Longbow Capital Wins 2024 Private Equity Deal of the Year Award for Certarus Ltd.

Calgary-based Certarus Ltd. is a leading North American distributor of on-road low-carbon fuels, including compressed natural gas (CNG), renewable natural gas (RNG), and hydrogen. Founded in 2012, the company was originally focused on displacing the use of diesel fuel in the energy industry, but eventually pivoted into different verticals across North America. Today, Certarus is the largest CNG distributor in North America and uses its virtual pipeline, consisting of a fleet of carbon fiber trailers, to transport low-carbon energy fuels directly to industrial customers.

“Pipelines are notoriously expensive to build and increasingly difficult to get approved,” says Certarus CEO Curtis Philippon. ​“We’ve built a solution that allows customers to access low-carbon energy that the existing pipeline infrastructure simply cannot serve.” 

Among the company’s earliest investors was Longbow Capital, one of the oldest private equity firms in Canada specifically focused on the energy sector. Initially focused exclusively on the oil and gas sector, over the past decade Longbow has expanded its mandate and is currently investing out of an Energy Transition Fund that invests in businesses poised to benefit from the ongoing energy transition. With just over $1 billion in assets under management, Longbow typically invests in growth-stage companies. But when they were approached in 2012 with a novel idea for delivering compressed natural gas to reduce costs and carbon emissions, they were intrigued. 

“We ultimately decided that the Certarus team had figured out how to make this business work,” recalls Tyson Birchall, Managing Director at Longbow Capital. ​“At the time there was no CNG industry and although a number of other groups were trying to get something off the ground, none of them had managed to create a viable business. We saw an opportunity to get it right with Certarus.”

Over the years that followed, Certarus navigated the tumultuous years of 2015 and 2016 when energy prices declined dramatically, repositioned the business, and consistently grew revenue year after year. Key to the company’s success was its ability to generate cost savings for customers while also significantly reducing their carbon footprint.

“Tyson and the entire Longbow team were great to work with,” says Phillippon. ​“They were patient and supportive investors who were always by our side throughout the many ups and downs we experienced over the years. They had great insights, helped us with our strategy, and were always there to bounce ideas off of, but also gave us the space to run the business the way we wanted to.”

By 2023, Certarus had grown to the point where it had become a very attractive acquisition target. The company was ultimately acquired for more than C$1 billion by Superior Plus, a leading North American distributor of propane, and related products and services that was looking to add a low-carbon, high-growth business line.

“It was a great outcome for us and our shareholders,” says Phillippon. ​“Beyond the financial returns, we’ve found a great home for Certarus and one where we can keep growing the business for years to come. We’re so grateful for everything Longbow Capital did for us. They did a great job of identifying a market niche, tirelessly supporting our business over the years, and ultimately helping to get to this point.”

It was a great outcome for Longbow Capital as well, with the exit generating an impressive 7.64x MOIC and an IRR of 23.5%, and ultimately earning the firm the PE Deal of the Year Award, sponsored by Fonds de solidarité FTQ.

“We couldn’t be happier with the results,” says Birchall. ​“It was a great return for our fund and for our investors. In many ways, Certarus was a marquee investment because it showcases the best of what we are trying to accomplish in our energy transition strategy. Plus, it’s a win for Calgary overall as it demonstrates the value and innovation coming out of the traditional energy sector that is contributing to decarbonization.”