BELCO Six Month Report To Shareholders

Hamilton, Bermuda, September 1, 2006 -- Consolidated net earnings of $8,355,586 for the first six months of the 2006 financial year were slightly below the $8,539,130 reported for the same period in 2005.

Bermuda Electric Light Company Limited (BELCO) results show that total kilowatt hours (kWhs) sold for the first six months of 2006 were ahead of 2005 results by 1.69 percent. Sales to residential customers remained flat compared to 2005 sales, only increasing 0.09 percent.  While there was a 1.64 percent increase in the average number of new metered connections, the average consumption of the residential customer decreased by 1.52 percent. This decrease may be driven by a deliberate effort to conserve electricity in response to increasing fuel adjustment charges brought about by the high cost of fuel.  Sales to large demand customers increased 2.72 percent compared to the same period in 2005. This is due to both increased consumption and new customer additions.

Revenue from electric sales for the first six months of 2006 increased 13.34 percent compared with the same period the previous year. This increase is due to the increase in kilowatt sales noted above, a 1.50 percent increase in our tariff rates granted by the Price Control Commission effective January 1, 2006, but more so to a 58.6 percent increase in fuel adjustment revenue from $13,262,993 in 2005 to $21,036,626 in 2006. The increase in fuel adjustment revenue, which accounted for 79.75 percent of the total increase in electric energy sales revenue, is offset by an identical increase in fuel cost, which is reflected in energy supply expenses.  The Company has not benefited from these rising prices.

Overall operating expenses for the period were up 13.27 percent above the first six months of 2005. Fuel adjustment costs account for 87.7 percent of this increase. The average price per barrel of fuel increased 28.89 percent to $75.99 from $58.96 the previous year. Overall fuel costs were marginally offset by improved fuel efficiency of 713.59 kWh per barrel in 2006 compared with 711.48 kWh per barrel in 2005. Medical, insurance and training related costs, along with increases in outside contractor expenditures, account for the balance of the increase.

Bermuda Gas & Utility Company Limited's (Bermuda Gas) net income for the first six months of 2006 decreased 34.9 percent to $450,012, compared with $691,123 in the same period of 2005. This is primarily due to a 24.9 percent reduction in appliance sales attributed to changes in the showroom location during the current period, and supply issues experienced with a significant vendor. It is anticipated appliance sales will improve during the remainder of the year with the new showroom firmly established at its new location on Church Street providing easier access to its customers, and the supply issue being resolved. Gas sales are 11.1 percent ahead of last year due to increases in both volume and gas prices. Service and parts sales have also increased 1.87 percent.

The Company sold its remaining 51 percent interest in BELCO Energy Services Company Limited (BESCO) on November 14, 2005 to focus on its core electric and gas operating businesses. Last year's consolidated results for the six months ended June 30, 2005 included earnings of $102,500 from this investment.

The Company's share price decreased 5.60 percent from $41.05 at June 30, 2005 to $38.75 at June 30, 2006. On August 31, 2006, the Company issued a 100 percent stock dividend to shareholders of record on August 15, 2005. This increased the Company's capital stock by 5,140,398 shares. As of August 31, 2006 the stock price was $21 the equivalent of a $42 price before the stock dividend.

Overall, the Company is satisfied with the first six months of 2006. Results for the second half of this year are anticipated to be on target with expectations.

Garry A. Madeiros