EXHIBIT 99.1
Certain information provided to and by
Goldman Sachs Credit Partners, L.P. and Credit Suisse First Boston
Pro forma for the recently announced acquisition of American Ref-Fuel Holdings Corp. (“ARC”), approximately 85% of Covanta Energy Corporation’s (“Covanta” or the “Company”) revenues will come from the domestic waste to energy business and approximately 70% of total pro forma revenue will be generated under contracts with a remaining term of at least 5 years.
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As of December 31, 2004, the size of Danielson Holding Corporation’s net operating loss carry forwards was estimated to be in excess of $500 million.
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Capitalization of Covanta and ARC on a Pro Forma Basis ($mm)
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Pro Forma 9/30/04 Cap Table | |
| | Cash | | | Debt | | | xLTM Adj. | | | | | | | xLTM Adj. | |
Capitalization | | Amount | | | Amount | | | EBITDA1 | | | Net Debt | | | EBITDA1 | |
Project Level Restricted Cash | | $ | 364.0 | | | | | | | | | | | | | | | | | |
ARC Non-recourse Project Debt | | | | | | | 534.2 | | | | 1.0 | x | | | | | | | | |
Covanta Non-recourse Project Debt | | | | | | | 930.0 | | | | 2.8 | | | | | | | | | |
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Total Non-recourse Project Debt | | $ | 364.0 | | | | 1,464.2 | | | | 2.8 | x | | $ | 1,100.2 | 4 | | | 2.1x | |
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Other Recourse Project Debt | | | | | | | 251.2 | | | | 3.3 | | | | | | | | | |
ARC 6.26% Sr Nts due 2015 | | | | | | | 253.0 | | | | 3.8 | | | | | | | | | |
MSW I 8.500% Sr Sec Nts due 2010 | | | | | | | 200.0 | | | | 4.2 | | | | | | | | | |
MSW II 7.375% Sr Sec Nts due 2010 | | | | | | | 225.0 | | | | 4.6 | | | | | | | | | |
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Total Project and Intermediate Debt | | $ | 364.0 | | | $ | 2,393.4 | | | | 4.6 | x | | $ | 2,029.4 | 4 | | | 3.9x | |
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Covanta Corporate Level Unrestricted Cash | | | 152.0 | | | | | | | | | | | | | | | | | |
New First Lien Term Loan | | | | | | | 250.0 | | | | 5.1 | | | | | | | | | |
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Total First Priority Debt | | $ | 516.0 | | | $ | 2,643.4 | | | | 5.1 | x | | $ | 2,127.4 | 4, 5 | | | 4.1x | |
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New Second Lien Term Loan / Notes | | | | | | | 450.0 | | | | 5.9 | | | | | | | | | |
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Total Debt | | $ | 516.0 | | | $ | 3,093.4 | | | | 5.9 | x | | $ | 2,577.4 | | | | 5.0x | |
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Market Equity2 | | | | | | | 1,587.8 | | | | 9.0 | | | | | | | | | |
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Total Capitalization | | $ | 516.0 | | | $ | 4,681.2 | | | | | | | | | | | | | |
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Selected Pro Forma Operating Assumptions and Credit Statistics
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Assumed Adj. EBITDA/Interest | | | 2.9 | x |
(Assumed Adj. EBITDA-CapEx)/Interest | | | 2.6 | |
Revenue | | $ | 1,166 | |
Adjusted EBITDA | | | 519 | |
Capex3 | | | 53 | |
Interest6 | | | 178 | |
| | 1. LTM Adjusted EBITDA of $519mm based on $277mm for ARC and an Adjusted EBITDA of $242mm for Covanta. |
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| | 2. Represents market cap as of 2-Mar-05 pro forma for a cash equity contribution of $400mm. |
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| | 3. See Investments in Facilities for Covanta, see Additions of PP&E for ARC. |
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| | 4. Includes Project Level Restricted Cash of $364mm. |
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| | 5. Includes Corporate Unrestricted Cash of $152mm. |
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| | 6. Includes all the interest at MSW Energy Holdings LLC and MSW Energy Holdings II LLC. |
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Asset Summary of Covanta and ARC on a Pro Forma Basis
