National Grid and ScottishPower have joined a group of 12 leading European utilities to form an e-business industry procurement exchange.

An independent company will be created to own and operate the exchange. Initially around 80% of the equity will be owned by the founding partners, who also include Northern Electric, United Utilities, Edf of France and RWE in Germany.

Ken Vowles, executive director of ScottishPower's UK power operation said last night: "These leading European utilities have come together to improve performance, productivity and capital efficiency."

He described it as "an exciting example of the application of the internet to promote efficiency in an industry and throughout the supply chain."

The founding partners are estimated to spend upwards of £20bn collectively each year on procurement. The exchange will provide an elec tronic marketplace open to buyers and sellers in the utilities industry. The intital focus will be on the European electricity and water industries.

The founding partners will work together to make the exchange attractive for all companies by establishing a collaborative platform for all industry participants.

In the first phase, the focus will be on catalogue purchasing, auctioning of goods and also procurement management information. Any supplier can participate. The approach is aimed at benefiting suppliers, giving them greater market reach and reducing transaction costs.

Members of the new procurement exchange claim that "a robust, scalable, open and independent technology platform will be chosen after a thorough evaluation of alternative providers."

The consortium plans to begin internet-based trading by late summer. The partners will use the exchange for a substantial proportion of their procurement.