


Delaware			95-6021257
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification Number)

445 South Street ~~Morristown, NJ~~	Morristown,	NJ	07960
(Address of Principal Executive Office)			(Zip Code)

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value per share	CVA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large ~~accelerated filer~~ þ

Accelerated Filer

Accelerated
filer

Non-accelerated
filer

Smaller reporting
companyo

Emerging growth
companyo

☐

(Do not check if a smaller
reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No þ

Applicable Only to Corporate Issuers:

Indicate the number of shares of the registrant’s Common Stock outstanding as of the latest practicable date.


Class						Outstanding at July 23, 2021
Common Stock, $0.10 par value						133,009,182


~~Class~~		~~Outstanding at October 20, 2017~~
~~Common Stock, $0.10 par value~~	~~131,014,890~~

~~This~~Certain statements in this report ~~contains “forward-looking statements” within~~may constitute "forward-looking" statements as defined in Section 27A of the ~~meaning~~Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of ~~1934.~~1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange Commission ("SEC"), all as may be amended from time to time. Forward-looking statements are those that address activities, events or developments that we or our management ~~intends, expects, projects, believes~~intend, expect, project, believe or ~~anticipates~~anticipate will or may occur in the future. They are based on management’s assumptions and assessments in ~~the~~ light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance ~~and~~or actual ~~results, developments~~results. Developments and business decisions may differ from those envisaged by our forward-looking statements. ~~Our forward-looking~~Forward-looking statements, are also subject to risks and uncertainties, which can affect our performance in both the near and long-term. These forward-looking statements should be considered in light of the information included in this report and our other filings with the Securities and Exchange Commission, including, without limitation, statements with respect to the ~~Risk Factors, as well as~~consummation of the ~~description of trends~~transaction with EQT, involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Covanta Holding Corporation (“Covanta”), its subsidiaries and joint ventures or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements, in ~~Management’s Discussion~~particular, the announced business combination with EQT depends on the satisfaction of the closing conditions to the business combination, and ~~Analysis of Financial Condition and Results of Operations, set forth~~there can be no assurance as to whether or when the business combination will be consummated. For additional information see the Cautionary Note Regarding Forward-Looking Statements in ~~our 2016~~the Company's 2020 Annual Report on Form ~~10-K.~~10-K and the Risk Factors set forth in Item 1A of this Quarterly Report on Form 10-Q for the period ended June 30, 2021 and in any subsequent filings with the SEC.

Item 1. FINANCIAL STATEMENTS

The accompanying notes are an integral part of the condensed consolidated financial statements.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

	(Unaudited, in millions)
Net loss	$	(19)	$	(13)	$	(17)	$	(45)
Foreign currency translation	3		6		(7)		0
Pension and postretirement plan unrecognized benefits	0		(1)		0		(1)
Net unrealized loss on derivative instruments, net of tax benefit of ($5), ($2), ($8) and ($2), respectively	(18)		(11)		(20)		(15)
Other comprehensive loss	(15)		(6)		(27)		(16)





Comprehensive loss	$	(34)	$	(19)	$	(44)	$	(61)

Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
(Unaudited, in millions)
Net income (loss) $ 15
$ 54
$ (74 ) $ (12 )
Foreign currency translation 4
(5 ) 16
1
Net unrealized (loss) gain on derivative instruments, net of tax benefit (expense) of $0, $1, $1 and ($4), respectively (1 ) —
2
(20 )
Other comprehensive income (loss) 3
(5 ) 18
(19 )
Comprehensive income (loss) $ 18
$ 49
$ (56 ) $ (31 )

The accompanying notes are an integral part of the condensed consolidated financial statements.

(In millions, except per

The accompanying notes are an integral part of the condensed consolidated financial statements.



	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated (Deficit) Earnings		Treasury Stock			Total
	Shares	Amount								Shares	Amount

	(Unaudited, in millions)
Balance as of December 31, 2020	136	$	14	$	882	$	(32)	$	(554)	4	$	0	$	310
Stock-based compensation expense	—	—		9		—		—		—	—		9
Dividend declared	—	—		—		—		(11)		—	—		(11)
Shares issued in non-vested stock award	—	—		—		—		—		(1)	—		—
Shares repurchased for tax withholdings for vested stock awards	—	—		(8)		—		—		—	—		(8)

Comprehensive (loss) income, net of income taxes	—	—		—		(12)		2		—	—		(10)
Balance as of March 31, 2021	136	$	14	$	883	$	(44)	$	(563)	3	$	0	$	290
Stock-based compensation expense	—	—		9		—		—		—	—		9
Dividend declared	—	—		—		—		(11)		—	—		(11)


Comprehensive loss, net of income taxes	—	—		—		(15)		(19)		—	—		(34)
Balance as of June 30, 2021	136	14		892		(59)		(593)		3	0		254






Balance as of December 31, 2019	136	$	14	$	857	$	(35)	$	(460)	5	$	0	$	376
Stock-based compensation expense	—	—		8		—		—		—	—		8
Dividend declared	—	—		—		—		(34)		—	—		(34)
Shares issued in non-vested stock award	—	—		—		—		—		(1)	—		—
Shares repurchased for tax withholdings for vested stock awards	—	—		(5)		—		—		—	—		(5)
Comprehensive loss, net of income taxes	—	—		—		(10)		(32)		—	—		(42)
Balance as of March 31, 2020	136	$	14	$	860	$	(45)	$	(526)	4	$	0	$	303
Stock-based compensation expense	—	—		6		—		—		—	—		6
Dividend declared	—	—		—		—		(11)		—	—		(11)
Other	—	—		1		—		0		—	0		1
Comprehensive loss, net of income taxes	—	—		—		(6)		(13)		—	—		(19)
Balance as of June 30, 2020	136	$	14	$	867	$	(51)	$	(550)	4	$	0	$	280

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

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, LLC and its subsidiaries.

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”~~(“WtE”), and also owns and operates related waste transport, processing and disposal assets. ~~EfW~~WtE serves ~~two key markets~~ as both a sustainable waste management 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~~WtE facilities earn revenue from ~~both~~ the disposal of waste, ~~and~~generally under long-term contracts, the generation of electricity, ~~and/or steam, generally under contracts, as well as~~and from the sale of ~~metal~~metals recovered during the ~~EfW~~WtE process. ~~We process approximately~~ ~~20 million~~ ~~tons of solid waste annually.~~ We operate and/or have ownership positions in ~~42 energy-from-waste~~41 WtE facilities currently in commercial operation, 39 of which are ~~primarily~~ located in North America. In total, these ~~assets~~facilities process approximately 21 million tons of solid waste annually, equivalent to 8% of the post-recycled municipal solid waste generated in the United States ("U.S."). Our facilities produce approximately 10 million megawatt hours (“MWh”) of baseload electricity annually. We also operate a waste management infrastructure, ~~that is~~including 13 waste transfer stations, 20 material processing facilities, four landfills (primarily for ash disposal), one metals processing facility, and one ash processing facility (currently in start-up and testing phase), all of which are complementary to our core ~~EfW~~WtE business.We also have ownership positions in several projects currently in development and/or under construction in the United Kingdom ("UK").

In addition, ~~to our core EfW business,~~ we offer a variety of sustainable waste management solutions, ~~in response to customer demand,~~ including ~~on site clean-up services,~~industrial, consumer products and healthcare waste handling, treatment and assured destruction, industrial wastewater treatment and disposal, product depackaging and recycling, on-site cleaning services, and transportation ~~and logistics, recycling and depackaging.~~services. Together with our processing of non-hazardous "profiled waste" for purposes of assured destruction or sustainability goals in our ~~EfW~~WtE facilities, we offer these services under our Covanta Environmental Solutions ("CES") brand.

~~We have~~ ~~one~~ reportable segment, North America, which is comprised of waste and energy services operations located primarily in the United States and Canada. We have completed construction of an energy-from-waste facility in Dublin, Ireland, which we own and which commenced commercial operations in October 2017. For additional information regarding our reportable segment, see ~~Note 5. Financial Information by Business Segments.~~

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~United States~~U.S. Generally Accepted Accounting Principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes thereto required by GAAP for complete condensed consolidated financial statements. In the opinion of management, all adjustments ~~(including normal recurring accruals)~~ considered necessary for fair presentation have been included in our condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated. Operating results for the interim period are not necessarily indicative of the results that may be expected for the ~~fiscal~~ year ending December 31, ~~2017~~.2021. The condensed consolidated balance sheet at December 31, ~~2016,~~2020, was derived from audited annual consolidated financial statements, but does not contain all of the notes thereto from the annual consolidated financial statements. This Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and accompanying Notes in our 2020 Annual Report on Form ~~10-K for the year ended~~ ~~December 31, 2016~~ ~~(“Form 10-K”).~~10-K.

~~Change in Accounting Principle~~

In March 2016, the Financial Accounting Standards Board ("FASB") issued an update to simplify the accounting for employee share-based payments, including income tax impacts, classification on the statement of cash flows, and forfeitures. We adopted this guidance effective January 1, 2017. The new guidance requires excess tax benefits and deficiencies to be recognizedReclassifications

Beginning in the income statement rather than in additional paid-in capital on the balance sheet and requires a tax benefit related to dividends paid on unvested share-based payment awards to be recognized as an income tax benefit on the income statement. As a resultfirst quarter of ~~applying this change prospectively,~~2021, we ~~recognized $0.5 million and zero of tax benefit in~~revised our provision for income taxes during the three and nine months ended September 30, 2017, respectively. In addition, adoption of the new guidance resulted in a $9 million decrease to Accumulated deficit as of January 1, 2017 to recognize the cumulative effect of deferred income taxes for U.S. Federal net operating loss and other carryforwards attributable to excess tax benefits. Excess tax benefits were not recognized for financial reporting purposes in the prior period. We prospectively applied the guidance which requires presentation of ~~excess tax benefits as an~~revenue to distinguish our waste and service activities between (a) revenue received in connection with accepting waste for processing or disposal and (b) revenue received for performing other services. We also aligned costs for all revenue producing activities, including construction services, under Cost of operations. The change in presentation did not affect our total operating activity on the statement of cash flows rather than as a financing activity. Cash paid on employees’ behalf related to shares withheld for tax purposes was retrospectively applied and required reclassifying $4 million from cash provided byrevenue, total operating activities to cash provided by financing activities on our condensed consolidated statement of cash flows as of September 30, 2016. We have elected to account for forfeitures as they occur, rather than to estimate them; adoption of this accounting policy election resulted in a $1 million increase to Accumulated deficit as of January 1, 2017 to recognize the cumulative-effect of removing the forfeiture estimate.expense, or operating loss.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

The impact of the reclassifications on our unaudited condensed consolidated statement of operations were as follows (in millions):


For the Three Months Ended June 30, 2020
As previously reported			Reclassifications		As adjusted

OPERATING REVENUE:
Waste and service revenue (1) (3)	$	344	$	(7)	Waste revenue (1) (3)	$	337
Energy revenue	78		0		Energy revenue	78
Recycled metals revenue (2) (3)	20		0		Materials sales revenue (2) (3)	20
Other operating revenue (1) (4)	12		7		Services revenue (1) (4)	19
Total operating revenue	$	454	$	0	Total operating revenue	$	454
OPERATING EXPENSE:
Plant operating expense (5)	$	340	$	11	Cost of operations (5)	$	351
Other operating expense, net (5)	14		(12)		Other operating expense, net (5)	2
General and administrative expense	26		1		General and administrative expense	27
Depreciation and amortization expense	56		0		Depreciation and amortization expense	56
Impairment charges	0		0		Impairment charges	0
Total operating expense	$	436	$	0	Total operating expense	$	436
Operating loss	$	18	$	0	Operating loss	$	18


For the Six Months Ended June 30, 2020
As previously reported			Reclassifications		As adjusted

OPERATING REVENUE:
Waste and service revenue (1) (3)	$	690	$	(13)	Waste revenue (1) (3)	$	677
Energy revenue	171		0		Energy revenue	171
Recycled metals revenue (2) (3)	37		0		Materials sales revenue (2) (3)	37
Other operating revenue (1) (4)	24		13		Services revenue (1) (4)	37
Total operating revenue	$	922	$	0	Total operating revenue	$	922
OPERATING EXPENSE:
Plant operating expense (5)	$	701	$	21	Cost of operations (5)	$	722
Other operating expense, net (5)	26		(22)		Other operating expense, net (5)	4
General and administrative expense	56		1		General and administrative expense	57
Depreciation and amortization expense	114		0		Depreciation and amortization expense	114
Impairment charges	19		0		Impairment charges	19
Total operating expense	$	916	$	0	Total operating expense	$	916
Operating loss	$	6	$	0	Operating loss	$	6

(1)Reflects reclassification of certain services performed by CES from the former Waste and service revenue category to the new Services revenue category.

(2)Reflects reclassification of the former Recycled metals revenue category to the new Materials sales revenue category.

(3)Reflects reclassification of E-waste recycling revenue from the former Waste and service revenue category to the new Materials sales revenue category.

(4)Reflects reclassification of construction related revenue from the former Other operating revenue category to the new Services revenue category.

(5)Expense classified under the former Plant operating expense category is now included in the new Cost of operations category, which also reflects the reclassification of construction related expense from the Other operating expense, net category.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Accounting Pronouncements Recently Adopted

In ~~January 2017,~~December 2019, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~updated guidance regarding business combinations, specifically on clarifying~~Accounting Standards Update (“ASU”) 2019-12 Income Taxes (Topic 740): Simplifying the ~~definition of a business and provided a screen to determine whether or not an integrated set of assets and activities constitutes a business. We are required to adopt the updates~~Accounting for Income Taxes. The amendments in this ~~standard~~update remove exceptions to the general principles in ~~annual periods beginning after December 15, 2017, including interim periods therein. The standard must be applied prospectively on or after the effective date, and no disclosures~~Topic 740 for aallocating tax expense between financial statement components, accounting basis differences stemming from an ownership change in foreign investments, and interim period income tax accounting ~~principle are required at transition. Early adoption is permitted~~ for ~~transactions (i.e., acquisitions or dispositions)~~year-to-date losses that ~~occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance.~~exceed projected losses. We ~~early~~ adopted this guidance ~~as of~~on January 1, ~~2017.~~2021 on a prospective basis. The adoption of this guidance did not have an impact on our consolidated financial statements.

~~Reclassifications~~

Certain amounts have been reclassified in our prior period condensed consolidated balance sheet to conform to current year presentation and such amounts were not material to current and prior periods. Also, as discussed above under ~~Change in Accounting Principle, certain amounts have been reclassified in our prior period condensed consolidated statements of cash flows to conform to current year presentation.~~

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

~~In August 2017, the Financial Accounting Standards Board (“FASB”)~~The following table summarizes recent ASU's issued Accounting Standards Update (“ASU”) No. 2017-12 “Derivatives and Hedging (Topic 815)” (“ASU 2017-12”). The amendments of ASU 2017-12 expand an entity’s ability to apply hedge accounting for nonfinancial and financial risk components and allow for a simplified approach for fair value hedging of interest rate risk. ASU 2017-12 eliminates the need to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, ASU 2017-12 simplifies the hedge documentation and effectiveness assessment requirements under the previous guidance. This standard is required to be adopted in the first quarter of 2019, with early adoption permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements and related disclosures.

~~In May 2017,~~by the FASB issued ASU 2017-10 “Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services (a consensus of the FASB Emerging Issues Task Force),” which provides clarity on determining the customer in a service concession arrangement. The guidance, which is required to be adopted in the first quarter of 2018, will be applied on a modified retrospective basis beginning with the earliest period presented. Early adoption is permitted. This guidance is not expected tothat could have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This standard is required to be adopted in the first quarter of 2018. This guidance is not


Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting as amended by ASU 2021-01	This standard provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting due to the cessation of the London Interbank Offered Rate (LIBOR). The amendments are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendment in ASU 2021-01 clarifies that all derivative instruments affected by changes to interest rates used for discounting, margining or contract price alignment are in the scope of ASC 848.	First quarter of 2020 through December 31, 2022.	Generally, our debt agreements and interest rate derivatives contracts include a transition clause in the event LIBOR is discontinued, as such, we do not expect the transition of LIBOR to have a material impact on our consolidated financial statements. During the second quarter of 2020, we elected to adopt the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. In addition, we elected to adopt the expedient to not reassess the conclusions reached on embedded derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323).” The portion of this ASU related to Topic 250 states that when a registrant does not know or cannot reasonably estimate the impact that future adoption of certain new accounting standards are expected to have on the financial statements, then in addition to making a statement to that effect, that registrant should consider additional qualitative financial statement disclosures addressing the significance of the impact the standard will have on the financial statements when adopted. We have included such disclosures for ASU 2014-09 but not for ASU 2016-02 since we have not yet performed sufficient analysis on future effects upon implementation of the new standards. We have concluded that the portion of this ASU related to Topic 323 is not applicable and, therefore, does not have a material impact on our consolidated financial statements. This ASU is effective upon issuance.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The guidance is required to be adopted in the first quarter of 2018 on a retrospective basis. Adoption of this guidance will eliminate the disclosure of Change in restricted funds held in trust, which we currently include in Net cash provided by operating activities and Net cash provided by financing activities on our condensed consolidated statement of cash flows.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,” requiring comprehensive recognition of current and deferred income taxes on intra-entity asset transfers other than inventory, which was previously prohibited. The guidance now requires us to recognize the tax expense from the intra-entity transfer of an asset when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. We are required to adopt this guidance in the first quarter of 2018 on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which updated guidance on eight specific cash flow issues with regard to how cash receipts and cash payments are presented and classified in the statement of cash flows in order to clarify existing guidance and reduce diversity in practice. The guidance is required to be adopted in the first quarter of 2018 on a retrospective basis, unless it is impracticable to apply, in which case it should be applied prospectively as of the earliest date practicable. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated statement of cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which amended guidance for lease arrangements in order to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. The guidance, which is required to be adopted in the first quarter of 2019, will be applied on a modified retrospective basis beginning with the earliest period presented. Early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires equity investments not accounted for as an equity method investment or that result in consolidation to be recorded at their fair value with changes in fair value recognized in our consolidated statements of operations. Those equity investments that do not have a readily determinable fair value may be measured at cost less impairment, if any, plus or minus changes resulting from observable price changes. This standard is required to be adopted in the first quarter of 2018, with early adoption prohibited. This guidance is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The standard is based on the principle that revenue is recognized in an amount expected to be collected and to which the entity expects to be entitled in exchange for the transfer of goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and certainty of revenue arising from contracts with customers. In August 2015, the FASB deferred the effective date by one year to January 1, 2018 and we will adopt the standard on January 1, 2018, as required. The standard can be adopted using either a full retrospective or modified retrospective approach as of the date of adoption. We have decided to adopt the standard using a modified retrospective approach, which may result in a cumulative effect adjustment as of the date of adoption. Our implementation approach includes performing a detailed review of key contracts representative of the services that we provide and assessing the conformance of historical accounting policies and practices with the standard. We continue to determine the impacts of the standard on our consolidated financial statements and continue to make progress on executing on a comprehensive change management project plan to implement the standard.

