Origin Energy stake in Octopus Energy gains hundreds of millions of dollars in value after super fund backing

ASX-listed Origin Energy, which owns 22.7 per cent of Octopus, has the exclusive licence to the AI-enabled Kraken energy tech platform, and has completed the migration of its Australian customers. The software enables energy companies to manage millions of accounts more efficiently, as well as shift household energy consumption to periods of low demand and pricing, and offer financial incentives for customers to allow their home solar and battery systems or electric car batteries to be called upon to feed the grid at critical times.

The stunning rise of Octopus and Kraken in such a short period and its growth outlook contributed to questions among some Origin Energy investors about whether last year’s $20 billion takeover bid for Origin by North America’s Brookfield and EIG had undervalued the Australian company. Origin ultimately voted down the proposal.

‘We continue to believe Origin’s investment in Octopus will be an important driver of future growth.’

Optus CEO Frank Calabria

Origin chief executive Frank Calabria said Octopus was unlikely to have been the “sole determining factor” for investors to query the valuation, but acknowledged it would have been challenging given the sheer speed of growth from the time the takeover bid was first unveiled.

Calabria said Origin, from the outset of its involvement with Octopus, had held a deep conviction in the potential of its unique capabilities and its Kraken technology, supported by its highly capable management team.

“We are pleased to see a similar confidence from both existing and new investors, with their investment and profile providing for Octopus’ growth ambitions in key markets,” Calabria said. “We continue to believe Origin’s investment in Octopus will be an important driver of future growth.”

UBS analysts said Octopus had reached “significant scale” in the UK market, through both the acquisitions of its key competitors and strong continued organic growth. Octopus last year completed its purchase of Shell Energy’s retail customer portfolio in the UK and Germany. Previously, it also acquired the customers of failed rival Bulb, which had been one of the largest energy retailers to collapse in 2021 amid Britain’s soaring wholesale gas and power costs.

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Macquarie analyst Ian Myles said Octopus had gone from being an industry disruptor to one of the UK’s leading power retailers.

“Octopus’ success in the UK market as the leading participant in retailing is impressive and accounts for half of Octopus’ value,” Myles told clients last month. “The enabler of the success is the technology stack, Kraken, which has delivered cost savings to the back office and a more dynamic front office.”

Although Kraken is dominant in the UK and has strong positions in Japan and Australia, Octopus will need to win greater market share for the platform in Europe and the US if it is to achieve its ambition of 100 million customer accounts by 2027.

The reporter travelled to Octopus Energy’s investor briefing in London as a guest of Origin Energy.

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