Neom has effectively mothballed the “alpine-in-the-desert” vision for Trojena, terminating contracts for the resort’s central freshwater lake. The move is the latest sign of the Kingdom’s shifting priorities towards gigaprojects, as prestige spending is scaled back in a construction market increasingly choked by Strait of Hormuz logistics and soaring input costs.

What happened: Italy’s Webuild Group said in a statement its USD 4.7 bn contract to build three dams and a freshwater lake with Al Bawani has been terminated, while Malaysia’s Eversendai Corporation confirmed in a bourse filing (pdf) its steel works agreement was also cancelled. Both firms are seeking reimbursement for the cancellations.

Where that leaves Trojena: The cancellation effectively scraps the resort’s primary engineering hook, a 2.8 km artificial lake, and leaves total works at the USD 19 bn Trojena project 30% complete, Webuild said.

Behind the cancellation

Eversendai said it believed the contract termination was “due to the current geopolitical situation in the Middle East”.

We know the war hasn’t been kind to construction: The Strait of Hormuz closure has trapped the Kingdom’s construction sector in rising costs and supply delays, with high energy prices and disrupted logistics driving up steel and cement prices and extending lead times. Craig Finlayson of Currie & Brown had warned EnterpriseAM earlier this month that project survival depends on contract terms. Agreements with escalation clauses may endure rising costs, while others risk forcing contractors to invoke force majeure or exceptional event provisions.

BUT- Trojena was struggling before that: The mountain resort was intended to host the Asian Winter Games 2029, though the event has since been postponed and reassigned to Kazakhstan’s Almaty, following reports of construction hurdles at Trojena that surfaced late last year.

Neom was already on the chopping block: Earlier this year, the Kingdom began scaling back Neom following a comprehensive review after years of delays, design challenges, and cost overruns. The project has come under growing pressure to generate returns as Riyadh tightens spending amid weaker oil revenues, with plans reportedly redesigning Neom to become a smaller, AI- and data center-focused hub.

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