Belco Releases Letter To Shareholders

Hamilton, Bermuda:  30 September 2005 - Belco Holdings Ltd. has today released to the Bermuda Stock Exchange (BSX) its most recent letter to shareholders:

"Dear Shareholder,

The Board of Directors has declared a dividend of 38.5¢ per share for the third quarter of 2005.  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 September 23, the market price per share was $40.25.

BELCO

Kilowatt hour sales for the first eight months of 2005, January through August, increased 2.28% over the same period in 2004.  The overall increase was led by the residential sector, where sales increased 3.26% over 2004, resulting from approximately 940 new metered connections and higher average electricity consumption.  Large commercial, or Demand, sales increased 1.83% during the period, and small commercial sales increases slightly, 0.78% over the same period in 2004.

Unfortunately, the most outstanding event for BELCO this quarter was the Thursday, July 14 fire at our power station that resulted in an Island-wide blackout. While a majority of the Island had electricity restored the same day, our most critical supply to the City of Hamilton could not be restored until Saturday evening, July 16. The blaze, which destroyed two switch rooms containing multiple feeds from the power station to the City, also left several engines stranded from our system. We appreciate the conservation efforts of many individuals and businesses in the days and weeks following the fire, which helped us to avoid rotating power outages. We are continuing to reconfigure the power system for maximum security from our currently compromised system, which remains more sensitive than normal to any minor system events.

We are currently in the process of preparing for a major milestone in the restoration with the installation of a temporary switchboard facility by November 30.  In order to accomplish this, the building damaged by the fire is being dismantled with the approval of the relevant Government agencies and investigators, and a temporary room will be rebuilt on the existing site utilizing infrastructure already in place. Once complete, this will address many of the current weaknesses in our system. This includes more flexibility in dealing with minor occurrences and a much stronger system and back up to the City.

The cause of the fire is the subject of a forensic investigation being carried out by EA Technology Ltd. of the U.K. This investigation was commissioned by the Board of Directors, who have committed to publicly reporting the findings.

Bermuda Gas

Bermuda Gas & Utility Company Limited's sales to the end of August increased 10.3% over the same period in 2004, reflecting strong performance in all operating units. New commercial and residential customers, as well as increased demand by existing customers contributed to moving gas sales ahead 12.8% for the first eight months of 2005, compared with the previous year. Appliance sales also increased 7.7% mainly driven by medium to large scale commercial contracts. Service and parts sales also benefited 4.6% from large scale project work.

Electric System Planning

Since September of last year, we have been focused on researching and developing an extensive discussion document on the options for meeting Bermuda's electricity requirements through the next 20 years. Development for electric utility installations can carry lead times of 3-5 years, so our practice is to develop long-term plans and review them annually.

It was 15 years ago that we went to the public with our previous long-term plan, which included the recently completed development of the East Power Station at our Pembroke site.  At the time of those presentations, we attempted to draw attention to the need for Bermuda to earmark alternative sites for future energy plant development. This has not occurred.  However, the recent fire at the BELCO plant has raised the visibility of the issues caused by a congested power plant site with no alternatives.  We anticipate that given the work currently underway for the development of a sustainable development plan, and the heightened awareness of sustainability issues, there will be greater interest and dialogue as we move to share our thoughts on future energy options with Government, business organizations and the community as a whole.

In closing, I would be remiss not to mention and indeed sincerely thank all those BELCO employees who worked around-the-clock in extremely stressful and difficult conditions to restore power to the Island following the blackout, specifically the re-engineering of our system to return power to the City, and then the efforts to continue to strengthen the reliability of the reconfigurations.  We are also grateful to the Bermuda Fire Service and many of our loyal and reliable contractors and vendors, who made themselves available to assist immediately where they could.

Finally, an interesting note, the date of this letter is actually the first day of the Company's 100^th year.  September 29 was our 99^th birthday.

Yours Sincerely,

Garry A. Madeiros

President & Chief Executive Officer