UK’s Octopus Energy is considering a $14 billion demerger of its technology unit, Kraken Technologies Ltd., according to Sky News, which cited sources familiar with the matter.
The company, the UK’s largest electricity supplier, is reportedly close to hiring bankers to manage the separation of Kraken, which licenses an operating system used by utilities. The tech division could be valued at up to $14 billion, Sky reported, citing one person.
“Britain’s Octopus Energy is close to hiring bankers to oversee a 10-billion-pound ($13.7 billion) separation and stake sale of its technology arm Kraken Technologies,” Sky News reported Saturday, referencing unnamed sources.
A minority stake of up to 20% in Kraken is expected to be sold to external investors in a move designed to help validate the company’s valuation, according to the report.
The demerger, expected within the next year, would see existing Octopus Energy investors receive shares in the newly independent Kraken business, Sky said.
A £10 billion valuation for Kraken would imply that the full group, including Octopus Energy’s retail business, is worth £15 billion or more, according to one source cited in the report.
Octopus Energy declined to comment on the matter, and Kraken Technologies could not immediately be reached.
Investment banks including Citi, Goldman Sachs, JP Morgan, and Morgan Stanley have been invited to pitch for the demerger mandate in recent weeks. The report said the split would reinforce Octopus Energy’s position as one of the UK’s most valuable privately held companies.
“Octopus Energy Group, Britain’s largest residential gas and electricity supplier, is plotting a £10bn demerger of its technology arm that would reinforce its status as one of the country’s most valuable private companies,” Sky News reported.
“Sky News can exclusively reveal that Octopus Energy is close to hiring investment bankers to help formally separate Kraken Technologies from the rest of the group,” the outlet added.
The proposed sale of a 20% stake is seen as a move to validate Kraken’s valuation, the report said.
“One banking source said that Kraken could be valued at as much as $14bn (£10.25bn) in a forthcoming demerger.”
A successful deal would increase the paper fortune of Octopus CEO Greg Jackson and mark another milestone in the company’s growth into a global energy technology force.
Octopus now serves 7.5 million retail energy customers in the UK, following its acquisition of Bulb in 2022 and Shell’s home energy business. In January, it became the UK’s largest energy supplier by customer count, surpassing Centrica-owned British Gas with a 24% market share. Globally, Octopus has another 2.5 million customers.
Kraken, the technology platform at the center of the demerger, licenses its software to utilities, water companies, and telecom providers. “Kraken is an operating system which is licensed to other energy providers, water companies and telecoms suppliers,” the report noted.
Its software manages everything from customer billing to renewable energy integration and device coordination, such as EV batteries and heat pumps. In the UK, Kraken’s clients include EON, EDF Energy, Severn Trent, and broadband firm Cuckoo.
Internationally, Kraken powers operations for Australia’s Origin Energy, Tokyo Gas, and Plentitude in Europe. Its biggest recent win was a deal with National Grid in the U.S., covering 6.5 million customers in New York and Massachusetts. Sources told Sky that additional U.S. deals are expected soon.
“Kraken, which is chaired by Gavin Patterson, the former BT Group chief executive, is now contracted to more than 70 million customer accounts globally — putting it easily on track to hit a target of 100 million by 2027.”
Earlier this year, CEO Greg Jackson said that goal now seems “embarrassingly unambitious.”
In July 2024, Kraken appointed Amir Orad, former head of NICE Actimize, as its first standalone CEO.
The separation of Kraken is also expected to ease concerns about conflicts of interest from potential clients wary of licensing software from a competitor’s parent company.
“One key advantage of demerging Kraken from the rest of Octopus Energy Group would be to remove the perception of a conflict of interest among potential customers of the technology platform,” the report said.
Kraken has recently expanded beyond energy, joining a consortium exploring a bid for Thames Water.
A demerger would likely lead to speculation over an eventual IPO. With Kraken growing rapidly in the U.S., differences in public market valuations between New York and London could influence a future listing.
As of this weekend, Octopus Energy declined to comment.
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