ASSETS HELD FOR SALE AND DISPOSITIONS

6 Months Ended

Jun. 30, 2011

ASSETS HELD FOR SALE AND DISPOSITIONS

NOTE 3. ASSETS HELD FOR SALE AND DISPOSITIONS

In 2010, we adopted a plan to sell our interests in our fossil fuel independent power production facilities in the Philippines, India, and Bangladesh.

During the first quarter of 2011, we completed the sale of our majority equity interests in a 106 MW (gross) heavy fuel-oil fired electric power generation facilities in Tamil Nadu, India (“Samalpatti”) and we completed the sale of our interests in a 510 MW (gross) coal-fired electric power generation facility in the Philippines (“Quezon”). The Quezon assets sold consisted of our entire interest in Covanta Philippines Operating, Inc., which provided operation and maintenance services to the facility, as well as our 26% ownership interest in the project company, Quezon Power, Inc. We received a combined total of cash proceeds of approximately $225 million, net of transaction costs.

During the second quarter of 2011, we signed an agreement with Samayanallur Power Investments Private Limited (“SPI”) to sell our interests in a 106 MW (gross) heavy fuel-oil fired electric power generation facility in Tamil Nadu, India (“Madurai”). The Madurai assets being sold include our entire interest in Covanta Madurai Operating Private Limited, which provides operation and maintenance services to the facility, as well as our approximately 77% ownership interest in the project company, Madurai Power Corporation Private Ltd. The project sells electrical output to the Tamil Nadu Electricity Board (“TNEB”) pursuant to long-term agreements and TNEB’s obligations are guaranteed by the government of the state of Tamil Nadu. This transaction is expected to close during 2011, and is subject to customary approvals and closing conditions and to SPI’s obtaining financing.

The remaining asset held for sale is our equity interest in a barge-mounted 126 MW (gross) diesel/natural gas-fired electric power generation facility located near Haripur, Bangladesh.

The assets and liabilities associated with these businesses are presented in our condensed consolidated balance sheets as “Current Assets Held for Sale” and “Current Liabilities Held for Sale.” The results of operations of these businesses are included in the condensed consolidated statements of operations as “Income from discontinued operations, net of tax.” The cash flows of these businesses are also presented separately in our condensed consolidated statements of cash flows. All corresponding prior year periods presented in our condensed consolidated financial statements and accompanying notes have been reclassified to reflect the discontinued operations presentation.

The following table summarizes the operating results of the discontinued operations for the periods indicated (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011		2010
Revenues	$	22,715		$	41,833		$	68,885	$	90,935
Operating expenses, including net gain on disposal of assets held for sale and loss on assets held for sale (A)	$	(20,894	)	$	(35,651	)	$	78,149	$	(78,401	)
Income before income tax expense and equity in net income from unconsolidated investments	$	1,899		$	6,519		$	147,503	$	13,232
Equity in net income from unconsolidated investments	$	939		$	6,422		$	6,469	$	11,434
Income from discontinued operations, net of income tax expense of $913, $1,919, $3,106 and $3,926, respectively	$	1,924		$	11,022		$	150,866	$	20,740

(A) During the three and six months ended June 30, 2011, we recorded a net after-tax (loss) gain on disposal of assets held for sale of $(3.6) million and $132.0 million, respectively. We recorded a loss on assets held for sale of $7.8 million in 2010.

The following table sets forth the assets and liabilities of the assets held for sale included in the condensed consolidated balance sheets as of the dates indicated (in thousands):

	As of
	June 30, 2011		December 31, 2010
Cash and cash equivalents	$	10,623	$	14,207
Restricted funds held in trust		252		18,966
Accounts receivable		31,376		19,479
Prepaid expenses and other assets		10,915		26,326
Property, plant and equipment, net		5,412		30,206
Investments in investees and joint ventures		22,699		81,322
Other long-term assets		—		451
Assets held for sale	$	81,277	$	190,957
Accounts payable	$	3,545	$	2,976
Accrued expenses and other		1,860		11,547
Project debt		8,292		15,555
Other noncurrent liabilities		5,250		4,188
Liabilities held for sale	$	18,947	$	34,266