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why water in a dam has potential energy?

Dear student, 
   The dam stored water is been stored upto a certain height.  As potential energy is increased due to the fact that it has been stored at a greater height. As they open the dam, the flow has been established then the potential energy is converted into kinetic energy as well, 

Regards

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Water stored in the dam has potential energy as the water is raised to a height which allows it to gain potential energy.As potential energy is a function oh height given by,
P.E=mgh
?Once the water is falling, this potential energy gets converted to kinetic energy.
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