Diluted EPS of $0.35 Adjusted EBITDA of $165 million for Covanta Energy Updated 2006 guidance reflects strong performance 

FAIRFIELD, NJ, August 3, 2006 - Covanta Holding Corporation (NYSE:CVA) ("Covanta" or the "Company") reported financial results today for the three and six months ended June 30, 2006.  The Company is presenting financial results on an as reported and pro forma basis.  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.  The Company believes a comparison between the 2006 results and the 2005 pro forma financial information will assist in assessing Covanta's performance.

Second Quarter and YTD 2006 Results
For the 2006 second quarter, total revenues as reported were $334.1 million, versus $199.1 million for the same period of 2005. This increase was the result of the Ref-Fuel acquisition that occurred at the end of the second quarter last year.  Net income for the second quarter of 2006 was $51.2 million, or $0.35 per diluted share which compares with 2005 second quarter net income of $5.9 million, or $0.05 per diluted share. 

Comparing 2006 results to 2005 pro forma financial information, total second quarter revenues rose 6% to $334.1 million from $315.7 million, and second quarter 2006 net income increased to $51.2 million from $18.3 million for the second quarter of 2005.   The increase in net income was driven primarily by strong operating performance, a lower effective tax rate and two tax benefits relating to the Company's international business which are described further in the accompanying exhibits.

Continuing the comparison to the prior year pro forma results, for the Company's principal subsidiary, Covanta Energy Corporation, ("Covanta Energy"), domestic waste and energy business revenues were $286 million for the 2006 second quarter compared to pro forma prior year revenues of $275.6 million. This revenue growth of $10.4 million, or 4%, was driven primarily by higher energy rates, contractual service fee escalation and favorable scrap metal pricing.  International revenues for the second quarter of 2006 were $44.6 million compared to prior year revenues of $36.3 million, an increase of $8.3 million primarily due to higher energy prices contractually provided to offset increased fuel cost. Covanta Energy's adjusted EBITDA for the second quarter of 2006 was $165 million versus $135 million on a pro forma basis for the second quarter of 2005. This increase of 22% was largely due to higher operating revenues, successful execution of cost reduction initiatives, reduced scope of scheduled maintenance work and a Philippine tax ruling which increased equity income.

For the six months ended June 30, 2006, total revenues rose 6% to $639.5 million from 2005 pro forma revenues of $604.2 million.  2006 net income also increased to $62.6 million for the six months ended June 30, 2006 from $23.4 million on a pro forma basis for the six months ended June 30, 2005. During the same period, earnings per diluted share increased to $0.43 versus $0.16 for the prior year on a pro forma basis. This increase of $0.27 was driven primarily by strong operating performance, a lower effective tax rate and the two tax benefits outlined in Exhibit 5 of this press release.

"We are very pleased with our results for the first half of 2006", stated President and Chief Executive Officer, Anthony Orlando.  He continued, "Our people have executed effectively in all key areas.  Waste-to-energy boiler availability remains above 90% and we've grown our top line while leveraging our larger size to achieve cost savings.  As a result, we are generating meaningful growth from our existing portfolio. In addition, we remain optimistic about opportunities to expand our business."

Update of 2006 Guidance - Company Expects to Outperform Original Key Financial Targets
Given the strong first half performance and its outlook for the remainder of the year, the Company expects to outperform its original 2006 guidance and is, therefore, updating its guidance on the following key metrics: 

• Covanta Energy adjusted EBITDA in the range of $535 million to $545 million,
• Covanta Energy free cash flow of approximately $235 million, and
• Diluted earnings per share of approximately $0.75.

Conference Call Information
Covanta Holding Corporation will host a conference call at 11:00 am (Eastern) on Friday, August 4, 2006 to discuss its results for the three and six months ended June 30, 2006.  Prepared remarks will be followed by a question-and-answer session.  To participate, please dial 800-310-6649 approximately 10 minutes prior to the scheduled start of the call.  If you are calling from outside of the United States, please dial 719-457-2693.  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, August 4, 2006 through midnight (Eastern) Friday, August 11, 2006.  To access the replay, please dial 888-203-1112 or 719-457-0820 and use the replay passcode: 4008868.  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 Energy's adjusted EBITDA and calculations of Free Cash Flow, measurements that are not in accordance with GAAP.  Adjusted EBITDA is defined as, for any period, EBITDA plus additional items deducted from, or added to, net income, as defined in Covanta Energy's financing arrangements.  Covanta believes this financial measure is helpful in assessing the overall performance of its business, and is helpful in highlighting trends in its overall business because the items excluded in calculating adjusted EBITDA have little or no bearing on its day-to-day operating performance.  Adjusted EBITDA is also a significant criterion of performance-based components of employee compensation.   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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