Fourth Quarter Results

For the three months ended December 31, 2008, consolidated operating revenues grew 5% to $414 million, up from $395 million in the prior year comparative period. The increase was driven by higher energy sales primarily at our biomass facilities, revenue from domestic acquisitions and increased electricity sales at two facilities located in India.

Operating Cash Flow was $135 million in the fourth quarter, compared to $119 million in 2007. Operating cash Ffow is generally affected by the same factors that impact Adjusted EBITDA, except that the negative impacts at our Indian facilities did not materially affect cash. Furthermore, our lower interest expense and improvements in our working capital contributed to the increase in Operating cash flow.

Adjusted EBITDA was $138 million, compared to $153 million for 2007. This $15 million decline was driven primarily by two items: incremental expenditures of $7 million during the quarter to pursue various growth initiatives and a $6 million decrease in revenues attributed to declining recycled metals prices and lower tip fees, with those revenue declines largely flowing through to Adjusted EBITDA. In addition, the benefits relating to our Stanislaus client’s decision to repay project debt ahead of schedule and the final insurance recoveries at our SEMASS facility were more than offset by the negative impact of timing issues related to fuel oil price fluctuations at our two facilities in India and adverse foreign exchange rates.

Net income was $30 million for the quarter compared to $72 million in the prior year comparative period. The majority of the decline relates to a higher tax rate in 2008 compared to the tax benefit in the comparative quarter in 2007, both relating to Grantor Trust activity and NOL valuation allowance, as detailed on the attached Exhibit 7. The remaining reduction in net income for 2008 from 2007 is due to the same events that negatively affected Adjusted EBITDA, partially offset by lower interest expense.

Full-Year 2008 Results

The company’s domestic segment operating revenues grew by 10% to $1.37 billion for the year, driven primarily by higher waste and energy revenues at our existing Energy-from-Waste facilities, and revenue from domestic acquisitions. International revenues grew by 58% to $280 million, primarily due to increased electricity sales at the two facilities in India.

Net income grew 7% to $139 million, up from $131 million in 2007.

Operating cash flow was $403 million for the year compared to $364 million the prior year. Adjusted EBITDA was $574 million compared to $549 million the prior year.

The company used almost all of its operating cash flow to invest in the business and to retire $195 million in debt. Capital expenditures were $88 million, as detailed on Exhibit 6 attached hereto. The company invested $73 million in acquisitions and $19 million in equity interests.

Anthony Orlando, president and chief executive officer of Covanta, stated that “In this difficult economic climate, we are fortunate that the vast majority of our revenues are derived from contracts to provide essential services. During 2008, waste processed at our Energy-from-Waste facilities hit record levels. This in turn enabled us to finish the year with operating cash flow and Adjusted EBITDA within the guidance ranges that we set at the beginning of that year. In light of the economic turmoil, I’m pleased with our performance.”

“Looking ahead, the slow economy will put downward pressure on our key financial metrics, but we are in an excellent position to manage these difficult times. Our balance sheet is solid, we continue to generate substantial free cash flow and we are actively pursuing a good pipeline of growth opportunities. From a legislative perspective, the stimulus bill that became law last week extended production tax credits for renewable energy, including new Energy-from-Waste projects. Hopefully this momentum will carry over to a renewable energy bill that could spur tremendous growth for our industry,” added Orlando.