NOTE 3. ~~ACQUISITIONS~~EQUITY AND ~~DISPOSITIONS~~

The acquisitions in the section below are not material to our condensed consolidated financial statements individually or in the aggregate and therefore, disclosures of pro forma financial information have not been presented. The results of operations reflect the period of ownership of the acquired businesses, business development projects and dispositions.

~~Environmental Services Acquisitions~~

During the nine months ended September 30, 2017, we acquired three environmental services businesses (one of which was accounted for as an asset purchase), in separate transactions, for approximately $17 million. These acquisitions expand our Covanta Environmental Solutions capabilities and client service offerings, and allow us to direct additional non-hazardous profiled waste volumes into our EfW facilities, and therefore are highly synergistic with our existing business.

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~~COVANTA HOLDING CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~China Investments~~

Prior to 2016, our interests in China included an 85% ownership of an EfW facility located in Jiangsu Province ("Taixing"), a 49% equity interest in an EfW facility located in Sichuan Province and a 40% equity interest in Chongqing Sanfeng Covanta Environmental Industry Co., a company located in the Chongqing Municipality that is engaged in the business of providing design and engineering, procurement, construction services and equipment sales for EfW facilities in China, as well as operating services for EfW facilities.

During 2016, we completed the exchange of our ownership interests in China for a 15% ownership interest in Chongqing Sanfeng Covanta Environmental Industrial Group, Co., Ltd ("Sanfeng Environment") and subsequently sold approximately 90% of the aforementioned ownership interest in Sanfeng Environment to a third-party, a subsidiary of CITIC Limited ("CITIC"), a leading Chinese industrial conglomerate and investment company, pursuant to agreements entered into in July 2015. As a result, during the year ended December 31, 2016, we recorded a pre-tax gain of $41 million. We received pre-tax proceeds of $105 million. The gain resulted from the excess of pre-tax proceeds over the cost-method book value of $70 million, plus $5 million of realized gains on the related cumulative foreign currency translation adjustment, that were reclassified out of other comprehensive income.

In 2016, in connection with these transactions, we entered into foreign currency exchange collars and forwards to hedge against rate fluctuations that impacted the cash proceeds in U.S. dollar terms. For more information, see ~~Note 11. Derivative Instruments~~.

Subsequent to completing the exchange, Sanfeng Environment has made certain claims for indemnification under the agreement related to the condition of the facility in Taixing. During the three and nine months ended September 30, 2017, we recorded $0 and $6 million charge respectively, related to these claims, which is included in "gain (loss) on asset sales" on our condensed consolidated statement of operations.

As of September 30, 2017 and December 31, 2016, our remaining cost-method investment in Sanfeng Environment totaled $6 million and was included in our condensed consolidated balance sheet as a component of "Prepaid expenses and other current assets" and "Other assets," respectively.

During the three months ended September 30, 2017, we entered into an agreement with CITIC to sell our remaining investment in Sanfeng Environment. This sale is expected to close within the next 12 months, subject to certain conditions. As such, the Company has reclassified its cost-method investment in our consolidated balance sheet as a component of "Prepaid expenses and other current assets" as of September 30, 2017. There were no impairment indicators related to our cost-method investment during the nine months ended September 30, 2017.

~~NOTE 4.~~ EARNINGS PER SHARE ~~(“EPS”~~("EPS") ~~AND EQUITY~~

~~Earnings Per Share~~Equity

Accumulated Other Comprehensive (Loss) Income ("AOCI")

The changes in AOCI are as follows (in millions):


	Foreign Currency Translation		Pension and Other Postretirement Plan Unrecognized Net Gain (Loss)		Net Unrealized Loss on Derivatives		Total
Balance at December 31, 2019	$	(30)	$	3	$	(8)	$	(35)
Other comprehensive loss	0		(1)		(15)		(16)
Balance at June 30, 2020	$	(30)	$	2	$	(23)	$	(51)

Balance at December 31, 2020	$	(8)	$	3	$	(27)	$	(32)
Other comprehensive loss	(7)		0		(20)		(27)
Balance at June 30, 2021	$	(15)	$	3	$	(47)	$	(59)

We calculate basic ~~earnings per share ("EPS")~~EPS using net earnings for the period and the weighted average number of outstanding shares of our common stock, par value $0.10 per share, during the period. Diluted ~~earnings per share~~EPS computations, as calculated under the treasury stock method, include the weighted average number of shares of additional outstanding common stock issuable for stock options, restricted stock awards and restricted stock units whether or not currently exercisable. Diluted ~~earnings per share~~EPS does not include securities if their effect was anti-dilutive.

Basic and diluted weighted average shares outstanding were as follows (in millions):


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Basic weighted average common shares outstanding	133	132	133	132
Dilutive effect of stock options, restricted stock and restricted stock units	0	0	0	0
Diluted weighted average common shares outstanding	133	132	133	132
Anti-dilutive stock options, restricted stock and restricted stock units excluded from the calculation of EPS	4	4	4	3

Three Months Ended September 30,
Nine Months Ended September 30,
2017
2016
2017
2016
Basic weighted average common shares outstanding 130
129
129
129
Dilutive effect of stock options, restricted stock and restricted stock units ⁽¹⁾
1
2
—
—
Diluted weighted average common shares outstanding 131
131
129
129
Disaggregation of Revenue

A disaggregation of revenue from contracts with customers is presented in our condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020. We have one reportable segment which comprises our entire operating business. Beginning in the first quarter of 2021, we revised our presentation of revenue and reclassified the prior years' amounts to conform to the current year's presentation. For additional information, see Note 1. Organization and Basis of Presentation.

~~(1) Excludes the following securities because their inclusion would have been anti-dilutive:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Stock options —
1
1
1
Restricted stock —
—
1
1
Restricted stock units —
—
1
1

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Performance Obligations and Transaction Price Allocated to Remaining Performance Obligations

~~Equity~~ASC 606 requires disclosure of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2021. The guidance provides certain conditions (identified as "practical expedients") that limit this disclosure requirement. We have contracts that meet the following practical expedients provided by ASC 606:

~~Dividends per Share~~

~~Dividends declared were~~1.The performance obligation is part of a contract that has an original expected duration of one year or less;

2.Revenue is recognized from the satisfaction of the performance obligations in the amount billable to our customer that corresponds directly with the value to the customer of our performance completed to date (i.e. “right-to-invoice” practical expedient); and/or

3.The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service or a series of distinct services that are substantially the same and that have the same pattern of transfer to our customer (i.e. “series practical expedient”).

Our remaining performance obligations primarily consist of the fixed consideration contained in our contracts. As of June 30, 2021, our total remaining performance obligation was $5.6 billion, of which we expect to recognize 6% for the remainder of 2021 and 11% in 2022.

Contract Balances

The following table reflects the balance in our contract assets, which we classify as ~~follows~~unbilled receivables and present in Receivables in our condensed consolidated balance sheets, and our contract liabilities, which we classify as deferred revenue and present in Accrued expenses and other liabilities in our condensed consolidated balance sheets (in millions):


	June 30, 2021		December 31, 2020
Unbilled receivables	$	27	$	23
Deferred revenue	$	19	$	17

For the six months ended June 30, 2021, revenue recognized that was included in deferred revenue in our condensed consolidated balance sheet at the beginning of the period totaled $5 million.

NOTE 5. STOCK-BASED AWARD PLANS

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Declared $ 33
$ 33
$ 99
$ 99
Per Share $ 0.25
$ 0.25
$ 0.75
$ 0.75
During the six months ended June 30, 2021, we awarded certain employees grants of 1,205,316 restricted stock units ("RSUs"). The RSUs will be expensed over the requisite service period. The terms of the RSUs include vesting provisions based solely on continued service. If the service criteria are satisfied, the RSUs will generally vest during March of 2022, 2023, and 2024.

~~Accumulated Other Comprehensive Income (Loss)~~During the six months ended June 30, 2021, we awarded 74,399 RSUs and 14,746 restricted stock awards ("~~AOCI"~~RSAs") for annual director compensation. In addition, during the six months ended June 30, 2021, we issued 13,023 RSUs for quarterly director fees to certain of our directors who elected to receive RSUs in lieu of cash payments. We determined the service vesting condition of the director awards to be non-substantive and, in accordance with accounting principles for stock compensation, recorded the entire fair value of the awards as compensation expense on the grant date.

During the six months ended June 30, 2021, we awarded certain employees grants of 319,762 cumulative Free Cash Flow ("FCF") per share and total shareholder return ("TSR") performance awards. The ~~changes~~FCF awards and the TSR awards will each cliff vest at the end of the 3 year performance period, however, the number of shares delivered will vary based upon the attained level of performance and may range from 0 to 2 times the number of target units awarded.

During the six months ended June 30, 2021, we withheld 555,345 shares of our common stock in ~~accumulated other comprehensive loss are as follows (in millions):~~connection with tax withholding for vested stock awards.

Foreign Currency Translation Pension and Other Postretirement Plan Unrecognized Net Gain Net Unrealized (Loss) Gain On Derivatives Total
Balance at December 31, 2015 $ (34 ) $ 2
$ (2 ) $ (34 )
Other comprehensive income (loss) before reclassifications 6
—
(20 ) (14 )
Amounts reclassified from accumulated other comprehensive (loss) income (5 ) —
—
(5 )
Net current period comprehensive income (loss) 1
—
(20 ) (19 )
Balance at September 30, 2016 $ (33 ) $ 2
$ (22 ) $ (53 )

Balance at December 31, 2016 $ (41 ) $ 2
$ (23 ) $ (62 )
Other comprehensive income (loss) before reclassifications 16
—
2
18
Net current period comprehensive income 16
—
2
18
Balance at September 30, 2017 $ (25 ) $ 2
$ (21 ) $ (44 )

Amount Reclassified from Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income Component Nine Months Ended September 30, 2016 Affected Line Item in the Consolidated Statement of Operations

Foreign currency translation $ 5
Gain on asset sales
5
Total before tax
—
Tax benefit
Total reclassifications $ 5
Net of tax

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

~~NOTE 5. FINANCIAL INFORMATION BY BUSINESS SEGMENTS~~

~~We have~~ ~~one~~ reportable segment, North America, which is comprised of waste and energy services operations located primarily in the United States and Canada. The results of our reportable segment are as follows (in millions):

North America   All Other Total
Three Months Ended September 30, 2017
Operating revenue $ 429
$ —
$ 429
Depreciation and amortization expense 51
—
51
Impairment charges —
—
—
Operating income (loss) 48
(2 ) 46

Three Months Ended September 30, 2016
Operating revenue $ 421
$ —
$ 421
Depreciation and amortization expense 52
—
52
Impairment charges —
—
—
Operating income (loss) 62
(2 ) 60
North America
All Other ⁽¹⁾
Total
Nine Months Ended September 30, 2017
Operating revenue $ 1,257
$ —
$ 1,257
Depreciation and amortization expense 155
—
155
Impairment charges 1
—
1
Operating income (loss) 49
(6 ) 43

Nine Months Ended September 30, 2016
Operating revenue $ 1,235
$ 7
$ 1,242
Depreciation and amortization expense 155
—
155
Impairment charges 19
—
19
Operating income (loss) 55
(4 ) 51

~~Table of Contents~~

~~COVANTA HOLDING CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~NOTE 6. CONSOLIDATED DEBT~~

~~Consolidated debt is as follows (in millions):~~

September 30, 2017
December 31, 2016
LONG-TERM DEBT:
Revolving credit facility (3.02% - 3.27%) $ 473
$ 343
Term loan, net (2.99%) 193
195
Credit Facilities Sub-total $ 666
$ 538
7.25% Senior notes due 2020 $ —
$ 400
6.375% Senior notes due 2022 400
400
5.875% Senior notes due 2024 400
400
5.875% Senior notes due 2025 400
—
  Less: deferred financing costs related to senior notes (16 ) (14 )
Senior Notes Sub-total $ 1,184
$ 1,186
4.00% - 5.25% Tax-exempt bonds due 2024 through 2045 $ 464
$ 464
  Less: deferred financing costs related to tax-exempt bonds (5 ) (5 )
Tax-Exempt Bonds Sub-total $ 459
$ 459
3.48% - 4.52% Equipment financing capital leases due 2024 through 2027 66
69
Total long-term debt $ 2,375
$ 2,252
Less: current portion (10 ) (9 )
Noncurrent long-term debt $ 2,365
$ 2,243
PROJECT DEBT:
North America project debt:
4.00% - 5.00% project debt related to service fee structures due 2017 through 2035 $ 68
$ 78
5.00% Union capital lease due 2017 through 2053 95
99
5.25% - 6.20% project debt related to tip fee structures due 2017 through 2020 10
16
Unamortized debt premium, net 4
4
  Less: deferred financing costs related to North America project debt (1 ) (1 )
Total North America project debt $ 176
$ 196
Other project debt:
Dublin senior loan due 2021 (5.72% - 6.41%)
⁽¹⁾
$ 257
$ 155
Less: debt discount related to Dublin senior loan (4 ) (6 )
Less: deferred financing cost related to Dublin senior loan (19 ) (18 )
Dublin senior loan, net $ 234
$ 131
Dublin junior loan due 2022 (9.23% - 9.73%) $ 67
$ 58
Less: debt discount related to Dublin junior loan —
(1 )
Less: deferred financing costs related to Dublin junior loan (1 ) (1 )
Dublin junior loan, net $ 66
$ 56
Total other project debt, net $ 300
$ 187
Total project debt $ 476
$ 383
Less: Current portion (31 ) (22 )
Noncurrent project debt $ 445
$ 361
TOTAL CONSOLIDATED DEBT $ 2,851
$ 2,635
        Less: Current debt (41 ) (31 )
TOTAL NONCURRENT CONSOLIDATED DEBT $ 2,810
$ 2,604

⁽¹⁾~~Reflects hedged fixed rates.~~

~~Table of Contents~~

~~COVANTA HOLDING CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~Credit Facilities~~

Our subsidiary, Covanta Energy, has $1.2 billion in senior secured credit facilities consisting of a $1.0 billion revolving credit facility, expiring 2019 through 2020, (the “Revolving Credit Facility”) and a $200 million term loan due 2020 (the “Term Loan”) (collectively referred to as the "Credit Facilities").

~~Revolving Credit Facility~~

~~As of September 30, 2017, we had unused capacity under the Revolving Credit Facility as follows (in millions):~~

Total
Direct Borrowings as of Outstanding Letters of Credit as of
Unused Capacity
as of
Credit Facility
Expiring ⁽¹⁾
September 30, 2017 September 30, 2017 September 30, 2017
Revolving Credit Facility $ 1,000
2020 $ 473
$ 191
$ 336

⁽¹⁾ ~~The Revolving Credit Facility consists of two tranches; Tranche A ($950 million), which expires in 2020, and Tranche B ($50 million), which expires in March 2019.~~

~~Repayment Terms~~

As of September 30, 2017, the Term Loan has mandatory remaining amortization payments of approximately $1 million in 2017, $5 million in both of the years 2018 and 2019 and $181 million in 2020. The Credit Facilities are pre-payable at par at our option at any time.

~~Guarantees and Security~~

The Credit Facilities are guaranteed by us and by certain of our subsidiaries. The subsidiaries that are party to the Credit Facilities agreed to secure all of the obligations under the Credit Facilities by granting, for the benefit of secured parties, a first priority lien on substantially all of their assets, to the extent permitted by existing contractual obligations; a pledge of substantially all of the capital stock of each of our domestic subsidiaries and 65% of substantially all the capital stock of each of our foreign subsidiaries which are directly owned, in each case to the extent not otherwise pledged.

~~Credit Agreement Covenants~~

The loan documentation governing the Credit Facilities contains various affirmative and negative covenants, as well as financial maintenance covenants (financial ratios), that limit our ability to engage in certain types of transactions. We are in compliance with all of the affirmative and negative covenants under the Credit Facilities as of September 30, 2017.

~~5.875% Senior Notes due 2025 (the "5.875% Notes")~~

In March 2017, we sold $400 million aggregate principal amount of 5.875% Senior Notes due July 2025. Interest on the 5.875% Notes is payable semi-annually on January 1 and July 1 of each year, which commenced on July 1, 2017, and the 5.875% Notes will mature on July 1, 2025 unless earlier redeemed or repurchased. Net proceeds from the sale of the 5.875% Notes were approximately $393 million, consisting of gross proceeds of $400 million net of approximately $7 million in offering expenses. On April 3, 2017, we used a portion of the net proceeds of the 5.875% Notes offering to fund the redemption of the 7.25% Senior Notes due 2020. For additional information see ~~Redemption of 7.25% Senior Notes due 2020~~ ~~below~~.

The 5.875% Notes are senior unsecured obligations, ranking equally in right of payment with any of the current and future senior unsecured indebtedness of Covanta Holding Corporation. The 5.875% Notes rank junior to our existing and future secured indebtedness, including any guarantee of indebtedness under the Credit Facilities. The 5.875% Notes are not guaranteed by any of our subsidiaries and are effectively subordinated to all existing and future indebtedness and other liabilities of our subsidiaries.

