3rd Quarter 2008 Report to Shareholders

30 September, 2008

Dear Shareholder,

The Board of Directors has declared a dividend of 21.25¢ per share for the third quarter of 2008. A cheque is enclosed, if you have requested payment in this way. If, however, you asked that a direct deposit be made to either a savings or a current account, this has been done for credit today. As of 22 September, the market price per share was $19.05.

Total kilowatt sales through August were 0.75% higher than the same period in 2007. Demand, or large commercial customer, sales were 4.09% higher than in 2007. Residential sales decreased 2.67% when compared to last year. Average monthly residential customer usage was down 4.44% from an average of 725.85 kWh in 2007 to 664.23 during the first eight months of 2008.

It is evident that our residential customers continue to conserve electricity. We feel that this behavioural change is primarily due to the increased fuel adjustment charge, which results directly from the higher price that BELCO must pay for fuel.

Bermuda Gas
Bermuda Gas sales through August 2008 were 7.5% higher than those of the same period last year, due, in large part, to the increased price of gas. Gas sales were 11.3% higher, while service and parts sales were 6.4% higher than those in 2007. Appliance sales, however, were 1.6% lower than 2007 levels.

Bermuda Gas has taken steps to improve sales levels by introducing a new sales team. The product range and retail outlet location are strong and Bermuda Gas is well placed to improve the performance of the Appliance Sales Group. Bermuda Gas has also invested in the development of new employee technicians to maintain and extend service capabilities.
Solicitation of Interest – Large-Scale Renewable Energy

On 12 September, BELCO issued a formal Solicitation of Interest (SOI) for Renewable Energy Projects.

The SOI invites suitably qualified parties to indicate their interest in developing large-scale, long-term, renewable energy projects in Bermuda, utilising wind, solar photovoltaic or ocean-generated power, as well as projects that would use waste products to generate power.

Our goal is to build a secure, reliable and sustainable electric system, and a key element in our plans is to develop a low-carbon generation option as a part of our future generation plant mix. We believe that there are two paths to achieve this objective. The first takes advantage of existing small-scale renewable technologies that can be deployed within our residential and commercial customer bases, and the other is to partner with experienced suppliers for the deployment of appropriate large-scale renewable projects that will help us meet future energy requirements.

BELCO is primarily interested in purchasing energy under long-term arrangements with renewable energy facilities that are owned and operated by separate entities, as it does with Government's Tynes Bay waste-to-energy facility. BELCO will, however, consider other arrangements, including ownership participation with other entities and build, own, operate and transfer projects.

The deadline for application under the SOI is 14 November, 2008. BELCO expects to announce a short list of preferred candidates and to hold public consultations in the first quarter of 2009, then to sign agreements by 30 June, 2009 with commercial operation expected to commence by 1 January, 2013. To learn more about this initiative, I invite you to visit www.empoweringprogress.bm

These are exciting times to be involved in the energy industry. We continue to pursue the required approvals to build generation capacity and to finalise plans for alternate generation sites to reinforce our transmission network. We also look forward to bringing our large and small-scale renewable offerings on stream. I am confident that this mix of traditional and renewable energy sources will serve both Bermuda and our shareholders well over the coming years.

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