By Sonali Paul
MELBOURNE, May 1 (Reuters) - Australia's top power and gas retailer, Origin Energy ORG.AX , agreed to buy a 20% stake in UK retailer Octopus Energy for A$507 million ($328.18 million), with an exclusive license to use its technology in Australia, the companies said on Friday.
Origin said the partnership with the fast-growing UK firm and use of its Kraken platform would radically improve Origin's customer service, cut its costs sharply and give it international growth opportunities.
"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," Origin Energy Chief Executive Frank Calabria said in a statement.
"Adopting its approach will allow Origin to create a genuine competitive advantage."
The push comes as Origin faces pressure to cut retail tariffs in Australia under pressure from the government and looks to differentiate itself in the transition to cleaner energy.
Octopus said the deal, under discussion since last year, values the company at well over 1 billion pounds ($1.26 billion) and said it would use the funds from Origin to develop its technology further and expand into more markets.
"We're thrilled to be able to accelerate our global expansion to make the green energy transition cheaper and faster," Octopus Energy founder and chief executive, Greg Jackson, said in a statement.
Octopus, among a number of smaller brands challenging Britain's traditional power suppliers, last month agreed to work with German utility E.ON to revamp its UK retail business and in January acquired French firm Engie's 70,000 British residential customers. said it would pay Octopus A$134 million up front and A$373 million over four financial years tied to the rollout of Kraken across Origin's retail operations.
That will entail a transfer of Origin's 3.8 million electricity and gas customer accounts to the new platform, which Origin said would result in pre-tax savings of around A$75 million in the year to June 2022, rising to around A$125 million annually from 2024.
That would come on top of A$100 million in cost savings Origin aims to achieve by June 2021.
The overhaul of its customer platform will cost around A$90 million, Origin said.
"For our customers, they will have a vastly simpler experience," Calabria said.
($1 = 0.7949 pounds) ($1 = 1.5449 Australian dollars)