1. POLAND Privatisation Plans & Investment Opportunities January 2013 Mikołaj Budzanowski - Minister of State Treasury Paweł Tamborski - Deputy Minister of State Treasury

2. Located in the centre of Europe offering stable economic fundamentals Well educated and highly productive society Political stability Investment incentives 2 Poland – a distinctive economy… Note: Map: 201 1 GDP, Inflation & Population data 2011 (Eurostat, OECD) (a) Refers to population age 25-34 yrs. (b) GDP at current prices in USD c) Ministry of Finance * The Convergence Programme – 2012 update CEE - GDP (b) and Population (2011)Real GDP growth rate (c) GDP: 5.5% Inflation: 4.2% Population: 3m GDP: 4.3% Inflation: 3.9% Population: 38m GDP: 1.7% Inflation: 1.9% Population: 11m GDP: 1.7% Inflation: 2.3% Population: 63m GDP: 3.1% Inflation: 3.6% Population: 6m GDP: 3.3% Inflation: 4.1% Population: 5m GDP: 1.7% Inflation: 3.9% Population: 10m GDP: 2.5% Inflation: 5.8% Population: 21m GDP: -6.9% Inflation: 3.1% Population: 11m GDP: 0.7% Inflation: 3.1% Population: 46m GDP: -1.6% Inflation: 3.6% Population: 11m GDP: 3.0% Inflation: 2.5% Population: 82m GDP: 0.7% Inflation: 4.5% Population: 63m

3. 3 Source: (a) Ministry of Finance, European Commission, Central Statistical Office (GUS), calculation by the Ministry of Finance Cumulative GDP growth rates (a) 2008-2011 … the fastest growing European economy 15.8

4. 4 Stimulus packages contribute to economic stability and development ► Government spending forecast 2009-2012: for roads EUR 23bn for rail EUR 4bn ► The Energy Information Administration estimates Poland’s shale gas resources at 5.23tcm** ► Significant FDI inflows to Poland: EUR 68.6bn (2006-2011) ► Wide range of fiscal and pension reforms to reduce public finance deficit to ca. 3% of GDP and public debt to 52% of GDP in 2012 ► EUR 67bn up to 2013 ► 72% of EU funds already allocated* Source:Ministry of Transport, Construction and Maritime Economy, National Bank of Poland, National Cohesion Strategy, EIU report as of March 2012. Note:Currency conversion based on USD/PLN exchange rate of 3.1891 as of May 4 2012 EU funds inflow Shale gas Foreign Direct Investments Government stimulus Infrastructure spending *As of February 2012 ** Trillion cubic metres

5. 5 Stable monetary policy… Prudent monetary policy Inflation ForecastFX Developments National Bank of Poland interest rates (%) Source: IMF, National Bank of Poland, Global Insight World Overview, Ministry of Finance 5.21 3.23 4.20 Inflation National Bank of Poland’s medium term inflation target 2.5% ± 1 percentage point (since 2004)  Nov 2012: 2.8% y/y (core inflation 1.7% y/y)  2013 e: 2.7%  Avg CPI inflation : 3.0% (since 2004) 25bp interest rate cut to 4.25% (6 Dec 2012); NBP has signalled further cuts. GDP forecasts: 2.2% - 2013; 2.5% - 2014

6. 6 … and fiscal policy Key drivers behind fiscal policy Government budget balance (% GDP) Source: Ministry of Finance ; (a) The Convergence Programme – 2011 update A widening fiscal deficit in 2009 and 2010 related to automatic stabilizers, tax cuts and accumulation of large infrastructure projects in 2009-2012 (mainly EURO 2012) Expenditure (mainly infrastructure) financed by EU funds made up over 10% of total expenditure Since 2011 a strategy of systematic deficit reduction has been in place Government deficit expected to fall to 3.4% of GDP in 2012, 3.1% of GDP in 2013 Government targets: ‐public debt/GDP to fall to 51.4% in 2013; 2015 expected slightly above 50% ‐2013 target budget deficit PLN 35.6bn – actual deficit levels tend to be below budget Budget deficit execution (PLN bn)

