POWER companies National Grid and Lattice are to merge to form a £14.8bn company and the UK's largest utility.

The companies said they would create National Grid Transco, which would be 57.3 per cent owned by National Grid shareholders and 42.7 per cent owned by Lattice shareholders.

The pair are aiming to make savings of at least £100m by the end of the first full year following the merger.

Roger Urwin, chief executive of National Grid, said: "The fit of skills, experience and resources of National Grid and Lattice are as near perfect as you can find.

"We will build upon the records of both companies to drive further improvements in operating performance in both our UK and US businesses."

He said the group would take advantage of opportunities in the liberalising energy markets abroad, especially the US.

Sir John Parker, chairman and acting chief executive of Lattice, said: "The combination of Lattice and National Grid will create a leading international energy company with significant cost-saving and synergy potential."

The groups admitted there would be job cuts under the merger. In a statement, they said the combination of similar functions would "necessarily lead to some staff reductions", adding: "So far as possible, job losses will be achieved by normal staff turnover, voluntary redundancies and early retirement."

The enlarged group will employ 31,000 staff. The job losses are expected to be at the group's head offices - both in London - as they eliminate duplicate costs.

The groups employ 100 staff at each head office and said potentially 100 could go in the rationalisation.

The deal needs shareholder approval, as well as regulatory approval in Britain and the US to proceed.

But the firms said they had "no reason to expect we will not get regulatory approval from both sides of the Atlantic".

The companies expected completion of the merger this autumn.

It comes amid a spate of deals in the power and utilities sector which has seen a number of British companies come under foreign ownership.

Last month, electricity group Innogy agreed to be taken over by Germany's RWE - which also owns Thames Water - in a £3.1bn deal, while Powergen has agreed to be bought by German firm E.ON.

Lattice itself came out of BG group in 2000. Under the name Transco, it operates the gas distribution system which was previously owned by British Gas.

National Grid, created from the privatisation in the British energy market, owns and manages the electricity transmission network in England and Wales. It also has an electricity transmission business in the US and a gas distribution network in New York State.

Mike Jeram, national secretary of Unison, said: "Unison will want assurances that there will be no further job losses as a result of this merger.

"Transco, which is the biggest company in the Lattice group, is already shedding more than 3,000 jobs - a third of the non-industrial staff - and we are worried that the merger could lead to more."

Brian Strutton, national officer at the GMB union - representing more than 7,000 members in Lattice and National Grid - said: "We are having emergency meetings this week with the proposed new company, to ensure proper transfer and to mitigate any job losses.