EU Utilities to set up Europe's largest online procurement exchange
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28-05-00
Twelve of Europe's power utilities are to set up one of Europe's largest online procurement exchanges doing business worth at least 22 billion euros a year, industry officials said. Scottish Power, which with Spain's Endesa leads the new Internet buying forum for industry goods and services, said the 12 account for about one-third of the 66 billion euros ($ 63 billion) spent Europe-wide every year on pipes, wires, switching gear, computers, and other industry goods and services.

The exchange will not deal in fuel, the biggest item on many of the partners' shopping lists, but it expects to save up to 50 % on transaction costs, and up to 10 % on purchasing costs for the rest of the industry's needs, mainly by bypassing long and expensive tender processes.

Electricité de France and ENEL of Italy, Europe's two biggest power utilities, are also involved in the new exchange, which expects to be up and running by late summer. Other members are Germany's RWE, Vattenfall of Sweden, Spain's Iberdrola and the Belgian group Electrabel, along with British companies National Grid, United Utilities, and Northern Electric and Nuon of the Netherlands.

Four-fifths of the exchange's equity will be owned initially by the 12 founders, who hope eventually to float the business, Scottish Power said. A memorandum of understanding was signed in Amsterdam, and an official announcement is expected.
Cross-border online purchasing partnerships are springing up everywhere among more capital intensive industries, with the aim of harnessing the low-cost, high speed exchange of information offered by the Internet to bring operating costs down and encourage price competition among suppliers.

The utility exchange is the latest example of business-to-business (B2B) commerce on the Internet, which is predicted to far outstrip the sales that will be made by businesses selling to consumers, or business-to-consumer (B2C). According to industry estimates, the new power utility exchange will be one of the largest in Europe, on a par with the linkups recently established by key players in the aerospace and oil industries.

The exchange, to be named in the next couple of months, will be in direct competition with Achilles, a similar proposal announced a few weeks ago. Achilles currently groups mainly smaller British power and water utilities including National Power, PowerGen and Anglian Water. "There's a feeling that it's going to be size that counts in online procurement," said one insider from among the partners. "Each industry will probably end up with only one exchange."

Source: Reuters

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