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.
|
|
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 ...
|
|
|
Showing 1061 to 1065 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- SMG Consultants - Indonesia
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
- Kobexindo Tractors - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- Ind-Barath Power Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- Jaiprakash Power Ventures ltd
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- Electricity Generating Authority of Thailand
- Medco Energi Mining Internasional
- Krishnapatnam Port Company Ltd. - India
- Marubeni Corporation - India
- Iligan Light & Power Inc, Philippines
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Independent Power Producers Association of India
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Cement Manufacturers Association - India
- Samtan Co., Ltd - South Korea
- Georgia Ports Authority, United States
- Jorong Barutama Greston.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- Mintek Dendrill Indonesia
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- Agrawal Coal Company - India
- Energy Development Corp, Philippines
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Salva Resources Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Aditya Birla Group - India
- New Zealand Coal & Carbon
- Electricity Authority, New Zealand
- Minerals Council of Australia
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Coastal Gujarat Power Limited - India
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Thai Mozambique Logistica
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- VISA Power Limited - India
- Antam Resourcindo - Indonesia
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Chamber of Mines of South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Australian Coal Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- South Luzon Thermal Energy Corporation
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Deloitte Consulting - India
- Bayan Resources Tbk. - Indonesia
- Kumho Petrochemical, South Korea
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- Kartika Selabumi Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Coalindo Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Ambuja Cements Ltd - India
- White Energy Company Limited
- Economic Council, Georgia
- Indian Energy Exchange, India
- SMC Global Power, Philippines
- Sinarmas Energy and Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Directorate Of Revenue Intelligence - India
- Mercuria Energy - Indonesia
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- Eastern Energy - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Rashtriya Ispat Nigam Limited - India
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Energy Link Ltd, New Zealand
- Parliament of New Zealand
- Sojitz Corporation - Japan
- Kapuas Tunggal Persada - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Wood Mackenzie - Singapore
- Lanco Infratech Ltd - India
- Straits Asia Resources Limited - Singapore
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Parry Sugars Refinery, India
- Siam City Cement - Thailand
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Rio Tinto Coal - Australia
- Carbofer General Trading SA - India
- LBH Netherlands Bv - Netherlands
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Attock Cement Pakistan Limited
- Eastern Coal Council - USA
- European Bulk Services B.V. - Netherlands
- Ministry of Transport, Egypt
- Neyveli Lignite Corporation Ltd, - India
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GAC Shipping (India) Pvt Ltd
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The University of Queensland
- Tata Chemicals Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- TNB Fuel Sdn Bhd - Malaysia
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- Riau Bara Harum - Indonesia
- Central Java Power - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Sical Logistics Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement PLC, Thailand
- London Commodity Brokers - England
- Price Waterhouse Coopers - Russia
- Ministry of Mines - Canada
- Singapore Mercantile Exchange
- ASAPP Information Group - India
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Bharathi Cement Corporation - India
- Sarangani Energy Corporation, Philippines
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
|
| |
| |
|