The 5.875% Notes are subject to redemption at our option, at any time on or after July 1, 2020, in whole or in part, at the redemption prices set forth in the prospectus supplement, plus accrued and unpaid interest. At any time prior to July 1, 2020, we may redeem up to 35% of the original principal amount of the 5.875% Notes with the proceeds of certain equity offerings at a redemption price of 105.875% of the principal amount of the 5.875% Notes plus accrued and unpaid interest. At any time prior to July 1, 2020, we may also redeem the 5.875% Notes, in whole but not in part, at a price equal to 100% of the principal amount of the 5.875% Notes, plus accrued and unpaid interest and a “make-whole premium.” The occurrence of specific kinds of changes in control will be a triggering event requiring us to offer to purchase from the holders all or a portion of the 5.875% Notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest. In addition, certain asset dispositions would be triggering events that may require us to use the proceeds from those asset dispositions to make an offer to purchase the 5.875% Notes at 100% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase if such proceeds are not otherwise used within 365 days to repay indebtedness or to invest or commit to invest such proceeds in additional assetsCompensation expense related to our ~~business or capital stock of a restricted subsidiary.~~

~~Table of Contents~~

~~COVANTA HOLDING CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~Redemption of 7.25% Senior Notes due 2020 (7.25% Senior Notes)~~

On April 3, 2017, we redeemed our 7.25% Senior Notes due 2020 using a portion of net proceeds from the issuance of the 5.875% Senior Notes due 2025 and borrowings under our credit facility. During the nine months ended September 30, 2017, as a result of the redemption, we recorded a prepayment charge of $9 million and a write-off of the remaining deferred financing costs of $4 million recognized in our condensed consolidated statements of operations as a loss on extinguishment of debt.

~~Other Non-current Liabilities~~

As of September 30, 2017, the Dublin convertible preferred instrument of $102 million (€87 million) was included as a component of "Other noncurrent liabilities" in our condensed consolidated balance sheet.

~~Capitalized Interest~~

~~Interest expense paid and costs amortized to interest expense related to project financing are capitalized during the construction and start-up phase of the project. Total interest expense capitalized~~stock-based awards was as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Stock-based compensation expense	$	9	$	6	$	18	$	14

Unrecognized stock-based compensation expense and weighted-average years to be recognized are as follows (in millions, except for weighted average years):


	June 30, 2021
	Unrecognized stock-based compensation		Weighted-average years to be recognized
Restricted stock units	$	15	1.6
Performance awards	$	9	2.0

Stock options	$	1	1.6

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Capitalized interest $ 12
$ 7
$ 32
$ 20

~~NOTE 7. INCOME TAXES~~

We have recorded our interim tax provision based upon our estimated annual effective tax rate ("EAETR") and account for tax effects of discrete events in the period in which they occur. We review the EAETR on a quarterly basis as projections are revised and laws are enacted. The effective tax rate ("ETR") was 6% and (50)% for the nine months ended September 30, 2017 and 2016, respectively. The net change in the ETR was primarily attributable to the increase of foreign loss which cannot be benefited, the discrete tax adjustments attributable to non-qualified stock options, which expired in the nine months ended September 30, 2017 and changes in the reserve for uncertain tax positions.

NOTE 8.6. SUPPLEMENTARY INFORMATION

Pass through costs

Pass through costs are costs for which we receive a direct contractually committed reimbursement from ~~municipal clients which sponsor an energy-from-waste~~the public sector client that sponsors a WtE project. These costs generally include utility charges, insurance premiums, ash residue transportation and disposal, and certain chemical costs. These costs are recorded net of ~~municipal~~public sector client reimbursements as a reduction to ~~"Plant operating expense,"~~Cost of operations in our condensed consolidated statement of operations.

Pass through costs were as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Pass through costs	$	12	$	10	$	23	$	23

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Pass through costs $ 14
$ 9
$ 37
$ 28

~~Other operating expenses, net~~Impairment Charges

~~Insurance Recoveries~~

~~Plymouth Energy-from-Waste Facility~~

~~In May 2016, our Plymouth energy-from-waste facility experienced a turbine generator failure. Damage~~Due to the ~~turbine generator was extensive~~marginal outcome of our review of goodwill recorded for our CES reporting unit as of October 1, 2019, we continued to monitor the CES reporting unit for impairment through the end of the first quarter of 2020. We considered the economic impacts of the novel coronavirus ("COVID-19") pandemic and ~~operations~~the decline in waste volumes from the commercial and industrial sectors to be a triggering event and reviewed the goodwill held at the ~~facility were suspended promptly to assess the cause and extent~~CES reporting unit. We performed an interim impairment test via a quantitative valuation as of damage. The facility is capable of processing waste without utilizing the turbine generator to generate electricity, and we resumed waste processing operations in early June of 2016. The facility resumed generating electricity earlyMarch 31, 2020. As a result, in the first quarter of ~~2017 after~~2020, we recorded an impairment of $16 million, net of tax benefit of $3 million, which represented the ~~generator~~carrying amount of our CES reporting unit in excess of its estimated fair value as of the testing date. We performed the required annual impairment review of our recorded goodwill for our two reporting units as of October 1, 2020. We performed a qualitative assessment and ~~other damaged equipment~~concluded that the fair value of the reporting units exceed the carrying value as of the testing date. For the six months ended June 30, 2021, there were ~~replaced.~~no indicators of impairment identified.

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Equity Method Investments

~~Fairfax County Energy-from-Waste Facility~~

~~In February 2017,~~Investments in investees and joint ventures accounted for under the equity method, included in Other assets on our ~~Fairfax County energy-from-waste facility located in Lorton, Virginia experienced~~condensed consolidated balance sheets, were as follows (in millions, except percentages):


	Ownership interest as of June 30, 2021		June 30, 2021		Ownership interest as of December 31, 2020		December 31, 2020
Dublin (Ireland)	50	%	$	145	50	%	$	153
Ambiente 2000 S.r.l. (Italy)	40	%	1		40	%	0
Earls Gate (UK)	25	%	10		25	%	9
Rookery (UK)	40	%	10		40	%	4
Newhurst (UK)	25	%	14		25	%	9
Protos (UK)	37.5	%	3		37.5	%	6
Zhao County (China)	26	%	7		26	%	7
			$	190			$	188

For certain of our investment projects, a ~~fire in the front-end receiving~~ portion of the ~~facility. During~~consideration received at financial close remained in the ~~first quarter of 2017, we completed our evaluation of~~project. These amounts are expected to be utilized for future equity contributions in projects in the impact of this event and recorded an immaterial asset impairment, which we have since recovered from insurance proceeds. We expect the facility to resume operations in December 2017. We expect receipt of insurance recoveries for both property loss and business interruption to continue into the first half of 2018. The overall impact of the fire, net of insurance, on financial results in 2017 will be impacted by the timing of receipt of insurance recoveries.UK.

The ~~cost of repair or replacement of~~consideration receivable balances included in prepaid expenses and other assets and business interruption losses for the above matters are insured under the terms of applicable insurance policies, subject to deductibles. We recorded insurance gains, as a reduction to "Other operating expense, net," inon our condensed consolidated ~~statement of operations~~balance sheets were as follows (in millions):


	June 30, 2021		December 31, 2020
Rookery (UK)	$	13	$	17
Newhurst (UK)	4		4
Protos (UK)	0		6
	$	17	$	27

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Insurance gains for property and clean-up costs, net of impairment charges $ 1
$ —
$ 4
$ —
Insurance gains for business interruption costs, net of costs incurred $ 1
$ —
$ 19
$ —

In connection with certain equity method investments we made contributions in the form of shareholder loans. Our shareholder loan balances included in other assets - long term on our condensed consolidated balance sheets were as follows (in millions):

~~HennepinCounty Legal Settlement~~


	June 30, 2021		December 31, 2020
Earls Gate (UK)	$	16	$	16
Newhurst (UK)	5		3
Protos (UK)	4		1
Zhao County (China)	9		9
	$	34	$	29

~~On September 25, 2017, we settled a dispute with Hennepin County, Minnesota regarding extension provisions in~~

For additional information on our ~~service contract to operate the Hennepin Energy Recovery Center. We received $8 million~~shareholder loans in connection with the settlement and will continue to operate the facility through March 2018. During the three months ended September 30, 2017, we recorded a gain on settlement of $8 million as a reduction of "Other operating expense, net" in our ~~consolidated statement of operations.~~equity method investments, see Note 9. Credit Losses.

~~Impairment charges~~

We are party to a joint venture that was formed to recover and recycle metals from EfW ash monofills in North America. During the nine months ended September 30, 2016, due to operational difficulties and the decline in the scrap metals market, a valuation of the entity was conducted. As a result, we recorded a net impairment of our investment in this joint venture of $3 million, pre-tax, which represents our portion of the carrying value of the entity in excess of the fair value. Such amount was calculated based on the estimated liquidation value of the tangible equipment utilizing Level 3 inputs. For more information regarding fair value measurements, see ~~Note 10. Financial Instruments~~.

In March 2016, we exercised an early termination option available under the steam sale agreement at our Pittsfield EfW facility that would have been effective in March 2017. Upon termination of the steam agreement, we intended to cease operations at the Pittsfield facility. As a result, during the nine months ended September 30, 2016, we recorded a non-cash impairment charge of $13 million, pre-tax, which was calculated based on the estimated cash flows for this facility during its remaining operations utilizing Level 3 inputs. For more information regarding fair value measurements, see ~~Note 10. Financial Instruments.~~ In October 2016, we withdrew our termination notice. The City of Pittsfield has agreed to fund upgrades to the facility and the State of Massachusetts will provide energy tax credits, both of which will serve to improve the economics of the facility. In addition, we will continue to sell steam generated by the facility under an amended agreement.

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

NOTE 7. INCOME TAXES

We generally record our interim tax provision based upon a projection of our annual effective tax rate ("AETR"). This AETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. We update the AETR on a quarterly basis as the pre-tax income projections are revised and tax laws are enacted. The effective tax rate ("ETR") each period is impacted by a number of factors, including the relative mix of domestic and international earnings, adjustments to the valuation allowances and discrete items. The currently forecasted ETR may vary from the actual year-end due to the changes in these factors.

Our global ETR for the six months ended June 30, 2021 and 2020 was 25% and 16%, including discrete tax items. The current year increase in the ETR was primarily due to the effect of the overall increase in pre-tax income.

NOTE 8. ACCOUNTS RECEIVABLE SECURITIZATION

We regularly sell certain receivables on a revolving basis to third-party financial institutions (the “Purchasers”) up to an aggregate purchase limit of $120 million. Transfers under the Receivables Purchase Agreement ("RPA") meet the requirements to be accounted for as sales in accordance with FASB ASC 860, Transfers and Servicing. We receive a discounted purchase price for each receivable sold under the RPA and will continue to service and administer the subject receivables. The weighted-average discount rate paid on accounts receivable sold was 1.03% for the six months ended June 30, 2021.

Amounts recognized in connection with the RPA were as follows (in millions):


	Six Months Ended June 30,
	2021		2020
Accounts receivable sold and derecognized	$	436	$	373
Cash proceeds received (1)	$	435	$	372

	June 30, 2021		December 31, 2020
Pledged receivables (2)	$	110	$	128

(1)Represents proceeds from collections reinvested in revolving-period transfers. This amount was included in Net cash provided by operating activities on our condensed consolidated statement of cash flows.

(2)Secures our obligations under the RPA and provides a guarantee for the prompt payment, not collection, of all payment obligations relating to the sold receivables.

We are not required to offer to sell any receivables and the Purchasers are not committed to purchase any receivable offered. The RPA has a scheduled termination date of December 3, 2021, or such later date as agreed in writing with the Purchasers. Additionally, we may terminate the RPA at any time upon 30 days’ prior written notice. The agreement governing the RPA contains certain covenants and termination events. An occurrence of an event of default or the occurrence of a termination event could lead to the termination of the RPA. As of June 30, 2021, we were in compliance with the covenants and no termination events had occurred. As of June 30, 2021, the maximum amount available under the RPA was utilized.

NOTE 9. CREDIT LOSSES

For our trade receivables, we assess each counterparty’s ability to pay for service by conducting a credit review. The credit review considers the counterparty’s established credit rating or our assessment of the counterparty’s creditworthiness based on our analysis of their financial statements when a credit rating is not available.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution, payment confirmation and monitoring current economic conditions and future forecast of economic conditions, to the extent that they impact the credit loss determination and can be reasonably estimated.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Changes in the allowance for credit losses of our trade receivables for the six months ended June 30, 2021 were as follows (in millions):


Balance as of December 31, 2020	$	8

Write-offs charged against the allowance	(1)

Balance as of June 30, 2021	$	7

We held the following receivables in connection with our equity method investments (in millions):


	June 30, 2021		December 31, 2020
Included in prepaid expenses and other assets	$	17	$	27
Included in other assets - long term	34		29
	$	51	$	56

We assess the collectability of the receivables from our equity method investments each reporting period through the impairment analysis procedures of our equity method investments which considers the loss history of the investments and the viability of the associated development projects. As of June 30, 2021 there were no expected credit losses associated with our equity method investment receivables.

~~NOTE 9. STOCK-BASED AWARD PLANS~~

During the nine months ended September 30, 2017 we awarded certain employees grants of 810,527 shares of restricted stock and 78,636 restricted stock units ("RSUs"). The restricted stock awards and RSUs will be expensed over the requisite service period. The terms of the restricted stock awards and the RSUs include vesting provisions based solely on continued service. If the service criteria are satisfied, the restricted stock awards and RSUs will generally vest during March of 2018, 2019, and 2020.

Additionally, during the nine, months ended September 30, 2017, we awarded certain employees grants of 440,070 performance based RSUs that will vest based upon the Company’s cumulative Free Cash Flow per share over a three year performance period.

In May 2017, we awarded 14,286 shares of restricted stock and 82,144 RSUs for annual director compensation. Additionally, on June 15, 2017 and September 15, 2017 we awarded 4,701 and 9,367 shares of RSUs, respectively, for quarterly director fees for certain of our directors who elected to receive RSUs in lieu of cash payments. We determined the service vesting condition of these restricted stock awards and restricted stock units to be non-substantive and, in accordance with accounting principles for stock compensation, recorded the entire fair value of the awards as compensation expense on the grant date.

~~During the nine months ended September 30, 2017, we withheld 235,066 shares of our common stock in connection with tax withholdings for vested stock awards.~~

~~Compensation expense related to our stock-based awards was as follows (in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Share based compensation expense $ 5
$ 4
$ 16
$ 13

~~Unrecognized stock-based compensation expense and weighted-average years to be recognized are as follows (in millions, except for weighted average years):~~

As of September 30, 2017

Unrecognized stock-
based compensation

Weighted-average years
to be recognized
Restricted stock awards $ 11 1.5
Restricted stock units $ 11 1.8

NOTE 10. FINANCIAL INSTRUMENTS

Fair Value Measurements

Authoritative guidance associated with fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs), then significant other observable inputs (Level 2 inputs) and the lowest priority to significant unobservable inputs (Level 3 inputs). The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

•For ~~cash and cash equivalents, restricted funds,~~ marketable securities, ~~and accounts receivable,~~ the carrying value of these amounts is a reasonable estimate of their fair value. ~~The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee.~~

•Fair values for long-term debt and project debt are determined using quoted market prices (Level 1).

•The fair value ~~for~~of our floating to fixed rate interest rate swaps ~~was~~is determined ~~by obtaining quotes from two counterparties (one is a holder of~~using discounted cash flow valuation methodologies that apply the ~~long position and the other is~~appropriate forward floating rate curve observable in the ~~short) and extrapolating those across~~market to the ~~long and short notional amounts.~~contractual terms of our swap agreements. The fair value of the interest rate swaps ~~was~~is adjusted to reflect counterparty risk of non-performance and ~~was~~is based on the counterparty’s credit spread in the credit derivatives market.

•The fair values of our energy hedges were determined using the spread between our fixed price and the forward curve information available within the market.

The fair value of our foreign currency hedge was determined by obtaining quotes from two counterparties and is based on market accepted option pricing methodology which utilizes inputs such as the currency spot rate as of the balance sheet date, the strike price of the options and volatility.

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~~COVANTA HOLDING CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we would realize in a current market exchange and are based on pertinent information available to us as of ~~September~~June 30, ~~2017.~~2021. Such amounts have not been comprehensively revalued for purposes of these financial statements and current estimates of fair value may differ significantly from the amounts presented herein.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

The following ~~table presents information about the~~financial instruments were recorded at their estimated fair value. The recurring fair value measurement of our assets and liabilities were as of ~~September 30, 2017~~follows (in millions):


Financial Instruments Recorded at Fair Value on a Recurring Basis:	Fair Value Measurement Level	June 30, 2021		December 31, 2020
Assets:
Investments — mutual and bond funds (1)	1	$	2	$	2
Derivative asset — energy hedges (2)	2	0		11


Total assets		$	2	$	13
Liabilities:
Derivative liability — energy hedges (3)	2	$	20	$	0
Derivative liability — interest rate swaps (3)	2	7		10
Total liabilities		$	27	$	10

(1)Included in Other assets in the condensed consolidated balance sheets.

(2)The short-term balance was included in Prepaid expenses and ~~December 31, 2016:~~other current assets and the long-term balance was included in Other assets in the condensed consolidated balance sheets.

(3)The short-term balance was included in Accrued expenses and other current liabilities and the long-term balance was included in Other liabilities in the condensed consolidated balance sheets.

Financial Instruments Recorded at Fair Value on a Recurring Basis: Fair Value Measurement Level September 30, 2017
December 31, 2016
(In millions)
Assets:
Cash and cash equivalents:
Bank deposits and certificates of deposit 1 $ 33
$ 79
Money market funds 1 4
5
Total cash and cash equivalents: 37
84
Restricted funds held in trust:
Bank deposits and certificates of deposit 1 22
12
Money market funds 1 27
36
U.S. Treasury/Agency obligations ⁽¹⁾
1 9
14
State and municipal obligations 1 28
46
Commercial paper/Guaranteed investment contracts/Repurchase agreements 1 2
2
Total restricted funds held in trust: 88
110
Investments — mutual and bond funds⁽²⁾
1 2
2
Derivative asset — energy hedges ⁽³⁾
2 5
3
Total assets: $ 132
$ 199
Liabilities:
Derivative liability — energy hedges ⁽⁴⁾
2 $ —
$ 1
Derivative liability — interest rate swaps ^{(4), (5)}
2 19
20
Total liabilities: $ 19
$ 21

The following financial instruments ~~are~~were recorded at their carrying amount (in millions):


	As of June 30, 2021				As of December 31, 2020
Financial Instruments Recorded at Carrying Amount:	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Liabilities:
Long-term debt	$	2,402	$	2,487	$	2,414	$	2,492
Project debt	$	120	$	125	$	125	$	130

As of September 30, 2017 As of December 31, 2016
Financial Instruments Recorded at Carrying Amount:
Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value
Assets:
Accounts receivable ⁽⁶⁾
$ 326
$ 326
$ 333
$ 333
Liabilities:
Long-term debt $ 2,375
$ 2,383
$ 2,252
$ 2,237
Project debt $ 476
$ 481
$ 383
$ 387


~~(1)~~	~~The U.S. Treasury/Agency obligations in restricted funds held in trust are primarily comprised of Federal Home Loan Mortgage Corporation securities at fair value.~~


~~(2)~~	~~Included in other noncurrent assets in the condensed consolidated balance sheets.~~


~~(3)~~	~~Included in prepaid expenses and other current assets in the condensed consolidated balance sheets.~~


~~(4)~~	~~Included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.~~


~~(5)~~	~~Included in other noncurrent liabilities in the condensed consolidated balance sheets.~~


~~(6)~~	~~Includes $1 million of noncurrent receivables recorded in "Other assets" in the condensed consolidated balance sheets as September 30, 2017 and December 31, 2016.~~

We are required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, accounts receivables, prepaid expenses and other assets, accounts payable and accrued expenses approximates their carrying value on the condensed consolidated balance sheets due to their short-term nature.

