Octopus Energy Plans to Spin Off Technology Arm Kraken

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3:05Octopus Energy Group planning to spin off its Kraken Technologies software platform unit. If you're not familiar well, energy companies definitely are. Kraken is a software platform, as we mentioned, a company. It helps utilities manage the transition to cleaner energy. and we've got a great guest to explain what it's all about and what's going on. Amir Orit is here, CEO of Kraken Technologies. As the company bio notes, he's a multi-time CEO entrepreneur and an AI analytics cyber and fintech veteran. He's here in the studio with us. Welcome. How are you? Very good. Thank you. Look, as Carol mentioned, energy companies are very familiar with what you do, but if people think about utilities and the transition to renewables, how does your company help them do that?

3:43So every utility on the planet is evolving these days because the technology behind energy is evolving. You have from electricity at every home, smart homes, EVs, all the way to renewable solar and the like. They need to modernize their entire infrastructure from billing to communication and from however price to modern technology. We help them do that. Hold on, I thought the president is canceling wind projects and he's talking about drilling more in the US and building nuclear. Look, nuclear takes a really long time. We've spent a lot of time talking about that. are utilities pulling back on renewables?

4:20The state with the most investment in renewable right now is Texas. It's cheaper. Solar is cheaper, more accessible, more affordable. You can buy it faster than building a nuclear power plant. There's more solar investments than any other energy form. It's apolitical. Can it be done even with tariffs on hardware that comes from China? Obviously, it's more expensive that way. but in general, solar became so cheap and it's getting cheaper every day that everyone are moving to that. But it's a mix. It's never just solar or wind or nuclear. It's always a mix. Well, so I'm still trying to understand what you guys do.

4:58You're a platform. So what are you helping energy companies do? I'll give you an example. If you're cooling your home during the summer or you have an electric vehicle you charge at 7 p.m. when you get home, that creates a massive spike on the grid. And the issue is the grid is actually built for the maximum point in time. So every spike is really expensive for us as consumers. What we do is help manage that spike, spread it a bit. Maybe we charge your car a bit later at night. As long as you wake up and you have enough juice. Maybe we cool your home slightly differently during the day. That's one example.

5:32There's many examples like that. We can move shift load between the weekend during the day. You can do dynamic pricing. So you incentivize consumers to spend the right time and the right energy. Is your software necessary because the grids in many parts of the United States are not sufficient? So for two decades, we did not have any increase in load and demand in the US. And then we found AI? Not just AI, more manufacturing, more EVs. We moved from gas to electricity and so on. Was moving from gas to electricity the right move in hindsight? Yes. Houses burn less if you use electricity. It's a fundamental, it's a safety thing.

6:11It's easier, easier to transport. There's a lot of advantages, but we do need to update our grid. But does it financially make sense for consumers? A hundred percent. A hundred percent. We've seen gas prices go up and down, and electricity from solar is actually really cheap when the sun is up. If you put a battery, you store it for night. You can actually reduce electricity prices using these technologies. You know, what's interesting is, I mean, Octopus has said that you guys help lower bills when renewables surge, but energy prices are still high for many households. Just talked to my husband.

6:46He's like, why is it so high? Why should consumers believe that this software benefits them and not just your bottom line? Because unrelated to Kraken, the entire industry now needs to invest in infrastructure, adding more capacity and improve the grid. That is going to cost a lot of money. Any usage of technology to optimize that will reduce that investment because we reduce the peaks and part of that saving can go to every household. Is there a point though where the grids are built? I mean, we've been talking about this and how much they're maxed out and now we've got all of the AI demand kind of starting to be factored in.

7:22But is there a point where the grid is built out and we don't need a software platform because we don't have peaks or we have enough? Even when the grid is perfect, we still need to choose which energy source do we use. The sun happens to be free, but it's not always there. If we can shift the usage and pick the right moments, we can reduce costs. You've talked a lot about solar, but wind is also of interest to us, not just because of what's happening offshore of the United States or what's not happening offshore of the United States right now. Is this administration making a mistake cancelling wind power projects?

7:55Look, some countries believe it's a really good investment for the future. The truth is you need a mix. You need variety. The ideal mix is a bit of everything versus choosing one over the other. So you think the U.S. should have wind power? I think we need to have a mix of everything versus just pick one or a favorite. And price goes into account. Investing in gas, for example, there's a five-year wait. There's a line to get a new generator, a new turbine. So we have to have a mix. We are talking with Amir Ored. He is chief executive officer of Kraken Technologies, joining us here in studio. Let's talk about the spinoff and why it's happening.

8:31Critics are saying that spinning this off is less about strategy and more about extracting value for investors. So how do you respond to this view, Amir, that this is a financial engineering play rather than an innovation story? Yeah. Kraken was born inside an energy company. Very few successful tech companies were born inside an energy company. It's actually quite rare. It made us who we are, improved our technology and knowledge of the space tremendously. but we would like to work with other energy companies who may compete with our parent company, would like to invest in other markets that our parent company may not play in.

9:08So we cannot grow and innovate and service the market when we're limited to a certain parent company. So you're saying that by going out on your own, you're able to access a lot more companies. What does that mean dynamically in terms of how big your company could be? I mean, Sky News reported that you guys could be worth as much as$14 billion. We have heard$10 billion. I've heard the rumors. I have no clue what's the number. But you understand the business and you understand that by spitting off what you might be able to access. So what does it mean in terms of valuation? Or is this all hype in terms of, do those numbers make you nervous?

9:44First of all, expectations should make you nervous. Our job is to build a great business and hopefully meet each and every expectation down the road. But by splitting the two companies, we can attract capital and investors that are experts in software, not just in energy, experts at late-stage software companies,$500 million ARR is not your typical startup. This is scale. So it would definitely allow us to attract the right capital structure and the right investors over time. Some of the Mag7 are actually eyeing energy, Amazon, Google, Microsoft, looking at the energy space, especially AI-driven grid management.

10:20Why should utilities bet on you rather than going with a larger player? So Kraken is unique in that it does only one thing. We only do the platform for utilities, for energy companies, and it's a very wide system end-to-end. The problem is the alternative, you can go with Oracle and SAP and other companies, you would need to buy a dozen, two, three, four, five, all the way to 50 systems in order to service your technology stack. It's expensive, it's slow, it's not fit for purpose, it's not designed for the needs of an energy company. And that's where we come in. So when does this all happen? So we've been running independently, operationally for the last 18 months, two years.

11:00We're now splitting physically the two structures, the cap table, and that is going to end by mid next year. By mid next year. And are you going to be a publicly held entity or? We'll stay private at that point in time. Obviously, it opens options down the road. But right now, the first step is split the two. what's a risk to the business? What is the thing that kind of worries you as you look at the outlook? What is it that's the thing that, I hate to say, keeps you up at night because everybody throws that out there, but it's fair. I have three teenagers. That keeps me up at night. Okay, there's more than one.

11:31Oh yeah. But the number one thing is the demand right now to modernize our energy infrastructure in every country is spiking, in each and every country. And our job is how do we service as many utilities as we can and making sure each and every project is a success. To date, all of our migrations, we service 70 million households. All of them have been successful. We want to keep that track record while handling more and more demand. Just real quickly, 20 seconds. Is most of your business in the US or is it global? Globally, all over Europe, half of the UK is running on Kraken, Australia, Japan, Germany, France, and the US, National Agree, just announced we picked Kraken to run VertiNol.

12:10We'll stay in touch. Love to hear more as you guys and when you are officially, I guess, Amir Orid, he's CEO of Kraken Technologies, joining us in studio.

12:23Amir Orad:When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation.

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