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Wealth Marine








The estimation of the value and economic efficiency of vessels, marine engineering, other assets and the marine companies’ complexes is methodologically isolated by the complex structure of the object which is based on the investor’s motivation to development the ocean resources through the vessels construction or the other marine engineering, by means of the creation of the marine engineering complex and productive operation of the specified objects.
           Professional experts in the field of the enterprise (business) value estimation, economy, management and crisis management should be familiar with the methods of the solution of the economic expert tasks in order to promote the advancement of financial investments into the real economic sector and to increase the efficiency of the marine companies’ complexes of the assets.
           To solve the expert tasks of the estimation of the value and economic efficiency an expert should have the understanding of features of estimation of the real assets of the marine companies’ complexes, in particular vessels, and also the experience and vision of prospects of marine industrial activity, technique and technology economic development.
           The textbook contains the methodological material explaining theoretical concepts and developing practical skills in solving the applied expert tasks of evaluation of the vessels, the marine engineering, other assets and the marine companies’ complexes.
           The choice of methodological approaches used in estimation of the value and economic efficiency of vessels and other real assets of the marine companies’ complexes is influenced by the following features of characteristic assets:
           – Characteristic asset of the marine company should be evaluated as a property complex, that is as economically isolated unit applying the methods of the evaluation of the operating company and necessary adjustments;
           – Value of the commercial vessel or other isolated asset of the marine company is proportional to the total value of the marine company as a whole;
           – Vessel or other isolated asset of the marine company in the technological and functional relation is not a stereotypic one, and even a large batch usually does not exceed several units with noticeable differences, and its properties substantially depend on marine resources for the development of which it is used;
           – Unlike the property complex and real estate the value of characteristic assets of the marine company considerably decreases over the time as the value transfers to the value of the production or services;
           – Characteristic asset of the marine company is constructed and operated to provide the investor’s access to the marine wealth that is the basic system precondition for estimation of the value and economic efficiency.
           The terms and the general concepts used in the field of shipbuilding, fleet technical operation and maintenance, which are necessary for the expert, including the concepts of the commercial vessels classification, the set of the vessels structural elements, the devices, the systems and the power–plants, the basic concepts in the field of the vessel repair service and maintenance are presented in Chapter 1.
           The Chapter 2 of the textbook contains the recommendations on the initial data processing and on the scheduling of the work of the vessel evaluation. The features of standard approaches application for commercial vessel evaluation are presented in the 3–rd Chapter.
           The concepts of the comparable sales approach to commercial vessel evaluation, including recommendations concerning a choice of units of comparison and a substantiation of the of statistical regressions formalization for the vessel evaluation based on Chapter 4.
           The Chapter 5 of the textbook covers the methodical features and recommendations concerning the vessel estimation by the cost approach, models of commercial vessel reproduction cost as well as concept of the integrated infrastructural part of reproduction cost. The comparable sales approach and marketing researches can be applied for the estimation of the vessel reproduction cost in a specific case in the form of statistical regressions that is stated in Chapter 6. The concepts of the estimation of depreciations in case of the evaluation based on cost approach are stated in Chapter 7, and characteristic examples of the estimation of the commercial vessel depreciations are considered in Chapter 8.
           The external economic obsolescence is considered among the general set of the components, and the approach to the estimation of the external economic obsolescence based on the account of economic difficulties of the seller and the buyer shifted to the seller, is presented in Chapter 9.
           Concept of the external economic obsolescence closely corresponds to the determination of the resale discount to the value since the basis for discount determination usually is either the limited duration of the exposure period of the commercial vessel for sale or difficulties of the parties participating in the sale, – the seller and the buyer, – shifted to the seller.
           Concepts of the resale discount estimation in case of vessel sale in the period substantially shorter than the typical marketing period are considered in Chapter 10.
           The features of evaluation of the commercial vessel, other real asset or the property complex of the marine company based on income approach are a subject of Chapters 11–16 of the textbook. The interval method of capitalization which is based on the relation of the time periods of capitalization of the discounted cash flow to the investment periods under the planned schedule is considered within the limits of the income approach application for the property complex evaluation (Chapter 12).
