Poland Today Business Review+ No. 067 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. 067 / 12th January 2015 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING Manufacturing PMI remains in expansion territory in December page 2 BANKING & FINANCE Polish bankers face new challenges in 2015 page 2 ENERGY & RESOURCES Poland cancels nuclear site contract with WorleyParsons page 4 Kompania Węglowa loses approximately PLN 60m on every ton of coal it mines. Photo: KW

Thousands of mining mining jobs facing the axe

Europe's largest coal miner, the ailing state-owned giant Kompania Węglowa (KW), is to be taken apart as part of desperate attempts by the Polish government to keep the entire industry from going under. The restructuring, which envisages four mines shut down and thousands of miners sacked, is facing stiff opposition from trade unions. page3

Helicopter tender attracts top players

The world's top three helicopter makers: Sikorsky, Airbus and AgustaWestland have placed bids in Poland's PLN 10bn utility helicopter tender. The Defense Ministry seeks to purchase 70 machines, which are to be assembled and serviced in Poland, creating jobs in the country's aircraft industry. page 10

PROPERTY & CONSTRUCTION Skanska sells two office projects and begins new scheme in Poznań page 5 TRANSPORT & LOGISTICS PKP Cargo seals deal to buy Czech Republic's no.2 railfreight firm page 6 CBRE fund buys 3rd logistic park in Warsaw page 7

tel. +48 881 650 600

IT & MEDIA Amazon expands Gdańsk technology development unit page 7 RETAIL PROPERTIES TH Real Estate teams up with Neinver, buys two Polish outlet malls page 8 Mayland gets financing for 42,000 sq.m retail project in Kraków page 10 POLITICS & ECONOMY Ministers see 2014 GDP growth at 3.4%; deficit at ca. 3% of GDP page 12 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 13-15

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weekly newsletter # 067 / 12th January 2015 / page 2

Total net earnings of Polish banks in PLNbn 16 14 12 10 8 6 4 2 *2014

2013

0 2012

"The December manufacturing PMI declined compared to the previous month but it was still the second-highest reading since March 2014," said Agata Urbańska-Giner, Economist, Central & Eastern Europe at HSBC.

"The positive message is that the manufacturing PMI rebounded in Q4 2014 to 52.4 from 49.3 in Q3 2014 and 51.0 in Q2 2014. We are cautiously optimistic on the outlook for Poland, and look for growth to consolidate at just over 3% y-o-y in 2015. Weak external demand remains one of the key downside risks. Inflation outlook is set to remain very benign. We expect the consumer price deflation to last at least until Q2 2015 leaving the central bank under pressure to respond with policy easing. But given MPC's recent focus on growth in the short-term we do not expect any rate cuts as long as growth holds up," Ms. Urbańska-Giner added.

2011

Poland's purchasing managers' index PMI, a gauge of manufacturing, declined to 52.8% from the November level of 53.2 points, but remained above the 50 points threshold that separates expansion from contraction. HSBC and Markit, the report's authors, called the reading "a robust overall improvement in business conditions" driven by "further solid increase in new orders" including new export orders.

The most obvious issue the banks will continue to have to deal with over the coming months are recordlow interest rates, which amid a deflationary environment are unlikely to go up in the near future. The main reference rate has been at 2% since October, which is bound to affect bank revenues. In 2013 Polish banks cashed in PLN 35bn from interest, some three times more than from fees & commissions.

2010

Manufacturing PMI remains in expansion territory in December

The reading was supported by continued expansion of production, new orders, exports and employment while backlogs rose for the first time since May 2011, authors said. Sales were supported in part by continued decline in sales prices of manufactured goods, down for the 25th straight month. The rise in backlogs signaled "growing pressure on capacity," authors said, while finished goods inventories were down for the twelfth straight month.

2009

MANUFACTURING & PROCESSING

Source: KNF *) Q1-Q3

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

BANKING & FINANCE

Polish bankers faci facing new challenges in 2015

45 Oct 13

Dec 13 Feb 14 Apr 14

Source: Markit & HSBC

Jun 14 Aug 14 Oct 14 Dec 14

Although Polish lenders kept breaking new profit records almost every year over the past half a decade, seemingly unaffected by the economic slowdown, according to analysts the 2015 is likely to be the most challenging period in years for the country's banking sector. A combination of unfavorable economic conditions and administrative decisions is expected to dent bank profits.

Moreover, since the official interest rate serves as a point of reference for the limits set in Poland's antiusury law, banks will not be allowed to offer loans with annual interest of more than 12%. Although Polish lenders have found ways to bypass these limits on certain types of loans, they find it difficult to do so with standard account debit or credit card debt. Thus, the lower usury limit may lead to slightly lower bank interest earnings. Banks will also be required to pay higher contributions to the bailout fund BFG, which has recently paid out an estimated PLN 800m to the clients of the bankrupt credit union SKOK Wspólnota. Since a number of other SKOKs are said to be in dire straits, BFG has de-

weekly newsletter # 067 / 12th January 2015 / page 3

cided to double the amount it collects from banks, in order to better prepare itself for any further bankruptcies. The increased contributions to BFG may set the Polish banks back by an estimated PLN 600-900m. This year will also see the limit on interchange fees on card transactions lowered from 0.5% to 0.3% (in the case of debit cards, the most commonly used kind). This may seem like a minor correction but a few years ago interchange fees in Poland were running as high as 1.55% (the weighted average between Visa and MasterCard consumer cards in 2012), adding as much as PLN 1.5-2bn annually to bank balance sheets. Following government intervention that led to the introduction of administrative limits, the banks are now making roughly a third of that amount.

Number of bank branches in Poland in thousands

Other problems Polish banks will have to deal with later this year will include tougher restrictions on sales of insurance products bundled with cards and loans, which currently generate a large portion of their revenues from commissions, as well as more consumer-friendly terms of personal bankruptcy. A number of banks started bracing for the tougher times already last year, focusing on cost cutting. In the first three quarters of 2014 the sector shed some 1,000 jobs, and currently employs an estimated 172,000. Layoffs affected mainly the staff of BZ WBK, Pekao, Getin and Citibank. At the same time, approximately 100 bank branches were closed down across the country, bringing their total number down to approximately 7,200. Market insiders are expecting this process to gain pace over time, as banks will continue to scaledown their networks gradually, as leases expire. In 2013 Polish banks posted a combined net profit of PLN 15.2bn, down from PLN 15.5bn in 2012 and 2011. In Q1-Q3 2014 the figure came to PLN 13.1bn, signaling that the full year figure may set a new record.

