The terms "we," "our," "ours," "us," "Covanta" and "Company" refer to Covanta Holding Corporation and its subsidiaries; the term "Covanta Energy" refers to our subsidiary Covanta Energy Corporation and its subsidiaries. The following discussion addresses our financial condition as of June 30, 2012 and our results of operations for the three and six months ended June 30, 2012, compared with the same periods last year. It should be read in conjunction with our Audited Consolidated Financial Statements and Notes thereto for the year ended December 31, 2011 and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2011 ("Form 10-K"), to which the reader is directed for additional information. The preparation of interim financial statements necessarily relies heavily on estimates. Due to the use of estimates and certain other factors, such as the seasonal nature of our waste and energy services business, as well as competitive and other market conditions, we do not believe that interim results of operations are indicative of full year results of operations. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

OVERVIEW

Covanta is one of the world's largest owners and operators of infrastructure for
the conversion of waste to energy (known as "energy-from-waste" or "EfW"), as
well as other waste disposal and renewable energy production businesses.
Energy-from-waste serves two key markets as both a sustainable waste disposal
solution that is environmentally superior to landfilling and as a source of
clean energy that reduces overall greenhouse gas emissions and is considered
renewable under the laws of many states and under federal law. Our facilities
are critical infrastructure assets that allow our customers, which are
principally municipal entities, to provide an essential public service.
Our EfW facilities earn revenue from both the disposal of waste and the
generation of electricity, generally under long-term contracts, as well as from
the sale of metal recovered during the energy-from-waste process. We process
approximately 20 million tons of solid waste annually, representing
approximately 5% of the solid waste generation in the United States. We operate
and/or have ownership positions in 44 energy-from-waste facilities, which are
primarily located in North America, and 14 additional energy generation
facilities, including other renewable energy production facilities in North
America (wood biomass and hydroelectric). In total, these assets produce
approximately 10 million megawatt ("MW") hours of baseload electricity annually,
representing approximately 7% of the nation's non-hydroelectric renewable power.
We also operate a waste management infrastructure that is complementary to our
core EfW business.
We hold equity interests in energy-from-waste facilities in China and Italy. We
are pursuing additional growth opportunities in parts of Europe, primarily in
the United Kingdom, where the market demand, regulatory environment or other
factors encourage technologies such as energy-from-waste to reduce dependence on
landfilling for waste disposal and fossil fuels for energy production in order
to reduce greenhouse gas emissions.
We also have investments in subsidiaries engaged in insurance operations in
California, primarily in property and casualty insurance; however these
collectively account for less than 1% of our consolidated revenue.
We plan to allocate capital to maximize stockholder value by investing in: our
existing businesses to maintain and enhance assets, high value core business
development projects and strategic acquisitions when available, and by returning
surplus capital to our stockholders. During each of the first and second
quarters of 2012, we declared a quarterly cash dividend of $0.15 per share and
during the six months ended June 30, 2012, we repurchased 3.7 million shares of
our common stock at a weighted average cost of $16.25 per share for an aggregate
amount of approximately $60 million. For additional information, see Liquidity
and Capital Resources below.
Strategy
Our mission is to be the leading energy-from-waste company in the world, which
we intend to pursue through the following key strategies:
•   Grow the value of our existing portfolio. We intend to maximize the long-term
    value of our existing portfolio by continuously improving safety, health and
    environmental performance, working in partnership with our client
    communities, continuing to operate at our historic production levels,
    maintaining our facilities in optimal condition, and managing our expenses.
    We also intend to effect organic growth through adding or extending waste and
    service contracts, seeking incremental revenue opportunities by investing in
    and enhancing the capabilities of our existing assets, deploying new or
    improved technologies targeted at increasing revenue or reducing costs and
    expanding our customer base and service offerings.



