The Origin Energy Ltd (ASX: ORG) share price is higher after announcing it's increasing its stake in Octopus Energy, a UK business.
Origin has decided to increase its stake in the UK technology and energy company by 3% to 23% for a total investment of £280 million, or around $530 million in Australian dollar terms.
The ASX energy share acquired its 20% stake in Octopus in May 2020. All of Origin's mass market electricity and natural gas customers are served through the Kraken platform.
Image source: Getty Images
Why is Origin boosting its stake?
Origin is taking part in the funding round alongside other major Octopus investors including Canada Pension Plan Investment Board (CPP Investments) and Generation Investment Management (GIM).
This latest capital raising is being carried out at a valuation of £5.6 million, which represents an increase of around 60% of Octopus since December 2021.
Origin is attracted to the company's rapid growth, including its continued expansion of the global licensing of its proprietary Kraken platform.
How much progress is Octopus making?
Since the last Origin investment, Octopus has more than doubled its retail customer base, after acquiring the UK's Bulb Energy (2.5 million customer accounts) and Shell Energy's retail business in the UK and Germany (2 million energy and broadband customers).
Octopus has also grown significantly with organic growth – in the past six months, it has added 400,000 customers.
It's now the UK's largest electricity retailer and second-largest energy retailer, with more than 11 million customer accounts. Origin believes the success of the business is being driven by a "superior customer experience, low-cost operating model and market-leading Kraken platform."
The Kraken platform is going from strength to strength, it's making significant progress globally. It has two new important licensing agreements with Tokyo Gas (a substantial shareholder) and UK water utility business Severn Trent. There are now around 52 million accounts contracted to be on Kraken globally – halfway to its 2027 target of 100 million customers.
CEO comments
The Origin CEO Frank Calabria said:
The success of Octopus since our initial investment in May 2020 has exceeded all expectations and cemented our belief in its unique capabilities and strong platform for future growth.
Octopus is now the second-largest energy retailer in the UK, Kraken is contracted to serve more than half of all UK households and is licensed in ten countries, and it has a strong global sales pipeline due to its ability to rapidly transform business operations and customer experience, which is critical in a rapidly transforming energy system. In addition, Octopus has over 1GW of assets connected to its virtual power plant through the Kraken Flex platform, growing at 25 per cent month-on-month since launching in January 2022.
Acquisition of an increased interest in Octopus reflects Origin's confidence in its business, strategy, proprietary technology platform and team, and is consistent with our ambition to lead the energy transition through cleaner energy and customer solutions. We continue to believe Octopus provides an important avenue for future growth.
Origin share price snapshot
After all of the volatility of the takeover attempt, the Origin share price is up by around 6% in 2023 to date.
