Belco Releases Letter To Shareholders

The Board of Directors has declared a dividend of 38.5¢ per share for the first quarter of 2003. 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 March 21, the market price per share was $30.50.

The Annual General Meeting of BELCO Holdings Limited will be held on Thursday, April 24th at 2 p.m. at Bermuda Electric Light Company Limited headquarters, 27 Serpentine Road. We encourage you to attend. The Annual Report is being prepared and is scheduled to be mailed out by the week of April 14th.

We are pleased to report that BELCO Holdings Limited achieved record consolidated net earnings in 2002, resulting from the sale of Quantum Communications Limited and Fibre.com Limited, as well as better than expected levels of performance by our three operating subsidiaries, although slightly lower than last year. Consolidated net earnings for 2002 increased 7.5 percent to $22,510,495 from $20,937,724 in 2001.

These successful results led the Board of Directors, in addition to the normal cash dividend, to declare a 10 percent stock dividend which was paid on December 31, 2002. Our stock price ended the year 11.9 percent higher at $30.50 compared with $27.25 at the end of 2001. Earnings per share increased 7.0 percent in 2002 from $4.14 to $4.43.

BELCO

We anticipated that 2002 would be a difficult year given the effects of the September 11, 2001 attack on the United States, the resultant war and impact this would have on tourism. We are, however, pleased to report that BELCO performed well, ending the year with earnings only slightly lower than the previous year at $19,505,653 compared with $19,807,374 in 200l. Total electricity sales increased 0.6 percent to $133.1 million. There was a 14.7 percent decrease in fuel adjustment revenue to $15.5 million, as a direct result of lower fuel costs. The average price of a barrel of fuel in 2002 was $45.67 or 7.4 percent lower than 2001. Overall kilowatt hour (kWh) sales increased 3.8 percent with commercial sales 5.3 percent ahead and residential sales 1.7 percent above the previous year. We anticipate that these sectors will continue to be the growth drivers in 2003.

BELCO made an investment of $13.6 million in Property, Plant and Equipment in 2002. Transmission & Distribution upgrades totalled $5.2 million, which included investment in the new Admiralty House Park Substation that was energised earlier this month.

BELCO has had a strong start to 2003 with kilowatt hour sales for the first two months of the year 6.3 percent ahead of last year. This is mainly as a result of cooler temperatures this winter. Commercial sales were up 8.5 percent and residential sales increased 11.8 percent.

We began 2003 with an organisational restructuring at BELCO, moving from our traditional 10 departments into five Groups with employees assigned to Business Centres that represent the main areas of concentration within the Groups. The Business Centres are comprised of smaller Work Units that reflect the most important activities that take place within the Business Centre. It is at this Work Unit level that we are re-engineering how some of our most important work gets done in favour of a process approach that is focused on a smarter, faster and more efficient outcome.

As part of the restructuring, the Senior Management Team was reduced from 12 to seven members, comprising the Executive and the leaders of the five Groups. The objectives are to improve management bench strength, streamline the organisation and enhance planning for orderly management succession. This new structure also best supports our initiative to become a process-driven company. As our process initiative is moved through the Groups, a greater number of employees will become directly involved in decision making that will affect their everyday working lives and their ability to deliver superior service.

Our new 24-hour Operations Centre, which consolidates BELCO's three main existing control rooms into one, is now going through the testing stage in preparation for commissioning in April. At a cost of $5.4 million, the new Operations Centre will integrate people and systems, and is expected to save the Company $1million annually after its first few years of operation. In addition to housing the operating controls for our generation, transmission and distribution systems and dispatch operations, the new facility includes meeting rooms for use in emergencies and a viewing area for BELCO visitors touring the plant. The official opening is being planned for May 15th.

Bermuda Gas

Bermuda Gas & Utility Company Limited also felt the effects of a weaker economy and mild winter temperatures in 2002, as net earning results trailed the previous year by 2.5 at $1,070,780. Gas sales declined 2.4 percent. However, appliance sales, helped by the introduction of new brands during the year, increased 6.3 percent. Service and parts sales, which were lower at the beginning of the year due to training initiatives resulting in less chargeable time, improved throughout the remainder of the year to end 0.7 percent ahead of 2001.

The first two months of 2003 have produced encouraging results with overall sales 12.1 percent higher than last year. Gas sales are 16.9 percent ahead of last year, as cooler temperatures have produced greater demand for gas for heating. Additionally, new developments at Ship's Hill and Hidden Cove led to increased demand for residential gas.

Appliance sales are 1.0 percent ahead of 2002. The new Mezzanine Viking showroom opened during the first quarter of this year is already attracting customer attention. An official opening event is planned for April and will involve representation from Viking and a presentation specifically targeting designers and architects servicing high-end residential clients.

Improvements in productivity brought about by training in 2002 are continuing to produce positive results. Service and parts sales for the first two months of the year are 11.4 percent ahead of last year.

Shortly we will be introducing the first propane fueled vehicle to our fleet. An Isuzu cylinder delivery truck is scheduled for delivery in early April. Over the first six months of its running, data relating to operational and cost efficiencies of running the vehicle will be collected and shared with Government. Propane burns cleaner than both gas and diesel and is therefore environmentally friendly.

BESCO

As expected, BESCO reported strong results for 2002, ending the year with a 14.9 percent increase in operating revenues and net income 28.8 percent ahead of 2001. In the first two months of this year BESCO has been concentrating on engineering Honeywell projects that will be installed during the second quarter.

BESCO played an integral part in the development of BELCO's new Operation Centre with the installation of the electrical and control systems, as well as project management. BESCO will also be completing installation of the Honeywell Enterprise Building Integrated Control System throughout the BELCO site early this year.

EMPLOYEE NEWS

Please join me in congratulating the three BELCO employees selected by their colleagues as Employees of the Quarter for the fourth quarter 2002. Nicole Williams Smith, Oral Swan and Lucinda Woolridge. Also congratulations to Employee of the Year awardees: Juliette Watson, MacKeith Wilson and James Dowling all of whom had previously been honoured as Employees of the Quarter. Their dedication and commitment has been of the calibre to attract this commendation, and we appreciate their talents and efforts.

Once again, a reminder that the Annual General Meeting of BELCO Holdings Limited will be at 2 p.m. on Thursday, April 24th. We look forward to seeing you at that time.