           In practice of the assets evaluation based on income approach discounting by the factor (1+i) on the basis of the discounting rate i, which has developed as the formalization of hypothec investment charges is usually applied.
           On the other hand, the analysis of formal properties of economic risks (Chapter 13) leads to determination of discount by using the exponential functions  of the Euler’ number, e = 2.71828283... And  with small values of the discounting rate i, when i » ln(1+ i), that is with rather small values of the rate , the results of the arithmetic discounting application and exponential functions of the Euler’ number for estimation of the value and efficiency of real asset are rather close.
           At the same time the discounting by the exponential functions of the Euler’ number  can be considered preferable for the vessel evaluation or other asset, and also the property complex of the marine company in which structure there is the isolated real asset proportional by its value to the value of property complex as a whole and applied by the investor get an access to the marine wealth.
           Unlike the discounting by the factor (1+i), the use of the exponential functions of the Euler’ number  in the basis does not contain any conditions and is not a mathematical model of interest on the loan or the deposit that is more objectively.
           The discounting by the factor (1+i) is a reasonable mathematical approximation in case of rather small risks .
           Application of the income approach methods for the estimation of the commercial vessel, other real asset or the real assets property complex of the marine company is based on the economic models which are the sequences of methodological dependences between vessel characteristics, data and the parameters usually evaluated by expert opinion, on the one hand, and by the basic economic indexes, on the other hand.
           The annual income, the annual operating costs and investments into the shipbuilding or the marine engineering manufacturing (or purchase at the pre–owned market) and in equipment – in replenishment of a stock of working assets are referred to a number of the basic economic indexes of the commercial vessel, other real asset or the property complex of the marine company concern.
           The basic economic models (that is most the general models suitable for detailed elaboration and use in an applied estimation) are presented in Chapter 14 – for a cargo vessel, Chapter 15 – for a fishing vessel.
           The methodical bases and recommendations used to determine the factors applied to value estimation with use of indicators of operation costs (article 16.1) and the annual income (article 16.2) are stated in Chapter 16 within the limits of variations of the income approach methods used for the vessels in which relation according to their concept of the highest and the best use the income indicator is not provided (for the support vessels as, for example, for a tug vessel, an icebreaker or an emergency vessel, that is intended for increase of efficiency of others vessels and fleet).
           And evaluation based on income approach using a factor of the annual income concerns the estimation of the commercial vessel or other real asset for which operation costs are in dependence on intensity of operation, that is if operation costs depend on the annual income, as, for example, for the variant of the industrial fishery within the limits of the quotas for the ocean biological resources, when the annual income is limited, and the value is determined using the annual income factor.
           Thus the value characterizes a complex object – a vessel and the ocean resources which are subject to development, and the vessel value (or other asset of the marine company) substantially depends on their efficiency.
           The estimation of the value of the right–of–use according to the usual terms of lease concerning marine commercial vessels and the estimation of the value of the charter rate are carried out in Chapter 17 on the basis of the standard concept of the market value as a basis of the evaluation, correlating the market value with the set of property rights – possession, disposal and use.
           The value of the right–of–use is defined as a difference between the present values of the vessel for the specific time interval at the beginning and at the end of use. And the charter market rate with the account various possible periodicity of the rent charges is determined by the equations, based on the equality of value of the right–of–use and the present value of the rent cash flow.
           When determining the adjustments besides of the periodicity of the rent charges the following factors are taken into consideration: predicted change of the vessel value by the end of the period of use (article 17.3); specific obligations of the owner for the commercial vessel maintenance, which is used by the tenant, for example, under the time–charter (article 17.4); the conditions of the vessel repayment at the end of the period of use (article 17.5).
           The general structure of the marine company’s real assets property complex is considered in Chapter 18. Modern shipbuilding and shipping develop in the conditions of the international specialization that is considered in article 18.1. The factor of global international specialization has the systematic character influencing the structure of the investor (article 18.2) as a part of the isolated object of the evaluation and the economic efficiency estimation of investments in shipbuilding and shipping (article 18.3).
