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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:
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Demand higher charter rates;
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Incur lower fuel costs;
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Increase corporate responsibility – more employable vessels, take advantage of the rising market;
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Reduce environmental footprint;
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Maintain their current speed;
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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
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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
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Saturday, 28 March 20
ASIA'S COAL MARKETS DIVERGE ON QUALITY LINES AS CORONAVIRUS HITS INDIA - REUTERS
Asia’s seaborne coal market is increasingly diverging between higher-quality Australian coal, where prices are holding up despite the economi ...
Friday, 27 March 20
CHINA'S BULKS: THE SENTIMENT GAP BETWEEN STEEL AND COAL WIDENS - WOOD MACKENZIE
China seems to be containing its local coronavirus situation, with imported cases now posing the greater threat. While quarantine measures remain t ...
Friday, 27 March 20
S.KOREA Q1 THERMAL COAL IMPORTS SET FOR 10-YR LOW ON ANTI-POLLUTION MEASURES - REUTERS
South Korea’s first-quarter thermal coal imports are set to fall to a decade-low due to stricter air pollution measures, while the coronaviru ...
Friday, 27 March 20
PORT OF NEWCASTLE OPERATIONS CONTINUE WITH COVID-19 RESPONSE MEASURES IN PLACE
Port of Newcastle, like many organisations, is taking a precautionary approach to help manage COVID-19 risks in the community. Our focus is on ensu ...
Thursday, 26 March 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 ...
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Showing 1041 to 1045 news of total 6871 |
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- SN Aboitiz Power Inc, Philippines
- Eastern Energy - Thailand
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Lanco Infratech Ltd - India
- GVK Power & Infra Limited - India
- Sojitz Corporation - Japan
- Toyota Tsusho Corporation, Japan
- Intertek Mineral Services - Indonesia
- Jindal Steel & Power Ltd - India
- Coastal Gujarat Power Limited - India
- Bharathi Cement Corporation - India
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- International Coal Ventures Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Kobexindo Tractors - Indoneisa
- Economic Council, Georgia
- Edison Trading Spa - Italy
- Bhatia International Limited - India
- India Bulls Power Limited - India
- Power Finance Corporation Ltd., India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Independent Power Producers Association of India
- Barasentosa Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- New Zealand Coal & Carbon
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Gujarat Mineral Development Corp Ltd - India
- Coal and Oil Company - UAE
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Xindia Steels Limited - India
- Kumho Petrochemical, South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Petron Corporation, Philippines
- Malabar Cements Ltd - India
- Maheswari Brothers Coal Limited - India
- Indian Energy Exchange, India
- Global Green Power PLC Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- ICICI Bank Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Australian Coal Association
- Ambuja Cements Ltd - India
- Ministry of Mines - Canada
- Bhushan Steel Limited - India
- Videocon Industries ltd - India
- Kartika Selabumi Mining - Indonesia
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Wood Mackenzie - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Vizag Seaport Private Limited - India
- CNBM International Corporation - China
- Maharashtra Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Sical Logistics Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Development Corp, Philippines
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- Georgia Ports Authority, United States
- Pipit Mutiara Jaya. PT, Indonesia
- Minerals Council of Australia
- European Bulk Services B.V. - Netherlands
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Oldendorff Carriers - Singapore
- CIMB Investment Bank - Malaysia
- Sree Jayajothi Cements Limited - India
- Central Java Power - Indonesia
- PTC India Limited - India
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rashtriya Ispat Nigam Limited - India
- Globalindo Alam Lestari - Indonesia
- Wilmar Investment Holdings
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- Central Electricity Authority - India
- Bayan Resources Tbk. - Indonesia
- Uttam Galva Steels Limited - India
- Star Paper Mills Limited - India
- Posco Energy - South Korea
- Binh Thuan Hamico - Vietnam
- Orica Australia Pty. Ltd.
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Indika Energy - Indonesia
- Carbofer General Trading SA - India
- Merrill Lynch Commodities Europe
- Kepco SPC Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Bukit Makmur.PT - Indonesia
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Ministry of Finance - Indonesia
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
- Planning Commission, India
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Miang Besar Coal Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Neyveli Lignite Corporation Ltd, - India
- Kapuas Tunggal Persada - Indonesia
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Indian Oil Corporation Limited
- GMR Energy Limited - India
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- San Jose City I Power Corp, Philippines
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- Banpu Public Company Limited - Thailand
- Billiton Holdings Pty Ltd - Australia
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- South Luzon Thermal Energy Corporation
- Vijayanagar Sugar Pvt Ltd - India
- Rio Tinto Coal - Australia
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Borneo Indobara - Indonesia
- Directorate Of Revenue Intelligence - India
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Indonesian Coal Mining Association
- Mjunction Services Limited - India
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Coalindo Energy - Indonesia
- The University of Queensland
- Simpson Spence & Young - Indonesia
- Energy Link Ltd, New Zealand
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- Larsen & Toubro Limited - India
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Parry Sugars Refinery, India
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