Irish utility ESB posts 40 pct drop in H1 profit

* H1 pretax profit of 81.9 mln euros vs 137.3 mln yr earlier

* Energy Minister says government won't do firesales

DUBLIN Feb 21 (Reuters) - Ireland's Electricity Supply Board (ESB), one of the companies that the cash-strapped government is considering selling a stake in, posted a 40 percent drop in first-half profit as sale talks rumbled in the background.

The former monopoly recorded a pretax profit of 81.9 million euros ($109 million) for the six months to end-June.

Revenue rose 2 percent to 1.38 billion euros, after the group swung to a full-year loss in 2010 amid a period of deep recession in Ireland.

The government has agreed to sell 2 billion euros ($2.6 billion) worth of state assets to plug its deficit, but has indicated it may exceed that after winning approval to use some of the proceeds to invest in the economy as well as pay down debt.

The IMF, one of Ireland's three international lenders, urged it to increase the figure to 5 billion euros last year.

The government has already said it plans to sell a minority stake in the ESB, but Energy Minister Pat Rabbitte told the Irish Times last week the government was under no obligation to go ahead with that sale and would not conduct any firesales.

ESB is viewed as a strategic asset given Ireland's huge potential - through wind and marine energy - to export renewable power as well as to generate its own needs.

Rabbitte said he had been presented with a due diligence report on the potential sale of the ESB stake and a separate, less forensic report covering each of the other states assets. Neither report has been considered yet by government, he told the Irish Times.

A government-commissioned report recommended last year that the state sell parts of Bord Gais, ESB and its 25 percent stake in airline Aer Lingus, as well as offloading smaller assets like peat utility Bord na Mona, forestry company Coillte and Irish horse racing's National Stud.

The government is considering selling part of gas utility Bord Gais to meet a privatisation target set by the country's EU-IMF creditors, said Rabbitte. ($1 = 0.7538 euros) (Reporting by Lorraine Turner; Editing by Jodie Ginsberg)