* Company plans to split generation and distribution
* Seen as vital step for liberalisation, EU accession
* EPS says uncollected bills amount to $1.46 bln
* Board decides to reschedule debt, write off interest
BELGRADE, Feb 22 (Reuters) - Loss-making Serbian state power utility EPS hived off its generation activities on Friday as the Balkan country moves towards liberalising its energy market with a view to joining the European Union.
EPS needs fresh funds urgently to upgrade infrastructure that was damaged and mismanaged during the Balkan wars of the 1990s to meet growing demand and cut reliance on imports.
Serbia's Socialist-led government has pledged to maintain control over EPS but said it needs to be restructured into a shareholder-owned company with separate production and distribution operations or face bankruptcy.
Successive governments have used energy bill pricing as a welfare policy tool, capping them to defend living standards.
The country suffered a recession last year and the utility lost 33 billion dinars, mainly because it was forced to absorb the cost of subsidised tariffs.
According to a business plan for 2013 that was approved by the government, EPS is 50 billion dinars ($602 million) short of funds for loan repayments, wages, investment and grid maintenance.
The executive board of EPS also decided on Friday to reschedule debts and write off non-payment charges on overdue bills from residential and industrial consumers who owe the company some 120 billion dinars.
Customers will now be able to pay off their bills in as many as 24 monthly instalments without paying those charges.
Acting general manager Aleksandar Obradovic had urged the EPS board to make a decision on borrowing plans for this year, but it did not address the issue on Friday.