NOVA joins hands with Nopetro to develop renewable natural gas

NOVA Infrastructure, a New York-based PE firm, partnered with Nopetro Energy to create a renewable natural gas (RNG) focused platform, as the fight for decarbonization using cleaner sources of energy continues to grow.

Dubbed Nopetro Renewables, the platform will construct a landfill-gas-to-RNG facility in Vero Beach, Florida.

Nopetro is led by Jorge Herrera. In addition to investing in the newly formed Nopetro Renewables’ platform, NOVA also has made an equity investment in Nopetro Energy.

The deal marks the seventh platform investment for NOVA. The firm closed its first infrastructure fund on $565 million in July 2022.

PE Hub spoke with NOVA’s co-founder Allison Kingsley, and senior vice-president Stephen Denis, about what attracted them in this space.

Opportunities to generate renewable natural gas comes from landfills, dairy farms, wastewater treatment plants and municipal waste facilities, Denis said.

“One thing that we do like about the space is that there is growing optionality for offtake,” he said, adding, “you can sell the gas into transportation customers that might fuel their vehicles with [compressed natural gas] CNG.”

CNG is a gasoline and diesel fuel alternative that consists primarily of methane. Nopetro owns and operates RNG distribution facilities in Florida and supplies CNG to government counterparties such as the Orlando Lynx bus system, garbage trucks and other industrial partners under long-term contracts in the Florida market.

What could also push demand is the fact that many regulators are pushing for the wide use of RNG in a bid to cut fossil fuel use. This could trigger more demand, Denis said.

“There is also a growing trend towards gas utilities being mandated by the states where those utilities operate to purchase a certain portion of their gas supply as RNG,” he said.

The government is also pushing policy and funding that promote clean energy use. The Inflation Reduction Act was widely celebrated as a milestone for energy transition.

But voluntarily, some corporates are gearing up to using more renewable energy, a move that is contributing to the growth of the RNG market. “That’s really driven by ESG goals of large corporates and energy companies where they have made internal decisions to supply a certain portion of their energy usage as renewable fuels,” he said.

Companies like Amazon are building a fleet of trucks that run on CNG.

Other opportunities come from cashing in on tax credits.

In terms of growth, Kingsley said their target will be both on the organic and M&A front, banking on the “strong industrial and commercial relationships” that the firm has developed in the sector to bring new customers onboard and grow the business.

“In terms of M&A, this is a fragmented space and I think there are interesting opportunities either for acquiring underlying assets or buying existing companies,” she added.