PT Business Review+ No. 069 by Poland Today Business Review+

1 year subscription: EUR 690 +VAT (23%) Newsletter Editor: Lech Kaczanowski lech.kaczanowski@poland-today.pl tel. +48 607 079 547 Sales Contact: James Anderson-Hanney james.anderson-hanney@poland-today.pl

No. 069 / 26th January 2015 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING Polish faucet maker Armatura acquires bathroom fittings producer Aquaform page 2

RETAILERS Private equity fund Pinebridge buys convenience store chain Małpka Express page 9

BANKING & FINANCE CHF loans pose no threat to financial stability, regulators say, but urge lenders to show more flexibility page 3

RETAIL PROPERTIES Immofinanz to build 22,000 sq.m shopping center in Krosno page 10

ENERGY & RESOURCES RWE to build 17 MW wind farm near Poznań page 5 The new regulations are of particular importance to wind farm developers. Photo: RWE

Sejm passes new renewable energy law

Poland's lower chamber of parliament has passed the longawaited renewable energy law, which lays out details of the transition from the current certificate-based system to auctions. A clear legal framework for the coming two decades is expected to help stimulate new investments in the sector. page 4

December production beats projections

Poland's industrial output jumped above expectations in December, driven by improvement in the manufacturing sector. Production rose by 8.4% y/y in December, fuelling hopes for solid economic growth in Q4. page 2

tel. +48 881 650 600

PROPERTY & CONSTRUCTION Griffin secures more prime assets in Warsaw page 6 VIG targets Poland for long term property investments page 7 TRANSPORT & LOGISTICS Pendolino trains travel half empty, but PKP Intercity is counting on 3m passengers in 2015 page 7 MLP Group is eyeing Germany following a record year in Poland page 8

Busy year ahead of shopping center developers page 11 POLAND TODAY EVENTS Primetime Wrocław: Poland's entrepreneurial capital? page 12 CCIFP GALA 2015: '80s in Paris' page 13 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

weekly newsletter # 069 / 26th January 2015 / page 2

POLITICS & ECONOMY

December production figures beat the most optimistic projections Poland's industrial output jumped above expectations in December, driven by improvement in the manufacturing sector. Production rose by 8.4% y/y in December after a 0.3% rise in November, Poland's statistics office said last week. The result was much higher than the market consensus (4.8% y/y) and beat even the most optimistic forecasts. Seasonally-adjusted output grew 5.3% on the year in December and 2.3% from November. "We were expecting a strong acceleration of industrial output as compared with November, due to statistical effects," BZ WBK analysts said in a comment, pointing to the fact that the December 2013 reading was low due to mild weather, which led to low output in the energy sector, and that December 2014 included an extra working day. "However, the final reading of industrial output was also better than the highest market forecast and a healthy growth was recorded in manufacturing (by 9.1% y/y), mainly in export-oriented sectors. We do not expect such a high growth rate to be maintained in the upcoming months, but a strong revival in export-oriented sectors is a positive signal," they added. Output grew annually in 26 out of 34 categories, with fastest increases in production of electronics equipment, up 30% annually, machinery and equipment, up 27.9% and electric equipment up 20.1%. The sharpest declines were recorded in the production of transportation equipment. Construction output rose 5% on the year.

"In the whole Q4 industrial output increased 3.3% y/y vs. 1.7% y/y in Q3. In the case of construction and assembly, growth reached 1% y/y in Q4, close to Q3 result. December's output data boosted our optimism regarding the Q4 2014 GDP growth as the slowdown vs. Q3 might have been only marginal. The surprisingly strong reading supports our view that the Monetary Policy Council will rather not rush to cut rates, particularly if the volatility in the global market does not abate in the coming weeks.

Industrial output & producer prices Industry output, y/y change Producer Price Index, y/y change 10% 8% 6% 4% 2% 0% -2% -4% Apr 13

Jun 13

Aug 13

Oct 13

Dec 13

Feb 14

Apr 14

Jun 14

Aug 14

O ct14

D ec14

Source: GUS, the central statistical office

Polish producer prices declined at an annual rate of 2.5% in December, the statistics office said. The figure compared with a forecast 2.2% decline and a 1.6% drop in November.

IN BRIEF: Poland's average corporate gross wage measured PLN 4,379.3 in December, rising by 3.7% y/y and by 9.4%m/m, the Central Statistical Office (GUS) said. Wages counting out bonus payments from profit at PLN 4,378.5 were up by 3.8% y/y on a monthly increase of 9.3%. Poland's corporate employment measured 5.549 million in December, up by 1.1% y/y and flat m/m.

MANUFACTURING & PROCESSING

Polish faucet maker Armatura acquires bathroom fittings plant Poland's leading manufacturer of faucets and valves , the Kraków-based Armatura Group, has acquired German-owned producer of acrylic bathroom fittings and furniture Aquaform, thus expanding its product range to include a full range of bathroom solutions. Armatura is best known as a manufacturer of bathroom and kitchen faucets as well as aluminum radiators and valves for water, gas, and central heating installations. Since 2009 the company has completed four acquisitions (including Aquaform) and currently the business includes three factories: in Nisko (where faucets, valves, radiators and other cast items are made), Radom (ceramic bathroom fittings) and Kijewo (acrylic fittings & furniture) with a combined workforce of 950 employees. Established in 1994, Aquaform used to be part of Germany's Dusar group. In 2010 the business was transformed into a joint stock company. Aquaform has a single production plant in Kijewo near Środa Wielkopolska, in western Poland and employs some 200 staff. Close to half of its sales, which in recent years have averaged PLN 69m per annum, come from the German market. Its product portfolio includes acrylic bathtubs, shower trays & cabins, as well as bathroom furniture. "This acquisition opens up new opportunities for Armatura Group, enabling us to expand to Western Europe as well as Romania and Ukraine, where Aquaform has its local subsidiaries," Konrad Hernik,

weekly newsletter # 069 / 26th January 2015 / page 3

CEO of Armatura Group, tells Poland Today. "We are expecting synergies on the sales side, in Poland and abroad. On the domestic market, Aquaform products will reach a much broader customer group via our distribution network. We are also hoping the deal will help us develop sales in Western Europe, where Aquaform's products have been selling for 20 years, mainly via home improvement chains. During the first year of integration, our expectations as to the expected synergies are rather conservative, but in the subsequent years we are counting on double digit sales growth."

CEO Konrad Hernik is hoping the Aquaform deal helps introduce Armatura's products to Western European home improvement chains. Image: Armatura

Last year exports represented 20% of Armatura's group sales, but the Aquaform takeover is to boost the figure beyond 25%. Back in 2012 the company controlled close to 30% of Poland's sanitary fittings market and had a 40% share in the aluminum centralheating radiator segment as well as a 20% share in the valves market. Ceramic fittings and furniture are the latest addition to Armatura's product range, as the Kraków-based company has been selling them only since mid-2012. According to its last publicly available full-year financial statement (for 2012), Armatura posted a net loss of

PLN 2.7m on PLN 254m turnover. In Q1-Q3 2013 Armatura returned into profit with PLN 196m turnover and net earnings of PLN 4.1m. At the beginning of 2014, Poland's key insurer PZU, which controlled a 93% stake in Armatura, delisted the company from the Warsaw Stock Exchange. 'The 2012 results included one-time items, such as the cost of restructuring which saw employment in Kraków drop from 670 to 100 staff as all production got relocated to Nisko. They were also negatively affected by high costs of raw materials and instability in the currency markets. Since 2013 our results have improved significantly, and in 2014 we reached our target EBITDA-to-sales ratio of 10%. However, due to the situation in Russia and Ukraine our sales revenues did not change much from 2013," says Konrad Hernik.

