BELCO Shareholders' Letter

Hamilton, Bermuda, December 29, 2006 - In an announcement made to the Bermuda Stock Exchange (BSX) the BELCO (BELCO.BH) Board of Directors has declared a dividend of 20.25¢ for the fourth quarter of 2006.  A cheque is enclosed for shareholders who have requested direct payment.  Those who have designated a deposit to their savings or current account have been given credit effective today.  As of December 18, the market price per share was $25.00.

Shareholders, who have their dividends deposited to an account with Bank of Bermuda- HSBC, should have already contacted Mrs. Jean Kromer with the new account number. If you have not, or if you require further information, please give Mrs. Kromer a call at 295-5111 ext. 1213.

BELCO

Total kilowatt-hour sales through November are 2.08% ahead of the same period in 2005. Demand, or large commercial sales increased 4.15%, which is mainly attributed to new-metered connections coming on line with the completion of new buildings and expansions.

A major focus for BELCO continues to be consultation with appropriate Government ministries and community groups in relation to specific elements of the Electric System Discussion Document. This comprehensive document details and assesses energy production and delivery options to meet Bermuda's electricity requirement through the next 20 years.  Options include additional development at BELCO's central plant site, distributed generation at other locations, renewable energy (large scale and residential), independent power producers, demand-side management and improved standards relating to building codes and appliance efficiency. 

As a part of this consultation process, a series of customer focus groups were conducted in November to obtain greater understanding of customer perceptions, knowledge and interests surrounding energy issues including, renewable energy sources and energy efficiency. These focus sessions are serving as a precursor to a more structured telephone survey that will be conducted in early 2007.  The results of the market research will be used to help determine potential uptake of a variety of energy related programs that will contribute to overall efficiency of our future electricity system, as well as greater individual energy efficiency.

Bermuda Gas

Bermuda Gas' overall sales for the 11 months through November 2006 are 3.9% above the same period last year.  Gas sales for the period were up 11.3%, resulting from both higher gas prices and increased sales volume.  Appliance sales are rebounding from earlier in the year, now that the Bermuda Gas showroom is firmly established in its new Church Street location.  Service & Parts sales are 2.6%  lower than the same period last year.

BELCO Executive Management Transition

In October, the Board of Directors announced the executive succession plan for BELCO and BELCO Holdings Limited in preparation for my retirement from the BELCO Holdings Group on December 31, 2007.  I am pleased to report that the Board of Directors has appointed Executive Vice President & Chief Operating Officer A.L.Vincent Ingham to succeed me as BELCO President and Chief Executive Officer effective July 1, 2007.  On January 1, 2008, Mr. Ingham will also assume the post of President & Chief Executive Officer of BELCO Holdings Limited.

Mr. Ingham and I have served together as the Executive for the last 14 years, and I know that he will be a tremendous leader for our organization.  In preparation for this leadership transition, the Company has also announced that William C. DeSilva Jr., Senior Vice President & General Manager of Bermuda Gas will move to BELCO in the New Year to join the Senior Management Team as Senior Vice President, Administration.  Mr. DeSilva will have overall responsibility for Human Resources, Process, Safety, and Compliance and Risk Management.  Senior Vice President, Corporate Services - Andrew D. Parsons has had his role expanded to include Customer Services and Customer Solutions. Senior Vice President, Energy Delivery Leonard Malloy is also taking on an expanded role leading a new amalgamated engineering group responsible for engineering development for the entire electrical system, including generation, transmission and distribution.  

On December 1, 2006, Bermuda Gas welcomed Lloyd Telford to the Company. On December 18, Mr. Telford became the new Senior Vice President & General Manager of Bermuda Gas. Mr. Telford has over 25 years experience in both the private and public sectors. Prior to joining Bermuda Gas, Mr. Telford was General Manager of the West End Development Corporation (WEDCO). He has also served as Assistant Chief Immigration Officer at the Bermuda International Airport, and as Vice President of Telford Industries Ltd. Mr. Telford holds a Bachelor of Science degree in Mechanical Engineering.

Community Support

We are once again proud to be the co-sponsor of the Festival of Lights competition, recognizing those who bring holiday cheer to our Island through their creative and carefully crafted Christmas lighting displays.  In cooperation with BF&M Insurance, we provide funding to a wide range of charitable organizations on behalf of the Festival of Lights winners.  We are very pleased to have had 43 participants in this year's program and were particularly pleased to see the Uptown Market Community, specifically residents and merchants in the Court Street area, come together to light up the street and win the Community Award in the Central Parishes. Over the past 11 years, the Festival of Lights for Charity has fostered growing community spirit and numerous relationships. We regret that some of our past participants were not able to participate this year due to circumstances beyond their control, yet they still called to wish us well, and expressed interest in participating next year. 

In closing, on behalf of the Directors, management and staff of our companies, we wish each and every one of you a happy, healthy and successful New Year.

Yours sincerely,

Garry A. Madeiros

President & Chief Executive Officer