shareholders.

Belco Holdings Ltd. has embarked on a $41 million project to increase electrical generation capacity 21 percent to 168 megawatts.

The project involves the construction over the next year of two new 14.5 megawatt engines and a 185 foot smokestack at the company's Serpentine Road plant. The company yesterday closed off part of Cemetery Road for the year as construction began.

The new plant is expected to be fully operational by March, 2000. Over the next five years Belco will phase out two engines, reducing electrical generation capacity by 21 megawatts. The company's peak electrical demand this year reached 98.7 megawatts.

The project will be financed by a combination of debt and cash.

"This project is far larger and more complex than any other expansion undertaken by Belco,'' company president and chief executive officer Garry Madeiros told shareholders in a letter. "In addition to extensive construction at our Serpentine Road plant, the project also involves the movement of a significant amount of heavy equipment both through Hamilton and on site.'' Elsewhere in his regular letter to shareholders Mr. Madeiros stated total kilowatt hour sales increased 4.77 percent in the 11 months through November over the same period last year.

"New large demand customers continued to push commercial sales up by 4.83 percent for the 11 months to the end of November compared to the same period in 1997,'' he stated. "In the residential category, sales were up 5.6 percent indicated an overall increase in average use. This trend is expected to continue in 1999 with the addition of several new commercial operations, such as the Centre Re building on the Pearman Watlington site and the renovations at Bacardi.'' Belco subsidiary Bermuda Gas & Utility Co. Ltd. had a slight fall in overall sales for the three months to the end of November, Mr. Madeiros reported.

Appliance sales increased 2.6 percent, while service and parts sales increased 4.8 percent.

For the 11 months total sales increased 1.7 percent over the same period last year. Appliance sales increased 9.7 percent, while service and part sales increased six percent.

Subsidiary Besco had a net operating profit for the year, Mr. Madeiros reported. Besco acts as an energy consultant to other companies, providing advice on how to save money on electricity use.

Besco signed six major contracts this year. Customers included the King Edward VII Memorial Hospital and the BF&M building. Four of the six projects have been completed. The other two are due to be completed this year.

Sales of uninterrupted power supply products also increased throughout the year.

Mr. Madeiros described Quantum Communications Ltd. first year in operation as "challenging''. Quantum has been battling to get connected to the Bermuda Telephone Co. Ltd. (BTC) so it can provide local voice service on the Island.

Last year a court ordered BTC to provide the interconnection. Quantum is currently testing the lines before providing the service.

Mr. Madeiros also reported Belco had completed testing of 18 of 19 electrical generating engines for Year 2000 compliance. The remaining engine will be tested for compliance this year.

The company has completed most of the testing in other areas with completion scheduled for the end of first quarter 1999.

Garry Madeiros