During the past year Manitoba Hydro established ambitious Corporate goals and strategies toassist with the transition to a sustained emphasis on operating activities. We continue to makesubstantial progress toward the goal of improving financial performance while maintaining focuson providing quality customer service.
Manitoba Hydro has taken significant first steps to profitability and we have laid the foundationfor increased future profitability. In 1994-95, the Corporation reported the highest export sales inits history at $253.1 million as being a significant contributor to the $55.9 million net income foryear end despite a decline in overall revenue from Manitoba customers. For 1995-96, net incomeis forecasted to be $59 million.
The Corporation also adopted more aggressive financial targets to improve the capital structure ofthe utility. Interest coverage ratio targets will be moved into the range of 1:20 to 1:35 as soon aspossible and a 75:25 debt to equity ratio is expected to be attained no later than 2005-06. It isalso Manitoba Hydro's intention to reduce debt levels by funding, from 1998-99 on, all capitalconstruction requirements from internal sources (except during periods where major newgeneration and/or major transmission facilities are being added to the system). These financialtargets will assist Manitoba Hydro to maintain its competitive advantage and flexibility to respondto changing conditions. The targets will be implemented in combination with low rate increases tocustomers, rigorous control over expenditures and continuous productivity enhancements.Through these measures, Manitoba Hydro aims to achieve the best balance of fiscal responsibility,competitive positioning and customer sensitivity.
The long-term outlook for Manitoba Hydro's business and residential users remains positive, withany future rate increases expected to be below the rate of inflation. Large industrial customershave gone without a rate increase since April 1992. In addition, two innovative rate programsrecently approved by The Public Utilities Board will provide some Manitoba customers access torates offered in the interruptible energy market as well as providing Manitoba Hydro anothermarket for this kind of energy. These programs offer similar terms normally made available to theCorporation's export utility customers.
Manitoba Hydro is pleased with the progress made in the settlement of outstanding obligationsunder the Northern Flood Agreement to the five Indian Bands and communities affected bynorthern development projects. A comprehensive settlement was reached with the Split Lake CreeFirst Nation in 1992 and agreements-in-principle have been reached by the remaining fourcommunities with the expectation that final documentation will be concluded with two of the fourin early 1996. It is expected that the remaining two will be concluded in 1996-97.
Power Smart programs continue to help industry adopt new technologies for lighting, motors andother equipment to conserve electricity, thereby reducing electricity bills. Since 1989, PowerSmart energy conservation initiatives along with load reductions achieved through curtailable rateprograms have resulted in cumulative savings of 155 GW.h in energy and 90 MW reduction indemand. This represents 35 per cent of the overall 257 MW target in demand and 17 per cent ofthe 922 GW.h estimated target in energy for all Power Smart initiatives by 2011.
Through this climate of change and the challenging opportunities that lie ahead, Manitoba Hydrowill maintain the fundamental principles of uncompromised employee and public safety, superiorcustomer service and high system reliability as the cornerstones of its corporate philosophy. It isbuilding on those principles that will take us successfully forward into the new electric utilityenvironment.