Biggest US public pension fund Calpers invests in UK’s Octopus Energy

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The largest public pension scheme in the US has invested in Octopus Energy, highlighting international interest in the fast-growing UK power company.

Calpers, which oversees the pensions of public workers in California and has about $500bn of assets under management, 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.

It made its investment in May alongside Australian pension fund Aware Super. Together the two funds put in $370mn via existing shareholder Generation Investment Management, Al Gore’s investment fund.

Calpers told the FT it was “pleased to support Octopus Energy as part of our $100bn 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 $9bn. Other major investors in the group include Tokyo Gas.

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 UK firm Lightrock — bought stakes in the company in June, although the amounts have not been revealed.

Calpers is stepping up its investment in green assets. Earlier this year, Peter Cashion, managing investment director for sustainable investments at Calpers, told the FT that the fund planned to inject more than $25bn 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 7mn 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 £283mn for the year ending April 30 2023. In the previous year, it had made a £165.7mn pre-tax loss.

In an interview last month, chief executive Greg Jackson, who owns almost 5 per cent of the company, said it had no immediate plans to go public. Octopus declined to comment.