We describe a hybrid bi- level decomposition scheme that addresses the challenge of solving a large- scale two-stage stochastic programming problem with mixed- integer recourse, which results from a multiscale capacity planning problem as described in Part I of this paper series. The decomposition scheme combines bi- level decomposition with Benders decomposition, and relies on additional strengthening cuts from a Lagrangean- type relaxation and subset- type cuts from structure in the linking constraints between investment and operational variables. The application of the scheme with a parallel implementation to an industrial case study reduces the computational time by two orders of magnitude when compared with the time required for the solution of the full- space model. (C) 2014 Elsevier Ltd. All rights reserved.