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Octopus Energy is spinning off its software arm after several years of rapid growth, in a move it said would allow Kraken to speed up expansion across the world and achieve a target of serving 1bn people in the next decade.
The moves comes ahead of a possible listing of Kraken in the next year or two with both London and New York as options, according to people familiar with the matter. They suggested that Kraken could be valued at about $10bn.
Originally developed for use within Octopus Energy, Kraken has become a big success by licensing its technology to other utilities, reaching $500mn in “committed” revenue from clients that include rivals such as EDF and Eon.
Octopus Energy’s current owners, which include Japanese utility Tokyo Gas and investment fund Generation Investment Management, will own an equivalent stake in the demerged entity.
Greg Jackson, chief executive and founder of Octopus, said Kraken was now a “successful company in its own right” and his initial goal of winning 100mn accounts by 2027 was “embarrassingly low”.
“It looks like it’ll beat that and can now aim to serve a billion people over the next decade.”
Kraken is used by energy companies and water utilities to manage customer billing as well as manage assets such as batteries, renewable energy generation and electric cars.
Octopus Energy has steadily made Kraken more independent, appointing former BT chief executive Gavin Patterson to serve as its chair, in part to stave off the risk of perceptions of a conflict of interest with Octopus Energy.
Amir Orad, Kraken’s chief executive, said becoming fully independent was a “strategic and inevitable next step” that would give the company “more freedom to invest, expand and serve our utility clients equally”.
Octopus Energy was founded by Jackson and colleagues in 2015 and this year overtook British Gas to become the UK’s largest household energy supplier.
Kraken’s growth prospects have helped Octopus attract investment from around the world. Along with Generation Investment Management, which is chaired by former US vice-president Al Gore, these include Tokyo Gas and the Canada Pension Plan Investment Board.
UBS analysts said in a note last week that Kraken was “on track to deliver and exceed its 100mn accounts growth target by 2027”, from 74.5mn currently.
However, they cautioned that while Kraken is currently about five years ahead of competitors, it “can and likely will be replicated”.
“The main value driver of the Kraken business is scale, and Octopus is going after it at speed.”
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