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CORRESP
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corresp

October
19, 2005

Mr. George F. Ohsiek, Jr.

Branch Chief

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549-7010

    Re:

    MSW Energy Holdings LLC

    Form 10-K for Fiscal Year Ended December 31, 2004

    Filed March 17, 2005

    Form 10-Q for Quarterly Period Ended March 31, 2005

    Form 10-Q for Quarterly Period Ended June 30, 2005

    File No. 333-109049

Dear Mr. Ohsiek:

          We are responding to your letter dated September 30, 2005 (the “Comment Letter”). To
facilitate your review, the comment in the Comment Letter is set forth below in bold type and our
corresponding response appears below it in ordinary type.

Form 10-K for Fiscal Year Ended December 31, 2004

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 11

Debt Covenants, page 15

    1.

    Reference is made to your presentation of “Proportionate Adjusted EBITDA” and
“Proportionate interest expense” on page 15, in the context of discussing certain of your
debt covenants. Please revise your disclosure to include:

    •

    the materiality of the credit agreement and the related covenants;

    •

    the amount of limit required for compliance with the covenants; and

    •

    the actual or reasonably likely effects of compliance or non-compliance with the
covenants on your financial condition and liquidity.

Refer for guidance to Question 10 of our Frequently Asked Questions Regarding the Use of
Non-GAAP Financial Measures, available on our website at www.sec.gov.

Also revise the reconciliation in note (1) to reconcile from cash flows from operations to
EBITDA, as opposed to reconciling from operating income. In this regard, to the extent
EBITDA or Adjusted EBITDA is presented as a measure of

Mr. George F. Ohsiek, Jr.

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October 19, 2005

liquidity, we believe the most directly comparable GAAP measure is cash flows from
operations.

Finally, please disclose in a reasonable amount of detail what the adjustment captioned
“Ref-Fuel Holdings fair value adjustment amortization and revenue levelization” represents
and how the amount of the adjustment is derived.

Response: At the time of the filing of the initial presentation by MSW Energy Holdings LLC
(the “Company”) of “Proportionate Adjusted EBITDA” and “Proportionate interest expense”, the credit
agreement referenced in comment number 1 above was the Company’s only material debt. In discussing
the covenants related to such debt, the Company’s presentation of “Proportionate Adjusted EBITDA”
and “Proportionate interest expense” was reviewed by the Staff in 2004 and was accepted by the
Staff in MSW Energy Holdings II LLC’s (“MSW II”) April 26, 2004 response to the Staff’s March 11,
2004 comments to MSW II’s Form S-4 (File No. 333-112640-01). Accordingly, in response to comment
number 1 above, the Company respectfully refers the Staff to MSW II’s responses to comments 24, 25
and 66 of the Staff’s March 11, 2004 letter. For your convenience, copies of such comments and
answers are attached hereto as Exhibit A.

Following the consolidation of the results of Covanta Ref-Fuel Holdings LLC, formerly known as
Ref-Fuel Holdings LLC (“Covanta Ref-Fuel”), however, the amount of such debt is significantly less
material to the total debt reflected on the balance sheet of the Company. Accordingly,
notwithstanding such prior reviews, in response to the Staff’s comment number 1 above, in future
filings the Company intends to remove such measurements from its annual or quarterly reports. In
the alternative, if the Company elects to provide such information in future filings, it will
provide for the reconciliations and additional disclosures noted by the Staff. The Company will
review and consider in future filings the purpose and use of such information and the appropriate
reconciliations, as viewed by the Staff. Finally, as such presentations have been previously
reviewed by the Staff, the Company’s presentations were consistent with such prior reviews, and the
Company’s commitment to take into account the Staff’s comment herein in future filings, the Company
does not believe it should be required to amend its prior filings.

Contractual Obligations and Commercial Commitments, page 17

    2.

    Please revise your contractual obligations table in future filings to include estimated
interest payments on debt. Because the table is aimed at increasing transparency of cash
flow, we believe interest payments should be included in the table. If you choose not to
include these payments, a footnote to the table should clearly identify the excluded item
and provide any additional information that is material to an understanding of your cash
requirements. See Section IV.A and footnote 46 to the Commission’s MD&A Guidance issued
December 19, 2003 available at www.sec.gov.

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Mr. George F. Ohsiek, Jr.

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October 19, 2005

Response: In response to the Staff’s comment number 2 above, in future filings the Company
will revise the contractual obligations table to include estimated interest payments on debt.

Item 8. Financial Statements and Supplementary Data, page 23

Consolidated Balance Sheets, page 25

    3.