7.4 7.2 7.0 6.8 6.6

ENERGY & RESOURCES

6.4 6.2 *2014

2013

2012

2011

2010

2009

6.0

Source: KNF *) end of Q3

The 2015 brings also a revised loan-to-value limits on home loans. Since 2014 banks could not offer loans representing more than 95% of a property's value, and from this year the limit is 90%. This new limit may render some 10-20% of potential mortgage borrowers unable to take loans. According to estimates, more than 50% of all mortgage loans sold in 2013 had LTV ratio of 80% or higher.

Government Gov ernment to axe thousands of jobs in a bid to save Poland's ailing mining industry Europe's largest coal miner, the ailing state-owned giant Kompania Węglowa (KW), is to be taken apart as part of desperate attempts by the Polish government to keep the entire industry from collapsing. The company, which produces about a third of Poland's coal output, is to close down its four worst-performing

pits, with the remaining nine mines to be transferred to a special purpose company owned by Polish coal trader Węglokoks. The cost of the entire rescue program, which will see up to 4,800 jobs cut, has been estimated at PLN 2.3bn (EUR 530m). The announcement is a major shift from the government's earlier rescue plan for KW, announced in the autumn, which were to see Węglokoks acquire some of the latter's assets, providing the company with a much needed cash injection. KW lost EUR 260m in the first 11 months of 2014, and has liabilities of almost EUR 1bn, the company said. At the moment, KW loses approximately PLN 60 (EUR 14) for every ton of coal it mines. The company had to give up a bond issue in November after investors demanded too-high yields. "The priority is to save Kompania Weglowa," said Wojciech Kowalczyk, a government official responsible for the mining sector. "Today, the alternatives are clear: a recovery plan or bankruptcy. We cannot have a negative scenario, which is a chaotic bankruptcy and liquidation." Government officials were quoted saying that without immediate action KW would go insolvent in less than a month. Poland's state-owned coal mines have been struggling for months to return to profit as they cope with low coal prices, weak demand and high operating costs. Decreasing oil prices and the impact of US shale boom on energy prices has reduced the price of coal over the past 18 months to levels that have made many of Poland's mines unviable. Plagued by powerful trade unions, which have effectively sabotaged any real restructuring over the past two decades, KW is an outdated and inefficient business. Its executives have recently admitted that only three or four of the company's 14 mines are currently profitable. The key problem for Polish coalmines are high production costs, which at PLN 311 (around USD 100) per

weekly newsletter # 067 / 12th January 2015 / page 4

ton in 1H 2014, make Polish coal way too expensive, against global prices that oscillate around USD 70 per ton. In Poland, coal prices dropped 8% y/y in 1H, down to PLN 280. Following decades if not centuries of intensive exploitation, Silesian mines have to reach deeper and deeper for coal, which, together with excessive benefits, is pushing costs beyond acceptable levels. Polish coalmines extracted slightly more than 34m tons of coal in the first six months of 2014 (down by 2.8m tons y/y) with sales reaching 31.8m tons (down by 4.3m). Stockpiles of unsold coal amounted to 8.3m tons as of end of June. Although Poland' coal reserves are the second largest in Europe, it is cheaper for Polish power plants to import coal from abroad. Annually, KW produces merely 620 tons of coal per employee (35m tons in total). Globally, the worstperforming companies mine about 1,000 tons per fulltime employee. Britain’s coal mines, slimmed down after the drastic Thatcherite restructuring, produce more than four times as much coal per employee as Polish ones. The listed Polish Lublin-based coalminer Bogdanka, which benefits from a much more favorable geology than KW's Silesian mines, but which has also undergone in-depth restructuring, produced 9.2 tons last year, or 1,800 tons per worker. According to the latest plan, KW's mines are to be split into two groups. One group will consist of four financially hopeless mines that will be closed, and a new entity will be formed to run nine more viable mines. The remaining mine will is to be sold to a third party. The pits that are to be shut down currently employ some 10,500 workers, some 6,000 of whom are to be transferred to other mines. The plan also entails introducing a six-day working week and a new system of remunerations. KW employees made redundant by the plan are to be offered various compensation packages. The government will also seek to create special economic zones in the areas affected by pit closures, hoping to attract new investments and create jobs. Mining

trade unions objected the government plans last week, with more than 1,000 miners remaining underground after their shifts. The long overdue restructuring of Poland's mining sector, will be a major test for Prime Minister Ewa Kopacz and the ruling Civic Platform (PO) party, which faces both presidential and general elections this year. Coal mining in Poland employ 100,000 people who enjoy a range of benefits dating back to the communist times that are unheard of in any other industry. There does seem to be a growing resentment against these privileges among the Poles, but only time will tell whether the voters see the planned reforms as a step in the right direction and reward the PO with another term in power.

acterization works relying on the pool of resources existing within PGE Capital Group and in cooperation with national subcontractors already involved in the project," it added. According to unconfirmed reports in Polish media, WorleyParsons, which generates a large portion of its revenue from contracts with Russia, may have been delaying the Polish project on purpose to please Moscow. Poland's counter-intelligence services had reportedly warned PGE about the risk involved in employing the Australians.

ENERGY & RESOURCES

Poland cancels nuclear site contract with WorleyParsons PGE EJ 1, the nuclear energy subsidiary of Poland's largest utility PGE, has ceased cooperation with Australia's WorleyParsons, which was carrying out characterization work on the potential locations of Poland's first nuclear power plant. The contract PGE awarded to Worley Parsons back in 2013 was worth in excess of PLN 250m. "Notice of contract termination with the original contractor was submitted on December 22, 2014 due to WorleyParsons’ failure to meet contractual obligations and a delay in execution of works performed under the contract. The decision follows legal and business analyses conducted by the investor and external experts," PGE EJ 1 said. "The Company will continue site char-

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 Source: PGE the most likely candidate.

Poland's first nuclear power unit is to go online by 2025, according to the national nuclear power program the Polish government adopted last year. The first unit would then be set to start up by the end of 2024, with a second unit starting up by the end of 2030. The second nuclear power plant is scheduled for operation around 2035. PGE has signed non-exclusive agreements with reactor vendors to investigate Areva's EPR, GE-Hitachi's ABWR and ESBWR, and Westinghouse's AP1000 as potential technology choices for the project. A timeline issued earlier this year by the Polish government foresees selection of the location

weekly newsletter # 067 / 12th January 2015 / page 5

and reactor technology for the first plant by the end of 2016, with all the necessary construction approvals in place by the end of 2018. The site characterization works have been underway since February 2013 at Choczewo and Żarnowiec on Poland's Baltic coast and the final decision will be based on the findings of the environmental impact assessment report and the location report, the state-owned PGE said.