In addition to the recurring fair value measurements, certain assets are measured at fair value on a non-recurring basis when an indication of impairment is ~~identified~~identified. Long-lived assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the ~~asset's~~carrying amount of an asset may not be recoverable. For the purpose of impairment testing, we review the recoverable amount of individual assets or groups of assets at the lowest level of which there are there are identifiable cash flows, which is generally at the facility level. Assets are reviewed using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on the fair value ~~is determined~~of assets as compared to ~~be less than its~~their carrying value. ~~See~~ ~~Note 8. Supplementary Information- Impairment charges~~ ~~for additional information.~~Fair value is generally determined using an income approach, which requires discounting the estimated future cash flows associated with the asset. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

NOTE 11. DERIVATIVE INSTRUMENTS

The following disclosures summarize the effect of changes in fair value related to those derivative instruments not designated as hedging instruments on the condensed consolidated statements of operations (in millions):

Amount of Gain or (Loss) Recognized In Income on Derivatives
Effect on Income of Derivative Instruments Not Designated As Hedging Instruments
Location of Gain or (Loss)
Recognized in Income on
Derivatives
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Foreign currency Other income (expense), net $ —
$ (1 ) $ —
$ (2 )
Effect on income of derivative instruments not designated as hedging instruments $ —
$ (1 ) $ —
$ (2 )

~~Foreign Exchange~~Energy Price Risk

~~During 2016, in order to hedge the risk of adverse foreign currency exchange rate fluctuations impacting the sale proceeds from our equity transfer agreement in China (See~~ ~~Note 3. Acquisitions and Dispositions~~), we entered into foreign currency exchange forwards with two financial institutions, covering approximately $100 million of notional, to protect against rate fluctuations pending the close of the sale of our ownership interest to CITIC. The foreign currency forwards were accounted for as derivative instruments and, accordingly, were recorded at fair value quarterly with any change in fair value recognized in our condensed consolidated statements of operations as "Other expense, net." As of December 31, 2016, we received $105 million of gross sale proceeds relating to the aforementioned sale of our ownership interests to CITIC and therefore, settled or canceled the remaining foreign currency exchange derivatives related to this hedged transaction, resulting in a current asset balance of zero. During the nine months ended September 30, 2016, cash provided by foreign currency exchange settlements totaled $5 million, and was included in net cash used in investing activities on our condensed consolidated statement of cash flows.

We have entered into ~~foreign currency forwards~~a variety of contractual hedging arrangements, designated as cash flow hedges, in order to manage foreign currency exchange rate fluctuations associated with a series of fixed payments to be made by an international subsidiary through the end November 2017. These foreign currency forwards are accounted for as derivative instruments at fair value in our consolidated balance sheet with any changes in fair value recognized in our consolidated statements of operations as "Other expense, net." This derivative instrument was not material to our consolidated statement of operations nor was it material to our condensed consolidated balance sheet as of September 30, 2017.

~~Energy Price Risk~~

Following the expiration of certain long-term energy sales contracts, we may have exposure to market risk, and therefore revenue fluctuations, in energy markets. We have entered into contractual arrangements that will mitigate our exposure to ~~short-term volatility through a variety of hedging techniques,~~energy market risk, and will 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~~do not involve taking positions (either long or short) on energy prices in excess of our physical generation. The amount of energy generation ~~for~~ which we have hedged on a forward basis under agreements with various financial institutions as of ~~September~~June 30, ~~2017~~2021 is indicated in the following table (in millions):


Calendar Year						Hedged MWh
2021						1.1
2022						1.1
2023						0.2

Total						2.4

Calendar Year Hedged MWh
2017 0.7
2018 2.7
2019 0.4
Total 3.8

As of ~~September~~June 30, ~~2017,~~2021, the ~~net~~ fair value of the energy ~~derivatives of $5~~derivative liability was $20 million. For the six months ended June 30, 2021, we recorded a $31 million ~~pre-tax, was recorded as a $5 million "prepaid and other current asset" on our condensed consolidated balance sheet. The effective portion of~~loss for the change in fair value ~~was recorded~~ as a component of AOCI. ~~As of September 30, 2017, the amount of hedge ineffectiveness was not material.~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, cash provided by and used in energy derivative settlements of ~~$16~~$9 million and ~~zero,~~$3 million, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows.

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, cash provided by and used in energy derivative settlements of ~~$26~~$27 million and ~~zero,~~0, respectively, was included ~~in the change~~ in net cash provided by operating activities on our condensed consolidated statement of cash flows.

Interest Rate Swaps

~~In order~~We may utilize derivative instruments to ~~hedge the risk of adverse~~reduce our exposure to fluctuations in cash flows due to changes in variable interest ~~rate fluctuations associated with the Dublin~~rates paid on our direct borrowings under a senior secured credit facility consisting of a revolving credit facility ("Revolving Credit Facility") and a term loan (“Term Loan”) of our subsidiary Covanta Energy (collectively referred to as the "Credit Facilities"). To achieve that objective, we ~~have~~ entered into ~~floating to fixed rate~~pay-fixed, receive-variable swap agreements ~~with various financial institutions terminating between 2017 and 2021,~~

~~Table~~on $200 million notional amount of ~~Contents~~

~~COVANTA HOLDING CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~denominated in Euros, for~~our variable rate debt under the ~~full €250 million loan amount. This~~Credit Facilities. The interest rate ~~swap is~~swaps are designated specifically to the Credit Facilities as a cash flow hedge ~~which is~~and are recorded at fair value with changes in fair value recorded as a component of AOCI. For further information on our Credit Facilities, see Note 12. Consolidated Debt.

As of ~~September~~June 30, ~~2017,~~2021, the fair value of the interest rate swap derivative liability of ~~$19~~$7 million ~~pre-tax,~~ was recorded ~~as a $5 million~~in short-term and ~~$14 million current and noncurrent liability, respectively~~long-term liabilities on our condensed consolidated balance sheets. ~~As of December 31, 2016,~~For the six months ended June 30, 2021, we recorded a $3 million gain for the change in fair value of the interest rate swap derivative of $20 million, pre-tax, was recorded as a $2 million and $18 million current and noncurrent liability, respectively on our consolidated balance sheets. There was an immaterial amount of ineffectiveness recognized in our condensed consolidated statements of operations as a component of ~~"Interest expense, net" during the three and nine months ended September 30, 2017 and September 30, 2016.~~AOCI.

~~NOTE 12. COMMITMENTS AND CONTINGENCIES~~

We and/or our subsidiaries are party to a number of claims, lawsuits and pending actions, most of which are routine and all of which are incidental to our business. We assess the likelihood of potential losses on an ongoing basis determine whether losses are considered probable and reasonably estimable prior to recording an estimate of the outcome. If we can only estimate the range of a possible loss, an amount representing the low end of the range of possible outcomes is recorded. The final consequences of these proceedings are not presently determinable with certainty. As of September 30, 2017 and December 31, 2016, accruals for our loss contingencies recorded in "Accrued expenses and other current liabilities" in our consolidated balance sheets were approximated $17 million and $11 million, respectively.

~~Environmental Matters~~

Our operations are subject to environmental regulatory laws and environmental remediation laws. Although our operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, which may result in fines, penalties, damages or other sanctions, we believe that we are in substantial compliance with existing environmental laws and regulations.

We may be identified, along with other entities, as being among parties potentially responsible for contribution to costs associated with the correction and remediation of environmental conditions at disposal sites subject to federal and/or analogous state laws. In certain instances, we may be exposed to joint and several liabilities for remedial action or damages. Our liability in connection with such environmental claims will depend on many factors, including our volumetric share of waste, the total cost of remediation, and the financial viability of other companies that also sent waste to a given site and, in the case of divested operations, the contractual arrangement with the purchaser of such operations.

The potential costs related to the matters described below and the possible impact on future operations are uncertain due in part to the complexity of governmental laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery and the questionable level of our responsibility. Although the ultimate outcome and expense of any litigation, including environmental remediation, is uncertain, we believe that the following proceedings will not have a material adverse effect on our condensed consolidated results of operations, financial position or cash flows.

~~Lower Passaic River Matter.~~ In August 2004, the United States Environmental Protection Agency (the “EPA”) notified our subsidiary, Covanta Essex Company (“Essex”), that it was a potentially responsible party (“PRP”) for Superfund response actions in the Lower Passaic River Study Area, referred to as “LPRSA,” a 17 mile stretch of river in northern New Jersey. Essex’s LPRSA costs to date are not material to its financial position and results of operations; however, to date the EPA has not sought any LPRSA remedial costs or natural resource damages against PRPs. On March 3, 2016, the EPA released the Record of Decision (“ROD”) for its Focused Feasibility Study of the lower 8 miles of the LPRSA; the EPA’s selected remedy includes capping/dredging of sediment, institutional controls and long-term monitoring. The Essex facility started operating in 1990 and Essex does not believe there have been any releases to the LPRSA, but in any event believes any releases would have been de minimis considering the history of the LPRSA; however, it is not possible at this time to predict that outcome or to estimate the range of possible loss relating to Essex’s liability in the matter, including for LPRSA remedial costs and/or natural resource damages.

~~Tulsa Matter.~~ In January 2016, we were informed by the office of the United States Attorney for the Northern District of Oklahoma (“U.S. Attorney”) that our subsidiary, Covanta Tulsa Renewable Energy LLC, is the target of a criminal investigation being conducted by the EPA. We understand that the EPA plans to allege improprieties in the recording and reporting of emissions data during an October 2013 incident involving one of the three municipal waste combustion units at our Tulsa, Oklahoma facility. We believe that our operations in Tulsa were and are in compliance with existing laws and regulations in all material respects. While we can provide no assurance as to the outcome of this matter, we do not believe that the investigation or any issues arising therefrom will have a material adverse effect on our consolidated results of operations, financial position or cash flows.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

NOTE 12. CONSOLIDATED DEBT

~~Other Matters~~

~~Durham-York Contractor Arbitration~~

We are seeking to resolve outstanding disputes with our primary contractor for the Durham-York construction project regarding (i) claims by the contractor for change orders and other expense reimbursement and (ii) claims by us for charges and liquidated damages for project completion delays. Our contract with this contractor contemplates binding arbitration to resolve these disputes, which we expect may conclude in 2017. While we do not expect resolution of these disputes to have a material adverse impact on our financial position, it could be material to our results of operations and/or cash flows in any given accounting period.

~~China Indemnification Claims~~

Subsequent to completing the exchange of our project ownership interests in China for a 15% ownership interest in Sanfeng Environment, Sanfeng Environment made certain claims for indemnification under the agreement related to the condition of the facility in Taixing. For additional information, see N~~ote 3. Acquisitions and Dispositions.~~

~~Other Commitments~~

~~Other commitments as of September 30, 2017 were~~Consolidated debt is as follows (in ~~millions)~~millions, except percentages):


	Average Rate (1)	June 30, 2021		December 31, 2020
LONG-TERM DEBT:
Revolving credit facility	1.99%	$	218	$	222
Term loan, net	2.82%	369		374
Credit facilities subtotal		$	587	$	596
Senior notes, net of deferred financing costs		1,185		1,184
Tax-exempt bonds, net of deferred financing costs		539		540
Equipment financing arrangements		75		78
Finance leases (2)		7		7
China venture loan		9		9
Total long-term debt		$	2,402	$	2,414
Less: current portion		(27)		(18)
Noncurrent long-term debt		$	2,375	$	2,396

PROJECT DEBT:
Total project debt		$	120	$	125
Less: current portion		(9)		(9)
Noncurrent project debt		$	111	$	116

TOTAL CONSOLIDATED DEBT		$	2,522	$	2,539
Less: current debt		(36)		(27)
TOTAL NONCURRENT CONSOLIDATED DEBT		$	2,486	$	2,512

Commitments Expiring by Period

Total
Less Than
One Year

More Than
One Year
Letters of credit issued under the Revolving Credit Facility $ 191
$ 11
$ 180
Letters of credit - other 69
69
—
Surety bonds 202
—
202
Total other commitments — net $ 462
$ 80
$ 382

~~The letters~~(1)Includes the effects of ~~credit were issued~~the interest rate swap agreement to ~~secure our performance under various contractual undertakings related to our domestic and international projects or to secure obligations under our insurance program. Each letter of credit relating~~swap to a ~~project is required to be maintained in effect for~~fixed rate the ~~period specified in related project contracts, and generally may be drawn if it is not renewed prior to expiration of that period.~~

We believe that we will be able to fully perform under our contracts to which these existing letters of credit relate, and that it is unlikely that letters of credit would be drawn because of a defaultvariable portion of our ~~performance obligations. If any~~interest rate expense on $200 million of ~~these letters~~notional amount of ~~credit were~~debt under the Credit Facilities. See Note 11. Derivative Instruments for further information.

(2)Excludes Union County WtE facility finance lease which is presented within project debt in our condensed consolidated balance sheets.

Our subsidiary, Covanta Energy, is the borrower of the Revolving Credit Facility and the Term Loan (collectively referred to ~~be drawn by~~as the ~~beneficiary, the amount drawn would be immediately repayable by us to the issuing bank. If~~"Credit Facilities"). The nature and terms of our Credit Facilities, Senior Notes, Tax-Exempt Bonds, project debt and other long-term debt are described in detail in Note 16. Consolidated Debt in our 2020 Annual Report on Form 10-K.

Unutilized Capacity under Revolving Credit Facility

As of June 30, 2021, we ~~do not immediately repay such amounts drawn under letters of credit issued~~had unutilized capacity under the Revolving Credit Facility ~~unreimbursed amounts would be treated~~as follows (in millions, except years):


	Total Facility Commitment		Expiring Year	Direct Borrowings		Outstanding Letters of Credit		Unutilized Capacity
Revolving Credit Facility	$	900	2023	$	218	$	229	$	453

Credit Agreement Covenants

The loan documentation governing the Credit Facilities contains various affirmative and negative covenants, as well as financial maintenance covenants (financial ratios), that limit our ability to engage in certain types of transactions. We were in compliance with all of the affirmative and negative covenants under the Credit Facilities as ~~either additional term loans or as revolving loans.~~of June 30, 2021.

The surety bonds listed in the table above relate primarily to construction and performance obligations and support for other obligations, including closure requirements of various energy projects when such projects cease operating. Were these bonds to be drawn upon, we would have a contractual obligation to indemnify the surety company.

We have certain contingent obligations related to the 6.375% Notes due 2022, 5.875% Notes due 2024, 5.875% Notes due 2025 and Tax-Exempt Bonds. Holders may require us to repurchase the instruments if a fundamental change occurs. For specific criteria related to the redemption features of the 5.875% Notes due 2025, see ~~Note 6. Consolidated Debt.~~ ~~For specific criteria related to the redemption features of the 6.375% Notes and 5.875% Notes due 2024, see~~ ~~Item 8. Financial Statements And Supplementary Data — Note 11. Consolidated Debt~~ ~~of our Annual Report on Form 10-K.~~

We have issued or are party to guarantees and related contractual support obligations undertaken pursuant to agreements to construct and operate waste and energy facilities. For some projects, such performance guarantees include obligations to repay certain financial obligations if the project revenue is insufficient to do so, or to obtain or guarantee financing for a project. With respect to our businesses, we have issued guarantees to municipal clients and other parties that our subsidiaries will perform in accordance with contractual terms, including, where required, the payment of damages or other obligations. Additionally, damages payable under such guarantees for our energy-from-waste facilities could expose us to recourse liability on project debt. If we must perform under one or more of such guarantees, our liability for damages upon contract termination would be reduced by funds held in trust and proceeds from sales of the facilities securing the project debt and is presently not estimable. Depending upon the circumstances giving rise to such damages, the contractual terms of the applicable contracts, and the contract counterparty’s choice of remedy at the time a claim against a guarantee is made, the amounts owed pursuant to one or more of such guarantees could be greater than our then-available sources of funds. To date, we have not incurred material liabilities under such guarantees.

