New government-focused firm to make first investment

Blue Wolf Capital Management has used a commitment from South African investor Johnnic Holdings to make a $110m venture into the energy sector.

Blue Wolf Energy Holdings, an affiliate of New York-based private equity firm Blue Wolf Capital Management, has agreed to buy Montauk Energy Capital, a landfill gas developer based in Pittsburgh, Pennsylvania, from DQE Financial Group, a subsidiary of Pittsburgh-based electric utility company Duquesne Light Holdings, for approximately $110 million (€83 million), Blue Wolf said in a statement. This investment will be the firm’s first.

Golden Tree Asset Management is providing senior financing for the deal, which is expected to close by the end of the year, the statement said. Montauk’s management will remain in place following the completion of the transaction. John Schmitt, the company’s president, will become its chief executive officer.

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“Montauk has pioneered new methods of profitably and efficiently converting landfill gas into a usable source of renewable energy,” Adam Blumenthal, a co-founder and managing partner at Blue Wolf, said in the statement.

Montauk operates US-based facilities that convert gas to energy. The company also has made investments in 13 other facilities and owns and regulates GSF Energy (formerly Getty Synthetic Fuels) and Waste Energy Technology, two of the oldest landfill energy operators in the US.

“Montauk is a pioneer in profitability operating advanced gas-to-energy technologies, including converting landfill gas into pipeline-quality methane,” the statement said, adding that the company controls approximately one-third of these facilities in the US. Montauk also has teamed up with Prometheus Energy Company, an alternative energy company that specialises in the conversion of methane, to create a commercial landfill at Irvine, California’s Frank R. Bowerman landfill, at which natural gas is converted into a liquefied form.

“According to the US Environmental Protection Agency (EPA), over 400 operational landfill-gas-to-energy sites in forty states across the US produce the annual equivalent of electricity for 725,000 homes, provide heat for 1.2 million homes and destroy emissions equivalent to those generated by 13 million vehicles,” the statement said. “The EPA estimates that fewer than half of the landfills which profitably could implement gas-to-energy projects have done so to date.”

Founded in April of 2005, Blue Wolf targets middle-market companies and focuses on managing relationships with state, local and federal governments as well as labor unions. Johnnic Holdings, a Johannesburg, South Africa-based investment holding company, made a $43.5 million commitment to Blue Wolf in September.