REpower stock down; will Areva sell-off its 30% to Suzlon?

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REpower stock down; will Areva sell-off its 30% to Suzlon?

REpower shares slipped post announcement that Suzlon may sell shares to create value. All eyes are now on Areva, which has a put option from May 24, 2008 to May 23, 2009. At any time, it can come and sell this 30% stake that it has in REpower to Suzlon.

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By Raja Rajeshwari, CNBC-TV18

REpower shares slipped post announcement that Suzlon may sell shares to create value. REpower had a knee-jerk reaction yesterday. It slipped almost by 4% in yesterday's trade in the Frankfurt Stock Exchange. Largely, we need to see what has gone in the run-up of the stock. Over a year's time, it has run up from 160 euro to almost 230 euro. It closed yesterday at 233 euro. On May 19, it hit its 52-week high. This has largely fueled the speculation that there will be some news regarding the Areva-Suzlon stake regarding REpower.

Suzlon holds 33.6%, Areva 30%, and Martifier 23% in REpower. The Suzlon management clarified that they are looking at the sale of a particular stake because the price has run-up considerably. But once they saw jitters about it, they came and clarified both to the exchange and to analysts that the relationship they have with REpower will continue.

The new piece of the jigsaw puzzle that is falling into place is the put option that Areva holds in its hand. Areva, technically, has a put option that from May 24, 2008 to May 23, 2009 at any time can come and sell this 30% stake that it has in REpower to Suzlon. We are yet to believe that pricing of this stake would be to an independent valuation.

The price at which it was done was 150 euros. There is speculation that it could be very well around 200 euros and that is what is fueling the run-up over there. So, there are a few grey areas in the huge Areva-Suzlon agreement that they have as to what is the nature of it. Is it a hard binding contract that Areva will come and sell only to Suzlon, and can it not go and sell to any of the other competitors, is the question.

So, all of these things are right now playing on REpower's minds. The huge run-up is also making the stock cool down. Citigroup has come and downgraded the stock exactly on these concerns.