BANKING & FINANCE

CHF loans pose no threat to financial stability, regulators regulators say, say, but urge lenders to show more flexibility

changes to mortgage agreements in order to keep CHF mortgage lenders from benefitting from declining CHF LIBOR rates. According to an official statement, the regulatory authorities are to "investigate actions taken by banks concerning changes to general conditions of loans denominated in foreign currencies" in order to determine whether "those actions violate legally protected borrower and consumer interests." Following a sudden decision by the Swiss National Bank earlier this month, which allowed the Swiss franc to appreciate, the estimated 550,000 Polish households with mortgage loans in Swiss franc saw their monthly payments shot up. Prior to the SNB decision the CHF/PLN rate stood at 3.55, only to increase in a matter of hours to 4.2-4.3 and it is likely to remain above 4 in the mid-term, according to central bank NBP management board member Jacek Bartkiewicz. At end-November, some 37% of the nation's total mortgage stock was still in Swiss franc at PLN 131bn of Poland's PLN 351.8bn in housing loan stock, KNF data showed.

The sharp appreciation of the Swiss franc in midJanuary, which left hundreds of thousands of Polish households deeply concerned about their financial stability, has turned the attention of Polish decision makers to the banks, which over the years issued close to 0.6m Swiss franc home loans.

Poland's key regulatory officials, including Finance Minister Mateusz Szczurek, central bank governor Marek Belka, heads of KNF Andrzej Jakubiak and UOKiK Adam Jasser, who together constitute the socalled Financial Stability Committee (FSC), assembled last week to discuss the potential impact of the Swiss franc crisis on the situation of borrowers and banks in Poland. Their conclusion was that although the recent developments do not pose a threat to the stability of the Polish financial system, dealing with their consequences will require more flexibility on the part of lenders, whose representatives also took part in the meeting.

The Polish government ordered the country's financial market regulator KNF and consumer protection watchdog UOKiK to investigate allegations that a number of Polish banks had unilaterally introduced

"In spite of a relatively large share of housing loans denominated or indexed in Swiss francs in the entire portfolio (PLN 131bn, 7.7% of GDP as at the end of November 2014; after CHF appreciation – almost PLN

weekly newsletter # 069 / 26th January 2015 / page 4

ENERGY & RESOURCES

Sejm passes passes new renewable energy law, law, investors rejoice Poland's long-awaited renewable energy law, which lays out details of the transition from the current certificate-based system to auctions, was passed by the lower house of the parliament (Sejm) in mid-January,

Under the support system that remains place in Poland at the moment, renewable energy production is being subsidized via green certificates that can be traded on the stock exchange. In essence, the amount one obtains from the sale of the certificates equals the support. The prices of green certificates have collapsed in recent years, jeopardizing many business plans and ongoing investments.

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500

Source: URE

*2014

2013

2012

2011

2010

2009

0 2005

According to central bank NBP chief Marek Belka, Polish banks need to come up with an offer for their FX-mortgage borrowers to help share the pain and prevent deterioration in asset quality or administrative decisions to help borrowers, which could prove much more costly for banks and/or taxpayers.

15% of the total by 2020 to meet EU rules on carbon emissions. The main challenge for the government has been to continue promoting development of clean energy, at the same time keeping the growth of energy prices in check. The existing subsidy system fails provide long-term guarantees, and governments across Europe have been progressively cutting subsidies.

Poland's installed wind energy capacity in MW

2008

"FSC emphasized the need for a symmetrical approach to market risk, both as regards banks and their clients. Therefore, FSC has accepted the banksâ&#x20AC;&#x2122; declaration that they will consistently apply negative LIBOR rates. At the same time, the Committee recommends that banks should consider not introducing limitations to the interest formula applied in loan contracts. A number of key lenders have since agreed to apply negative interest rates to CHF loans," it said.

"We finally have a framework and the scenario is much clearer. Investors and banks will see this very positively. Stability and clear rules will keep existing investors and bring new ones," comments Mikel Garay, managing director at Taiga Mistral, a Spanish wind energy investor.

2007

The Committee urged commercial banks to "take into account the complexity of the situation surrounding the CHF loans" including the negative interest rates in Switzerland, which stand at -0.75% following the recent cut.

clearing the way for its official adoption in the coming months. Although the Renewable Energy Act can still be amended or rejected by the Senate within 30 days, the legistlation is widely expected to come into force by mid-2015. Poland has been working on the new regulations for way over three years, leading many renewable energy investors to suspend their projects due to legal uncertainty.

2006

160bnand 9.4% of GDP), the banking sector is stable and resilient to external shocks, including major changes in the exchange rate," read an official statement the FSC.

*) as of end of Q3

Turning to renewable power auctions is estimated to allow Poland to save over PLN 7bn (EUR 1.6bn) annually over the coming years. According to government estimates, by moving away from the current subsidy scheme, the country will save up to PLN 20bn by 2020 alone. Poland generates around 90% of its electricity from coal and must increase renewable energy to at least

The introduction of the new renewable energy l;aw will be hugely positive for the market, according to Mikel Garay, Managing Director at Taiga Mistral, a Spanish private equity fund investing in renewable Image: Taiga Mistral energy projects.

"Following the adoption of the new law the current oversupply of green certificates will be corrected, their prices will go up and recover their targeted values," says Mikel Garay.

weekly newsletter # 069 / 26th January 2015 / page 5

The aim of the new legislation is to replace the certificates, with their fluctuating prices, with feed-in tariffs. As a result, developers and owners of new renewable installations will be able to sell their energy at auctions for a fixed price that would be guaranteed for 15 years regardless of market prices, but not longer than till the end of 2035, which is when the support scheme is to end. According to Mr. Garay, a fixed indexed price for 15 years should make banks comfortable. The proposal also sets a ceiling on the subsidy. Under to the new bill, renewable energy installations up to 10 kW (micro-installations) will be supported by feed-in tariffs, while larger systems can apply for FIT distributed in an auction system. Tariffs are foreseen for 15 years and are capped to the first 800 MW of installed capacity: 300 MW for installations below 3 kW and 500 MW for installations between 3 and 10 kW. The auction system is expected to be in force at the beginning of 2016 and the first auctions are to take place in the second half of the year. The green certificates will not disappear completely, however, as the owners of operating renewable energy installations will be able to choose between the green certificates or the auction system. However, all new or upgraded installations will be subject to the auction system. In order to participate in an auction new installations will have to obtain a certificate of admission to the auction, preceded by a formal opinion carried out by the President of the Energy Regulatory Authority (URE). This obligation will not apply to existing renewable energy installations that have the right to choose between the two systems. "As far as the negatives are concerned, a non-indexed substitution fee for operating assets means that the law is in a way retroactive. Moreover, biomass cofirers will continue to receive a portion of the green certificates and in my opinion they should not. As for the assets to be commissioned after January 1, 2016, it

will be difficult for investors to prepare a business plan without winning an auction. There is uncertainty about prices, and financing will come only once the auction is won." Since the new law is likely to enter into force as of end of 2015, some investors (for instance RWE Innogy, see the next story) are in a hurry to complete their projects this year in order to take advantage of the existing support mechanism, despite its shortcomings.

of the project later this year, RWE's total installed wind energy capacity in Poland reach 214 MW. "Poland is an important core market for us. Following times of regulatory uncertainty, the final draft of the new Polish Act on the Promotion of Renewable Energies has now been completed. This is an important step on the way for sustainable investments and hence for the construction of Opalenica – and we are open to further projects", explained Hans Bünting, CEO of RWE Innogy.

