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