In this paper, we study the problem of extracting work from heat flows. In thermodynamics, a device doing this is called a heat engine. A fundamental problem is to derive hard limits on the efficiency of heat engines. Here we construct a linear-quadratic-Gaussian optimal controller that estimates the states of a heated lossless system. The measurements cool the system, and the surplus energy can be extracted as work by the controller. Hence, the controller acts like a Maxwell's demon. We compute the efficiency of the controller over finite and infinite time intervals, and since the controller is optimal, this yields hard limits. Over infinite time horizons, the controller has the same efficiency as a Carnot heat engine, and thereby it respects the second law of thermodynamics. As illustration we use an electric circuit where an ideal current source extracts energy from resistors with Johnson-Nyquist noise.