NEOM Has Budgeted $16 Billion Just to Cancel Contracts

SAR60bn — $16bn. That is what NEOM has set aside between 2026 and 2030 to pay contractors to stop working, according to reporting by Semafor on 7 June 2026 citing people familiar with the project’s budget [S1]. The NEOM contract cancellation cost is not a write-off, not an impairment and not a projection of lost value. It is a cash line item: anticipated payments to counterparties for terminating long-term agreements, budgeted five years forward.

Set against the Saudi Ministry of Finance’s projected SAR165bn ($44bn) budget deficit for 2026 — 3.3 per cent of GDP — the exit provision is worth more than a third of the entire fiscal shortfall [S15]. Set against NEOM’s own forward construction budget, it is larger still. Semafor’s reporting puts new development spending at about SAR40bn ($10.7bn) over the same period, concentrated on the Oxagon industrial city and utilities [S1]. NEOM has therefore budgeted roughly one and a half riyals of exit cost for every riyal it plans to spend building.

What follows is the contractor-by-contractor arithmetic that the syndicated coverage of the Semafor scoop did not attempt. Four terminations are documented in the contractors’ own regulatory disclosures, with values, completion percentages and effective dates. Together they account for about $8.45bn of terminated contract value. That is the anchor. The $16bn provision is the reported figure that hangs from it.

Termination for convenience is a clause allowing the employer to end a construction contract at any time, for any reason, without alleging the contractor has failed. The contractor demobilises and is reimbursed for what it has spent. The employer absorbs the sunk cost and keeps whatever has been built. Nobody is at fault, and nobody, in principle, sues.

For what was cancelled and when, in a backward-looking forensic account of March 2026, see our companion piece on NEOM’s $6.85bn month of contract cancellations. This page covers what cancellation costs — the forward 2026-2030 liability, the payment mechanics, and the arithmetic that connects the two.

Last verified: 31 July 2026.

How Much Will Saudi Arabia Pay to Cancel NEOM Contracts?

SAR60bn ($16bn) over five years, or about SAR12bn ($3.2bn) a year. Semafor’s 7 June 2026 report described the sum as “anticipated payments to contractors to terminate long-term agreements,” tied to penalty clauses in those agreements, and cautioned that the final amount could move depending on negotiations [S1].

Three other numbers frame it. NEOM has spent about $64bn since its 2017 launch [S1] — materially above the “over $50 billion” figure that circulated through early 2025 and that our earlier NEOM audit worked from. Public Investment Fund accounts for 2024 carried an approximately $8bn writedown on giga-project assets, disclosed in August 2025 and the first material public concession that the pipeline as originally scoped could not clear its return hurdles [S14]. And the value of construction contracts issued across the kingdom collapsed from $71bn in 2024 to under $30bn in 2025, a fall of almost 60 per cent, on Saudi Contractors Authority data [S6].

That last series is the one that reframes the exit bill. PIF alone accounted for about $27bn, or 38 per cent, of all Saudi construction contracts by value in 2024. In 2025 the fund’s share fell to 14 per cent of a market that had itself shrunk by three fifths [S6]. Tim Callen, former International Monetary Fund mission chief to Saudi Arabia, told AGBI that “it was evident something was going on much earlier last year in terms of the drop in contract awards” [S6]. The cancellation budget is the accounting consequence of a decision that had already been visible in the award data for a year.

What Is a Termination for Convenience Clause?

A termination for convenience clause lets the employer end the contract at will, without alleging default. It is the single most important thing to understand about the NEOM cancellations, and almost none of the coverage explains it.

Standard international construction contracts contain two distinct exit routes. Termination for default requires the employer to establish that the contractor breached — abandoned the works, failed to proceed, became insolvent — and it lets the employer recover its losses from the contractor. Termination for convenience requires nothing. The employer gives notice, the contractor stops, and the money flows in the opposite direction: the employer pays.

Webuild’s own language is precise. Its 25 March 2026 press release states that the client “exercised the termination for convenience regarding the construction in Trojena” of three dams, a freshwater lake and the architectural structure known as The Bow [S2]. This is not a euphemism supplied by a press office. It is the contractual mechanism, named.

