Public-Private Partnership in Ukraine: Legal Nature, Procedure, and Economic Incentives for the Private Sector

Source: Yurydychna Gazeta (Legal Newspaper)

The reconstruction of energy infrastructure is one of Ukraine’s primary post-war challenges. Damage to generation capacities, the need for decentralized energy sources, and grid modernization require the mobilization of private capital. The new Law of Ukraine “On Public-Private Partnership” (which entered into force on October 31, 2025) (the Law) establishes a modern legal framework for such investments, converging state and business interests.

The Public-Private Partnership (PPP) mechanism is set to become the central tool for implementing large-scale energy projects—from the construction of new power plants and grid development to the deployment of “green” technologies. For investors, this signifies predictable rules of the game; for the state, it offers an efficient pathway to restore strategic infrastructure.

The Legal Nature of Public-Private Partnership

According to the Law, PPP is a form of cooperation where the private partner finances, constructs, or operates a public facility, undertaking a portion of the risk. In the energy sector, this could involve new generation, renewable energy, or heat and electricity grids.

A crucial change is that project initiation belongs exclusively to the public partner. This means that energy companies aiming to execute infrastructure projects must now cooperate with state or municipal structures even at the conceptual stage. While this simplifies planning, it requires the investor to be proactive in convincing the public party of the feasibility of their proposed solution.

The Cabinet of Ministers is expected to adopt secondary legislation within a year: rules for the functioning of the electronic platform, standard contracts, efficiency assessment methodologies, and registry procedures. Until these are approved, most procedures will operate in a hybrid format—partially manual, partially online. This will temporarily slow the launch of energy PPPs but will establish the foundation for the full digitalization of the process.

Regarding the Subject Composition of the Partnership

The new Law specifies who can be a party to a PPP. The Public Partner is a government authority or a public sector business entity—for example, Ukrenergo or state-owned energy companies. The Private Partner is a resident legal entity or an EU company created specifically for the particular project.

For investors, this broadens the pool of potential partners: projects can now be implemented directly with state-owned enterprises, even if they are not the contracting authority acting on behalf of a Ministry. This approach simplifies the deal structure and aligns it closer to European SPV (Special Purpose Vehicle) models.

Possible Cooperation Models

The Law enshrines two basic PPP models:

Concessionary: The private investor constructs and operates the energy facility (power plant, thermal power station, hydro-power plant, or RES complex), receiving revenue from users or the state, and transfers the asset back to state ownership upon the expiry of the term.
Non-Concessionary (PPP Agreement): The private company modernizes or maintains the facility without acquiring ownership rights, but receives compensation for operational readiness (availability payment).

Both models allow for attracting private financing without the state losing control over strategic assets. For the energy sector, this means the private sector can build new capacity, modernize grids, or provide maintenance services—while the state retains ownership.

Procedure for Engaging the Private Partner

The selection of the private partner is conducted through a competitive procedure, ensuring openness, equality among participants, and adequate state control. This procedure is crucial specifically for energy projects, where the scale of investment, risks, and public significance demand clear and transparent mechanisms.

Project Initiation. The public partner formulates the concept or the Feasibility Study (FS). For energy projects, this usually means developing a preliminary generation model, assessing technical grid connection possibilities, environmental expert review, and energy demand forecasting. At this stage, investors may engage as consultants, offering proposals or alternative solutions, though the final initiative rests with the public partner.
Efficiency Analysis and Decision on Feasibility. Energy PPPs are evaluated not only by financial metrics but also by energy security, integration into state decarbonization strategies, and compliance with the EU “Green Deal.” For foreign investors, this is the stage at which they can influence the choice of technology or financial model to meet international ESG standards.
Organisation of the Competition. The public partner establishes a tender commission and prepares the documentation, defining the selection criteria. The Law mandates a clearly defined evaluation system encompassing technical, financial, and legal aspects. For energy, this may include guarantees of stable supply, deadlines for facility commissioning, the level of equipment localisation, and the share of renewable sources.
Tender Announcement. Information is published on the public partner’s website and in the future electronic PPP system (expected launch by January 1, 2027). Until its creation, all announcements and documents will be placed in a hybrid format. This is important for investors planning to participate in tenders in the near future. Some communications will remain paper-based or via email.
Qualification Selection. At this stage, participants are vetted against qualification criteria. In the energy sector, particular attention is paid to the investor’s technical experience, portfolio of similar projects, financial stability, and the absence of anti-corruption violations. This establishes an additional barrier for non-compliant participants while increasing confidence in the tender among large international companies.
Submission and Evaluation of Proposals. Three components are assessed: technical, financial, and legal. In energy projects, the key criteria include technological reliability of the equipment, projected efficiency (KPIs), the cost of energy produced, the financing structure (equity, loans, grants), and mechanisms for hedging currency risks.
Determination of the Winner. The decision is made based on efficiency criteria, risk allocation, and economic feasibility. The Law obligates the public party to provide documentary justification for the proposal selected. For the energy sector, this means prioritizing companies that offer a balance between investment cost, reliability, and innovation (e.g., hybrid generation systems, energy storage systems, etc.).
Conclusion of the PPP Agreement. The agreement is signed after coordination with the Ministry of Finance of Ukraine, the authorized state body, and, where necessary, the local self-government body. It is essential for the investor to remember that all PPP agreements are governed by Ukrainian law. Arbitration can be used only as a dispute resolution mechanism, but not as an alternative to Ukrainian jurisdiction.

The new procedure for selecting a private partner thus creates a balanced model: the state retains control, and the investor receives a transparent, competitive, and predictable process for participation. For the energy sector, this opens the door to realizing large-scale projects with the minimization of political and regulatory risks.

Economic Incentives for the Private Partner

The legislative PPP model stipulates that created or modernized facilities remain in state or communal ownership, while the private partner gains the right to use them, with the possibility of transferring that right to other entities.

The main sources of remuneration for the private partner include:

User Fees: In the case of commercial use (toll roads, energy facilities, logistics hubs);
Availability Payment: Regular payments for the availability of the facility or service;
Combined Model: Partial financing from users and compensation from the state;
In-Kind Remuneration: Land plots, infrastructure, or utility networks;
Tax Incentives and State Support: Benefits, compensations, and access to financing programmes.

An important element of the PPP system reform is the introduction of the electronic platform stipulated by the Law. It is intended to ensure the submission of applications, the conduct of tenders, the monitoring of contract execution, and public oversight of results. The deadline for creating the platform is set for January 1, 2027.

The new PPP Law creates a high-quality normative basis for attracting investment into the restoration of Ukraine’s energy system. It gives the state a control mechanism and provides business with predictability and protection for its investments.

The model—where the private partner constructs, commissions, and operates the energy facility, receiving revenue from users or compensation from the state—is a realistic way to rapidly build out generation and modernize networks. While ownership remains with the state, management efficiency is provided by the private operator.

The potential of PPP for the energy sector is immense. Simultaneously, the outcome will depend on whether the Cabinet of Ministers manages to promptly adopt the secondary legislation and whether the public partner proves professional enough to translate the legislative model into tangible investment agreements.

Yehor Hrechushkin, Senior Lawyer at Altelaw&Sempra