Waste Business Journal

Covanta Revenue Modestly Higher, Outlook Stable

Date: April 21, 2011

Source: Covanta Holding Corporation

Covanta Reports 2011 First Quarter Results

• 2011 Guidance Reaffirmed

• Regular Quarterly Dividend Established

• Quezon Asset Sale Closed

Covanta Holding Corporation (NYSE: CVA) ("Covanta" or the "Company") reported unaudited financial results today for the three months ended March 31, 2011.

Commenting on the first quarter of 2011, Anthony Orlando, President and CEO stated, "First quarter results were in-line with our expectations, plus we achieved two big milestones: we initiated a quarterly dividend and separately, we completed the sale of two non-core fossil fuel power plants." Looking ahead, Mr. Orlando continued, "More than half of our intense spring maintenance activity is behind us and it continues to go well. In addition, we're beginning to see waste markets firm-up, which positions us nicely to achieve our full year goals."

First Quarter Results From Continuing Operations

For the three months ended March 31, 2011, operating revenues increased $9 million or 2% to $377 million, up from $368 million in the prior year comparative period. This increase is primarily attributable to increased construction revenues, higher revenues from the sale of recycled metals, service fee contract escalations as well as a full quarter operating the Dade facility, partially offset by lower energy revenues, which are primarily attributable to the economic dispatching of certain biomass facilities.

Operating expenses of $379 million rose 2% from $372 million in the prior year comparative period. The increase reflects normal cost escalations, higher fuel related costs as well as higher construction related expenses, partially offset by reduced development spending and lower costs associated with the economic dispatching of certain biomass facilities.

Adjusted EBITDA of $71 million rose 3% compared to $69 million in last year's first quarter. Organic growth, including strong recycled metals pricing, coupled with lower development spending more than offset the impact of declining debt service revenue.

Free Cash Flow was $66 million in the first quarter, compared to $83 million in the prior year comparative period. The reduction was primarily attributable to the favorable working capital realized in 2010 highlighted by the Company at that time.

Adjusted EPS for the first quarter of 2011 was $(0.10) compared to $(0.11) in last year's first quarter, primarily due to the factors noted above.

2011 Guidance for Continuing Operations

The Company is reaffirming its 2011 guidance for the following key metrics (in millions, except per share amounts):

Shareholder Return Activities

During the quarter, the Company repurchased $54 million in common stock, or 3.2 million shares (2.1% of our outstanding shares), at a weighted average cost of $16.84 per share. Aggregate repurchases since June 2010 total $149 million, or 9.3 million shares, representing 6% of our outstanding shares. The Company also initiated a quarterly dividend in the amount of $0.075 per share, ($0.30 per share annualized). Mr. Orlando noted that, "Since last June, we have returned approximately $390 million to shareholders while holding our net debt flat. This significant distribution evidences our commitment to returning excess capital not needed for reinvestment or growth opportunities."

Sale of Asia IPP Assets

During the first quarter, the Company completed the sale of Quezon (Philippines) and Samalpatti (India), two of the four Asia IPP assets designated as assets held for sale. Earlier this month, the Company also entered into an agreement to sell a third facility, Madurai (India), with a closing expected to occur later this year, subject to satisfaction of certain closing conditions, including financing. "We are on track to realize gross proceeds of $270 to $290 million, assuming we successfully close all four asset sales. We currently expect to repatriate at least $100 million of that amount, which we anticipate returning to shareholders," added Mr. Orlando.

Conference Call Information

Covanta will host a conference call at 8:30 am (Eastern) on Thursday, April 21, 2011 to discuss its results for the three months ended March 31, 2011. To participate, please dial 877-806-3982 approximately 10 minutes prior to the scheduled start of the call. If you are calling from outside of the United States, please dial 702-928-7062. Please utilize conference ID number 57123173 when prompted by the conference call operator. We will also be referring to supplemental slides and webcasting the conference call, either of which can be accessed from the Investor Relations section of the Covanta website at www.covantaenergy.com.

A replay of the conference call will be available from 11:30 am (Eastern) Thursday, April 21, 2011. To access the replay, please dial 800-642-1687, or from outside of the United States 706-645-9291 and use the replay conference ID number 57123173. The webcast will also be archived on www.covantaenergy.com.

About Covanta

Covanta 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 44 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 approximately 20 million tons of waste into 9 million megawatt hours of clean renewable electricity and more than 9 billion pounds of steam that are sold to a variety of industries. For more information, visit www.covantaenergy.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 general industry or broader economic performance in global markets in which Covanta operates or competes, 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, the risk that Covanta may not successfully close its announced or planned acquisitions or projects in development and those factors, risks and uncertainties that are described in periodic 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.

Attachments

Discussion of Non-GAAP Financial Measures

We use a number of different financial measures, both United States generally accepted accounting principles ("GAAP") and non-GAAP, in assessing the overall performance of our business. To supplement our assessment of results prepared in accordance with GAAP, we use the measures of Adjusted EBITDA, Free Cash Flow, and Adjusted EPS, which are non-GAAP measures as defined by the Securities and Exchange Commission. The non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, and Adjusted EPS as described below, and used in the tables above, are not intended as a substitute or as an alternative to net income, cash flow provided by operating activities or diluted earnings per share as indicators of our performance or liquidity or any other measures of performance or liquidity derived in accordance with GAAP. In addition, our non-GAAP financial measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes.

The presentations of Adjusted EBITDA, Free Cash Flow and Adjusted EPS are intended to enhance the usefulness of our financial information by providing measures which management internally use to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business.

Adjusted EBITDA

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, through which we conduct our core waste and energy services business, 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 core business. 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 for continuing operations.

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 March 31, 2011. 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 3.50 to 1.00, 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 (which for purposes of calculating the leverage ratio and interest coverage ratio, is adjusted on a pro forma basis for acquisitions and dispositions made during the relevant period); 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 months ended March 31, 2011 and 2010, reconciled for each such periods to net loss from continuing operations and cash flow provided by operating activities from continuing operations, which are believed to be the most directly comparable measures under GAAP.

Free Cash Flow

Free Cash Flow is defined as cash flow provided by operating activities from continuing operations less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. We use the non-GAAP measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation.We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in construction of new projects or make principal payments on debt.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the three months ended March 31, 2011 and 2010, reconciled for each such periods to cash flow provided by operating activities from continuing operations, which we believe to be the most directly comparable measure under GAAP.

Adjusted EPS

Adjusted EPS excludes certain income and expense items that are not representative of our ongoing business and operations, which are included in the calculation of Diluted Earnings (Loss) Per Share in accordance with GAAP. The following items are not all-inclusive, but are examples of reconciling items in prior comparative and future periods. They would include write-down of assets, the effect of derivative instruments not designated as hedging instruments, significant gains or losses from the disposition of businesses, gains and losses on assets held for sale, transaction-related costs, income and loss on the extinguishment of debt and other significant items that would not be representative of our ongoing business.

We will use the non-GAAP measure of Adjusted EPS to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EPS for the three months ended March 31, 2011 and 2010, reconciled for each such periods to diluted earnings per share from continuing operations, which is believed to be the most directly comparable measure under GAAP.