Multi-Billion State Energy Sector Restructuring

We advised on complex tax and regulatory qualification issues arising from a large-scale restructuring within the state-controlled energy sector.

Our mandate focused on determining the legal and tax treatment of a series of interrelated transactions executed between state-owned and state-controlled entities, including:

• The transfer of 100% corporate ownership in a national gas transmission operator;

• Settlement of a one-off final payment under the share purchase framework;

• Compensation arrangements linked to tariff revenue adjustments following the change of licensed operator.

All transactions were implemented under common state control and pursuant to governmental restructuring decisions, without any loss of ultimate ownership over strategic assets.

A central issue addressed in our legal opinion was whether such transactions could be classified, for Ukrainian law and tax purposes, as:

• Taxable income; and/or

• Commercial supply of goods or services carried out for profit-generation purposes.

We further analysed the legal nature of regulatory compensation payments made by the newly licensed operator to the previous operator in connection with adjustments to “necessary revenue” embedded within state-approved transportation tariffs.

These payments reflected regulator-recognised income reallocations rather than market-based commercial consideration and were structured to be disbursed across multiple regulatory periods, including significant upfront settlements financed through external credit facilities.

Our advisory work provided the client with legal certainty regarding accounting treatment, tax exposure, and regulatory compliance in the context of one of the most significant infrastructure restructurings in the national energy sector.

Details have been anonymised due to confidentiality obligations.