The ceaseless debate that surrounds climate change and the adoption of workable solutions that will end the world’s dependence on fossil fuels sometimes seems so routinely framed in the negative, and mired in claim and counter-claim, that even an avid follower of the discussion could be forgiven for thinking that we are many years away from achieving a complete transition to a low-carbon economy.

In some senses this is accurate. Many of the technologies are indeed a number of years away from making a difference. However, the frequent misinformation which surrounds the transition process is arguably obscuring one of the great investment opportunities of recent times, behind a veneer of what a vested minority would have us believe are insoluble problems.

To find support for this contention, one need go no further than the hugely impressive results delivered last week by three of the world’s leading clean technology firms; Siemens, Johnson Controls and NextEra Energy.

In contrast to the lack of clarity, continuity or commitment evidenced in Australian government policy, these three companies – among some of the largest in the world – demonstrated that excellent growth and superior shareholder returns can be generated from seizing the enormous opportunity presented by the transition to a low carbon economy.

With a market capitalisation of €82 billion, Siemens is the world’s largest firm primarily focused on renewable energy and energy efficiency. While a conglomerate, Siemens is a world leader in building technologies, LED lighting, high speed rail, grid transmission, renewable energy (primarily wind and solar) and financial services.

With a market capitalisation of $US27 billion, Johnson Controls is a global conglomerate that has re-aligned its business to best leverage global growth opportunities in energy efficiency.  Its businesses span building efficiency, automotive componentry and battery power storage segments.

NextEra Energy, also a global top 10 listed clean energy company, has a market capitalisation of $US23 billion. NextEra has over 43 gigawatts of power generation capacity in North America. Formerly known as Florida Power & Light, NextEra renamed itself in 2010 to reflect its massive transition to clean energy over the last decade. NextEra has more than half of its enterprise value invested in renewable energy assets.

Siemens reported its very strong first quarter results of FY2011 on 25 January. Global revenues rose 12 per cent, new orders rose 19 per cent, income from continuing operations rose 17 per cent (to €1.8 billion) and free cashflow was up 25 per cent year on year (YOY) to €925 million. In a result covered with very impressive figures, a highlight was the 390 basis point expansion in return on capital employed to 23 per cent for the quarter. Siemens’ emerging markets business units (lead by China, Russia and India) outperformed dramatically, with new orders up 31 per cent YOY, accounting for 35 per cent of total orders for the quarter, leaving Siemens to forecast income growth of at least 25-30 per cent for the full year 2011.

Not content to rest on its laurels, the scale of Siemens growth plans can be evidenced by the number of its renewable projects that are breaking world records in terms of scale and significance. Partnering with Prysmian (of Italy), Siemens this week won a €1 billion contract to install the world’s longest undersea transmission line – at 160 km – connecting offshore wind farms to the mainland grid. The contract from the Danish transmission Grid operator Tennet Holding will connect-up the 288 MW DanTysk offshore wind farm. Scheduled to come on line in 2014, this wind farm will utilise 80 Siemens 3.6 MW turbines.

This announcement follows Siemens' winning the largest onshore wind turbine order from Warren Buffett’s MidAmerican Energy on 28 December 2010, immediately following the US Congress’ 12 month extension of its 1603 Funding Program. At 594 MW, this single project equates to 10 per cent of all wind installations in the US in 2010. Indeed, the sheer significance of this project offers cause for cautious optimism that a recovery in the US wind sector should be felt in 2011.

On 28 January 2011, Siemens also signed a framework agreement with Suntech Power, the world’s leading solar photovoltaic panel producer. As a leading European engineering, procurement and construction contractor, Siemens handles the turnkey construction of solar power plants, combining in-house components such as inverters and transformers, in combination with Siemens Financial Services and independent panel sourcing from Suntech.

Johnson Controls reported its December quarter 2010 results on 20 January. Revenues of $US9.5 billion for the quarter were up 13 per cent YOY while orders received grew 17 per cent YOY. Operating Income of $US533 million was up 31 per cent YOY and earnings per share were up 28 per cent (excluding one-time items). Emerging markets again made a significant impact on Johnson Controls’ global growth, with Asian Automotive sales +49 per cent YOY and Asian Building Efficiency sales +31 per cent YOY.

China is a core focus for Johnson Controls. With 47 manufacturing plants in operation across 24 Chinese joint ventures, and equity share of sales of over $US1 billion per quarter, Johnson Controls continues to aggressively make the most of its leading position. In batteries, Johnson Controls is looking to increase its Chinese production capacity by over 200 per cent over the next two years from 6 million to 20 million units per annum.

Another highlight from the first quarter FY2011 result was the dramatic ramp-up of Johnson Controls’ AGM (Absorbent Glass Mat) battery capacity. From a current production rate of 3.6 million units in 2011, Johnson Controls is targeting production of 11.2 million AGM units globally by 2014. This represents compound annual growth of almost 50 per cent. As recently as October 2010 Johnson Controls was preparing for a doubling of AGM capacity to 7 million by 2014, highlighting the massive acceleration in demand for stop-start battery technologies required for regenerative auto braking systems and to meet the tough new automotive carbon emissions standards being introduced by the EU and the US. AGM batteries have three times the cyclic durability of conventional technology batteries, are maintenance-free and have a considerably longer life.

NextEra Energy reported its full year 2010 results on 25 January. Full year net income was up 21 per cent YOY to $US1.96 billion. Earnings were up 19 per cent YOY to $US4.74 per share and adjusted earnings were up 6 per cent YOY to $US4.30 per share, reflecting depressed US power prices. Total capex for 2010 was $US5.5 billion, flat on 2009. While Utility shares globally have seen lackluster performance in general over the last five years, NextEra has been a significant exception, delivering total shareholder returns of 48 per cent.

We at Arkx exclude firms from our portfolio with a material exposure to older nuclear power technologies. However, NextEra is a key customer of many of our portfolio companies, and a world leading power utility that is not waiting for the government to act before expanding rapidly into zero emission electricity.

NextEra installed 754 Megawatts of wind farms in 2010, taking their installed base of wind to 8,298 MW. This makes NextEra the largest wind farm owner in the US and more generally a producer of electricity at half the carbon footprint average of its US utility peers.

Having been a world leader in underwriting the development of wind power in the US, NextEra has most recently turned its focus to Solar. In 2010 NextEra completed the commissioning of its 75 MW Martin thermal solar farm, at the time the largest solar farm in the world. Earlier this month, NextEra also received US Bureau of Land Management approval and commenced site works on its new 250 MW Genesis solar farm in California.

Tim Buckley is a managing director and portfolio manager at Arkx Investment Management.

Disclaimer: Arkx Investment Management (Ark – x) focuses its investment approach on a small portfolio of high conviction stocks in the listed global cleantech universe. It looks for proven performers with world leading technologies backed by strong balance sheets and priced on sensible valuation metrics. While Arkx holds long positions in Siemens and Johnson Controls nothing in this article should in any way be considered as investment advice.