7. 7 Privatisation via the Stock Exchange

8. 8  IPO and follow-on offerings pipeline  Civic Shareholding The intention is to to retain decision-making and intellectual capital creation in Poland. Why privatise? Capital Markets Privatisation Methods Polish Privatisation Programme 2012–2013  ca. 260 companies earmarked for privatisation (e.g. energy, food, transport, metallurgy, chemicals, services, coal mining, real-estate, defence, agriculture)  The Ministry intends to sell off all of its holdings in 85% of companies included in the Privatisation Programme  The Ministry will retain majority/controlling stakes in companies of strategic importance (mainly energy, financial and defence companies)  Negotiations following a public invitation, public tender, public auction  Direct sale to secure know-how and consolidated ownership  Price is the only selection criterion  Additional investor commitments Trade Sale  To transform and strengthen the domestic economy and capital markets  Promote Warsaw as a financial centre in the CEE region  To raise budgetary proceeds (est. privatisation proceeds in 2013 of EUR 1.2bn) *Exchange rate as of May 4, 2012: 1 USD = 3,1891 Privatisation Programme

9. 9 Privatisation via the Stock Exchange Key Sectors  Chemical  Energy  Financial institutions  Mining Privatisation Plan 2012-2013  Many companies earmarked for privatisation are already listed  Timing is dependant on market conditions WSECompanySectorState Hldg % ListedCiechChemicals38.72% ListedZA Pulawy ***Chemicals00.00% ListedGrupa Azoty Tarnow***Chemicals45.13% ListedENEAEnergy51.78% Not ListedEnergaEnergy84.18% Listed PGE* Energy61.89% Listed PKO BP* Financial Institutions33.39% Listed PZU* Financial Institutions35.19% ListedWSEFinancial Institutions35.00% Not ListedPHN S.A.Real Estate100% ListedJSW**Mining - Coal56.18% Not ListedKompania Węglowa**Mining - Coal100% Not ListedKatowicki Holding Węglowy**Mining - Coal100% Not ListedWęglokoks**Mining - Coal100% Note: * - Companies of strategic importance included in the Privatisation Plan ** - Companies under the supervision of the Ministry of Economy *** - New shareholding as part of the consolidation process (21 Jan 2013)

10. 10 Core Companies  The Treasury has identified core companies which are considered to be of strategic importance to the country  The Treasury will sell tranches but will retain majority/controlling stakes  The priority is to increase corporate governance standards, professionalism, transparency and quality in those companies Apply Best Practice in Corporate Governance  To assure professional management and supervision of companies  The goal is to create long-term value for all shareholders of publicly listed state-owned companies Professional Management and Supervisory Board selection procedures Compensation and Incentives Schemes for Management Corporate governance Code of Best Practice for WSE listed companies CompanySectorState Hldg % Listed PGE* Energy61.89% Listed Tauron Energy30.03% Listed PKO BP* Financial Institutions33.39% Listed PZU* Financial Institutions35.19% Listed KGHM Metals & Mining31.76% Listed PGNiG Oil & Gas72.41% Listed Grupa Lotos Oil & Gas53.19% Listed PKN Orlen Oil & Gas27.52% * companies included in the Privatisation Plan 2012-13