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

NOTE 13. LEASES

~~Benefit Obligations - Defined Contribution Plans~~

~~Substantially all~~The components of ~~our employees in the United States are eligible to participate in defined contribution plans we sponsor. Our costs related to defined contribution plans~~lease expense were as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Finance leases:
Amortization of assets, included in Depreciation and amortization expense	$	2	$	2	$	4	$	4
Interest on lease liabilities, included in Interest expense	1		1		2		2
Operating leases:
Amortization of assets, included in Total operating expense	2		2		4		4
Interest on lease liabilities, included in Total operating expense	0		0		1		1
Total net lease cost	$	5	$	5	$	11	$	11

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):


	June 30, 2021		December 31, 2020
Operating leases:
Operating lease right-of-use ("ROU") assets, included in Other assets	$	40	$	43

Current operating lease liabilities, included in Accrued expenses and other current liabilities	$	7	$	6
Noncurrent operating lease liabilities, included in Other liabilities	40		43
Total operating lease liabilities	$	47	$	49

Finance leases:
Property and equipment, at cost	$	170	$	170
Accumulated amortization	(37)		(33)
Property and equipment, net	$	133	$	137

Current obligations of finance leases, included in Current portion of project debt	$	6	$	6
Finance leases, net of current obligations, included in Project debt	69		72
Current obligations of finance leases, included in Current portion of long-term debt	1		1
Finance leases, net of current obligations, included in Long-term debt	6		6
Total finance lease liabilities	$	82	$	85

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COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Costs related to defined contribution plans $ 4
$ 5
$ 13
$ 13
Supplemental cash flow and other information related to leases was as follows (in millions, except lease term and discount rate):

~~Dublin EfW Facility~~


	Six Months Ended June 30,
	2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	5		$	4
Financing cash flows related to finance leases	$	4		$	3





Weighted average remaining lease term (in years):
Operating leases	11.2			11.4
Finance leases	30.6			31.5

Weighted average discount rate:
Operating leases	4.54		%	4.59		%
Finance leases	5.06		%	5.06		%

~~In connection with the financing~~

Maturities of ~~the Dublin EfW facility, Covanta Energy has made commitments for contingent support~~lease liabilities were as follows: (1) lending commitments up to €25 million to fund working capital shortfalls in the project company under certain circumstances during operations; and (2) up to €75 million commitment in the aggregate to provide support payments to the project company, under certain circumstances, in the event waste revenue falls below minimum levels (set far below anticipated levels).follows (in millions):

~~New York City Waste Transport and Disposal Contract~~


	June 30, 2021
	Operating Leases		Finance Leases
Remainder of 2021	$	5	$	6
2022	8		11
2023	7		11
2024	7		11
2025	6		10
2026 and thereafter	27		94
Total lease payments	60		143
Less: Amounts representing interest	(13)		(61)
Total lease obligations	$	47	$	82

In 2013, New York City awarded us a contract to handle waste transport and disposal from two marine transfer stations located in Queens and Manhattan. Service for the Manhattan marine transfer station is expected pending approval from New York City.

As of ~~September~~June 30, ~~2017,~~2021, we ~~expect to incur approximately $30 million of~~had no additional ~~capital expenditures, primarily for transportation equipment.~~significant operating or finance leases that had not yet commenced.

NOTE ~~13. SUBSEQUENT EVENTS~~14. COMMITMENTS AND CONTINGENCIES

~~During October 2017,~~We and/or our subsidiaries are party to a number of claims, lawsuits and pending actions, most of which are routine and all of which are incidental to our business. We assess the ~~activities necessary~~likelihood of potential losses on an ongoing basis to ~~ready~~determine whether losses are considered probable and reasonably estimable prior to recording an estimate of the outcome. If we can only estimate the range of a possible loss, an amount representing the low end of the range of possible outcomes is recorded. The final consequences of these proceedings are not presently determinable with certainty. As of June 30, 2021 and December 31, 2020, accruals for our ~~Dublin energy-from-waste facility~~loss contingencies recorded in Accrued expenses and other current liabilities in our condensed consolidated balance sheets were ~~considered complete~~$3 million and $4 million, respectively.

Environmental Matters

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

state laws. In certain instances, we may be exposed to joint and several liabilities for remedial action or damages. Our liability in connection with such environmental claims will depend on many factors, including our volumetric share of waste, the total cost of remediation, and the ~~facility was placed-in-service.~~financial viability of other companies that also sent waste to a given site and, in the case of divested operations, the contractual arrangement with the purchaser of such operations.

~~Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")~~

The potential costs related to the matters described below and the possible impact on future operations are uncertain due in part to the complexity of governmental laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery and the questionable level of our responsibility. Although the ultimate outcome and expense of any litigation, including environmental remediation, is uncertain, we believe that the following ~~MD&A is intended to help the reader understand the~~proceedings will not have a material adverse effect on our consolidated results of operations, ~~and~~ financial ~~condition of Covanta Holding Corporation and its subsidiaries; ("Covanta"~~position or cash flows.

Lower Passaic River Matter. In August 2004, the ~~"Company"~~U.S. Environmental Protection Agency (the “EPA”) ~~for the three and nine months ended September 30, 2017. The term "Covanta Energy" refers to~~notified our subsidiary, Covanta ~~Energy, LLC and its subsidiaries. The financial information as of September 30, 2017 should be read in conjunction with the financial statements~~Essex Company (“Essex”) that it was a potentially responsible party (“PRP”) for ~~the year ended December 31, 2016 contained in our 2016 Annual Report on Form 10-K.~~

~~Factors Affecting Business Conditions and Financial Results~~

The following are various published pricing indices relating to the U.S. economic drivers that are relevant to those aspects of our business where we have market exposure; however, there is not an exact correlation between our results and changes in these metrics.

September 30, 2017 September 30, 2016
Consumer Price Index ⁽¹⁾
2.2 % 1.5 %
PJM Pricing (Electricity) ⁽²⁾
$ 26.13
$ 27.90
NE ISO Pricing (Electricity)⁽³⁾
$ 25.36
$ 31.76
Henry Hub Pricing (Natural Gas) ⁽⁴⁾
$ 2.95
$ 2.88
#1 HMS Pricing (Ferrous Metals) ⁽⁵⁾
$ 275
$ 212
Scrap Metals - Old Sheet & Old Cast ⁽⁶⁾
$ 0.60
$ 0.58


~~(1)~~	~~Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by the U.S. Department of Labor Bureau of Labor Statistics.~~


~~(2)~~	~~Average price per MWh for Q3 2017 and Q3 2016. Pricing for the PJM PSEG Zone is provided by the PJM ISO.~~


~~(3)~~	~~Average price per MWh for Q3 2017 and Q3 2016. Pricing for the Mass Hub Zone is provided by the NE ISO.~~


~~(4)~~	~~Average price per MMBtu for Q3 2017 and Q3 2016. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update, U.S. Energy Information Administration.~~


~~(5)~~	~~Average price per gross ton for Q3 2017 and Q3 2016. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price as published by American Metal Market.~~


~~(6)~~	~~Average price per pound for Q3 2017 and Q3 2016. Calculated using the high price of Old Cast Aluminum Scrap ($/lb) as published by American Metal Market.~~

~~Seasonal -~~ Our quarterly operating income (loss) within the same fiscal year typically differs substantially due to seasonal factors, primarily as a result of the timing of scheduled plant maintenance. We 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 expense and receive less revenue until the boiler and/or turbine units resume operations. This scheduled maintenance usually occurs during periods of off-peak electric demand and/or lower waste volumes, which are our first, second and fourth fiscal quarters. The scheduled maintenance periodSuperfund response actions in the ~~first half~~Lower Passaic River Study Area (“LPRSA”), a 17 mile stretch of the year (primarily first quarter and early second quarter) is typically the most extensive, while the third quarter scheduled maintenance period is the least extensive. Given these factors, we normally experience our lowest operating income from our projects during the first half of each year.

Our operating income (loss) may also be affected by seasonal weather extremes during summers and winters. Increased demand for electricity and natural gas during unusually hot or cold periods may affect certain operating expenses and may trigger material price increases for a portion of the electricity and steam we sell.

~~Quarter Updates~~

~~Capital Allocation~~

~~Our key capital allocation activities through the nine months ended September 30, 2017, included the following:~~

~~$99 million declared~~river in ~~dividends~~northern New Jersey. Essex’s LPRSA costs to ~~stockholders; and~~

$138 million for growth investments, including $91 million towards construction of the Dublin EfW facility, $17 million to acquire three environmental services businesses, and $27 million for various organic growth investments, which include metals recovery projects, investments related to our profiled waste and environmental services businesses, and continuous improvement projects at our EfW facilities.

~~New Business Development~~

During the nine months ended September 30, 2017, we acquired three environmental solutions businesses, in separate transactions, for a total of $17 million. These acquisitions further expand our Covanta Environmental Solutions capabilities, including client service offerings and geographic reach.

We began commercial operation of our Dublin EfW facility, a 600,000 metric ton-per-year, 58 megawatt facility in Dublin, Ireland, in October 2017. Prior to operations, we secured 90% of the facility’s waste processing capacity under long-term contracts with leading waste and recycling collection companies in Ireland.

~~In April 2017, we began utilizing our regional metals processing facility, located in Fairless Hills, Pennsylvania, to process non-ferrous metal recovered at our EfW facilities. The non-ferrous metals~~date are ~~cleaned and separated by size and type for purposes of improving product quality to create a higher-valued recycled metal product and expanding our potential end markets.~~

~~Contract Extensions~~

In June 2017, we extended our agreement with the Delaware County Solid Waste Authority to process waste at our Delaware Valley EfW facility for an additional five years under terms similar to our existing contract.

In February 2017, we extended our agreement with the Southeastern Connecticut Regional Resource Recovery Authority for waste disposal at our Southeast Connecticut EfW facility for an additional four years, restructuring the new contract as a tip fee arrangement.

~~Other Significant Events~~

On September 25, 2017, we settled a dispute with Hennepin County, Minnesota regarding extension provisions in our service contract to operate the Hennepin Energy Recovery Center. We received $8 million in connection with the settlement and will continue to operate the facility through March 2018. During the three months ended September 30, 2017, we recorded a gain on settlement of $8 million as a reduction of "Other operating expense, net" in our consolidated statement of operations.

In February 2017, our Fairfax County energy-from-waste facility located in Lorton, Virginia experienced a fire in the front-end receiving portion of the facility. We expect the facility to resume operations in December 2017. The cost of repair or replacement and business interruption losses are insured under the terms of applicable insurance policies, subject to deductibles. We expect receipt of insurance recoveries for both property loss and business interruption to continue through the first half of 2018. The overall impact of the fire, net of insurance, on financial results in 2017 will be impacted by the timing of receipt of insurance recoveries. For additional information, see ~~Item 1. Financial Statements - Note 8. Supplemental Information - Insurance Recoveries.~~

~~We have completed the assessment of damage from Hurricane Irma to our six facilities located in Florida. We have determined that damage sustained is~~ not material to ~~our~~its financial position and results of ~~operations but is covered by applicable insurance policies, subject~~operations; however, to ~~policy terms and conditions.~~

~~CONSOLIDATED RESULTS OF OPERATIONS~~

~~The following general discussions should be read in conjunction with~~date the ~~condensed consolidated financial statements,~~EPA has not sought any LPRSA remedial costs or natural resource damages against PRPs. In March 2016, the ~~notes to~~EPA released the condensed consolidated financial statements and other financial information appearing and referred to elsewhere in this report. Additional detail relating to changes in operating revenue and operating expense and the quantificationRecord of specific factors affecting or causing such changes is provided in the segment discussion below. We have one reportable segment, North America, which is comprised of waste and energy services operations located primarily in the United States and Canada.

~~The comparability~~Decision (“ROD”) for its Focused Feasibility Study of the ~~information provided below~~lower 8 miles of the LPRSA; the EPA’s selected remedy includes capping/dredging of sediment, institutional controls and long-term monitoring. In June 2018, PRP Occidental Chemical Corporation (“OCC”) filed a federal Superfund lawsuit against 120 PRPs including Essex with respect to ~~our revenue, expense~~past and ~~certain other items for~~future response costs expended by OCC with respect to the ~~periods presented was affected by several factors. As outlined~~LPRSA. The Essex facility started operating in ~~Item 8. Financial Statements And Supplementary Data — Note 1. Organization~~1990 and ~~Summary of Significant Accounting Polices~~ ~~and~~ ~~Note 3. New Business and Asset Management~~ ~~of our Annual Report on Form 10-K~~, ~~our business development initiatives, contract transitions, and acquisitions resulted~~Essex does not believe there have been any releases to the LPRSA, but in ~~various transactions that are reflected in comparative revenue and expense. These factors must be taken into account in developing meaningful comparisons between~~any event believes any releases would have been de minimis considering the ~~periods compared below.~~

~~The following terms used within the Results of Operations discussion are defined as follows:~~

~~“Organic growth”: reflects the performance~~history of the ~~business on a comparable period-over-period basis, excluding~~LPRSA; however, it is not possible at this time to predict that outcome or to estimate the ~~impacts~~range of ~~transactions and contract transitions.~~possible loss relating to Essex’s liability in the matter, including for LPRSA remedial costs and/or natural resource damages.

~~“Transactions”: includes the impacts~~

Other Commitments

Other commitments as of ~~acquisitions, divestitures, and the addition or loss of operating contracts.~~

~~Contract “transitions”~~June 30, 2021 were as follows (in millions): ~~includes the impact of the expiration of: (a) long-term major waste and service contracts, most typically representing the transition to a new contract structure, and (b) long-term energy contracts.~~

~~Certain amounts in our Consolidated Results of Operations may not total due to rounding.~~

~~CONSOLIDATED RESULTS OF OPERATIONS — OPERATING INCOME~~

Letters of credit issued under the Revolving Credit Facility

~~Three Months EndedSeptember 30, 2017 and 2016~~

Consolidated: Three Months Ended September 30, Variance
Increase (Decrease)
2017 2016 2017 vs 2016
(In millions)
OPERATING REVENUE:
Waste and service revenue $ 306
$ 299
$ 8
Energy revenue 80
92
(12 )
Recycled metals revenue 23
14
9
Other operating revenue 20
16
4
Total operating revenue 429
421
9
OPERATING EXPENSE:
Plant operating expense 301
272
29
Other operating expense, net 7
14
(8 )
General and administrative expense 24
23
1
Depreciation and amortization expense 51
52
(1 )
Total operating expense 383
361
21
Operating income $ 46
$ 60
$ (14 )

~~Nine Months Ended September 30, 2017 and 2016~~

Consolidated: Nine Months Ended September 30, Variance
Increase (Decrease)
2017 2016 2017 vs 2016
(In millions)
OPERATING REVENUE:
Waste and service revenue $ 902
$ 875
$ 27
Energy revenue 241
279
(38 )
Recycled metals revenue 54
44
10
Other operating revenue 60
44
16
Total operating revenue 1,257
1,242
15
OPERATING EXPENSE:
Plant operating expense 952
901
51
Other operating expense, net 24
45
(21 )
General and administrative expense 82
71
11
Depreciation and amortization expense 155
155
—
Impairment charges 1
19
(18 )
Total operating expense 1,214
1,191
23
Operating income $ 43
$ 51
$ (8 )

~~Operating Revenue~~

~~Waste and Service Revenue~~

Consolidated (in millions): Three Months Ended September 30,
Nine Months Ended September 30,
Variance
Increase (Decrease)
2017 2016
2017 2016
Three Months
Nine Months
EfW waste processing $ 238
$ 241
$ 711
$ 706

$ (3 )
$ 5
Environmental services 32
26
90
72
$ 6

18
Municipal services 50
48
146
140
$ 2

6
Other revenue 12
10
30
28

$ 2

2
Intercompany (26 ) (26 ) (75 ) (71 )
$ —

(4 )
Total waste and service revenue $ 306

$ 299

$ 902

$ 875

$ 8

27

~~Certain amounts may not total due to rounding.~~

North America segment - EfW facilities - Tons ⁽¹⁾
(in millions):
Three Months Ended September 30, Nine Months Ended September 30, Variance
Increase (Decrease)
2017 2016 2017 2016 Three Months Nine Months
Contracted 4.2
4.6
12.5
13.0
(0.4 ) (0.5 )
Uncontracted 0.5
0.5
1.5
1.6
—
(0.1 )
Total tons 4.7
5.1
14.0
14.6
(0.4 ) (0.6 )

~~(1) Includes solid tons only. Does not include contribution from China investments.~~

~~Certain amounts may not total due to rounding.~~

For the three month comparative period, waste and service revenue increased by $8 million year-over-year, driven by $3 million of organic growth, $3 million due to transactions and $2 million due to service contract transitions. Within organic growth, $8 million in improved EfW price and $6 million in higher environmental services revenue were partially offset by lower volume due to downtime at the Fairfax facility.

For the nine month comparative period, waste and service revenue increased by $27 million year-over-year, driven by $18 million of organic growth, $6 million due to transactions and $4 million due to service contract transitions. Within organic growth, $22 million in improved price, driven in part by higher mix of profiled waste, and $18 million in higher environmental services revenue were partially offset by lower volume due to downtime at the Fairfax facility.

~~Energy Revenue~~

Consolidated ⁽¹⁾ (in millions):
Three Months Ended September 30, Nine Months Ended September 30, Variance
Increase (Decrease)
2017 2016 2017 2016 Three Months Nine Months
Energy Sales $ 68
$ 81
$ 209
$ 240
$ (13 )
$ (31 )
Capacity 12
11
32
30
1

2
Other revenue —
—
—
9
—

(9 )
Total energy revenue $ 80
$ 92
$ 241
$ 279
$ (12 )
$ (38 )

~~(1) Covanta share only. Represents the sale of electricity and steam based upon output delivered and capacity provided.~~

~~Certain amounts may not total due to rounding.~~

Total EfW (in millions): Three Months Ended September 30, Variance
Increase (Decrease)
2017 2016 2017 vs 2016

Revenue ⁽¹⁾

Volume ^{(1) (2)}
% of Total Volume
Revenue ⁽¹⁾

Volume ^{(1) (2)}
% of Total Volume Revenue Volume
At Market $ 5
0.2
14 % $ 9
0.2
16 %
Contracted 54
0.6
42 % 65
0.8
53 %
Hedged 21
0.7
44 % 18
0.5
31 %
Total EfW $ 80
1.5
100 % $ 92
1.5
100 % $ (12 ) — %

~~(1) Covanta share only. Represents the sale of electricity and steam based upon output delivered and capacity provided.~~

~~(2) Steam converted to MWh at an assumed average rate of 11 klbs of steam / MWh.~~

~~Certain amounts may not total due to rounding.~~

For the three month comparative period, energy revenue decreased by $12 million year-over-year driven by a $9 million decline related to the expiration of certain long-term energy contracts and a $4 million decline from lower production at EfW facilities (with a $7 million decline related to downtime at the Fairfax facility partially offset by higher production at other EfW facilities).

For the nine month comparative period, energy revenue decreased by $38 million year-over-year, primarily due to a $21 million impact from the expiration of certain long-term energy contracts, $15 million from lower production at EfW facilities, driven by downtime at the Fairfax facility, and a $9 million impact from the sale of our facility in Taixing, China, partially offset by a $4 million favorable impact from higher revenue share due to waste and service contract transitions.

