BELCO Holdings yesterday announced that its profits fell marginally after costs increased during the first six months of 2001.

The company announced that consolidated net earnings for the first six months of the 2001 financial year declined slightly by 0.21 percent to $8.3 million compared to $8.4 million a year earlier.

The firm, which supplies gas and electricity to the Island's 62,000 population, said, while electric energy revenue, which represents the primary contributor to BELCO's bottom line, increased by 6.4 percent to $61.8 million, operating expenses increased proportionately during the six month period.

Kilowatt hour sales were up three percent - a direct result of a 5.2 percent increase in residential sales - and growth in this sector was attributed to a large number of new residential units coming on line as well as increased usage by existing customers. An increase in fuel adjustment revenue, which also contributed to the increase in electricity sales, was offset by an equal increase in fuel costs.

Expenses rose 6.3 percent during the six month period over the same period last year as a result of higher fuel adjustment costs and increased depreciation costs mainly related to the two new engines which became operational in May, 2001.

Administration expenses also increased as a result of reallocating resources, as well as increased expenditure on environmental, safety and training programmes, the company said.

"We are pleased with BELCO Holdings performance during the first half of 2001," said president and chief executive officer Garry Madeiros.

"We expect to see further increases in sales in the second half of the year, especially in the demand sector as the ACE development becomes operational and XL House significantly increases its usage."

Mr. Madeiros added: "We are also very pleased with the 28.5 percent capital appreciation of our share price, even though the share price remains undervalued.

"The dividend yield on $24.75 is a very attractive 6.2 percent which is positive for investors but highlights it being undervalued. This is further reinforced by the price earnings ratio which was 5.2 times at year-end 2000 and has had a range of five to six times earnings over the last few years."

Other results showed total gas sales were up 5.9 percent, driven primarily by an increase in gas sales, while energy service sales increased 20.6 percent, a direct result of a number of new projects, signed in late 2000, commencing during the first six months of 2001.

The peak load rose 1.8 percent in the first half year of 2001 compared to the same period in 2000 to reach a new high of 98,700 kilowatts. Peak load is expected to be significantly higher during the second half of 2001 as it reached a record daytime high of 106,300 kilowatts on August 21.

BELCO Holdings Limited is the investment holding company for Bermuda Electric Light Company Limited (BELCO), Bermuda Gas & Utility Company Limited and BELCO Energy Services Company Limited (BESCO).