11. Polski Holding Nieruchomości (PHN) One of the biggest commercial real estate companies in CEE. It was established as a result of consolidation of state owned companies linked to the real estate market. Ultimately it will change its business profile into three segments: office, commercial and logistics. 11 Energy Sector Enea The company’s operations are based on electricity trading, generation and distribution. Its distribution network covers 20% of the country. It is the 3rd largest energy group in Poland with total production capacity of 3,189 MW. PGE Polska Grupa Energetyczna (PGE) Poland’s largest power producer and supplier, and one of the biggest heat and energy companies in CEE. Due to a combination of its own fuel resources (lignite), power generation and final distribution networks, PGE guarantees safe and stable power supply to over 5 million households, businesses and institutions. Real Estate Coal Mining Sector Energy Sector Jastrzębska Spółka Węglowa (JSW) The largest producer of high quality coking coal and a significant coke producer in the European Union. The Company is also a producer of steam coal, sold mainly to power plants and CHP plants. Tauron The second largest domestic producer of electricity in Poland and one of the largest business entities in Poland. TAURON Group’s activities include : coal mining, electricity generation from conventional and renewable sources, electricity distribution, and electricity supply to retail customers. Overview of key holdings (1) Energa Energy generation, distribution and trading company - provides electricity to 2.5 m households, ca. 300,000 companies (17% market share). Energa’s distribution covers one-quarter of Poland’s area. The company generates ca. 4.5 mn MWh of electricity in 54 manufacturing facilities. Energa’s installed capacity is ca. 1,200 MW (3% market share).

12. Warsaw Stock Exchange (WSE) WSE is the largest securities exchange in CEE. It is one of the most dynamically growing capital markets in Europe. The WSE operates a regulated market of equity and derivative instruments, and the alternative stock market NewConnect for growing companies. 12 Financial Sector Powszechny Zakład Ubezpieczeń (PZU) PZU is the largest insurance group in the CEE in terms of written premiums (PFSA). It has a broad range of insurance and financial products. PZU is the market leader in Polish property and casualty insurance in terms of gross written premiums (33% market share), and life insurance (26% market share). PKO Bank Polski (PKO BP) PKO BP is Poland's largest bank and one of the oldest in continuous operation. In recent years the bank has consolidated its market leadership. It operates the largest banking network in Poland with over 1,200 branches and nearly 2,000 smaller outlets. Copper & Silver Sector KGHM Polska Miedź One of the largest producers of copper and silver in the world. KGHM possesses its own copper ore deposit and its own integrated production structure, comprising three mines, two copper smelters, a wire rod plant and auxiliary units supporting the core business. KGHM acquired Canadian Quadra FNX Mining in March 2012 through which it now has operations in Arizona, Canada and Chile. Oil & Gas Sector PGNiG is the largest Polish oil and gas exploration and production company. It is a leader in natural gas segments in Poland and the largest importer of natural gas. PKN Orlen (Orlen) PKN ORLEN is one of Central Europe’s largest refiners of crude oil. The company specialises in processing crude oil into world- class unleaded petrol, diesel, heating oil, and aviation fuel, as well as plastics and other petroleum related products. Grupa Lotos Lotos Group is a vertically integrated oil company, whose business encompasses exploration for and production of crude oil, processing of crude oil, as well as wholesale and retail sale of high-quality petroleum products. Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) Overview of key holdings (2)

13. 13 Chemical Sector Zakłady Azotowe Puławy (ZAP) One of Poland’s largest chemical companies, ZAP has been the leader in the Polish fertiliser sector for over forty years. The company concentrates on the production of nitrogen fertilisers for agricultural needs, and production of chemicals which make up 40% of overall production. Also a leading producer of caprolactam and nitrogen fertilisers. ZAP is the world’s 3rd largest melamine producer with ca. 10 % global market share, and 20% European market share. Ciech Ciech Group is one of the Europe’s chemical market leaders. It comprises over 40 companies and counts itself among the 50 largest business organisations in Poland. The main products of the Group are: soda ash (the second largest producer in Europe), epoxy & polyester resins, plant protection chemicals and fertilisers, as well as other chemical products which are used in the glass, furniture, chemical, food, agriculture and construction industries. Grupa Azoty Tarnow Poland’s largest chemical company. Possesses unique competences in: construction plastics (polyamides, polyoxymethylene, compounds) caprolactam mineral fertilisers It also produces a large number of other chemical products, renowned on both domestic and international markets. The company is the country’s sole producer of polyacetal. Overview of key holdings (3) In July 2012 ZA Tarnow announced its acquisition of ZA Pulawy. Both companies stand to benefit from significant synergies. Following the transaction, the Ministry of Treasury may dispose part of its stake in the combined entity. Significant increase in value for shareholders is expected due to the possible synergies and size of the combined entity.