"This makes sense as long as they make it before December 31st, 2015. In case they fail to make it on time, they will have to participate in the auctions to earn the feed-in premium. Taking into consideration possible delays in construction, I would not advice anyone to go forward until they have won an auction," concludes Mikel Garay. Poland's installed renewable energy capacity came to 5,844 MW as of end of September 2014 , up by over 1,400 MW compared to end-2012, according to energy market regulator URE. Wind power capacity increased the most, reaching 3,668 MW as of Q3, followed by biomass-fueled plants with 1,009 MW and hydro-power capacity amounting to 979 MW, the data showed.

RWE's deal with Nordex covers seven N117 2.4MW turbines (pictured), which are slated for installation at the project in the Poznań region in the summer. Image: Nordex

ENERGY & RESOURCES

RWE to build 17 MW wind farm near Poznań RWE Innogy, the renewable energy arm of Germany's RWE has broken ground on their 7th wind farm in Poland. Based in Opalenica, in the Poznań region, the farm will include seven Nordex turbines with a combined capacity of 17MW. Following the commissioning

The first Polish Renewable Energy Act aims to change the current subsidy scheme ("green certificates") into a tendering scheme. This auctioning system is to apply to all plants that will be commissioned after the Act has come into force. Operators of existing plants which will feed electricity into the grid for the first time before the end of 2015 will be able to choose between the old subsidy scheme and the new system. This explains why RWE is in such a hurry to deliver Opalenica by the end of this year.

weekly newsletter # 069 / 26th January 2015 / page 6

"For the time being, we will opt for the tried and proven certificate system for projects where we can choose. The auctioning system will still have to prove itself on the Polish market although it has already been successful in other European markets and is thus a promising alternative", explained Hans Bünting.

PROPERTY & CONSTRUCTION

Griffin secures more prime assets in Warsaw

German wind turbine maker Nordex said the Opalenica wind farm is expected to have an aboveaverage capacity factor of 34% despite the fact that the overall height of the systems has been capped at 150 metres by an administrative order. To date, Nordex has installed 14 wind farms with a combined output of 240 megawatts in Poland.

Luxembourg-based Griffin Real Estate has become such a force in Poland's property sector that there seems to be virtually no week without some major deals involving the company. Just recently, Griffin has agreed to acquire Qualia Development, the property arm of Poland's top lender PKO BP as well as secured one of Warsaw's most attractive investment sites.

At the present time, RWE operates six onshore wind farms in Poland with a total installed capacity of 197 MW. The wind farms are located in three regions: Nowy Staw is situated near the city of Gdańsk, Krzęcin and Tychowo are located in Western Pomerania, Poland, and the wind farms Suwałki, Piecki and Taciewo are situated next to each other in Podlasie region in the northeast of Poland.

Besides the Qualia unit, which specializes in apartment buildings and condo hotels and is value in the bank's books at PLN 317m, the Griffin-PKO agreement includes also two office buildings in central Warsaw, which will most likely be demolished to make space for much larger office projects. The whole transaction, may reach PLN 400m according to estimates, and it is to close in late Q1/early Q2 as Griffin is currently awaiting consent from the anti-monopoly regulator.

RWE's key Polish operations include the main unit RWE Polska (which supports the group's development in the country and sells energy to some 0.9m clients primarily in the Warsaw area) and the Warsaw power grid company RWE Stoen Operator. Last year the latter announced plans to invest more than PLN 1.6bn in the development of the Warsaw power grid(see BR+ No. 038), following a estimated PLN 1.9bn worth of investments in the past decade. RWE Business Services, RWE's shared services arm, is in the process of increasing the headcount of its Kraków unit from 150 to 250 employees. The center handles bookkeeping & finance processes for all RWE group subsidiaries as well as HR management services for 19 group companies from Poland, Germany, Netherlands and the UK.

Earlier this month, Griffin Real Estate had acquired more than 0.8 hectares of land in the so-called Serek Wolski area of the Wola district of Warsaw which is regarded as one of the most attractive investment sites in the city. The company obtained the plot from the Holy Trinity Lutheran Church in Warsaw in return for the Prima Court office building in downtown Warsaw and a tenement house in downtown Wrocław. Transactions involving the swapping of properties are very rare in Poland, noted Piotr Fijołek, partner at Griffin Real Estate. The company earlier bought 0.15 hectares of building land from the Spanish Harmonia Gruppo in the same area. Griffin Real Estate plans to develop a major office project on the Serek Wolski

site. The company has revealed the scheme will be developed in cooperation with developer Skanska Property Poland. "The investment, which encompasses the construction of a certified green office complex, is at a very early planning stage. We will be able to provide more details with respect to the size and timeline of the project once we have completed formalities, and obtained all permits," Katarzyna Zawodna, Managing Director at Skanska Property Poland tells Poland Today. Griffin Real Estate has recently also acquired 0.6 hectares of land on ul. Towarowa in the Wola district of Warsaw on which it is planning to develop a major office project. The value of the transaction has not been disclosed. Currently, the site in question houses a Statoil petrol station. Griffin Real Estate has not revealed any details regarding the future redevelopment of the plot but it has announced that the petrol station is going to continue to operate at least till the end of next year. For Griffin Real Estate, the latest acquisition marks the last phase of the process of acquiring plots in the area of ul. Towarowa which the company initiated in late 2013 by purchasing the Jupiter shopping centre site. In July and December last year, Griffin Real Estate purchased a number of plots on ul. Miedziana and ul. Panska which neighbour the Jupiter mall. Following the acquisitions, the investor currently owns a total of approximately 6.2 hectares of land in the area. The Jupiter shopping centre will continue to operate till the end of 2017. Property market experts expect that a new large-scale shopping centre or a mixed-use complex with a number of mid-rise buildings featuring office and residential space could be developed in the location. The sites acquired by Griffin Real Estate are located close to Daszynskiego Roundabout where a stop of the second subway line will soon be completed.

weekly newsletter # 069 / 26th January 2015 / page 7

Major developers including Ghelamco, Hines and Skanska Property Poland, have large office projects there. Griffin Real Estate has managed to achieve its goal of becoming the owner of the largest amount of land in the business centre of Warsaw that can house commercial real estate space, Fijołek said. He pointed out that the significance of the Wola district on the business map of the Polish capital is rising. "Seeing the potential, we decided to make investments in the area,” Fijołek said. Griffin Group was founded in 2006 as a joint-venture between Polish Cornerstone Partners and British Chelsfield Partners, as a platform to manage funds focused on real estate investment in Central and Eastern Europe, mainly in Warsaw. In March 2013 the global private equity giant Oaktree Capital Management joined the project with a view to create a long-term platform for real estate-related investments in Poland, including direct purchases of assets, development projects and lending activities. Griffin and Oaktree had been cooperating since 2010 with the private equity partner providing the Warsawbased property investor with some EUR 150m for acquisition of several key assets, including Hala Koszyki, Meble Emilia, Renoma shopping center, office buildings in Warsaw and a land bank for residential development. Following the takeover of Chelsfield's stake in Griffin, as a shareholder, Oaktree pledged to invest a further EUR 200m into their projects. Last year, the investor acquired the Nordic Park, Bliski Office Center and Company House II office buildings in Warsaw, as well as the Centrum Biurowe Lubicz office complex in Krakow.

