We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Friday, 13 March 20
TOP 4 ACCOUNTING CONSIDERATIONS AFTER THE IMPLEMENTATION OF IMO 2020 - PWC
 To install or not to install?
Following the IMO 2020 global low sulphur cap for marine fuel effective since 1 January 2020, many shipowners are still evaluating their positioning on whether to install scrubbers or not.
Some shipping companies have already made an initial assessment, have weighed the risks and have taken the decision not to install scrubbers just yet, advocating a “wait and see” approach in an effort to avoid speculation of bunker spreads. They also keep the option (put/call) to install a scrubber later in the future, in case the spreads between HSFO and LSFO / ULSFO increase significantly. On the other hand, there is a large number of shipowners (by January 2020 approximately 11% of the global fleet by tonnage and 4.5% by vessel count*) who have already decided to invest in scrubbers installation (the amounts range between $1,5m – $5m depending on the type of vessel) in order to avoid the uncertainty related to the future supply and prices of LSFO /ULSFO. One of the main drivers behind such investment decisions, is the assumption that these vessels will be more employable in the future as charterers are also being driven by their boards and corporate responsibility initiatives to employ more “green” friendly vessels. Moreover, the vessel owners can also take advantage (i.e. higher rates, lower fuel cost) of scrubber investment programs in a rising market.
Investing in scrubbers is one of the most significant one-off capital improvements having an important impact on the shipping industry over the last decade. The cost of the scrubbers is either being funded by the owners of the vessels, the charterer (lessee) or a combination of both. Where the charterers fully or partially fund the cost of scrubbers, this is done through either an upfront payment or through increased hire charter rates during the lease term.
For those shipping companies that have taken the decision to install scrubbers on their vessels, PwC has identified four main accounting considerations to be taken into account.
Capitalization of scrubbers
In general, an expenditure that adds to the productive capacity or improves the efficiency of an existing asset can be considered a capital item. Some key benefits that vessels with scrubbers are expected to generate in the future include:
-
Demand higher charter rates;
-
Incur lower fuel costs;
-
Increase corporate responsibility – more employable vessels, take advantage of the rising market;
-
Reduce environmental footprint;
-
Maintain their current speed;
-
Possibly a reduction in interest rates (finance costs), as more banks are turning to “green lending” or are now incorporating reduction in interest rates for environmentally friendly assets
-
On the other hand, vessels without scrubbers may demand lower charter rates, incur higher fuel costs and potentially slow down their speed
Overall, taking into consideration that scrubbers improve the efficiency of the vessel, a view can be taken that the costs related to scrubber installation qualify for capitalization.
Useful life of the scrubber
The useful life of an asset is defined as the period over which the asset is expected to contribute directly or indirectly to future cash flows, the assessment of which can require a significant amount of judgment dependent on a number of factors.
Based on inquiries with technical departments of shipping companies, it is rather difficult to say that there is a certain useful life for a scrubber. Given that there are no regulations or guidelines yet on scrubbers’ lifecycle and replacement, we can assume that a scrubber with proper maintenance can contribute to the operation of the vessel over the remaining useful life of the asset.
Who is the owner of the asset?
It is generally expected that the owner of the vessel will be the owner of the scrubber as it would be difficult for a charterer to remove a scrubber after the completion of a charter – in which case, probably neither of the two parties would undertake the incremental cost. It is also highly likely that the scrubber will be used by subsequent charterers, regardless of whether the installation was funded by the vessel owner or reimbursed by the charterer. In both cases, the increase in the daily hire rate or the one-time payment from the charterer could be considered as an additional revenue for the owner as it relates to the premium that the charterer is willing to pay in order to benefit from the lower bunker expense. Any potential upfront reimbursements from the charterer for the scrubber could be deferred and amortized over the lease term.
Impairment considerations
To the extent scrubbers will be fitted, there is a need to determine if the cash flow projections used in the long-lived asset impairment tests will need to include an estimate of the relevant outflow (i.e. scrubber costs and future maintenance costs). The effect of any additional operating expenses associated with the scrubber maintenance on the projected cash flows should also be considered.
Currently, vessels predominantly utilize HSFO, and the installation of scrubbers would allow the vessels to continue to utilize this fuel. The ability to consume specific types of fuel could become a new service potential, with vessels’ scrubber installation probably being a cash outflow able to maintain this new service.
Charterers may fund or partially fund the installation of a scrubber through either a one-time payment or an amended charter rate including a potential premium. For cases where one-time payment is received from the charterer, the impairment assessment may not include this payment or the related scrubber cost and accordingly keep the original charter rate until the scrubber is installed. With this approach projected revenue is not overstated and the expense will be included upon installation, to offset the additional charter hire. Ultimately, the impact to the cash flows should be nil or minimal when the charterer is funding or partially funding the cost of the scrubber, respectively.
