BELCO 3rd Quarter Shareholders Letter

Hamilton, Bermuda: September 29, 2006 - In an announcement made to the Bermuda Stock Exchange (BSX) The BELCO Board of Directors has declared a dividend of 20.25¢ for the third quarter of 2006.  As you were advised in earlier correspondence, as a result of the 100% Stock Dividend declared on August 31, the dividend rate payable has been reduced by half from the former prevailing quarterly amount of 40.5¢ to 20.25¢.  On August 31, share certificates representing the 100% stock dividend were mailed to all shareholders of record as of August 15.  If you have not already done so, please sign and return the receipt notification contained with the share certificate to our Jean E. Kromer.  If you have any questions or require further information, please give Mrs. Kromer a call at 299-5111 ext 1213.

Also, shareholders who have their dividends deposited to an account with the Bank of Bermuda - HSBC, should also contact Mrs. Kromer with your new account number.  The HSBC Group is changing over their banking system which will result in new account numbers for all their customers, effective October 16.

Today marks a milestone in the history of your company.  It was 100 years ago today that Bermuda Electric Light Power & Traction Company Ltd. held its first shareholders meeting. Over the past 12 months we have been working on a number of projects to commemorate BELCO's 100^th anniversary.  These have included a donation of $100,000 to the campaign for the Bermuda Aquarium, Museum & Zoo (BAMZ) to support a new Zoo Hospital and Diagnostic Treatment Centre, the hosting of a centennial golf tournament for business associates, and a commemorative stamp released earlier this year. Concluding the highlights of our 100^th year activities are the publication of a pictorial hardback book, the opening of "The Progress of Power" exhibit at the Maritime Museum on Saturday, September 30, and the planting of 100 endemic Bermuda cedar and olivewood trees in October. 

A key focus of our anniversary activities have been on the preservation of the Company's history and artifacts.  Over the century, hundreds of photographs have accumulated at our Company headquarters, many undated and unmarked. These have now been identified and have been used to tell the BELCO story in our anniversary book. We have also had numerous objects collected at BELCO and/or donated to us.  With the assistance of many of our pensioners, and employees, the curator and staff at the Maritime Museum have researched and documented the development of electricity in Bermuda and developed an attractive, interesting and informative exhibit that we hope the community and visitors to our Island will enjoy.  We are also grateful to the Bermuda Maritime Museum staff for the assistance they provided us in the development of our book.

Electric System Discussion Document

Over the past several months, we have continued meeting with small groups to further discuss the options and opportunities outlined in our Electric System Discussion Document.  The purpose is to stimulate thought and discussion in an effort to gain consensus regarding the best way forward as we consider options for energy production, transmission and distribution for the next 20 years, so that we may adapt our business model accordingly.  The talks are timely as they coincide with community discussions on Government's Sustainable Development Plan and making the best use of our limited natural resources to meet the needs of the present and future. 

Demand for electricity is expected to grow by 1.5 percent annually over the next 20 years which, coupled with scheduled retirement of older generating units, will require the installation of up to 40 MW of generating capacity by 2010.  We are looking at the future with a view of incorporating a more integrated approach to meeting future energy requirements.  These include consideration of the technical and economic feasibility of developing distributed generation sites, outside of the traditional Pembroke location, where the electricity generation process could either benefit from the by-product of another function, or where another entity could benefit from a by-product of the electricity generation process. Examples include using steam from the Tynes Bay incinerator to generate electricity, and/or using steam from the electricity generating process to provide water to a section of the Island.

The Discussion Document also examines opportunities to utilize energy from renewable sources to generate electricity on a large scale, such as the ocean current technology expected to be provided by Current to Current Bermuda Limited. Additionally, the document explores renewable energy options on a residential level. These include solar powered water heating, photovoltaic technology and other micro-generation technology that householders could use to supplement their electricity supply. This is an area where we are focusing on meaningful solutions and opportunities for 2007. We also see the need for energy efficient products and materials to be incorporated into the construction of new buildings as we look toward the future. Discussion of all of these options requires commitment toward a collaborative approach so that the Island can maximize the benefits received from infrastructure changes and additions.

Hurricane Florence 

In closing, I wish to personally thank all BELCO employees and vendors who contributed to our electricity restoration efforts following Hurricane Florence on September 11. We were fortunate that Florence did not bring the devastation that we experienced with Hurricane Fabian in 2003, but it was a category one storm and caused a large number of outages. We are proud that despite hurricane and tropical storm force winds extending late into the afternoon on the Monday of the storm, we were able to restore power to all customers by mid-afternoon Friday of that week.  It was a mammoth effort that once again saw our people working late into the night and beginning the next day at first light.  It would be fair to say that Bermuda expects and deserves no less, as BELCO people have consistently rallied to keep electricity supply flowing.  It's our tradition.