PROPERTY & CONSTRUCTION

VIG targets Poland for long term property investments A few weeks ago (see BR+ no. 066) we wrote about the acquisition of two office buildings in Warsaw by Vienna Insurance Group. The Austrian insurer purchased Jasna 26 and Libra Business Centre, with a combined GLA of 21,700 sq.m from Polish developer Mermaid Properties. Since VIG has so far been better known as one of the most active investors in Poland's insurance market, Poland Today asked the company to tells us more about their approach to property investments.

Following a number of acquisitions in recent years, the Vienna Insurance Group is represented in Poland by three non-life insurance companies, Benefia, Compensa and Interrisk, and three life insurers, Benefia Life, Compensa Life und Polisa Life. Premiums at VIG’s Polish group companies Compensa, InterRisk, Benefia and Polisa totaled some PLN 4.8bn (EUR 1.2bn) in 2013, making VIG one of the country’s top three insurers. The premiums were almost evenly divided between the non-life and life divisions. The entire VIG Group, which operates also in Austria, the Czech Republic, and several other markets, raised EUR 7bn in gross written premiums over the first three quarters of the year. Listed in Vienna and Prague, VIG is the leading insurer in Austria and a major player in the CEE region with about 23,000 employees and 50 companies in 24 countries.

"Poland is one of VIG’s core markets and due its stable economic environment, VIG is strategically interested in selected acquisitions. For the VIG Fund, these are the first acquisitions and underline the Group’s strategy to invest in Class A assets in core markets in Central and Eastern Europe as part of VIG’s sustainable commitment to the region," VIG's spokesperson Julia Thaller told Poland Today.

TRANSPORT & LOGISTICS

"We are interested in long-term investments - buy and hold - and in prime locations, for example near the center or well-established business locations. The Group focuses on good tenant structure and long-term leases. The VIG Fund is a platform that enables VIG Group companies to invest in real estate across the CEE region," Ms. Thaller added, confirming that the fund may be interested in further acquisitions in Poland, should the properties in question meet its criteria.

Alstom’s Pendolino, the first high-speed train to operate in Poland, which has been in service since midDecember, attracted some 150,000 passengers during the first month. With a seat occupancy ratio at roughly 50%, the Pendolino has so far failed to revolutionize Poland's intercity passenger transport. PKP Intercity, the train's operator, is hoping to sells 3m tickets for the new high-speed service in 2015.

Pendolino trains travel half empty, but PKP Intercity is counting on 3m passengers in 2015

The Pendolino trains have replaced previous Express InterCity Premium services that connected Poland's

weekly newsletter # 069 / 26th January 2015 / page 8

main cities of Warsaw, Gdańsk, Gdynia, Kraków, Katowice and Wrocław. Thanks to the Pendolino (as well as a large-scale modernization of key railway routes), the travel time from Warsaw to Katowice & Kraków has been shortened to 2½h. It takes only 3h to get from Warsaw to Tricity and 3h40min to reach Wrocław.

The trains were manufactured in Savigliano, Italy, the Alstom centre of excellence for Pendolino. Image: Alstom

It may still be too early to assess how big of a success the Pendolino has been, as since December 14, 2014 only nine Pendolino trains have been in operation, with six serving as backup. To-date, Alstom has delivered 19 of the 20 trainsets ordered by PKP Intercity, of which 16 have already been tested. By March 15, 2015, 17 Pendolinos will be in service, with three being kept in reserve. Moreover, in the first few weeks PKP Intercity offered an extra pool of low-cost tickets for the new highspeed train, with as many as 70% of all Pendolino tickets being sold at a discount. With regular tickets on the Warsaw-Kraków route being priced at PLN 105-150 one way, many regular passengers will end up choosing cheaper (albeit slower) alternatives, such as the PolskiBus.com coach service. Amid falling gasoline prices and improving road network, the car also provides a cost effective alternative. In the end, the Pendolino may provide a convenient solution for busi-

ness travelers, for whom the comfort and speed of travel are more important than the price of the ticket. PKP Intercity ordered the Pendolino under a EUR 665m deal awarded to Alstom in 2011. The PKP Pendolino has seven cars and can carry up to 402 people in three classes: first, second, and dedicated closed compartments for families. The cars are all equipped with air conditioning, passenger information on LED screens, table and sockets for each passenger, high luggage capacity, and bicycle storage. Besides the delivery of 20 high speed trains, the contracts covers full maintenance of the fleet for up to 17 years and the construction of a maintenance depot, in Warsaw. The 12,000 sq.m newly-built depot employs 92 people at the moment, but the figure is to reach 130 at full capacity. The first of the 20 trains were to be commissioned in May 2014, but Alstom failed to obtain Polish certification on time. Discussions between the manufacturer and the Polish railway authorities lasted a couple of months before the Polish Office of Rail Transport, responsible for the supervision of the railway sector’s safety in Poland finally certified the Pendolino trains in September 2014. During the tests performed, the Pendolino beat its own speed record with 293 km/h, establishing also Poland’s highest ever speed record on rail. However, due to limitations of the Polish railway network, they mostly travel at 160km/h reaching 200 km/h only on an 80km section between Zawiercie and Olszamowice. Poland has bought the slower, nontilting version of the Pendolino. The European Union allocated EUR 74m for the development of high speed rail travel in Poland as part of its sustainable transport initiatives. An additional EUR 10bn will be granted within the EU cohesion fund 2014- 2020 to further support the development of the Polish railway network. With 20,000 km of tracks, Poland has the 3rd biggest railway network in Europe.

TRANSPORT & LOGISTICS

MLP Group is eyeing Germany following a record year in Poland The Warsaw-listed industrial space developer MLP Group signed leases for 256,000 sq.m and boosted the amount of built-up space by more than a fifth last year, reaching 367,000 sq.m. The company intends to maintain a similar growth pace in 2015 and mulls expansion across Poland's western border. "We are analyzing development in the German market. We expect to sign the first contracts across our western border already in H1 2015," says Radosław T. Krochta, Chief Executive Officer and Vice - President of MLP Group S.A. In 2014, MLP Group S.A. signed 33 leases for a total of approx. 256,000 sq.m of warehouse and office space. Out of this number, 195,000 sq.m was related to agreements with new clients in MLP's newly built or expanded parks. A further 8,000 sq.m was leased by the developer's existing clients, who boosted their premises in existing parks. MLP also handed over some 8,000 sq.m of completed space to new clients. Last but not least, existing contracts for 45,000 sq.m were extended for subsequent periods. Two of the largest leases were signed in the final weeks of 2014. In its largest contract ever, MLP agreed to develop three buildings with a combined 120,800 sq.m of warehouse space for Polish retail group Czerwona Torebka near Poznań, under a 15-year lease. In December, the developer was awarded a contract to build a new central warehouse for the Polish supermarket chain Piotr i Paweł. The project, with a

weekly newsletter # 069 / 26th January 2015 / page 9

floor space of 38,000 sq.m is to be delivered in 20162017 in Teresin near Warsaw, but the retailer has also secured an additional 7,000 sq.m in Poznań, where it currently leases 8,500 sq.m from MLP.

In the first three quarters of 2014 MLP boosted its revenues by 9.2% to PLN 75.3m, while its net assets increased by 25.3% and came close to PLN 547m. As of end of Q3 2014, the value of the Group’s investment property was just above PLN 1bn, having increased by PLN 78.7m from the end of the prior year. The key shareholder in MLP Group is Cajamarca Holland B.V., a Dutch-based subsidiary of the Tel-Aviv-listed Israel Land Development Company Ltd.

of convenience stores that has grown from 80 locations in mid-2013 to nearly 350 as of end of 2014. Established by Mateusz Świtalski, the son of Czerwona Torebka's founder, Małpka Express is hoping to speed up the pace of expansion to reach 300 new stores per annum in the coming years, aiming at 2,500 locations. Unlike its main competitor Żabka, which focuses on big cities, Małpka Express targets all promising locations with no exceptions. Interestingly, Żabka also belongs to a private equity investor, the Czech fund Penta.

