FINANCE LEASES

12 Months Ended

Dec. 31, 2023

As of December 31, 2023, we held seven vessels under finance lease (December 31, 2022: seven vessels). With reference to Note 10, ''Operating Leases'', we have leased in eight vessels from SFL, a related party, one of these vessels was classified as operating lease and remaining seven were classified as finance lease as of December 31, 2023. The daily time charter rate for vessels classified as finance lease was $19,135, of which $7,000 is for operating expenses (including drydocking costs) up until the third quarter of 2022 when the daily time charter rate was reduced to $16,435 up until June 30, 2025. Subsequently, the daily time charter rate will be reduced to $14,900 until the expiration of the contracts. For the finance leases, the profit share mechanism is calculated based on a base rate of $14,900 adjusted for a reference rate dependent variable lease consideration. For further description of the calculation of the profit share element and payment structure, refer to Note 10, "Operating Leases". The average daily rate was calculated to be $17,649 for finance leases in 2023 and there was no profit share for all eight SFL vessels in 2023 ($3.0 million and $9.8 million in 2022 and 2021, respectively). Contingent or variable lease expense for the eight SFL leases was recorded in 2023 as interest expense of $2.5 million. In 2022 and 2021 we recorded the variable lease expense of $0.6 million and $2.0 million, respectively. The lease term for these vessels has been determined to be 13 years and expires in 2028.

Our right of use asset for our finance leases were as follows:


(in thousands of $)
Balance as of January 1, 2022						98,535
Additions						—
Depreciation						(14,946)
Impairment						—
Balance as of December 31, 2022						83,589
Additions						16,281
Depreciation						(14,946)
Impairment						—
Disposal						(16,281)
Balance as of December 31, 2023						68,643

Our lease obligations for our finance leases were as follows:


(in thousands of $)
Balance as of January 1, 2022						127,730
Additions						—
Repayments						(29,059)
Interest expense on obligations under finance lease						7,304
Balance as of January 1, 2023						105,975
Additions						16,281
Repayments						(40,568)
Foreign exchange translation						(198)
Interest expense on obligations under finance lease						6,098
Balance as of December 31, 2023						87,588
Current portion						19,601
Non-current portion						67,987

With reference to Note 10, "Operating Leases", upon declaring the purchase option for one Supramax vessel, Golden Hawk, we included the option price into lease asset and lease liability and reclassified the lease from operating lease to finance lease. Repayments of finance leases above includes repayment of $15.3 million for Golden Hawk upon purchase of the vessel in November 2023 before the end of the lease term.

The weighted average discount rate in relation to our SFL finance leases was 6.3% and the weighted average lease term was 4.6 years as of December 31, 2023. The weighted average discount rate was 6.3% and the weighted average lease term was 5.6 years as of December 31, 2022.

The outstanding obligations under finance leases as of December 31, 2023 are payable as follows:


(in thousands of $)
2024						24,553
2025						22,551
2026						20,617
2027						20,617
2028						12,320
Thereafter						—
Minimum lease payments						100,658
Less: imputed interest						(13,070)
Present value of obligations under finance leases						87,588

With regard to the eight SFL Capesize vessels, we have a purchase option of $112.0 million en-bloc in 2025. If such option is not exercised, SFL will have the option to extend the charters by three years at $14,900 per day. Our lease obligation is secured by the lessor's title to the leased asset.