Belco Releases Letter To Shareholders

"The Board of Directors has declared a dividend of 38.5¢ per share for the first quarter of 2004. 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 15th, the market price per share was $41.50.

The Annual General Meeting of BELCO Holdings Limited will be held on Thursday, April 29th at 2:00 p.m. at Bermuda Electric Light Company Limited (BELCO) headquarters, 27 Serpentine Road. We encourage you to attend. The Annual Report is being prepared, and is scheduled to be mailed by the week of April 19.

BELCO Holdings Limited has ended 2003 with mixed results. While our shares performed well in 2003, closing the year at $35.25, up 15.6 percent over $30.50 the previous year, earnings per share declined to $3.39 from $4.43, reflecting a decrease in 2003 consolidated net earning results to $17,268,247 compared with $22,510,495 in 2002. This significant decrease of 23.3 percent in one year is made up of two components. The first is the one-time gain of $2,483,513 experienced in 2002 on the sale of Quantum Communications Limited and Fibre.Com Limited. The second is the restoration expense of $3,353,000, which the Company incurred as a result of Hurricane Fabian's visit.

BELCO

The first six months of 2003 were on target at BELCO, but the Company ended the year earning $16,322,519, compared with $19,505,653 in 2002, as a result of Hurricane Fabian restoration expenses of $3,353,000. Total electricity sales revenue rose 8.3 percent in 2003 to $144,136,656 up from the $133,112,648 achieved in 2002. Of that increase, $6,408,771 was a direct result of fuel adjustment revenue increasing to $21,911,509 from $15,502,738. The remainder of the sales revenue increase resulted from a 2.7 percent increase in kilowatt hour (kWh) sales.

Expenditures increased in 2003, particularly in our two major operating areas, Energy Supply and Energy Delivery. In Energy Supply, fuel cost was the most significant expense. The price of fuel averaged $52.09 per barrel compared to $45.67 in 2002, resulting in extra fuel costs of $6,408,771. Also, increased generation demand on our power plant required the running of less efficient gas turbine engines to meet the demand. Both of these factors contributed to $2,919,576 additional costs. Also contributing to increased cost was the need for Energy Supply to complete seven major engine overhauls in 2003, compared to six in 2002.

Energy Delivery expenses increased mainly due to the devastation caused to our overhead distribution system as a result of Hurricane Fabian. The Company expended $3.3 million in restoration costs as a result of the storm, and a further $1.1 million in capital costs during a four-month system rehabilitation period to restore the system to full strength.

In November 2003, we signed the contract for two new medium-speed diesel engines to be installed in an extension of our East Power Station. E7 & E8 will add 29 MW of plant capacity at a cost of $45 million. Preparatory work has begun for delivery and installation of the new engines in August 2004. The engines will be brought online in March 2005.

A major focus in 2004 is to make Process redesign a way of life at BELCO, as Process teams with broad mandates have been formed in each of our operating groups. The Process teams, guided by our four-person Process Office, are charged with looking at important segments of our business to map how things are done now, and then to develop recommendations for workflow improvements that will enhance employee job satisfaction, optimise use of resources and, most importantly, contribute to greater customer satisfaction. Corporate Services is already realising cost savings from its first Process initiative that has simplified the procurement or purchasing process providing buyers more time to concentrate on planning purchases and sourcing competitive pricing. Energy Supply is focused on redesigning the Process used for routine maintenance in order to increase the availability of our most efficient base load generating engines. Later this month, Energy Delivery will look to Process to find ways to improve our response to and delivery of customer-driven projects. Bermuda Gas has also launched a Process initiative, and has already completed mapping current processes involved in order fulfilment and begun redesign work.

In 2004, we will also continue to build upon the Performance Management and Leadership Development initiatives that have been introduced over the past two years. These are closely linked to Process, forming the foundation for managing our business going forward. We have also launched an important safety initiative, focusing on safe work practices. We began this initiative with training and awareness, and at the end of March we will commence an external safety audit of our operations. The audit report will provide additional components to the safety programme as we move ahead.

Bermuda Gas

Bermuda Gas & Utility Company Limited ended 2003 with record net earnings of $1,158,931, closing 8.2 percent higher than the $1,070,780 earned in 2002. This was supported by improved performance in all categories of operations.

For the two months ended February 2004, Bermuda Gas total sales trailed the same period in 2003 by .2 percent primarily due to some larger commercial customers remaining closed while hurricane damage repairs continue. Gas operations sales are 1.1 percent behind, appliance sales are 5.8 percent ahead. High-end and special order sales have been the main contributors to the increase in appliance sales. For the first two months of 2004, Service and Parts sales are down 5.4 percent below 2003.

BESCO

BELCO Energy Services Company (BESCO) had an acceptable year in 2003 with net earnings of $176,976, down from 2002 earnings of $270,508. BESCO was involved in significant project work for related companies in 2003. In January 2004, the sale of 49 percent of BESCO to New Venture Holdings Group was completed, as the companies entered into a joint venture agreement, seeking additional opportunities and operational efficiencies. BELCO Holdings will continue to have a significant relationship with BESCO, retaining majority representation on the new BESCO Board of Directors.

Board of Directors

Christopher Z. Marshall, who made a tremendous contribution as a Director had to resigned from the Board in June 2003 due to business commitments. We are fortunate to have Peter C. Durhager, Chief Administrative Officer of ReniassanceRe to have joined the Board, replacing Mr. Marshall.

Effective March 31, Miles E.H. Outerbridge, having reached mandatory retirement age, will retire. Mr. Outerbridge joined the Board in 1982, and has served 22 years, six as Deputy Chairman and three as Chairman. He has brought a wealth of business and engineering expertise to the Board, and we will miss his wise counsel. He was passionate about the Company and all those who have made it what it is. He was an advocate for the shareholder and fulfilled his governance role with enthusiasm and commitment. Cris Valdes Dapena, who joined the Board in 2000, will also be leaving us due to business commitments. We are pleased to announce, however, that J. Michael Collier has been named as our new Chairman. Mr. Collier has been a Board Member since 1989 and Deputy Chairman since 2000. We look forward to benefiting from his leadership as Chairman.

The two open Board positions will be filled by Stanley Oliver, former head of the Civil Service, and Kathryn Siggins, Vice President, International of Bermuda Life Insurance Company Limited. Mr. Oliver brings both engineering and administration experience to the Board, having worked with the IBM Agency in Bermuda and in Government both with Transport Control and the Ministry of Works & Engineering. Mrs. Siggins, a Chartered Accountant, has a broad background in investment management, having also served as General Manager of Bank of Bermuda's Global Fund Services Division. We welcome them to the Board and look forward to profiting from their unique perspectives.

Please remember that the Annual General Meeting will be at 2:00 p.m. on Thursday, April 29, and I hope to see you there."

Signed by:

Garry A. Madeiros

President & Chief Executive Officer