RETAILERS

MLP Pruszków I near Warsaw is MLP's oldest asset, Spread across 43ha, the project can house up to 167,000 sq.m of industrial space. Image: VW

"Last year was record - breaking for us in terms of leases. The outlook for our industry has been improving every year. Therefore in 2015 we hope to at least maintain the current growth rate," commented Radosław Krochta. The company increased the total amount of built-up space by 21% over the past year, reaching 367,00 sq.m as of end of December. MLP Group is currently developing six logistic parks: Pruszków I & II, Tychy, Poznań, Bieruń and Lublin, with a target area of 775,000 sq.m. Although at the moment the company offers expansion potential primarily in the Pruszków II, Poznań and Lublin parks, it is preparing further investments in Western and central Poland, including MLP Poznań West and MLP Teresin. With these projects, MLP Group’s target warehouse space will exceed 1 million sq.m.

Private equity fund Pinebridge to acquire convenience store chain Małpka Express At the end of last year private equity company PineBridge entered an agreement to acquire Polish convenience store chain Małpka Express from the Warsaw-listed retail group Czerwona Torebka. PineBridge, which holds a 16% stake in Czerwona Torebka, is seeking to take over a full stake in Małpka Express via its special purpose company Fortream Investments Limited. The value of the transaction is to reach PLN 362.3m, and the investor is also ready to inject up to EUR 12m of additional financing into the company, if needed. Czerwona Torebka is a brainchild of Mariusz Świtalski, the creator of Poland's most successful retail concepts (Biedronka discount groceries, Żabka convenience stores, and Eurocash wholesale warehouses). The company started up as a developer of neighborhood shopping plazas, only to change its strategic focus to retail in August 2013, when it acquired Małpka Express, a rapidly expanding franchise chain

Małpka Express was created in 2012. Image: Małpka Express As for Czerwona Torebka, it has recently focused on the development of Dyskont Czerwona Torebka, a discount grocery concept that targets both small towns (with population of 10,000+) and big cities, but unlike its key rivals Biedronka and Lidl, does not sell private labels, focusing on brand name goods only. Every product carries two price tags: a retail and a wholesale one, the latter being applicable when a client purchases more than six items of the same kind. The chain has opened 31 locations to-date, but its long-term plan is 100 openings annually. Besides the two retail chains and its network of shopping plazas, Czerwona Torebka is also the owner of one of Poland's top mul-

weekly newsletter # 069 / 26th January 2015 / page 10

timedia retailer and e-commerce operators Merlin.pl. The group counts on synergies between its online and brick & mortar business on the of logistics and purchasing side. Czerwona Torebka debuted on the Warsaw Stock Exchange in 28 December 2012, raising merely 19m instead of the PLN 280m it had been hoping to get. Despite the disappointing IPO, the business attracted a strong minority shareholder in the shape of private equity fund Pinebridge, and its listed status enables it to finalize acquisitions via share swaps, which proved handy in the case of Merlin.pl and Małpka Express. In the first three quarters of last year Czerwona Torebka turned over PLN 262m (up from PLN 101m in Q1-Q3 2013) while its net loss on continued operations quadrupled and came to PLN 104m. The company's share price lost more than 80% of its value last year.

pansion of the VIVO! chain," explained Eduard Zehetner, CEO of Immofinanz Group. The Austrians are developing VIVO! Krosno in cooperation with retail property firm Acteeum (the latter has a 15% stake in the project). The two have been cooperating on Immofinanz's ongoing investment in Stalowa Wola. The new shopping center will have a GLA of approx. 22,000 sq.m with more than 70 stores as well as roughly 800 parking spaces. Krosno has a population of approx. 50,000 plus a catchment area, including the cities of Jasło and Sanok, with roughly 350,000 residents. The location offers optimal traffic connections in the southern area of the city with direct access to the newly built ring road.

RETAIL PROPERTIES

Immofinanz to build 22,000 sq.m shopping center in Krosno Austrian property firm Immofinanz Group has secured a 6-ha site in Krosno, southeastern Poland, for a 22,000 sq.m shopping centre. The project will be delivered at the cost of EUR 37m under Immofinanz's newly created VIVO! shopping center brand. "We plan to continue our expansion in the Polish retail sector – in 2014 alone, we opened 33,000 sqm of retail space in this core country. Krosno follows VIVO! Piła, which opened in October 2014, and VIVO! Stalowa Wola, which is now under construction, as the third city in Poland for our VIVO! brand. Further locations are currently under evaluation to drive the rapid ex-

space, of which 91% was leased upon opening. Immofinanz acquired the project when it was still being built, from Polish developer Rank Progress. The total investment on VIVO! Piła came to EUR 32m. The project in Stalowa Wola, 60km north of Rzeszów, is to reach completion this year at the cost of EUR 50m with a GLA of approx. 30,000 sq.m. Besides the VIVO! shopping centers, the Vienna-listed developer is expanding also its network of STOP.SHOP.-branded retail parks. To date, the company has launched three properties under that logo (Kętrzyn, Legnica & Mława) and its target for the coming years is ten STOP.SHOP. retail parks. Immofinanz is close to completing its flagship retail development in Poland – Tarasy Zamkowe in Lublin, which is set to open in Q1 2015. The EUR 95m shopping and entertainment project will comprise up to 38,000 sq.m of rentable space divided into ca. 150 retail units.

ject in Q1 2017. Image:Immofinanz

Besides shopping centers, Immofinanz Group's ongoing investments in Poland include the Nimbus office building (19,000 sq.m of GLA) in Warsaw, and residential projects Riverpark in Poznań (189 apartments) and Dębowe Tarasy in Katowice (phase three with 317 apartments). Immofinanz has recently decided to pull out of the logistics sector in Poland and the Czech Republic, starting with the sale of Bokserska Distribution Park in Warsaw and Westpoint Distribution Park in Prague for a combined EUR 33.2m.

The key features of Immofinanz's VIVO! concept include single-storey construction and a focus on fashion and entertainment with strong anchor tenants. According to the company, the concept is aimed at the so-called "secondary" cities with 40,000 to 100,000 residents and a catchment area of at least 200,000 persons. The first VIVO! project in Poland was opened in October last year in Piła with 24,000 sq.m of rentable

The Vienna-listed company, which carried out a secondary listing in Warsaw last year, has recently completed one of the largest ever deals on Poland's property market with the EUR 412m sale of Silesia City Center retail property in Katowice to an international consortium of investors led by Allianz. Silesia City Center has about 340 stores with combined floor space of 89,000 sq.m, all of which is occupied.

Immofinanz hopes to deliver the VIVO! Krosno pro-

weekly newsletter # 069 / 26th January 2015 / page 11

Since its founding in 1990, Immofinanz has compiled a portfolio that now comprises more than 470 investment properties with a carrying amount of approx. EUR 6.9bn. The company concentrates on development management and sale of commercial properties in top locations. Immofinanz Group concentrates its activities in the retail, office, logistics and residential segments of eight regional core markets: Austria, Germany, Czech Republic, Slovakia, Hungary, Romania, Poland and Russia.

projects: Vivo! in Piła (23,800 sq.m), Centrum Galardia in Starachowice (18,000 sq.m), Galeria Dębiec in Poznań (9,800 sq.m), and a number of extensions (11,800 sq.m in CH Rywal in Biała Podlaska as the largest).