Why sovereign-backed employers write the clause in

Employers who expect to change their minds buy the right to do so. A sovereign fund financing a programme whose scope is defined by political ambition rather than demand studies faces exactly that risk, and a convenience clause converts an open-ended dispute into a priced option. The alternative — walking away without the clause — is repudiation, which exposes the employer to damages including the contractor’s lost profit on the whole unperformed balance.

The Kingdom’s giga-project contracts are built on the FIDIC 1999 suite of standard forms. The international construction law practice at Pinsent Masons records that the 1999 FIDIC contract “has been used in the NEOM reimagined industrial city project, including the Line, Trojena and Oxagon elements,” as well as at New Murabba and Qiddiya in Riyadh [S11]. In the 1999 Red and Yellow Books, the relevant provision is Sub-Clause 15.5, which entitles the employer to terminate “at any time for the Employer’s convenience,” with effect 28 days after the contractor receives notice [S10].

One restriction matters here. Under the 1999 wording, the employer “shall not terminate the contract… in order to execute the Works himself or to arrange for the Works to be executed by another Contractor” [S10]. Convenience is an exit, not a substitution. It is consistent with what NEOM has done — the terminated packages have not been re-let to cheaper bidders; the scopes themselves have gone.

Which NEOM Contracts Have Been Cancelled?

Four packages are documented through the contractors’ own filings and press releases. This is the ledger.

The March 2026 subtotal — Webuild’s Trojena package, the SHAJV tunnel and the Eversendai steel package — comes to about $6.85bn in a single month. The Connector termination two months later takes the documented 2026 total to roughly $8.45bn.

Each entry is a primary disclosure, not a briefing. Webuild published dated press releases on 25 March and 21 May 2026 [S2][S3]. Eversendai notified Bursa Malaysia and said it was “preparing documentation to substantiate project progress” and would “submit commercial claims, including compensation for termination and related demobilisation costs” [S16]. Hyundai Engineering & Construction disclosed the tunnel termination to Korean regulators, attributing it to “a request for contract termination due to the client’s project restructuring” [S5]. Where an employer’s plans are contested and a fund’s disclosures are thin, the contractors’ filing obligations are the reliable record.

Resolving the tunnel contract figures

The Wadi Sharma–Tabuk tunnel is reported at three different values, and the discrepancy is worth stating rather than smoothing over. AGBI and TradeArabia put the total consortium award at about $1bn [S4][S5]. Other regional coverage cites SAR6.16bn (about $1.6bn). Hyundai E&C’s own regulatory disclosure gives its share as KRW723.1bn, roughly $500m at the time of the June 2022 award, described as a 35 per cent participation — which implies a whole-contract value near SAR6.16bn [S5].

The resolution is that the two larger figures measure the full three-party consortium award, including Samsung C&T and Saudi Archirodon, while the $1bn figure appears to reflect the tunnelling scope narrowly defined. The ledger above uses the conservative $1bn to avoid inflating the total. If the SAR6.16bn reading is correct, the documented 2026 termination book is closer to $9bn.

Who Gets Paid When NEOM Cancels a Contract?

The contractor gets paid for what it has spent. It does not, on the standard wording, get paid for what it would have earned.

Under FIDIC 1999, Sub-Clause 15.5 refers payment to Sub-Clause 19.6, which covers amounts payable for work executed, the cost of plant and materials ordered and delivered, other cost or liability reasonably incurred in expectation of completing the works, the cost of removing temporary works and equipment, and the cost of repatriating staff and labour [S10]. Loss of profit on the unperformed balance is not on the list. The 2017 FIDIC editions changed this, adding an entitlement to “the amount of any loss of profit or other losses and damages” — an amendment made precisely because employers and contractors had been negotiating the point contract by contract for years [S10].

This is the distinction that the phrase “Webuild takes no loss” conceals. Webuild’s releases say costs are reimbursed, and chief executive Pietro Salini confirmed on 1 July 2026 that the group recorded no losses on its NEOM work [S3][S7]. That is cost recovery. It is not the same as being paid the margin on the €2.8bn of Trojena backlog and €1bn of Connector backlog that vanished from the order book. Whether NEOM’s contracts were amended to add a loss-of-profit entitlement has not been disclosed by either side, and it is the single largest unknown sitting inside the $16bn.

