Preparatory work on the project began in August 2002 and construction on the Kárahnjúkar Dam and headrace tunnels for the Hálslón Reservoir began in April 2003. In September of the same year, construction began on the underground power station. Construction on both the Desjará Dam and the Sauðárdalur Dam began in April 2004. In June 2006, construction of the Kelduá Dam and Ufsarstífla Dam began and in September, the Hálslón Reservoir began to fill. In mid-2008, the Kelduá and Ufsarstífla Dams were complete and the Ufsarlón Reservoir headrace tunnel was ready.