This week, the British Government announced it was taking an equity stake in Kraken Technologies, the software platform being spun out of Octopus Energy. Some £25 million of public money, we are told, will “help the company scale up and become a UK champion”. Yet the same press release tells us that Kraken already serves 70 million customers’ accounts across four continents and is a “powerhouse”, which raises the question of why it needs public money at all.

Governments usually nationalise or invest for one of two reasons: to bail out failing firms whose collapse would be catastrophic — the banks in 2008, or more recently steel and chemicals businesses — or to fund projects that cannot otherwise attract capital. This is usually either because they are so capital-intensive that private markets cannot bear the risk, or because they are highly speculative but potentially transformative, such as early-stage nuclear fusion research.

Kraken fits none of these categories. It’s already scaled, already global, and already profitable. If it genuinely needed capital, private investors would be queueing up, particularly given the current appetite for energy-adjacent technology. So what, exactly, is the taxpayer buying?

The press release is conspicuously vague. We are not told the valuation, nor whether the Government’s stake is being taken before or after a planned stock market listing. We are told only that Kraken “may” list in London, a market struggling to attract new listings, implying that the Government’s involvement may somehow influence that choice.

This matters because £25 million is not serious money at Kraken’s scale, with its valuation widely estimated at around £1 billion. On those numbers, the Government’s stake would amount to a few percent at most, nowhere near enough to force strategic outcomes. If the objective is to secure a London listing rather than a New York one, this is an odd way to do it: a small, non-controlling stake does not buy veto rights over listing venues.

Which brings us to Octopus Energy, Kraken’s current owner.

For years, Octopus was loss-making, surviving only because its shareholders repeatedly provided fresh capital. The obvious question was always why those shareholders tolerated persistent losses, and the answer was Kraken, the jewel in the Octopus crown. The energy supply arm absorbed losses while the software platform quietly embedded itself across the market.

Several developments now bring this into sharper focus. Last year, Ofgem announced tougher capital requirements to ensure suppliers do not collapse and leave consumers to pick up the bill. In July last year, Centrica chief executive Chris O’Shea said Octopus was more than £1 billion short of its regulatory capital requirement and should be prevented from taking on new customers. Since then, Octopus’s capital requirement has risen again, to almost £1.5 billion, driven by rapid customer growth. In September, the de-merger of Kraken was announced.

The Octopus Energy accounts published in January, covering the year to April 2025, make sobering reading: it is in the red, recording a loss of £255 million. Selling Kraken could ease Octopus’s financial troubles, but what happens to the remaining proceeds will be revealing. This matters because Octopus is now the UK’s largest energy supplier. If it were to fail, the consequences would dwarf those of Bulb, whose collapse required a costly Special Administration regime.

There are also unresolved governance questions. Greg Jackson sits on the Cabinet Office board and on the Industrial Strategy Advisory Council, both of which provide strategic input to the Government. While this does not imply wrongdoing, the optics are uncomfortable: the state is taking an equity stake in a business being sold by a Government adviser, whose other business appears to be struggling to meet regulatory obligations.

Public money is supposed to address market failure, but the only market failure here is Octopus’s regulatory capital position, a problem it can solve perfectly well by selling Kraken. So why is the Government buying a stake in an already successful software business, and what exactly is it getting for our money?

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Kathryn Porter is an independent energy consultant at Watt-Logic.

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