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