Local energy retailer Origin will invest another $70 million into UK energy company Octopus as part of a fresh funding round that values the UK-based entity at £3 billion.
Origin Energy told investors that a fund managed by leading sustainable investor Generation Investment Management (GIM) would invest £211 million to acquire approximately 7% of the company. As a result, Origin will invest an additional £38 million to maintain its 20% equity interest in the company.
Octopus will use the investment to accelerate its growth strategy focused on the international expansion of technology licencing and energy retail, including customer solutions such as electric vehicle charging and leasing capabilities and electric heat pump services.
Octopus is an energy retailer with approximately 5.3 million customer accounts, a technology and software provider licencing its proprietary platform, Kraken, to a growing list of energy retailers around the world, and a renewable asset manager with more than £3.4 billion of assets under management. Octopus is also increasingly focused on developing future energy products and services, including the decarbonisation of heat, smart meters and electric vehicle leasing and charging.
On 26 September, Octopus agreed with the UK energy regulator to take on Avro Energy’s 1.1 million customer accounts under the supplier of last resort mechanism, enabling the company to keep the lights on for Avro customers and materially grow its customers base at a competitive cost. When combined with continued organic growth, Octopus’ total UK customer base is now approximately 9.5% of the UK market. In addition, Octopus expects approximately £250 million in licensing revenue over the next three years based on deals done to date to license the Kraken platform.
Octopus has also expanded into new markets, with strategic acquisitions in Spain, Texas and New Zealand. Octopus and Tokyo Gas have also progressed their entry into Japan, the world’s largest deregulated energy market, and are on track for their first electricity customers in October.
Origin entered into a strategic partnership with Octopus in May 2020, acquiring a 20 per cent equity interest for £215 million.
GIM will have an option to double its stake in Octopus under the same terms prior to 30 June 2022, with Origin having also an option to invest to maintain its 20% share if GIM exercises its option.
Origin CEO Frank Calabria said, “Since our investment in May 2020, Octopus has emerged as a global leader in energy retailing and technology, achieving significant growth in its home market and expanding into several international markets. It has also continued licencing its Kraken technology platform to leading energy retailers around the world with a target of 100 million customer accounts on Kraken by 2027. The rapid expansion of Octopus underpinned by its market-leading technology has driven a tripling in the company’s value to approximately £3 billion since we made our initial investment. Origin’s additional investment demonstrates our confidence in Octopus’ strategy, management team and growth prospects, confirmed by GIM, which is one of the world’s most innovative sustainable investment funds. Our exposure to Octopus’ continued success is expected to be an important avenue of growth for Origin.”