Octopus Energy, which has taken over customers from collapsed competing suppliers, has raised up to $ 600million (£ 438million) from an investment fund set up by former US Vice President Al Gore.
Generation Investment Management (GIM), a $ 36 billion fund manager that finances companies focused on sustainability and the fight against climate change, will take up a 13% stake in a deal that values Octopus at 4, $ 6 billion.
The price tag means that Octopus, a renewable energy specialist launched in 2016, could be worth more on paper than Centrica, the parent company of British Gas, once the investment is over.
Gore, the environmentalist and former presidential candidate who co-founded Generation in 2004, announced the investment via a Zoom call to Octopus staff earlier this afternoon.
Octopus said it would use the money to capitalize on its rapid growth, built on the success of its Kraken green energy platform, software that helps manage energy use more efficiently.
The platform is used to manage 17 million energy accounts worldwide, including Octopus customers, as well as those of competing vendors such as npower, E.ON and Good Energy.
Kraken served 2.5 million Octopus customers last week, but over the weekend Octopus agreed to take 600,000 customers from collapsed rival Avro Energy, bringing its customer base to 3.1 million.
Avro was one of seven small suppliers to have left the energy market since early August, amid a crisis caused by rising gas prices that led energy regulator Ofgem to relocate 1.9 million customers from bankrupt businesses to competitors since the start of the year.
Octopus said GIM’s new funds, in two installments of $ 300 million, would help grow the business, with the goal of supporting 100 million energy customers by 2027.
Octopus Energy founder and chief executive Greg Jackson said company staff were inspired by the film An Inconvenient Sequel, a sequel to Gore’s landmark climate change documentary An Inconvenient Truth.
Jackson and Gore have reportedly had personal discussions about selling a stake in San Francisco-based GIM, which Gore co-founded in 2004 with former Goldman Sachs chief asset management officer David Blood.
The deal involves an initial investment of $ 300 million, followed by another $ 300 million by June 2022 if Octopus meets certain undisclosed conditions.
The valuation up to $ 4.6 billion, implicit if GIM goes ahead with the second round of funding, would more than double the size of the company as it hit a price tag of $ 2 billion in December 2020, thanks to the investment of Tokyo Energy and the Australian firm Origin Energy.
Octopus said on Monday that Origin also agreed to invest an additional $ 55 million alongside Generation’s new funds.
Octopus is one of many companies that have emerged as “suppliers of last resort” for customers of competitors who have collapsed in recent weeks. Shell Energy said Monday it would take 255,000 customers from Green, which left the market the same day as Avro.
Suppliers have been rocked by soaring wholesale gas and electricity prices, which have reached record levels in recent weeks, as several factors have combined to cause the market to skyrocket.
A global increase in demand for gas after a cold winter that left gas storage facilities depleted has been exacerbated by a rebound in energy demand after the lockdown in Asia.
Half of the UK’s electricity is produced in gas-fired power plants, while a series of nuclear reactor shortages, as well as the recent shutdown of a major power cable that carries electricity from France, have made matters worse.
The UK also had one of its least windy summers since 1961, which means wind power has been low. Experts fear the situation will worsen as temperatures get colder.