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• Expand through development and/or acquisitions in selected attractive

    markets. We seek to grow our portfolio primarily through the development of
    new facilities and acquisitions where we believe that market and regulatory
    conditions will enable us to invest our capital at attractive risk-adjusted
    rates of return. We are currently focusing on development opportunities in
    the United States and Canada, which we consider to be our core markets. In
    addition, we believe that there are numerous attractive opportunities in the
    United Kingdom, where national policies, such as a substantial tax on
    landfill use, are intended to achieve compliance with the European Union
    ("EU") Landfill Directive.

We believe that our approach to development opportunities is highly-disciplined, both with regard to our required rates of return and the manner in which potential new projects will be structured and financed. In general, prior to the commencement of construction of a new facility, we intend to enter into long-term contracts with municipal and/or commercial customers for a substantial portion of the disposal capacity and obtain non-recourse project financing for a substantial portion of the capital investment. We intend to finance new projects in a prudent manner, minimizing the impact on our balance sheet and credit profile at the parent company level where possible. • Develop and commercialize new technology. We believe that our efforts to

    protect and expand our business will be enhanced by the development of
    additional technologies in such fields as emission controls, residue
    disposal, alternative waste treatment processes, gasification, and combustion
    controls. We have advanced our research and development efforts in these
    areas, and have developed and have patents pending for major advances in
    controlling nitrogen oxide ("NOx") emissions and have a patent for a
    proprietary process to improve the handling of the residue from our
    energy-from-waste facilities. We have also entered into various agreements
    with multiple partners to invest in the development, testing or licensing of
    new technologies related to the transformation of waste materials into
    renewable fuels or the generation of energy, as well as improved
    environmental performance.

• Advocate for public policy favorable to energy-from-waste. We seek to educate

    policymakers and regulators about the environmental and economic benefits of
    energy-from-waste and advocate for policies and regulations that
    appropriately reflect these benefits. Energy-from-waste is a highly regulated
    business, and as such we believe that it is critically important for us, as
    an industry leader, to play an active role in the debates surrounding
    potential policy developments that could impact our business.

• Allocate capital efficiently. We plan to allocate capital to maximize

    stockholder value by: investing in our existing businesses to maintain and
    enhance assets; effecting organic growth; investing in high value core
    business development projects and strategic acquisitions when available; and
    by returning surplus capital to our stockholders.


Factors Affecting Business Conditions and Financial Results
Economic - The economic slowdown reduced demand for goods and services
generally, which reduced overall volumes of waste requiring disposal and the
pricing at which we can attract waste to fill available capacity. We receive the
majority of our revenue under short- and long-term contracts, with little or no
exposure to price volatility, but with adjustments intended to reflect changes
in our costs. Where our revenue is received under other arrangements and
depending upon the revenue source, we have varying amounts of exposure to price
volatility.
The largest component of our revenue is waste revenue, which has generally been
subject to less price volatility than our revenue derived from the sale of
energy and metals. Waste markets tend to be affected by local and regional
economic activity. The downturn in economic activity has reduced waste
generation rates in the northeast United States which subsequently caused market
waste disposal prices to decline modestly.
Furthermore, global demand and pricing of certain commodities, such as the scrap
metals we recycle from our energy-from-waste facilities have also been
materially affected by economic activity in recent years. Metal markets tend to
be affected by national and global economic activity. Pricing for recycled
metals reached historically high levels in 2008, and declined significantly in
2009 due to the downturn in economic activity. During 2010 through the first
quarter of 2012, pricing for recycled metals recovered from the economically
deflated rates in 2009. Market pricing for recycled metals has declined during
the second quarter of 2012 and July 2012.
At the same time, the declines in United States natural gas prices have pushed
electricity and steam pricing generally lower, which causes lower revenue for
the portion of the energy we sell which is not under fixed-price contracts.
Energy markets tend to be affected by regional and national economic activity
and regulations. Natural gas is a commodity with limited storage capacity. As
such market prices move based on fundamental supply and demand. The decline in
natural gas prices in 2011 and the first half of 2012 was attributed to
increased supply related to significant increase in shale gas drilling and
reduced demand related to generally mild winter weather conditions and the
continued sluggish economy.  Recently, prices have rebounded modestly due to
reduction in drilling and higher demand related to hot summer weather.
At certain of our biomass facilities, lower energy prices combined with higher
fuel prices have caused us to economically dispatch operations where continued
operations are not currently profitable. We will continue to consider this
practice until we experience increased energy revenue, or decreased fuel costs
or both.

