Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Octopus Energy has reached a deal to sell a minority stake in its Kraken Technologies unit, a transaction that would value the software business at $8.65bn and pave the way for its potential public listing.
The UK energy group is selling about $1bn of Kraken equity to a syndicate of investors including D1 Capital Partners, Fidelity and a unit of the Ontario Teachers’ Pension Plan, according to the company.
The vast majority of the $1bn proceeds from the investment in Kraken — about $850mn — will go to Octopus Energy, and the remaining $150mn to Kraken.
The deal underlines investor appetite for utility technology as they bet that power companies will need to upgrade their software systems to help customers move towards lower-carbon technologies such as solar panels and electric cars.
Greg Jackson, founder of Octopus Energy, said the investment would allow Kraken to “grow even faster”, adding that the software arm was “in a class of its own in terms of technology, capability and scale”.
Existing shareholders will retain a stake in Kraken, alongside Octopus Energy and the new investors.
Octopus Energy said the investment was a step towards Kraken’s formal independence and demerger from the group.
The move sets up an initial public offering of Kraken potentially within the next year or two and could enable an eventual flotation of Octopus Energy, the people added. Kraken could float in London or New York.
Octopus Capital, one of Octopus Energy’s largest investors, and other shareholders would provide $320mn to it for “innovation and growth”, Octopus Energy also announced on Monday.
It confirmed this year that it was one of three UK retail energy companies that had not yet met regulator Ofgem’s capital adequacy targets, intended to ensure utility companies are financially robust.
Octopus Energy announced plans in September to spin out Kraken as a standalone company, a move that executives said would allow the business to speed up its global growth and pursue its ambition of serving 1bn people within the next decade. After the split, Octopus Energy will retain a 13.7 per cent stake in Kraken.
The transaction marks the first standalone investment round into Kraken since the software business was developed inside Octopus Energy.
Amir Orad, chief executive of Kraken, said becoming an independent company would give the business “the focus and freedom to scale as a neutral, global operating system for utilities”.
Kraken’s software was developed in-house by Octopus Energy and is now licensed to rival utilities, turning it into one of the group’s most valuable assets.
The platform is licensed to companies including EDF and Eon. It is used by energy and water groups to manage everything from customer accounts to batteries, renewable generation and electric vehicle charging.
Kraken is contracted to serve more than 70mn customer accounts worldwide, according to the company.
Analysts at UBS said recently that Kraken was on track to exceed its target of serving 100mn customer accounts by 2027, though they cautioned that the software’s competitive advantage could narrow over time.
Octopus Energy has steadily taken steps to distance Kraken from its retail energy business to avoid perceptions of conflicts of interest. Former BT Group chief executive Gavin Patterson was appointed chair of Kraken in 2023, and the software arm has built its own management team and governance structure.
Founded in 2015, Octopus Energy overtook British Gas this year to become the UK’s largest household energy supplier. Its rapid growth and technology-led model have attracted investors from around the world, including the Canada Pension Plan Investment Board and Generation Investment Management, which is chaired by former US vice-president Al Gore.