Salini’s framing is worth quoting in full because it is the only senior on-the-record comment from a terminated counterparty. “The ambition for Saudi Arabia is to grow,” he told AGBI. “We would like to be more effective in transforming Vision 2030 into reality.” On the terminations themselves: “This decision must not be paid for by those who are working there. It is important that these situations are dealt with together with the industry” [S7]. Webuild, present in the kingdom since 1966, continues on Riyadh Metro Line 2 and Diriyah Square and is bidding on the Line 7 metro extension and on desalination and water infrastructure [S7]. A contractor that had been badly treated would not be bidding.

Is Saudi Arabia Spending More Cancelling NEOM Than Building It?

On NEOM’s own forward budget, yes. SAR60bn to terminate against about SAR40bn to develop, for the same 2026-2030 window [S1]. The comparison is not rhetorical; both numbers come from the same reporting on the same budget document, which is what makes the NEOM contract cancellation cost the more consequential of the two lines.

Three readings follow. First, the exit provision alone exceeds what several announced Saudi giga-projects will spend in total over the same period — Oxagon, the only NEOM module still receiving material capital, is inside the SAR40bn line, not outside it. Second, the $16bn is a cash commitment while the $8bn writedown was an accounting adjustment; one consumes money, the other only recognises that money already spent will not come back. Third, and least comfortable, the exit bill is being incurred at exactly the point when the 2026 budget is already carrying a SAR165bn shortfall and a SAR217bn borrowing programme [S15].

One clarification the syndicated coverage skipped: NEOM’s spending sits on PIF’s balance sheet, not in the state budget, so the SAR60bn does not appear as a line in the Ministry of Finance’s deficit. The deficit comparison is a scale benchmark, not a direct claim on the treasury. It still matters, because PIF’s own funding comes from government capital transfers, Aramco dividends and borrowing — and the transfers have already collapsed, which is why the fund’s 2025 accounts show debt replacing state equity as the marginal source of capital.

Why the NEOM Contract Cancellation Cost Is Bigger Than It Looks

Here is the arithmetic nobody has run. A termination payment is not the contract value. Most of the money on a 30-per-cent-complete contract has already been certified and paid in the ordinary course. What termination adds is the unpaid balance of executed work, materials ordered but not installed, demobilisation, and repatriation — a fraction of the whole. So what size of contract book does SAR60bn of exit payments imply?

This is our estimate, not a reported figure, and it depends entirely on the assumed exit rate. But it brackets the problem usefully. At a low exit rate, the implied book is larger than anything NEOM has ever been publicly reported to have contracted. At a high exit rate — 30 to 40 per cent, plausible only if payments include large volumes of certified-but-unpaid work and long-lead procurement — the implied book is $40bn to $53bn, which is the same order of magnitude as everything NEOM has spent since 2017.

Either reading is significant. Either NEOM’s forward contractual commitments were far larger than the $8.45bn of publicly documented terminations suggests, or the exit terms are far more generous to contractors than the unamended FIDIC 1999 wording provides for. There is no third explanation that reconciles SAR60bn with a $8.45bn documented book.

“No Projects Have Been Cancelled”: The Official Position

The official position is that nothing has been cancelled, and it must be carried alongside every figure above.

PIF governor Yasir Al-Rumayyan told Al Arabiya Business on 15 April 2026 that no projects at NEOM had been cancelled, that the project company had instead been instructed to reprioritise its spending, and that some elements had been delayed “because they are not on the critical path” [S8]. The remarks came as the PIF board approved the fund’s 2026-2030 strategy, which raises the domestic allocation target to 80 per cent and envisages the next phase of NEOM proceeding with reduced direct PIF funding and greater private participation [S8].

Finance minister Mohammed al-Jadaan had set the frame in Riyadh in December 2025, after the 2026 budget was published: “We have no ego — absolutely no ego. If we announce something and we need to adjust it, accelerate it and make it a priority more than others, or defer or cancel it, we will without blinking.” Asked specifically about NEOM cancellations, he added: “It’s for the Public Investment Fund to decide” [S17].