           The estimation of the efficiency in the marine industrial activity and estimation of the value are the integral adjacent subject matters in the applied economics (Chapter 19), of the financial investments aimed at the advancement into the real sector. The concepts of efficiency and value are redefined in interrelation to each other.
           The annual income, operation costs and investments (article 19.1) are referred to a number of the basic economic indexes which within the limits of the systematic approach are evaluated with application of the economic models of commercial vessels, other real asset or the property complex of the marine company economic models in correspondence with the data, characteristics and parameters.
           The basic indicators do not reflect critical judgments about the efficiency of variants necessary for the comparison and the choice of characteristics combination of the vessel for the commercial order (or another asset of the marine company). There is a need for correlations of «pluses» and «minuses», and these correlations, logical from the point of view of the systematic approach, determined by mathematical operations on the basic indicators, are economic criteria.
           The following indicators such as: net present value (reproduced value) and internal rate of return which can be transformed to index of investments recovery term are most widespread among the criteria of efficiency estimation of the commercial vessel or the property complex of real assets.
           The ocean resources defined as properties of the marine environment which are of investor’s concern, and which are an element of the real assets complex of the marine enterprise or the factor of the value and efficiency of the commercial vessel, are evaluated formally by their net present values (Chapter 20), that at the methodological level corresponds to the concept of unidentifiable intangible asset – goodwill – as a part of the real assets property complex of the marine company (article 20.2).
           Among the applied expert tasks in the sphere of joint marine industrial activity there can be a task to estimate the contribution of separate investors (Chapter 21), for example, in case of joint offshore development on the basis of the production sharing contract, in case of joint activity in marine cargo traffic transportation, in case of the partition of property of the marine fishery company which possesses the vessels and the rights for quotas for fishing of the ocean biological resources, etc.
           The dependences of the basic economic indexes of the annual income, the operation costs and the investments on varied characteristics of the commercial vessel when keeping to a systematic approach of the variants comparability for the known and specified parameters and data and dependence of economic criteria on the basic indicators make the criterial functions for economic optimization of the vessel characteristics for the commercial order (Chapter 22), that in case of indeterminate of the marine company asset purpose or data (Chapter 23) leads to multiobjective sense and to use of the generalized criteria, corresponding some determinations or other of the value, with the account the methodological conditions.
           The determination of the optimal vessel characteristics (or another asset of the marine company’s property complex) by the economic criteria according to the concepts of the systematic approach is made with the account the limitations. It is possible to refer the financial constrain of the investor and the resource constrain to a number of the basic limitations (Chapter 24).
           When the marine company has its own innovative strategy which access of the investor to the development of the ocean resources, the financial constrain is not so important, since on the one hand the efficiency of the strategy provides access to the financial markets and on the other hand the strategy means rather a sufficient amount of the ocean resources for the overcoming of resource constrain (functional).
           In other words, when there is an innovative strategy of the investor, the optimality is the internal property of the commercial vessel characteristics (or the other asset of the marine company), and optimization of the project characteristics is carried out using the criterial function without imposing financial or functional limitations.
           In order to work out the initial technical requirements of the contract (or of the choice at the pre–owned market) it is required to determine the combination of the set of characteristics and particulars which are interconnected and have a complex influence on the vessel efficiency and the properties: seaworthiness, reliability, life time, long–lasting, safety, etc.
           The subject of project economic optimization is the main characteristics, but the particulars can be approximately determined using the proportional statistical equations and the regression dependences (Chapter 25).
           The methodical recommendations concerning the methods of the determination of marine commercial vessels’ value (cargo and fishery) are included in the appendix to the textbook as a model of a term paper and the recommendations can be used to develop practical skills in the field of vessel evaluation as an asset of the property complex of the marine company.
