex-port competitiveness," wrote William Jackson of Capi-tal Economics.


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Sep '13 Oct '13 Nov '13 Dec '13

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

Food & bev +2.6 0.0 +1.9 -0.1 +1.9 +0.3 +1.5 +0.7

Alcohol, tobacco +3.7 +0.2 +3.6 +0.1 +3.6 +0.1 +3.7 0.0

Clothing, shoes -4.7 +0.7 -4.8 +3.5 -4.9 -0.2 -4.9 -0.6

Housing +1.8 +0.1 +1.8 +0.2 +1.8 +0.1 +1.8 0.0

Transport -1.4 +0.8 -2.3 -1.0 -2.3 -1.2 -0.9 0.4

Communications -9.7 0.0 -7.2 +2.8 -11.7 -4.9 -11.6 0.0

Gross CPI +1.0 +0.1 +0.8 +0.2 +0.6 -0.2 +0.7 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Dec 11

Feb 12

Apr 12

Jun 12

Aug 12

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

Oct 13

Dec 13

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Aug '13 Sep '13 Oct '13 Nov '13 Dec '13

m/m (%) -0.7 -0.9 +3.6 -5.8 +17.3

y/y (%) +3.4 +3.9 +3.2 +3.8 +5.8

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)

2008 2009 2010 2011 2012 2013 y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 138.7 -16.0

Commenced 174.7 142.9 158.1 162.2 141.8 127.4 -10.2

U. construction 687.4 670.3 692.7 723.0 713.1 694.0 -2.6

Completed 165.2 160.0 135.7 131.7 152.5 146.1 -4.4

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

Q3 2013 +1.9% 404,310 -1.9%

Q2 2013 +0.8% 395,657 -2.3%

Q1 2013 +0.5% 377,815 -3.1%

Q4 2012 +0.7% 442,231 -3.5%

2013 +1.6% n/a n/a

2012 +1.9% 1,522,736 -3.5%

2011 +4.5% 1,462,734 -4.9%

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% +3.1%

Consumer inflation +2.6% +4.3% +3.7% +0.9% +1.4%

Producer inflation +2.1% +7.6% +3.4% -1.3% +0.7%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.3% -0.2%

Nominal gross wage +3.9% +5.2% +3.7% +2.9% +4.9%

Unemployment** 12.4% 12.5% 13.4% 13.4% 12.7%

EUR/PLN 3.99 4.12 4.19 4.20 4.06

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

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

Sector Q4 2012 Q1 2013 Q2 2013 Q3 2013

A B A B A B A B

Coal mining 8,427 192 6,060 138 6,290 143 6,061 138

Manufacturing 3,522 154 3,491 152 3,560 155 3,625 158

Energy 6,535 198 6,196 188 5,828 177 6,021 183

Construction 3,829 163 3,556 152 3,693 157 3,766 160

Retail & repairs 3,365 143 3,432 146 3,421 146 3,408 145

Transportation 3,816 135 3,439 122 3,547 125 3,589 127

IT, telecoms 6,379 166 6,685 174 6,707 174 6,654 173

Financial sector 6,044 136 6,356 143 6,702 151 6,109 137

National average 3,878 154 3,741 149 3,613 144 3,652 145

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13

m/m (%) +19.1 +7.8 -0.8 +9.4 +14.3 -2.9 +21.5

y/y (%) -18.3 -5.2 -11.1 -4.8 -3.2 -8.9 +5.8

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

Mar

11

Jun 11

Sep 1

1

Dec 11

Mar 12

Jun 12

Sep 12

Dec 12

Mar

13

Jun 13

Sep 13

Dec 13

60

80

100

120 Co nsumer confidence (left axis)

Economic sentiment (right axis)

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

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month Jun '13 Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13

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

y/y (%) -1.3 -0.8 -1.1 -1.4 -1.4 -1.5 -0.9

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 Jun '13 Jul'13 Aug'13 Sep'13 Oct'13 Nov'13 Dec'13

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

y/y (%) -2.0 -1.9 -1.9 -1.8 -1.8 -1.7 -1.7

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 OutputIndustrial OutputIndustrial OutputIndustrial Output

Month Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13

m/m (%) +2.6 +1.5 -4.5 +9.6 +6.0 -6.2 -9.7

y/y (%) +2.8 +6.3 +2.2 +6.2 +4.4 +2.9 +6.6

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-Nov 2013

y/y (%)

share (%)

2012 share (%)

Jan-Nov 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 63,081 +8.5 10.7 61,694 10.3 43,296 +4.6 7.3 44,287 6.9

Beverages and tobacco 7,955 +6.5 1.4 7,967 1.3 3,764 +1.7 0.6 3,989 0.6

Crude materials except fuels 14,606 +10.1 2.5 14,024 2.4 19,851 -5.3 3.4 22,053 3.5

