US Pension Scheme CalPERS Invest in UK’s Octopus Energy

Expanding its global footprint, the California Public Employees’ Retirement System (CalPERS), the largest public pension scheme in the US, has invested in Octopus Energy, the fastest growing energy company in the UK according to a report in Financial Times.

CalPERS, which oversees the pensions of public workers in California and has about $500 billion of assets under management (AUM), invested in the private company this year as part of a push into climate-related assets, Calpers confirmed in response to a query from the Financial Times.

The pension firm made its investment in May alongside Australian pension fund Aware Super. Together the two funds put in $370 million via existing shareholder Generation Investment Management, the US ex- vice president Al Gore’s investment fund.

CalPERS told Financial Times that it was pleased to support Octopus Energy as part of its $100 billion Climate Action Plan, designed to take advantage of opportunities to invest in the global transition to a low-carbon economy.

The Canada Pension Plan Investment Board also increased its stake in the business at the time, giving Octopus a valuation of $9 billion. Other major investors in the group include Tokyo Gas, the report said.

A key appeal of Octopus to international investors is its Kraken software — for customer billing and matching electricity demand to the intermittent output from wind turbines and solar farms — which it licenses to other energy providers.

Two other investment groups — San Francisco-based Galvanize Climate Solutions and the UK firm Lightrock — bought stakes in the company in June, although the amounts have not been revealed, the report said.  

More Green Investments

CalPERS is stepping up its investment in green assets and earlier this year, Peter Cashion, managing investment director for sustainable investments at pension firm said that the fund planned to inject more than $25 billion into green private market investments, with a particular focus on Europe and Asia.

Cashion said CalPERS would focus on sustainable real estate and renewable infrastructure, as well as looking at private equity investments in companies supporting the shift to clean energy, including those with specialised software.

Octopus was founded in 2015 aiming to take on what were then the ‘Big Six’ energy suppliers that dominated the UK market — British Gas, EDF, Eon, Npower, Scottish Power and SSE.

It has grown through acquisitions and organically to become the UK’s second-largest household energy supplier with about 7 million customers. It has also expanded into the US, Spain, Japan and New Zealand. 

As well as supplying households, it has a growing portfolio of wind, solar and other renewable assets and is backing a major project to import electricity from Morocco to the UK. Octopus licenses Kraken not only to other energy suppliers but also to water companies.

Last year, the group made its first profit, reporting a pre-tax figure of $369.83 million for the year ending 30 April 2023. In the previous year, it had made a $216.54 million pre-tax loss, the report said.