Energy company Octopus has hired Goldman Sachs to handle the sale of a smaller share in their subsidiary, Kraken.
Octopus Energy Demerges Kraken Technologies in Multi-Billion Pound Deal
Octopus Energy, the UK's leading energy supplier, is set to demerge its multibillion-pound software arm, Kraken Technologies, in a move that could value the company at up to $10bn. The demerger, which will be handled by Goldman Sachs, is aimed at reinforcing Octopus Energy's status as one of the UK's most valuable private companies.
Kraken Technologies, an operating system licensed to various energy providers, water companies, and telecoms suppliers, has been a significant part of Octopus Energy's success. With over 70 million customer accounts globally, Kraken connects various parts of the energy system, including customer billing and the flexible management of renewable generation and energy devices such as heat pumps and electric vehicle batteries.
The decision to demerger Kraken comes after a series of strategic moves by Octopus Energy. In July last year, Kraken recruited Amir Orad, a former boss of NICE Actimize, as its first chief executive. The company was subsequently valued at $9bn in a transaction involving Generation Investment Management and the Canada Pension Plan Investment Board, a valuation that is double the company's valuation of little more than a year ago.
The demerger will also help to remove the perception of a conflict of interest among potential customers of the technology platform. Kraken's platform is currently licensed to Octopus Energy's rivals EON and EDF Energy, as well as the water company Severn Trent and broadband provider Cuckoo in the UK.
Gavin Patterson, the current chairman of Kraken Technologies, is the former chief executive of BT Group. Under Patterson's leadership, Kraken has diversified beyond the energy sector and earlier this year joined a consortium which was exploring a takeover bid for stricken Thames Water.
Octopus Energy's success has been evident in its growth in the UK market. The company now has 7.5m retail customers in Britain, following its 2022 rescue of the collapsed energy supplier Bulb, and the subsequent acquisition of Shell's home energy business. In January, Octopus Energy became the country's biggest supplier, surpassing Centrica-owned British Gas, with a 24% market share.
The demerger plan for Kraken Technologies was secured with funds from Galvanize Climate Solutions and Lightrock. Goldman Sachs will also orchestrate discussions with prospective investors about the disposal of a minority stake in Kraken. A deal for the sale of a minority stake in Kraken Technologies could value Kraken in the region of $10bn, implying that the whole group, including the retail supply business, is worth in the region of £15bn.
Overseas, Kraken serves Origin Energy in Australia, Tokyo Gas in Japan, and Plentitude in countries including France and Greece. Octopus Energy also has a further 2.5 million customers outside the UK.
With the demerger of Kraken Technologies, Octopus Energy is positioning itself for future growth and expansion, both in the UK and abroad. The company's focus on renewable energy and innovative technology solutions is set to continue, as it aims to unlock smart grids and enable people to use more renewable energy when there is an abundant supply of it.
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