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The downturn in economic activity has also affected many municipalities and
public authorities, some of which are our customers. Many local and central
governments are seeking to reduce expenses in order to address declining tax
revenues. We work closely with these municipal customers, with many of whom we
have shared a long-term relationship, to effectively counter some of these
economic challenges.
Market Pricing for Waste, Energy and Metal - Global and regional economy
activity, as well as technological advances, regulations and a variety of other
factors, will affect market supply and demand and therefore prices for waste
disposal services, energy (including electricity and steam) and other
commodities such as ferrous and non-ferrous metals. As market prices for waste
disposal, electricity, steam and recycled metal rise it benefits our existing
business as well as our prospects for growth through expansions or new
development. Conversely, market price declines for these services and
commodities will adversely affect both our existing business and growth
prospects.
Seasonal - Our quarterly operating income within the same fiscal year typically
differs substantially due to seasonal factors, primarily as a result of the
timing of scheduled plant maintenance. We typically conduct scheduled
maintenance periodically each year, which requires that individual boiler and/or
turbine units temporarily cease operations. During these scheduled maintenance
periods, we incur material repair and maintenance expenses and receive less
revenue until the boiler and/or turbine units resume operations. This scheduled
maintenance typically occurs during periods of off-peak electric demand and/or
lower waste volumes, which are our first, second and fourth fiscal quarters. The
first half of the year scheduled maintenance period is typically the most
extensive. The third quarter scheduled maintenance period is typically the least
extensive. Given these factors, we typically experience our lowest operating
income from our projects during our first half of each year.
In addition, at certain of our project subsidiaries, distributions of excess
earnings (above and beyond monthly operation and maintenance service payments)
are subject to periodic tests of project debt service coverage or requirements
to maintain minimum working capital balances. While these distributions occur
throughout the year based upon the specific terms of the relevant project debt
arrangements, they are typically highest in the fourth quarter. Our net cash
provided by operating activities exhibits seasonal fluctuations as a result of
the timing of these distributions, including a benefit in the fourth quarter
compared to the first nine months of the year.
Performance - We have historically performed our operating obligations without
experiencing material unexpected service interruptions or incurring material
increases in costs. In addition, with respect to many of our contracts, we
generally have limited our exposure for risks not within our control. For
additional information about such risks and damages that we may owe for
unexcused operating performance failures, see Item 1A. Risk Factors included in
our Form 10-K. In monitoring and assessing the ongoing operating and financial
performance of our businesses, we focus on certain key factors: tons of waste
processed, electricity and steam sold, and boiler availability.
Our ability to meet or exceed historical levels of performance at projects, and
our general financial performance, is affected by the following:
•   Seasonal or long-term changes in market prices for waste, energy, or ferrous

and non-ferrous metals for projects where we sell into those markets;

• Seasonal or geographic changes in the price and availability of wood waste as

fuel for our biomass facilities;

• Seasonal, geographic and other variations in the heat content of waste

processed, and thereby the amount of waste that can be processed by an

energy-from-waste facility;

• Our ability to avoid unexpected increases in operating and maintenance costs

while ensuring that adequate facility maintenance is conducted so that

historic levels of operating performance can be sustained;

• Contract counterparties' ability to fulfill their obligations, including the

    ability of our various municipal customers to supply waste in contractually
    committed amounts, and the availability of alternate or additional sources of
    waste if excess processing capacity exists at our facilities; and

• The availability and adequacy of insurance to cover losses from business

interruption in the event of casualty or other insured events.

