We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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:
-
Demand higher charter rates;
-
Incur lower fuel costs;
-
Increase corporate responsibility – more employable vessels, take advantage of the rising market;
-
Reduce environmental footprint;
-
Maintain their current speed;
-
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
-
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
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Tuesday, 03 March 20
COAL'S SHARE OF CHINA ENERGY MIX FALLS IN 2019 BUT CONSUMPTION STILL RISING - REUTERS
Coal accounted for 57.7% of China’s primary energy consumption in 2019, the National Bureau of Statistics said on Friday, down 1.5 percentage ...
Monday, 02 March 20
SHIPOWNERS AND OPERATORS COULD FACE DETENTION OF SHIPS FROM 1ST MARCH UNDER IMO RULE - ICS
Port state control authorities will begin to enforce the IMO’s Sulphur 2020 from 1st March, making it an offense for ships to carry fuel that ...
Saturday, 29 February 20
SUPRAMAX SENTIMENT WAS UP IN A FEW KEY AREAS OVER THE LAST WEEK - BALTIC BRIEFING
Capesize
The Capesize market woes related to Coronavirus have now spread through the wider global markets like wildfire. The wider supply and d ...
Thursday, 27 February 20
FOREIGN COMPANIES LIKELY TO SKIP COMMERCIAL COAL BLOCK AUCTIONS - ECONOMIC TIMES
The Centre is in the process of inviting global players for commercial mining, following 100% foreign direct investment in the sector. However, giv ...
Wednesday, 26 February 20
SHIPPING MARKET INSIGHT - INTERMODAL
Coming from one of its busiest periods historically, with a list of scrubber and BWMS retrofits on a waiting list, the ship repair sector is witnes ...
|
|
|
Showing 1101 to 1105 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Metalloyd Limited - United Kingdom
- The University of Queensland
- PNOC Exploration Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- Riau Bara Harum - Indonesia
- India Bulls Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maharashtra Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Energy Development Corp, Philippines
- Meralco Power Generation, Philippines
- Toyota Tsusho Corporation, Japan
- Bulk Trading Sa - Switzerland
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- TNB Fuel Sdn Bhd - Malaysia
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- Planning Commission, India
- Agrawal Coal Company - India
- Singapore Mercantile Exchange
- Orica Mining Services - Indonesia
- Thiess Contractors Indonesia
- Electricity Generating Authority of Thailand
- CIMB Investment Bank - Malaysia
- Bukit Baiduri Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- Bhatia International Limited - India
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- The State Trading Corporation of India Ltd
- GVK Power & Infra Limited - India
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Georgia Ports Authority, United States
- Independent Power Producers Association of India
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Edison Trading Spa - Italy
- Latin American Coal - Colombia
- San Jose City I Power Corp, Philippines
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Africa Commodities Group - South Africa
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Sree Jayajothi Cements Limited - India
- Bhoruka Overseas - Indonesia
- Mercuria Energy - Indonesia
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- Ministry of Mines - Canada
- Orica Australia Pty. Ltd.
- OPG Power Generation Pvt Ltd - India
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Bayan Resources Tbk. - Indonesia
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Siam City Cement - Thailand
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- Kideco Jaya Agung - Indonesia
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- Price Waterhouse Coopers - Russia
- AsiaOL BioFuels Corp., Philippines
- Eastern Coal Council - USA
- Wood Mackenzie - Singapore
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- PowerSource Philippines DevCo
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Posco Energy - South Korea
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Madhucon Powers Ltd - India
- Kaltim Prima Coal - Indonesia
- Eastern Energy - Thailand
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Australian Coal Association
- Tamil Nadu electricity Board
- SMG Consultants - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Antam Resourcindo - Indonesia
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- European Bulk Services B.V. - Netherlands
- Videocon Industries ltd - India
- Iligan Light & Power Inc, Philippines
- Central Java Power - Indonesia
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
- Sarangani Energy Corporation, Philippines
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Binh Thuan Hamico - Vietnam
- White Energy Company Limited
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Marubeni Corporation - India
- Cement Manufacturers Association - India
- CNBM International Corporation - China
- Gujarat Sidhee Cement - India
- Thai Mozambique Logistica
- Parliament of New Zealand
- Larsen & Toubro Limited - India
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Ind-Barath Power Infra Limited - India
- Deloitte Consulting - India
- Intertek Mineral Services - Indonesia
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Kumho Petrochemical, South Korea
- Meenaskhi Energy Private Limited - India
- Economic Council, Georgia
- Coal and Oil Company - UAE
- Oldendorff Carriers - Singapore
- Kepco SPC Power Corporation, Philippines
- Australian Commodity Traders Exchange
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Ceylon Electricity Board - Sri Lanka
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Petron Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Mjunction Services Limited - India
- Banpu Public Company Limited - Thailand
- Bangladesh Power Developement Board
- Parry Sugars Refinery, India
- Coastal Gujarat Power Limited - India
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- Global Business Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- SN Aboitiz Power Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Jaiprakash Power Ventures ltd
- Semirara Mining and Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Bukit Asam (Persero) Tbk - Indonesia
|
| |
| |
|
