To optimally operate a pumped-storage hydropower plant, the strategy is essentially to determine the right time for production – typically when prices are high at peak-load during the day – and for pumping back up extra water to the reservoir using cheap off-peak electricity when the demand is low. This strategy aims to maximize net income. The evaluation of a storage hydropower plant based on a conventional swing option is in general not sufficient. In order to improve the evaluation and risk management of storage hydropower plants, the concept of the swing option has been extended. Besides the spot price development and the external inflows, the water levels of the basins, is accounted for. In general, the number of times the option is exercised to generate electricity and the number of pumping events is unlimited. Further, the model accounts for the impact of operation constraints on the hydropower scheme. With this approach, the plant operator gains detailed and accurate information to value and risk-analyse the power plant. The model also provides the optimal operation modus of the plant. The potential of the model is demonstrated on a stylised pumped storage hydropower plant.