14. 14 Appendix – Poland’s Capital Markets

15. International trading flows - with approx. 50% of all trading volume generated by international investors Domestic institutional investors (pension funds (OFE), mutual funds, asset managers) Priority of the Polish government 15 Domestic Issuers 396 423 International Issuers 43 on the main market / 8 on the alternative market. Listings from 20 countries including: Hungary, Slovenia, Ukraine, Israel, Lithuania, Bulgaria, Estonia, France, UK. WIG 20 – privatised core companies Global and Domestic Investors POLAND’S CAPITAL MARKET MAIN MARKET NEWCONNECT CATALYST DERIVATIVES – options & futures Active retail investor segment (18% 0f trading flows on WSE main market) Source: Warsaw Stock Exchange and NewConnect websites, as of January 18, 2013

16. 16 Warsaw Stock Exchange Stable and Vibrant Platform to Raise Capital and partnership with NYSE Share Turnover Velocity (%) (c) Market Capitalisation (EURbn) – November 2012 Number of New Companies Listed through an IPO in 2011 (b) Source: World Federation of Exchanges Members and Federation of European Securities Exchanges, Company data Note: a) Oct 2012; exchange rate as of Oct 31,2012 1 USD = 0.7716 EUR b)Main Market c) March 2012 EOB value of share trading Domestic Market Capitalisation – CEE countries (a) Equity market cap (EUR bn)

17. 17 Trading Velocity - 2011Market Capitalisation / GDP - December 2011 Source: FESE (LSEG data from WFE) as of 31st December 2011, Dealogic as of 16th April 2012 Note: Domestic market capitalization includes regulated and exchange-regulated markets, and foreign-incorporated companies with sole listing on exchange in question. (in %) Debt Markets – Bond Issuance 2010-2012WSE - 5 th European index futures exchange in 2011 Significant potential for future market development Source: FESE Source: Dealogic Volume Turnover (EUR Bn)

18. 18 Domestic Pension Funds - a key liquidity driver of WSE Continued Inflow of Funds Despite Recent Changes to the Pension System Pension Funds (a) * - AUM Mutual Funds (a) * - AUM (a) KNF-Financial Supervision Authority - statistics, Chamber of Fund and Asset Management * PLN/EUR: PLN 3.9517 average exchange rate for 2005-2011 15 14 N0. of Funds: EUR bnmn 215 281281381499578658744 N0. of Funds: EUR bnmn Assets Under Management Clients Assets Under Management Clients 15 14 Number of brokerage accounts in Poland (b) (‘000) WSE Equity - Turnover Breakdown (%) (c) Retail Investors Contribute to WSE Market Liquidity ( b) WSE internet portal, KNF-Polish Financial Supervision Authority - statistics, KDPW, Chamber of Fund and Asset Management ( c) Investors in stock exchange turnover 2011 - presentation

19. 19 Polish Retail Investors Unique Support for Liquidity across WSE Segments  Akcjonariat Obywatelski (Civic Shareholding Programme) - a long term programme initiated by the Ministry of Treasury during the IPO of PZU and further developed during the privatisation of Tauron, WSE and JSW  The aim is to increase the participation of Polish individuals in the domestic capital markets and Privatisation Programme, and also to encourage Poles to actively manage their savings  Successful participation in IPOs CompanyPGEPZUTauronWSEJSW IPO DateOct- 2009May-2010Jun-2010Oct-2010Jul-2011 No of subscribers85,ooo250,000230,000323,000168,000  Today individual investors generate ca. 18% of trading flows of WSE Main market 77% of trading flows on NewConnect 46% of trading flows in future contracts 64% of trading flows in options

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