British renewable energy group Octopus Energy is moving closer to a major corporate milestone after securing $1 billion in funding for its artificial intelligence and software arm, Kraken Technologies.
The deal values the business at $8.65 billion and lays the groundwork for a potential public listing by mid-2026.
The planned spin-out, confirmed late Monday by Origin Energy, one of Octopus’s largest shareholders, reflects the growing strategic importance of software and data-driven platforms in the global energy transition, as utilities race to modernize ageing systems and manage increasingly complex power networks.
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Origin said the funding round marks Kraken’s first as a standalone business and included Daniel Sundheim’s hedge fund D1 Capital Partners alongside a “major Kraken customer,” which was not named. Origin itself will commit an additional $140 million, reinforcing its long-term bet on the technology platform.
Kraken’s valuation and capital raise underscore how far the unit has evolved from its origins as an internal technology tool within Octopus Energy. The platform now supplies cloud-based software to major utilities, including EDF and E.ON, supporting customer billing, energy trading, grid optimization, demand forecasting, and the integration of renewable energy and electric vehicles.
According to Origin, Kraken’s contracted annual recurring revenue has more than doubled over the past 18 months, driven by strong demand from utilities under pressure to decarbonize, comply with stricter regulations, and cope with volatile power markets. The company is now rapidly approaching its target of managing 100 million customer accounts globally.
“In signing this major new customer, Kraken is rapidly closing in on its 100 million customer account target well ahead of plan,” Origin chief executive Frank Calabria said, pointing to the scale and commercial momentum behind the business.
Under the proposed structure, Octopus Energy will retain a 13.7% stake in Kraken following the spin-out, while Origin’s interest will remain unchanged at 22.7%.
Calabria said the restructuring would give both companies greater financial and strategic flexibility.
“We believe these transactions put Octopus and Kraken in a strong position to unlock their next phase of growth, underpinned by the appropriate capital structure,” he said.
The move is part of Octopus’ broader effort to crystallize value from its technology assets while allowing the core energy supply business to focus on retail expansion and renewable generation. For Kraken, independence is expected to accelerate customer acquisition, attract new categories of investors, and sharpen its positioning as a pure-play software company rather than an in-house utility platform.
Kraken CEO Amir Orad has previously said the company benefited significantly from being incubated within Octopus, which first deployed the technology internally before licensing it to rival utilities. That strategy helped Kraken overcome one of the biggest barriers in the energy sector: persuading competitors to adopt software developed by a peer.
Over time, Kraken has emerged as what Orad has described as “the modern operating system for utilities,” offering an alternative to legacy IT systems that struggle to handle decentralized generation, real-time pricing, and the electrification of transport and heating.
The spin-out also sharpens the company’s path toward a stock market debut. Speaking to CNBC’s “Squawk Box Europe” earlier this year, Orad said Kraken already had a strong investor base focused on energy and utilities, but acknowledged that a separation from Octopus was necessary to attract a broader pool of late-stage, software-focused investors.
When asked in September about a potential IPO, Orad said the opportunity was “significant,” but stressed that Kraken needed to complete its transition into a fully independent software business.
“Over the years, we expect [the investor base] to evolve to be more software focused, given the separation,” he said.
The deal comes as investor interest in energy technology platforms intensifies, with utilities globally under pressure to digitize operations, improve customer engagement, and support net-zero targets. If completed as planned, Kraken’s spin-out would stand as one of the most prominent examples yet of a renewable-era technology platform breaking out as a standalone business. That will highlight how software and AI are becoming central to the future economics of the global energy industry.