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