General financial performance at our international projects is also affected by the financial condition and creditworthiness of our international customers and partners, fluctuations in the value of the domestic currency against the value of the U.S. dollar, and political risks inherent to the international business. Business Segment We have one reportable segment which is Americas and is comprised of waste and energy services operations primarily in the United States and Canada. The Americas segment is comprised primarily of energy-from-waste projects. Our energy-from-waste projects generate revenue from three main sources: (1) fees charged for operating projects or processing waste received, (2) the sale of electricity and/or steam, and (3) the sale of ferrous and non-ferrous metals that are recycled as part of the energy-from-waste process. We may also generate additional revenue from the construction or expansion of a facility when a municipal client owns the facility. Our customers for waste disposal or facility operations are principally municipal entities, though we also market disposal capacity at certain

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facilities to commercial and special waste customers. Our facilities sell energy
primarily to utilities at contracted rates or, in situations where a contract is
not in place, at prevailing market rates in regional markets (primarily PJM,
NEPOOL and NYISO in the Northeastern United States).
We also operate, and in some cases have ownership interests in, transfer
stations and landfills which generate revenue from ash disposal fees or
operating fees. In addition, we own, and in some cases operate, other renewable
energy projects in the Americas segment which generate electricity from wood
waste (biomass) and hydroelectric resources. The electricity from these other
renewable energy projects is sold to utilities under contracts or into the
regional power pool at short-term rates. For these projects, we receive revenue
from sales of energy, capacity and/or cash from equity distributions and
additional value from the sale of renewable energy credits.
Contract Structures
We currently operate energy-from-waste projects in 16 states and one Canadian
province, and are constructing an energy-from-waste project in a second Canadian
province. Most of our energy-from-waste projects were developed and structured
contractually as part of competitive procurement processes conducted by
municipal entities. As a result, many of these projects have common features.
However, each service agreement is different reflecting the specific needs and
concerns of a client community, applicable regulatory requirements and other
factors. The following describes features generally common to these agreements,
as well as important distinctions among them:
•   We design the facility, help to arrange for financing and then we either
    construct and equip the facility on a fixed price and schedule basis, or we
    undertake an alternative role, such as construction management, if our
    municipal client so desires.

• Our projects were generally financed at construction with project debt in the

    form of tax-exempt municipal bonds issued by a sponsoring municipality, which
    generally mature at the same time the initial term of our service contract
    expires and are repaid over time based on set amortization schedules. At Tip
    Fee facilities, our project subsidiary is responsible for meeting any debt
    service or lease payment obligations out of the revenue generated by the
    facility. At Service Fee projects that we own and where project debt is in
    place, a portion of our monthly fee from the municipal client is dedicated,
    dollar-for-dollar, to project debt service. For these facilities, the bond
    proceeds are loaned to us to pay for facility construction and to fund a debt
    service reserve for the project, which is generally sufficient to pay
    principal and interest for one year. Project-related debt is included as
    "project debt" and the debt service reserves are included as "restricted
    funds held in trust" in our condensed consolidated financial statements.
    Generally, project debt is secured by the project's revenue, contracts and
    other assets of our project subsidiary. When the service contract expires and
    the debt is paid off, the project owner (either Covanta or the municipal
    entity) will determine the form of any new contractual arrangements. We are
    not responsible for debt service for projects that we neither own nor lease.

• Following construction and during operations, we receive revenue from two

    primary sources: fees we receive for operating and maintaining projects or
    for processing waste received, and payments we receive for electricity and/or
    steam we sell.

• We agree to operate the facility and meet minimum waste processing capacity

    and efficiency standards, energy production levels and environmental
    standards. Failure to meet these requirements or satisfy the other material
    terms of our agreement (unless the failure is caused by our client community
    or by events beyond our control), may result in damages charged to us or, if
    the breach is substantial, continuing and unremedied, termination of the
    applicable agreement. These damages could include amounts sufficient to repay
    project debt (as reduced by amounts held in trust and/or proceeds from sales
    of facilities securing project debt) and as such, these contingent
    obligations cannot readily be quantified. We have issued performance
    guarantees to our client communities and, in some cases other parties, which
    guarantee that our project subsidiaries will perform in accordance with
    contractual terms including, where required, the payment of such damages. If
    one or more contracts were terminated for our default, these contractual
    damages may be material to our cash flow and financial condition. To date, we
    have not incurred material liabilities under such performance guarantees.

