Octopus Energy to spin off $8.65bn tech arm Kraken

Octopus Energy is set to spin off its Kraken Technologies arm as a standalone company following a deal to sell $8.65bn (£6.4bn) worth of shares in the platform.

The energy giant, the UK’s largest gas and electricity supplier, sold a $1 billion stake in its AI-based division to a group of investors led by New York-based D1 Capital Partners.

The move paves the way for Kraken’s separation from Octopus and a potential stock market flotation for the business in the future.

Octopus founder and CEO Greg Jackson told the BBC there was “every chance” of Kraken listing its shares “in the medium term” with the IPO location “between London and the US”.

Kraken uses AI to automate customer service and billing for energy companies, managing when customers use energy and rewarding them for reducing consumption during peak times.

It was originally built for use by Octopus, but has since acquired numerous other utility clients, including EDF, E.On Next, TalkTalk, and National Grid US. It currently serves 70 million household and business accounts worldwide.

The bulk of the $1 billion investment will go to Octopus to fund expansion, with the rest given to Kraken. Mr Jackson said Kraken would be operating completely independently of Octopus “within a few months”.

Other investors in the business include Fidelity International and a unit of the Ontario Teachers’ Pension Plan; Octopus owns a 13.7% stake in Kraken.

Kraken CEO Amir Orad said the spinoff would give it “focus and freedom” to grow, as the company had previously struggled to do business with Octopus’ rivals.

Mr Jackson said the location for a major tech firm like Kraken to list shares would be London or the US.

“The thing about Kraken is that we have a global investor base… and so exchanges need to show why they are the right exchanges for the business.”

Listing Kraken’s shares in London could reverse the trend of firms downplaying the UK in favor of going public in the US.

Mr Jackson said Octopus had created 12,000 jobs in the UK, 1,500 of which were attributed to Kraken.

He said the company would remain headquartered in England and “if London could be the right place to list, I’d love that.”

“But that’s where you’ll get the most investor support and the most support from the stock market.”

The demerger coincides with 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 this year, regulator Ofgem confirmed it was one of three retail energy firms yet to meet financial resilience targets.

Octopus, which will announce its annual results on Tuesday, said the cash injection “will almost double Octopus Energy Group’s already strong balance sheet.”