Separating Kraken and restating accounts will not address the underlying problems at Octopus Energy.
DAVID TURVER
Introduction
An article last year speculated that we might have seen Peak Pink Octopus. The article was in response to the news that Octopus was floating the possibility of separating its Kraken Technologies unit. It was suggested that Kraken might be worth £10bn and the whole group some £15bn. Octopus was also in the news for not holding as much cash in the bank as Ofgem rules said it should, although the latest accounts show an improved position.
Now the transaction to demerge Kraken has been announced at a much lower valuation than originally suggested and the latest accounts for several subsidiaries show restated 2024 results what can we learn about the state of the UK’s largest energy supplier?
Octopus Energy Group Operating Performance
Octopus Energy Group Limited (OEGL) is a sprawling empire with dozens of subsidiaries across the energy sector. The largest subsidiary, Octopus Energy Limited is best known as the largest UK energy supplier with the pink Octopus logo. The group also of course includes Kraken Technologies which provides customer management software and applications to manage remote technologies like electric vehicles, solar panels, heat pumps and batteries. There is also an Octopus Generation arm which owns some wind turbines and manages funds investing in renewable energy. Octopus Electric Vehicles provides EVs, Octopus Electroverse provides EV charging software, Octopus Energy Services installs heat pumps, solar panels EV chargers and so on. Finally, we have Octopus Energy Heating that researches and makes heat pumps.
The group has shown explosive growth with revenue growing from just £477m in year ended April 2019 to £13,683m in 2025. Much of this growth has been achieved through acquisition, with the group acquiring Avro Energy in 2021, Bulb in 2022 and Shell’s energy supply business in 2024. Kraken and the other subsidiaries have also been acquisitive.
However, as Figure 1 shows, the OEGL has not been very profitable.
As turnover rose sharply (orange line) to £4.2bn in 2022, losses before tax (green bars) grew from £39.9m in 2019 to £165.7m in 2022. The energy crisis and acquisitions saw turnover explode to £12.5bn in 2023 and probably helped the group generate a profit before tax of £283m, but profits fell back to just £77.6m in 2024 as revenue fell slightly to £12.4bn. Revenue rose again in year-ended April 2025, but losses before tax ballooned to £260m.
The explosive growth has been funded by large injections of share capital (blue bars) totalling £1,661m from various shareholders including Australia’s Origin Energy, Tokyo Gas, the Canadian Pension Plan Investment Board and Al Gore backed Generation Investment Management. Galvanize Climate Solutions and Lightrock also made investments after the 2024 year-end of an undisclosed amount.
However, no new equity injections were made in FY2025. We might speculate that the investors are not keen on providing additional capital and are now keen to see a return on their investment which perhaps explains the Kraken demerger.
Kraken Technologies
The jewel in the crown of OEGL was Kraken Technologies. This subsidiary has seen rapid growth with revenue growing strongly from £10.2m in 2019 to an originally reported £136.3m in 2024. In the accounts for the nine months to 31 January 2025 revenue for FY2024 has been revised upwards to £143.4m, and revenue for the shorter FY2025 has grown again to £163.8m. They do not give a reason for the restatement of FY2024’s numbers but do say the 2024 figures in the 2025 accounts are unaudited, whereas the original FY2024 numbers were audited. This is more than a little peculiar.
Profits have been patchy with profit before tax growing from £9.4m in 2019 to £49.5m in 2022 before plunging to £20.8m in 2023 and then recovering to £45.8m originally reported for FY2024. However, the revised numbers for 2024 show profit before tax of just £27.1m and a loss before tax for the shortened FY2025 of £5m. It does seem rather odd that revenue for FY2024 has been revised upwards and profits revised down. Cost of sales have been revised up from £26.8m to £28.5m and administrative expenses have gone up from £65.4m to £83.5m. It is also odd that the financial year for Kraken has been shortened but not for the main group or other subsidiaries.
Live accounts on the platform grew from 1.4m in 2020 to 41.3m in 2025. Contracted accounts have grown from 24.3m in 2022 to 62.5m in 2025 and the Kraken demerger press release claims 70m accounts are now contracted. Growth in the number of accounts has been flattered somewhat by the acquisitions of Avro, Bulb and Shell.
