BELCO Holdings 3rd Quarter Report

Hamilton, Bermuda: September 28, 2007 - The Board of Directors has declared an increased dividend of 21.25¢ per share for the third quarter of 2007.  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 September 19, the market price per share was $21.75.

BELCO

Total kilowatt sales through August were 0.98% ahead of the same period in 2006.  Demand, or large commercial sales, increased 2.03%, small commercial sales were also ahead 0.19% and residential sales contributed a modest 0.33% increase compared to the same period in 2006. This minimal increase is primarily due to residential customers' efforts to be energy efficient, particularly given rising fuel adjustment rates.

Managing fuel expenditure is vital to BELCO, as it is to our customers, especially with no end in sight to rising prices on the world market.  In order to get the best price per barrel of fuel, while also ensuring that the security of our fuel oil supply is protected, our Energy Supply Group invited seven companies to submit proposals to supply Heavy Fuel Oil and No. 2 Diesel Oil. Four vendors, which included Esso our sole fuel supplier for the last 50 years, responded to the Request for Proposal (RFP).  As a result, the contract for heavy fuel oil, which represents 82% of our consumption, is moving to BP Products North America Inc., while Esso Bermuda will continue to supply No. 2 Diesel Oil.  The two new agreements commence on November 1, 2007. 

In addition to trying to get the best price for fuel, BELCO continues to concentrate on maximizing plant efficiency to reduce the usage of fuel.  We also urge customers to be aware of and efficient in their energy usage.  Energy saving tips are available at www.belco.bm, and more ideas will be offered to customers in coming weeks.

Providing customers with excellent service is a major goal at all the companies in the BELCO Holdings Limited Group.  In this regard BELCO signed a contract at the end of August with Cayenta, a Canadian based software company specializing in Customer Information Systems (CIS).  This technology handles most of the interfaces with our customers, including meter reading entries, billing, payment, queries, trends, analysis, credit and information.  Our present system is no longer supported by the company from which it was purchased and its functionality is behind the times.  The new state-of-the-art system will go live at the end of Summer 2008.  For our customers it will provide improved functionality in terms of on-line access to accounts, the ability to pay via the internet and it will result in faster responses to questions and requests.  For our employees the increased functionality, improved business processes and the higher level of integration with other business systems will tremendously enhance their service ability.

Of course, changes taking place at BELCO are now under the leadership of A.L. Vincent Ingham who became President and Chief Executive Officer on July 1, 2007.  He has started putting his own stamp on the role, as evidenced by organizational changes, including establishment of a new Management tier.  Mr. Ingham has focused the new Executive and Management teams on a more comprehensive set of business performance indicators that clearly defines corporate targets and accountability, as they develop and commit to an integrated plan that will guide the Company's decisions going forward.  The plan outlines strategies for power system development, the integration of renewable technology, a human resource focus on recruitment, training and retention and meeting the financial needs.  These strategies will ensure that the Company continues to successfully develop and operate a growing energy infrastructure to meet Bermuda's energy needs while providing adequate returns to shareholders. 

Bermuda Gas

Bermuda Gas' overall sales through August 2007 are 8.6% ahead of the same period last year.  Gas sales for the period were up 4.6%.  Appliance sales, which continue to benefit from the highly visible and accessible Church Street showroom increased 23.66% over the same period in 2006.  Service and Parts sales were also 2.6% ahead of last year.   

Community

We are mindful that BELCO and Bermuda Gas have a responsibility to serve customers and the community. Sometimes in doing so, however, we cause temporary inconvenience, as has been the case while trenching from King Edward VII Memorial Hospital to our Belmont substation.   This project will replace aging underground cables, enhance the security of supply to the hospital and prepare for development in the West End of the Island.  As the project nears conclusion, we thank the community for being patient and supportive.  We also thank Works & Engineering, the Bermuda Police and Fire Services, D&J Construction and those members of BELCO staff for their professional contributions to a massive, time-consuming job.  This was a true team effort, and to date a highly successful one.

We also thank those members of staff who participated in planting BELCO 100^th Anniversary trees this summer in concert with Government Conservation Services. They planted 100 endemic Bermuda cedar and olivewood trees to help restore Spittal Pond Nature Reserve, which was devastated by Hurricane Fabian, and Cooper's Island, which was part of the military base.  We look forward to continuing to work in partnership with Conservation Services at Cooper's Island.

Finally, we remind you that the 2007 hurricane season is still with us, so please remain prepared.

Yours sincerely,

Garry A. Madeiros