• The client community generally must deliver minimum quantities of municipal

    solid waste to the facility on a put-or-pay basis and is obligated to pay a
    fee for its disposal. A put-or-pay commitment means that the client community
    promises to deliver a stated quantity of waste and pay an agreed amount for
    its disposal, regardless of whether the full amount of waste is actually
    delivered. Client communities have consistently met their commitment to
    deliver the stated quantity of waste. Where a Service Fee structure exists,
    portions of the service fee escalate to reflect indices for inflation, and in
    many cases, the client community must also pay for other costs, such as
    insurance, taxes, and transportation and disposal of the ash residue to the
    disposal site. Generally, expenses resulting from the delivery of
    unacceptable and hazardous waste on the site are also borne by the client
    community. In addition, the contracts generally require the client community
    to pay increased expenses and capital costs resulting from unforeseen
    circumstances, subject to specified limits. At three publicly-owned
    facilities we operate, our client community may terminate the operating
    contract under limited circumstances without cause.

• Our financial returns are expected to be stable if we do not incur material

    unexpected operation and maintenance costs or other expenses. In addition,
    most of our energy-from-waste project contracts are structured so that
    contract counterparties generally bear, or share in, the costs associated
    with events or circumstances not within our control, such as uninsured force
    majeure events and changes in legal requirements. The stability of our
    revenues and returns could be affected by our ability



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to continue to enforce these obligations. Also, at some of our energy-from-waste facilities, commodity price risk is mitigated by passing through commodity costs to contract counterparties. With respect to our other renewable energy projects, such structural features generally do not exist because either we operate and maintain such facilities for our own account or we do so on a cost-plus basis rather than a fixed-fee basis. • We receive the majority of our revenue under short- and long-term contracts,

    with little or no exposure to price volatility, but with adjustments intended
    to reflect changes in our costs. Where our revenue is received under other
    arrangements and depending upon the revenue source, we have varying amounts
    of exposure to price volatility. The largest component of our revenue is
    waste revenue, which has generally been subject to less price volatility than
    our revenue derived from the sale of energy and metals. At some of our
    renewable energy projects, our operating subsidiaries purchase fuel in the
    open markets which exposes us to fuel price risk.

• We generally sell the energy output from our projects to local utilities

    pursuant to long-term contracts. At several of our energy-from-waste
    projects, we sell energy output under short-term contracts or on a spot-basis
    to our customers.


