Even a visionary and above all very rich Arab prince he may have a few pebbles in his shoe these days. Mohammed bin Salman (Mbs) crown prince, as well as prime minister of Saudi Arabia, begins to see some cracks in his pharaonic project Neom and in the creation of The Line, and decided to scale back his dreams. The reasons would be linked both to an issue of execution times and to greater financial prudence. But what could the repercussions be on Italian companies more involved in the project? The opinion of analysts.
Neom, strongly desired by bin Salam to diversify the economy from dependence on oil, it is at the center of the economic reforms indicated in the "Vision 2030", the modernization plan in open competition with the other metropolises of the Gulf. As is known, it is a place built from scratch in the desert overlooking the Red Sea, where everything must be eco-sustainable and reachable on foot in five minutes, but with the possibility of moving from one end to the other in 20 minutes on a train high speed. Plans include an industrial city, ports and tourism infrastructure, as well as hosting in 2029 i Asian Winter Games in a mountain town called Troyena.
The delays in the creation of The Line and the first layoffs
The development of The Line, on the border between Egypt and Jordan, was to take place in several phases to cover a stretch of coast approximately 170 km long. The first phase it had to be concluded in 2026 and reach between 1,5 and 2 million inhabitants in 2030, reaching nine million in 2045. Instead, it is now estimated that it will welcome fewer than 300.000 people within the same period, with only 2,4 km of the project completed compared to to the expected 170 km. This has led some contractors to lay off some construction workers, Bloomberg reported.
Pif looking for other ways to raise money
Meanwhile the sovereign fund Saudi Arabia has not yet approved Neom's budget for 2024 and the highest levels of the government are starting to worry whether the trillions of dollars of investments are actually sustainable and effective. Industry officials have already announced that some of the projects will slide beyond 2030. A longer period is needed to "build sufficient factories and human resources" Finance Minister Mohammed Al Jadaan said a few weeks ago. “The delay – he added – or rather the temporal extension of some projects will help the economy”. The Public Investment Fund (Pif) is evaluating a series of options for raising liquidity, including the issuance of bond and an offer of actions of portfolio companies, Bloomberg News reported. The cash reserves of the sovereign fund fell to 15 billion dollars in September, the lowest level since 2020. In 2022, the crown prince said that the first phase of Neom is expected to cost 1.200 billion riyals ($320 billion) by 2030. Half of this figure is expected to come from the PIF, in the hands of “de facto ruler” bin Salman .
The Italian companies most involved in the Saudi project
Which Italian companies will be most affected by a downsizing of the project? Here are the main ones, identified by analysts. Technogym, a leader in the fitness and wellness sector, is involved in several key aspects of the Neom project, such as sports, health and tourism, analysts point out Equity sim. It also has a direct relationship with Neom Investment Fund, the strategic investment fund created to support the development of Neom, owner of 6% of the capital (purchased at the end of November 2023). “Technogym is already involved in the consultancy and design phase, and we expect it to maintain a privileged role also in the executive phase, with the supply of the equipment”, predict Equita analysts, seeing no impact from the news given that the initial objectives however, they appeared rather ambitious and that the project remains a visible medium/long-term driver to support Technogym's growth in the Middle East area (10% of total turnover).
Webuild and Trevi Finanziaria Industriale are active in Saudi Arabia in the construction sector. Webuild has 5,5 billion euros of orders or 10% of the backlog (order book). Last January Webuid announced the award of a contract with an estimated value of Sar 20 billion (5 billion of dollars) to build 3 dams that they will create a artificial lake in the center of Trojena project of Neom. “To date, Webuild's exposure to The Line is limited with the main order: it is worth 4,7 billion dollars which concerns the development of Trojena where we think investments will be concentrated in the short term given that it will be the area that will host the games Asian winter events 2029”, say Equita analysts.
instead Financial Trevi Industriale is involved in the development of The Line as the main contractor for the piling of the foundations. The group's works are the first to be carried out in the overall project. Furthermore, between the end of 2023 and the beginning of 2024 the company won a major order with three more lots to be awarded in 2024. Furthermore Leonardo last February announced the signing of a Memorandum of Understanding (MoU) with theSaudi Arabia which will significantly contribute to Vision 2030.
Equita has a buy rating on both Technogym and Webuild with target prices of 10,80 euros and 3 euros respectively. On Piazza Affari the first is at 8,82 euros, down by 0,28% and the second rises by 1,42% to 2,28 euros. Trevi marks 0,34 euros up by 1,03% and Leonardo is at 23,66 euros up by 1,68%.
