UK-based Octopus Energy is to de-merge with its dedicated technology division, Kraken Technologies*. The new company will be valued at around $10 billion.
Although the two companies are to separate, the new company will be owned by Octopus Energy shareholders, with new investors possibly being sought for minority holdings.
Octopus Energy is the UK’s biggest energy supplier, larger than the previous title owner, Centrica British Gas. Octopus aims to serve 100 million accounts in the next two years. Despite its position as the country’s biggest power supplier, its key differentiation is its technology-first approach to both its domestic and business customers.
Kraken Technologies’ separation will enable it to more easily sell tech-related services to other power suppliers, many of whom have struggled to compete with the challenger power and technology company, which formed in 2015.
The company specialises in technologies such as IoT (internet of things) which collect data from infrastructure, suppliers, and customers, and data services that monitor and predict power generation and distribution across the UK. Kraken tech lets customers and its decision-makers have access to near-realtime information relating directly to power consumption and operations, allowing them to make more accurate decisions concerning power use, efficiency, and costs.
With an increasing reliance on renewable power, the UK’s infrastructure has struggled to cope with the varying outputs of solar and wind power in particular. Kraken’s technology helps wholesalers and other operators plan for and react to the rapidly-changing makeup of renewables.
Octopus Energy has spearheaded specialist tariffs that are becoming increasingly popular in the consumer market, such as those designed for overnight, low-cost EV charging, and ‘smart contracts’ that offer customers cheaper (or free) power when surplus energy is generated. Customers can also be rewarded for using less power during times of peak demand, a process that can be largely automated.
Octopus Energy was valued at $9 billion in May last year, when existing investors increased their stake in the company. Canada Pension Plan Investment Board and GIM’s backing was joined by new investment from Lightrock around this time a year ago.
Veery Maxwell of new investor Galvanise Climate Solutions told the Financial Times in January this year, “Octopus has managed to position itself as a high-trust band and disrupter – but [one] of sufficient scale that customers aren’t taking start-up risk. Kraken is the software platform that underpins [the] offering.
Octopus Energy’s CEO, Greg Jackson, has not ruled out a flotation for the separate entity, Kraken Technologies, saying he remained open-minded about the newly-formed company’s future.
Separating the business of access to infrastructure technology from power generation and supply would help Octopus avoid accusations of monopolistic practices. A similarly contentious situation existed in the form of BT and Openreach in the UK. The former is the privatised telecommunications company British Telecom, the latter becoming the de facto supplier of infrastructure in the sector, and previously part of British Telecom. The companies are now legally separate entities after competitors directed a long campaign at successive UK governments to remove Openreach’s privileged position in the telecoms infrastructure market.
*Editor’s note: Kraken Technologies is not associated with Kraken, a cryptocurrency exchange.
(Image source: “Deadly Kraken Attack, part 3” by mrjorgen is licensed under CC BY-NC-ND 2.0.)
