Octopus Energy has announced a landmark deal to spin out its software division, Kraken, establishing it as an independent entity with a formidable $8.65 billion valuation. The move is backed by a significant $1 billion investment from a consortium of prominent global investors. This strategic demerger paves the way for Kraken to accelerate its global expansion as a leading technology platform for the energy sector.
A Landmark Investment
The funding round was led by US-based D1 Capital Partners, with notable participation from Fidelity International, Durable Capital Partners, and the Ontario Teachers' Pension Plan. This transaction represents the first standalone investment into Kraken, underscoring strong investor confidence in its technology and growth trajectory. The majority of the capital, $850 million, will be directed to Octopus Energy, with the remaining $150 million bolstering Kraken's own operations.
Strategic Rationale for Independence
The formal separation provides Kraken with the autonomy to operate as a neutral technology provider for utilities worldwide, including direct competitors of Octopus Energy. Kraken CEO Amir Orad stated that independence grants the company the "focus and freedom" to scale its global operating system. This move is designed to eliminate potential conflicts of interest and deepen partnerships with a broader range of energy companies.
Kraken's Growing Influence
Kraken is an advanced, AI-powered platform that manages everything from customer billing to the optimization of renewable energy assets like solar panels and EV chargers. Its client roster includes industry giants such as EDF, E.ON Next, and National Grid US, supporting over 70 million customer accounts globally. The technology is pivotal in helping utilities navigate the complexities of the modern energy grid and enhance operational efficiency.
Implications for Octopus Energy
While spinning out its valuable technology arm, Octopus Energy will retain a significant 13.7% stake in the newly independent Kraken. The deal also includes a separate $320 million investment into Octopus, which will substantially strengthen its balance sheet for future innovation and growth. This financial reinforcement comes as Octopus continues its expansion, having recently become the UK's largest energy supplier.
A Potential Public Listing
The demerger is widely seen as a precursor to a potential stock market flotation for Kraken within the next couple of years. Octopus founder Greg Jackson has indicated that a public listing is a strong possibility, with London and New York being considered as primary venues. The final decision will depend on which exchange can offer the most robust support for a global technology firm of Kraken's scale.
This strategic spin-off marks a pivotal moment, transforming Kraken into a standalone technology powerhouse poised for accelerated growth in the global energy market. The move not only unlocks significant value for investors but also positions both Kraken and Octopus Energy to independently pursue their distinct missions. Ultimately, the demerger is set to fuel innovation and competition across the utility sector, potentially hastening the worldwide transition to a smarter, cleaner energy system.