~~Recycled Metals Revenue~~

Three Months Ended September 30,

Metal Revenue
(in millions)
Tons Recovered
(in thousands)
Tons Sold
(in thousands) ⁽¹⁾
2017 2016 2017 2016 2017 2016
Ferrous Metal $ 13
$ 8
98
101
81
72
Non-Ferrous Metal 10
6
10
9
8
10
Total $ 23
$ 14

Nine Months Ended September 30,

Metal Revenue
(in millions)
Tons Recovered
(in thousands)
Tons Sold
(in thousands) ⁽¹⁾
2017 2016 2017 2016 2017 2016
Ferrous Metal $ 34
$ 27
291
298
209
235
Non-Ferrous Metal 20
17
29
26
22
27
Total $ 54
$ 44

~~(1) Represents the portion of total volume that is equivalent to Covanta's share of revenue under applicable client revenue sharing arrangements.~~

~~For the three month comparative period, recycled metals revenue increased $9 million primarily due to higher pricing for both ferrous and non-ferrous of $3 million and $6 million, respectively.~~

For the nine month comparative period, recycled metals revenue increased $10 million primarily due to higher pricing for both ferrous and non-ferrous of $12 million and $8 million, respectively, partially offset by lower volume of ferrous and non-ferrous sales of $5 million each due to timing and the impact of metals processing on volume sold.

~~Other Operating Revenue~~

~~Other operating revenue increased by $4 million and $16 million for the three and nine month comparative period, respectively, primarily due to higher construction revenue.~~

~~Operating Expense~~

~~Plant Operating Expense~~

Consolidated (in millions): Three Months Ended September 30,
Nine Months Ended September 30,
Variance
Increase (Decrease)
2017
2016
2017
2016 Three Months Nine Months
Plant maintenance ⁽¹⁾
$ 57
$ 48
$ 234
$ 220
$ 9
$ 14
All other 243
224
718
681
19
37
Plant operating expense $ 301
$ 272
$ 952
$ 901
$ 29
$ 51

229
~~(1)~~Letters of credit — other	~~Plant maintenance costs include our internal maintenance team and non-facility employee costs for facility scheduled and unscheduled maintenance and repair expense.~~	80
Surety bonds		137
Total other commitments — net		$	446

~~Plant operating expenses increased by $29 million from the three month comparable period, primarily driven by higher plant maintenance~~

We issue letters of ~~$9 million, higher wage and benefit expenses of $8 million and new costs~~credit to secure our performance under various contractual undertakings related to ~~growth in~~ our ~~Covanta Environmental Solutions business~~domestic and ~~new metals processing operations of $7 million.~~

Plant operating expenses increased by $51 million from the nine month comparable period, driven by higher plant maintenance of $14 million, higher wage and benefit expenses of $14 million, new costs relatedinternational projects or to ~~growth in~~secure obligations under our Covanta Environmental Solutions business and new metals processing operations of $8 million and other organic cost increases of $11 million, partially offset by transactions which reduced plant operating expenses by $5 million, on a net basis.

~~Other operating expenses decreased by $8 million for the three month comparative period primarily due to a gain from the settlement of our contract dispute with Hennepin County.~~

~~Other operating expenses decreased by $21 million for the nine month comparable period, primarily due to~~ insurance ~~recoveries, which are recorded as a contra expense,and the aforementioned contract settlement gain, partially offset by higher construction expenses.~~

~~General and Administrative Expense~~

~~Consolidated general and administrative expenses increased for the three month comparative period by $1 million.~~

Consolidated general and administrative expenses increased for the nine month comparative period by $11 million primarily due to higher year-over-year compensation expense of $5 million and increased costs for outside consulting and accounting services.

~~CONSOLIDATED RESULTS OF OPERATIONS — NON-OPERATING INCOME ITEMS~~

~~Three~~our contracts to which these existing letters of credit relate, and ~~Nine Months Ended September 30, 2017 and 2016~~

Three Months Ended September 30, Nine Months Ended September 30,
Variance
(Increase) Decrease
2017 2016 2017 2016 Three Months Nine Months
(In millions)
Interest expense, net $ (35 ) $ (35 ) $ (106 ) $ (103 ) $ —

$ (3 )
Gain (loss) on asset sales —
43
(6 ) 43
(43 )
(49 )
Loss on extinguishment of debt —
—
(13 ) —
—

(13 )
Other income (expense), net 2
(1 ) 2
(1 ) 3

3
Total other (expense) income $ (33 ) $ 7
$ (123 ) $ (61 ) $ (40 )
$ (62 )

~~The loss on asset sales for the nine months ended September 30, 2017 related to charges for indemnification claims related to the sale~~that it is unlikely that letters of ~~our interests in China. For additional information, see~~ ~~Item 1. Financial Statements - Note 3. Acquisitions and Dispositions.~~

~~During the nine months ended September 30, 2016, we recorded a gain of $41 million on the sale of our interests in China and a $2 million gain on the sale~~credit would be drawn because of a ~~transfer station.~~

The loss on extinguishment of debt for the nine months ended September 30, 2017 was attributable to the redemption of our 7.25% Senior Notes due 2020 on April 3, 2017. As a result of the redemption, we recorded a prepayment charge of approximately $9 million and a write-off of the remaining deferred financing costs of approximately $4 million. For additional information, see ~~Item 1. Financial Statements - Note 6. Consolidated Debt.~~

~~Income Tax Benefit (Expense):~~

Three Months Ended September 30, Nine Months Ended September 30,
Variance
Increase (Decrease)
2017 2016 2017 2016 Three Months Nine Months
(In millions, except percentages)
Income tax benefit (expense) $ 2
$ (12 ) $ 5
$ (5 ) $ 14
$ 10
Effective income tax rate (11 )% 17 % 6 % (50 )% N/A
N/A

The difference between the effective tax rate for September 30, 2017 and 2016 is primarily attributable to the increase of foreign loss which cannot be benefited, the discrete tax adjustments attributable to non-qualified stock options, which expired in the nine months ended September 30, 2017 and changes in the reserve for uncertain tax positions.

~~Net Income (Loss) and Earnings (Loss) Per Share:~~

Cash dividend declared per share

We use a number of different financial measures, both United States generally accepted accounting principles (“GAAP”) and non-GAAP, in assessing the overall performance of our business. To supplement our results prepared in accordance with GAAP, we use the measure of Adjusted EPS, which is a non-GAAP financial measure as defined by the Securities and Exchange Commission (“SEC”). The non-GAAP financial measure of Adjusted EPS is not intended as a substitute or as an alternative to diluted earnings (loss) per share as an indicatordefault of our performance orobligations. If any ~~other measure~~ of performance derived in accordance with GAAP. In addition, our non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We use the non-GAAP financial measurethese letters of Adjusted EPS to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business.

In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EPS for the three and nine months ended September 30, 2017 and 2016, reconciled for each such period to diluted loss per share, which is believedcredit were to be ~~the most directly comparable measure under GAAP (in millions, except per share amounts):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Diluted Earnings (Loss) Per Share $ 0.11
$ 0.42
$ (0.58 ) $ (0.09 )
Reconciling items ^(a)
0.01
(0.24 ) 0.11
(0.14 )
Adjusted EPS $ 0.12
$ 0.18
$ (0.47 ) $ (0.23 )

~~(a) Additional information is provided in the Reconciling Items table below.~~

Impairment charges ^(a)

Property insurance recoveries, net ^(c)

Pro forma income tax impact ^(d)

~~To supplement our results prepared in accordance with GAAP, we use the measure of Adjusted EBITDA, which is a non-GAAP financial measure as defined~~drawn by the ~~SEC. This non-GAAP financial measure is described below, and is~~beneficiary, the amount drawn would be immediately repayable by us to the issuing bank. If we do not ~~intended as a substitute and should not be considered in isolation from measures~~immediately repay such amounts drawn under letters of financial performance prepared in accordance with GAAP. In addition, our use of non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. The presentation of Adjusted EBITDA is intended to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business.

~~We use Adjusted EBITDA to provide further information that is useful to an understanding of the financial covenants contained in the~~ credit facilities of our most significant subsidiary, Covanta Energy, and as 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 our core business. The calculation of Adjusted EBITDA is based on the definition in Covanta Energy’s Credit Facilities, which we have guaranteed. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income. Because our business is substantially comprised of that of Covanta Energy, our financial performance is substantially similar to that of Covanta Energy. For this reason, and in order to avoid use of multiple financial measures which are not all from the same entity, the calculation of Adjusted EBITDA and other financial measures presented herein are measured on a consolidated basis. Under the Credit Facilities, Covanta Energy is required to satisfy certain financial covenants, including certain ratios of which Adjusted EBITDA is an important component. Compliance with such financial covenants is expected to be the principal limiting factor which will affect our ability to engage in a broad range of activities in furtherance of our business, including making certain investments, acquiring businesses and incurring additional debt. Covanta Energy was in compliance with these covenants as of ~~September 30, 2017. Failure to comply with such financial covenants could result in a default~~issued under the ~~Credit Facilities, which default would have a material adverse effect on our financial condition and liquidity.~~

Adjusted EBITDA should not be considered as an alternative to net income or cash flow provided by operating activities as indicators of our performance or liquidity or any other measures of performance or liquidity derived in accordance with GAAP.

~~In order to provide a meaningful basis for comparison, we are providing information with respect to our Adjusted EBITDA for the three and nine months ended~~ ~~September 30, 2017~~ and 2016, respectively, reconciled for each such period to net loss and cash flow provided by operating activities, which are believed to be the most directly comparable measures under GAAP. The following is a reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions):

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016 2017
2016
Net Income (Loss) $ 15
$ 54
$ (74 ) $ (12 )
Depreciation and amortization expense 51
52
155
155
Interest expense, net 35
35
106
103
Income tax (benefit) expense (2 ) 12
(5 ) 5
Impairment charges ^(a)
—
—
1
19
Gain (loss) on asset sales ⁽ᵃ⁾ —
(43 ) 6
(43 )
Loss on extinguishment of debt —
—
13
—
Insurance recoveries 1
—
(2 ) —
Adjustments for changes in working capital and other items:
Debt service billing in excess of revenue recognized 2
1
4
3
Severance and reorganization costs —
1
1
3
Stock-based compensation expense 5
4
16
13
Other non-cash items —
—
3
4
Capital type expenditures at service fee operated facilities ^(b)
10
6
36
29
Other ^(c)
—
2
1
3
Total adjustments 102
70
335
294
Adjusted EBITDA $ 117
$ 124
$ 261
$ 282

~~See~~ ~~Adjusted EPS~~ ~~discussion above.~~

~~Adjustment for impact of adoption of FASB ASC 853 -~~ ~~Service Concession Arrangements.~~ ~~These types of expenditures at our service fee operated facilities were historically capitalized prior to adoption of this accounting standard effective January 1, 2015.~~

~~The following is a reconciliation of cash flow provided by operating activities to Adjusted EBITDA (in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net cash provided by operating activities $ 88
$ 88
$ 114
$ 150
Capital type expenditures at service fee operated facilities ^(a)
10
6
36
29
Cash paid for interest, net of capitalized interest 33
24
100
91
Cash paid for taxes, net (1 ) 3
—
7
Adjustment for working capital and other (13 ) 3
11
5
Adjusted EBITDA $ 117
$ 124
$ 261
$ 282

~~See~~ ~~Adjusted EBITDA - Note (b)~~.

~~For additional discussion related to management’s use of non-GAAP measures, see~~ ~~Liquidity and Capital Resources — Supplementary Financial Information — Free Cash Flow (Non-GAAP Discussion)~~ ~~below.~~

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Our principal sources of liquidity are our cash and cash equivalents, cash flow generated from our ongoing operations, and available capacity under our~~ Revolving Credit Facility, ~~which we believe will allow us to meet our liquidity needs. For additional information regarding our credit facilities and other debt, see~~ ~~Item 1. Financial Statements - Note 6. Consolidated Debt.~~ ~~We typically receive cash distributions from our North America segment projects on a monthly basis. Our primary future cash requirements will~~unreimbursed amounts would be to fund capital expenditures to maintain our existing businesses, service our debt, invest in the growth of our business, and return capital to our stockholders. We believe that our liquidity position and ongoing cash flow from operations will be sufficient to finance these requirements for at least the next twelve months.

In March 2017, we sold $400 million aggregate principal amount of 5.875% Senior Notes due July 2025. We utilized the net proceeds of the 5.875% Notes offering together with funds borrowed under our Credit Facilities, to redeem the 7.25% Senior Notes due 2020. For further information, see ~~Item 1. Financial Statements - Note 6. Consolidated Debt.~~

We have substantial indebtedness, including approximately $650 million that will mature through 2020. We generally intend to refinance these instruments prior to maturity with like-kind financing in the bank and/or debt capital markets in order to maintain a capital structure comprised primarily of long-term debt, which we believe appropriately matches the long-term nature of our assets and contracts. The loan documentation governing the Credit Facilities contains various affirmative and negative covenants, as well as financial maintenance covenants (financial ratios), that limit our ability to engage in certain types of transactions. We are in compliance with all of the covenantstreated under the Credit Facilities as either additional term loans or as revolving loans.

The surety bonds listed in the table above relate primarily to construction and performance obligations and support for other obligations, including closure requirements of ~~September 30, 2017. Further,~~various energy projects when such projects cease operating. Were these bonds to be drawn upon, we would have a contractual obligation to indemnify the surety company. The bonds do not ~~anticipate~~have stated expiration dates. Rather, we are released from the bonds as the underlying performance is completed.

We have certain contingent obligations related to our ~~existing debt covenants~~Senior Notes and Tax-Exempt Bonds. Holders may require us to ~~restrict our ability~~repurchase their Senior Notes and Tax-Exempt Bonds if a fundamental change occurs. Under the taxable note indentures, a Change of Control Offer to ~~undertake additional financing.~~ purchase the Bonds at a purchase price in cash equal to 101% of the principal amount of the Notes would need to be made if (a) a Change of Control (“CoC”) occurs and (b) the Notes are downgraded by either Rating Agency on any date during the period commencing 60 days prior to the consummation of such CoC and ending 60 days following consummation of such CoC. Under the tax-exempt indentures, a Change of Control Offer to purchase the Bonds at a purchase price in cash equal to 101% of the principal amount of the Notes would need to be made, if, inter alia, the long-term credit rating on the tax-exempt bonds is lower than the rating on the Bonds immediately prior to such transaction.

Table of Contents

COVANTA HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

For ~~additional information regarding~~specific criteria related to the ~~covenants under our Credit Facilities,~~redemption features of the Senior Notes and Tax-Exempt Bonds, see Item 8. Financial Statements ~~and~~And Supplementary Data — Note ~~11.~~16. Consolidated Debtof our 2020 Annual Report on Form ~~10-K~~10-K.

In 2017, we expect to generate net cash from operating activities which may not alone meet all of our cash requirements for both capital expenditures to maintain our existing assets and for ongoing dividends to stockholders, in which case we would utilize our Revolving Credit Facility on an interim basis. We commenced operations of our Dublin EfW facility and we expect it to contribute meaningfullya project. With respect to our ~~financial results for the remainder of the year. For a full discussion of the factors impacting our 2017 business outlook, see~~ ~~Item 7. Management's Discussion~~businesses, we have issued guarantees to municipal clients and ~~Analysis of Financial Condition and Results of Operations - Business Outlook~~ of our Annual Report on Form 10-K for the year ended December 31, 2016. We intend to utilize debt financing as the primary means to fund investments in the growth of our business in 2017. For additional information regarding the financing arrangements referenced above, see ~~Item 8. Financial Statements and Supplementary Data - Note 11. Consolidated Debt~~ ~~of our Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~Beyond 2017, we expect~~other parties that our ~~financial results~~subsidiaries will ~~be affected by several factors, including: market prices, contract transitions, new contracts, rates of new business growth~~perform in our environmental services operations, acquisitions and other growth investments, continuous improvement initiatives, and our ability to manage facility production and operating costs. Under our capital allocation policy, we intend to use any excess cash flow from operations aboveaccordance with contractual terms, including, where required, the amount of ongoing requirements for capital expenditures to maintain our existing assets and for ongoing dividends to stockholders either and to invest in growth opportunities or to repay indebtedness. If and as we identify attractive growth investment opportunities that exceed our expected cash flow from operations, we will continue to consider utilizing debt financing to the extent that it is available in the market on acceptable terms.

~~Other Factors Affecting Liquidity~~

As of September 30, 2017, we held cash balances of $37 million, of which $33 million was held by international subsidiaries and not generally available for near-term liquidity in our domestic operations. In addition, as of September 30, 2017, we had restricted cash of $88 million, of which $16 million was designated for future payment of damages or other obligations. Additionally, damages payable under such guarantees for our WtE facilities could expose us to recourse liability on project ~~debt principal. Restricted~~debt. If we must perform under one or more of such guarantees, our liability for damages upon contract termination would be reduced by funds held in trust ~~are primarily amounts received~~ and ~~held by third-party trustees relating to certain projects we own. We generally do not control these accounts and these funds may be used only for specified purposes.~~

~~As of September 30, 2017, we had unused capacity under our Revolving Credit Facility of $336 million and are in compliance with all~~proceeds from sales of the ~~covenants under our Credit Facilities. For additional information regarding~~facilities securing the ~~Credit Facilities, see~~ ~~Item 1. Financial Statements — Note 6. Consolidated Debt.~~

~~During~~project debt and is presently not estimable. Depending upon the ~~three months ended September 30, 2017, dividends declared~~circumstances giving rise to ~~stockholders were $33 million, or $0.25 per share. Such amounts were paid in October 2017. We may repurchase outstanding shares from time to time,~~such damages, the ~~amount and timing~~contractual terms of ~~future repurchases may vary depending on market conditions~~the applicable contracts, and the ~~level~~contract counterparty’s choice of ~~operating, financing and other investing~~remedy at the time a claim against a guarantee is made, the amounts owed pursuant to one or more of such guarantees could be greater than our then-available sources of funds. To date, we have not incurred material liabilities under such guarantees.

We have entered into certain guarantees of performance in connection with our recent divestiture activities. ~~As of September 30, 2017,~~Under the ~~amount remaining under our currently authorized share repurchase program was $66 million.~~

Our projected contractual obligations are consistent with amounts disclosed in our Form 10-K for the year ended December 31, 2016. For additional information regarding the 5.875% Notes due 2025 and the 7.25% Notes due 2020, see ~~Item 1. Financial Statements — Note 6. Consolidated Debt.~~ ~~For additional informationon other commitments, see~~ ~~Item 1. Financial Statements — Note 12. Commitments and Contingencies - Other Matters.~~

~~Sources and Uses of Cash Flow for the Nine Months Ended September 30, 2017 and 2016:~~

Net cash provided by operating activities for the nine months ended September 30, 2017 was $114 million, a decrease of $36 million from the same prior year period. The decrease was primarily due to the operating performance as discussed in our Managements Discussion and Analysis of Financial Condition and Results of Operations. The cash outflow related to working capital was greater as compared to the prior year, primarily due to the payment of bonus compensation in 2017, which was absent in 2016, partially offset by higher collections of accounts receivables in 2017.

