Saudi Sovereign Fund Writes Off $8 Billion of Its Megaprojects

The Saudi sovereign fund PIF (Public Investment Fund) has reduced the value of its investments in development projects by eight billion dollars, with budget overruns and falling oil prices jeopardizing, among other things, the giant project of the futuristic Neom building.

According to the Financial Times, PIF’s investments in Saudi megaprojects were valued at $56 billion (211 billion Saudi riyals) at the end of 2024, which is 12.4 percent, or eight billion dollars less than the previous year.

– There has been a devaluation of certain projects, which is primarily related to conditions in the global economic market, changes in operational plans, and increases in planned costs – explained a source familiar with the matter to FT.

Neom Under Scrutiny

PIF has five so-called megaprojects, including Neom, which is envisioned as a linear city inspired by science fiction. These projects are the de facto plans of de facto Crown Prince Mohammed bin Salman for modernizing the kingdom and diversifying the economy, all to reduce dependence on oil.

However, although strong growth has been recorded in other sectors in recent years, the kingdom still relies on oil exports, which account for more than 60 percent of its revenue. Saudi officials state that the kingdom is therefore reassessing ambitious projects as lower oil prices burden state spending.

The Neom project, which is being built in a remote area along the Red Sea, is currently under scrutiny, and many other projects are expected to be scaled back or gradually phased out.

The fund announced reduced estimates in its annual report for 2024 published on Wednesday. Total assets under management rose to approximately 913 billion dollars, 19 percent higher than at the end of 2023, but megaprojects now account for six percent of the fund’s assets compared to eight percent in 2023.

The growth was partially driven by an increase in PIF’s stakes in the state oil company Aramco during 2024, when the Saudi government transferred an additional eight percent stake to the fund, raising its share to 16 percent. Additionally, more than a third of PIF’s investments by the end of last year were in Saudi companies.

Shares in Aramco are under significant pressure due to low oil prices. Aramco’s stock has lost 14.3 percent of its value since the beginning of the year, and the company has also reduced dividends.

PIF announced that its average annual returns in 2024 were 7.2 percent, a decline from 8.7 percent the previous year. Earlier this year, the fund reported that net profit fell by 60 percent due to higher interest rates, inflation, and the devaluation of projects.

PIF’s Investments in Croatia

Regarding the Croatian market, PIF first invested in Croatia in early 2024, specifically in the project Rimac’s robotaxis. PIF entered the ownership structure of Project 3 Mobility (now Vernea) through its investment company TASARU Mobility Investments, which invests in smart and sustainable transportation solutions.

Furthermore, the Saudi company TAWAL, of which PIF is the majority owner, made a significant acquisition in the region by purchasing telecommunications towers from United Group in Bulgaria, Croatia, and Slovenia for €1.22 billion. TAWAL now owns and operates over 4,800 sites in these three countries. This is TAWAL’s first investment in the European telecommunications sector.

International investments accounted for 17 percent of PIF’s portfolio at the end of 2024 compared to 20 percent the previous year. Similarly, the International Monetary Fund reported this month that PIF and Aramco have repatriated some of their foreign assets back to the homeland in 2024.

The kingdom’s economic modernization program, called Vision 2030, has transformed PIF from a dormant state holding company that invested in domestic companies into a major player on both the domestic and international stage. However, the fund, once known for spectacular investments in football clubs (e.g., Al Nassr, where Cristiano Ronaldo plays) and golf tournaments, and regarded as a competitor to Tesla, is now scaling back global investments and focusing on the domestic market.