Energy generation in Poland in 2035 By source, government plans Nuclear 36%

Gas 11% Coal 39% RES* 14% Source: PGE

*) renewable sources

A few months ago PGE chose British engineering firm Amec as the technical adviser for its nuclear power plant project. Amec's role will be to support PGE EJ1, set up to build and run the plant, during the development and execution of the nuclear new-build project. Amec will support PGE EJ1 in meeting the requirements of the yet-to-be-selected reactor vendor and EPC (engineering, procurement and construction) contractor and other key service providers. The scope of the work will cover 13 areas of close cooperation from licensing to start-up and testing. According to PGE EJ1, the bid is worth just over PLN 1.3bn, with PLN 205m of that for "required work" and PLN 1.1bn for optional services.

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 pressure from the EU, which expects Poland to gradually do away with its coal-fired power stations, the government has been keen to find a viable long-term alternative, albeit one that would not increase the country's dependence on Russian gas. According to plans, by 2035 nuclear 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%. According to survey carried out by Millward Brown for the Economy Ministry, in November last year 58% of Poles supported the construction of a nuclear power station in the country, with 35% opposing the plan, and 7% having no opinion on the matter. The percentage of supporters was the highest since the ministry's first nuclear power plant poll in 2012.

PROPERTY & CONSTRUCTION

Skanska Skanska sells two office projects and begins new scheme in Poznań The last two weeks of 2014 were extremely busy for Skanska Property Poland, the Polish real estate development unit of Swedish construction giant Skanska. The company sold two office projects in Wrocław and Łódź and brok ground on a new investment in Poznań. Although Skanska's Dominikański project in Wrocław is to be completed in Q4 2015, the Hamburg-based real estate investment manager Union Investment decided to add the property to its Polish portfolio nearly 10

months before the building's scheduled completion. Union Investment is currently holding some EUR 600m worth of property assets in Poland's regional cities of Katowice, Krakow and Łódź. Located near Wrocław's landmark Dominikański Square, the Dominikański is to include 40,000 sq.m of class A office space, of which 50% has been leased todate. Among the scheme’s tenants are companies such as: HP Global Business Center occupying 16,400 sq.m and Deloitte as well as PKO BP. Skanska’s local units also have their offices in the complex. The second deal, sealed just before Christmas, saw Skanska sell its Green Horizon complex in Łódź to a fund managed by Griffin, one of the most active investors and developers on Poland's real property market in recent years. Backed by private equity fund Oaktree Capital Management, Griffin has put together an impressive portfolio of attractive sites in key Polish cities, including Łódź, where it owns the former Scheibler factory, which is to be transformed into a mixed-use complex combining office, retail, services and residential functions in historic and new buildings. Green Horizon was commissioned for use in Q2 of 2013 and offers ca. 33,000 sq.m of modern class A office space. The complex is almost entirely leased to companies predominantly from the business services sector. Among its main tenants are Infosys BPO and Southwestern, with Infosys occupying the largest space at over 21,000 sq.m. The sale of Dominikański and Green Horizon follows the divestment of Skanska's first project in Kraków, Kapelanka 42, to Polish fund REINO Dywidenda FIZ at the beginning of November 2014. As for the new project in Poznań, Skanska's second in the Western Polish city, it is to reach completion in Q4 2016, offering 25,000 sq.m of offices. The Maraton

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project will be developed in the very centre of Poznań and will comprise six floors and two underground levels with over 300 parking spaces. In the first phase, an underground garage part and 13,000 sqm of office space will be developed. The scheme will be located in proximity to a number of transport links, with Poznań Główny railway station just a few minutes away. Furthermore, the city’s Old Town as well as Stary Browar, the most famous centre in Poznan which combines an art gallery and shopping center, and four parks are located nearby.

Polish office project to-date, the 46,000 sq.m Silesia Business Park, is currently under construction. In Warsaw, Skanska has recently broken ground on Atrium 2, a 20,000 sq.m office tower in the heart of the city's central business district. Later this year the developer hopes to start working on the 80,000-sq.m Generation Park, Skanska's largest project in Warsaw to-date. In November last year, Skanska broke ground on its second project in Kraków. Located only a few minutes from the city center and scheduled for completion in Q4 2016, Skanska's Axis building will offer ca. 20,000 sq.m of modern office space. Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world's leading project development and construction groups, which currently has 57,000 employees in selected home markets in Europe, the US and Latin America. Skanska’s revenue in 2013 totaled SEK 136bn (EUR 15.8bn).

TRANSPORT & LOGISTICS Maraton will be Skanska's 2nd project in Poznań. Image: Skanska Property Poland

"Poznan is listed among the top regional cities for investments in Poland. It attracts global brands because of both its convenient location, and large pool of specialists – especially those who are linguistically proficient, specialize in IT, or finance and booking. Maraton’s design was developed with a focus on modern companies. These companies need office buildings which enable dynamic growth and that can also attract the most talented staff," comments Krzysztof Wilczek, Regional Director at Skanska Property Poland. Skanska Property Poland is very active in Poland's regional markets, with investments in Wrocław, Łódź, Poznań, Kraków and Katowice, where its largest

