Origin Energy will remodel its retail operations with a new strategic partnership with UK energy retailer Octopus Energy.
Origin will acquire a 20 per cent interest in Octopus and a licence in Australia to its market-leading customer platform, Kraken.
The strategic partnership will see Origin work with Octopus to adopt Octopus’ leading operating model and technology platform, delivering significant benefits for Origin customers, employees and shareholders.
Over the next 24 to 30 months, Origin will transfer its 3.8 million retail electricity and gas customer accounts to the Kraken platform, delivering a step-change reduction in operating and capital costs, with expected pre-tax cash savings of $70-80 million in FY2022, increasing to $100-150 million annually from FY2024.
The transaction is funded with staged consideration of $134 million paid upfront and $373 million spread over four financial years, comprising equity instalments and progress payments related to the rollout of Kraken across Origin’s retail operations.
Origin CEO, Frank Calabria, said, “The future of energy retailing lies in delivering superior customer experience at lowest cost and seamlessly integrating products and services, enabled by new technologies.
“While we have made good progress towards improving our customers’ experiences and the efficiencies within our retail business, this partnership with Octopus will help us transform energy retailing by automating our end-to-end processes and embedding an operating model designed around, and for, the customer experience.
“This will make every transaction simpler for our customers.
“This is an exciting opportunity because it delivers transformative change through a partnership with a company that is leading in customer satisfaction and experience in products and services that sit at Origin’s core.”
Mr Calabria says the collaboration of Octopus’ platform and operating model with Origin’s leadership in Australian energy retailing will aid in accelerating the delivery of Origin’s retail strategy.
“For our customers, they will have a vastly simpler experience, with the technology capable of integrating multiple services to a single bill, delivering agile tariffs and easy integration of smart meters, solar, storage and electric vehicles, accelerating demand-side management capability,” Mr Calabria said.
“Our people will be given the tools and empowered to provide an exceptional service, with small autonomous teams having full accountability for end-to-end customer experience, resulting in faster and better service.
“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.
“Adopting its approach will allow Origin to create a genuine competitive advantage.”
Octopus Energy CEO, Greg Jackson, said, “Octopus has been courted by platform partners and investors from across the globe, but Origin shone out.
“They have the most forward-thinking management of any market-leading energy company we’ve met, and we admire their commitment to accelerate renewable energy adoption and deliver better service to Australian customers.
“We’re looking forward to helping them on that journey by using our technology to reduce energy costs, improve customer service and provide cleaner and smarter energy solutions.”
Octopus has reformed energy retailing through its purpose-built Kraken platform and customer-centric operating model enabling superior customer service at lowest cost. Since its inception in 2016, Octopus has grown rapidly, with a customer base representing around 5 per cent of the UK market (approximately 1.5 million customers) and is pursuing opportunities to scale its model in other markets.
Origin has made progress on improving customer experience and reducing operating costs within existing business structures and technology. Implementing Kraken and redesigning the end-to-end retail operating model will help Origin differentiate from the market through:
- Radical improvement in customer experience – a premium end-to-end experience with seamless processes, personalisation and transparency delivering high levels of customer loyalty and trust
- Material reduction in cash costs – step-change reduction in Origin’s cost to serve through automation and self service
- Agile operations – a unique model that empowers lean teams with accountability for the end-to-end lifecycle of specific customer groups
- Building on existing digital and data analytics capability – real-time analytics and machine learning
“Energy markets are changing, with rapid growth of interconnected smart devices and decentralised energy and storage in the home,” Mr Calabria said.
“Kraken allows a more agile integration of products and services, putting Origin in the box seat to deliver new technology to enable smarter and more sustainable energy for customers ahead of the market.”
Dedicated teams from Origin and Octopus will implement a fully customised version of Kraken across Origin’s retail divisions.