"The Board of Directors has declared a dividend of 38.5¢ per share for the second quarter of 2002. A cheque is enclosed for shareholders who have requested direct payment. Those who designated a deposit to their savings or current account have been given credit effective today. As of June 25th, the market price per share was $31.25.
BELCO
BELCO's total kilowatt hour sales through May 2002 were up 1.59% over the same period last year, primarily due to increased demand in the commercial sector. A mild winter with temperatures averaging two to four degrees higher than last year resulted in a 4.13% decrease in residential sales. Small commercial sales increased 4.32%, while demand (large commercial) sales rose 7.35% for the first five months of 2002, compared with the same period last year. This reflects the additions of the ACE and XL Capital buildings, as well as the Southampton Princess and Elbow Beach hotels, both of which were closed for renovations during the early part of 2001. Increased business on the Southside property is also contributing to the rise in demand sales. Total expenses through the end of May were 4.08% below the same period in 2001. Net earnings for the first five months of this year are in line with budget expectations.
Fuel prices averaged $42.17 per barrel through the end of May 2002, compared with $52.26 during the same period last year, resulting in lower fuel costs and fuel adjustment revenue. Operating efficiency remains relatively steady with 685.74 kwh generated per barrel of fuel through May 2002, compared with 686.29 kwh per barrel of fuel last year.
Major Undergrounding Project
Earlier this month we began preliminary work on our second largest capital project scheduled for 2002, major undergrounding required for the ultimate commissioning of the new Admiralty Substation. Over the next four to five months we will be trenching between BELCO's main plant and the substation in order to lay the 22,000 volt transmission cables needed to activate the substation.
As a result of this project, with the exception of the Cox's Hill roundabout area through to Tulo Valley, where lines will remain overhead due to a requirement for significant additional infrastructure; all commercial customers on the main trench route including Serpentine Road and Pitts Bay Road will have complete underground service (i.e. high voltage and distribution) when this project is completed. Undergrounding high voltage lines will improve security of supply to those areas, as well as improve aesthetics. Additionally, Spanish Point will realise an improved system with the commissioning of the new substation.
As has been our practice, we encourage other utilities to partner with us in large underground projects, and in this regard, BTC, CableVision and Bermuda Waterworks will also be installing equipment in the trench where it fits their needs.
We recognise that this type of project can result in frustration and inconvenience to residents and commercial customers in the area, as well as the motoring public. Throughout the duration of the trenching project on the main roads, we will be working closely with our contractor and Government's Works & Engineering department to ensure suitable traffic controls. Additionally, we have put in place a communications plan to advise the public of the work, traffic controls, detours etc. and will be communicating via letters and through the news media as the project progresses.
Bermuda Gas
Bermuda Gas & Utility Limited is also feeling the effects of a warm winter and weakened hospitality industry. Similar to propane gas distributors on the east coast of the United States who experienced a decline in demand due to one of the warmest winters on record, Bermuda Gas also saw a decrease in both residential and commercial sales. Residential sales for the first five months of the year are down 5.3% from 2001, reflecting a decrease in demand for propane for heating. Commercial sales also decreased 6.3% during the first five months of the year, a combination of warmer weather and a reduction in tourism related activities. Sales of small cylinders, primarily for barbeque use, are up 12.7% supporting the fact that we have experienced a very mild winter and early spring.
As a result of a more aggressive approach to meeting consumer expectations, appliance sales are ahead of budget for the period through May 31, 2002. Units sold are 12.8% above last year. Training initiatives earlier this year resulted in less chargeable service time, and a 1.8% decrease in service and parts sales during the five month period. However, in the long-term our training programme will provide us with an improved multi-skilled service workforce and greater efficiency.
BESCO
BESCO is consolidating its position in the Energy Management and Building Controls market and continues to expand its client base. We are pleased to report that during the quarter BESCO received commitment for three new projects, and completed 80% of the work required in its largest major electrical retrofit project, an office building in Hamilton. Additionally, BESCO is working on a project to up-grade BELCO's security and surveillance systems and has been retained by one of Bermuda Gas & Utility Limited's clients to provide power protection and power quality products and services. The power protection business is meeting 2002 expectations, with uninterruptible power supply (UPS) systems leading sales.
Fibre.com Limited
We are pleased to report that during the quarter, we were successful in selling our subsidiary Fibre.com Limited to Phoenix Trust for $3 million. This follows three years of negotiations with a variety of interested parties. We are still in discussions with others interested in purchasing our shares in Quantum. We hope to successfully conclude these discussions within this quarter.
Community Support
For the sixth consecutive year running, BELCO was the major sponsor of the Annual Agape House Rubber Duck Derby. We are pleased to report that over $95,000 was raised through personal, team and corporate sponsorships of rubber ducks competing in St. George's on June 2nd , as well as through the sale of promotional items. Agape House is Bermuda's only hospice for the terminally ill and depends on the generous support of both businesses and the public. We are happy to be a part of its success.
Early this month "Bermuda's Defence Heritage" exhibit was opened by Premier, The Hon. Jennifer Smith, JP, DHumL, MP at Commissioner's House in Dockyard. The exhibit commemorates more than 350 years of fortifications and military history honouring the local forces and war veterans of Bermuda. Last year BELCO pledged $100,000 to the Bermuda Maritime Museum's War Veterans exhibit project. We are pleased that the donation, being made over a five year period, has resulted in this fitting tribute to the many Bermudians who served in the military, in particular in the two World Wars, a number of whom lost their lives in the line of duty.
This year BELCO has also agreed to sponsor a portion of the acclaimed children's educational programme Sesame Street on local television. BELCO was a sponsor some ten years ago before it was totally funded by Government. Despite the fact that Sesame Street can be seen on cable television stations, we believe that it is an excellent educational tool for small children and should be available to all children in Bermuda. We also recognise the important role that the local media play in our community and the need for educational and special interest programmes to be supported for the enjoyment and benefit of all of Bermuda.
Employee News
Please join me in congratulating two BELCO employees who were selected by their colleagues as Employees of the Quarter for the first quarter of 2002, and three BELCO Employees selected as Employees of the Year for 2001. James Dowling, Information Technology, and Joshua Simons of Generation were voted Employees of the Quarter. Three employees, previously nominated for Employee of the Quarter during at least one quarter in 2001, received the greatest number of ballots for the Employee of the Year: Donovan Tulloch in Engineering & Planning, Richard Spurling in Human Resources and Dennis Joaquin of Meter Reading.
Congratulations is also in order for Bermuda Gas & Utility Limited's retired Parts Manager, Kenneth Smith who was recently awarded the Queen's Certificate and Badge of Honour for the contributions he and his jazz group, the Aldana Quintet, have made to the Bermuda community since forming in 1955.
Once again, we are in hurricane season, when often the best protection, is precaution. Please take the time to make sure you are ready before the storms arrive. Hopefully, we will not have too hard a season. However, trimming trees on your property and getting the necessary supplies ahead of time will help make you more comfortable should we experience bad weather."
Signed,
Garry A. Madeiros
President & Chief Executive Officer