Both the elephant and the performer are on the ground. Let's call this zero potential
energy. (Because potential energy is always measured relative to some position,
you can always define some convenient position as zero potential energy. It
is often convenient to define ground level as zero potential energy, as in
The elephant uses some energy (potential energy) from the hay it ate that morning to raise up its front legs. Now the front part of its body has a higher potential energy.
The elephant lets its legs drop, converting the potential energy into kinetic energy.
When the elephant lands on the plank, the kinetic energy is transferred to the performer, who shoots into the air.
As the performer gains height, he slows down until he lands on the shoulders of his fellow performer. When he does, all his kinetic energy has been converted to potential energy.