Diluted EPS of $0.08
Adjusted EBITDA $112 million - increase of 11%
Company Reaffirms 2006 Guidance

FAIRFIELD, NJ, May 4, 2006 - Covanta Holding Corporation (NYSE:CVA) ("Covanta" or the "Company") reported financial results today for the quarter ended March 31, 2006.  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 acquisition of Covanta ARC Holdings, Inc. formerly American Ref-Fuel Holdings Corp., ("Ref-Fuel") was consummated on January 1, 2005. 

First Quarter 2006 Results

For the 2006 first quarter, total revenues as reported in accordance with GAAP were $305.4 million, versus $174.8 million for the same period of 2005. This increase is the result of the Ref-Fuel acquisition during the second quarter last year. Net income for the 2006 first quarter was $11.4 million, or $0.08 per diluted share. This compares with 2005 first quarter net income of $10.3 million which included a one-time after-tax investment gain of $2.1 million.  

The Company believes a comparison between the 2005 pro forma financial information and the 2006 actual results will assist in assessing Covanta's first quarter performance. On that basis, total revenues climbed from $288.5 million to $305.4 million, a 6% increase.   Net income doubled from $5.7 million for the quarter on a pro forma basis for 2005 to $11.4 million for the first quarter of 2006. Excluding the one-time investment gain in the first quarter of 2005, net income increased $7.8 million and diluted EPS increased from $0.03 to $0.08. 

Continuing the comparison to the prior year pro forma results, for the Company's principal subsidiary, Covanta Energy Corporation, ("Covanta Energy"), adjusted EBITDA for the first quarter of 2006 was $111.7 million versus $100.4 million on a pro forma basis for the first quarter of 2005, an increase of 11%.  This was primarily driven by revenue growth relating to improved pricing while also managing expense increases.

For the 2006 first quarter, domestic waste and energy business revenues were $262.6 million compared to pro forma prior year revenues of $248.5 million, an increase of $14.1 million, or 6%, driven primarily by higher energy rates and contractual service fee escalation.  International revenues for the 2006 first quarter were $38.8 million compared to pro forma prior year revenues of $36.0 million, an increase of $2.8 million, or 8%, primarily due to higher energy prices.  

Anthony J. Orlando, President and Chief Executive Officer, said, "We are very pleased with our first quarter results. With most of our revenue under contract and so many talented employees working to safely provide outstanding client service, we continue to deliver predictable financial results."

Mr. Orlando continued, "During this first quarter, we experienced favorable market conditions. Notably, energy prices continued trending higher, boosting our current revenue and creating greater opportunities to grow the business by leveraging our expertise in waste-to-energy."

2006 Guidance Reaffirmed - On Target to Achieve Key Financial  Metrics

The Company is on track to achieve its key metrics and reaffirmed its 2006 guidance of Adjusted EBITDA in the range of $515 million to $525 million, free cash flow of approximately $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 on a pro forma basis, total debt reduction of approximately $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 Covanta Energy.

Conference Call Information

Covanta Holding Corporation will host a conference call at 11:00 am (Eastern) on Friday, May 5, 2006 to discuss its 2006 first quarter results.  Prepared remarks will be followed by a question-and-answer session.  To participate, please dial 800-475-3716 approximately 10 minutes prior to the scheduled start of the call.  If you are calling from outside of the United States, please dial 719-457-2728.  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 2:00 pm (Eastern) Friday, May 5, 2006 through midnight (Eastern) Friday, May 12, 2006.  To access the replay, please dial 888-203-1112 or 719-457-0820 and use the replay passcode: 9054160.  The webcast will also be archived on www.covantaholding.com.
 

Non-GAAP Measures

The information presented includes non-GAAP financial measures, as defined by the Securities and Exchange Commission, relating to adjusted EBITDA and 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 EBITDA, a measurement that is not in accordance with GAAP.  Also included are calculations of 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.

Contact:
Doreen Lubeck

973.882.7001
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