In a strategic move, Octopus Energy, the UK’s largest gas and electricity supplier, has announced the sale of a £1bn stake in its AI-powered division Kraken Technologies. The deal, valued at £6.4bn, paves the way for Kraken to be spun off as a standalone company, with the potential for a future stock market flotation.
The majority of the £1bn investment will go towards funding Octopus Energy’s expansion, while the remaining funds will be directed to Kraken. Octopus founder and CEO Greg Jackson stated that Kraken will be “operating completely independently of Octopus within a few months.”
The investors involved in the deal include New York-based D1 Capital Partners, Fidelity International, and a unit of the Ontario Teachers’ Pension Plan. Octopus will maintain a 13.7% stake in Kraken following the transaction.
Kraken, which uses AI to automate customer service and billing for energy companies, has already secured a number of high-profile clients, including EDF, E.On Next, TalkTalk, and National Grid US. The platform currently serves 70 million household and business accounts worldwide.
Kraken CEO Amir Orad believes the spinoff will provide the company with the “focus and freedom” it needs to grow, as it had previously struggled to do business with Octopus’ rivals.
The decision on where to list Kraken’s shares, whether in London or the US, will be based on securing the most investor support and stock exchange backing, according to Jackson. He noted that a London listing would “reverse a trend of firms snubbing the UK in favour of floating in the US.”
The demerger comes amid Octopus Energy’s continued growth, having overtaken British Gas to become the UK’s largest energy supplier earlier this year, serving 7.7 million households. However, the company confirmed that it was one of three retail energy firms that had not yet met Ofgem’s financial resilience target.
The cash injection from the Kraken deal is expected to “almost double Octopus Energy Group’s already strong balance sheet,” the company said. This comes as Octopus reported a £260m loss before tax for the year ending April, compared to a £78m pre-tax profit the previous year, due to lower energy demand and the ending of crisis allowance payments.