Transfer of asset ownership to the project company may be done for a number of reasons, for example to
i) Keep debt off balance sheet, where government ownership of assets might result in project debt associated with the assets being treated as government debt
ii) Allow the project company to account for depreciation and other tax benefits to the extent these are reserved for owners of the underlying property
iii) Provide the project company with regulatory/legal rights (e.g. for simplified access to third party land, disconnection of services or legal "standing" to challenge regulatory decisions) to the extent these attach only to the asset owner
iv) Give investors and lenders security of legal title
However, the implications of asset ownership are relatively limited, and in fact are only slightly different than other rights that might be created over the assets (like leases and licenses). The regulatory and accounting issues discussed above aside, the key concern associated with asset ownership is the enforcement of government reversion rights or whatever transfer arrangements there may be at the end of the project period. Where the project company owns the assets, enforcing such transfer obligations may be more difficult unless specifically supported by law or the legal system. However, most legal systems allow governments to seize assets used for public services, including roads, water, power and similar facilities. And every jurisdiction allows the government to seize private assets for reasons of public or national interest. In some cases, the government will have a legal right to seize assets associated with important public services, in urgent cases, for example the UK government seized the assets of Railtrack under a similar legal right.9
Therefore, asset ownership is an illusory comfort. Lenders will often proclaim the importance of asset ownership and security for their loans, but such rights are rarely more effective than other security rights. Lenders will generally not be able to remove assets to dispose of them or sell the whole project, therefore such security rights are more often defensive in nature - to protect against those who would want to seize project assets or stop project operations. Therefore, so long as other creditors are junior to the lenders, and they have stepping rights to ensure that they can maintain project operations, asset ownership is not needed. And, in practice, most projects do not benefit from asset ownership.
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