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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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- Interocean Group of Companies - India
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Georgia Ports Authority, United States
- Semirara Mining and Power Corporation, Philippines
- Energy Development Corp, Philippines
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Parliament of New Zealand
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Mjunction Services Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- International Coal Ventures Pvt Ltd - India
- India Bulls Power Limited - India
- Ceylon Electricity Board - Sri Lanka
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- Maharashtra Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- Kideco Jaya Agung - Indonesia
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- VISA Power Limited - India
- Indian Energy Exchange, India
- AsiaOL BioFuels Corp., Philippines
- Africa Commodities Group - South Africa
- Lanco Infratech Ltd - India
- Energy Link Ltd, New Zealand
- Barasentosa Lestari - Indonesia
- Tamil Nadu electricity Board
- Leighton Contractors Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- Malabar Cements Ltd - India
- Wood Mackenzie - Singapore
- Billiton Holdings Pty Ltd - Australia
- ICICI Bank Limited - India
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- PowerSource Philippines DevCo
- Bhoruka Overseas - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- Eastern Energy - Thailand
- Orica Mining Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Australian Coal Association
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bharathi Cement Corporation - India
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Gujarat Sidhee Cement - India
- Independent Power Producers Association of India
- Videocon Industries ltd - India
- Wilmar Investment Holdings
- PetroVietnam Power Coal Import and Supply Company
- Asmin Koalindo Tuhup - Indonesia
- Makarim & Taira - Indonesia
- Larsen & Toubro Limited - India
- Therma Luzon, Inc, Philippines
- Thai Mozambique Logistica
- Metalloyd Limited - United Kingdom
- Cigading International Bulk Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Antam Resourcindo - Indonesia
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Coalindo Energy - Indonesia
- Bhatia International Limited - India
- London Commodity Brokers - England
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- Coal and Oil Company - UAE
- Economic Council, Georgia
- Mintek Dendrill Indonesia
- Meralco Power Generation, Philippines
- New Zealand Coal & Carbon
- Essar Steel Hazira Ltd - India
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Vizag Seaport Private Limited - India
- MS Steel International - UAE
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Maheswari Brothers Coal Limited - India
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Sical Logistics Limited - India
- Goldman Sachs - Singapore
- SMC Global Power, Philippines
- Manunggal Multi Energi - Indonesia
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Merrill Lynch Commodities Europe
- ASAPP Information Group - India
- White Energy Company Limited
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Samtan Co., Ltd - South Korea
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining Corp, Philippines
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- SMG Consultants - Indonesia
- Borneo Indobara - Indonesia
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Agrawal Coal Company - India
- PTC India Limited - India
- Renaissance Capital - South Africa
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Planning Commission, India
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aditya Birla Group - India
- Kartika Selabumi Mining - Indonesia
- Baramulti Group, Indonesia
- Grasim Industreis Ltd - India
- Marubeni Corporation - India
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Cement Manufacturers Association - India
- Straits Asia Resources Limited - Singapore
- Standard Chartered Bank - UAE
- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bukit Makmur.PT - Indonesia
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- Deloitte Consulting - India
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- Latin American Coal - Colombia
- Pendopo Energi Batubara - Indonesia
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Holcim Trading Pte Ltd - Singapore
- The Treasury - Australian Government
- Central Electricity Authority - India
- Madhucon Powers Ltd - India
- Chettinad Cement Corporation Ltd - India
- Commonwealth Bank - Australia
- Indika Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- SN Aboitiz Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- Sakthi Sugars Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Timah Investasi Mineral - Indoneisa
- GMR Energy Limited - India
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- Siam City Cement - Thailand
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bulk Trading Sa - Switzerland
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- Trasteel International SA, Italy
- Sarangani Energy Corporation, Philippines
- Attock Cement Pakistan Limited
- Chamber of Mines of South Africa
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