The growth in the accounts with patchy profitability leads to some interesting operational metrics as shown in Figure 2.
As the number of accounts has grown, total revenue per live account has fallen alongside profit before tax per live account which fell to a loss of £0.12/account in 2025. On the positive side, recurring revenue per live account has risen from £1.10 in 2021 to £3.70/account in 2025.
Kraken was billed as an attractive growth business, but the restatement of the accounts and the fall into losses has blunted the valuation. The business was originally claimed to be worth £10bn in this Sky article. However, the announcement of the transaction values the business at $8.65bn (or about £6.4bn), a significant reduction of about 36%. It appears some of the business has been demerged to existing shareholders and some of it sold to new and existing investors for $1bn with the proceeds going to both Octopus and Kraken. After the split, Octopus will retain just 13.7% of Kraken. It is not clear how much of the $1bn is going to Octopus and how much to Kraken. However, this article appears to suggest the full $1bn is going to Kraken. Maybe Octopus is selling some of its stake as part of the deal because after the split, Octopus will retain just 13.7% of Kraken. Apparently, Kraken will shortly reveal the identity of a new 10 million account customer acquired as part of the $1bn fund-raising, which is certainly an interesting business model. As discussed below, the government has recently invested a further £25m in Kraken to help it scale up.
Investors are also said to be injecting a further $320m into Octopus for innovation and growth. However, the implied valuation of the rump Octopus Group as a result of this fund-raising has not been disclosed. The lack of disclosure probably means the valuation is somewhat lower than the £5bn mooted in the Sky article linked above. The changes to the ownership structure of Kraken and OEGL have not yet been posted at Companies House.
Taken together, there appears to be more than a little smoke and mirrors surrounding the valuation of the combined group, accounting changes and the demerger transaction.
Octopus Energy
The main energy supply business of Octopus is called Octopus Energy Limited (OEL) and analysis of this company is somewhat tricky. Re-stating the accounts, the energy crisis, the various acquisitions and moving around of subsidiaries makes like-for-like comparisons difficult. They say the re-statement is a result of adopting the Reduced Disclosure Framework (FRS 101).
However, we can note that OEL made losses in years ended 2019, 2020, 2021 and 2022. There were profits before tax in 2023 of £227m which fell to an originally stated £204m in FY2024 but those profits have been revised down to £200.7m in the latest accounts. Pre-tax profits for FY 2025 have risen to £240.2m but note 25 tells us they would have been £266.4m under the old accounting method.
OEL has a subsidiary Octopus Energy Operations Limited (OEOL) that services the customers from the Bulb acquisition. However, it is not clear if the OEL profit and loss account consolidates the results of OEOL. OEOL’s FY2025’s accounts have re-stated the accounts for FY2024 and as a result the operating loss widened from the original £46.7m to £51.0m. OEOL’s operating losses narrowed to £4.9m in FY2025. The customers serviced by OEOL are being transferred to OEL.
We will have to wait for the 2026 accounts to get a clearer view of the profitability of the combined complete OEL business. Until we get that proper consolidated view, we cannot properly understand the fundamentals of the main energy retail supply business. However we can look at how well OEL and OEOL meet Ofgem’s financial adequacy rules (see Figure 3).
Ofgem sets two requirements for energy suppliers. The first requirement is that energy suppliers must maintain positive Adjusted Net Assets (ANA) which is termed the Capital Floor. ANA is defined as net assets recorded on the balance sheet less intangibles and goodwill. The second requirement is that suppliers must maintain ANA above £115 per dual fuel customer, called the Capital Target.
Both companies have recorded a much better performance than in FY2024. In FY2025 both companies meet the Capital Floor requirement but both fall short of the Capital Target. OEOL is short ~£17m or about £12 per customer. OEL is worse falling short by £528m or £86 per customer. Octopus really needs whatever cash is raised from the Kraken transaction and the extra $320m capital injection to comply with Ofgem’s Capital Target.
Octopus EVs
The fundamentals of Octopus Electric Vehicles (OEV) are even worse, see Figure 4.
