Octopus Energy Group Ltd., the UK’s largest electricity supplier, is reportedly planning to spin off its Kraken Technologies unit.

The move would allow existing Octopus investors to receive shares in Kraken, with a minority stake of up to 20% potentially sold to external investors.

Kraken Technologies, which licenses an operating system to utilities, could be valued at up to US$14 billion.

The company is said to be working with major banks such as including Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley to manage the demerger process.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Tech platforms emerge as critical infrastructure in utility transformation

Octopus Energy’s move to separate Kraken Technologies highlights how tech platforms have become valuable assets within traditional utility businesses.

Kraken currently manages over 50 million customer accounts globally and aims to reach 100 million by 2027, demonstrating the significant scale these specialized platforms can achieve even when developed within parent companies 1.

This trend aligns with the broader digital transformation in the energy sector, where technologies like smart grids are facilitating two-way communication between utilities and consumers, improving real-time data management 2.

Kraken has already expanded beyond energy into water and broadband services, showing how utility-focused tech platforms can create value across multiple infrastructure sectors 3.

The potential $14 billion valuation for Kraken would represent a substantial portion of Octopus Energy’s overall value, suggesting that the technology arm has grown to be as strategically important as the core energy supply business.

2️⃣ Energy sector demergers follow established value-creation pattern

Octopus Energy’s planned Kraken separation follows a well-established pattern in the utility sector where companies separate technology or specialized units to unlock shareholder value.

APA Group, now a major Australian energy infrastructure company, was originally established in 2000 as a demerger from AGL, demonstrating the long-term potential for separated energy businesses to thrive independently 4.

Corporate demergers typically aim to improve financial performance by allowing management teams to focus on core competencies and pursue independent growth strategies tailored to their specific market segments 5.