225648--3/14/2006--COVANTA_HOLDING

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{debt, indebtedness, cash}

{cost, operation, labor}

{control, financial, internal}

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Reduced liquidity and price volatility could result in a loss to investors. Concentrated stock ownership and a restrictive certificate of incorporation provision may discourage unsolicited acquisition proposals. Future sales of our common stock may depress our stock price. Our controls and procedures may not prevent or detect all acts of fraud. Failure to maintain an effective system of internal control over financial reporting may have an adverse effect on our stock price. Waste and Energy Services Business-Specific Risks In connection with the ARC Holdings acquisition, Covanta has incurred a large amount of debt, and we cannot assure you that our cash flow from operations will be sufficient to pay this debt. We may not have access to the cash flow and other assets of our subsidiaries that may be needed to make payment on Covanta Energy s debt. Our ability to grow our Waste and Energy Services business may be limited. Operation of our Waste and Energy Services facilities and the expansion of facilities involve significant risks. Development, construction and operation of new projects may not commence as scheduled, or at all. Our insurance and contractual protections may not always cover lost revenues, increased expenses or liquidated damages payments. Performance reductions could materially and adversely affect us and our projects may operate at lower levels than expected. Our Waste and Energy Services businesses generate their revenue primarily under long-term contracts and must avoid defaults under their contracts in order to service their debt and avoid material liability to contract counterparties. Covanta Energy and certain of its subsidiaries have provided guarantees and support in connection with its subsidiaries projects. Covanta Energy may face increased risk of market influences on its domestic revenues after its contracts expire. Our Waste and Energy Services businesses depend on performance by third parties under contractual arrangements. Concentration of suppliers and customers may expose us to heightened financial exposure. Our Waste and Energy Services business is subject to pricing fluctuations caused by the waste disposal and energy markets. Covanta Energy s waste operations are concentrated in one region, and expose us to regional economic or market declines. Some of Covanta Energy s energy contracts involve greater risk of exposure to performance levels which could result in materially lower revenues. We may be unable to integrate the operations of ARC Holdings and Covanta Energy successfully and may not realize the full anticipated benefits of the acquisition. Exposure to international economic and political factors may materially and adversely affect our Waste and Energy Services businesses. Exposure to foreign currency fluctuations may affect CPIH s costs of operations. Exposure to fuel supply prices may affect CPIH s costs and results of operations. Our inability to obtain resources for operations may adversely affect our ability to effectively compete. Our efforts to grow our business will require us to incur significant costs in business development, often over extended periods of time, with no guarantee of success. Compliance with environmental laws could adversely affect our results of operations. Energy regulation could adversely affect our revenues and costs of operations. Failure to obtain regulatory approvals could adversely affect our operations. The energy industry is becoming increasingly competitive, and we might not successfully respond to these changes. Changes in technology may have a material adverse effect on our profitability. We have incurred and will continue to incur significant transaction and combination-related costs in connection with the acquisition of ARC Holdings. Insurance regulations may affect NAICC s operations. The insurance products sold by NAICC are subject to intense competition. If NAICC s loss experience exceeds its estimates, additional capital may be required. Failure to satisfy capital adequacy and risk-based capital requirements would require NAICC to obtain additional capital.

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225648--3/14/2006--COVANTA_HOLDING_CORP