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.
|
|
Friday, 03 April 20
CHINA'S BENCHMARK POWER COAL PRICE DROPS SLIGHTLY - XINHUA
China’s benchmark power coal price dropped slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge ...
Wednesday, 01 April 20
TRADERS SCRAMBLE TO SELL CHEAP CRUDE CARGOES AS GLUT GROWS - REUTERS
Oil traders across the globe are offering cargoes far in advance as rapidly vanishing demand drives key physical crude prices to multi-decade lows, ...
Wednesday, 01 April 20
MARKET INSIGHT - INTERMODAL
There is an old, allegedly Chinese, saying suggesting that living in “interesting” times usually refers to times of trouble. The latest ...
Tuesday, 31 March 20
FREIGHT MARKET: DRY BULKERS - SPOT MARKET 23-29 MARCH 2020
Capesize
The rebound in freight rates resumed this past week, with rates man-aging to post further gains by week’s end. The BCI is in negat ...
Tuesday, 31 March 20
DRY BULK: Q1 HAS BEEN THE WORST QUARTER NOTED FOR MORE THAN 3 YEARS NOW - ALLIED RESEARCH
At this point, the Covid-19 pandemic seems to be monopolizing all market (as well as all other) discussions across the world and any market insight ...
|
|
|
Showing 1031 to 1035 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bhushan Steel Limited - India
- Cigading International Bulk Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Ministry of Finance - Indonesia
- Deloitte Consulting - India
- Billiton Holdings Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Indika Energy - Indonesia
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Banpu Public Company Limited - Thailand
- Ministry of Mines - Canada
- Singapore Mercantile Exchange
- Indogreen Group - Indonesia
- Thai Mozambique Logistica
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- Sarangani Energy Corporation, Philippines
- India Bulls Power Limited - India
- Ind-Barath Power Infra Limited - India
- Grasim Industreis Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Kaltim Prima Coal - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Heidelberg Cement - Germany
- Posco Energy - South Korea
- PowerSource Philippines DevCo
- Larsen & Toubro Limited - India
- IHS Mccloskey Coal Group - USA
- Sinarmas Energy and Mining - Indonesia
- Bangladesh Power Developement Board
- Global Business Power Corporation, Philippines
- Ministry of Transport, Egypt
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- Medco Energi Mining Internasional
- Cement Manufacturers Association - India
- Agrawal Coal Company - India
- Thiess Contractors Indonesia
- Savvy Resources Ltd - HongKong
- Meralco Power Generation, Philippines
- Central Electricity Authority - India
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Generating Authority of Thailand
- GAC Shipping (India) Pvt Ltd
- Price Waterhouse Coopers - Russia
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- Karaikal Port Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- The University of Queensland
- Gujarat Mineral Development Corp Ltd - India
- Chettinad Cement Corporation Ltd - India
- SMG Consultants - Indonesia
- Georgia Ports Authority, United States
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Simpson Spence & Young - Indonesia
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- GVK Power & Infra Limited - India
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Videocon Industries ltd - India
- CNBM International Corporation - China
- Petrochimia International Co. Ltd.- Taiwan
- Eastern Coal Council - USA
- Coastal Gujarat Power Limited - India
- South Luzon Thermal Energy Corporation
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Sakthi Sugars Limited - India
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- London Commodity Brokers - England
- Malabar Cements Ltd - India
- Bayan Resources Tbk. - Indonesia
- Star Paper Mills Limited - India
- Semirara Mining and Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Australia Pty. Ltd.
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- The Treasury - Australian Government
- Economic Council, Georgia
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- Aboitiz Power Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- Sojitz Corporation - Japan
- Mjunction Services Limited - India
- Oldendorff Carriers - Singapore
- Goldman Sachs - Singapore
- Independent Power Producers Association of India
- New Zealand Coal & Carbon
- San Jose City I Power Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- The State Trading Corporation of India Ltd
- CIMB Investment Bank - Malaysia
- Petron Corporation, Philippines
- Indian Energy Exchange, India
- AsiaOL BioFuels Corp., Philippines
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Electricity Authority, New Zealand
- Attock Cement Pakistan Limited
- Antam Resourcindo - Indonesia
- Rashtriya Ispat Nigam Limited - India
- OPG Power Generation Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Bulk Trading Sa - Switzerland
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- European Bulk Services B.V. - Netherlands
- Binh Thuan Hamico - Vietnam
- Bukit Makmur.PT - Indonesia
- Rio Tinto Coal - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Formosa Plastics Group - Taiwan
- Borneo Indobara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- Krishnapatnam Port Company Ltd. - India
- Globalindo Alam Lestari - Indonesia
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- Interocean Group of Companies - India
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Mercuria Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Chamber of Mines of South Africa
- Therma Luzon, Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Sical Logistics Limited - India
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- PTC India Limited - India
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Dalmia Cement Bharat India
- Eastern Energy - Thailand
- Ceylon Electricity Board - Sri Lanka
- Bhatia International Limited - India
- Australian Coal Association
- Meenaskhi Energy Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Anglo American - United Kingdom
- Orica Mining Services - Indonesia
- Carbofer General Trading SA - India
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Kartika Selabumi Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- Edison Trading Spa - Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- White Energy Company Limited
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Coalindo Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Jaiprakash Power Ventures ltd
- LBH Netherlands Bv - Netherlands
- Minerals Council of Australia
- VISA Power Limited - India
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Kobexindo Tractors - Indoneisa
- Siam City Cement PLC, Thailand
- Leighton Contractors Pty Ltd - Australia
- Indonesian Coal Mining Association
- Africa Commodities Group - South Africa
- TeaM Sual Corporation - Philippines
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Directorate Of Revenue Intelligence - India
- Baramulti Group, Indonesia
|
| |
| |
|