The two statements are not identical. Al-Jadaan asserts the right to cancel; Al-Rumayyan denies exercising it. Both can be reconciled with the documented record if “project” means a module — The Line, Trojena, Magna — rather than a contract. On that reading nothing has been cancelled and everything has been deferred: Semafor reported on 22 May 2026 that work on The Line was halted with no new funding until after 2030, that Trojena and the Magna Red Sea resorts would receive no new investment until the next decade, and that the 2030 population target had fallen again, to as few as 100,000 residents from the 300,000 that had already replaced the original 1.5 million [S9]. Contracts, meanwhile, have unambiguously been terminated — the contractors say so in writing.

Why Nobody Has Sued NEOM

No public lawsuit or arbitration filing over the NEOM terminations had surfaced as of mid-2026, despite $16bn in reported liabilities and $8.45bn in documented terminated contract value. That silence is a structural feature, not evidence of harmony.

Two mechanisms explain it. The first is the convenience clause itself: a properly exercised termination for convenience generates a settlement, not a dispute. The contractor’s remedy is contractual, the employer is not alleging fault, and Webuild and Hyundai have both said their positions were settled without loss [S2][S3][S5].

The second is that the forum is private. Saudi giga-project contracts based on FIDIC 1999 are routinely amended to strip out the dispute adjudication board and substitute a final stage of arbitration under the rules of the Saudi Center for Commercial Arbitration (SCCA), seated in Riyadh [S11], typically behind a tiered pre-arbitration process of project-level adjudication and senior-management negotiation. SCCA proceedings are confidential. A contractor could file today and the public record would show nothing.

The scale mismatch is the part worth stating in print. Construction and engineering disputes are already the SCCA’s largest category — approximately 47.3 per cent of its 2025 caseload, according to HKA [S12]; SCCA chief executive Hamed bin Hassan Mira put construction at over 30 per cent of registered cases in 2024 [S13]. The two figures describe different years rather than contradicting each other. But the absolute numbers are small: Mira reported roughly 560 cases in eight years of operation, 120 filed in 2024, with disputed value of about SAR2.2bn between January and mid-August 2025 [S13]. The entire disputed value passing through Saudi Arabia’s flagship arbitration institution in a partial year was under four per cent of NEOM’s single-project exit provision. If even a modest share of the SAR60bn is contested rather than settled, the institution that would hear it has never handled anything on that scale.

Why This Matters for Vision 2030

The NEOM contract cancellation cost converts a narrative problem into a fiscal one. For three years the argument about NEOM has been about credibility — whether The Line would be built, whether the population targets meant anything, whether the one module presented as finished had ever opened to guests. The $16bn provision moves the argument onto the Ministry of Finance’s balance sheet, where it competes for the same riyals as everything else.

It also establishes a precedent that will be priced into every future award. A contractor bidding a Saudi giga-project package in 2027 now has four documented examples of employer-side termination — two of them with completion disclosed, at 20 and 30 per cent — and knows that the compensation on offer is cost recovery. Rational bidders respond by raising margins, shortening programmes, front-loading payment schedules and demanding amended convenience terms. That cost does not appear in any budget line; it appears in the price of the next tender. The collapse in construction contract awards from $71bn to under $30bn already reflects demand withdrawal [S6]; the terminations add a supply-side risk premium on top.

Finally, it disciplines the language. NEOM’s remaining defensible assets are the ones that generate returns without the megacity thesis: the Oxagon port, and the $8.4bn NEOM Green Hydrogen complex with Air Products and ACWA Power, targeting first ammonia in 2027. Everything terminated so far — dams for an artificial lake, a ski village, tunnels beneath a city that is not being built — depended on the integrated concept. The cancellation budget is the price of admitting that, paid in instalments through 2030.

Risks, Contradictions and Open Questions

The headline NEOM contract cancellation cost is reported, not documented. The $16bn comes from Semafor, citing people familiar with the budget, and has not been confirmed by NEOM, PIF or the Ministry of Finance. It has also not been denied. Every downstream outlet that carried it — Arabian Business, Yahoo Finance, Construction Week Saudi and a long aggregator tail — repeated Semafor’s figure without independent verification. Treat it accordingly.

