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.
|
|
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 ...
|
|
|
Showing 1071 to 1075 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Wood Mackenzie - Singapore
- Aditya Birla Group - India
- International Coal Ventures Pvt Ltd - India
- Romanian Commodities Exchange
- Directorate General of MIneral and Coal - Indonesia
- Meralco Power Generation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- New Zealand Coal & Carbon
- Pipit Mutiara Jaya. PT, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kaltim Prima Coal - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Sojitz Corporation - Japan
- Vijayanagar Sugar Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Mjunction Services Limited - India
- Formosa Plastics Group - Taiwan
- Chettinad Cement Corporation Ltd - India
- Global Green Power PLC Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Bahari Cakrawala Sebuku - Indonesia
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Central Java Power - Indonesia
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Singapore Mercantile Exchange
- Salva Resources Pvt Ltd - India
- Central Electricity Authority - India
- ASAPP Information Group - India
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Parliament of New Zealand
- Bayan Resources Tbk. - Indonesia
- Mintek Dendrill Indonesia
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- Agrawal Coal Company - India
- Carbofer General Trading SA - India
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Finance - Indonesia
- Port Waratah Coal Services - Australia
- Baramulti Group, Indonesia
- Africa Commodities Group - South Africa
- Metalloyd Limited - United Kingdom
- Bhoruka Overseas - Indonesia
- Globalindo Alam Lestari - Indonesia
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- Mercator Lines Limited - India
- Miang Besar Coal Terminal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Neyveli Lignite Corporation Ltd, - India
- Dalmia Cement Bharat India
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Sinarmas Energy and Mining - Indonesia
- Therma Luzon, Inc, Philippines
- Malabar Cements Ltd - India
- Bhatia International Limited - India
- AsiaOL BioFuels Corp., Philippines
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- White Energy Company Limited
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Madhucon Powers Ltd - India
- Latin American Coal - Colombia
- Electricity Generating Authority of Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- GMR Energy Limited - India
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- Global Business Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Minerals Council of Australia
- ICICI Bank Limited - India
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Renaissance Capital - South Africa
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Siam City Cement PLC, Thailand
- Makarim & Taira - Indonesia
- Ministry of Mines - Canada
- Trasteel International SA, Italy
- PetroVietnam Power Coal Import and Supply Company
- Jorong Barutama Greston.PT - Indonesia
- Indika Energy - Indonesia
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Tamil Nadu electricity Board
- Barasentosa Lestari - Indonesia
- Bukit Baiduri Energy - Indonesia
- Banpu Public Company Limited - Thailand
- London Commodity Brokers - England
- Kartika Selabumi Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- MS Steel International - UAE
- Krishnapatnam Port Company Ltd. - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Planning Commission, India
- Commonwealth Bank - Australia
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- Eastern Coal Council - USA
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Kumho Petrochemical, South Korea
- Semirara Mining and Power Corporation, Philippines
- VISA Power Limited - India
- Bangladesh Power Developement Board
- Independent Power Producers Association of India
- Australian Coal Association
- Price Waterhouse Coopers - Russia
- European Bulk Services B.V. - Netherlands
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Merrill Lynch Commodities Europe
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- The University of Queensland
- Karbindo Abesyapradhi - Indoneisa
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Vizag Seaport Private Limited - India
- Jaiprakash Power Ventures ltd
- GAC Shipping (India) Pvt Ltd
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Authority, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Edison Trading Spa - Italy
- Bukit Makmur.PT - Indonesia
- SMG Consultants - Indonesia
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Semirara Mining Corp, Philippines
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- The Treasury - Australian Government
- LBH Netherlands Bv - Netherlands
- Larsen & Toubro Limited - India
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
|
| |
| |
|
