Belco Holdings Ltd. has agreed to demolish the existing construction of its controversial new chimney stack and "rebuild from the ground'', according to a shareholders' quarterly report.

Main operating subsidiary Bermuda Electric Light Co. is expanding its generation capacity at its Serpentine Road plant.

The project involves the construction of two brand new 14.5 megawatt engines and chimney which will be erected on the site of Belco's east power station.

However construction of a new chimney stack was put on hold in May after complaints. After several surveys to determine whether the chimney was within industry-standard specifications the company decided to rebuild, president and chief executive officer Garry Madeiros stated.

In other matters he said total electricity sales for the year to the end of May were up 1.2 percent over the same period in 1998.

Subsidiary Bermuda Gas & Utility Co. Ltd. reported increased sales of 8.6 percent for the period. Appliance sales jumped 19 percent to $1.6 million.

Subsidiary BESCO, which advises companies on energy management, had net earnings of $379,819 to May.

The subsidiary is completing projects at the Bermuda College and Stonington Beach Hotel.

Mr Madeiros also reported that the company is in discussions with two possible buyers for Quantum Communications Ltd. Quantum, which is owned jointly by Belco and Cable & Wireless, was set up to compete in the local telephone market but halted operations after heavy financial losses in the first year.