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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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Friday, 13 March 20
PANAMAX: SLIGHTLY STRONGER NUMBERS IN BOTH BASINS THIS WEEK - FEARNLEYS
Cape
Still very sad times for the big ships, and merit in further trading at present levels is highly debatable for most tonnage. Spot fixtures ...
Friday, 13 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 ...
Friday, 13 March 20
KOREA SOUTH-EAST POWER INVITED BIDS FOR 390,000 MT OF THERMAL COAL FOR MAY-JUNE 2020 LOADING
COALspot.com: Korea South-East Power Co., Ltd. (KOEN), has issued an international tender for total 390,000 Metric Tons of coal for May & June ...
Thursday, 12 March 20
INDIA 2019 THERMAL COAL IMPORTS RISE 12.6% TO NEARLY 200 MILLION TONNES - REUTERS
India’s thermal coal imports rose 12.6% to nearly 200 million tonnes in 2019, government data reviewed by Reuters showed, reflecting the seco ...
Wednesday, 11 March 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.07 PCT - XINHUA
China Taiyuan coal transaction price index stood at 133.16 points Monday, up 0.07 percent week on week.
The index, released by China ...
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Showing 1071 to 1075 news of total 6871 |
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- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- PTC India Limited - India
- Thai Mozambique Logistica
- Cement Manufacturers Association - India
- Gujarat Electricity Regulatory Commission - India
- Economic Council, Georgia
- Marubeni Corporation - India
- Oldendorff Carriers - Singapore
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Indika Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sical Logistics Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Coastal Gujarat Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Wood Mackenzie - Singapore
- Sinarmas Energy and Mining - Indonesia
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- Malabar Cements Ltd - India
- Mercuria Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- IEA Clean Coal Centre - UK
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Samtan Co., Ltd - South Korea
- Global Coal Blending Company Limited - Australia
- Karaikal Port Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- MS Steel International - UAE
- Central Electricity Authority - India
- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Port Waratah Coal Services - Australia
- Madhucon Powers Ltd - India
- Krishnapatnam Port Company Ltd. - India
- CNBM International Corporation - China
- Kalimantan Lumbung Energi - Indonesia
- Orica Australia Pty. Ltd.
- Bukit Asam (Persero) Tbk - Indonesia
- Parliament of New Zealand
- Parry Sugars Refinery, India
- Directorate Of Revenue Intelligence - India
- Interocean Group of Companies - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Binh Thuan Hamico - Vietnam
- Lanco Infratech Ltd - India
- Chamber of Mines of South Africa
- Indian Energy Exchange, India
- PetroVietnam Power Coal Import and Supply Company
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Essar Steel Hazira Ltd - India
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Indonesian Coal Mining Association
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- Trasteel International SA, Italy
- Gujarat Sidhee Cement - India
- Singapore Mercantile Exchange
- Eastern Coal Council - USA
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- Aditya Birla Group - India
- Coalindo Energy - Indonesia
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Australian Commodity Traders Exchange
- Cigading International Bulk Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- SMG Consultants - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kartika Selabumi Mining - Indonesia
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- Edison Trading Spa - Italy
- Thiess Contractors Indonesia
- Deloitte Consulting - India
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Therma Luzon, Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Makarim & Taira - Indonesia
- New Zealand Coal & Carbon
- Goldman Sachs - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Power Finance Corporation Ltd., India
- Savvy Resources Ltd - HongKong
- Simpson Spence & Young - Indonesia
- Salva Resources Pvt Ltd - India
- Independent Power Producers Association of India
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Romanian Commodities Exchange
- Mintek Dendrill Indonesia
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- Pipit Mutiara Jaya. PT, Indonesia
- TeaM Sual Corporation - Philippines
- Semirara Mining Corp, Philippines
- The Treasury - Australian Government
- The University of Queensland
- Vizag Seaport Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Barasentosa Lestari - Indonesia
- Ministry of Mines - Canada
- Kaltim Prima Coal - Indonesia
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- Planning Commission, India
- Antam Resourcindo - Indonesia
- Star Paper Mills Limited - India
- South Luzon Thermal Energy Corporation
- GVK Power & Infra Limited - India
- Energy Development Corp, Philippines
- Mercator Lines Limited - India
- Renaissance Capital - South Africa
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Price Waterhouse Coopers - Russia
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Vedanta Resources Plc - India
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Bharathi Cement Corporation - India
- Heidelberg Cement - Germany
- White Energy Company Limited
- India Bulls Power Limited - India
- Timah Investasi Mineral - Indoneisa
- SMC Global Power, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Ministry of Finance - Indonesia
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Dalmia Cement Bharat India
- The State Trading Corporation of India Ltd
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Toyota Tsusho Corporation, Japan
- Aboitiz Power Corporation - Philippines
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Tata Chemicals Ltd - India
- International Coal Ventures Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- Kideco Jaya Agung - Indonesia
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Manunggal Multi Energi - Indonesia
- Xindia Steels Limited - India
- Bhushan Steel Limited - India
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
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