The PPP model has been widely used in water conservancy project. Because the water conservancy PPP project has many features with vast investment, long life cycle,various processes and so on, the participants have been faced up with many risks. To figure out the optimal risk allocation proportion to achieve maximum utility, the paper based on the characteristics of Water conservancy PPP project and used utility theory as method, makes public, private and financial institutions as risk-sharing bodies to establish the optimal risk-sharing model of Water conservancy PPP project and got its solution.Result showed that the basis of establishing reasonable risk allocation proportion is to definite the status of participants in the negotiation.The establishment of minimum risk cost is depend on the expectancy cost. At last, the applicability and of utility theory in water conservancy PPP project and the feasibility of risk allocation have been verified through the south-to-south water diversion project.