Fuels etc 27,381 +0.6 4.6 29,389 4.9 69,873 -10.4 11.8 85,280 13.4

Animal and vegetable oils 1,687 +32.5 0.3 1,342 0.2 2,430 -9.6 0.4 2,887 0.5

Chemical products 54,529 +6.9 9.3 54,295 9.1 85,948 +2.6 14.4 89,140 14.0

Manufactured goods by material 120,946 +1.3 20.5 126,161 21.1 104,027 -1.3 17.5 110,773 17.4

Machinery, transport equip. 221,253 +5.3 37.5 223,646 37.5 198,729 +3.4 33.3 203,718 31.9

Other manufactured articles 76,469 +7.1 13.0 75,925 12.7 53,487 -2.8 9.0 57,646 9.0

Not classified 1,606 n/a 0.2 2,653 0.5 14,854 n/a 2.3 18,515 2.8

TOTAL 589,513 +4.9 100 597,096 100 596,259 -0.9 100 638,288 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan- Nov 2013

share *2012 Share No Country Jan- Nov 2013

share *2012 Share

1 Germany 147,936 25.1% 150,046 25.1% 1 Germany 128,267 21.5% 134,933 21.1%

2 UK 38,640 6.6% 40,184 6.7% 2 Russia 73,484 12.3% 91,033 14.3%

3 Czech Rep. 36,340 6.2% 37,475 6.3% 3 China 56,314 9.4% 57,235 9.0%

4 France 33,145 5.6% 34,862 5.8% 4 Italy 30,866 5.2% 32,782 5.1%

5 Russia 31,656 5.4% 32,290 5.4% 5 France 22,700 3.8% 25,303 4.0%

6 Italy 25,415 4.3% 29,067 4.9% 6 Netherlands 22,875 3.8% 24,543 3.8%

7 Netherlands 23,129 3.9% 26,678 4.5% 7 Czech Rep. 21,954 3.7% 23,327 3.7%

8 Ukraine 16,612 2.8% 17,213 2.9% 8 USA 15,956 2.7% 16,436 2.6%

9 Sweden 16,304 2.8% 15,811 2.6% 9 UK 15,594 2.6% 15,509 2.4%

10 Slovakia 15,487 2.6% 15,288 2.6% 10 South Korea n/a n/a 14,619 2.3%

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

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 31 January 2014

100 USD 312.88 ↑

100 EUR 423.68 ↑

100 GBP 514.58 ↑

100 CHF 346.44 ↑

100 DKK 56.77 ↑

100 SEK 47.90 ↑

100 NOK 49.99 ↓

10,000 JPY 305.09 ↑

100 CZK 15.40 ↑

10,000 HUF 136.09 ↓

100 USD/EUR against PLN

300

350

400

450

14 Feb 13

24 A

pr 13

4 Jul 13

11 Sep 13

20 N

ov 13

31 Jan 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Sep '13 Oct '13 Nov '13 Dec '13

Monetary base 166,620 154,967 153,672 164,010

M1 540,873 536,237 538,837 555,851

- Currency outside banks 113,223 113,174 113,718 114,401

M2 931,042 935,095 934,713 960,361

- Time deposits 405,703 414,941 412,469 421,160

M3 947,228 955,419 953,446 978,924

- Net foreign assets 147,978 150,517 148,702 143,430 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 Aug '13 Sep '13 Nov '13 Dec '13

Loans to customers 908,106 901,288 906,298 903,890

- to private companies 262,963 260,585 262,396 259,061

- to households 560,608 559,965 563,157 562,381

Total assets of banks 1,626,489 1,612,836 1,627,119 1,601,293

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13

PLN (up to 1 year) 5.0% 4.7% 4.6% 4.5% 4.5% 4.5%

PLN (up to 5 y ) 5.4% 5.1% 5.1% 4.9% 4.9% 4.9%

PLN (over 5 y) 5.3% 4.9% 4.9% 4.8% 4.8% 4.8%

PLN (total) 5.3% 5.0% 4.9% 4.8% 4.8% 4.8%

EUR (up to 1m EUR) 1.9% 2.3% 1.9% 1.8% 2.0% 1.9%

EUR (over 1m EUR) 2.9% 3.5% 3.5% 3.2% 2.5% 3.0%

Warsaw Inter Bank Offered Rate (WIBOR) as of 31 Jan 2014

Overnight 1 week 1 month 3 months 6 months

2.58%% 2.59% 2.61% 2.71% 2.73%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 31 Jan '14

