Origin reaps $420m Octopus gain as Aware Super climbs on board

“It is building a very strong balance sheet,” he said. “There’s a queue of investors wanting to join the cap table. Some just weren’t able to move faster for the last round, so we’re just squeezing them in.”

Aware Super and an unnamed US pension fund tipped in capital to help GIM lift its stake in Octopus from 11 per cent to 13 per cent, while CPP boosted its holding from 10 per cent to 12 per cent. As a secondary sale, the raising did not dilute Origin’s stake.

Aware did not disclose the size of its holding, but was likely to have been within the $150 billion fund’s typical private-equity investment size of between $50 million and $100 million, sometimes up to $150 million.

Aware Super’s London-based global head of private equity, Jenny Newmarch, told The Australian Financial Review it was difficult to find opportunities for PE funds to find large investments that offered good risk-adjusted returns and also supported the energy transition.

“Very few companies meet that bar, but Octopus is certainly one of them,” she said. “There’s a clear story around bringing UK households into clean energy, supporting utilities around the world in enabling their customers to transition to cleaner forms of energy – and doing that in a way that delivers strong financial returns for our members.”

Aware opened its London office only late last year, and Ms Newmarch said this had helped the fund “understand the market dynamics for a business like Octopus Energy, and just understand how it has been tracking from a local perspective”.

Octopus Energy was founded in early 2018 and is now the largest electricity supplier in Britain, after going on an acquisition spree of struggling rivals hit by the post-Ukraine energy price surge.

It is now building its brand in several European markets, including France, Italy, Spain and Germany. Mr Jackson said in some of these countries it was growing faster than Octopus did in Britain at the same stage.

The centrepiece of Octopus’s business is its AI-enabled tech platform, Kraken, which it uses in its own retail business and also licenses to competitors, and now also to other utilities such as water and telco firms.

Kraken is now operationally separate from Octopus’s retail business, to help its rollout into some of Octopus’s key competitors in Britain such as E.ON and EDF. Origin has exclusivity over Kraken in the Australian market, although Hanwha has also deployed it.

Mr Calabria said Origin was hoping to use Kraken as Octopus has: applying dynamic real-time pricing, plus the storage capacity of hardware such as residential batteries and electric vehicles, to smooth and optimise energy supply, particularly as renewable electricity displaces other forms of generation.

This allows the supplier to build a “virtual grid” of electricity stored in its customers’ cars and homes. In Britain, Octopus’s virtual grid is already at 1 gigawatt, and Origin’s is 1.3 gigawatts.

“We completely see electrification dominating distributed energy, playing an increasing role in managing supply and demand in real time. We have exactly the same belief,” he said.

Mr Jackson said the company was now well-capitalised and “we don’t need to go back for new equity”. Asked if the company might list, or split its Kraken business from its Octopus Energy retail business, Mr Calabria said he was comfortable with the current structure.

Mr Calabria said that in the takeover last year, the value of Octopus had been hard to gauge, but was unlikely to have been the primary reason the bid failed. “I wouldn’t put it down the sole determining factor. But clearly it’s a driver and has become more material in value,” he said.