ORG ASX: Why the Origin Energy (ASX:ORG) Share Price Just Soared 7% in One Morning
How does a traditionally slow-moving utilities business like Origin Energy Ltd (ASX:ORG) suddenly surge 7% in a single trading session? The answer lies in a stealthy stake in a $10 billion AI-powered energy tech platform — Kraken — hiding in plain sight.
Over the weekend, The Financial Times reported that Kraken, a cloud-based customer platform developed by Octopus Energy, is now being valued at USD $10 billion. ORG’s indirect exposure through a 23% stake in Octopus is now commanding investor attention — and rightly so.
So, what has this got to do with ORG’s share price?
Backtracking to 2020, ORG bought a 20% stake in Octopus Energy for just over $500M AUD. At the time, ORG had a market cap of approximately $8.3 billion. ORG made follow on investments in 2021 and again in 2023, in total outlaying just over $1 billion.
Separating out Kraken from Octopus via an IPO has been on the cards for some time now.
When the IPO takes place ORG’s outlay of $1 billion would be worth $3 billion in the Kraken business alone. Not a bad return for a boring utilities business. ORG’s market cap currently sits at $19 billion.
What’s ORG’s combined value in the Octopus and Kraken business?
Based on the upper end of estimates, ORG’s 23% stake in Octopus and the eventually de-merged Kraken could be worth as much as $6.6 billion.
For a good overview of the Octopus business I highly recommend this podcast with Octopus Energy’s CEO, Greg Jackson.
In the podcast Jackson puts the success of Octopus down to the Kraken platform. He estimates the platform makes it $50 to $100 cheaper per year to service a customer through its automation. This may not sound like a lot, but when you have millions of customers, that’s significant. Currently there are 70 million customers around the world being served via Kraken and the team have a goal of 100 million.
On average, Octopus’s cost to serve a customer is 40% lower than the nearest competitor. ORG has now completed its full migration on to the Kraken platform and is starting to experience the improved cost to serve benefits and an increase in net promoter scores.
Energy as an investment theme
Energy consumption and the energy transition make electricity utilities compelling investments. We can sit here and try to predict which data centre providers will be the ultimate winner from the AI arms race, or which of the Magnificent 7 will benefit the most, or we can say they’re all going to consume a huge amount of electricity.
And this is why we hold the iShares Core FTSE Global Infrastructure ETF (ASX: GLIN). Utilities make up 50% of the ETF with energy making up a further 13%.
GLIN features across all our Rask Invest portfolios.
I’ll be keeping an eye on the progress of ORG’s investment in Octopus. It has so far been a great example of a small-ish bet having a fantastic asymmetric return.
If you would like to talk to me about the Rask Invest portfolios please use the chat in the bottom right hand corner to say hello.
