Brazilian industrial group Sinergy, poised to take control of bankrupt Colombian airline Avianca, on Wednesday said it will focus investments of $250 million next year on oil operations and a regional airline in Brazil.

The investments will go toward expanding the group's Ecuadorean petroleum operations, development of 18 oil exploration blocks in Brazil and bolstering OceanAir, Sinergy's small Brazilian regional airline, Sinergy chief German Efromovich told reporters in Bogota.

"We are talking about an investment of about $250 million," the mechanical engineer turned magnate told a press conference.Efromovich also said he is in talks with the Colombian government aimed at extending Sinergy's contract for its Rubiales oil field in southeast Colombia, which produces 6,500 barrels a day.

Sinergy eventually wants to invest about $1 billion in the Rubiales operation alone.

Meanwhile, Sinergy is set to take control of Colombian airline Avianca after a New York bankruptcy court approved a restructuring plan based on its sale.

Efromovich proposed a $63 million cash injection into the airline and assumption of its debt of about $220 million.The Avianca restructuring plan will reduce its commercial debt to $44 million from $140 million, according to Avianca.

Efromovich said he planned to upgrade Avianca's fleet of 35 planes in 2008 or 2010 while expanding Ocean Air's operations."The center of this growth ... and these operations will be Bogota, through Avianca," Efromovich said.

OceanAir was founded in 1998 and services 28 Brazilian cities with its seven EMB-120 propeller planes and three Fokker 50s.In the days to come, Sinergy will buy Colombian conglomerate Valores Bavaria's (VBS.CN: Quote, Profile, Research) 50 percent stake in Avianca and half of the 50 percent stake held by Colombia's Coffee Growers' Federation. The federation will hold on to 25 percent of Avianca.

Efromovich said the deal will have no adverse impact on Sinergy's finances.Founded in 1919, Avianca says it is the world's second-oldest airline after Dutch carrier KLM.The company covers 16 destinations within Colombia, including the capital Bogota, and flies to 17 international cities.

Avianca, which has lost money for years, posted a net profit of 74 billion pesos ($29 million) in the third quarter from revenues of 476 billion pesos ($184 million).

(From Reuters, November 18, 2004)
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