PKP Cargo seals deal to buy Czech Republic's no.2 railfreight firm In the last issue of BR+ we wrote about PKP Cargo's unsuccessful attempts to acquire the Warsaw-based operator CTL Logistics and Port of Gdańsk-based stevedoring firm PGE. However, on December 30, the Polish railfreight giant sealed a deal to purchase an 80% stake in AWT, the Czech Republic's secondlargest rail cargo firm, from Czech billionaire Zdenek Bakala and the Bakala Trust. The EUR 103.2m purchase is PKP Cargo's first ever acquisition of a railfreight operator outside Poland and is intended to

strengthen the company's presence in central and eastern Europe, particularly on north-south corridors. AWT has an 8% share of the Czech railfreight market and also operates in Slovakia, Slovenia, Hungary, Poland, Germany, Romania, Bulgaria, and Croatia. The company employs nearly 2,000 staff and operates a fleet of around 160 locomotives and 5,100 wagons. In AWT carried 12m tons of freight (1.54m ton-km) and achieved sales revenues of EUR 282m in 2013. Its EBITDA margin has grown consistently over the last five years. The deal includes AWT's terminal at Paskov near Ostrava, which is strategically located 25km from the Polish border and 60km from the Slovakian frontier. "We are convinced that there is a possibility to further increase our share in the Czech market and we recognize the enormous potential of the Ostrava-Paskov terminal, whose strategic location makes it highly suitable to serve as a hub for ports in Hamburg and Gdańsk," says Mr Jacek Neska PKP Cargo management board member for commercial affairs. The transaction, which will be financed entirely through PKP's own funds, is subject to approval from competition authorities in Poland, the Czech Republic, Slovakia, and Germany. PKP Cargo is also close to sealing a deal with the Polish copper mining giant KGHM concerning up to 50% of shares in the latter's rail freight unit Pol-Miedź Trans. The two firms signed an MOU in September 2013. PKP Cargo is the European Union's second largest railway freight company after Deutsche Bahn AG and the first publicly listed one, following its recent PLN 1.42bn IPO on the Warsaw Stock Exchange, which saw the state-owned Polish railway operator PKP sell 20.9m shares in the business. A few weeks ago PKP reduced its stake in the business by a further

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7.63m shares, down to 33%. The 17% stake in PKP Cargo was sold for PLN 580m.

BPH Towarzystwo Funduszy Inwestycyjnych S.A. (BPH TFI SA).

PKP Cargo saw its revenues top PLN 4.72bn in 2013, down from PLN 5.16bn in 2012, while its net earnings slumped to PLN 74m from PLN 268m, due to economic slowdown and an almost PLN 200m worth privatization bonus. Last year the company carried around 114m tons of freight, mainly hard coal and building materials. Based on the volume of transported goods and the distance travelled, PKP Cargo had a 56.7% share in the Polish market in 1H 2014.

The property is located in Zone I of Warsaw’s logistic market and comprises approximately 20,200 sqm of warehouse space and 10,400 sq.m of office space. There are 14 tenants in the centre, including Solid Group, Wincor-Nixdorf and Baltona.

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

TRANSPORT & LOGISTICS

CBRE fund buys 3rd logistic park in Warsaw CBRE Global Investors has added a third logistic property in the Warsaw area to its Polish portfolio with the recent acquisition of the "Ideal Idea" distribution and office park. A fund managed by CBRE Global Investors paid EUR 32m for the asset, which had previously belonged to an investment fund managed by

one of the world’s largest real estate investment management firms with USD 88.6bn in assets under management. It is an independently operated affiliate of the NYSE-listed commercial real estate services and investment giant CBRE Group, Inc. According to JLL, the vacancy rate in logistics parks located close to the Warsaw city centre stood at 15.6% as of end of Q3 2014. The total warehouse stock in this area exceeds 620,000 sq.m, with Warsaw suburbs offering a further 2.15m sq.m of modern logistic space.

IT & MEDIA

"Ideal Idea" has a GLA of more than 30,000 sq.m with a further 9,500 sq.m currently under construcImage: CBRE tion.

"The Ideal Idea park is perfectly located in the most stable logistic hub in Poland. This is our third acquisition in this location, after the purchase of Warsaw Distribution Centre in December 2012 and Manhattan Distribution Centre in November 2013. The property fits the investment criteria of the Fund and will add synergy to our existing portfolio in Zone I. I believe the acquisition of Ideal Idea will contribute to the performance of the Fund and meets the requirements of our investors," commented Richard Everett, Fund Manager, CBRE Global Investors. CBRE Global Investors has also inked a preliminary agreement to acquire an additional two buildings in the "Ideal Idea" park, comprising a combined 9,500 sq.m, which are currently under construction. With USD 88.6bn worth of assets under management as of end of September 2014, CBRE Global Investors is a is

Amazon expandi expanding Gdańsk technology development unit Besides its three giant distribution centers in Western Poland the company launched last year at the combined cost of more than EUR 300m, the global ecommerce giant Amazon is investing also in its Gdańsk-based development unit Ivona Software. The latter has just moved to Olivia Business Centre in Gdańsk, where Amazon leased 2,700 sq.m to house its newly-launched technology development center. Amazon has not disclosed how many new jobs will be created in Gdańsk as a result of the expansion, but says recruitment is already underway. "We are looking for the best professionals, both programmers as well as researchers, who share our passion for innovation and focus on customer needs," says Michał Kaszczuk, head of Amazon's development unit in Gdańsk.

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Amazon acquired Polish text-to-speech company Ivona Software for an undisclosed amount at the beginning of 2013, following the successful implementation of the latter's technology to power a number of features on its Kindle Fire tablets. Amazon said it had bought Ivona Software, to begin development of its technology in-house and "deliver world-class voice solutions to customers around the world."

Amazon has leased 2,700 sq.m at Gdańsk's Olivia Image: CBRE Business Center.

Established in 2001 by Łukasz Osowski and Michał Kaszczuk (when it was called IVO Software) in Gdynia, Ivona was initially working on solutions to help the blind and visually impaired. Over time it made its name offering text-to-speech technology for use in the voice user interfaces on mobile devices, computers, communication systems and services. In a number of global comparisons, the Polish company beat much larger competitors, such as Toshiba or Nokia, in terms of natural voice quality, accuracy and ease of use. The Ivona suite includes a wide range of text-to-speech solutions for consumers, developers who want to incorporate text-to-speech into their user interfaces, and business customers from a variety of industries, including accessibility, public announcement/ transportation, telecommunications, e-learning and more.

Currently, Ivona provides voice and language services with 49 voices in 22 languages. With its Ivona Voices with BrightVoice product, the company uses AI algorithms to detect expressions and characteristics in the human voice, which can then be used to read back words, sentences, paragraphs, speeches and books that it says is "virtually indistinguishable from the professional voiceover recording." For Amazon, Ivona has been instrumental in helping users receive audio prompts on their Kindle Fire tablets, but currently the Gdańsk development center is working also on Echo Amazon's intelligent, talking home speaker/virtual assistant, among other projects. Originally an online bookstore, Amazon has evolved into a global e-commerce platform that sells pretty much everything as well as produces movies, mobile phones and tablets, The Seattle-based giant, which has branches in Canada, Germany, France, China, Japan, Italy, Spain, Brazil and the UK, is yet to break even however, as its financial results to-date have failed to impress. In Q3 2014, the company posted a net loss of USD 437m on USD 20.58bn revenues. Although Polish customers can already order goods from Amazon's European retail websites, the US giant is yet to launch a Polish website. The last week of October saw the official opening of Amazon's three giant Polish fulfillment centers near Poznań and Wrocław, each measuring more than 123,000 sq.m. Delivered by US industrial property firm Panattoni Europe and Australian-owned Goodman at the estimated cost of more than EUR 100m each, the Polish centers are the most technologically advanced of Amazon's 30 existing fulfillment centers worldwide. Each of the centers, which serve Amazon's customers in Western Europe, has 2,000 full-time employees, and during the peak holiday season Amazon takes on an extra 3,000 temporary workers in Poland.

