British energy firm Octopus is reportedly planning to demerge its tech arm, Kraken, to create a standalone entity which could be valued at £10bn on its own.
Over the last few months, Octopus Energy founder Greg Jackson has sought to raise the profile of the tech arm in interviews, describing the rest of the business as “a demo client” for the real star: Kraken.
Amir Orad, Kraken’s CEO, had suggested a demerger could be on the cards. “If you’re reading the tea leaves, it’s a very clear direction where we’re more and more separated from the Octopus group,” he told Sifted back in February.
As reports suggest bankers are now being lined up to oversee the demerger, what does the move mean for Kraken, Octopus and its shareholders?
Release the Kraken
Octopus, which was set up in 2015, delivers gas and electricity to customers. Kraken is a software platform sold to other utilities companies to help them bill customers, as well as manage energy assets like solar panels, heat pumps and EV chargers.
The company has raised $2bn from investors including Lightrock, Al Gore’s Generation Investment Management and Galvanize Climate Solutions.
Chatter in the market suggests Kraken is the reason Octopus has managed to convince investors looking for a strong growth-trajectory to back a utility company.
“Kraken is the reason for the valuation,” says one climate-focused investor, who is not invested in Octopus and spoke to Sifted on the condition of anonymity. Investors are likely to have put funds into the company because of Kraken, the person added.
“Kraken is certainly the valuation driver,” agrees a banker, who works on similar deals but has not worked on Octopus’s transactions.
Octopus’ retail business is buffeted by gas prices and geopolitical shockwaves: in 2022, amid the energy crisis, the retail wing recorded a loss of £161m as the price it paid for gas rose from £1.5bn to £9bn.
Software business Kraken, on the other hand, offers steady recurring revenue without the potential fluctuations — a model investors, particularly those accustomed to high-growth tech investing, want to see.
Octopus and Kraken’s annual results, covering the year up to April 2025, confirm the growth trajectory of Kraken: Octopus saw a 12% dip in post-tax profit, while Kraken’s profits surged by 483%.
Should the main Octopus business look to raise new funds post-separation, it would remain to be seen whether it could convince investors to take new stakes without the potential for owning part of Kraken.
Reports suggest the new Kraken entity will be owned by Octopus shareholders, though new investors may be offered a small stake.
What it means for Kraken
A demerger is likely to increase appetite for Kraken’s software.
Prior to the news of the demerger, Kraken CEO Orad had been keen to reiterate that Kraken was already operationally entirely separate from its parent company, including its offices, bank accounts, technology and contracts.
It’s a move echoed by other energy software spinouts. In January, fellow UK energy supplier Ovo cleared the way for the sale of Kaluza, its software arm, by restructuring it into a holding company. Kaluza operates a separate management team from Ovo and has secured independent investment.
That allows rival energy companies to feel comfortable using the tech, Kraken’s Orad told Sifted back in February: “It’s just like how AWS was part of Amazon and then slowly separated.”
Read the orginal article: https://sifted.eu/articles/octopus-energy-spinoff-kraken/
