Octopus Energy sells stake in software arm Kraken, valuing unit at £6.4bn

Octopus Energy has agreed a deal to sell a minority stake in its Kraken Technologies division in a move valuing the software business at 8.65 billion dollars (£6.4 billion) and paving the way for its possible stock market flotation.

The UK energy giant – Britain’s biggest gas and electricity supplier – sold about 1 billion dollars (£740 million) of equity in Kraken to a consortium of investors, including global investment firm D1 Capital Partners, Fidelity International and a unit of Ontario Teachers’ Pension Plan.

The investment round will see the cash used to fund both Octopus and Kraken, but it is understood the majority of the proceeds will go towards Octopus Energy.

Octopus said a further 320 million dollars (£237 million) would also be injected into Octopus by investors, led by Octopus Capital – one of Octopus Energy’s largest investors – to fund “innovation and growth”.

Octopus, which will unveil its annual results later on Tuesday, will retain a 13.7% stake in Kraken Technologies after the split.

Greg Jackson, founder of Octopus Energy Group, said: “Kraken is in a class of its own, in terms of technology, capability, and scale.

“As an independent company with world-class backers and outstanding leadership, it will be free to grow even faster and is set to be a true UK-founded success story.

“Having incubated Kraken, Octopus is a powerhouse of innovation and technology, and will now have even more horsepower to deliver 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, connecting more than 70 million household and business energy accounts.

The demerger is set to help speed up the expansion of Kraken globally, with reports that Kraken could go public with a stock market listing, likely to be in London or New York, by next September.

Amir Orad, chief executive of Kraken, said: “Becoming an independent company gives 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 move to bring on board new investors, he added: “With their backing, we can accelerate our impact on the energy transition, deepen partnerships with utilities worldwide, and help modernise the energy system at global scale – our goal being to positively impact a billion lives within a decade”.

Kraken was initially built for use by Octopus but has since picked up a raft of other utilities clients, including EDF, E.On Next, TalkTalk and National Grid US.

The demerger comes amid the continued growth of Octopus Energy, which overtook British Gas to become the UK’s largest energy supplier earlier this year, serving 7.7 million households.

But it confirmed this year it was one of three retail energy firms that had not yet met regulator Ofgem’s financial resilience targets.

Octopus said on Tuesday the investment round and further cash injection will “almost double Octopus Energy Group’s already strong balance sheet”.