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