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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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Thursday, 19 March 20
A CRUDE TSUNAMI: UP TO 3 MILLION BPD OF EXTRA OIL CAN HIT THE MARKET FROM APRIL, MORE COMING IN MAY - RYSTAD ENERGY
The extra oil coming into the global market from April will be as much as 3 million barrels per day (bpd), Rystad Energy estimates. Two million bpd ...
Thursday, 19 March 20
BIMCO REVISES 2020 FORECAST FOR MAIN SHIPPING MARKETS
The coronavirus pandemic is impacting global shipping demand for 2020 negatively. The speed of the virus spread makes it difficult to assess the fu ...
Thursday, 19 March 20
U.S. COAL EXPORTS DECLINED IN 2019 - EIA
In 2019, U.S. coal exports declined to 93 million short tons (MMst), a 20% decrease from the previous year, according to the U.S. Energy Informatio ...
Thursday, 19 March 20
SOUTH KOREA'S KOSPO INVITED BIDS FOR MIN 3,700 OR MIN 4,200 NCV LOW CALORIFIC VALUE COAL
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO), has issued an international tender for total 160,000 MT (±10%) (80,000 x 2 Panamax) of ...
Wednesday, 18 March 20
DRY BULK: INDONESIAN COAL CARGOES PROVIDING A BIG BOOST IN THE EAST WHERE SENTIMENT FOR HANDIES ALSO STARTED IMPROVING - INTERMODAL
The BDI ended last week with small gains on the back of an encouraging number of cargoes out of key trading regions that helped sustain the reserve ...
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Showing 1061 to 1065 news of total 6871 |
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- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- IHS Mccloskey Coal Group - USA
- Power Finance Corporation Ltd., India
- Gujarat Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Bukit Asam (Persero) Tbk - Indonesia
- Tamil Nadu electricity Board
- Alfred C Toepfer International GmbH - Germany
- Australian Coal Association
- Carbofer General Trading SA - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kumho Petrochemical, South Korea
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- AsiaOL BioFuels Corp., Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Savvy Resources Ltd - HongKong
- Baramulti Group, Indonesia
- Directorate Of Revenue Intelligence - India
- Parliament of New Zealand
- Wood Mackenzie - Singapore
- Gujarat Sidhee Cement - India
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Minerals Council of Australia
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Global Business Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Sree Jayajothi Cements Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Aditya Birla Group - India
- Indika Energy - Indonesia
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Aboitiz Power Corporation - Philippines
- Ministry of Transport, Egypt
- Vijayanagar Sugar Pvt Ltd - India
- Meralco Power Generation, Philippines
- Sical Logistics Limited - India
- Indo Tambangraya Megah - Indonesia
- Cement Manufacturers Association - India
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Orica Mining Services - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Kalimantan Lumbung Energi - Indonesia
- ICICI Bank Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Kaltim Prima Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Grasim Industreis Ltd - India
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Riau Bara Harum - Indonesia
- Coal and Oil Company - UAE
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- Thiess Contractors Indonesia
- TeaM Sual Corporation - Philippines
- Dalmia Cement Bharat India
- Salva Resources Pvt Ltd - India
- Marubeni Corporation - India
- Sojitz Corporation - Japan
- Cigading International Bulk Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Independent Power Producers Association of India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Trasteel International SA, Italy
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement PLC, Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- European Bulk Services B.V. - Netherlands
- Wilmar Investment Holdings
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- The University of Queensland
- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- Mjunction Services Limited - India
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Latin American Coal - Colombia
- GMR Energy Limited - India
- Star Paper Mills Limited - India
- Makarim & Taira - Indonesia
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- The Treasury - Australian Government
- Mercator Lines Limited - India
- VISA Power Limited - India
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Global Coal Blending Company Limited - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
- Indogreen Group - Indonesia
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- Jindal Steel & Power Ltd - India
- Formosa Plastics Group - Taiwan
- Orica Australia Pty. Ltd.
- Energy Link Ltd, New Zealand
- Sakthi Sugars Limited - India
- Renaissance Capital - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Sindya Power Generating Company Private Ltd
- Bulk Trading Sa - Switzerland
- Madhucon Powers Ltd - India
- Petron Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Gujarat Mineral Development Corp Ltd - India
- Africa Commodities Group - South Africa
- MS Steel International - UAE
- Lanco Infratech Ltd - India
- Electricity Authority, New Zealand
- Indian Oil Corporation Limited
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Bangladesh Power Developement Board
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Georgia Ports Authority, United States
- Maheswari Brothers Coal Limited - India
- Oldendorff Carriers - Singapore
- Commonwealth Bank - Australia
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- PTC India Limited - India
- ASAPP Information Group - India
- Planning Commission, India
- Miang Besar Coal Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- Uttam Galva Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- Energy Development Corp, Philippines
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- Central Java Power - Indonesia
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Parry Sugars Refinery, India
- Banpu Public Company Limited - Thailand
- Bukit Baiduri Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- McConnell Dowell - Australia
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