WEBVTT - Octopus Energy Plans to Spin Off Technology Arm Kraken

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News. You're listening to Bloomberg

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<v Speaker 1>Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.

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<v Speaker 2>Octopus energy group planning to spin off it's Cracking Technology

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<v Speaker 2>software platform unit. If you're not familiar, well, energy companies

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<v Speaker 2>definitely are. Cracking is a software platform, as we mentioned

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<v Speaker 2>a company, it helps utilities manage the transition to cleaner energy.

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<v Speaker 2>And we've got a great guest to explain what it's

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<v Speaker 2>all about. What's going on.

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<v Speaker 1>I'm heir Arit is here CEO of Cracking Technologies, as

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<v Speaker 1>the company bio notes, he's a multi time CEO, entrepreneur

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<v Speaker 1>and an AI analytics, cyber and fintech veteran. He's here

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<v Speaker 1>in the studio with us. Welcome, How are you very good?

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<v Speaker 3>Thank you.

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<v Speaker 1>Look, as Carol mentioned, energy companies are very familiar with

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<v Speaker 1>what you do. But if people think about utilities and

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<v Speaker 1>the transition to renewables, how does your company help them

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<v Speaker 1>do that?

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<v Speaker 3>So every utility on the planet is evolving these days

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<v Speaker 3>because the technology behind the energy is evolving. You have

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<v Speaker 3>from electricity at every home Smiths Homes evs although it's

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<v Speaker 3>renewable solar and the like vainly to modernize their entire infrastructure,

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<v Speaker 3>from billing to communication, from hard price to modern technology.

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<v Speaker 3>We help him do that.

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<v Speaker 1>Hold on, I thought the president is canceling wind projects

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<v Speaker 1>and he's talking about drill drilling more in the US

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<v Speaker 1>and building nuclear. Look, nuclear takes a really long time.

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<v Speaker 1>We've spent a lot of time talking about that. Are

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<v Speaker 1>utilities pulling back on renewables?

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<v Speaker 3>The state with the most investment in renewable right now

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<v Speaker 3>is Texas. It's cheaper, Solar is cheaper, more accessible, more affordable.

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<v Speaker 3>Un can bite faster than building a new nuclear power plants,

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<v Speaker 3>more solar investments than any other energy form.

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<v Speaker 1>It's a political Can it be done even with tariffs

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<v Speaker 1>on hardware that comes from China?

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<v Speaker 3>Obviously it's more expensive that way, But in general, solar

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<v Speaker 3>became so cheap and it's getting cheaper every day that

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<v Speaker 3>everyone are moving to that. But it's a mix. It's

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<v Speaker 3>never just all wind or nuclear. It's always a mix.

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<v Speaker 2>Well, so I'm still trying to understand what you guys

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<v Speaker 2>do your platform, So what are you helping energy companies do?

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<v Speaker 3>I'll give you an example. If you have you're cooling

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<v Speaker 3>your home during the summer, or you have an electric

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<v Speaker 3>vehicle you charge at seven pm when you get home.

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<v Speaker 3>That creates a massive spike on the grid. And the

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<v Speaker 3>issue is the grid is actually built for the maximum

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<v Speaker 3>point in time, so every spike is really expensive for

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<v Speaker 3>us as consumers. What we do is help manage that spike.

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<v Speaker 3>Spread it a bit. Maybe we charge your call a

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<v Speaker 3>bit later at night, as long as you wake up

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<v Speaker 3>and you have enough juice. Maybe we cool your home

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<v Speaker 3>slightly differently during the day. That's one example. There's many

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<v Speaker 3>examples like that. We can move shift load between the

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<v Speaker 3>weekend during the day. You can do dynamic pricing, so

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<v Speaker 3>you incentivize consumers to spend the right time and right energy.

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<v Speaker 1>Is your software necessary because the grids in many parts

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<v Speaker 1>of the United States are not sufficient.

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<v Speaker 3>For two decades we did not have any increase in

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<v Speaker 3>load and demand in.

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<v Speaker 1>The US, And now we found AI.

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<v Speaker 3>Not just SAYI with more manufacturing, more evs, we move

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<v Speaker 3>from gas to electricity and so on.

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<v Speaker 1>What was moving from gas to electricity the right move

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<v Speaker 1>in hindsight.

