The private sector will usually accept residual value risk. For assets of considerable economic life, such as roads, the asset may revert to Government at the end of the concession period, which will usually be substantially less than the expected economic life of the asset.
Residual ownership rights are a key determinant in the likely accounting classification of a PPP transaction. If the contract is to confer residual value risk on the Government, there must be sufficient operational risk borne by the private sector under the terms of the service contract to support an assessment that the private sector nevertheless carries substantially all of the risks related to the underlying asset.