Reservoir Capital Corp., ("Reservoir" or the "Company") as the name suggests, has focused its efforts on hydroelectricity, a reliable well-established technology not dependant just on government subsidy to be economic. Hydroelectricity, or power generated from water backed-up behind dams or diverted from rivers, has been around for a long time and Serbia is an integral part of its history. The third hydroelectric plant ever built went into operation in 1901 in the town of Uzice in southwest Serbia and it is still operational today. Serbia currently generates some 30% of its power from hydro, but there is potential to double the current capacity. Other countries where there are mountains or large rivers such as Switzerland and Brazil for example generate a large proportion of their power from this source.
Reservoir is active throughout southeast Europe but has focused on Serbia where it has undertaken an exhaustive survey of the untapped hydropower potential to determine the most attractive investment opportunities. Serbia is estimated to have a water resource of 208 km3, making it the largest resource in the Southeastern European region and one of the few areas with any growth potential for hydropower in Europe currently. After identifying the best targets, using historical reports and over 40 years of hydrological data accumulated by the State, Reservoir prepared technical studies and applied for an energy license to develop the Brodarevo 1 and Brodarevo 2 projects with an estimated 48 MW power capacity on the River Lim in Southwest Serbia. In January 2009, the Company became the first private company in Serbian history to receive an Energy License from the Serbian Government, giving it exclusive rights to develop the Brodarevo 1 and Brodarevo 2 hydroelectric projects.
After years of economic and political turmoil following the breakup of the Yugoslavia, Serbia now has a stable, pro-EU government in place. A Stabilization and Association Agreement has been agreed to with the European Union and Serbia has been recognized as one of the top reformers in Europe by the EBRD. Having one of the lowest corporate tax rates in Europe, Serbia has seen increased Foreign Direct Investment and improved productivity in its industrial sector, giving one of the faster growing GDP rates in Europe. This, coupled with a lack of investment in its electrical infrastructure has caused Serbia to become a net importer of electricity.
In 2004, Serbia enacted a new Energy Law, based on EU standards. The law does not differentiate between either private and public companies, or domestic and foreign investors. By enacting the legislation, Serbia became a member of the regional energy market known as the Energy Community of South East Europe (ECSEE), and can freely export energy throughout Europe.
About one third of Serbia's installed generating capacity comes from hydropower. Current hydroelectric power generation is estimated at 10,200 GWh annually, although the potential exists to double this figure. Serbia's interconnectivity to its eight neighboring states and as a hub for the whole regional grid, makes it an ideal location for Reservoir to begin its energy business in South Eastern Europe. The region has attracted the attention of some of Europe's largest energy companies, including ENEL, Statkraft, and Edison, among others, all of which recognize the importance of a region estimated by many to have up to 5,000 MW of undeveloped hydro potential.
As EU States continue to strive for their mandated 20% Renewable Energy by 2020, the importance of Serbia, and its neighbors cannot be overlooked. Reservoir as the first mover in Serbia and one of the more active players in the region is well positioned to take full advantage of this opportunity. As the Brodarevo projects advance through feasibility and construction, Reservoir is actively seeking additional projects and investment opportunities in the sector, with a mission to provide an environmentally responsible solution to the energy demands of the future.