Net cash used in investing activities for the nine months ended September 30, 2017 was $235 million, a net increase of $57 million from the prior year period. The net increase in cash used was principally attributable to reduced proceeds from asset sales, as this activity occurred only in 2016, and reduced purchases of property, plant and equipment of $64 million, including a lower rate of spend for constructionterms of the ~~Dublin EfW facility, offset by an increase in acquisition spending of $7 million.~~

~~Net cash provided by financing activities for~~arrangements, we guarantee performance should the ~~nine months ended September 30, 2017 was $70 million, a net increase of $26 million from the prior period. The increase was primarily attributable~~guaranteed party fail to ~~higher net borrowings~~fulfill its obligations under the ~~revolving credit facility of $95 million, offset by lower proceeds from our Dublin financing arrangement of $71 million as compared to the prior year period.~~specified arrangements.

~~Supplementary Financial Information — Free Cash Flow (Non-GAAP Discussion)~~

To supplement our results prepared in accordance with GAAP, we use the measure of Free Cash Flow, which is a non-GAAP measure as defined by the SEC. This non-GAAP financial measure is not intended as a substitute and should not be considered in isolation from measures of liquidity prepared in accordance with GAAP. In addition, our use of Free Cash Flow may be different from similarly identified non-GAAP measures used by other companies, limiting its usefulness for comparison purposes. The presentation of Free Cash Flow is intended to enhance the usefulness of our financial information by providing measures which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates, and highlight trends in the overall business.

We use the non-GAAP financial measure of Free Cash Flow as a criterion of liquidity and performance-based components of employee compensation. Free Cash Flow is defined as cash flow provided by operating activities, less maintenance capital expenditures, which are capital expenditures primarily to maintain our existing facilities. We use Free Cash Flow as a measure of liquidity to determine amounts we can reinvest in our core businesses, such as amounts available to make acquisitions, invest in construction of new projects, make principal payments on debt, or return capital to our stockholders through dividends and/or stock repurchases. For additional discussion related to management’s use of non-GAAP measures, see ~~Consolidated Results of Operations — Supplementary Financial Information — Adjusted EBITDA and Adjusted EPS (Non-GAAP Discussion)~~ ~~above.~~

~~In order to provide a meaningful basis for comparison, we are providing information with respect to our Free Cash Flow for the three and nine months ended~~ ~~September 30, 2017~~ ~~and 2016, reconciled for each such period to cash flow provided by operating activities, which we believe to be the most directly comparable measure under GAAP.~~

~~The following is a reconciliation of Free Cash Flow and its primary uses (in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016 2017
2016
Net cash provided by operating activities $ 88
$ 88
$ 114
$ 150
Less: Maintenance capital expenditures ^(a)
(20 ) (14 ) (84 ) (82 )
Free Cash Flow $ 68
$ 74
$ 30
$ 68
Uses of Free Cash Flow
Investments:
Growth investments ^(b)
$ (43 ) $ (84 ) $ (138 ) $ (209 )
Property insurance proceeds —
2
5
2
Capital expenditures associated with property insurance events (4 ) —
(13 ) —
Other investing activities, net (2 ) 4
(5 ) 6
Total investments $ (49 ) $ (78 ) $ (151 ) $ (201 )
Return of capital to stockholders:
Cash dividends paid to stockholders $ (33 ) $ (33 ) $ (98 ) $ (98 )
Common stock repurchased —
—
—
(20 )
Total return of capital to stockholders $ (33 ) $ (33 ) $ (98 ) $ (118 )
Capital raising activities:
Net proceeds from issuance of corporate debt ^(c)
$ —
$ —
$ 393
$ —
Net proceeds from Dublin financing 11
60
69
134
Change in restricted funds held in trust 2
4
2
17
Proceeds from sale of China assets —
105
—
105
Net proceeds from capital raising activities $ 13
$ 169
$ 464
$ 256
Debt repayments:
Net cash used for scheduled principal payments on corporate debt $ (1 ) $ (1 ) $ (3 ) $ (2 )
Net cash used for scheduled principal payments on project debt ^(d)
(11 ) (11 ) (18 ) (15 )
Voluntary prepayment of corporate debt —
—
(410 ) —
Payments on equipment financing leases (2 ) (1 ) (4 ) (3 )
Total debt repayments $ (14 ) $ (13 ) $ (435 ) $ (20 )

Borrowing activities - Revolving credit facility, net $ (2 ) $ (110 ) $ 130
$ 35

Other financing activities, net 5
(3 ) 9
(4 )
Effect of exchange rate changes on cash and cash equivalents 1
(1 ) 4
1
Net change in cash and cash equivalents $ (11 ) $ 5
$ (47 ) $ 17

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Maintenance capital expenditures $ (20 ) $ (14 ) $ (84 ) $ (82 )
Capital expenditures associated with construction of the Dublin EfW facility (35 ) (59 ) (91 ) (132 )
Capital expenditures associated with organic growth initiatives (7 ) (16 ) (27 ) (38 )
Capital expenditures associated with the New York City contract —
—
—
(3 )
Capital expenditures associated with the Essex County EfW emissions control system —
(9 ) (3 ) (27 )
Total capital expenditures associated with growth investments (42 ) (84 ) (121 ) (200 )
Capital expenditures associated with property insurance events (4 ) —
(13 ) —
Total purchases of property, plant and equipment $ (66 ) $ (98 ) $ (218 ) $ (282 )

~~(b) Growth investments include investments in growth opportunities, including organic growth initiatives, technology, business development and other similar expenditures.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Capital expenditures associated with growth investments $ (42 ) $ (84 ) $ (121 ) $ (200 )
Asset and business acquisitions (1 ) —
(17 ) (9 )
Total growth investments $ (43 ) $ (84 ) $ (138 ) $ (209 )

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Total scheduled principal payments on project debt $ (8 ) $ (8 ) $ (20 ) $ (17 )
Decrease in related restricted funds held in trust (3 ) (3 ) 2
2
Net cash used for scheduled principal payments on project debt $ (11 ) $ (11 ) $ (18 ) $ (15 )

~~Recent Accounting Pronouncements~~

~~Discussion of Critical Accounting Policies and Estimates~~

NOTE 15. SUBSEQUENT EVENT

On July 14, 2021, we announced that we had entered into a definitive agreement with EQT Infrastructure (“EQT”) whereby EQT will acquire all shares of Covanta common stock for $20.25 per share. The acquisition is subject to Covanta shareholder approval, as well as customary government approvals, and is expected to close in the fourth quarter of this year. The agreement resulted from a competitive sale process and is not subject to a financing condition.

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")

The following MD&A is intended to help the reader understand the results of operations and financial condition of Covanta for the three and six months ended June 30, 2021. The financial information as of June 30, 2021 should be read in conjunction with the financial statements for the year ended December 31, 2020 contained in our 2020 Annual Report on Form 10-K.

Factors Affecting Business Conditions and Financial Results

Impact of novel coronavirus ("COVID-19") on the United States and the global economy

The COVID-19 pandemic has impacted, and is expected to continue to impact, our employees, our operations, our business and the economy. In early 2020, we began to see impacts from COVID-19 on the economy and commercial activity in the United States, resulting in reduced waste volumes and disruptions in waste markets. We have seen an increase in commercial activity and a stabilization of business conditions from the lows in the second quarter of 2020, but the extent of potential impacts from COVID-19 in the future remains uncertain. We cannot predict the potential future impact of the COVID-19 pandemic with new variants of the virus circulating and delays in distributing and administering the vaccine, and it could materially and adversely affect our business, financial condition and results of operations in the future.

While a limited number of our employees have contracted COVID-19, we have followed recommended protocols and have thus far not experienced material disruptions to our operations as result of workforce availability issues. Depending upon the rate, extent, and location of future COVID-19 infection, more widespread infection of our employees could cause significant increases to operating expenses at specific facilities, or the curtailment of operations at such facilities on a temporary basis.

Our WtE plants and material processing facilities provide a vital service to our municipal and commercial clients. As waste disposal facilities, they have been recognized as part of Critical Infrastructure by the Department of Homeland Security and as essential services by state and local governments. Residential waste represents the substantial majority of our contracted volumes, and there has been limited impact on these volumes to date. We also process commercial waste, including profiled waste, at many facilities, and while overall volumes of these materials for disposal in the market fell during the early stages of the pandemic, volumes have generally returned to pre-pandemic levels, and our average revenue per ton levels have returned as well.

As the COVID-19 pandemic is ongoing with new variants and the near term worldwide economic outlook remains uncertain, we cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact our consolidated financial statements.

Commodity Markets— Our quarterly results within an operating year may be affected substantially by movements in commodity markets relevant to our business, principally those relating to energy and metals. As noted above, the COVID-19 pandemic has had a dampening effect on prices in these markets in prior periods. Such factors have caused, and may continue to cause, the portion of our energy revenue exposed to the market and/or our materials sales revenue to fluctuate to an extent that may materially affect our quarterly and annual financial results.

Energy Markets — A portion of our energy revenue is sold under short term arrangements at prevailing market prices. Underlying market prices are affected by a variety of factors not within our control such as weather, natural gas supply/demand conditions (including seasonal storage), regional electricity transmission and system conditions, and global demand. We maintain a disciplined program to hedge our exposure to market price volatility, see Item 1. Financial Statements — Note 11. Derivative Instruments. As a result of our hedging program, we have only a limited amount of exposure to market price volatility in the near term, including for the remainder of 2021.

Metals Markets — We sell recycled ferrous and non-ferrous metals under short term arrangements based on prevailing rates that are affected by regional and global demand for specific types of recycled metals. In addition, recycled metal prices for both ferrous and non-ferrous materials are potentially impacted, directly and indirectly, by tariff and trade actions both by the U.S. as well as foreign countries.


	June 30, 2021		June 30, 2020
Consumer Price Index (1)	5.4%		0.6%
PJM Pricing (Electricity) (2)	$	24.23	$	15.69
NE ISO Pricing (Electricity) (3)	$	29.41	$	18.23
Henry Hub Pricing (Natural Gas) (4)	$	2.94	$	1.71
#1 HMS Pricing (Ferrous Metals) (5)	$	425	$	208
Old Sheet & Old Cast (Non-Ferrous Metals) (6)	$	0.71	$	0.37

(1)Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by the U.S. Department of Labor Bureau of Labor Statistics.

(2)Average price per megawatt hours ("MWh") for Q2 2021 and Q2 2020. Pricing for the PJM PSEG Zone is provided by the PJM ISO.

(3)Average price per MWh for Q2 2021 and Q2 2020. Pricing for the Mass Hub Zone is provided by the NE ISO.

(4)Average price per MMBtu for Q2 2021 and Q2 2020. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update, Energy Information Administration, Washington DC.

(5)Average price per gross ton for Q2 2021 and Q2 2020. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price as published by American Metal Market.

(6)Average price per pound for Q2 2021 and Q2 2020. Calculated using the high price of Old Cast Aluminum Scrap ($/lb.) as published by American Metal Market.

Seasonal — Our quarterly operating results within the same fiscal year typically differ substantially due to seasonal factors, primarily as a result of the timing of scheduled plant maintenance. We 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 expense and receive less revenue until the boiler and/or turbine units resume operations. This scheduled maintenance usually occurs during periods of off-peak electric demand and/or lower waste volumes, which are our first, second and fourth fiscal quarters. The scheduled maintenance period in the first half of the year (primarily first quarter and early second quarter) is typically the most extensive, while the third quarter scheduled maintenance period is the least extensive. Given these factors, we normally experience our lowest operating income from our projects during the first half of each year.

Our operating results may also be affected by seasonal weather extremes during summers and winters. Increased demand for electricity and natural gas during unusually hot or cold periods may affect certain operating expenses and may trigger material price increases for a portion of the electricity and steam we sell.

Brexit Implications — In March, 2017, the United Kingdom formally notified the European Union ("EU") of its intention to leave the EU (so-called “Brexit”), and on January 31, 2020, the UK formally severed political ties and left the EU. The UK’s economic ties to the EU and its existing trading arrangements with both the EU and countries outside the EU remained in place pending trade agreement renegotiations during a “standstill” transition period through December 31, 2020. The COVID-19 pandemic has created additional challenges in finalizing these trade agreements, but the UK reached a trade deal with the EU on December 24, 2020 ahead of the UK leaving the EU's single market and customs union on December 31, 2020. As there are ongoing matters which remain to be agreed to, and the legislative frameworks of both UK and EU law continue to develop (and potentially further diverge), there remains ongoing uncertainty as to the implications of Brexit. The UK is also now negotiating and renegotiating its trade arrangements with non-EU countries. We have studied and consulted with local experts regarding the potential market and economic impacts of Brexit on the UK, with a particular focus on potential impacts to the waste and energy markets as they might affect our plans to expand our business with Green Investment Group Limited ("GIG"). The government of the UK has shown no indication of an intention to rollback or reverse its policy support for environmental protection generally, the renewables market, or for WtE specifically. As such, while Brexit may have some impact on construction costs and schedule for both existing and potential new UK WtE projects, we do not believe that Brexit will materially impact the key market and economic drivers for investment in the combined pipeline of WtE projects we are pursuing jointly with GIG.

Our key capital allocation activities for the three months ended June 30, 2021 included the following:

•$11 million declared in dividends to stockholders; and

•$3 million for growth investments.

Completion of Strategic Review

In October 2020, we announced the launch of a comprehensive strategic review of our assets, operations, growth priorities, and capital structure. This review was an opportunity to explore all options to enhance stockholder value, including assessing plans for each of our business lines and geographies. The board of directors appointed Michael Ranger as President and Chief Executive Officer to lead this review and its subsequent execution.

In April 2021, we announced that, in connection with the strategic review, we were implementing an overhead cost rationalization program with a target to reduce costs by $30 million on a run rate basis by the end of 2022. Initial efforts on this program have begun, including a voluntary early retirement program.

The following general discussions should be read in conjunction with the condensed consolidated financial statements, the notes to the condensed consolidated financial statements and other financial information appearing and referred to elsewhere in this report. We have one reportable segment which comprises our entire operating business.

The comparability of the information provided below with respect to our revenue, expense and certain other items for the periods presented was affected by several factors. As outlined in Item 1. Financial Statements — Note 1. Organization and Basis of Presentation in this quarterly report on Form 10-Qand in Item 8. Financial Statements And Supplementary Data — Note 1. Organization and Summary of Significant Accounting Policies and Note 3. New Business and Asset Management of our 2020 Annual Report on Form 10-K, our business development initiatives, contract transitions, and acquisitions resulted in various transactions, which are reflected in comparative revenue and expense.

Certain reclassifications of the prior years' amounts have been made to conform to the current year's presentation. The change in presentation did not affect our total operating revenue, total operating expense or operating loss. For further information on the reclassifications, see Item 1. Financial Statements — Note 1. Organization and Basis of Presentation. In addition, comparability of our results was affected by the COVID-19 pandemic as discussed above under Impact of COVID-19 on the U.S. and the global economy. These factors must be taken into account in developing meaningful comparisons between the periods compared below.

The following terms used within the Results of Operations discussion are defined as follows:

•“Organic growth”: reflects the performance of the business on a comparable period-over-period basis, excluding the impacts of transactions and contract transitions.

•“Transactions”: includes the impacts of acquisitions, divestitures, and the addition or loss of operating contracts.

•Contract “transitions”: includes the impact of the expiration of: (a) long-term major waste contracts, most typically representing the transition to a new contract structure, and (b) long-term energy contracts.

Certain amounts in our Consolidated Results of Operations may not total due to rounding.

