The LOI enables Reservoir Capital to acquire a 35% stake in Saxa Gres and a 65% interest in a new spinout company, Saxa Energy, by offering technical and financial support.
Saxa Energy is being established to acquire the energy assets of Saxa Gres, particularly a 3.9MWgas-fired power plant and associated infrastructure.
Reservoir Capital has agreed to provide funding for feasibility studies assessing the acquisition of new equipment to produce biogas from municipal organic waste and the conversion of the existing power plant to run on the biogas.
After converting into a waste-to-energy operation, Saxa Energy would sell biogas, heat and electricity to Saxa Gres under long-term agreements.
It will generate revenue by selling municipal organic waste and excess energy will be supplied to the Italian grid.
Renewable energy firm Reservoir Capital is engaged in the development of a 59.1MW hydroelectric project at Brodarevo on the River Lim, the Vranjska Banja geothermal project, both in southern Serbia.
The company said the proposed agreements with Saxa Gres provide an important new growth business for it in the Italian market.