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<v Speaker 3>Yes, houses burn less if you use electricity. It's a

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<v Speaker 3>fundamental it's a safety thing. It's easier, easier to transport.

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<v Speaker 3>There's a lot of advantages, but we do need to

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<v Speaker 3>update our agreed.

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<v Speaker 1>But does it financially make sense?

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<v Speaker 3>It's consumers gas perces go up and down. An electricity

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<v Speaker 3>form solar is actually really cheap when the sun is up.

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<v Speaker 3>If you put the buttery, you store it for night.

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<v Speaker 3>You can actually reduce electricity prices using these technologies.

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<v Speaker 2>You know what's interesting is I mean Octopus has said

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<v Speaker 2>that you guys help lower bills when renewable surge, but

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<v Speaker 2>energy prices are still high for many households. Just talk

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<v Speaker 2>to my husband's like, why is it so high? Why

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<v Speaker 2>should consumers believe that this software or benefits them and

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<v Speaker 2>not just your bottom line?

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<v Speaker 3>Because unrelated to cracking, the entire industry now need to

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<v Speaker 3>invest in infrastructure, adding more capacity and improve the grid.

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<v Speaker 3>That is going to cost a lot of money. Any

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<v Speaker 3>usage of technology to optimize that will reduce that investment

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<v Speaker 3>because we reduce the peaks and part of that saving

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<v Speaker 3>can go to every household.

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<v Speaker 2>Is there a point though where the grids are built?

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<v Speaker 2>I mean, we've been talking about this and how much

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<v Speaker 2>they're maxed out, and now we've got all of the

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<v Speaker 2>AI demand kind of starting to be factored in. But

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<v Speaker 2>is there a point where the grid is built out

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<v Speaker 2>and we don't need a software platform because we don't

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<v Speaker 2>have peaks or we have enough.

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<v Speaker 3>Even when the grid is perfect, we still need to

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<v Speaker 3>choose which energy source do we use. The sun happens

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<v Speaker 3>to be free, but it's not always there. If we

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<v Speaker 3>can shift the usage and pick the right moments, we

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<v Speaker 3>can reduce costs.

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<v Speaker 1>You've talked a lot about solar, but wind is also

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<v Speaker 1>of interest to us, not just because of what's happening

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<v Speaker 1>offshore of the United States or what's not happening sure

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<v Speaker 1>of the United States right now? Is this administration making

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<v Speaker 1>a mistake canceling wind power projects?

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<v Speaker 3>Look, some countries believe it's a really good investment for

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<v Speaker 3>the future. The truth is you need to mix, You

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<v Speaker 3>need variety. The ideal mix is a bit of everything,

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<v Speaker 3>versus choosing one over the other.

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<v Speaker 1>So you think the US should have wind power.

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<v Speaker 3>I think we need to have a mix of everything

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<v Speaker 3>versus just pick one or favorite and price goes into account.

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<v Speaker 3>Investing in you gaz for example, there's a five yew weight.

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<v Speaker 3>There's a line to get a new generator, a new turbine,

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<v Speaker 3>So we have to have a mix.

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<v Speaker 2>We are talking with a mirror.

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<v Speaker 1>Aort.

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<v Speaker 2>He is chief executive officer of krack and Technology is

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<v Speaker 2>joining us here in studio. There. Let's talk about the

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<v Speaker 2>spin off and why it's happening. Critics are saying that

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<v Speaker 2>spinning this off is less about strategy and more about

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<v Speaker 2>extracting value for investors. So how do you respond to

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<v Speaker 2>this view a mirror that this is a financial engineering

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<v Speaker 2>play rather than an innovation story.

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<v Speaker 3>Yeah, Kracken was born inside an energy company. Very few

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<v Speaker 3>successful tech companies were born inside an energy company. It's

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<v Speaker 3>such actually quite rare. It made us who we are,

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<v Speaker 3>improved our technology and knowledge of the space tremendously. But

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<v Speaker 3>we would like to work with other energy companies who

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<v Speaker 3>may compete with our parent company. We'd like to invest

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<v Speaker 3>in other markets that our parent company may not play in.

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<v Speaker 3>So we cannot grow and innovate and service the market

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<v Speaker 3>when we're limited to a certain parent company.