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Private | | | | Initial Service | | PPA | | | Waste | | | Gross | | | |
WTE Facility | | | | Agreement | | Expiration | | | Disposal | | | Electric | | | |
Location | | State | | Expiration | | Date | | | (TPD) | | | Output (MW) | | | Technology |
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Fairfax | | Virginia | | 2011 | | | 2015 | | | | 3,000 | | | | 79 | 4 | | Martin |
SEMASS | | Massachusetts | | 2005-2016 | | | 2015 | | | | 2,700 | | | | 79 | 4 | | RDF |
Essex | | New Jersey | | 2020 | | | 2021 | | | | 2,700 | | | | 70 | | | DB |
Hempstead | | New York | | 2009 | | | 2009 | | | | 2,505 | | | | 72 | 4 | | DB |
Indianapolis | | Indiana | | 2008 | | | 2008 | | | | 2,362 | | | | 6 | 3 | | Martin |
Niagara Falls | | New York | | 2007-2012 | | | 2014 | | | | 2,250 | | | | 50 | 3 | | DB / RDF |
Haverhill | | Massachusetts | | NA | | | 2019 | | | | 1,650 | | | | 45 | | | Martin |
Onondaga1 | | New York | | 2015 | | | 2025 | | | | 990 | | | | 37 | | | Martin |
Alexandria | | Virginia | | 2013 | | | 2023 | | | | 975 | | | | 22 | | | Martin |
Stanislaus | | California | | 2010 | | | 2010 | | | | 800 | | | | 22 | | | Martin |
Huntington1 | | New York | | 2012 | | | 2012 | | | | 750 | | | | 24 | | | Martin |
Babylon | | New York | | 2019 | | | 2019 | | | | 750 | | | | 17 | | | Martin |
SECONN | | Connecticut | | 2015 | | | 2017 | | | | 689 | | | | 18 | | | DB |
Bristol | | Connecticut | | 2014 | | | 2014 | | | | 650 | | | | 16 | | | Martin |
Marion | | Oregon | | 2014 | | | 2014 | | | | 550 | | | | 13 | | | Martin |
Lake | | Florida | | 2014 | | | 2014 | | | | 528 | | | | 14 | | | Martin |
Wallingford | | Connecticut | | 2010 | | | 2010 | | | | 420 | | | | 11 | | | Other |
Warren2 | | New Jersey | | 2008 | | | 2013 | | | | 400 | | | | 12 | | | Martin |
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Total | | | | | | | | | | | 24,669 | | | | 607 | | | |
1 | | Facilities are limited partnerships |
2 | | In bankruptcy. |
3 | | Facility has been designed to export steam for sale. |
4 | | Net electric output. |
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Public | | | | Initial Service | | PPA | | | Waste | | | Gross | | | |
WTE Facility | | | | Agreement | | Expiration | | | Disposal | | | Electric | | | |
Location | | State | | Expiration | | Date | | | (TPD) | | | Output (MW) | | | Technology |
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Detroit | | Michigan | | 2009 | | | 2008 | | | | 2,832 | | | | 682 | | | RDF |
Delaware1 | | Pennsylvania | | 2017 | | | 2016 | | | | 2,688 | | | | 793 | | | RDF |
Honolulu | | Hawaii | | 2010 | | | 2015 | | | | 2,160 | | | | 57 | | | RDF |
Hartford | | Connecticut | | 2012 | | | 2012 | | | | 2,000 | | | | 69 | | | RDF |
Montgomery | | Maryland | | 2016 | | | 2006 | | | | 1,800 | | | | 63 | | | Martin |
Union1 | | New Jersey | | 2023 | | NA | | | 1,440 | | | | 42 | | | Martin |
Hennepin | | Minnesota | | 2018 | | | 2018 | | | | 1,212 | | | | 39 | | | Martin |
Lee | | Florida | | 2014 | | | 2015 | | | | 1,200 | | | | 37 | | | Martin |
Lancaster | | Pennsylvania | | 2011 | | | 2016 | | | | 1,200 | | | | 33 | | | Martin |
Hillsborough | | Florida | | 2007 | | | 2010 | | | | 1,200 | | | | 29 | | | Martin |
Pasco | | Florida | | 2011 | | | 2024 | | | | 1,050 | | | | 30 | | | Martin |
Huntsville | | Alabama | | 2016 | | | 2016 | | | | 690 | | | Steam | | Martin |
Kent | | Michigan | | 2010 | | | 2022 | | | | 625 | | | | 172 | | | Martin |
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Total | | | | | | | | | | | 17,265 | | | | 563 | | | |
1 | | Facilities are under long term leases. |
2 | | Facilities have been designed to export steam for sale. |
3 | | Net electric output. |
International Projects
The Company owns a series of fossil fuel based power projects which sell the electricity and steam they generate under long-term contracts or market concessions to utilities, governmental agencies providing power distribution, industrial users, or local governmental units. In select cases, such sales of electricity and steam may be provided under short-term arrangements as well. Similarly, the Company seeks to obtain long-term contracts for fuel supply from reliable sources.