OEV has restated its 2024 figures in its 2025 accounts following on from restating the 2023 figures in 2024. However, these revisions have not changed the fact that OEV has lost money every year since 2019. The persistent losses have led to net liabilities ballooning to £111.9m in 2025, up from a revised £76.7m in 2024. The latest revision is to put the company in compliance with IAS37 which appears to increase revenue, increase cost of sales, reduce administrative expenses and reduce operating losses. In the balance sheet, the main change is to reduce the provision for liabilities by about £7.1m and reduce net liabilities by £5.4m in FY2024.
To be fair, the losses in 2025 of £50.8m are down on the revised losses of £62.1m in 2024. They say the losses are a result of “continued investment into the growth of the business” but do admit that there has been “volatility in electric vehicle residual values.” In other words, the second-hand value of the EVs they are leasing out has fallen through the floor and they are taking a bath. The fleet grew from 16,062 vehicles in 2024 to 27,410 in 2025. They say the EV salary sacrifice scheme is a big driver in the growth of their fleet. This scheme allows employees to pay for their EV out of their pre-tax salary, reducing their income tax and National Insurance contributions. Employers also benefit from lower employer NI contributions. That means that all of us are paying indirectly for OEV to squander all this cash.
OEV recognises “residual value risk” in its strategic report, which means the value of the lease vehicles at the end of the lease period maybe lower than that estimated at the outset of the lease contracts. Provisions for this risk have increased from £26.4m in 2024 to £30.9m in 2025. It remains to be seen whether the pay per mile tax for EVs announced in the Budget will lead to OEV taking a bigger residual value hit.
The EV part of the website also pushes the Octopus Go tariff which gives low charging rates of 7.5p/kWh or 70% less than price cap rates. The trouble with this is that the current Ofgem price cap is currently about 27.7p made up of about 8p/kWh wholesale plus the balance of nearly 20p made up of renewables subsidies, network, policy & operating costs plus profit. If Octopus is selling power below even the wholesale price, they must be losing money on these tariffs and they cannot be sustainable. OEL also offer 12p/kWh for electricity exported under their Outgoing tariff. It cannot be profitable to pay customers more than the wholesale rate for electricity.
The marketing claim of OEV providing “everything you need to switch to cheaper, greener electric driving” is revealed to be smoke and mirrors because OEV is losing so much money and the tariffs offered are unsustainable which must impact the profitability of OEL.
Octopus Energy Services
Octopus Energy Services is another division that is also rather adept at losing money. This company installs heat pumps, chargers, smart meters, solar panels, batteries and so on. This is another company with net liabilities of £50.8m in 2024, up from £9.1m in 2023. The 2025 accounts have yet to be posted.
The company posted revenue of £165.4m in 2024 and managed to make a pre-tax loss of £58.3m. They made this loss despite receiving over £8m of grant income to install heat pumps and EV chargers.
Again, the fundamentals are not looking very sound.
Octopus Energy Heating
We now come to Octopus Energy Heating that conducts research and development for low carbon heating, trying to drive down the cost of heat pumps. This company does not report any turnover but made a loss before tax of £6.1m in 2024 that widened to £8.7m in 2025. Net liabilities have also grown from £8.2m in 2024 to £14.9m in 2025.
This company also apparently owns Octopus Energy Production (formerly known as Renewable Energy Devices), a Northern Irish company that makes the Octopus Cosy heat pump. This company is also lossmaking with losses before tax rising from £1.6m in 2024 to £4.1m in 2025 on turnover of £4.2m. Net liabilities rose from £1.3m in 2024 to £4.2m in 2025.
The financial reality falls short of the marketing smoke and mirrors as the Cosy heat pump is described as a “game changer” on their website.
Octopus Energy Generation
Now we move to Octopus Renewables Limited (ORL) trading as Octopus Energy Generation. This is the part of the Group that manages green energy generation. They claim to have £6.8bn of funds under management covering some 4.4GW of energy capacity and say they are transforming the world of renewable generation. There are five funds that are open for investment:
- Octopus Renewables Infrastructure SCSp (aka Sky Fund)
- Octopus Energy Generation Sustainable Growth Fund
- Octopus Energy Offshore Wind SCSp
- Octopus Energy Transition SCSp
- Octopus Renewables Infrastructure Trust Plc (ORIT)
The first four funds are quite secretive and performance data has proven impossible to find. However, we do know the Sky fund had raised £1bn by November 2023 and had a target of raising £3bn by 2025 but in September 2025 had only managed to reach £2bn of assets. Octopus Energy Generation recently announced a $1bn investment in California’s ‘next-gen tech scene’. The announcement does not specify which of its funds will participate.
