London/Sydney — British renewable energy supplier Octopus Energy is preparing to spin out its artificial intelligence and technology division, Kraken Technologies, following a $1 billion standalone funding round that values the unit at $8.65 billion. The move, supported by major investor Origin Energy, sets the stage for Kraken to potentially pursue a public listing as a focused software company.

The funding round, which includes an unnamed major Kraken customer and hedge fund D1 Capital Partners, paves the way for the separation targeted by mid-2026. Origin Energy, which will invest an additional $140 million, stated that Kraken's contracted annual recurring revenue has more than doubled in the past 18 months. The platform, which serves utilities like EDF and E.ON, is rapidly approaching a goal of managing 100 million customer accounts.

Strategic Positioning for a Software-Focused Future

The spinoff represents a deliberate strategic pivot to unlock value. Post-separation, Octopus Energy will retain a 13.7% stake in Kraken, while Origin's interest remains at 22.7%. Kraken CEO Amir Orad has emphasized the need for the company to evolve into a pure-play software business to attract a different class of long-term investors. "Over time, we expect to get more pure software... investors," Orad told CNBC in September, highlighting the separation as key to that transformation.

This shift allows Kraken to concentrate on scaling its AI-powered "operating system for utilities" independently, a high-stakes endeavor in the rapidly digitizing energy sector. The substantial valuation underscores investor confidence in its technology's potential to streamline global energy retail operations.

A Major Player in the Energy Tech Ecosystem

The transaction highlights Kraken's growing dominance within the competitive energy technology ecosystem. By carving out the high-margin software business, Octopus Energy is executing a shrewd corporate strategic maneuver that could provide capital to fuel both Kraken's expansion and Octopus's core renewable energy ambitions. The planned separation positions Kraken as a formidable, independent contender in the market for utility management platforms, with a clear path toward an eventual IPO as it solidifies its financial profile and investor base.