Asset ownership risk

Asset ownership risk is the risk:

•  of maintaining the asset to the requisite standard, including the risk that the cost of maintenance may increase during the term; or

•  of premature obsolescence; or

•  that the construction of competing facilities will occur.

The result of this type of risk is that the economic value of the asset may vary, either during or at the end of the contract term, from the value upon which the financial structure of the project was originally based.

In social infrastructure projects, asset ownership risk is generally allocated to the private party (except for technology risk). The risk that competing facilities may be constructed is not generally relevant to social infrastructure projects, as government pays a fixed service fee based on the availability of the facility. However, where a private party's bid is predicated on a third-party revenue source, government may consider, on a value for money basis, accepting the risk that construction of competing facilities may adversely affect that third-party revenue source.