UPDATE 1-Manila Electric shares slide as board struggle drags on

(Recasts, updates share price)

MANILA, May 28 (Reuters) - Shares of Manila Electric Co (Meralco) (MER.PS) fell more than 2 percent on Wednesday as investors feared a possible protracted struggle for board control in the company.

"We all know that the battle will continue," said Astro del Castillo, managing director of First Grade Holdings.

"Meralco will face questions on the management proxies, it will continue to face regulatory pressure on pricing, plus negative sentiment in the global markets remains," he said.

By late morning, Meralco shares had slipped 2.4 percent, underperforming the main index .PSI, which was down 0.7 percent. Meralco was the third heaviest traded stock in the market.

Meralco's stock has lost more than 20 percent since end-April when the state pension fund started its moves against management.

The Philippine Stock Exchange imposed a trading halt on Meralco shares before the market opened following the results of the company's shareholders' meeting on Tuesday.

The Lopez family, which controls the country's largest power utility, retained majority control of Meralco's 11-person board on Tuesday, but voting was delayed for 10 hours as the state pension fund Government Service Insurance System (GSIS) tried to halt proceedings.

GSIS head Winston Garcia, who has led a campaign against the Lopez family's management of Meralco, said he would question the results of the vote with the securities regulator.

GSIS argues that the vote was tainted by illegitimate proxies and said the final vote would have showed GSIS getting majority control if the illegal proxies were taken out.

GSIS, which holds about a fourth of Meralco, wants a change in the company's management, saying the Lopez family has not done enough to bring down power rates in the country.

Power rates in the Philippines are among the highest in the region due to expensive contracts with private power producers, the Southeast Asian nation's reliance on costly imported oil to generate electricity and widespread illegal tapping of power lines.

"There are uncertainties on their ability to recoup their investment, given regulatory issues," said Laura Dy Liacco, analyst at ATR Kim Eng Securities, regarding Meralco.

Critics say Meralco buys power at high rates from Lopez-owned generating firms and does not do enough to prevent illegal tapping of electricity, the cost of which is passed on to consumers.

(Reporting by Rosemarie Francisco; Editing by Kim Coghill)