Origin (ASX:ORG) share price on watch after Octopus investment update

a wide smiling businessman in suit and tie rips open his shirt to reveal a green chest underneath.

The Origin Energy Ltd (ASX: ORG) share price will be one to watch on Tuesday.

This follows the release of a positive announcement on its UK investment.

Why is the Origin share price on watch?

The Origin share price will be on watch after it revealed that the value of its investment in fast-growing UK energy retailer and emerging technology business Octopus Energy has increased materially.

According to the release, Octopus Energy has received a 211 million pounds investment from leading sustainable investor Generation Investment Management (GIM) for a 7% stake.

This investment values Octopus at approximately 3 billion pounds or $5.5 billion. As a comparison, last year Origin agreed to invest a total of $507 million for a 20% stake in the company. This valued Octopus at approximately $2.55 billion.

The release explains that in order to maintain its 20% stake, the company has agreed to invest a further 38 million pounds or $70 million.

Furthermore, GIM will have an option to double its stake in Octopus under the same terms prior to 30 June 2022. Origin will have an option to invest to maintain its 20% if GIM exercises its option.

What is Octopus?

Octopus is an energy retailer with approximately 5.3 million customer accounts and a technology and software provider licensing its proprietary platform, Kraken, to a growing list of leading energy retailers around the world.

It is also a renewable asset manager with more than 3.4 billion pounds of assets under management.

The release notes that Octopus is also increasingly focused on developing future energy products and services. This includes the decarbonisation of heat, smart meters, and electric vehicle leasing and charging.

Management commentary

Origin’s CEO, Frank Calabria, said: “Since our investment in May 2020, Octopus has emerged as a global leader in energy retailing and technology, achieving significant growth in its home market and expanding into several international markets. It has also continued licencing its Kraken technology platform to leading energy retailers around the world with a target of 100 million customer accounts on Kraken by 2027.”

“In the competitive and fast-changing energy sector, a technology-enabled retail business that delivers superior customer experience at low cost will be core to Origin’s continued success. The strategic partnership with Octopus will help Origin achieve these objectives and strengthen our retail leadership, as we migrate our retail customers to Kraken by the end of 2022 and replicate its low cost, high service operating model, delivering an expected $100-150 million of cash benefits from FY2024,” he added.

The Origin share price is down 7% in 2021.

The post Origin (ASX:ORG) share price on watch after Octopus investment update appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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