BELCO Holdings Limited Releases 2008 Six-Month Results

Hamilton, Bermuda - 12 September, 2008 - BELCO Holdings Limited (BELCO.BH) announced that consolidated net earnings were $7,115,494 for the first six months of the 2008 financial year, compared to $9,789,242 for the same period the previous year.

Reductions in energy sales stemming from more favourable weather conditions and customer conservation measures, coupled with higher operating costs, had an adverse affect on BELCO's earnings, and the performance of Bermuda Gas was below expectations for the first six months.

The dramatic rise in fuel costs has had a significant impact on the reported revenue of BELCO, however, our actual revenue was $87,472,668 after adjustments for fuel surcharges, comparing favourably with $85,865,037 for the same period last year.  The additional revenue collected is a direct result of the fuel adjustment clause, which is fully expensed to meet BELCO's total incurred fuel costs as provided for under the agreement with the Price Control Commission.  At the end of June, BELCO had accumulated some $1,206,203 of under-recovery in fuel expense.  The tariff rate that took effect from 1 January, 2008 contributed an additional $2,116,346 in revenue, however, this was offset by lower revenue totalling $508,715 due to the decrease in kilowatt hour sales.

Total kilowatt hours (kWh) sold for the first six months of 2008 decreased 0.8 percent from sales realised over the same period in 2007.  While sales to large demand customers increased 4,322,368 kWh, or 3.7 percent, compared to the same period last year, this was not sufficient to offset the decrease in sales to the residential customer base, which decreased 7,113,871 kWh or 5.4 percent.  The reduction in residential consumption was due mainly to a mild first quarter and a cooler second quarter as well as continuing efforts by our residential customers to conserve electricity.  We believe this conservation on the part of our customer base is primarily driven by the increased fuel adjustment charge resulting from the higher cost of fuel worldwide.

Fuel costs also impact operating expenses.  Adjusting for the impact of fuel costs, operating expenses rose 5.0 percent.  Fuel continues to form a major component of our operating expenses, and we continue to suffer from the impact of rising world oil prices. Through June 2008, the average price per barrel of fuel was $108.30, a significant increase of almost 44 percent, up from $75.43 or some $14.7 million over the same period one year ago.

Bermuda Gas & Utility Company Limited's (Bermuda Gas's) comparative net income for the first six months of 2008 was disappointing, falling from $758,119, to $137,855 due to lower sales volumes for both propane and appliances, and increased operating expenses.  Bermuda Gas has taken steps to improve the lower sales levels by introducing a new sales team.  Bermuda Gas has also invested in the development of new employee technicians to maintain and extend its capability to service product. During the first six months of 2008, gas sales have been lower due to extended closures by some commercial customers and a relatively mild winter that resulted in less residential cylinder sales.  Management has been tasked to take steps to return Bermuda Gas to targeted profitability levels previously achieved by this key subsidiary.  

On 30 May, 2008 BELCO Holdings Limited acquired, through its subsidiary company, BELCO Properties Limited, the property located at 25 Serpentine Road in Pembroke.  This adjoining real estate, known as the Winter-Cookson-Petty property, was purchased to provide office facilities for Bermuda Gas and to meet additional office and warehouse needs in anticipation of our future growth.

In May 2008, the Company announced the creation of a new BELCO Holdings Limited subsidiary, PureNERGY Renewables Ltd.  This Company offers design services and installation and maintenance of customised, small-scale renewable systems for the residential and commercial markets.

The Company's share price at 30 June, 2008 of $21.00 is 6.67 percent below the 30 June, 2007 market prices of $22.50.  The Company has initiated a share repurchase programme.

The Company continues to look to the future.  We are encouraged by the significant number of major developments that have been announced.  We continue to pursue the necessary permissions required to build generation capacity and to finalise plans, including alternate generation sites to reinforce our transmission network.

We remain cautiously optimistic about the second half of the year, as world fuel prices will continue to have a bearing on our businesses.