RETAIL PROPERTIES

TH Real Estate teams up with Neinver, buys two Polish outlet malls Global property investor TH Real Estate will acquire two outlet malls in Poland from Spain's Neinver as part of a newly formed strategic partnership between the two companies, which seek to create a "leading designer outlet platform in Europe." The joint venture will invest in a number of outlet malls focusing initially on Neinver’s existing portfolio and development pipeline across Europe. The Spanish developer will continue to provide its specialist and dedicated asset management and operational skills across the portfolio, the companies said. The partnership – a 50/50 exclusive shareholders joint venture agreement - has commenced with TH Real Estate’s acquisition of a 50% stake in Roppenheim The Style Outlets, in France, and will quickly grow in early 2015 with the agreed purchases of Factory Outlet Annopol in Warsaw and Factory Outlet and Futura Park, in Krakow, Poland. The joint venture will also develop out Neinver’s flagship project Viladecans The Style Outlets, in Barcelona, Spain. Both partners have aspirations to build a significant investment platform over time. TIAA Henderson Real Estate (TH Real Estate) is an investment management company with specialization in real estate equity and debt investing worldwide. The company was formed in 2014 from two organizations, TIAA-CREF and Henderson Global Investors, which currently hold the respective 60% and 40% shares in the business, which has offices across Asia and Europe, managing some USD 25.2bn of real estate

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assets across c.50 funds and mandates. Their alliance with TIAA-CREF in North America increases the company's global assets under management to c. USD 79.1bn, as of September 2014. TH Real Estate, which represents its main shareholder TIAA-CREF in the JV with Neinver, employs approximately 230 professionals in 11 countries.

Factory Annopol in Warsaw is Neinver's latest comImage: Neinver pletion in Poland.

"A partnership with Neinver allows us to further penetrate this niche market, opening up opportunities for us to broaden our geographic reach. It marks the first foray into the outlet sector on behalf of TIAA CREF. TH Real Estate, meanwhile, already has a wellestablished track record, having built up a USD 3bn+ global outlet mall portfolio across the UK, continental Europe & China. This partnership is aligned with our aspirations to expand our presence across the global market as further consolidation across the sector takes place," said David Turner, Head of TIAA European Investment, TH Real Estate.

Poland's top outlet mall developer Overall, Neinver's retail property portfolio totals 565,000 sq.m, of which some 230,000 sq.m is located

in Poland. Neinver is Europe's second largest outlet centre operator with properties in Poland, Spain, Portugal, France, Germany, and Italy, and the number one player in Poland where it has five centers: Warszawa Ursus, Warszawa Annopol, Wrocław, Poznań, Kraków with a total GLA of almost 84,000 sq.m and approximately 550 shops. The Kraków center is part of the 44,000 sq.m Futura Park complex, which encompasses also a retail park. Their most recent completion was the 19,700-sq.m Factory Warszawa Annopol, which opened in 2013 with 120 retail units and 1,400 parking spaces. Last year Neinver broke ground on a major extension of its Factory Warszawa Ursus property, which was opened back in 2002 as Poland's first outlet centre. By September 2015, the centre's GLA is to increase from 13,700 sq.m to 19,900 sq.m, boosting the number of retail outlets from 80 to 110. Additionally, the investor is to refurbish the existing building and more than double the number of parking spaces to a total of nearly 1,000.

Futura Park in Kraków is a 44,000 sq.m retail park Image: Neinver that houses also an outlet mall.

"Designer outlets have been one of the most widely misunderstood, but strongest performing, real estate sectors in Europe over the past decade and, relatively

speaking, they thrived during the global economic downturn. Strong demand from international retailers means the occupier base is broadening and covenant quality is improving; likewise, the investor base is deepening. Constrained supply, coupled with growing demand, should see continued rental growth and a long term structural improvement in investment pricing globally,” added Alice Breheny, Global Co-Head of Research at TH Real Estate. Besides outlet centers, Neinver has developed a number of major mixed-use and retail schemes in Poland. The company has recently launched its most ambitious project to-date, the EUR 240m retail-anchored mixed-use development Galeria Katowicka. Located in the southern Polish city of Katowice, the project is part of a large-scale urban revitalization scheme spearheaded by Polish State Railways (PKP), which chose Neinver seven years ago to trans-form a rundown train station into a modern transportation hub, shopping and office complex. Following the completion of brand new rail and bus stations, Neinver has delivered the retail section of the project, which includes more than 220 shops and service points set over four levels and 53,000 sq.m of GLA. Prior to Galeria Katowicka, Neinver's flagship Polish project was Poznań's Galeria Malta, 75% of which Neinver sold to US Heitman back in December 2010. The Spaniards have plans to extend the property in the near future. "We have been in the outlet business in Europe since 1996 and have established a successful track record, developing and managing USD 3bn+ of retail across continental Europe of which USD 2bn+ have been outlet centers, under the brands Factory and The Style Outlets. The joint venture with TH Real Estate will reinforce our specialized asset management and development skills and is a great opportunity to merge global expertise in the outlet sector, with a common approach to value creation," commented Daniel Losantos, Managing Director, Neinver.

weekly newsletter # 067 / 12th January 2015 / page 10

RETAIL PROPERTIES

Mayland gets financing for 42,000 sq.m retail project in Kraków Mayland Real Estate, the Polish property of French retail giant Casino, and its partner Foncière Euris have secured financing for the construction of the Serenada shopping center in Kraków. The two partners are to contribute EUR 45m of the total investment of EUR 140m, with the outstanding EUR 95m to be provided in commercial loans by banks Pekao SA, the Polish unit of Italy's UniCredit and BZ WBK, part of Spain's Santander Group.

amount would be spent on new shopping centers and mixed-use projects in Poland. Foncière Euris has been financing large commercial developments in Poland for some years including Manufaktura in Łódź as well as Mayland’s Riviera in Gdynia where Pekao SA, and BZ WBK, also provided loans. CH Riviera has evolved from a much smaller (21,000 sq.m) CH Wzgórze into the largest retail project in the TriCity region, with a GLA of nearly 70,000 sq.m, 238 retail outlets and 2,500 parking spaces. The capital expenditures on CH Riviera came to approximately EUR 200m.