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<v Speaker 2>So you're saying that by going out on your own,

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<v Speaker 2>you're able to access a lot more companies. What does

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<v Speaker 2>that mean dynamically in terms of how big your company

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<v Speaker 2>could be? I mean, Sky News reported that you guys

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<v Speaker 2>could be worth as much as fourteen billion. We have

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<v Speaker 2>heard ten billion.

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<v Speaker 3>I've heard the rumors. I have no clue what's the number.

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<v Speaker 2>But you understand the business and you understand that by

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<v Speaker 2>spinning off what you might be able to access. So

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<v Speaker 2>what does it mean in terms of valuation or is

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<v Speaker 2>this all hype in terms of do those numbers make

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<v Speaker 2>you nervous?

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<v Speaker 3>First of all, expectations should make you nervous. Our job

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<v Speaker 3>is to be with a great business and hopefully meet

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<v Speaker 3>each and every expectation down the road. But by splitting

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<v Speaker 3>the two companies, we can attract capital in investors that

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<v Speaker 3>are experts in software, not just in energy experts at

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<v Speaker 3>lad stage software companies. Five hundred million dos ERL is

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<v Speaker 3>not your typical startup. This is scale, so it would

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<v Speaker 3>definitely allow us to attruct the right capital structure and

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<v Speaker 3>the right investors over time.

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<v Speaker 1>Some of the mag seven are actually eyeing energy, Amazon, Google,

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<v Speaker 1>Microsoft looking at the energy space, especially AI driven grid management.

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<v Speaker 1>Why should utilities bet on you rather than going with

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<v Speaker 1>a larger player.

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<v Speaker 3>So kracking is unique in that it does only one thing.

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<v Speaker 3>We only do the platform four utilities for energy companies,

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<v Speaker 3>and it's a very wide system end to end the

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<v Speaker 3>problem is the alternative you can go with ORACID and

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<v Speaker 3>SAP and other companies. You will need to buy a

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<v Speaker 3>dozen to three, four or five all the way to

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<v Speaker 3>fifty systems in order to service for technology stock. It's expensive,

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<v Speaker 3>it's slow, it's not fit for purpose, it's not designed

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<v Speaker 3>for the needs of an energy company. And that's where

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<v Speaker 3>we're coming.

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<v Speaker 2>So when does this all happen?

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<v Speaker 3>So we've been running independently operationally for the last eighteen

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<v Speaker 3>months two years. We're now splitting physically the two structures

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<v Speaker 3>the cup table, and that is going to end by mid.

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<v Speaker 2>Next year, by mid next year, and are you going

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<v Speaker 2>to be a publicly held.

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<v Speaker 3>Entity or will stay private at that point in time.

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<v Speaker 3>Obviously it opens options down the road, but right now,

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<v Speaker 3>the first step is split the two.

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<v Speaker 2>What's a risk to the business. What's the thing that

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<v Speaker 2>kind of worries you usually look at the outlook? What

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<v Speaker 2>is it that's the thing that I hate to say

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<v Speaker 2>keeps you up at night because everybody throws that out there.

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<v Speaker 3>I have three teenagers.

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<v Speaker 2>Okay, there's more than one.

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<v Speaker 3>But the number one thing is the demand right now

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<v Speaker 3>to modernize our energy infrastructure in every country is spiking

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<v Speaker 3>in each and every country. And our job is how

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<v Speaker 3>do we service as many utilities as we can and

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<v Speaker 3>make sure each and every project is a success. To date,

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<v Speaker 3>all of our migrations we serve you seventy million households,

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<v Speaker 3>all of them have been successful. Want to keep that

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<v Speaker 3>truck recorded while handling more and more demand, just.

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<v Speaker 2>Real quickly twenty seconds. Is most of your business in

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<v Speaker 2>the US or is it.

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<v Speaker 3>Global globally all over Europe? Half of the UK is

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<v Speaker 3>running on Krakcke in Australia, Japan and Germany Front and

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<v Speaker 3>the US National GRIE just announced we picked Krakcken to

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<v Speaker 3>run ver Technology.

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<v Speaker 2>We'll stay in touch, love to hear more as you guys,

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<v Speaker 2>and when you are officially I guess I mer ord.

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<v Speaker 2>He's THEEO of Krakin Technology is joining us in studio