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