Change 24 Jan

'14

Change end of '13

↑ Asseco Pol. 46.04 +0% +0%

→ Bogdanka 125 +0% -1%

↑ BZ WBK 395 +1% 2%

↑ Eurocash 41 +1% -14%

↑ Grupa Lotos 35.32 -2% 0%

↓ GTC 7.41 +2% -1%

↑ Handlowy 103.2 -4% -2%

↓ JSW 46.2 -2% -13%

↓ Kernel 38.1 -5% 0%

↓ KGHM 109.5 0% -7%

→ mBank 510 +3% +2%

↓ Orange Pol. 10.5 +9% +7%

→ Pekao 185.15 +2% +3%

→ PGE 16.5 -1% +1%

↓ PGNiG 4.63 -2% -10%

↓ PKN Orlen 38.79 0% -5%

↑ PKO BP 40.8 +1% +4%

↓ PZU 412.5 -2% -8%

↓ Synthos 5.07 -2% -7%

↓ Tauron 4.28 +6% -2%

Source: Warsaw Stock Exchange

Key indices

as of 31 January 2014

WIG Total index

50505050,,,,831.61831.61831.61831.61 Change 1 week 0% →

Change end of '13 -1% ↓

WIG-20 blue chip index

2,2,2,2,333355555555....89898989 Change 1 week 0% →

Change end of '13 -2% ↓

WIG Total closing index

last three months

49,000

50,000

51,000

52,000

53,000

54,000

55,000

56,000

23 O

ct 13

18 N

ov 13

10 D

ec 13

9 Jan 14

31 Jan 14


Poland Today Sp. z o. o.

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Publisher Richard Stephens

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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-Dec 2013 *

Monthly wages (PLN)

Jan-Dec 2013 **

Unemploy-ment

Dec 2013

New dwellings Jan-Dec 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 101.1 96.6 4,317 4,114 153.6 13.2 16,730 111.3

Kujawsko-Pomorskie (Bydgoszcz) 103.6 105.4 3,350 3,346 150.1 18.1 6,680 105.1

Lubelskie (Lublin) 104.6 95.9 3,736 3,080 134.0 14.4 6,892 95.9

Lubuskie (Zielona Góra) 97.4 90.7 3,388 2,990 59.8 15.7 3,322 104.8

Łódzkie (Łódź) 104.0 91.0 3,715 3,084 151.6 14.1 6,113 76.2

Małopolskie (Kraków) 98.2 92.5 3,763 3,386 164.4 11.6 15,525 101.5

Mazowieckie (Warszawa) 107.6 78.4 4,488 4,787 283.2 11.0 29,609 96.9

Opolskie (Opole) 97.9 94.4 3,500 3,192 51.6 14.3 1,747 96.0

Podkarpackie (Rzeszów) 108.3 96.8 3,276 3,093 154.2 16.4 6,192 94.9

Podlaskie (Białystok) 106.8 98.6 3,224 3,796 70.9 15.1 4,228 93.4

Pomorskie (Gdańsk-Gdynia) 102.0 97.3 3,885 3,503 114.1 13.3 11,948 84.2

Śląskie (Katowice) 97.8 92.7 4,681 3,582 208.3 11.2 10,384 106.6

Świętokrzyskie (Kielce) 101.9 90.1 3,393 3,211 90.1 16.5 2,786 90.0

Warmińsko-Mazurskie (Olsztyn) 98.9 84.1 3,178 3,076 115.9 21.7 4,768 86.8

Wielkopolskie (Poznań) 104.4 92.4 3,697 3,649 144.8 9.6 13,686 92.4

Zachodniopomorskie (Szczecin) 112.5 86.5 3,436 3,262 111.1 18.0 5,512 77.9

National average 102.2 88.7 3,959 3,729 2,157.9 13.4 146,122 95.6

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

in Poland 1,861 1,381 2,886 175 -3,020 -1,794

Polish DI 310 -550 -1,203 957 2,588 -1,529

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 14,832 4,716

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

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

Period 2010 2011 2012 Q1 '13 Q2 '13 Q3 '13

Trade balance -8,893 -10,059 -5,313 -139 1,203 1,017

Services, net 2,334 4,048 4,816 1,274 1,686 1,047

CA balance -18,129 -17,977 -13,332 -2,313 486 -2,027

CA balance vs GDP -5.1% -5.0% -3.7% -3.1% -2.3% -2.0%

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

Q4 10

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

Q4 13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

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

3.5–5.0

Warsaw suburbs 1.9–3.2

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

Poznań 1,041,000 50,000 3.6% 2.3–2.9

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

Wrocław 795,000 84,000 5.5% 2.4–3.0

Gdańsk 192,000 n/a 9.6% 3.2–4.0

Kraków 149,000 n/a 7.6% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

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

Q3 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,146 +3.4% 11.5-25.5 10.5% 85 85

Kraków 5,989 -13.1% 13-15 2.71% 41 78

Katowice 5,898 +9.0% 13-14 8.29% 48 56

Poznań 6,351 -6.7% 14-16 14.66% 44 55

Łódź 4,780 -3.8% 12-14 14.97% 31 26

Wrocław 5,997 -4.3% 13-16 12.37% 38 41

Gdańsk 6,398 -1.2% 13-15 11.24% 39 31

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

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Dec09

Aug10

Apr11

Dec11

Aug12

Apr13

Dec14

Wage CPI

Index 100 = Jan 2005. Source: GUS

Poland Today Business Review+ No. 021

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