Belco Holdings Limited recorded a seven percent increase on consolidated net earnings in 2004.

The parent company for Bermuda Electric Light Company Limited (Belco), Bermuda Gas & Utility Company Limited, Belco Energy Services Company Limited (BESCO) and Belco Properties Limited reported consolidated net earnings of $18,482,511 for the year ended December 31, 2004 compared to $17,268,247 in 2003.

President and chief executive officer Garry Madeiros said in a letter to shareholders: "These positive 2004 results are despite a slow start to the year as the Island was still recovering from Hurricane Fabian with several commercial customers remaining closed for repairs and renovations early in the year."

An increase in residential electricity sales sent Belco's earnings in 2004 up to $17,312,102 from $16,322,519 in 2003. Total electricity sales revenue increased 3.3 percent during 2004 to $148,837,333. The figure includes an 18.69 percent increase in fuel adjustment revenue of $4,096,252 to $26,007,761 which Belco said was a direct result of higher fuel costs. The increase in fuel adjustment revenue is offset by an identical increase in fuel cost. In 2004, overall kilowatt hour (kWh) sales increased 0.84 percent. commercial sales decreased slightly, 0.52 percent, from 2003, while residential sales increased 2.59 percent.

Belco's recorded a 3.57 percent increase in expenditures during 2004 which includes $56,607,998 in fuel costs and purchased power from the Tynes Bay Incinerator plant, an increase of 7.8 percent. The average price per barrel of fuel increased 5.9 percent in 2004 to $55.18 from $52.09 the previous year.

Mr. Madeiros said: "Overall generation expenditure increased significantly in 2004 as foundation problems on two large engines, coupled with tighter than normal plant capacity in the lead-up to the installation of two new base-load engines, resulted in the company incurring additional costs to ensure reliability of supply during the summer months.

The foundation problems were subsequently rectified, however, in the lead-up to the summer, the company undertook an accelerated maintenance programme, and during the hottest months, instituted extended staff hours in the generation plant to allow for immediate response to any unplanned engine outages."

Belco invested $40,689,997 in property, plant and equipment in 2004, $25,208,511 of that was used for the East Power Station extension for the addition of two new 14.5 MW diesel generator sets, a projected total investment of approximately $45 million.

Mr. Madeiros said: "These two new units are currently undergoing commissioning tests and are due to be brought online in spring 2005."

Belco also invested $11,789,577 in the transmission and distribution system, including the new St. John's Road Substation and upgrades to the underground transmission system from the Belco plant through Dundonald Street to the eastern portion of the City of Hamilton.

Sister company Bermuda Gas & Utility Company Limited saw its net earnings fall 2.7 percent on the previous year to $1,128,138. Mr. Madeiros said that this was due primarily to staff transitions in 2004 which required some outsourcing of services at an additional expense. The company continues to look for suitable retail space in Hamilton after vacating its former Wesley Street premises earlier this year. The cost of electricity and propane gas increased last year as the cost of fuel spiralled to record levels throughout 2004. Belco's most recent shipment of fuel cost $83.59 for diesel and $55.03 for heavy fuel, the highest diesel price to date. Heavy fuel oil reached its highest price in 2004 of $56.47.

The cost of fuel is reflected in the fuel adjustment portion of the electricity bill, and for the past several months has been at 5.3? per kilowatt hour of electricity consumed, accounting for approximately 25 percent of customers' bills. Mr. Madeiros said in his letter to shareholders that Belco has no control over the price paid for fuel.

"The only control our customers have is through individual efficiency and conservation. We do not expect to see fuel prices reducing in the short-term and recommend conservation, where appropriate, as a cost saving measure," he said.

Belco's cost of fuel is calculated by adding the actual cost of the fuel purchased on the world market to a Customs Duty of $15.10 per barrel. Built into the tariff rates, which do not fluctuate, is a base cost of fuel of $30.00 per barrel. While the actual price of fuel can be higher or lower, the difference is either added to, or subtracted from, monthly bills as the Fuel Adjustment Charge.

Mr. Madeiros said: "Fuel prices are the most volatile factor in electricity rates. By adjusting the portion of the charges that a customer pays to match the cost of fuel, Belco minimises the effect of fluctuating prices of electricity and the need to ask continually for rate revisions from the Price Control Commission. Belco does not make any more or less money as a result of the fuel adjustment charge."

Belco Holdings Limited shares closed 2004 at $41.80, up 18.6 percent over the previous year's closing price of $35.25. Earnings per share increased to $3.62 in 2004 from $3.39 the previous year. As of March 23, 2005 the market price per share was $42.00. Belco declared a dividend of 38.5? per share for the first quarter of 2005.