INVESTORS SPEND EUR 570M ON POLISH RETAIL ASSETS

RETAIL PROPERTIES

Busy year ahead of shopping center developers Although figures regarding modern retail space completions vary somewhat, depending on the source, market experts agree that the 2014 saw less space delivered to the market than in the prior year. According to JLL, Poland's shopping centre stock rose by 332,000 sq.m last year, down from 466,000 sq.m in 2013. With way over 700,000 sq,m of shopping centre space under construction as of end of 2014, the 2015 is expected to be the busiest year developers since 2009. Developer activity was centered on Poland's mediumsized and small cities last year, with 45% of completions in cities with fewer than 100,000 residents and 26% in cities with population between 100,000 and 200,000. The biggest shopping centers to enter the market in 2014 were: Atrium Felicity (75,000 sq.m) in Lublin, Galeria Warmińska (41,000 sq.m) in Olsztyn, Galeria Siedlce (34,000 sq.m) in Siedlce, and Galeria Amber (33,500 sq.m) in Kalisz. In Q4 alone, shopping centre market expanded by 65,000 sq.m in three new

it became a frequent occurrence to surrender or suspend new developments, developers are now taking greater care when analyzing the location and target group for future investments, for when dealing with an extremely competitive and demanding market they cannot afford to make any mistakes," Magdalena Frątczak, Director, Retail Department, CBRE.

With a floor area of 75,000 sq.m Atrium Felicity in Lublin was the largest new shopping center opened in 2014. Image: Atrium

Poland's modern retail space stock totals 12.4m, of which shopping centers represented some 8.82m sq.m - up from 3.8m sq.m in 2004 when Poland entered the EU. Throughout the last year, the shopping centre density increased from 220 to 229 sq.m/ 1,000 residents. Upon completion of all shopping centers that are currently under construction, the figure is to grow to reach 248 sq.m/ 1,000 residents, which still places Poland below the Western European average of 260. According to JLL, the total amount of modern retail space delivered to the Polish market last year across all formats (shopping centers, retail parks, outlet centers and retail warehouses) came to 476,000 sq.m. CBRE said new completions amounted to 425,000 sq.m, representing a 30% decline. "After a year dominated by launches of shopping centers and approx. 17 smaller developments that fit in the convenience and retail park trend in smaller cities, the new year will bring a greater number of new developments in agglomerations and large cities. However, as

The total volume of retail investment transactions concluded in Poland in 2014 amounted to approximately EUR 570m, with the most notable transactions being the sale of Poznań City Center by TriGranit, Europa Capital and Polish State Railways to the consortium of Resolution and ECE Fund for an undisclosed amount; and the acquisition of Focus Mall in Bydgoszcz by Atrium European Real Estate from Aviva Investors for EUR 122m. Importantly, there is a number of retail investment deals at very advanced stages that were expected to close in Q4 2014 but were delayed to 2015 (a significant number of these transactions is expected to be finalized in Q1). Investors’ sentiment for retail in Poland continues to be strong and volumes in 2015 are expected to significantly exceed those recorded in 2014. Source: JLL

Although according to current plans an estimated 547,000 sq.m of shopping center space is to hit the market this year, analysts doubt all of the projects will be finished on time. However, should new completions indeed reach this level, the 2015 would be the best year for the sector, on the development front, since 2009. The largest projects in the pipeline for 2015 include Zielone Arkady in Bydgoszcz (50,000 sq.m) and Sukcesja in Łódź (45,000 sq.m), while the largest project currently under construction is Posnania in Poznań (99,000 sq.m, scheduled for 2016).

weekly newsletter # 069 / 26th January 2015 / page 12

Also, extensions and refurbishments of existing centers continue to be among the most important market trends. This year, some 40% of all new spaced will be delivered in the largest agglomerations. "New projects entering already saturated markets present challenges for aging schemes and those which are considered secondary. As the competitive environment changes and improves in quality, weaker centres may be facing higher vacancies. This may further deteriorate their position if proper strategy is not implemented. This will be the case not only in smaller cities, but also in some of the largest agglomerations," said Anna Wysocka, head of retail agency at JLL. Although retailers continued to expand their footprint in Poland last year, by entering new cities, boosting presence in the best-performing markets as well as introducing new brands, their growth was far from straightforward, according to JLL, which described the overall approach as "stable yet selective." "Expansion managers no longer merely examine a given location and its competitive environment, but also consider the general macroeconomic characteristics of a given city and its catchment with potential market drivers and future development scenarios”, Wysocka added. Rents for average-sized fashion units at top retail centers remained stable last year in most markets with the exception of Tricity and Szczecin, where they went up by 5% and 10% respectively. The best shopping centers in Warsaw also slightly raised rents last, which currently stand at EUR 105 / sq.m/ month. The most expensive units in leading centers outside of Warsaw can be rented for approximately half of that.

Poland Today Events

demand by both the Polish and global economy,” he said.

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

The picture though, is not all rosy. Fears of labor flight, a lack of communication between Wrocław’s universities and its business community and the city’s reliance on the BPO sector, were felt at the conference. “While BPO is well developed, it’s just one part of the picture,” said Karol Patynowski, an associate director at JLL Poland.

Recent events: PRIMETIME WROCŁAW

Poland's entrepreneurial entrepreneurial capital? Wrocław is one of Poland’s most business friendly cities, but it needs to continue bringing academia and companies together to stay ahead Is Wrocław Poland’s entrepreneurial capital? Is it innovative? And what should it do to focus on sustainability? These were the questions on the minds of journalists and business leaders at Poland Today’s Primetime Wrocław conference, held January 14 in the Old Town Hall in the city’s centre. Wrocław City Council Chairman Jacek Ossowski offered a robust defence of the city in a “fireside chat” with The Economist’s Poland correspondent and frequent contributor to Poland Today, Jan Cienski. Ossowski focused on Wrocław’s educational assets, as a city that produces highly valuable graduates and crucially, keeps and employs these graduates within the local economy. “The city has the asset of educating people in the sectors that will likely pay well and are in

Panelists talk over the challenges facing Wrocław. From left: Barbara Kaśnikowska, CEO of Wałbrzych Special Economic Zone INVEST PARK; Jan Cienski, Poland correspondent for The Economist; Radek Kokot, head of advertising operations for Central and Eastern Europe at Google; Joanna Bensz, Country Manager and vice president of CH2MHILL Polska and vice president of AmCham.Photo: Natalia Dobryszycka / Poland Today

Wrocław boasts a number of top-notch universities, but how can businesses utilize such an attractive asset? Patrycja Radek, deputy director of marketing and sales at EIT+, offered a blueprint of how universities can fruitfully engage with the business world. “We brought in world-class professors and developed research labs. We call EIT+ a space for innovation – it’s open to anyone with an idea,” she said.

weekly newsletter # 069 / 26th January 2015 / page 13

Krzysztof Karolczyk, a plant development manager at Fortum Power and Heat Polska, is also at the forefront of capitalizing on the city’s labor market. “We want to combine the world of the academy with the world of business in order to develop innovation, and to get heat to our customers faster, safer and in more environmentally friendly ways. The question we ask every day is how can we improve the lives of our customers,” he said.

Poland Today would like to thank the event’s partners: ARAW, Fortum Power and Heat Polska, UBM, JLL, Vastint and CH2MHILL, as well as patrons MIPIM, AmCham and EIT+, as well as cocktail party partners Brasserie 27 and the Europeum Hotel.