Mayland's development pipeline Mayland's Polish projects, completed & planned

City

Name

GLA sq.m

Opening

Słupsk Opole Dabrowa Górnicza Gdynia

Completed Jantar Karolinka Pogoria Riviera

46,000 70,000 36,000 70,000

2008 2008 2008 2013

Kraków Wrocław Rzeszów Bielsko-Biała Piła Szczecin Przemyśl Warsaw Warsaw Zabrze Tarnobrzeg

Planned Serenada Idylla Bella Dolina Koniczynka Nimfea Aleja Slonca Karmina Libretto* Fort Wola n/a n/a

42,000 40,400 53,000 30,000 30,000 38,000 35,000 190,000 40,000 9,500 30,000

2016 TBA TBA TBA TBA TBA TBA TBA TBA TBA TBA

*) a mixed-use project combining offices and retail

Serenada is currently under construction in the north of Kraków, near an existing Real hypermarket, OBI home improvement store, Toys'R'Us, McDonald’s, Norauto, a 12 screen cinema and a large water park. Mayland's project will complement this offer with 42,000 sqm of GLA, focusing primarily on the missing operators there – including the fashion and catering industries. It will include 170 stores and 1,700 parking spaces. So far Mayland has signed leases for some 50% of the planned GLA at the centre, which is scheduled to open in 2016. Mayland Real Estate was formed in 2006 to manage shopping center development operations for the Casino group, which had sold its retail chains in Poland (Geant & Leader Price). A year later the company teamed up with the Whitehall fund managed by Goldman Sachs and announced an ambitious EUR 1bn investment program for the CEE region. Mayland Real Estate representatives told Poland Today's Lech Kaczanowski at the time that some EUR 750m of that

Source: Mayland, PT archives

POLITICS & ECONOMY Serenada is to reach completion in 2016.

Image: Mayland

The developer has since completed four retail properties in Poland: Jantar in Słupsk, Karolinka in Opole, Pogoria in Dąbrowa Górnicza, and Riviera in Gdynia with a combined GLA of 220,000 sq.m. Mayland had intended to deliver a further 10-15 projects to the market by 2012, but the financial crisis seems to have thrown a wrench in their plans. In 2009 the company sold Karolinka and Pogoria to Australian fund MGPA for EUR 187m, and three years later the two centers were bought by Heitman European Property Partners IV. MGPA passed up on the opportunity to acquire Jantar in 2009 for a further EUR 49m and the Słupsk property remains in Mayland's portfolio.

Global aircraft giants bidding in Poland's USD 3bn helicopter tender The world's top three helicopter makers: Sikorsky, Airbus and AgustaWestland have placed bids in Poland's PLN 10bn utility helicopter competition. The Polish Defense Ministry seeks to purchase 70 helicopters: 48 multi-role transport, 16 Search And Rescue/Combat SAR, and 6 anti-submarine machines. Since the choppers are to be produced and serviced in Poland, the tender of huge importance for the country's aerospace industry, regardless of which consorti-

weekly newsletter # 067 / 12th January 2015 / page 11

um grabs the contract. Defense Ministry experts are now to review the technical specifications of the submitted bids, whereas the Ministry of Economy is to assess the accompanying offset packages.

the Polish Defense Ministry three offers from reputable helicopter makers. Sikorsky has deep roots in Poland, and their PZL Mielec subsidiary has served as the S-70i Black Hawk helicopter’s global center for several years now, selling an international export variant of the UH-60 to customers from Colombia to Saudi Arabia and beyond. As the only competitor with proven helicopters in all roles and a deep industrial relationship, Sikorsky had been seen by many as the favorite, which is perhaps what gave the US company confidence to make additional demands with regard to the tender process.

and investment out of Poland, in order to better serve the industrial imperatives of major customers. AgustaWestland and its PZL Świdnik subsidiary would make Poland the major launch customer for their AW149 medium utility helicopter, which also has an armed variant but not a developed anti-submarine variant. The AW149 was offered to Turkey in an earlier tender, but it lost to the S-70i.

Airbus's EC 275 Caracal has been well tested during Image: Wikipedia missions in Afghanistan.

Since US Sikorsky and Italian-British AgustaWestland both have production units in Poland, their participation in the tender had been taken as a given, although in the past few months Sikorsky asked the Polish authorities twice (the first time together with AgustaWestland) to extend the bid submission deadline, saying it may abandon the procedure altogether if its demands are not met. Sikorsky's tactic was criticized by Airbus Helicopters President Guillaume Faury in an open letter: "I see it as a clear intend to destabilize the tender, thus jeopardizing the vital interests of Poland. This tender started two years ago with precise rules and agenda. The postponement of the tender would be unfair for those bidders who are strictly following the rules and providing solutions in due time." In the end, Sikorsky and its competitors were awarded an additional month to put together an offer, giving

There are more than 3,000 Black Hawk helicopters in Image: PZL Mielec service today in 27 countries.

AgustaWestland's AW149 is the newest of the three Image: Wikipedia rival models .

However, Poland is no longer Sikorsky’s only low-cost manufacturing option. A major Turkish "T-70" order is setting up a manufacturing location in Turkey, and the USD 3.5bn deal could lead to 600 helicopters being produced there, according to independent estimates. Then there’s India, whose competition for naval helicopters could also lead to another larger scale H-60/S70 local build and export deal. Some industry insiders suggest that either or both of those deals could become part of a gradual Sikorsky strategy to move its work

Poland is known to want a deeper industrial tie-up with Airbus, which doesn't have the same local base as Sikorsky or AgustaWestland, so their medium-heavy EC725 Caracal would depend on a recent teaming arrangement with the Łódź-based Heli Invest/WZL-1. Besides agreeing to build the helicopters in Poland, Airbus said it would also assemble engines there, at a Dęblin-based plant belonging to WZL-1. Regardless of the outcome of the tender, Airbus is to set up a product development unit in Łódź, which will employ some 100 engineers. Although the EC725 offers very good SAR/CSAR performance, it lacks a tested ASW variant and it is likely to be more expensive than its rivals, due to larger size.

weekly newsletter # 067 / 12th January 2015 / page 12

Poland's centre-right government, has put modernizing the armed forces high on its agenda. The Defense Ministry seeks to spend USD 43bn over the coming decade to replace outdated weaponry, much of which dates back to the Communist times. Investments will include a missile-defense system, new ships for the navy, upgraded tanks, military training aircraft, 70 helicopters, unmanned aerial vehicles and better equipment for ground troops. Overall, the share of the defense budget going on equipment will rise from 15% to 33%.

