October 3, 2003



Unsecured Creditors of Covanta
  Energy Corp and its
  Reorganizing Subsidiaries (Class 4,
  6 and 8 Creditors)

         Re:  Voting in Support of the Covanta Plan of Reorganization

Dear Class 4, 6 and 8 Unsecured Creditor:

         The Official Committee of Unsecured Creditors, which represented your
interests in the Covanta Chapter 11 proceedings, urges you to vote in favor of
the Covanta Reorganization Plan. The Plan accomplishes the Debtors' stated goals
of their bankruptcy proceeding: ridding the Debtors of their non-core,
non-energy, money-losing businesses, and restructuring the debt of the
remaining, profitable energy businesses.

         Unfortunately, the going concern value left after this restructuring
process cannot support payment of all of the Debtors' pre-petition debt. The
Class 3 secured creditors, for example, are receiving only between a 63.0% to
70.5% recovery on their secured claims, according to the Debtors' investment
bankers' valuations (see the Disclosure Statement at pp. xvii to xx), not
counting the 9.25% bondholders (Class 3B) settlement with Class 6 creditors. The
Debtors estimate that implementation of the 9.25% bondholders settlement,
whereby accepting 9.25% bondholders transfer 12.5% of their recovery to Class 6
creditors, will lower the recovery of such 9.25% bondholders to between a 55.2%
to 61.7 % recovery on their claims. (Those who opt out of the settlement run the
litigation risk of losing their secured status).

         While the valuation of the Debtors' assets undertaken by the
Committee's investment bankers, Houlihan, Lokey Howard & Zukin, vary from those
prepared by the Debtors' advisors, they are within a close range. Under either
valuation, the partial recoveries to the secured creditors make any recovery to
the unsecured creditors problematic. Nonetheless, by litigating certain issues,
preserving the right to litigate others, creative thinking (the ESOP idea), and
a constructive and realistic approach, the Committee was able to obtain a modest
recovery for many unsecured creditors (Class 6), and a good return for some
others (Class 4 and Class 8). Only the creditors of the Liquidating Debtors and
the holders of Class 7 convertible bonds (due to the contractual subordination
provisions of their bonds) are denied any recovery on their claims.

         Class 4 and Class 8 Creditors. Because of their structural priority,
Class 4 creditors are receiving a note equal to the face value of their claims.
Their recovery also rests on their potential ability to effectuate the
fraudulent conveyance waiver protection provisions in the secured lenders' 2001
Credit Agreement. The Committee believes this legal uncertainty justifies Class
4 creditors accepting this recovery which, notwithstanding the Debtors'
valuation, will be discounted from par value in the market. With respect to the
holders of Class 8 claims, these same considerations apply and justify such
creditors accepting a recovery of cash equal to 75% of their claims of $2,500 or
less.

         Class 6 Creditors. The recovery under the Plan for Class 6 creditors is
modest. Assuming that none of the 9.25% bondholders opt out of the 9.25%
settlement and all of such bondholders give 12.5% of their recovery to Class 6
in exchange for the Committee dropping its challenge to their lien (we believe
it unlikely that none of the 9.25% bondholders will opt out), the Debtors'
valuation of the Class 6 recovery is from 3.3% to 13.9%. The Committee believes
these modest recoveries should be accepted, as they reflect the financial and
legal realities of the Class 6 Creditors position in the Debtors' Chapter 11
proceeding.

         Therefore, the Committee urges the holders of Class 4, Class 6 and
Class 8 claims to vote to accept the Covanta Reorganization Plan.


                                            Very Truly Yours,



                                            The Official Committee of
                                            Unsecured Creditors