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Facility | | | | | | | | Ownership | | | | | | |
Location | | Country | | Gross MWs | | | (%) | | | Fuel | | Offtaker | |
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Quezon | | Philippines | | | 510 | | | | 26 | % | | Coal | | Manilla Elec Co. |
Haripur | | Bangladesh | | | 126 | | | | 45 | % | | Natural Gas | | Governmental Agency |
Madurai | | India | | | 106 | | | | 77 | % | | Fuel Oil | | State Electricity Board |
Samalpatti | | India | | | 106 | | | | 60 | % | | Fuel Oil | | State Electricity Board |
Huantai | | China | | | 36 | | | | 60 | % | | Coal | | Provincial State Board |
Yangiang | | China | | | 24 | | | | 96 | % | | Coal | | Provincial State Board |
Lin’an | | China | | | 24 | | | | 60 | % | | Coal | | Provincial State Board |
Trezzo1 | | Italy | | | 18 | | | | 13 | % | | WTE | | GRTN2 |
Rio Volcan | | Costa Rica | | | 17 | | | | 1 | % | | Hydroelectric | | O & M Contracts |
Don Pedro | | Costa Rica | | | 14 | | | | 1 | % | | Hydroelectric | | O & M Contracts |
Total | | | | | 981 | | | | | | | | | | | |
1 | | Covanta has a minority stake in Trezzo
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2 | | Gestore della Rete di Transmission Nazionale (State owned national grid operator). |
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Material Deleveraging
Due to Covanta’s stable and contracted cash flows, the Company will delever substantially over the coming years. In the next five years, scheduled principal repayments on existing debt total more than $900 million, all of which will be funded from operating cash flow.
Pro Forma Debt

Thus for the 18 privately owned facilities of Covanta and ARC, there is substantial deleveraging of owned assets. For Covanta, the ARC acquisition adds materially to its base of assets which it can continue to operate after existing contracts expire and project debt is paid off.
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Superior Operating History with Proven Technology
Covanta’s facilities utilize proven technology with a history of high availability. The vast majority of Covanta’s plants utilize the Martin technology and are characterized by high reliability, high energy efficiency and low emissions owing to modern combustion technology and highly effective flue gas cleaning systems. To date, Covanta has processed more than 132 million tons of waste in its facilities with an average availability of over 90%.
Covanta Average Availability

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Non-GAAP Financial Measures
The following summarizes unaudited non-GAAP financial measures for Covanta. Certain items are included in the Historical Financials below that are not measured under U.S. generally accepted accounting principles (“GAAP”) and are not intended to supplant other information provided by Covanta in accordance with GAAP. Furthermore, these measures may not be comparable to those used by other companies. The following information should be read in conjunction with the Historical Financials set forth below. Adjusted EBITDA means, for any period, EBITDA plus additional items deducted from net income, as provided below, that have been made to EBITDA. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of Covanta’s performance or any other measures of performance derived in accordance with GAAP. The presentation of Adjusted EBITDA is intended to enhance the usefulness of the financial information by providing a measure which management uses as an indicator of Covanta’s ability to meet financial covenants and to assess performance. Adjusted EBITDA for each of the periods set forth in the Historical Financials below is reconciled to net income, which is believed to be the most directly comparable measure of GAAP.
