Octopus Energy has agreed to sell a minority stake in its Kraken Technologies division, valuing the software business at 8.65 billion dollars (£6.4 billion) and paving the way for a potential stock market flotation.
The UK energy giant – the largest gas and electricity supplier in Britain – has sold about 1 billion dollars (£740 million) worth of equity in Kraken to a group of investors, including the global investment firm D1 Capital Partners, Fidelity International and a branch of Ontario Teachers’ Pension Plan.
The investment round will fund both Octopus and Kraken, but it is understood that most of the proceeds will benefit Octopus Energy.
Octopus announced that an additional 320 million dollars (£237 million) would also be provided to Octopus by investors, led by Octopus Capital – one of Octopus Energy's largest investors – to support “innovation and growth.”
Octopus, which is set to release its annual results later on Tuesday, will retain a 13.7% stake in Kraken Technologies after the separation.
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Greg Jackson, founder of Octopus Energy Group, commented: “Kraken is in a class of its own regarding technology, capability, and scale.
“As an independent company with world-class backers and exceptional leadership, it will have the freedom to grow even faster, setting the stage for a UK-founded success story.
“Having developed Kraken internally, Octopus is a powerhouse of innovation and technology, and will now have even more resources to lead the transformation of energy globally.”
Octopus announced plans in September to spin off Kraken Technologies.
Kraken is an artificial intelligence (AI) powered platform used by global energy retailers, managing more than 70 million household and business energy accounts.
The separation aims to accelerate Kraken's global expansion, with reports suggesting it may go public with a stock market listing, likely in London or New York, by next September.
Amir Orad, chief executive of Kraken, said: “Becoming an independent company allows Kraken the focus and freedom to scale as a neutral, global operating system for utilities, with Octopus Energy remaining a key innovation partner and forward-thinking global customer.”
On the decision to bring in new investors, he added: “With their support, we can accelerate our impact on the energy transition, strengthen partnerships with utilities worldwide, and help modernize the energy system on a global scale – our aim is to positively affect a billion lives within a decade.”
Kraken was initially developed for Octopus' use but has since attracted a variety of utility clients, including EDF, E.On Next, TalkTalk, and National Grid US.
The separation follows the continued growth of Octopus Energy, which surpassed British Gas earlier this year to become the UK’s largest energy supplier, serving 7.7 million households.
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However, it was confirmed this year that it was one of three retail energy companies that had not yet met the regulator Ofgem’s financial resilience targets.
Octopus stated on Tuesday that the investment round and additional cash injection will “almost double Octopus Energy Group’s already strong balance sheet.”
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