FAIRFIELD, NJ, March 14, 2006 - Covanta Holding Corporation (NYSE:CVA) ("Covanta" or the "Company") reported financial results today for the quarter and year ended December 31, 2005.  The Company is presenting financial results on an as reported and pro forma basis to assist investors in assessing its financial performance.  The pro forma information was prepared as if the acquisitions of Covanta Energy Corporation ("Covanta Energy") and Covanta ARC Holdings, Inc. formerly American Ref-Fuel Holdings Corp., ("Ref-Fuel") were both consummated on January 1, 2004. 

Key Pro Forma Metrics on Target and 2006 Guidance Reaffirmed
The Company noted that its 2005 performance against four key investment metrics was in line with its expectations. These metrics include non-GAAP financial measures as further described in the "Non-GAAP Measures" section below.

• Adjusted pro forma EBITDA for the full year 2005 was $501 million. 
• Pro forma free cash flow for 2005 was $211 million.
• Pro forma net income for 2005 was $67.3 million, or $0.46 per diluted share.  After adjusting to remove the effects of a one-time investment gain and a one-time settlement expense, diluted EPS was $0.44. 
• Covanta continued to make progress on its initiative to reduce the Company's debt, paying down approximately $220 million of debt on a pro forma basis in 2005.

The Company reaffirmed its 2006 guidance of Adjusted EBITDA in the range of $515 million to $525 million, free cash flow of about $225 million and diluted earnings per share of approximately $0.50.  In addition, the Company reaffirmed that, when combined with the $220 million already repaid in 2005, total debt reduction of about $700 million is planned by the end of 2007.  Note: Diluted earnings per share is provided for Covanta while all of the other performance metrics discussed above relate to the Company's principal subsidiary, Covanta Energy.

Fourth Quarter and Fiscal 2005 Financial Results
For the 2005 fourth quarter, total revenues as reported in accordance with GAAP were $303.4 million, versus $173.8 million for the same period of 2004.  Net income for the 2005 fourth quarter was $5.7 million, or $0.04 per diluted share, compared with net income of $8.3 million, or $0.08 per diluted share, for the 2004 fourth quarter.  Results for the fourth quarter of 2005 included a one-time operating expense of $10.3 million relating to a settlement with the California Insurance Commissioner's Conservation and Liquidation Office ("CLO") of matters related to the Company's predecessor insurance entities. 

For the full year 2005, total revenues as reported in accordance with GAAP were $978.8 million, versus $576.2 million for 2004.  Reported net income for 2005 was $59.3 million, or $0.46 per diluted share, compared with $34.1 million, or $0.37 per diluted share, for 2004.  The increases in revenue, net income and earnings per share were primarily related to the acquisition of Ref-Fuel.

Pro Forma Fiscal 2005 Results
Pro forma fiscal 2005 revenues, after giving effect to the acquisitions noted earlier, were $1,209 million compared to $1,204 million for the fiscal 2004. 

Domestic waste and energy business revenues increased by $15.6 million, or 1.5%, driven primarily by higher energy rates and contractual service fee escalation, while the international revenues decreased $4.9 million primarily due to the mid-year 2004 shutdown and reorganization of two unprofitable facilities in the Philippines. Insurance revenues declined by $6.1 million as a result of Covanta's strategy to focus on more profitable lines of business, rather than premium volume.

Pro forma net income for fiscal 2005 increased by $14.4 million, or 27%, to $67.3 million, or $0.46 per diluted share, as compared with $52.9 million, or $0.37 per diluted share, for the full year 2004.  The increase was driven largely by higher waste and energy revenues, lower interest expense and higher equity in income from unconsolidated subsidiaries. Excluding the one-time CLO expense of $10.3 million and the $15.2 million one-time investment gain, 2005 pro forma diluted earnings per share would have been $0.44. (Note: A table reconciling the above items follows as Exhibit 9 at the end of this release.)

Anthony J. Orlando, President and Chief Executive Officer, said, "2005 was an outstanding year for Covanta, highlighted by the Ref-Fuel acquisition which solidified our leadership position in waste-to-energy and enhanced our ability to grow. The combined businesses performed very well, demonstrating the capacity of our industry-leading team to create shareholder value and to generate strong free cash flow."

