Waste Business Journal

Covanta Sees 19% Gain in 2Q on Higher Energy Revenues

Date: July 29, 2008

Source: Covanta Holding Corporation

COVANTA HOLDING CORPORATION REPORTS 2008 SECOND QUARTER RESULTS

• REAFFIRMS 2008 GUIDANCE

Covanta Holding Corporation (NYSE: CVA) (“Covanta” or the “Company”) reported financial results today for the three months ended June 30, 2008. Diluted earnings per share rose by 21% to $0.29 in the second quarter of 2008, up from $0.24 in the second quarter of 2007.

For the three months ended June 30, 2008, consolidated operating revenues grew 19% to $423 million, up from $355 million in the prior year comparative period. Domestic segment revenue grew 17% to $351 million, driven primarily by the contribution of revenue from domestic acquisitions completed in 2007, contractual escalations in service fees, and higher prices for electricity and recycled metal. Domestic plant operating expenses increased by 15%, primarily due to the incremental expenses associated with businesses acquired in 2007 and escalating fuel and material costs. International segment revenue increased by 33% to $69 million, driven primarily by increased electricity sales at two facilities located in India. International plant operating expenses increased by 38%, primarily due to higher fuel costs at the same two facilities.

Cash Flow Provided by Operating Activities (“Operating Cash Flow”) was $111 million in the second quarter. Adjusted EBITDA was $162 million.

Anthony Orlando, President and Chief Executive Officer of Covanta, stated that “Facility production was solid and energy markets continue to move in our favor. We turned in a good second quarter and anticipate delivering strong full year results near the high end of our published guidance ranges. I’m also optimistic about our long-term prospects. We are effectively managing contract transitions and capitalizing on global growth opportunities which are being presented with increasing frequency in light of the sharp rise in energy prices.”

For the six months ended June 30, 2008, total Company operating revenues rose 18% to $812 million. Operating Cash Flow was $160 million for the year-to-date period. Adjusted EBITDA was $268 million.

The Company is reaffirming its guidance for 2008 for the following key metrics:

• Adjusted EBITDA of $550 million to $575 million;

• Diluted earnings per share of $0.90 to $1.00; and

• Operating Cash Flow of $380 million to $420 million.

Covanta will host a conference call at 8:30 am (Eastern) on Wednesday, July 30, 2008 to discuss its results for the three and six months ended June 30, 2008. To participate, please dial 877-604-9675 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States, please dial 719-325-4873. The conference call will also be web cast live on the Investor Relations section of the Covanta website at www.covantaholding.com.

A replay of the conference call will be available from 11:30 am (Eastern) on Wednesday, July 30, 2008 through midnight (Eastern) on Thursday, August 7, 2008. To access the replay, please dial 888-203-1112 or 719-457-0820 and use the replay pass code: 9091411. The web cast will also be archived on www.covantaholding.com.

Covanta Holding Corporation (NYSE: CVA), is an internationally recognized owner and operator of large-scale Energy-from-Waste and renewable energy projects and a recipient of the Energy Innovator Award from the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy. Covanta’s 38 Energy-from-Waste facilities provide communities with an environmentally sound solution to their solid waste disposal needs by using that municipal solid waste to generate clean, renewable energy. Annually, Covanta’s modern Energy-from-Waste facilities safely and securely convert more than 16 million tons of waste into more than 8 million megawatt hours of clean renewable electricity and create 10 billion pounds of steam that are sold to a variety of industries. For more information, visit www.covantaholding.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta and its subsidiaries, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. Covanta cautions investors that any forward-looking statements made by Covanta are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to Covanta, include, but are not limited to, those factors, risks and uncertainties that are described in Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2007, and in securities filings by Covanta with the SEC.

Although Covanta believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any forward-looking statements. Covanta’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this press release are made only as of the date hereof and Covanta does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

Contacts:

Marisa F. Jacobs, Esq.
Vice President, Investor Relations and Corporate Communications
1-973-882-4196

Vera Carley
Media Relations Manager
1-973-882-2439

Discussion of Non-GAAP Financial Measures

To supplement our results prepared in accordance with United States generally accepted accounting principles (“GAAP”), we use the measure of Adjusted EBITDA, which is a non-GAAP measure as defined by the Securities and Exchange Commission. The non-GAAP financial measure of Adjusted EBITDA described below, and used in the tables above, is not intended as a substitute and should not be considered in isolation from measures of financial performance or liquidity prepared in accordance with GAAP. In addition, our non-GAAP financial measure may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.

We use a number of different financial measures, both GAAP and non-GAAP, in assessing the overall performance of our business. We use Adjusted EBITDA to provide further information that is useful to an understanding of the financial covenants contained in the credit facilities of our most significant subsidiary, Covanta Energy Corporation, and as additional ways of viewing aspects of its operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our business. The presentation of Adjusted EBITDA is intended to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business. We also use this non-GAAP financial measure as a significant criterion of performance-based components of employee compensation.

Adjusted EBITDA should not be considered as an alternative to net income or an alternative to cash flow provided by operating activities as indicators of our performance or liquidity or any other measures of performance or liquidity derived in accordance with GAAP.

Adjusted EBITDA

The calculation of Adjusted EBITDA is based on the definition in Covanta Energy’s credit facilities, which we have guaranteed. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income. Because our business is substantially comprised of that of Covanta Energy, our financial performance is substantially similar to that of Covanta Energy. For this reason, and in order to avoid use of multiple financial measures which are not all from the same entity, the calculation of Adjusted EBITDA and other financial measures presented herein are ours, measured on a consolidated basis.

Under these credit facilities, Covanta Energy is required to satisfy certain financial covenants, including certain ratios of which Adjusted EBITDA is an important component. Compliance with such financial covenants is expected to be the principal limiting factor which will affect our ability to engage in a broad range of activities in furtherance of our business, including making certain investments, acquiring businesses and incurring additional debt. Covanta Energy was in compliance with these covenants as of June 30, 2008. Failure to comply with such financial covenants could result in a default under these credit facilities, which default would have a material adverse affect on our financial condition and liquidity.

These financial covenants are measured on a trailing four quarter period basis and the material covenants are as follows:

• maximum Covanta Energy leverage ratio of 4.25 to 1.00 (which declines for quarterly periods after September 30, 2008), which measures Covanta Energy’s Consolidated Adjusted Debt, (which is the principal amount of its consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs) to its Adjusted EBITDA; and

• minimum Covanta Energy interest coverage ratio of 3.00 to 1.00, which measures Covanta Energy’s Adjusted EBITDA to its consolidated interest expense plus certain interest expense of ours, to the extent paid by Covanta Energy.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three and six months ended June 30, 2008 and 2007, reconciled for each such periods to net income and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP.