Octopus Energy is set to spin off its Kraken Technologies arm as a standalone company after a deal to sell a stake in the platform valued it at $8.65bn (£6.4bn).

The energy giant, Britain’s biggest gas and electricity supplier, has sold a $1bn stake in the AI-based division to a group of investors led by New York-based D1 Capital Partners.

The move paves the way for Kraken to be demerged from Octopus, and for a potential stock market flotation for the business in the future.

Octopus founder and chief executive Greg Jackson told the BBC there was “every chance” Kraken would list its shares “in the medium term”, with the location of the flotation “between London and the US”.

Kraken uses AI to automate customer service and billing for energy companies and can manage when customers use energy, rewarding them for reducing consumption at peak times.

It was initially built for use by Octopus but has since picked up a raft of other utilities clients, including EDF, E.On Next, TalkTalk and National Grid US. It now serves 70 million household and business accounts around the world.

The majority of the $1bn investment will go to Octopus to fund its expansion, with Kraken receiving the rest. Mr Jackson said Kraken will be operating completely independently of Octopus “within a few months”.

Other investors in the business included Fidelity International and a unit of Ontario Teachers’ Pension Plan, with Octopus maintaining a 13.7% stake in Kraken.

Kraken chief executive Amir Orad said the spinoff would give it the “focus and freedom” to grow, with the company having previously struggled to do business with Octopus’s rivals.

Mr Jackson said that for a large tech firm such as Kraken, the location for its share listing would be either London or the US.

“One thing about Kraken is we’ve got this global investor base… and so really the stock exchanges have got to kind of show why they are the right one for business.”

A London listing for Kraken’s shares would reverse a trend of firms snubbing the UK in favour of floating in the US.

Mr Jackson said Octopus had created 12,000 jobs in the UK, with 1,500 of these attributed to Kraken.

He said the company would keep its headquarters in the UK, and that “if London can be the right place to list, I would love that”.

“But it’s down to be where you’re going to get the most investor support and the most support from the stock exchange.”

The demerger comes amid the continued growth of Octopus Energy, which overtook British Gas to become the UK’s largest energy supplier earlier this year, serving 7.7 million households.

But it confirmed this year it was one of three retail energy firms that had not yet met regulator Ofgem’s financial resilience targets.

Octopus said the cash injection would “almost double Octopus Energy Group’s already strong balance sheet”.

The deal was announced as Octopus published its results for the year to April, revealing it made a £260m loss before tax, compared with a £78m pre-tax profit a year earlier.

That came despite overall sales rising by a tenth to £13.7bn. Octopus took a hit from lower energy demand due to warmer weather and the ending of energy crisis allowance payments in 2024.

It said warmer weather hit profits by around £103m, blaming the UK’s hottest spring on record since 1885, which saw gas usage slump by 11% in March and 25% in April.