Ships and other fixed assets
excl. dry dock
costs dry dock
excl. dry dock
costs dry dock
|Cost per 1 January||8 475||145 490||3 709||149 199||4 920||14 125||118 756||954||119 710||4 896|
|Additions||20 531||22 740||1 140||23 880||183||22 600||26 734||2 755||29 489||71|
|Disposals||-29 006||0||0||0||-140||-28 250||0||0||0||-47|
|Cost per 31 Desember||0||168 230||4 849||173 079||4 963||8 475||145 490||3 709||149 199||4 920|
|Depreciations per 1 Jan.||4 250||60 381||1 088||61 469||3 565||0||30 467||324||30 791||3 490|
|Depreciation for the year||0||3 701||1 077||4 778||123||0||3 817||764||4 581||105|
|Impairment||0||13 823||0||13 823||0||5 750||26 097||0||26 097||0|
|Disposals||-4 250||0||0||0||-131||-1 500||0||0||0||-30|
|Deprec. as at 31 Dec.||0||77 905||2 165||80 070||3 556||4 250||60 381||1 088||61 469||3 565|
|Book value per 31 Dec.||0||90 325||2 684||93 009||1 407||4 225||85 109||2 621||87 730||1 355|
|Other fixed assets||0||0||0||0||276||0||0||0||0||320|
|Book value at 31 Dec.||0||90 325||2 684||93 009||1 683||4 225||85 109||2 621||87 730||1 675|
Spesification of the group’s ships
|Total fleet||168 224||-27 125||-50 774||2 684||93 009|
|ship||Built year||Ownership||Cost price||Ordinary depreciations||Impairments||Capitalised drydock exps.||Book value|
|M/S Belstar||2009||100 %||40 542||-9 795||-13 135||185||17 797|
|M/S Belnor||2010||100 %||39 891||-8 874||-10 643||325||20 699|
|M/S Belocean||2011||100 %||38 317||-6 918||-20 387||741||11 753|
|M/S Belforest||2015||BBC||26 734||-918||-6 609||675||19 882|
|M/S Belisland||2016||BBC||22 740||-620||0||758||22 878|
M/S Belstar, M/S Belnor and M/S Belocean (until mid February 2016) have continued the long-term contracts to Canpotex Shipping Services Ltd of Canada. In February 2016 M/S Belocean was fixed to Cargill International S.A of Switzerland for 10-15 month period. The ships have operated satisfactorily over the year. The three supramaxes are owned by the Group and reference is made to note 13 regarding financing.
M/S Belisland was delivered 15 March 2016. The remaining newbuilding commitment amounting to USD 19.8 million was paid at time of delivery. The ship was at time of delivery sold to a Japanese counterpart and leased back for a period of 15 years with purchase options from year 5 onwards. The sale generated a loss amounting to USD 1.1 million. The lease transaction is considered as a financial lease. The ship was chartered to Canpotex for 5 years from delivery.
M/S Belforest is leased for a period of 12 years with purchase options from year 3 onwards. The ship is chartered to Cargill unto mid of May 2017 with charterers option of further 4 months.
The counterparty risk with the charterers is considered to be low. The operating result is impacted by a provision of USD 0.4 million for unfavourable timecharter contracts for M/S Belocean and M/S Belforest.
Impairment tests for the company’s assets are performed in accordance with IAS 36. Due to the declining dry bulk market (charter rates/ship values), Belships has had several impairment indicators in 2016, accordingly impairment tests have been performed every quarter. The impairment tests led to an impairment charge of USD 13.8 (31.8) million in 2016. The method and estimates applied in the impairment test is described in note 3.
For calculations of the net present value of the estimated fair value of the remaining 3-5 years charter, the Group has calculated the variance between the contractual rate and the current observable market rate for similar ships and a weighted average cost of capital ratio (WACC) of 8%. In the calculation of the required rate of return, the risk-free interest rate was set at the 5-year LIBOR at 1.75%, and the margin was fixed at 4% which is approximately equal to margin on external loan and implicit interest on the lease agreement. The equity risk premium was set at 6%, which is the estimated additional return required by investors in order to invest in a market portfolio above a risk-free interest rate.
For ships where the Group has entered into sale & leaseback agreements, the implied price in the agreement has also been taken into consideration in the impairment test.
The Company’s impairment model has taken into consideration market expectations of future development in the dry bulk market. If the market continue to further detoriate, or the period until recovery is prolonged, additional impairment can be expected.
The table below shows sensitivity in the impairment tests of the ships.
|Change in market value of the ships (incl. c/p agreements) when:|
|WACC increase with 1%||-98||-149||0||0||-207||-454|
|WACC decrease with 1%||99||154||0||0||213||466|
|Market rate increase 5% and ship values increase 2.5%||-52||-97||297||500||-29||619|
|Market rate decrease 5% and ship values decrease 2.5%||52||97||-297||-500||29||-619|
If the general charter rate increase more than expected in the company’s impairment model, this will have a negative impact on the net present value on ships currently trading on long favorable charters, but partly offset by an increase in underlying broker values on the Company’s ships. For ships without a long favorable charter, an increase in market value will have positive effect. If the general charter rate decrease more than expected, this will have a negative impact and additional impairment based on underlying broker values.
Calculation of depreciations
Depreciation is calculated on a straight line basis over the estimated useful life of the ships taking its residual value into consideration. The useful life, which is also considered as the economic life of the ships, has been estimated to 25 years. Residual value is estimated based on steel prices of the ships less cost to demolish and is reassessed every year-end. Dry docking expenses are depreciated until next planned dry docking, typically 30-60 months.
Other assets have a useful life of 3-5 years, except for the office premises in Singapore in which the useful life is estimated at 57 years.
Reference is made to note 5 regarding contracted time charter incomes for the ships.