Contracted and Merchant Capacity
Our service and waste disposal agreements, as well as our energy contracts,
expire at various times. The extent to which any such expiration will affect us
will depend upon a variety of factors, including whether we own the project,
market conditions then prevailing, and whether the municipal client exercises
options it may have to extend the contract term. As our contracts expire, we
will become subject to greater market risk in maintaining and enhancing our
revenues. As service agreements at municipally-owned facilities expire, we
intend to seek to enter into renewal or replacement contracts to operate such
facilities. We will also seek to bid competitively in the market for additional
contracts to operate other facilities as similar contracts of other vendors
expire. As our service and waste disposal agreements at facilities we own or
lease expire, we intend to seek replacement or additional contracts, and because
project debt on these facilities will be paid off at such time, we expect to be
able to offer rates that will attract sufficient quantities of waste while
providing acceptable revenues to us. At facilities we own, the expiration of
existing energy contracts will require us to sell our output either into the
local electricity grid at prevailing rates or pursuant to new contracts.
To date, we have been successful in extending a majority of our existing
contracts to operate energy-from-waste facilities owned by municipal clients
where market conditions and other factors make it attractive for both us and our
municipal clients to do so. See Growth and Development discussion below for
additional information. The extent to which additional extensions will be
attractive to us and to our municipal clients who own their projects will depend
upon the market and other factors noted above. However, we do not believe that
either our success or lack of success in entering into additional negotiated
extensions to operate such facilities will have a material impact on our overall
cash flow and profitability for the next several years.
As we seek to enter into extended or new contracts, we expect that medium- and
long-term contracts for waste supply, at least for a substantial portion of
facility capacity, will be available on acceptable terms in the marketplace. We
also expect that medium- and long-term contracts for sales of electricity will
be less available than in the past, while medium- and long-term contracts for
sales of other energy products may be more attainable. As a result, following
the expiration of these long-term contracts, we expect to have on a relative
basis more exposure to market risk, and therefore revenue fluctuations, in
energy markets than in waste markets. We have entered into contractual
arrangements in order to mitigate our exposure to revenue fluctuations in energy
markets through a variety of hedging techniques, and we expect to continue to do
so in the future. Our efforts in this regard will involve only mitigation of
price volatility for the energy we produce, and will not involve speculative
energy trading.
In conjunction with our energy-from-waste business, we also own and/or operate
13 transfer stations and four ash landfills in the northeast United States,
which we utilize to supplement and manage more efficiently the fuel and ash
disposal requirements at our energy-from-waste operations. We provide waste
procurement services to our waste disposal and transfer facilities which have
available capacity to receive waste. With these services, we seek to maximize
our revenue and ensure that our energy-from-waste facilities are being utilized
most efficiently, taking into account maintenance schedules and operating
restrictions that may exist from time to time at each facility. We also provide
management and marketing of ferrous and non-ferrous metals recovered from
energy-from-waste operations, as well as services related to non-hazardous
special waste destruction and ash residue management for our energy-from-waste
projects.
Growth and Development
We intend to grow our business through expanding the capabilities of our
existing business, and adding new projects through development and/or
acquisition, all with the goal of maximizing long-term stockholder return. Our
growth opportunities include: organic growth, new energy-from-waste and other
renewable energy projects, existing project expansions, acquisitions, and
businesses ancillary to our existing business, such as additional waste
transfer, transportation, processing, recovery and disposal businesses. We also
intend to maintain a focus on research and development of technologies that we
believe will enhance our competitive position, and offer new technical solutions
to waste and energy problems that augment and complement our business.
We will effect organic growth through adding or extending waste and service
contracts, seeking incremental revenue opportunities by investing in and
enhancing the capabilities of our existing assets, deploying new or improved
technologies targeted at increasing revenue or reducing costs in areas such as
metals recovery, and expanding our customer base and service offerings.

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We also have extensive experience in developing, constructing, operating, acquiring and integrating waste and energy services businesses. We intend to continue our efforts on pursuing acquisition-based growth in the United States, Canada, and the United Kingdom. We will also continue to pursue growth through development opportunities in the same markets, where the demand, regulatory environment or other factors encourage technologies such as energy-from-waste to reduce dependence on landfilling for waste disposal and fossil fuels for energy production. We have a project development pipeline and continue to pursue several billion dollars worth of energy-from-waste opportunities. However, there is substantial time and uncertainty involved in the bidding and permitting process for each project opportunity. If, and when, these development efforts are successful, we plan to invest in these projects to achieve an attractive return on capital particularly when leveraged with project debt which we intend to utilize for all of our development projects.

