Whether the land asset (as distinct from the project infrastructure) should be in government ownership, depends on the degree of government's anticipated need for the site. This will generally fall within the following categories
• sites that government clearly wants into the future, e.g. major roadways:
- government should retain ownership of the site and lease it to the private party. Ownership will give government important rights under the lease and may help underpin step-in rights under the contract
- Projects in this category are likely to be projects where the asset reverts to government on termination
• sites from which government may wish to receive or deliver future services:
- government may either own the land and lease it to the private party, or allow the private party to own the land - subject to government having first option to purchase the land (and presumably the facility) at the end of the contract term or on early termination, according to an agreed valuation method
• sites in which government has no special interest and from which it can, if need
be, walk away
- government may consider allowing the private party to build, own and operate the facility on private land, without being obliged to transfer the site to government either at the start or end of the contract.
Determining which scenario will apply depends primarily on government's future intentions in relation to the land and the facility and, to a lesser extent, on the financing structure that most suits the project circumstances. This is especially relevant in the second category, where government's position is flexible and residual site value (and residual asset value) may be factored into the project financial structure in a variety of ways. (The question of residual value and the role it plays in the project financial structure is dealt with in detail in chapter 13: Asset ownership risk.)