Octopus Energy has announced plans to spin off its Kraken Technologies arm into a standalone company following a significant investment deal that valued the platform at $8.65 billion (£6.4 billion). This deal included a sale of a $1 billion stake in Kraken to a group of investors led by D1 Capital Partners, a New York-based investment firm.
The strategic move indicates a potential future public offering for Kraken, with Octopus founder and CEO Greg Jackson stating that a share listing could happen “in the medium term,” with considerations for whether it would take place in London or the U.S. Kraken Technologies employs artificial intelligence to automate customer service and billing processes for energy companies, and it also manages energy consumption by incentivizing customers to reduce their usage during peak times.
Initially developed for Octopus’s use, Kraken has expanded its client base to include major utility companies such as EDF, E.On Next, TalkTalk, and National Grid US, now servicing a total of 70 million household and business accounts worldwide. Following the investment, most of the $1 billion will support Octopus’s expansion, while Kraken will operate independently within a few months.
In addition to D1 Capital Partners, other investors in Kraken include Fidelity International and a unit of the Ontario Teachers’ Pension Plan. Octopus will retain a 13.7% stake in Kraken, emphasizing its continued interest in the platform’s trajectory. Kraken’s CEO, Amir Orad, highlighted that the spinoff would provide the company with the “focus and freedom” necessary to flourish, addressing challenges it faced due to its connection with Octopus’s rivals.
Jackson noted that the choice of a stock exchange for a future listing hinges significantly on attracting global investor interest. He remarked on the need for stock exchanges to demonstrate their advantages for companies like Kraken that have a diverse international investor base. A London listing would mark a departure from the trend of UK firms opting to go public in the U.S.
While Octopus Energy has seen considerable growth, becoming the UK’s largest energy supplier with 7.7 million households served and creating around 12,000 jobs—including 1,500 directly related to Kraken—challenges remain. The company acknowledged it had not yet met financial resilience targets set by the regulator Ofgem.
The announcement of the spinoff coincided with Octopus Energy’s financial results for the fiscal year ending in April, revealing a pre-tax loss of £260 million in contrast to a profit of £78 million the previous year. This downturn occurred despite a significant sales increase to £13.7 billion, as the company faced decreased energy demand attributed to unusually warm weather and the cessation of energy crisis allowance payments in the upcoming year. The milder conditions reportedly wiped approximately £103 million from profits, contributing to notable declines in gas usage.
As Octopus continues to navigate its rapid growth, this transformative phase for Kraken Technologies marks a pivotal point for both entities as they seek to enhance their operational focus and market presence.