Upcoming events: MEDIA PATRONAGE

CCIFP GALA 2015 ‘80s in Paris’ February 6, 19:30 Sofitel Hotel Warsaw Victoria Ul, Królewska 11, Warsaw Guests of the conference enjoyed premium networking at a cocktail party at Brasserie 27 in Wrocław. Photo: Natalia Dobryszycka / Poland Today

As the conference came to an end, the themes were clear: the city needs to continue to think big, refrain from resting on its laurels, and eschew complacency. “At the end of the day, Wrocław is an innovative city,” said Marek Ulanecki, a leasing manager at Vastint Real Estate. All the attendees of the conference had a lively enthusiasm for entrepreneurship. Drive, passion and intellectual capability are clearly present in Wrocław, what remains is for the city to bring it all together. by Gabriel Rom

The annual Gala of the CCIFP has already become a tradition. In the past years this prestigious event gained particular significance among companies that are members of the CCIFP and has become an important moment in the agenda of the Polish-French community. Every year the Gala evening offers a great opportunity to meet representatives of French business in Poland, high profile Polish politicians and influential representatives of media. The elegant Sofitel Warsaw Victoria is an ideal place for the occasion. The Gala also offers extraordinary entertainment. During this year’s Gala the CCIFP will invite their guests to join them in a unique time travel back to the magical 80s in Paris. An extraordinary artistic show full of dance, lights and colors is prepared for the evening in a truly French atmosphere.

The annual CCIFP gala has become an important event for the Polish-French business community. Photo: CCIFP

The CCIFP Gala is synonymous with culinary and artistic excellence. To cater to the tastes of the guests, the chef de cuisine will invite them to a delicious journey through the regions of France and prepare a special dinner on the top level of culinary art. Meals full of finesse created with the best products and prepared with the greatest care will go with the exquisite taste of delicious and original French wines, carefully selected by an acclaimed sommelier. Feel free to contact the CCIFP and make a reservation for a table on this prestigious Gala evening, on 6th of February in Sofitel Warsaw Victoria. Please visit http://ccifp.pl for more information.

weekly newsletter # 069 / 26th January 2015 / page 14

KEY STATISTICS Consumer Prices

Inflation

Clothing, shoes

-4.7

+1.1

Housing

+0.5

Transport

-3.2

-0.1

-3.2

0.0

0.0 +3.6

+0.1

+3.5

-0.1

-0.2

-5.0

-1.1

-4.6 +3.4

-4.6

+0.1 +0.5

+0.1 +0.4

0.0 +0.4

0.0

-1.0

-3.0

-0.8

-2.0

-2.4

-3.7

Communications +4.0

0.0

-0.4

-0.3 +3.0

Gross CPI

0.0

-0.6

0.0

-0.3

-6.5

-0.7 +3.0

-0.6 -0.2

-1.0

Aug '14 Sep '14

Oct '14 Nov '14

+4.7

-1.1

-0.9

+4.2

-9.1

+2.1

+1.7

+1.6

+2.3

-0.2

y/y (%)

Year

2009

2010

2011

2012

2013

-1%

Turnover in PLNbn

582.8

593.0

646.1

676.0

685.7

-2%

y/y (%)

+4.3

+5.5

+11.6

+5.6

+2.3

0.0

Dec 14

0.0 +3.6

-2.5

Oct 14

Alcohol, tobacco +3.6

-0.2

Jun 14

-2.2

Jul '14

m/m (%)

m/m

Aug 14

+0.1

Apr 14

-2,0

Dec 13

Food & bev

Month y/y

Feb 14

y/y m/m y/y m/m y/y m/m y/y m/m

Oct 13

Sector

Retail Turnover

Jun 13

Dec '14

Aug 13

Nov '14

Apr 13

Oct '14

Feb 13

Sep '14

Dec 12

Data in (%)

-0.3

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-Dec y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

(in '000 units)

Producer Prices

Industrial Indust rial Output

Permits

2014

(%)

156.7

+13.0

Commenced

142.9

127.4

148.1

+16.3

m/m (%)

-0.1

+0.3

0.0

-0.4

-0.5

-1.0

m/m (%)

-0.1

+2.0

-8.5

+16.5

+3.5

+0.3

-2.3

U. construction

670.3 692.7 723.0

713.1 694.0

706.9

+0.3

y/y (%)

-1.8

-2.1

-1.5

-1.6

-1.3

-1.6

-2.5

y/y (%)

+1.7

+2.3

-1.9

+4.2

+1.6

-7.5

+8.4

Completed

160.0 135.7

152.5

143.4

-1.2

2008

2009

2010

2011

2012

2013

2014

Year

2008

2009

2010

2011

2012

2013

2014

Source: Central Statistical Office (GUS)

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

-1.5

y/y (%)

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

+3.3

Gross Domestic Product (ESA2010)

Month

Year y/y (%)

Jun'14 Jul'14 Aug'14 Sep'14 Oct'14 Nov'14 Dec'14

Jun '14 Jul '14 Aug '14 Sep'14 Oct'14 Nov'14 Dec'14

Construction Output

Construction Prices Month

Month

Jun'14 Jul'14 Aug'14 Sep'14 Oct'14 Nov'14 Dec'14

Month

Period

Jun '14 Jul '14 Aug '14 Sep '14 Oct '14 Nov '14 Dec '14

m/m (%)

0.0

-0.1

m/m (%)

+16.9

+0.9

-5.4

+19.8

+7.2

-9.4

+29.7

y/y (%)

-1.4

-1.2

-0.9

-0.8

-0.7

-0.6

--.8

y/y (%)

+8.0

+1.1

-3.6

+5.6

-1.0

-1.6

+5.0

2008

2009

2010

2011

2012

2013

2014

Year

2008

2009

2010

2011

2012

2013

2014

Year y/y (%)

+4.8

+0.2

-0.1

+1.0

+0.2

-1.8

-1.2

y/y (%)

+12.1

+5.1

+4.6

+11.8

-0.6

-12.0

+3.6

Source: The Central Statistical Office of Poland, GUS

Gross Wages

131.7

146.1

GDP in PLN bn current prices

Growth y/y unadjusted

Current account def. in % of GDP

Q3 2014

+3.3%

426.836

-1.3%

Q2 2014

+3.5%

418,317

-1.2%

Q1 2014

+3.4%

403,121

-1.1%

Q4 2013

+3.0%

463,855

-1.3%

2013

+1.7%

1,662,052

-1.3%

2012

+1.8%

1,615,894

-3.6%

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

Sentiment Indicators

2011

+4.8%

1,553,582

-5.0%

Sector

Economic sentiment and consumer confidence indicators

2010

+3.7%

1,437,357

-5.1%

163 3,747 164

Energy

6,736 205 6,358

193 6,020

183 6,392 194

Construction

3,895

166 3,706

158 3,884

166 3,872 165

Retail & repairs

3,456

147 3,544

151 3,577

153 3,532

3,913

151

138 3,666 130 3,650

129 3,710

6,695

174 6,987

181 6,835

177 6,835 177

Financial sector 6,602

148 6,747

152 6,738

151 6,360 143

National average 3,823

152 3,895

155 3,740

Transportation IT, telecoms

Source: Central Statistical Office (GUS)

149

131

3,781 154

100

-20

-40

60 De c 14

145 6,044 137

161 3,663 160 3,743

120

Sep 14

196 6,333 144 6,382

3,690

Jun 14

8,615

Manufacturing

C onsumer confidenc e (le ft a xis) Economic se ntiment (right axis)

