Armenia`s government changes Kaps reservoir project funding 

ArmInfo. On April 18, the Cabinet of Ministers of Armenia approved the proposal to sign an agreement  attached to the agreement between the Republic of Armenia and KfW "Financial cooperation of Germany with the Republic of Armenia: "Combined water resources management/Akhuryan River I (Phase 2 of the project)>.

As stated in the explanation to the document, on December 18, 2017, a  loan agreement worth 18.5 million euros "Combined water resources  management/Akhuryan River I (Phase 2 of the project)" was signed  between the Government of the Republic of Armenia and KfW. The loan  agreement provides that the borrower will use the loan exclusively  for the expansion of the Kumayri irrigation water tunnel, the  construction of a pipeline system, the acquisition and installation  of irrigation equipment in order to ensure more efficient irrigation  of about 740 hectares, which was reflected in a separate agreement  signed on 03/27/2018 as part of this agreements.

Credit agreement between the RA and a German bank dated December 19,  2014 <Combined water resources management/Akhuryan River stage 1> for  50 million euros, about 41.9 million euros are available today.  However, due to the high price bid of 61.5 million euros (excluding  contingencies and taxes) received as part of the tender for the  construction works of the "Cape Reservoir and Ancillary Works", in  agreement with the Federal Ministry for Economic Cooperation and  Development (BMZ), It was decided to fill the financing gap for the  construction of the Caps Reservoir with financial resources of ?17.4  million available for construction from a loan of ?18.5 million under  Phase 2 of the project. The rest of the missing amount of 2.2 million  euros (excluding VAT) will be covered from financial resources  allocated by the Government of the Republic of Armenia.

The Kaps reservoir, unfinished due to the earthquake of 1988 with a  design capacity of 110 million cubic meters of water, is located in  the Shirak region, 22 km north-west of the city of Gyumri, in the  valley of the Akhuryan River.

On August 27, 2020, the Government of Armenia approved the Action  Plan for Land Acquisition and Resettlement under the Combined Water  Resources Management/Akhuryan River Phase 1 program, under which the  Cape Reservoir will be constructed. It was reported that in the 90s  the work was stopped, and the village of Dzhradzor, which was  originally planned to be repopulated, continued to live in the area  of the supposed flooding all this time. As Deputy Minister of  Territorial Administration and Infrastructure Vache Terteryan stated  then, to implement this project, a loan agreement of 60 million euros  was concluded with KfW in 2014. And since, according to Terteryan,  already at the first stage some buildings of the village will be  flooded, Jradzor should be repopulated already at the first stage of  construction. The new village, which will be located next to the  reservoir, is planned to be populated by about 350 residents.  According to the deputy minister, residents were offered two options:  the allocation of certificates and the construction of a new  settlement.

On May 18, 2023, the foundation of the reservoir was officially laid.  The project is financed through loans from KfW and co-financing from  the Government of the Republic of Armenia. The total project budget  is 95.2 million euros, including borrowed funds - 68.5 million euros.  At the first stage, it is planned to build a reservoir with a total  volume of 25 million cubic meters with a further increase in the  maximum volume of the reservoir to 60 million cubic meters.  Construction will be carried out by the Chinese company Shanxi  Construction Investment Group. At the first stage, the water supply  level of the Shirak main and Akhuryan right-bank canals and about  17,000 hectares of land under their management will be increased. In  addition, it will be possible to replace mechanical irrigation of  2,280 hectares of land with gravity irrigation, which will save 1.3  million kWh of electricity annually. With a reservoir volume of 60  million cubic meters. It will be possible to increase the area of  irrigated land in the Shirak region by another 920 hectares, and in  the Talin district of the Aragatsotn region, replace mechanical  irrigation of about 6,600 hectares of land with gravity irrigation,  which will save 11.0 million kWh of electricity annually. The program  is implemented by the Territorial Development Fund of Armenia.