2nd Quarter 2009 Report to Shareholders

30 June, 2009

Dear Shareholder,

The Board of Directors has declared a dividend of 21.25ยข for the second quarter of 2009. 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 24 June, the market price per share was $16.35.
Change of Parent Company Name

The Annual General Meeting (AGM) of BELCO Holdings Limited was held on Wednesday, 20 May at the Bermuda Underwater Exploration Institute. During the AGM, shareholders approved the proposed resolution to change the name of the holding company from BELCO Holdings Limited to Ascendant Group Limited.

The purpose of the name change is to position each of our companies to pursue new growth opportunities, unencumbered by restrictions that may be placed on any other of our businesses. The name change positions the parent company to grow through diversification in energy and infrastructure businesses. By building on our core strengths, including engineering and technical capacity, complex project management experience, and industrial and large commercial plant expertise, we can develop new business opportunities that will add value to the parent company outside of an increasingly regulated electricity business.

Administratively, there is no affect on our shareholders or any shareholdings, and no action is required by shareholders
Leadership Restructuring

To support this new business model, effective 1 July, 2009 we are implementing the following changes to our leadership structure: William DeSilva, Jr., Senior Vice President, Administration, BELCO, will become Executive Vice President of Ascendant Group with responsibility for general oversight of subsidiary companies Bermuda Gas and PureNERGY, as well as new business development.

Andrew Parsons, Senior Vice President, Finance, BELCO, has been appointed Executive Vice President of BELCO with responsibility for overall BELCO operations, supported by Senior Vice President Operations Len Malloy and Senior Vice President Engineering Robert Steynor.

Jenny Smatt-Adkins, Vice President, Human Resources, BELCO, has been promoted to Senior Vice President, Human Resources for Ascendant Group Limited.

Linda Smith, Senior Vice President, Corporate Relations will also oversee Corporate Relations, Corporate Communications and Marketing for Ascendant Group Limited and all subsidiaries.

Damon Wade, Vice President, Customer Services & Customer Solutions, BELCO, will move to Bermuda Gas as Senior Vice President and General Manager.
Power Plant Availability

On Thursday, 11 June one of BELCO's newest two engines suffered a major alternator failure that will require the entire 60-tonne alternator to be shipped back to the U.K. for repair. The process of disconnecting the alternator from the engine, then shipping it, repairing it and returning it to Bermuda and re-commissioning is expected to take at least seven months.

Normal maximum plant capacity is 167 MW, but BELCO will be operating with a maximum 152 MW this summer. The summer peak load last year was 119.8 MW which could still be met, providing existing plant is operating as planned, and maintenance outages are kept to a minimum. As unplanned engine outages occur from time to time, on 23 June BELCO issued a press statement advising customers that they may be called upon to reduce consumption in order to avoid load sheds. Should there be load sheds, the public will be kept informed via the news media and BELCO's web site, www.empoweringprogress.bm.

It is clear that this event will have some impact on our operating costs to the end of the year. Preliminary estimates for return of the alternator to the U.K. and the added operational costs associated with higher fuel costs and overtime expenses may be as high as $2.5 million. This consequence, along with reduced sales brought about by conservation measures is requiring each operating group to review budgeted expenditures through the end of the year.
Energy Act

As you are most likely aware, on 19 June, the Minister of Energy tabled the Energy Act 2009 in the House of Assembly. The Energy Act, which is largely a composite of the Price Control Act and the Telecommunications Act, establishes a new Energy Commission as the authority regulating essentially all aspects of our electricity company, BELCO.

As we have communicated before, we anticipated an expanded regulatory environment. The Ministry of Energy had stated to BELCO, and publicly, that legislation would follow the development of both Green and White Papers. To date, only the Green Paper has been prepared. However, the Ministry of Energy says it was necessary to bring this legislation forward now to facilitate the implementation of BELCO's Interconnect Policy, which will allow customers using small-scale renewable energy technologies to contribute to the grid. The Policy is currently being drafted and, following consultation is expected to be implemented over the summer months.

The Energy Act in its current form is expansive in authority and proposed enforcements, and provides little definition and detail. BELCO has been advised that there will be regular consultation with the company on development of the details, which will be prioritised based on the timing of decisions that are required to meet the Island's energy needs. These regulations will be applied by negative resolutions which do not require assent of the legislature. Simultaneously, the Ministry will continue developing the White Paper on Energy and the two efforts will come together at a later date to form what will ultimately be Bermuda's Energy Policy, supported the built-out Energy Act.

As this new regulatory process is now moving forward, we will continue our efforts to participate in discussions, and encourage Government to consult a range of industry expertise. Specifically, we believe that Government should involve consultants with experience in developing appropriate regulation for small, sophisticated island jurisdictions. Regulatory clarity is vital, as it will ultimately determine BELCO's energy planning activities and Bermuda's success in attracting businesses willing to invest in energy alternatives.

Yours sincerely,
A.L.Vincent Ingham
President & Chief Executive Officer