           The applied economics approaches suitable for determining the marine technology design characteristics, particularly the commercial vessels, and optimization by the systematic approach extend the methodological systematization, since the systematic approach is an interdisciplinary
           The statement requires clarification. The concept of the design object, such as a commercial vessel of a certain class, can be introduced the methodological approach allow the uniformity of approaches for all vessels of this class, for example, the similar methods of the ship theory (the seaworthy properties evaluation) and structural mechanics (the provision of the vessel life time) are applied to all commercial vessels.
           But it can be difficult to define the concepts of: the marine engineering, the ocean technology, the marine technical complex, etc., which are broader than the concept of vessel of a certain class. That is, the vessel can be attributed to marine engineering (ocean technology, marine technical complex), but these objects are not confined to a vessel, since they include other classes of objects.
           The question is if it is possible whether to formulate general design methodology for marine engineering (ocean technology) if it covers commercial vessels of different classes, offshore rigs, underwater technology for industrial use, coastal infrastructure of marine enterprises, industrial shipbuilding and ship repair facilities, parts of hydraulic structures, etc., that is, whether it is possible to provide general design methods of such diverse objects, and this way justify in terms of project methodology the concepts of: the marine engineering, the ocean technology, the marine technical complex, etc.
           Since the above mentioned subjects of ship theory and structural mechanics, as well as other technical subjects, are usually attributed to objects in the narrow definition, for example, to the commercial vessels, then, it is possible to justify a broader concept of the object in terms of design methodology, such as marine technology, including commercial vessels of various classes and other objects of marine engineering (ocean technology), by introducing a common systematic approach for optimization of project characteristics by the economic criterion of maximized marine resources (ocean resources) contribution to the value of the marine engineering object.
           It is the optimization by the economical criterion and by the systematic approach that is a common methodological basis for the design of marine engineering (ocean technology, marine technical complex), as well as the commercial vessels of all classes, and offshore rigs, coastal infrastructure of marine enterprises, facilities of shipyards and dockyards, parts of hydraulic structures, etc. The optimization by the criterion of contribution of the marine resources (ocean wealth) to the value of the marine engineering object is a systematic approach for the design to be applied to any object from the specified list. Other objects that not reefer to the marine engineering (ocean technology), are not subject for the design optimization by the criterion of the marine resources contribution for object value.
           The understanding of the marine engineering as objects of designing, production and investment is the basis for improvement of design methodology based on optimization and systematic approach and allows solving the applied tasks.
           And it should be noted that the systematic approach for designing is a unifying approach in various aspects and allows not only to combine structurally different marine objects in the general concept of marine technology on the basis of a uniform methodology for project optimization, but also facilitate mutual understanding between the shipyards which should produce vessels, that are in demand, and shipping companies which are investors – the customers for the shipbuilding industry, and with due regard of the global industrial specialization in shipbuilding, shipping and other fields of ocean development on the basis of international cooperation.
           This way the extra features opened by the systematic approach and methods of the design optimization of the marine technological facilities and property complexes of marine companies based on the approach are as follows:
           1. Inclusion of applied economics methods in a number of the concepts of Naval Architecture and theory of ship design, along with the mechanics (structural mechanics, hydromechanics) and other subjects of the applied physics, the development of ship designing theory on the basis of the systematic approach.
           2. Methodological ordering of the subject–matter – the definition of the sets of independent variables: initial data (external, i.e. constants), variables to be optimized – the main characteristics and the parameters of optimization – particulars of the designed ship.
           3. «Marine Technology» can be defined from the standpoint of the design theory, taking into account that this term includes technical facilities for the ocean development along with the commercial vessels, and the general designing methods of a broad class of marine engineering that differ in design and in respect of mechanic are the optimization by the economic criteria based on a systematic approach.
           4. Promotion of the financial investments in the real assets and improvement of economic indexes of marine industries by the application of a project economic evaluation from the standpoint of the investor, who develops the marine resources.
           5. Promotion of the international cooperation in shipbuilding and ocean development, in view of the fact that the batch commercial shipbuilding in recent years is located mainly in the industrialized countries of East Asia, while investors are located everywhere – with reference to the geographical location of the ocean resources.


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