The partially constructed Kaps Reservoir is located in the Shirak Region, 22 km north of the city of Gyumri, in the Akhuryan River valley. Phase 1 ("Integrated Water Resources Management / Akhuryan River, Phase 1") foresees the construction of a reservoir with an initial capacity of 25 million , with a long-term goal to expand it to a maximum capacity of 60 million .

The project includes the following main works:

• Construction of the Kaps Reservoir dam and auxiliary structures
• Re-equipment of hydrological observation posts along the Akhuryan River (from Lake Arpi Reservoir to the Akhuryan Reservoir), construction of additional stations, and establishment of a centralized database (SCADA system)

The project is financed through loan funds from the German Development Bank (KfW) and co-financing from the Government of the Republic of Armenia. The total budget for the project is EUR 93.8 million, of which EUR 25.3 million is co-financed by the Government of Armenia, and EUR 68.5 million is financed via loans. Under the EUR 50 million loan agreement signed on December 19, 2014, for "Integrated Water Resources Management / Akhuryan River, Phase 1," the disbursement deadline is December 30, 2026. Under the EUR 18.5 million loan agreement signed on December 12, 2017, for "Integrated Water Resources Management / Akhuryan River, Phase 2," the disbursement deadline is also December 30, 2026.

Expected Outcomes:

• Construction of the reservoir to a 25 million  capacity will increase the water reliability for approximately 17,000 hectares of land served by the Shirak Main Canal and the Akhuryan Right-Bank Canal.
• It will enable a transition from mechanical pumping to gravity-fed irrigation for 2,280 hectares of land served by 8 pumping stations, saving 1.3 million kWh of electricity annually.
• The project covers 29 beneficiary communities with a total of 41,000 individual beneficiaries.
• Regular irrigation will boost agricultural output.
• Installation of a reliable flow measurement system will enhance water resources management and monitoring.
• The completion of the unfinished dam and auxiliary structures at Kaps will primarily ensure the safety of downstream settlements.

Project Status:

On April 21, 2023, a EUR 74.2 million construction contract was signed with the Chinese companies Shanxi Construction Investment Group Co. and Shanxi Hydraulic Construction Engineering Bureau Group Co. for the construction of the Kaps Reservoir and its auxiliary structures. Construction works commenced on June 9, 2023, with a 34-month implementation period. However, due to slow progress and breaches of contractual obligations, the contract with the contractors was terminated on February 2, 2026.