Mar 14

Dec 13

Se p 13

Jun 13

M ar 13

De c 12

Q3 2014

Sep 12

Q2 2014

Jun 12

Q1 2014

Ma r 12

Coal mining

Q4 2013

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

Key Economic Data & Projections Indicator

2011

2012

*2014

*2015

GDP change

+4.5%

+1.8%

+1.7%

+3.3%

+3.2%

Consumer inflation

+4.3%

+3.7%

+0.9%

+0.0%

-0.4%

Producer inflation

+7.6% +3.4%

-1.3%

-1.5%

-1.1%

CA balance, % of GDP

-5.0%

-3.7%

-1.4%

-1.5%

-2.2%

Nominal gross wage

+5.2%

+3.7%

+3.4%

+3.5%

+3.8%

Unemployment**

12.5%

13.4%

11.5%

10.9%

4.12

4.19

4.20

4.18

4.15

EUR/PLN

2013

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

weekly newsletter # 069 / 26th January 2015 / page 15

100 DKK

56.90 ↓

100 SEK

45.35 ↓

10,000 JPY

USD EUR 350

48.65 ↑

300

318.34 ↓ 15.22 ↓

100 CZK 10,000 HUF

400

10 Feb 14

100 NOK

136.01 ↑

Money Supply Aug '14

Sep '14

WIG Total index

PLN (up to 1 year)

4.5%

PLN (up to 5 y ) PLN (over 5 y) PLN (total)

4.4%

4.1%

4.8%

4.7%

3.6%

4.8%

4.7%

4.5%

3.9%

↑ Alior Bank

4.7%

4.5%

4.0%

↑ Asseco Pol.

4.7%

4.4%

4.0%

↑ Bogdanka

EUR (up to 1m EUR) 1.9%

1.7%

1.6%

1.7%

↓ BZ WBK

EUR (over 1m EUR) 3.4%

3.1%

2.5%

2.4%

↑ Eurocash

Overnight

1 week

1 month

3 months

6 months

2.02%

2.04%

2.03%

2.02%

2.00%

Nov '14

Reference

Lombard

NBP deposit

Rediscount

2.00%

3.00%

1.00%

2.25%

Monetary base

167,008

166,104

171,649

169,090

574,529

578,485

574,606

583,682

- Currency outside banks

124,986

124,389

125,902

127,107

1,003,128 1,003,354 1,011,930 1,017,659

- Time deposits

448,037

444,514

457,106

453,769

1,020,561 1,021,824 1028,665 1,033,418

- Net foreign assets 162,129 159,513 157,084 160,634 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

+9%

+4%

51,680. 680.12

53.8

+1%

+17%

Change 1 week

+3% ↑

+2%

-21%

Change end of '13

+1% ↑

343.15

-1%

-11%

36.5

+4%

-23%

WIG-20 blue chip index

24.74

+1%

-30%

84.77

20.4

-4%

-62%

2,319 2,319. 319.59

↑ Kernel

32.48

+7%

-15%

Change 1 week

+3% ↑

↑ KGHM

108.25

+5%

-8%

Change end of '

-3% ↓

+8%

-14%

↑ Grupa Lotos

Warsaw Inter Bank Offered Rate (WIBOR) as of 23 Jan 2015

Oct '14

WIG-20 stocks Price Change Change in alphabetical 23 Jan 16 Jan end of order '15 '14 '13

Jun '14 Jul '14 Aug '14 Sep '14 Oct '14 Nov '14

↓ JSW

Central Bank (NBP) Base Rates

in PLN m

as of 23 January 2015

7,716

↑ LPP

WIG Total closing index

466.2

+3%

-7%

↑ Orange Pol.

8.2

+2%

-16%

Credit

↑ Pekao

179

+4%

54,000

The financial sector's net lending in PLN bn,

↓ PGE

19.07

-2%

+17%

53,000

loan stock at the end of period

↑ PGNiG

4.36

+1%

-15%

↑ PKN Orlen

53.31

+6%

+30%

-16%

51,000 50,000

Type of loan

Aug' 14

↑ mBank

Sep' 14

Oct' 14

Nov' 14

Loans to customers

950,774

954,978

958,641

966,268

→ PKO BP

- to private companies

277,482

280,248

279,124

282,031

↑ PZU

508.65

+6%

+13%

- to households

587,136

590,208

592,068

593,456

↑ Synthos

4.07

+2%

-26%

↓ Tauron

5.01

-1%

+15%

Total assets of banks

1,718,251 1,737,728 1,742,288 1,755,746

Source: Central Bank NBP

last three months

52,000

23 Jan 15

432.23 ↑

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

29 Dec 14

564.68↓

100 CHF

23 Jan 15

100 GBP

12 Nov 14

423.54 ↓

4 Sep 14

100 EUR

Key indices

Term / currency

450

27 Jun 14

376.87 ↑

17 Apr 14

100 USD

Stock Exchange

Average weighted annual interest rates

2 Dec 14

as of 23 January 2015

I nterest rates

7 Nov 14

100 USD/EUR against PLN

Central Bank average rates

16 Oct 14

Currency

Source: Warsaw Stock Exchange

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

Poland exports and imports according to commodity groups, according to SITC classification EXPORTS in PLN bn Jan-Sep 2014

y/y (%)

share (%)

2013

EXPORTS in PLNbn

IMPORTS in PLN bn share (%)

Jan-Sep 2014

y/y (%)

share (%)

2013

share (%)

No Country

Jan-Nov share 2014

IMPORTS in PLN bn 2013

share No

Country

Jan-Nov share 2014

2013

54,009

+4.3

10.7

69,304

10.9

36,296

+3.9

7.2

47,906

7.4

1 Germany

164,416 26.1% 162,548 25.1%

1 Germany

138,921 21.8% 142,161 21.7%

7,729

+19.9

1.5

8,624

1.4

3,158

+5.8

0.6

4,150

0.6

2 UK

39,890

6.3%

42,138

6.5%

2 Russia

68,146 10.7% 79,578 12.1%

Crude materials except fuels

12,459

+2.1

2.5

15,744

2.5

16,368

+07

3.2

21,585

3.3

3 Czech Rep.

39,520

6.3%

40,110

6.2%

3 China

Fuels etc

21,003

-6.1

4.2

30,013

4.7

55,523

-0.5

11.0

75,539

11.7

4 France

35,354

5.6%

36,367

5.6%

4 Italy

34,920 5.5% 34,940 5.3%

Food and live animals Beverages and tobacco

66,219 10.4%

61,127 9.3%

1,471

+4.7

0.3

1,864

0.2

1,985

-0.6

0.4

2,646

0.4

5 Russia

27,329

4.3% 34,069

5.3%

5 Netherlands

23,878 3.8% 25,409 3.9%

Chemical products

46,392

+4.3

9.2

59,103

9.3

75,454

+6.7

14.9

92,917

14.3

6 Italy

28,514

4.5%

27,958

4.3%

6 France

23,782 3.7%

Manufactured goods by material

101,308

+2.8

20.1

129,915

20.3

90,508

+6.9

17.8

112,392

17.3

7 Netherlands

26,026

4.1%

25,707 4.0%

7 Czech Rep.

22,712 3.6% 24,054 3.7%

167,104

+4.0

32.9

216,608

33.4

8 Ukraine

n/a

18,020

2.8%

8 USA

15,542 2.4%

17,431

51,133 +16.6

10.1

58,210

9.0

9 Sweden

17,917

2.8%

17,581

2.7%

9 UK

16,296 2.6%

17,184 2.6%

10 Slovakia

15,965

2.5%

17,099

15,559 2.4%

15,137 2.3%

Animal and vegetable oils

Machinery, transport equip.

190,119

+5.1

37.8

239,434

37.5