Octopus Energy mulls £10bn demerger of tech arm Kraken

Octopus Energy is considering demerging its tech arm Kraken Technologies to create a separate business worth up to £10billion, according to reports. 

The demerger could take place within the next 12 months, with investment bankers from Citi, Goldman Sachs, JP Morgan and Morgan Stanley among those invited to pitch for the demerger mandate, Sky News said on Tuesday.

Founded in 2015, Octopus Energy is Britain’s largest residential energy supplier with a valuation of £7.2billion as of an investment round last year.

Octopus reached a 23.7 per cent market share earlier this year, surpassing British Gas which had previously stood as the UK’s largest energy provider for some 20 years.

The group’s technology arm, Kraken, has grown rapidly in recent years, with its software used by Octopus itself, as well as being licensed to other energy, water and telecoms firms around the world, particularly in the UK, Australia and Japan.

In the UK, Kraken has so far been adopted by Eon and EDF Energy.

Kraken’s platform offers an operating system for billing, customer management, and management of energy devices.

Kraken’s platform offers an operating system for billing, customer management, and management of energy devices.

While it already serves more than 70million customers, Kraken has set its sights on further global expansion, with further contracts set to be signed in the US this year.

In May, the firm signed a deal with the US National Grid to introduce Kraken to 6.5million customers in New York and Massachussetts.

Kraken has targeted expansion to 100million accounts by 2027, a move that Octopus boss Greg Jackson says risks being ‘embarrassingly unambitious’.

Sources say a demerged Kraken would be owned by Octopus Energy shareholders, and that Octopus may keep a small stake in the business.

According to Sky News, as much as 20 per cent of Kraken could be sold to external shareholders in order to validate the firm’s expected £10billion valuation.

A split between the two business would raise questions about a potential future IPO for Kraken, with suggestions that it could follow the likes of Flutter and Arm in shunning London in favour of a listing on the New York Stock Exchange.

Earlier this year, Jackson told This is Money: ‘We’re big in the UK… we’re currently building out our business [elsewhere] but we won’t be successful at that if we’re tarnished in the UK.’

Octopus declined to comment on the potential demerger.

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