At a time of climbing prices, crashing competitors and demands for green energy, Octopus Energy is welcoming new customers and investors, and is set to make a profit, says Jason Sinclair
It’s an ill wind that blows nobody any good. The surge in gas prices that has done for several UK energy suppliers has seen Octopus Energy gain more than half a million domestic customers from Avro Energy, when the latter stopped trading at the end of September 2021. Will soaring gas prices for consumers enable the six-year-old company to make its first profit? Al Gore’s investment fund clearly thinks so – in September 2021, it invested $600m for a 13% stake, valuing the business at $4.6bn.
Established in 2015, with a vision of “using technology to make the green energy revolution affordable”, Octopus Energy has grown into a rival to the UK’s Big Six – amassing 3.1 million domestic and business customers.
A KPMG Energy M&A team led by Gavin Quantock, with Sarah Strachan (who featured in ‘Career Paths’ in October’s Corporate Financier), has acted as strategy and lead M&A adviser to Octopus for three transactions now, which have raised more than $1bn of capital.
Different partners came in at each round. “At every stage, we have transacted with a party that brought something special and unique,” says Quantock. “Whether it was the technology licensing and equity deal with Origin, the joint venture with Tokyo Gas to enter Japan, or bringing in Al Gore’s investment fund to enhance the global transition story – it has always been a carefully thought-out strategy to deliver on these partners.”
Always keen to push its green credentials and permanently near the top of Which? magazine’s recommended providers list, Octopus has swiftly achieved unicorn status, with Australian electricity and gas supplier Origin Energy buying a 20% stake in the firm for US$327m in May 2020. By December of that year, Octopus’s book value had jumped again, with a $200m investment netting a 9.7% stake for Tokyo Gas.
Acquisitions have fuelled growth, within the UK and overseas, including the recent deal to acquire Spanish green energy start-up Umeme.
Originally a reseller, Octopus has developed into an investor in energy generation, particularly solar farms, while a chunk of company income also comes from licensing its customer management system Kraken to other utilities companies. This software is quite possibly the business’s real USP.
Despite posting a £61m loss as it ploughed cash into expansion […]