Octopus boss calls for action to make London top choice for possible Kraken IPO

The founder of Octopus Energy has said he would like to float the firm’s £6.4 billion Kraken Technologies division in the UK, but called on the London Stock Exchange to do more to make the market attractive for new listings.

Octopus Energy Group is set to demerge the software division in the next few months, having agreed a deal to sell a minority stake in Kraken, valuing the unit at 8.65 billion US dollars (£6.4 billion).

Chief executive Greg Jackson told the Press Association a stock market flotation is one of the options being considered within the next two to three years, following the demerger.

He said he would “love” to choose London, but at the moment it is a “coin toss” between the UK and New York.

He told PA: “Speaking as the founder, shareholder and a Brit, I would love it to be London.

“But I would need to see more hustle from the London Stock Exchange (LSE) – they need to be bringing in more capital.”

He said the LSE needs to be “banging the drum for London”, while be believes the Government also needs to do more to encourage British pension funds to invest in UK companies.

“We need to see ongoing efforts to improve London for companies and for investors,” he said.

The comments came after Octopus – Britain’s biggest gas and electricity supplier – sold about 1 billion dollars (£740 million) of equity in Kraken to a consortium of investors, including global investment firm D1 Capital Partners, Fidelity International and a unit of Ontario Teachers’ Pension Plan.

Annual results posted on Tuesday showed the firm swung to a hefty annual loss as it revealed a hit of more than £100 million from lower energy demand due to warmer weather.

The firm, which has 7.6 million customers in the UK, reported a £260.1 million pre-tax loss for the year to April 30 against profits of £77.6 million the previous year.

It said warmer weather knocked underlying earnings by around £103 million, blaming the UK’s hottest spring on record since 1885, which saw gas usage slump by 11% in March and 25% in April.

The group also said earnings were impacted by a one-off final payment to the Government following its rescue takeover of collapsed supplier Bulb in 2021, when Octopus received state support to bail the provider out, as well as payouts for an industry-wide scheme that previously allowed energy suppliers to recover costs they had racked up during the crisis.

On an underlying basis stripping out these one-offs, it made £90 million in earnings, down 69% as it ramped up spending on staff, expansion and marketing.

Its UK household energy arm made record underlying earnings of £347 million and added another 800,000 energy customers through switching, taking its total to 7.6 million by the end of April, while overseas customers almost doubled to 2.4 million.

Octopus overtook British Gas to become the UK’s largest energy supplier earlier this year, with a market share of 24%.

Revenues across the group rose 10% to £13.7 billion, its figures showed.

The group said it spent £57 million on keeping its standard energy tariff lower for UK customers, adding it has a “strong” balance sheet, with £1.5 billion in net assets.

But Octopus confirmed earlier this year it was one of three retail energy firms that had not yet met one of regulator Ofgem’s two financial resilience targets.

It said it continues to “work constructively” with Ofgem on a plan to meet the rules on capital adequacy, although it added the requirements were “set at a level without precedent in any of the other deregulated markets in which we operate”.

It added: “The group is financially resilient and the UK retail business exceeds the regulator’s minimum capitalisation requirements, with an agreed pathway to the target.”

The group said the Kraken investment plans and a further 320 million dollars (£237 million) cash injection will almost double its current net assets, boosting its balance sheet.

Octopus announced plans in September to spin off Kraken, an AI powered platform used by global energy retailers, connecting more than 70 million household and business energy accounts.

The demerger is set to help speed up the expansion of Kraken, which was initially built for use by Octopus but has since picked up a raft of other utilities clients, including EDF, E.On Next, TalkTalk and National Grid US.