Octopus Energy Set to Sell Stake in Software Division at $10bn Valuation
Octopus Energy Group is preparing to divest a significant stake in its software subsidiary, Kraken Technologies, which is expected to be valued between $9 billion (£6.67 billion) and $10 billion (£7.4 billion). This move is poised to reinforce Octopus Energy’s status as one of the UK’s largest private companies.
Investment Syndicate Engaged
Sources have disclosed that Octopus Energy has arranged a consortium of investors, which includes D1 Capital Partners, Fidelity, and Canada’s Ontario Teachers Pension Plan, to acquire between 10% and 20% of Kraken. The conclusion of this deal is anticipated to be announced shortly.
Demerger Plan Progressing
Goldman Sachs has been retained by Octopus Energy to orchestrate the demerger of Kraken, alongside the sale of equity to outside investors. This strategic move aims to further enhance the personal wealth of Greg Jackson, the company’s chief executive, while simultaneously highlighting his achievements in establishing a globally significant UK enterprise over the past decade.
Growing Customer Base
Octopus Energy has grown its customer base to over 7.5 million in the UK, particularly following the acquisition of the collapsed energy company Bulb and Shell’s home energy operations. In January, the firm surpassed British Gas to become the UK’s leading supplier, claiming a market share of 24%.
Valuation Implications
A valuation of $10 billion for Kraken would suggest that the entire Octopus Energy Group, inclusive of its retail supply division, could be valued around £15 billion. This reflects a significant increase from just over a year ago, when the firm announced it had garnered additional support from investors such as Galvanize Climate Solutions and Lightrock.
Kraken’s Operational Reach
Kraken operates as an advanced operating system, providing services to other energy providers, water companies, and telecommunications firms. Its technology integrates various aspects of the energy infrastructure, including customer billing and the management of renewable energy resources such as electric vehicle batteries and heat pumps. Notably, Kraken is already licensed by competing UK energy firms EON and EDF Energy, and has a growing international footprint, servicing companies like Origin Energy in Australia and Tokyo Gas in Japan.
Future Growth Objectives
Currently, Kraken manages over 70 million customer accounts worldwide, aiming to reach the milestone of 100 million by 2027. However, Jackson has indicated that this target may soon appear “embarrassingly unambitious” given the rapid growth of the business.
Addressing Potential Conflicts of Interest
Demerger plans may help alleviate perceived conflicts of interest among potential clients of Kraken’s technology, which has reportedly deterred some energy suppliers. Earlier this year, Kraken also diversified its interests by contemplating a bid for the struggling Thames Water.
Background
Octopus Energy now stands as the largest domestic energy supplier in the UK, following the acquisition and rescue efforts of Bulb. The company has attracted substantial investment from notable funds like Generation Investment Management and the Canada Pension Plan Investment Board, showcasing the growing confidence in the UK energy market and the innovative approaches being employed by new entrants like Octopus Energy.
Octopus Energy has been approached for comments regarding the imminent deal.
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