    Please tell us why you began consolidating Ref-Fuel Holdings LLC on April 30, 2004,
rather than on December 12, 2003, the date that MSW Energy Holdings II LLC acquired its 50%
interest in Ref-Fuel Holdings LLC. In this regard, it is our understanding that as of
December 12, 2003, Holdings Corp was the parent company of MSW Energy Holdings II LLC and
the managing member of you/MSW Energy Holdings LLC, thus suggesting that you had effective
control over Ref-Fuel Holdings as of December 12, 2003. Also tell us how not consolidating
this entity until April 30, 2004 is consistent with the fact that push-down basis was
applied from Holdings Corp to Ref-Fuel Holdings LLC effective December 12, 2003.

Response: As discussed with the Staff, the foregoing comment was previously made by the
Staff in its letter dated April 25, 2005 and responded to by Parent on May 12, 2005 in connection
with Covanta Holding Corporation’s, formerly known as Danielson
Holding Corporation (“Parent”),
Amendment No. 2 to Form S-3 as filed April 8, 2005 (File
No. 333-120755) and Form 8-K filed April 7, 2005 (File
No. 001-06732). Accordingly, in response to comment number 3 above, the Company
respectfully refers the Staff to Parent’s May 12, 2005
response to comment 13 of the Staff’s April 25, 2005 letter.

Notes to Consolidated Financial Statements, page 29

Note 2. Summary of Significant Accounting Policies, page 30

Intangible Assets, page 31

    4.

    Please tell us in detail how you determined it is appropriate to treat Nitrous Oxide
emission allowances as indefinite-lived intangibles. Please ensure you address in your
response each of the factors listed in paragraph 11 of SFAS 142 which might limit the
useful life of these assets.

Response: Created by the Clean Air Act and implemented by subsequent state and federal
regulation, nitrogen oxide (“NOx”) emission allowances represent a regulatory right of the
facilities to emit certain levels of NOx indefinitely, subject to change in law. As referenced by
the Staff, management applied the guidance of the Financial Accounting Standards Board No. 142
(SFAS 142) Goodwill and Other Intangible Assets in determining that the useful life of the NOx
emission allowances was indefinite. Specifically, SFAS 142, paragraph 11 lists various criteria
that should be addressed in evaluating the useful life of an asset. These are:

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Mr. George F. Ohsiek, Jr.

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October 19, 2005

    a.

    The expected use of the asset by the entity;

    b.

    The expected useful life of another asset or a group of assets to which the
useful life of the intangible asset may relate;

    c.

    Any legal, regulatory, or contractual provisions that may limit the useful
life;

    d.

    Any legal, regulatory, or contractual provisions that enable renewal or
extension of the asset’s legal or contractual life without substantial cost (provided
there is evidence to support renewal or extension and renewal or extension can be
accomplished without material modifications of the existing terms and conditions);

    e.

    The effects of obsolescence, demand, competition, and other economic factors
(such as the stability of the industry, known technological advances, legislative
action that results in an uncertain or changing regulatory environment, and expected
changes in distribution channels); and

    f.

    The level of maintenance expenditures required to obtain the expected future
cash flows from the asset (for example, a material level of required maintenance in
relation to the carrying amount of the asset may suggest a very limited useful life).

Since the emission allowances are essential to the operation of the plant and without these
allowances, the plants could not operate legally, the requirement of subsection a was satisfied.

Further, management considered the implications of subsection b, relating to the useful life of the
underlying assets. The Company concluded that since the allowances were linked to the operations of the
plant as a group, rather than a specific plant, the useful life of a plant of 50 years did not
limit the useful life of the emission allowances since they could be used in connection with other
plants. This position was further supported by the Company’s intention to continue to operate its
plants on an ongoing basis.

Under the current legal and regulatory environment, there was no indication that these assets would
be limited or changed, and therefore, prior management concluded that subsections c and d did not
operate to limit the useful life of such intangible assets.

Prior
management reviewed the potential effects of obsolescence, demand,
competition, and other economic factors, as required by subsection e,
and such analysis
did not affect the conclusion that such emission allowances had an indefinite life.

Finally, management concluded that subsection f was not applicable since there was no maintenance
required in order to maintain the validity of the emission allowances.

Consequently, since (i) the emission allowances have an effective indefinite life; (ii) the
emission allowances were linked to the plant operations, (iii) and the intent was to continue
running the

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Mr. George F. Ohsiek, Jr.

