Power and gas retailer Origin Energy has agreed to buy a 20 per cent stake in UK retailer Octopus Energy for $507 million, with an exclusive license to use its technology in Australia.
Origin said the partnership with the fast-growing UK firm and use of its Kraken platform would radically improve Origin’s customer service, cut its costs sharply and give it international growth opportunities.
“Octopus is genuinely unique in the global energy market, having purpose-built its low-cost operating model and technology platform around the needs of customers,” Origin Chief Executive Frank Calabria said.
“Adopting its approach will allow Origin to create a genuine competitive advantage.”
The push comes as Origin faces pressure to cut retail tariffs in Australia under pressure from the government.
Octopus said it would use the funds to develop its technology further and expand into more markets.
Origin will pay Octopus $134 million up front and $373 million over four financial years, which will be tied to the rollout of Kraken across Origin’s retail operations.
Origin will transfer its 3.8 million electricity and gas customer accounts to the new platform.
It hopes to achieve cost savings of $100 million by June 2021, as well as pre-tax savings of around $75 million in 2021/22 and $125 million annually from 2024.
The overhaul of its customer platform will cost around $90 million, Origin said.
By 1105 AEST, Origin Energy shares were down 25 cents or 4.5 per cent to $5.31 each.