Octopus Energy is preparing to spin off its technology arm, Kraken Technologies, into a separate entity following a deal that values the platform at $8.65 billion (£6.4 billion).
The energy giant, which is the largest supplier of gas and electricity in Britain, has sold a $1 billion stake in Kraken to a consortium of investors led by D1 Capital Partners, based in New York.
This move sets the stage for Kraken to be demerged from Octopus, opening up the possibility of a future stock market listing for the technology business.
Greg Jackson, founder and chief executive of Octopus, stated to the BBC that there was a strong likelihood of Kraken listing its shares “in the medium term,” with the potential location for the flotation being “between London and the US.”
Kraken utilizes artificial intelligence to streamline customer service and billing processes for energy companies, including managing energy consumption patterns and incentivizing customers to reduce usage during peak demand.
Initially developed for internal use by Octopus, Kraken has since expanded its client base to include prominent utilities such as EDF, E.On Next, TalkTalk, and National Grid US, now servicing 70 million household and business accounts worldwide.
Octopus will receive the majority of the $1 billion investment to fund its expansion, with the remainder allocated to Kraken. Mr. Jackson indicated that Kraken would operate independently of Octopus “within a few months.”
Other investors in the business include Fidelity International and a unit of Ontario Teachers’ Pension Plan, with Octopus retaining a 13.7% stake in Kraken.
Amir Orad, chief executive of Kraken, said the spinoff would provide the company with the “focus and freedom” needed to facilitate growth, as it had previously faced challenges conducting business with Octopus’s competitors.
Mr. Jackson noted that for a technology firm of Kraken’s scale, the location for its share listing would likely be either London or the US.
“One thing about Kraken is we’ve got this global investor base… and so really the stock exchanges have got to kind of show why they are the right one for business.”
A London listing for Kraken’s shares would be a positive sign, reversing a recent trend of companies choosing to list in the US over the UK.
Mr. Jackson highlighted that Octopus has created 12,000 jobs in the UK, with 1,500 of those attributed to Kraken.
He affirmed the company’s commitment to maintaining its headquarters in the UK, stating that “if London can be the right place to list, I would love that.”
“But it’s down to be where you’re going to get the most investor support and the most support from the stock exchange.”
The demerger coincides with Octopus Energy’s ongoing expansion, having surpassed British Gas to become the UK’s largest energy supplier earlier this year, serving 7.7 million households.
However, the company recently confirmed that it was one of three retail energy firms that had not yet met the financial resilience targets set by regulator Ofgem.
Octopus stated that the capital injection would “almost double Octopus Energy Group’s already strong balance sheet.”
The announcement of the deal coincided with the publication of Octopus’s results for the year ending in April, revealing a pre-tax loss of £260 million, compared to a pre-tax profit of £78 million the previous year.
This occurred despite overall sales increasing by a tenth to £13.7 billion. Octopus experienced a downturn due to decreased energy demand resulting from warmer weather and the conclusion of energy crisis allowance payments in 2024.
The company attributed approximately £103 million in profit losses to warmer weather, citing the UK’s warmest spring on record since 1885, which led to an 11% decrease in gas usage in March and a 25% decrease in April.