POLITICS & ECONOMY

Ministers see 2014 GDP growth at 3.4%; 3.4%; deficit at ca. 3% of GDP Poland may have recorded 3.4% or slightly higher GDP growth in 2014, above the government plan for 3.3%, the Economy Ministry said in a monthly report, maintaining their mid-December forecasts following the publication of November macroeconomic data (see pages 13-15 for up-to date figures). The government expects the Polish economy to expand by 3.4% 2015. The Finance Ministry has confirmed the 3.4% fullyear growth estimate, adding that the 2014 budget deficit settled below PLN 30bn, some PLN 17bn less than planned. "It is possible that the general government deficit dropped below 3% of GDP already last year, but this is not our base scenario," Finance Minister Mateusz Szczurek said last week at a meeting in the Polish Senate. The government's 2014 target was 3.3%. Szczurek has been recently named ‘Finance Minister of the Year 2015, Europe’ by The Banker, a London-based finan-

cial monthly owned by The Financial Times, in appreciation of his successful deficit reduction efforts as well as Poland's continuous GDP growth. "[Poland’s] economy may be the poster child for the central and Eastern Europe region – but western European countries could also learn a lot from Poland’s success," the magazine said. Poland seeks to reduce the general government deficit to 2.8% of GDP in 2015, but according to the Finance Ministry the final result may be even lower. "We are projecting the average annual inflation to have settled close to zero in 2014, against 0.9% in 2013. The inflationary pressures will remain low in 2015, which may negatively affect state budget revenues, despite being positive for household finances," Szczurek told senators. The 2015 budget act is based on a 1.2% CPI projection. Some forecasts expect Poland's economic growth to accelerate to over 4% by end-2015. These optimistic projections are built, however, on assumption of strong inflows of EU infrastructure funds and hopes for Euro zone quantitative easing, economists say. The average Q4 2015 forecast stands at 3.7%.

IN BRIEF: The Polish government raised minimal monthly wage to PLN 1,750 gross as of January 1 as a Council Of Ministers resolution from September last year takes effect. This marks a PLN 70 rise. For people in their first year of employment, the minimum salary cannot be lower than 80% of the minimum wage, i.e. PLN 1,400 gross. The minimum wage is negotiated on an annual basis by the Tripartite Committee, which brings together trade union, government and employers’ representatives. The government has until June 15 to propose a new mini-

mum wage for the following year, and if the Committee does not reach an agreement the government is charged with making a decision in the matter. According to the law on minimum wage the lowest salary depends on government estimates on inflation, GDP growth and other inflation indicators. The Polish currency suffered deep losses over the holiday period, with USD/PLN passing the 3.6 threshold and EUR/PLN trading at as low as 4.4 before recovering to 4.3. In December, the zloty lost more than 3% against the euro and close to 7% against the dollar, as Russia's deepening economic woes increased riskaversion in the region (see page 14). The exchange rate fluctuated seriously on the shallow holiday market, prompting some calls for the central bank to intervene. However, Poland's finance minister Mateusz Szczurek said he was not worried by the zloty's recent weakening, which supports the economy. Poland's registered unemployment rate increased to 11.4% in November from the prior-month level of 11.3%, according to Central Statistical Office (GUS) figures released at the end of December. The number of registered jobless at end-November measured 1.8m. Polish retail sales fell at an annual rate of 0.2% in November, on a 8.1% monthly decline, the Central Statistical Office (GUS) said. The PAP Polish news agency’s analyst survey had shown consensus expectations for annual growth of 1.7% and a monthly decline of 6.2%. In real terms, Polish retail sales were up by 1.4% year on year in November after a 3.7% y/y increase in October, GUS added.

weekly newsletter # 067 / 12th January 2015 / page 13

KEY STATISTICS Consumer Prices

Inflation

Alcohol, tobacco +3.8

0.0 +3.6

Clothing, shoes

-2.7

+1.1

Housing Transport

-5.1 +0.6 -1.5

-4.7

-2.5

-0.1

0.0 +3.6

+0.1

-4.6 +3.4

+0.1 +0.5

0.0

-1.0

-3.2

-0.2

-4.6

+0.1 +0.4

-3.0 -0.8

-2.0 -0.7

+1.3 +4.0

0.0

-0.4

-0.3 +3.0

Gross CPI

-0.4

0.0

-0.6

0.0

-0.3

0.0

-3.7

Communications +3.9 -0.3

-0.2

y/y (%)

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

Year

2009

2010

2011

2012

2013

Turnover in PLNbn

582.8

593.0

646.1

676.0

685.7

-1%

y/y (%)

+4.3

+5.5

+11.6

+5.6

+2.3

Nov 14

-2.2

Sep 14

+0.1

Jul 14

-2,0

Jul '14

m/m (%)

m/m

May 14

-1.6

Mar 14

-2.1

Jan 14

Food & bev

Month y/y

Nov 13

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

Sep 13

Sector

Retail Turnover

Jul 13

Nov '14

May 13

Oct '14

Mar 13

Sep '14

Jan 13

Aug '14

Nov 12

Data in (%)

-0.6 -0.2

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-Nov y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

(in '000 units)

Producer Prices Month

Industrial Output Output

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

Commenced

142.9

127.4

139.5

+15.3

+2.0

-8.5

+16.5

+3.5

+0.3

U. construction

670.3 692.7 723.0

713.1 694.0

706.9

+0.3

y/y (%)

+4.4

+1.7

+2.3

-1.9

+4.2

+1.6

-7.5

Completed

160.0 135.7

152.5

127.6

-1.2

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product (ESA2010)

-0.1

+0.3

0.0

-0.4

-0.5

m/m (%)

y/y (%)

