Believe what you'd like, it's happening.
I'm not going to bother arguing with you about it.
It's not about what I believe, its about physics.
Water at a higher elevation has POTENTIAL energy.. when it falls it releases that energy as KENETIC energy... When it reaches the bottom of the hill.. it takes as much energy to put that water to the top of the hill as it gave up falling down the hill.. its called the law of conservation of energy.
So, to do what you claim, every bit of energy of that water falling would need to be captured, and then used to put that water back to the top of the hill... which would not throw of any extra energy at all for any other use... not to mention the loss of energy through friction and basic inefficiencies of mechanical devices.
What you are suggesting is going on is impossible, not because I believe it to be, but because it defies the fundamental laws of physics. Trust me, if someone has built a system as you describe they would be receiving the nobel price for science and it would be headlines around the world. Our fundamental understanding of physics would be shattered.
Are you sure they aren't using above and/or below ground streams to help the turbines along?
You should call your friend and explain what you claim here. If he is really in the business, he will enjoy the laugh.