Abstract
In this paper, the optimal power generation policy in the project contract on a hydro power plant, which are carried out under separation between procession and operation is investigated. The operator generates electricity in order to maximize the expected revenue by considering the volatility in river cow volume and electricity prices. The owner maximizes the lease income cow through the contract period. In this paper, the expected revenue maximizing model is presented to investigate the project values and risks by use of stochastic dynamic programming. The model is extended to investigate the risk sharing schemes in the direct purchasing contract under which the customer can purchase directly the electricity from the operator. The model presented in this paper is examined through a case study carried out for the Oroville Dam in U.S. by the presented model.