-1.0

-1.8

-2.1

-1.5

-1.6

-1.3

-1.6

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 Output

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

Month

Period

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

m/m (%)

-0.1

0.0

-0.1

m/m (%)

+14.0

+16.9

+0.9

-5.4

+19.8

+7.2

-9.4

y/y (%)

-1.5

-1.4

-1.2

-0.9

-0.8

-0.7

y/y (%)

+10.0

+8.0

+1.1

-3.6

+5.6

-1.0

-1.6

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Year y/y (%)

+7.4

+4.8

+0.2

-0.1

+1.0

+0.2

-1.8

y/y (%)

+15.5

+12.1

+5.1

+4.6

+11.8

-0.6

-12.0

Source: The Central Statistical Office of Poland, GUS

Gross Wages Wages

(%) +14.3

-0.1

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

-0.2

Construction Prices

2014 144.4

-1.7

Month

m/m (%)

Month

Permits

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

n/a

Q2 2014

+3.5%

418,317

-1.2%

Q1 2014

+3.4%

403,121

-1.2%

Q4 2013

+3.0%

463,855

-1.3%

2013

+1.7%

1,662,052

-1.3%

2012

+1.8%

1,615,894

-3.6%

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

Transportation IT, telecoms

3,913

138 3,666 130 3,650

129 3,710

151 131

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

Source: Central Statistical Office (GUS)

149

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

Jun 12

Q2 2014

Sep 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

GDP change

+4.5%

+1.8%

+1.7%

+3.2%

Consumer inflation

+4.3%

+3.7%

+0.9%

+0.0%

Producer inflation

+7.6% +3.4%

-1.3%

-1.2%

+0.7%

CA balance, % of GDP

-5.0%

-3.7%

-1.4%

-1.8%

-2.4%

Nominal gross wage

+5.2%

+3.7%

+3.4%

+3.5%

+4.0%

Unemployment**

12.5%

13.4%

11.5%

10.9%

4.12

4.19

4.20

4.18

4.12

EUR/PLN

2013

*2014

*2015

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

weekly newsletter # 067 / 12th January 2015 / page 14

57.58 ↑

100 SEK

45.13 ↑

100 NOK

47.35 ↑

10,000 JPY

USD EUR 350

300

15.31 ↑

100 CZK 10,000 HUF

400

303.83 ↑ 134.79 ↓

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%

4.8%

4.7%

3.6%

4.1%

4.8%

4.7%

4.5%

3.9%

↑ Alior Bank

79.27

+3%

-3%

4.7%

4.5%

4.0%

↑ Asseco Pol.

53.10

+3%

+16%

Change 1 week

+1% ↑

4.7%

4.4%

4.0%

↓ Bogdanka

97.5

-1%

-22%

Change end of '13

+2% ↑

EUR (up to 1m EUR) 1.9%

1.7%

1.6%

1.7%

→ BZ WBK

374.50

-3%

EUR (over 1m EUR) 3.4%

3.1%

2.5%

2.4%

↓ Eurocash

37.11

-3%

-22%

WIG-20 blue chip index

↑ Grupa Lotos

26.7

+3%

-25%

↑ JSW

20.99

+21%

-60%

2,3 2,337. 37.21

→ Kernel

29.34

-23%

Change 1 week

+1% ↑

↓ KGHM

111

-1%

-6%

Change end of '

-3% ↓

7360.05

-3%

-18%

504.7

+3%

+1%

8.11

-3%

-17%

Warsaw Inter Bank Offered Rate (WIBOR) as of 9 Jan 2015 Overnight

1 week

1 month

3 months

6 months

2.09%

2.07%

2.05%

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

52,065. 065.88

4.4%

Oct '14

WIG-20 stocks Price Change Change in alphabetical 9 Jan 19 Dec end of order '15 '14 '13

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

Central Bank (NBP) Base Rates

in PLN m

as of 9 January 2015

↓ LPP ↑ mBank ↓ Orange Pol.

WIG Total closing index last three months

Credit

↓ Pekao

176.5

-3%

-2%

54,000

The financial sector's net lending in PLN bn,

↑ PGE

19.01

+3%

+17%

53,000

loan stock at the end of period

↑ PGNiG

4.55

+6%

-12%

↑ PKN Orlen

51.27

+5%

+25%

35.15

-11%

51,000 50,000

Type of loan

Aug' 14

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

482

+1%

+7%

- to households

587,136

590,208

592,068

593,456

↑ Synthos

4.16

+4%

-24%

↑ Tauron

5.06

+3%

+16%

Total assets of banks

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

Source: Central Bank NBP

52,000

9 Jan 15

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

10 Dec 14

356.63 ↑

9 Jan 15

548.35↑

100 CHF

28 Oct 14

100 GBP

12 Jun 14

428.37 ↑

21 Aug 14

100 EUR

Key indices

Term / currency

450

3 Apr 14

362.52 ↑

27 Jan 14

100 USD

Stock Exchange

Average weighted annual interest rates

18 Nov 14

as of 9 January 2015

I nterest rates

2 Oct 14

100 USD/EUR against PLN

Central Bank average rates

24 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-Oct share 2014

IMPORTS in PLN bn 2013

share No

Country

Jan-Oct 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

148,094 26.1% 162,548 25.1%

1 Germany

124,792 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

335,966

6.3%

42,138

6.5%

2 Russia

62,706 10.9% 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.

35,430

6.2%

40,110

6.2%

3 China

59,368 10.4%

Fuels etc

21,003

-6.1

4.2

30,013

4.7

55,523

-0.5

11.0

75,539

11.7

4 France

32,011

5.6%

36,367

5.6%

4 Italy

31,056 5.4% 34,940 5.3%

Food and live animals Beverages and tobacco

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

25,034

4.4% 34,069

5.3%

5 Netherlands

21,277 3.7% 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

25,808

4.5%

27,958

4.3%

6 France

21,780 3.8%

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

23,358

4.1%

25,707 4.0%

167,104

+4.0

32.9

216,608

33.4

8 Ukraine

10,922

1.9%

18,020

2.8%

8 USA

13,693 2.4%

17,431 2.7%

51,133 +16.6

10.1

58,210

9.0

9 Sweden

16,331

2.9%

17,581

2.7%

9 UK

14,687 2.6%

17,184 2.6%

10 Slovakia

14,368

2.5%

17,099

14,125

15,137 2.3%

Animal and vegetable oils

Machinery, transport equip.

190,119

+5.1

37.8

239,434

37.5