"With the integration of Ref-Fuel progressing as planned and the vast majority of our revenue under contract, Covanta enters 2006 in a strong position to fund substantial debt reduction and capitalize on improved market conditions resulting from a renewed emphasis on the benefits of generating clean energy from waste."

Mr. Orlando added that, "The Company is very pleased to have reached agreement with the California Insurance Commissioner's Conservation and Liquidation Office.  This brings us closer to a full and positive resolution of matters involving our predecessor insurance business, which have been pending since 1989 and, while we cannot say with certainty, Covanta believes these arrangements will result in no material reduction in available net operating loss carryforwards."

2005 Operating Results and Key Developments
Operating results at Covanta's 31 domestic waste-to-energy (WTE) plants were generally in line with historical results.  The domestic WTE portfolio posted strong operating performance by processing 15 million tons of waste with average boiler availability of 90.7%.  Key developments during 2005 included agreements to expand WTE facilities and to extend the associated operating contracts in Hillsborough County and Lee County, Florida.  Covanta's Warren County, New Jersey subsidiary successfully completed its reorganization and emerged from bankruptcy in December 2005, and now operates in this attractive market under a market-rate 'tip fee' contract structure. 

Conference Call Information
Covanta Holding Corporation will host a conference call at 2:00 pm (Eastern) on Wednesday, March 15, 2006 to discuss its 2005 fourth quarter and full-year results.  Prepared remarks will be followed by a question-and-answer session.  To participate, please dial 800-289-0544 approximately 10 minutes prior to the scheduled start of the call.  The conference call will also be webcast live on the Investor Relations section of the Covanta website at www.covantaholding.com. 

A replay of the conference call will be available from 5:00 pm (Eastern) Wednesday, March 15, 2006 through midnight (Eastern) Tuesday, March 21, 2006.  To access the replay, please dial 719-457-0820 or 888-203-1112 and use the replay passcode:  1306470.  The webcast will also be archived on www.covantaholding.com.  Covanta's 2005 Annual Report on Form 10-K will be available on the Investor Relations page of the company's website under "SEC Filings."

Non-GAAP Measures
The information presented includes non-GAAP financial measures, as defined by the Securities and Exchange Commission, relating to adjusted pro forma EBITDA, adjusted pro forma EPS and pro forma free cash flow.  These measures may be different from non-GAAP measures used by other companies.  The presentation of such non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with United States generally accepted accounting principles ("GAAP").  These non-GAAP financial measures should be read in conjunction with Covanta's financial information reported in accordance with GAAP.  Covanta uses these measures to provide 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 factors and trends affecting Covanta's business.  Reconciliations to the most directly comparable GAAP measure and management's reasons for presenting such information are set forth in the exhibits to this release. Included among the exhibits are calculations of Covanta's adjusted pro forma EBITDA, a measurement that is not in accordance with GAAP.  Also included are calculations of pro forma Free Cash Flow. Free Cash Flow is defined as, for any period, cash flow provided by operating activities less purchase of property, plant and equipment.  Free Cash Flow is not a measurement of financial performance under GAAP and is used by management as an alternative measure of cash flow available for the repayment of debt and for investment in strategic opportunities.

About Covanta Holding Corporation
Covanta Holding Corporation is a New York Stock Exchange listed company engaging in waste disposal, energy services and specialty insurance through its subsidiaries. Covanta's subsidiary, Covanta Energy Corporation, is an internationally recognized owner and operator of waste-to-energy and power generation projects.  Covanta Energy's waste-to-energy facilities convert municipal solid waste into renewable energy for numerous communities, predominantly in the United States.

NOTE:  Covanta's charter contains restrictions that prohibit parties from acquiring 5% or more of Covanta's common stock without its prior consent.

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, 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", "proposed", 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, 2005,  and in other securities filings by Covanta or its subsidiaries.

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:
Elizabeth O'Melia
973-882-4193

Doreen Lubeck
773-583-4331

Attachments

Adjusted EDITDA Reconciliation