The above-mentioned accounting considerations include a high level of judgement. Therefore, it is crucial that management assesses the accounting treatment on a case by case basis, taking into consideration its specific characteristics and ensuring that the proper disclosures are made.
Source ING
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Tuesday, 07 April 20
IS CHINA EMBARKING ON A MAJOR EXPANSION OF COAL-FIRED POWER GENERATION? - WOOD MACKENZIE
As energy companies worldwide grapple with the economic impact of the coronavirus pandemic, long-term planning continues. Ahead of the release of t ...
Tuesday, 07 April 20
COAL INDIA'S DISPATCHES DROP, OUTPUT INCREASES - THE HINDU
India’s largest coal producer Coal India Ltd. (CIL) has seen a 10% fall in dispatches in March 2020 due to a sharp fall in demand from the po ...
Tuesday, 07 April 20
CORONAVIRUS AND LOCKDOWNS DRAG DOWN THE INDONESIAN COAL PRICE REFERENCE IN APRIL
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of the Indonesian ther ...
Monday, 06 April 20
A 52,000DWT SHIP FIXING DELIVERY SINGAPORE TRIP, VIA INDONESIA, REDELIVERY TAIWAN, AT $3,100 - BALTIC BRIEFING
Capesize
The Capesize market this past week looks to have come off life support and found some improved sentiment. The week began rather ordina ...
Monday, 06 April 20
INDIA'S 21-DAY LOCKDOWN - IMPACT ON COMMODITIES? - WOOD MACKENZIE
India is under a three-week lockdown from 25 March, to contain the spread of the coronavirus outbreak. Wood Mackenzie analysts discuss what this me ...
|
|
|
Showing 1026 to 1030 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Intertek Mineral Services - Indonesia
- Energy Link Ltd, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- LBH Netherlands Bv - Netherlands
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Medco Energi Mining Internasional
- Altura Mining Limited, Indonesia
- Bangladesh Power Developement Board
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Uttam Galva Steels Limited - India
- Singapore Mercantile Exchange
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- Central Electricity Authority - India
- Wood Mackenzie - Singapore
- Binh Thuan Hamico - Vietnam
- GMR Energy Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Salva Resources Pvt Ltd - India
- London Commodity Brokers - England
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Deloitte Consulting - India
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- Makarim & Taira - Indonesia
- IEA Clean Coal Centre - UK
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Siam City Cement - Thailand
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Global Business Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Sakthi Sugars Limited - India
- Thiess Contractors Indonesia
- Sical Logistics Limited - India
- Holcim Trading Pte Ltd - Singapore
- Wilmar Investment Holdings
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Sree Jayajothi Cements Limited - India
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Romanian Commodities Exchange
- Parry Sugars Refinery, India
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- Rio Tinto Coal - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Kartika Selabumi Mining - Indonesia
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- Renaissance Capital - South Africa
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- White Energy Company Limited
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Minerals Council of Australia
- Neyveli Lignite Corporation Ltd, - India
- New Zealand Coal & Carbon
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Electricity Generating Authority of Thailand
- Kumho Petrochemical, South Korea
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Eastern Energy - Thailand
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- Bukit Makmur.PT - Indonesia
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- CNBM International Corporation - China
- Aditya Birla Group - India
- Planning Commission, India
- Sarangani Energy Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Grasim Industreis Ltd - India
- India Bulls Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Kobexindo Tractors - Indoneisa
- Bharathi Cement Corporation - India
- Petron Corporation, Philippines
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- GVK Power & Infra Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- Gujarat Mineral Development Corp Ltd - India
- South Luzon Thermal Energy Corporation
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Thai Mozambique Logistica
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- Mercuria Energy - Indonesia
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Sojitz Corporation - Japan
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- VISA Power Limited - India
- Mjunction Services Limited - India
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- SN Aboitiz Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- PNOC Exploration Corporation - Philippines
- Jindal Steel & Power Ltd - India
- Xindia Steels Limited - India
- Essar Steel Hazira Ltd - India
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- IHS Mccloskey Coal Group - USA
- Larsen & Toubro Limited - India
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- Straits Asia Resources Limited - Singapore
- Orica Mining Services - Indonesia
- Indonesian Coal Mining Association
- Ministry of Mines - Canada
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- Australian Coal Association
- Cigading International Bulk Terminal - Indonesia
- Cement Manufacturers Association - India
- Vijayanagar Sugar Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Eastern Coal Council - USA
- Bayan Resources Tbk. - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Standard Chartered Bank - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- Chamber of Mines of South Africa
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The State Trading Corporation of India Ltd
- Indian Oil Corporation Limited
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
|
| |
| |
|