We can gain an indication of how the funds are performing by looking at ORIT which is publicly traded as in Figure 5.
Over the past five years the share price has fallen substantially and the shares have moved from trading at a premium to the estimated Net Asset Value (NAV) to a big discount. After trending upwards the NAV is now showing a steady downtrend.
The financial performance of ORL mirrors that of ORIT. Profits before tax of £3.9m for FY2024 crashed to pre-tax losses of £5.6m in FY2025 and assets under management barely grew from £6.7bn to £6.8bn. It looks like the marketing smoke and mirrors of “transforming the world of renewable generation” is not very profitable.
Centre for Net Zero and Cabinet Office
Octopus also owns its own captive think tank, the Centre for Net Zero (CNZ). In the 2024 accounts, this division generated revenue of just over £0.5m but managed to post a pre-tax loss of £0.9m. Turnover went up to £0.6m in 2025 and losses before tax increased to £1.2m. Octopus might view this as a good strategic investment because Lucy Yu, CEO of CNZ is also well ensconced in the Green Blob. Ms Yu is a member of the Ed Miliband’s Clean Power 2030 Advisory Commission and is also a non-executive director of climate change think tank E3G.
In related news, OEG CEO Greg Jackson was appointed as a non-executive director of the Cabinet Office Board in July 2025. This appointment may go some way towards explaining the £25m government investment in Kraken announced in January 2026. Apparently, this money is to help the company scale up but £25m is trivial compared the alleged $1bn already raised by Kraken discussed above. More smoke and mirrors.
Contradictory Public Statements
The smoke and mirrors continue with the public statements from senior Octopus officials. Back in October Rachel Fletcher, Director of Regulation and Economics at Octopus, gave evidence to the ESNZ select committee and said:
“If we continue on the path that we are on right now, in all likelihood electricity prices for a typical customer are going to be 20% higher in four or five years’ time than they are now. That is even if wholesale prices halve.”
In other words, if wholesale prices (driven by gas) halve, electricity bills are still going to go up. This increase can only be driven by renewables and their associated on-costs of subsidies, backup, grid balancing and expansion. This is in direct contradiction to tweets made by Octopus CEO Greg Jackson over many years. Here are some examples:
2021: “renewables are now cheaper than FF – so if we transition to gas as a backup rather than main source it’ll get costs down”.
2022: “Renewables was [sic] cheaper than gas generation even before the crisis.”
2023: “renewables are cheapest”.
2024: “renewables are the cheapest power we’ve ever had”.
2025: “On wind – it’s genuinely cheap”.
2025: “We were founded to bring energy prices down thru renewables”.
We have shown all these claims to be untrue in many articles (here, and here for example) on this Substack. Perhaps the kindest thing we can say about Greg’s statements is that they are at best smoke and mirrors.
Conclusions
We can see that the original £10bn valuation of Kraken was more than a little ambitious. If we look at the ambiguous announcement about the demerger transaction, the fall into loss-making territory and the restatement of the 2024 accounts we can see there was a lot of smoke and mirrors in the original Sky article.
The Octopus PR machine makes wild claims like game changing heat pumps, transforming renewables generation and cheaper driving costs from EVs. But when you dig deeper into the accounts, these subsidiaries are making losses and cannot be sustainable.
They have even restated the accounts of the energy supply business that appears to still not be compliant with Ofgem capital adequacy rules and is in desperate need of any cash the Kraken demerger may have provided. It is also surprising that even though the accounts of significant subsidiaries have been re-stated for FY2024, those of the parent OEGL have not.
Despite the propaganda tweets about cheap renewables, the financial reality is vastly different. If the founding principle of the company “to bring energy prices down through renewables” is wrong, then the Octopus Group without Kraken is going to need more than very senior connections in DESNZ and the Cabinet Office to weather the coming storm.
The country’s largest energy supplier needs more than smoke and mirrors to stem the losses.
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This article (Octopus Smoke and Mirrors) was created and published by David Turver and is republished here under “Fair Use”
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