In the five-month wave of collapse, the number of British household energy suppliers has been halved, and one of the companies seems to have been bucking the flow.
Octopus Energy raised US$900 million from the sustainable investment group of former US President Al Gore and Canadian pension fund CPP Investments, pushing up its valuation Close to 5 billion U.S. dollars, To compete with Centrica, owner of British Gas.
Founded in 2016, this London start-up company currently operates in 13 countries/regions, serves 3.1 million British households and businesses, and ranks among the top six energy retailers in the UK.
The fundraising comes as record wholesale prices for natural gas and electricity have triggered the industry’s worst crisis in decades, leading to the closure of two dozen of the company’s competitors in the UK.
Rivals call for government intervention, Good Energy recently announced “National Crisis”Suppliers continue to hold talks with the British minister during the holiday season to promote support for the industry and customers. They face up to 56% The UK energy price ceiling will be in their bills when the next adjustment is made in April.
Greg Jackson, the founder and CEO of Octopus, believes that it is necessary to find a way to disperse the effects of the “one in 30-year event” for consumers within a few years.
“The key is that the industry and the government work together to find a way to spread it so we don’t see it all reach the bill in a year,” Jackson said.
The trade agency British Energy Corporation suggested that government loans may be needed to allow suppliers to share costs for consumers, but in the process they will not jeopardize their own business.
Jackson said that private financing can also fill this gap.
“There is a large amount of private sector financing available to deal with energy sector affairs, in this case, whether it is the private sector or the government sector [financing], All we need is a mechanism to reduce this year’s bills and spread the costs over several years,” Jackson said.
Bulb Energy is by far the largest bankrupt company, and its establishment is only one year earlier than Octopus. Until 2020, it has surpassed Jackson’s company in terms of customers. It is now backed by taxpayers, with an initial loan of £1.7 billion, and managers on behalf of the government study how to deal with its assets and customers.
Jackson admitted that it was “completely reasonable” to question the success of octopus when other suppliers fell like flies, but he also likes to compare with other suppliers.
“I compare us to technological disruptors like Amazon, rather than British energy retailers like Bulb,” he said. “We were founded by tech entrepreneurs.”
“Sadly, energy retailers have become popular in the UK… There are no spoilers. They are basically mini versions of traditional energy companies, without economies of scale, balance sheets or risk management.”
Jackson is an experienced entrepreneur and investor who co-founded Octopus with unrelated CFO Stuart Jackson and CTO James Eddison.
The core of the company is its “Kraken” and “KrakenFlex” software, which it also licenses to other companies, including EDF Energy, Eon UK and Origin Energy of Australia.
Jackson likens Kraken, which helps companies save costs and improve their business areas (such as billing and customer service), to disruptive software systems that support global companies such as Uber.
At the same time, KrakenFlex allows companies to provide services that customers will increasingly need in the future, which will help grid operators Balance supply and demand more efficient. One of its uses is to enable households to trade energy through electric car batteries, charge them when demand and prices are low, and sell profits back to the grid when demand is high.
Approximately 25 million customers worldwide use the Kraken platform, and Octopus plans to increase this number to at least 100 million by 2027.
Jackson said that compared with energy retail, software license agreements generate lower revenue, but higher profit margins, and are key to the company’s ability to attract new investors. Octopus also raised funds from Origen Energy and Tokyo Gas in Japan in 2020, attracting a total of US$1.5 billion in equity investment.
“Half of our $5 billion valuation fell [the] We are licensing the technology platform,” Jackson said.
However, Octopus has not been spared the recent market chaos.
“If it weren’t for the energy crisis, our UK energy retail business would break even this year… The energy crisis may have set this back a year,” he said.
The company’s last available accounts as of April 30, 2020 show a net loss of nearly 47 million pounds, revenue of 1.2 billion pounds, and net liabilities of 62 million pounds. Its next account will be submitted in the company building in January.
Jackson insisted that he didn’t care about short-term profits.
“What we will see is the business within the group, and as they mature, they will be profitable, but we will continue to work hard in the process of developing the group,” he said.
“I think what people need to understand is the huge size of this market, so our chances of continuing to attract capital to maintain growth are far greater than that short-term profit pressure.”