Historical Financials of Covanta
Covanta
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($ in millions) | | 2001 | | | 2002 | | | 2003 | | | LTM 9/30/04 | | | CAGR | |
Income Statement | | | | | | | | | | | | | | | | | | | | |
Service | | $ | 561 | | | $ | 494 | | | $ | 499 | | | $ | 476 | | | | | |
Electricity and Steam | | | 232 | | | | 289 | | | | 278 | | | | 241 | | | | | |
Construction | | | 63 | | | | 42 | | | | 13 | | | | 3 | | | | | |
Other | | | 62 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Total Revenues | | $ | 918 | | | $ | 826 | | | $ | 790 | | | $ | 721 | | | | (7.2%) | |
Plant Operating Expense | | | 528 | | | | 528 | | | | 502 | | | | 456 | | | | | |
Construction Costs / Project Development | | | 103 | | | | 47 | | | | 20 | | | | 6 | | | | | |
Depreciation and Amortization | | | 78 | | | | 77 | | | | 72 | | | | 69 | | | | | |
SG&A | | | 79 | | | | 54 | | | | 36 | | | | 40 | | | | | |
Net Interest on Project Debt | | | 86 | | | | 86 | | | | 77 | | | | 54 | | | | | |
Write-downs of Assets Held for Use1 | | | 0 | | | | 85 | | | | 17 | | | | 17 | | | | | |
Write-downs of Assets Held for Sale | | | 187 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Cost of Goods Sold | | | 37 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Loss on Sale of Business | | | 3 | | | | 2 | | | | 7 | | | | 8 | | | | | |
Total Operating Costs and Expenses | | $ | 1,102 | | | $ | 879 | �� | | $ | 730 | | | $ | 649 | | | | | |
EBIT2 | | $ | (184 | ) | | $ | (53 | ) | | $ | 60 | | | $ | 72 | | | NA |
Investment in Subsidiaries | | | (61 | ) | | | (21 | ) | | | (22 | ) | | | (11 | ) | | | | |
Reconciliation to Adjusted EBITDA | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (231 | ) | | $ | (179 | ) | | $ | 44 | | | $ | 106 | | | | | |
Loss (gain) from discontinued operations, net of income taxes | | | 25 | | | | 43 | | | | (79 | ) | | | (64 | ) | | | | |
Cumulative effect of change in accounting principles, net of income taxes | | | 0 | | | | 8 | | | | 9 | | | | 0 | | | | | |
Gain (loss) from continuing operations before discontinued operations and change in accounting principles | | $ | (206 | ) | | $ | (128 | ) | | $ | (27 | ) | | $ | 42 | | | | | |
Depreciation and amortization | | | 78 | | | | 77 | | | | 72 | | | | 69 | | | | | |
Net interest on project debt | | | 86 | | | | 86 | | | | 77 | | | | 54 | | | | | |
Net interest on recourse debt | | | 47 | | | | 44 | | | | 40 | | | | 40 | | | | | |
Interest income | | | (8 | ) | | | (2 | ) | | | (3 | ) | | | (2 | ) | | | | |
Income taxes | | | (6 | ) | | | (0 | ) | | | (13 | ) | | | 226 | | | | | |
Minority interests | | | 6 | | | | 9 | | | | 9 | | | | 9 | | | | | |
Change in unbilled service receivables | | | (2 | ) | | | 10 | | | | 18 | | | | 7 | | | | | |
Non-cash compensation | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Reorganization items | | | 0 | | | | 49 | | | | 83 | | | | 84 | | | | | |
Gain of cancellation of pre-petition debt | | | 0 | | | | 0 | | | | 0 | | | | (511 | ) | | | | |
Fresh start adjustments | | | 0 | | | | 0 | | | | 0 | | | | 215 | | | | | |
Loss on sale of businesses | | | 3 | | | | 2 | | | | 7 | | | | 8 | | | | | |
Write-downs of Assets Held for Use1 | | | 0 | | | | 85 | | | | 17 | | | | 17 | | | | | |
Write down of assets held for sale | | | 187 | | | | 0 | | | | 0 | | | | 0 | | | | | |
Reclass of arena commitment write down | | | 0 | | | | 0 | | | | 0 | | | | (14 | ) | | | | |
Total adjustments | | $ | 391 | | | $ | 360 | | | $ | 307 | | | $ | 201 | | | | | |
Adjusted EBITDA1 | | $ | 186 | | | $ | 233 | | | $ | 280 | | | $ | 242 | | | | 22.8% | |
1. | | “Assets held for use” includes charges relating to the following discrete events, each of which is related to a disposition of a non-core business in the Covanta bankruptcy or to entities that have declared bankruptcy or are being liquidated, and accordingly none are capable of recurrence:
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| | • | During 2002, relating to impairment of the contract value on Covanta’s Bataan energy project in the Philippines, because a potential contract extension in 2004 was determined to be unlikely ($37.2 million). This contract was subsequently terminated in 2004 and the project’s assets are currently being sold for scrap.
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| | • | During 2002, relating to impairment of the contract value on Covanta’s Magellan energy project in the Philippines, because of material fuel price increases without corresponding increases in electricity tariffs ($41.7 million). This project subsequently filed for bankruptcy protection in the Philippines. |
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| | • | During 2002, relating to impairment of the contract value on Covanta’s entertainment business in Ottawa, Canada which it disposed of as part of its bankruptcy in 2003 ($6.0 million).
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| | • | During 2003, relating to the disposition of Covanta’s entertainment business in Ottawa, Canada during the 4th quarter, 2003 ($17.0 million). Because this event occurred during the 4th quarter, 2003, this charge is reflected both in the 2003 column and the LTM 9/30/04 column. |
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2. | | EBIT has not been reduced by minority interest or increased for equity income from unconsolidated subs. |