DOI: 10.32609/j.ruje.12.168448

Authors: Mikhail V. Rodchenkov

Abstract: This study examines the impact of extreme temperatures on energy-sector companies, highlighting the financial and economic consequences of these temperatures as an important aspect of financial performance analysis. The research methodology is based on the application of regression models to corporate financial statements. This research obtained statistically significant evidence of a relationship among asset structure, financial flows, and external temperature for 55 publicly traded energy companies from 20 countries. The transformation of asset and cost structures is a necessary adaptation measure for companies operating in regions with harsh climates; the results reveal a significant excess of capital expenditures over operating expenses under such conditions. This study identified changes in the structure of financial flows that increased the financial burden and reduced investment attractiveness for these companies. The J-factor’s nonlinear function reflects greater variability in operating conditions at low temperatures than at high temperatures, explaining contradictions in capitalization between regions with hot and extremely cold climates. The forced nature of the changes and the involvement of many sectoral players heighten the challenges in finding solutions to ensure market fairness and mitigate the uneven impact of climate change on businesses in colder regions. This study’s results partially explain inconsistencies in tariff setting and product cost coordination among companies in regions with extreme climates and those in more temperate areas and outline the contours of required management decisions at the global, national, and corporate levels. The author expresses sincere gratitude to the attendees of the Lomonosov Readings in April 2025 and the 52nd EBES conference in Istanbul in July 2025 for their insightful comments. The author also thanks Professor Viktor Suyts for his continuous support and the companies that provided financial statements and valuable comments for this study.

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