BUSINESS DEVELOPMENT AND ORGANIC GROWTH
Alexandria/Arlington County Energy-from-Waste Facility
In February 2012, we entered into a new tip fee contract with the City of
Alexandria and Arlington County to provide for continued waste supply to our
Alexandria EfW facility through 2025. Both parties have the option to terminate
the agreement in 2019. The agreement also provides the City of Alexandria and
Arlington County with the option to extend the agreement to 2038.
Braintree Transfer Station
In March 2012, we began a major renovation project to increase recycling
capacity at the Braintree transfer station located near our Southeast
Massachusetts EfW facility. The project is expected to be completed by the end
of 2012. The town of Braintree extended the site lease agreement with the
facility to 2030.
Montgomery County Energy-from-Waste Facility
We extended the service agreement for our Montgomery County EfW facility and
Derwood transfer station from 2016 to 2021 on substantially the same terms as in
the existing agreement.
Niagara Energy-from-Waste Facility
During the first quarter of 2012, we extended a steam sale contract from 2013 to
2021 for our Niagara EfW facility. This contract combined with new and extended
contracts entered in 2011 will increase the steam demand from our customer base
and will require us to invest in capital expenditures in 2012 and 2013 to
install a new natural gas package boiler and steam line to connect to our new
customers.
Springfield Energy-from-Waste Facility
In April 2012, we extended the service fee agreement with the City of
Springfield for our Springfield EfW facility from 2014 to 2024. This contract
represents about one-third of the capacity at our Springfield EfW facility. The
agreement also includes an amendment to our contract relating to the ash
landfill that is directly adjacent to the facility which will support our plan
to build and operate a new metal recovery and recycling facility at the ash
landfill.
Stanislaus Energy-from-Waste Facility
In June 2012, we amended and extended our service fee agreement with the City of
Modesto and the County of Stanislaus, California. The contract was amended to a
tip fee agreement under which the City of Modesto and the County of Stanislaus
will continue to supply nearly all the facility's waste through 2027.
Tulsa Energy-from-Waste Facility
In June 2012, we extended a tip fee agreement for our Tulsa EfW facility with
the City of Tulsa, Oklahoma from 2012 to 2022. The City of Tulsa will supply
approximately one third of the facility's waste.
Organic Growth Investments
During the six months ended June 30, 2012, we invested approximately $11 million
in various organic growth initiatives, including by enhancing the capabilities
of our existing assets, deploying new or improved technologies targeted at
increasing revenue and expanding our customer base and service offerings.


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ASSETS HELD FOR SALE AND DISPOSITIONS
In 2010, we adopted a plan to sell our interests in certain fossil fuel
independent power production facilities in the Philippines, India, and
Bangladesh. During 2011, we sold the majority of those assets and in April 2012,
we completed the sale of our interest in a barge-mounted 126 MW (gross)
diesel/natural gas-fired electric power generation facility located near
Haripur, Bangladesh, the last of the four Asia fossil fuel independent power
production ("IPP") assets designated as assets held for sale. We have realized
total net proceeds of approximately $268 million, net of transaction costs, for
the sale of these four IPP assets.
The assets and liabilities associated with these businesses are presented in our
condensed consolidated balance sheets as "Current Assets Held for Sale" and
"Current Liabilities Held for Sale." The results of operations of these
businesses are included in the condensed consolidated statements of income as
"Income from discontinued operations, net of tax." The cash flows of these
businesses are also presented separately in our condensed consolidated
statements of cash flows.

OTHER

Hartford Energy-from-Waste Facility
On May 31, 2012, our contract with the Connecticut Resource Recovery Authority
expired under which we operated only the boilers and turbines for the Hartford
EfW facility. The effect of the loss of revenues and related expenses from this
contract is not material to our condensed consolidated financial statements.
China Energy-from-Waste Facilities
We own a 40% equity interest in Chongqing Sanfeng Covanta Environmental Industry
Co., Ltd. ("Sanfeng").  During the three months ended June 30, 2012, Sanfeng
sold its existing 32% interest in the Fuzhou EfW project in China.  Equity in
net income from unconsolidated investments includes a $2 million gain for our
equity interest in the sale of Sanfeng's interest in the Fuzhou EfW project. In
a related transaction, Sanfeng increased its ownership interest in the Tongxing
EfW facility in China from 25% to 40%.

RESULTS OF OPERATIONS The comparability of the information provided below with respect to our revenues, expenses and certain other items for the periods presented was affected by several factors. As outlined above under Overview - Growth and Development, our business development initiatives resulted in various additional projects which increased comparative revenues and expenses. These factors must be taken into account in developing meaningful comparisons between the periods compared below.

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