Today: Kraken could look to go public within the next year as it aims for U.S. growth; Exxon Mobil to halt European recycling plant investments; California wants to stop oil industry exodus after years of climate focus.

Welcome back: British renewable-energy startup Octopus Energy is spinning off its AI arm, Kraken, in what could create a stand-alone entity worth $15 billion, WSJ Pro Sustainable Business's Yusuf Khan reports.

Kraken has operated in Octopus’s shadow but has helped power its parent to unicorn status as the startup provides renewable energy to British and European consumers. Based on its last funding round in 2024, Octopus was valued at over $9 billion.

The company is now looking to spin off the golden goose as demand for Kraken, which serves as an AI platform designed for energy and utility companies, grows. Kraken serves companies with some 75 million customers and has annual recurring revenue of $500 million.

Kraken CEO Amir Orad said the demerger will give the company the option to go public, with New York or London the most likely listing destination. Analysts say this could happen within 12 months. In the spinoff, Octopus’s current investors will receive ownership stakes in the stand-alone Kraken.

Kraken’s valuation could reach $15 billion in an IPO after its spinoff, according to analysts. Meanwhile, Octopus could be valued between $4 billion and $6 billion were it to go public, according to people familiar with the matter. Octopus has made no indications it would go public itself.

• Who better to midwife a giant mythical cephalopod than finance’s most famous great vampire squid? (FT)
• Octopus Energy launches £165 million clean-energy fund with SDR ‘sustainable focus’ label. (ESG News)

Energy giant Exxon Mobil is halting more than $100 million in planned investments for two European chemical recycling projects because of concerns over new rules that the company says will undermine the projects’ business case, the WSJ's Kim Mackrael reports.

Exxon senior vice president Jack Williams said the projects, which it had planned to develop in Belgium and the Netherlands, are now on hold. A European Union proposal on chemical recycling threatens to curb the amount of recycling credits the company can claim for processing that takes place at existing petrochemical plants, he said.

Recycling credits are valuable for Exxon because some customers pay a premium for products that were made using recycled materials.

Exxon’s decision comes amid growing concern about Europe’s competitiveness. High energy prices, competition from subsidized Chinese products and the Trump administration’s tariffs are all weighing on the continent’s economy, putting pressure on policymakers to relax some of the EU’s rules and make the continent more business friendly.

• Exxon technology that allows shareholders to automatically vote with management on all policies is angering activist investors. (Barron's)
• Exxon is calling for European leaders to repeal a new climate and human rights law that would fine corporations. (Bloomberg)

California policymakers who had tried to spur a transition away from fossil fuels are now working to entice fuel-makers to stay open​, while polls show voter frustration with rising living costs. Gasoline prices in the state averaged $4.66 a gallon Wednesday, among the highest in the nation, and about $1.45 higher than the national average, according to AAA, the WSJ's Collin Eaton and Ryan Dezember write.

Gov. Gavin Newsom, who is widely seen as a top potential Democratic presidential candidate, asked state regulators to work closely with oil refiners to avoid price spikes. They have discussed ways to keep the state’s dwindling number of refineries from shrinking further. Newsom has called the approach consistent with its past pursuit of an energy transition. Thus far, the industry says California isn’t doing enough.

The state passed a bill last week allowing Kern County, which encompasses Bakersfield and the heart of the state’s oil patch north of Los Angeles, to issue 2,000 drilling permits each year for the next decade. That could bring enough drillers back to the region to help feed the state’s refineries.

• California shift should boost oil companies including California Resources Corporation, Berry Petroleum and Chevron. (Barron's)
• California to extend cap-and-trade program aimed at advancing state climate goals. (Spectrum News)

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• Rivian broke ground on a Georgia factory, doubling down on EVs despite the policy shift toward gasoline cars. (WSJ)
   
• Ford plans to cut 1,000 jobs in Germany due to weak electric vehicle demand in Europe. (WSJ)
   
• LG is continuing its U.S. battery plant buildout despite a recent immigration raid that temporarily detained hundreds of workers. (WSJ)
   
• Prospects for America’s offshore wind industry are bleak, but two surprising moves show the industry could still find a footing. (Barron's)
   
• Think Bill Gates is fixing the climate crisis? Not if you follow the money. (Guardian)
   
• Airlines fear a European Union carbon tax as the CORSIA climate scheme develops holes. (FT)
   
• Australian steelmaking coal producers face strain due to rising costs and falling prices, leading to layoffs and mine closures. (WSJ)
   
• The global banking sector failed to make progress in financing the clean energy transition last year. (Bloomberg)

WSJ Pro Sustainable Business gives you an inside look at how companies are tackling sustainability. Send comments to bureau chief Perry Cleveland-Peck at perry.cleveland-peck@wsj.com and reporters Clara Hudson at clara.hudson@wsj.com and Yusuf Khan at yusuf.khan@wsj.com. Follow us on LinkedIn at wsjperry, clara-hudson and yusuf_khan.