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October 19, 2005

plant, and (iv) management had no reason to believe that emission credit allowance would not be
available in the future (in part through its review of the emission reduction credit market),
management concluded in accordance with SFAS 142, Paragraph 11 that these assets should be treated
as having an indefinite life.

Note 3. Acquisition of Membership Interests in Ref-Fuel Holdings, page 34

    5.

    Please tell us more about the nature and terms of your obligations under the Duke
Agreement. Also tell us whether your obligations under this agreement related to ongoing
services provided by Duke Capital Corporation, and if so, tell us your basis for recording
this obligation as part of your purchase price allocation.

Response: When Duke Energy was selling its indirect 50% interest in Covanta Ref-Fuel to
the Company pursuant to an Equity Purchase Agreement dated as of March 19, 2003 (the “Purchase
Agreement”), Duke Energy sought to have its subsidiary, Duke Capital Corporation (“Duke Capital”),
released from Duke Capital’s obligations under an existing
support agreement (the “Support Agreement”). Pursuant to the Support Agreement and
subject to certain limitations, Duke Capital agreed to make 50% of the capital contributions
necessary to remedy the occurrence of certain contingent events. Before consummating the
transactions under the Purchase Agreement, Duke Capital requested such release but did not obtain
it.

To address the resulting issue of Duke Capital being subject to the Support Agreement without
having post-closing ownership in Covanta Ref-Fuel and still wishing to close the transaction
contemplated by the Purchase Agreement, the Company and Duke Capital entered into an Agreement
dated as of June 30, 2003 (the “Duke Agreement”). The Duke Agreement, among other things, provides
that for so long as Duke Capital remains obligated on the Support Agreement, the Company will pay
to Duke Capital the annual fee described in Note 3 of the Company’s Form 10-K for the fiscal year
ended December 31, 2004.

The basis for recording the obligation in purchase accounting was that there is a contract for
payments to Duke for the remaining obligation on the Support Agreement which was considered in
conjunction with the underlying service agreement. As this payment is a stream which extends over
the next fifteen years, it was separately present valued as part of purchase accounting. The asset
relating to these on-going services provided by Duke was included as a component of the underlying
service agreement which was also valued in purchase accounting.

Note 13. Future Minimum Payments Under Operating Leases, page 43

    6.

    Please tell us and revise your disclosure to clarify the terms of the “stipulated loss”
clause in the Delaware Valley lease. Also tell us and disclose how you account for your
obligation under this clause and ensure we understand the basis in GAAP for your
accounting. If material, please consider disclosure of the contingent payments and
possible contingent payments in your liquidity section of Item 7.

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Mr. George F. Ohsiek, Jr.

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October 19, 2005

Response: Under the terms of the lease, if Delaware Valley defaults in the payment of rent
under the Delaware Valley lease beyond the applicable grace period, then the lessor has the right
to pursue one or more of several different remedies provided under the lease. One such remedy of
the lessor is the right to recover from Delaware Valley a contractually-specified amount called
Stipulated Loss Value B (“Stipulated Loss”). The Stipulated Loss is similar to lease termination
liability and is generally intended to provide the lessor with the economic value of the lease, for
the remaining lease term, had the default in rent payment not occurred.

The Company accounts for the Delaware Valley lease as an operating lease, and future rent payments
under the lease are included in the contracts and commitment table. The Company believes it will
continue to operate the Delaware Valley facility in the ordinary course for the entire term of the
lease, and will continue to pay rent throughout that period. We do not expect that we will incur
an obligation to pay Stipulated Loss. As such, the Company does not believe its liquidity will be
affected by Stipulated Loss payments, and does not believe it is meaningful or required to discuss
the potential for such payments in its discussion of liquidity under Item 7 since under a
probability and magnitude analysis, they are not material.

Note 14. Employee Compensation and Benefit Plans, page 44

    7.

    Your disclosures here with respect to the American Ref-Fuel Company Retirement Savings
Plan appear to be inconsistent with the related disclosures included in note 14 of the
separate financial statements you provide for Ref-Fuel Holdings LLC and Subsidiaries. In
particular, the description of your “basic contribution” is inconsistent, and so is your
disclosure regarding the amount contributed by you to the plan. Please advise and also
revise your disclosures to ensure consistency.

Response: While the Staff correctly notes that the clarifying clause, “plus six percent of
an employee’s regular earnings in excess of the Social Security Wage Base,” was inadvertently not
included in the notes to the financial statements of Covanta Ref-Fuel and subsidiaries, such
language was properly included and disclosed in (and as an Exhibit to) the Company’s Form 10-K for
the