CONSOLIDATED RESULTS OF OPERATIONS — OPERATING INCOME


					Variance Increase
	Three Months Ended June 30,				(Decrease)
	2021		2020		2021 vs 2020
	(In millions)
OPERATING REVENUE:
Waste revenue	$	364	$	337	$	27
Energy revenue	86		78		8
Materials sales revenue	38		20		18
Services revenue	18		19		(1)
Total operating revenue	506		454		52
OPERATING EXPENSE:
Cost of operations	390		351		39
Other operating expense, net	3		2		1
General and administrative expense	33		27		6
Depreciation and amortization expense	55		56		(1)

Total operating expense	481		436		45
Operating income	$	25	$	18	$	7


					Variance Increase
	Six Months Ended June 30,				(Decrease)
	2021		2020		2021 vs 2020
	(In millions)
OPERATING REVENUE:
Waste revenue	$	707	$	677	$	30
Energy revenue	190		171		19
Materials sales revenue	74		37		37
Services revenue	33		37		(4)
Total operating revenue	1,004		922		82
OPERATING EXPENSE:
Cost of operations	788		722		66
Other operating expense, net	(1)		4		(5)
General and administrative expense	66		57		9
Depreciation and amortization expense	112		114		(2)
Impairment charges	—		19		(19)
Total operating expense	965		916		49
Operating income	$	39	$	6	$	33


	Three Months Ended				Six Months Ended				Variance
	June 30,				June 30,				Increase (Decrease)
(In millions)	2021		2020		2021		2020		Three Months		Six Months
Tip fees	$	169	$	158	$	328	$	319	$	11	$	9
Service fees	123		115		246		234		8		12
Waste to energy processing	292		273		574		553		19		21
Materials processing and recycling	27		19		52		41		8		11
Waste handling and disposal	75		72		142		139		3		3
Intercompany	(32)		(28)		(62)		(56)		(4)		(6)
Total waste revenue	$	364	$	337	$	707	$	677	$	27	$	30



				Page
			PART I. FINANCIAL INFORMATION
		~~Page~~
Cautionary Note Regarding Forward-Looking Statements				3
Item 1.			Financial Statements	4
			Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	4
			Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	5
			Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 (Unaudited) and December 31, ~~2016~~2020	6
			Condensed Consolidated Statements of Cash Flow for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	7
			Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	8
			Notes to Condensed Consolidated Financial Statements (Unaudited)	89
			Note 1. Organization and Basis of Presentation	89
			Note 2. Recent Accounting Pronouncements	911
			Note 3. ~~Acquisitions~~Equity and ~~Dispositions~~	10
	~~Note 4.~~ Earnings Per Share (“EPS”) ~~and Equity~~	1112
			Note 4. Revenue	12
			Note 5. ~~Financial Information by Business Segments~~Stock-Based Award Plans	13
			Note 6. ~~Consolidated Debt~~Supplementary Information	14
			Note 7. Income Taxes	16
			Note 8. ~~Supplementary Information~~Accounts Receivable Securitization	16
			Note ~~9. Stock-Based Compensation~~9 . Credit Losses	1816
			Note 10. Financial Instruments	1817
			Note 11. Derivative Instruments	2019
			Note 12. Consolidated Debt	20
			Note 13. Leases	21
			Note 14. Commitments and Contingencies	2122
			Note 15. Subsequent Event	24
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
			Consolidated Results of Operations	2527
			~~Adjusted Earnings Per Share (Non-GAAP Discussion)~~	32
	Adjusted EBITDA (Non-GAAP Discussion)	3332
			Liquidity and Capital Resources	34
			Free Cash Flow (Non-GAAP Discussion)	3536
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.			Controls and Procedures	38
			PART II. OTHER INFORMATION
Item 1.			Legal Proceedings	4039
Item 1A.			Risk Factors	4039
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	4041
Item 3.			Defaults Upon Senior Securities	4041
Item 4.			Mine Safety Disclosures	4041
Item 5.			Other Information	4041
Item 6.			Exhibits	4042
			OTHER
Signatures				4143


	September 30, 2017			December 31, 2016				June 30, 2021		December 31, 2020
	(Unaudited)							(Unaudited)
	(In millions, except per share amounts)							(In millions, except per share amounts)
ASSETS							ASSETS
Current:							Current:
Cash and cash equivalents	$	37		$	84		Cash and cash equivalents	$	54	$	55
Restricted funds held in trust	56			56			Restricted funds held in trust	8		11
Receivables (less allowances of $11 million and $9 million, respectively)	325			332
Receivables (less allowances of $7 and $8, respectively)							Receivables (less allowances of $7 and $8, respectively)	242		260
Prepaid expenses and other current assets	93			72			Prepaid expenses and other current assets	85		117

Total Current Assets	511			544			Total Current Assets	389		443
Property, plant and equipment, net	3,170			3,024			Property, plant and equipment, net	2,398		2,421
Restricted funds held in trust	32			54			Restricted funds held in trust	10		6
Waste, service and energy contracts, net	254			263
Other intangible assets, net	38			34
Intangible assets, net							Intangible assets, net	227		237
Goodwill	313			302			Goodwill	303		302

Other assets	43			63			Other assets	300		297
Total Assets	$	4,361		$	4,284		Total Assets	$	3,627	$	3,706
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current:							Current:
Current portion of long-term debt	$	10		$	9		Current portion of long-term debt	$	27	$	18
Current portion of project debt	31			22			Current portion of project debt	9		9
Accounts payable	64			98			Accounts payable	79		75
Accrued expenses and other current liabilities	316			289			Accrued expenses and other current liabilities	307		303

Total Current Liabilities	421			418			Total Current Liabilities	422		405
Long-term debt	2,365			2,243			Long-term debt	2,375		2,396
Project debt	445			361			Project debt	111		116
Deferred income taxes	605			617			Deferred income taxes	346		362
Other liabilities	190			176			Other liabilities	119		117
Total Liabilities	4,026			3,815			Total Liabilities	3,373		3,396
Commitments and Contingencies (Note 12)
Commitments and Contingencies (Note 14)							Commitments and Contingencies (Note 14)
Equity:							Equity:
Covanta Holding Corporation stockholders' equity:
Preferred stock ($0.10 par value; authorized 10 shares; none issued and outstanding)	—			—			Preferred stock ($0.10 par value; authorized 10 shares; none issued and outstanding)	0		0
Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, outstanding 131 and 130, respectively)	14			14
Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, outstanding 133 shares and 132 shares, respectively)							Common stock ($0.10 par value; authorized 250 shares; issued 136 shares, outstanding 133 shares and 132 shares, respectively)	14		14
Additional paid-in capital	821			807			Additional paid-in capital	892		882
Accumulated other comprehensive loss	(44		)	(62		)	Accumulated other comprehensive loss	(59)		(32)
Accumulated deficit	(455		)	(289		)	Accumulated deficit	(593)		(554)
Treasury stock, at par	(1		)	(1		)	Treasury stock, at par	0		0
Total Covanta Holding Corporation stockholders' equity	335			469
Total Equity							Total Equity	254		310

Total Liabilities and Equity	$	4,361		$	4,284		Total Liabilities and Equity	$	3,627	$	3,706



þ	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(Unaudited) (In millions, except per share amounts)
OPERATING REVENUE:
Waste and service revenue	$	306		$	299		$	902		$	875
Energy revenue	80			92			241			279
Recycled metals revenue	23			14			54			44
Other operating revenue	20			16			60			44
Total operating revenue	429			421			1,257			1,242
OPERATING EXPENSE:
Plant operating expense	301			272			952			901
Other operating expense, net	7			14			24			45
General and administrative expense	24			23			82			71
Depreciation and amortization expense	51			52			155			155
Impairment charges	—			—			1			19
Total operating expense	383			361			1,214			1,191
Operating income	46			60			43			51
OTHER INCOME (EXPENSE):
Interest expense, net	(35		)	(35		)	(106		)	(103		)
Gain (loss) on asset sales	—			43			(6		)	43
Loss on extinguishment of debt	—			—			(13		)	—
Other income (expense), net	2			(1		)	2			(1		)
Total other (expense) income	(33		)	7			(123		)	(61		)
Income (loss) before income tax benefit (expense) and equity in net (loss) income from unconsolidated investments	13			67			(80		)	(10		)
Income tax benefit (expense)	2			(12		)	5			(5		)
Equity in net (loss) income from unconsolidated investments	—			(1		)	1			3
Net Income (Loss)	$	15		$	54		$	(74	)	$	(12	)

Weighted Average Common Shares Outstanding:
Basic	130			129			129			129
Diluted	131			131			129			129

Earnings (Loss) Per Share
Basic	$	0.11		$	0.42		$	(0.58	)	$	(0.09	)
Diluted	$	0.11		$	0.42		$	(0.58	)	$	(0.09	)

Cash Dividend Declared Per Share	$	0.25		$	0.25		$	0.75		$	0.75



	Foreign Currency Translation			Pension and Other Postretirement Plan Unrecognized Net Gain		Net Unrealized (Loss) Gain On Derivatives			Total
Balance at December 31, 2015	$	(34	)	$	2	$	(2	)	$	(34	)
Other comprehensive income (loss) before reclassifications	6			—		(20		)	(14		)
Amounts reclassified from accumulated other comprehensive (loss) income	(5		)	—		—			(5		)
Net current period comprehensive income (loss)	1			—		(20		)	(19		)
Balance at September 30, 2016	$	(33	)	$	2	$	(22	)	$	(53	)

Balance at December 31, 2016	$	(41	)	$	2	$	(23	)	$	(62	)
Other comprehensive income (loss) before reclassifications	16			—		2			18
Net current period comprehensive income	16			—		2			18
Balance at September 30, 2017	$	(25	)	$	2	$	(21	)	$	(44	)



Amount Reclassified from Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income Component	Nine Months Ended September 30, 2016		Affected Line Item in the Consolidated Statement of Operations

Foreign currency translation	$	5	Gain on asset sales
	5		Total before tax
	—		Tax benefit
Total reclassifications	$	5	Net of tax



	North America		All Other			Total
Three Months Ended September 30, 2017
Operating revenue	$	429	$	—		$	429
Depreciation and amortization expense	51		—			51
Impairment charges	—		—			—
Operating income (loss)	48		(2		)	46

Three Months Ended September 30, 2016
Operating revenue	$	421	$	—		$	421
Depreciation and amortization expense	52		—			52
Impairment charges	—		—			—
Operating income (loss)	62		(2		)	60
	North America		All Other ⁽¹⁾			Total
Nine Months Ended September 30, 2017
Operating revenue	$	1,257	$	—		$	1,257
Depreciation and amortization expense	155		—			155
Impairment charges	1		—			1
Operating income (loss)	49		(6		)	43

Nine Months Ended September 30, 2016
Operating revenue	$	1,235	$	7		$	1,242
Depreciation and amortization expense	155		—			155
Impairment charges	19		—			19
Operating income (loss)	55		(4		)	51



	Total			Direct Borrowings as of		Outstanding Letters of Credit as of		Unused Capacity as of
	Credit Facility		Expiring ⁽¹⁾	September 30, 2017		September 30, 2017		September 30, 2017
Revolving Credit Facility	$	1,000	2020	$	473	$	191	$	336



	As of September 30, 2017
	Unrecognized stock- based compensation	Weighted-average years to be recognized
Restricted stock awards	$ 11	1.5
Restricted stock units	$ 11	1.8



	As of September 30, 2017				As of December 31, 2016
Financial Instruments Recorded at Carrying Amount:	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Accounts receivable ⁽⁶⁾	$	326	$	326	$	333	$	333
Liabilities:
Long-term debt	$	2,375	$	2,383	$	2,252	$	2,237
Project debt	$	476	$	481	$	383	$	387



		Amount of Gain or (Loss) Recognized In Income on Derivatives
Effect on Income of Derivative Instruments Not Designated As Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Three Months Ended September 30,					Nine Months Ended September 30,
		2017		2016			2017		2016
Foreign currency	Other income (expense), net	$	—	$	(1	)	$	—	$	(2	)
Effect on income of derivative instruments not designated as hedging instruments		$	—	$	(1	)	$	—	$	(2	)



	Commitments Expiring by Period
	Total		Less Than One Year		More Than One Year
Letters of credit issued under the Revolving Credit Facility	$	191	$	11	$	180
Letters of credit - other	69		69		—
Surety bonds	202		—		202
Total other commitments — net	$	462	$	80	$	382



	September 30, 2017			September 30, 2016
Consumer Price Index ⁽¹⁾	2.2		%	1.5		%
PJM Pricing (Electricity) ⁽²⁾	$	26.13		$	27.90
NE ISO Pricing (Electricity)⁽³⁾	$	25.36		$	31.76
Henry Hub Pricing (Natural Gas) ⁽⁴⁾	$	2.95		$	2.88
#1 HMS Pricing (Ferrous Metals) ⁽⁵⁾	$	275		$	212
Scrap Metals - Old Sheet & Old Cast ⁽⁶⁾	$	0.60		$	0.58



Consolidated:	Three Months Ended September 30,				Variance Increase (Decrease)
	2017		2016		2017 vs 2016
	(In millions)
OPERATING REVENUE:
Waste and service revenue	$	306	$	299	$	8
Energy revenue	80		92		(12		)
Recycled metals revenue	23		14		9
Other operating revenue	20		16		4
Total operating revenue	429		421		9
OPERATING EXPENSE:
Plant operating expense	301		272		29
Other operating expense, net	7		14		(8		)
General and administrative expense	24		23		1
Depreciation and amortization expense	51		52		(1		)
Total operating expense	383		361		21
Operating income	$	46	$	60	$	(14	)



Consolidated (in millions):	Three Months Ended September 30,						Nine Months Ended September 30,						Variance Increase (Decrease)
	2017			2016			2017			2016			Three Months			Nine Months
EfW waste processing	$	238		$	241		$	711		$	706		$	(3	)	$	5
Environmental services	32			26			90			72			$	6		18
Municipal services	50			48			146			140			$	2		6
Other revenue	12			10			30			28			$	2		2
Intercompany	(26		)	(26		)	(75		)	(71		)	$	—		(4		)
Total waste and service revenue	$	306		$	299		$	902		$	875		$	8		27



Consolidated ⁽¹⁾ (in millions):	Three Months Ended September 30,				Nine Months Ended September 30,				Variance Increase (Decrease)
	2017		2016		2017		2016		Three Months			Nine Months
Energy Sales	$	68	$	81	$	209	$	240	$	(13	)	$	(31	)
Capacity	12		11		32		30		1			2
Other revenue	—		—		—		9		—			(9		)
Total energy revenue	$	80	$	92	$	241	$	279	$	(12	)	$	(38	)



Total EfW (in millions):	Three Months Ended September 30,										Variance Increase (Decrease)
	2017					2016					2017 vs 2016
	Revenue ⁽¹⁾		Volume ^{(1) (2)}	% of Total Volume		Revenue ⁽¹⁾		Volume ^{(1) (2)}	% of Total Volume		Revenue			Volume
At Market	$	5	0.2	14	%	$	9	0.2	16	%
Contracted	54		0.6	42	%	65		0.8	53	%
Hedged	21		0.7	44	%	18		0.5	31	%
Total EfW	$	80	1.5	100	%	$	92	1.5	100	%	$	(12	)	—	%



	Three Months Ended September 30,
	Metal Revenue (in millions)				Tons Recovered (in thousands)		Tons Sold (in thousands) ⁽¹⁾
	2017		2016		2017	2016	2017	2016
Ferrous Metal	$	13	$	8	98	101	81	72
Non-Ferrous Metal	10		6		10	9	8	10
Total	$	23	$	14



	Three Months Ended September 30,						Nine Months Ended September 30,						Variance (Increase) Decrease
	2017			2016			2017			2016			Three Months			Nine Months
							(In millions)
Interest expense, net	$	(35	)	$	(35	)	$	(106	)	$	(103	)	$	—		$	(3	)
Gain (loss) on asset sales	—			43			(6		)	43			(43		)	(49		)
Loss on extinguishment of debt	—			—			(13		)	—			—			(13		)
Other income (expense), net	2			(1		)	2			(1		)	3			3
Total other (expense) income	$	(33	)	$	7		$	(123	)	$	(61	)	$	(40	)	$	(62	)



	Three Months Ended September 30,						Nine Months Ended September 30,
Reconciling Items	2017			2016			2017			2016
Impairment charges ^(a)	$	—		$	—		$	1		$	19
Gain (loss) on asset sales ⁽ᵇ⁾	—			(43		)	6			(43		)
Severance and reorganization costs	—			—			1			2
Property insurance recoveries, net ^(c)	1			—			(2		)	—
Loss on extinguishment of debt	—			—			13			—
Effect on income of derivative instruments not designated as hedging instruments	—			1			—			2
Effect of foreign exchange gain on indebtedness	(1		)	—			(2		)	(1		)
Total reconciling items, pre-tax	—			(42		)	17			(21		)
Pro forma income tax impact ^(d)	—			10			(5		)	2
Grantor trust activity	1			1			2			1
Total reconciling items, net of tax	$	1		$	(31	)	$	14		$	(18	)
Diluted per share impact	$	0.01		$	(0.24	)	$	0.11		$	(0.14	)
Weighted average diluted shares outstanding	131			131			129			129


~~(b)~~	During the nine months ended September 30, 2017, we recorded a $6 million charge for indemnification claims related to the sale of our interests in China, which was completed in 2016. During the three months ended September 30, 2016, we recorded a $41 million gain on the sale of our interests in China.


~~(c)~~	~~During the nine months ended September 30, 2017, we recorded a $2 million property insurance gain related to our property insurance recoveries.~~


~~(d)~~	~~We calculate the federal and state tax impact of each item using the statutory federal tax rate and applicable blended state rate.~~


~~(c)~~	~~Includes certain other items that are added back under the definition of Adjusted EBITDA in Covanta Energy's credit agreement.~~


~~(a)~~	Purchases of property, plant and equipment are also referred to as capital expenditures. Capital expenditures that primarily maintain existing facilities are classified as maintenance capital expenditures. The following table provides the components of total purchases of property, plant and equipment:


~~(c)~~	~~Excludes borrowings under Revolving Credit Facility. Calculated as follows:~~


WtE Tons (1)	Three Months Ended		Six Months Ended		Variance
	June 30,		June 30,		Increase (Decrease)
(In millions)	2021	2020	2021	2020	Three Months	Six Months
Tip fees - contracted	2.2	2.2	4.2	4.2	—	—
Tip fees - uncontracted	0.4	0.5	1.0	1.1	(0.1)	(0.1)
Service fees	2.6	2.5	5.1	5.1	0.1	—
Total tons	5.2	5.2	10.3	10.5	—	(0.2)


(In millions):	Six Months Ended June 30,						Variance Increase (Decrease)
	2021			2020			2021 vs 2020
	Revenue (3)		Volume (3)(4)	Revenue (3)		Volume (3)(4)	Revenue		Volume
Energy sales	$	139		$	134		$	5
Capacity	21			20			1
Wholesale load serving (1)	17			13			4
Renewable energy credits and other (2)	13			4			9
Total energy revenue	$	190	3.2	$	171	3.2	$	19	—


	Three Months Ended June 30,
	Materials Sales Revenue (In millions)				Tons Recovered (In thousands)		Tons Sold (In thousands) (1)
	2021		2020		2021	2020	2021	2020
Ferrous	$	23	$	10	115	116	100	99
Non-ferrous	15		9		14	12	10	8

Total materials sales revenue	$	38	$	20


	Total Project Debt		Percentage Ownership	Proportionate Unconsolidated Project Debt		Project Stage
Dublin (Ireland) (1)	$	430	50%	$	215	Operational
Earls Gate (UK) (2)	132		25%	33		Under construction
Rookery (UK) (3)	336		40%	134		Under construction
Zhao County (China) (4)	57		26%	15		Under construction
Newhurst (UK) (5)	170		25%	43		Under construction
Protos (UK) (6)	144		37.5%	54		Under construction
Total	$	1,269		$	494



Exhibit Number						Description of Exhibits
Material Contracts.
~~31.1~~10.1*						Letter Agreement between Covanta Holding Corp. and Paul Stauder dated May 17, 2021
Other.
31.1*						Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 by the Chief Executive Officer.
~~31.2~~31.2*						Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 by the Chief Financial Officer.
3232*						Certification of periodic financial report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 by the Chief Executive Officer and Chief Financial Officer.
~~Exhibit 101.INS:~~101.INS**						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
~~Exhibit 101.SCH:~~101.SCH**						XBRL Taxonomy Extension Schema
~~Exhibit 101.CAL:~~101.CAL**						XBRL Taxonomy Extension Calculation Linkbase
~~Exhibit 101.DEF:~~101.DEF**						XBRL Taxonomy Extension Definition Linkbase
~~Exhibit 101.LAB:~~101.LAB**						XBRL Taxonomy Extension Labels Linkbase
~~Exhibit 101.PRE:~~101.PRE**						XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)