The credit rating on Covanta Holding Corp. (Holdings) continues to reflect its reliance on residual distributions from its wholly owned subsidiary Covanta Energy Corp. (Covanta) and we base the ratings on the consolidation of the two entities. In turn, Covanta is dependent on distributions from project investments and its limited financial flexibility as it pursues its growth strategy given the capital-intensive nature of its business. Although Covanta generates significant cash flow from its operating subsidiaries, it also has significant ongoing maintenance capital requirement. Furthermore, the company continues to grow its business through acquisitions, expansion of existing projects, or investments in greenfield energy-from-waste development. Covanta benefits from a stable base of cash flow coming from distributions from its projects, most of