Three things we do not know. Whether NEOM’s contracts carry an amended loss-of-profit entitlement, which would materially change what $16bn buys. Whether the provision is a hard budget or a negotiating ceiling — Semafor’s own sources said the final amount could change. And whether any of it is already in dispute, which the confidentiality of SCCA arbitration makes unverifiable from outside.

One internal tension worth naming. Our own earlier work used the “$50bn-plus” spend figure current in early 2025. The $64bn reported in June 2026 is not a correction of that number; it is roughly fifteen months of further spending on top of it. Both stand, dated.

What to Watch Next

• Webuild’s H1 2026 results and 2026 full-year accounts. The group’s construction backlog was stated as above €50bn after removing the Trojena and Connector residuals [S2][S3]. Any provision, receivable or claim disclosure relating to NEOM settlements would be the first hard number on what a termination payment actually looks like.
• Eversendai’s quarterly filings. The company said in March 2026 it was preparing commercial claims. Whether those are settled, written down or escalated will appear in Bursa Malaysia disclosures before it appears anywhere else.
• The 2027 Saudi budget statement, expected late 2026. Watch whether any provision for giga-project termination appears in the Ministry of Finance’s own numbers, or whether it stays inside PIF and NEOM Company accounts.
• PIF’s 2026 annual financial statements, expected mid-2027. A second giga-project impairment, following the ~$8bn taken in the 2024 accounts, would be the clearest confirmation that the exit is being recognised rather than deferred.
• Any SCCA case disclosure or enforcement action. Awards can surface publicly at the enforcement stage even when the arbitration was confidential.
• The next termination. The documented book is $8.45bn against a SAR60bn provision. On the arithmetic above, most of the cancelling has not yet happened.

Related Vision 2030 Context

• NEOM: the $500bn giga-project and what is actually being built — the entity page covering scope, modules and cuts.
• NEOM dismembered: $6.85bn of contracts terminated in a single month — the March 2026 forensic account of what was cancelled; this page covers what cancellation costs.
• NEOM Company: the corporate vehicle behind the giga-project — the contracting counterparty itself.
• Public Investment Fund: mandate, governance and structure — NEOM’s sole shareholder.
• PIF’s $8 billion giga-project writedown — the 2024 impairment that preceded the cancellations.
• PIF’s 2025 results and the SAR64.7bn comprehensive loss — how the fund’s accounts absorb giga-project losses.
• PIF 2026-2030 strategy and capital allocation — the framework Al-Rumayyan invoked in April 2026.
• The Line: original vision and the 2026 scope cuts — the module the Connector rail line was to serve.
• Trojena: the mountain destination — where three of the four terminated packages sat.
• Trojena delivery risk: ski resort economics and timeline — why the dams and steel packages were always the marginal spend.
• Oxagon: NEOM’s industrial city and port — the only module still receiving material capital.
• NEOM Green Hydrogen: the $8.4bn complex — the surviving asset with a commodity offtake.
• NEOM delivery risk scorecard 2026 — the maintained module-by-module status map.
• NEOM feasibility: technical and financial viability — the underlying engineering and returns case.
• The contractor graveyard: who eats the losses — the supply-chain consequences across the giga-project programme.
• Construction spending in Saudi Arabia — the award series that fell from $71bn to under $30bn.
• Saudi Arabia’s 2026 national budget — the SAR165bn deficit the exit bill is measured against.
• The 2026 budget and the quiet abandonment of the megaprojects — the fiscal decision behind the contract terminations.
• Saudi fiscal sustainability under stress — the deficit and debt trajectory.
• Sindalah: the island resort — the module that opened in 2024 and closed again.

Sources

• [S1] Semafor, Exclusive: Saudi’s NEOM Faces $16 Billion Bill to Cancel Contracts, news report, 7 June 2026. https://www.semafor.com/article/06/07/2026/saudis-neom-faces-16-billion-bill-to-cancel-neom-contracts
• [S2] Webuild Group, Update on Trojena Contract in Saudi Arabia (Neom), press release, 25 March 2026. https://www.webuildgroup.com/en/media/press-releases/update-trojena-contract-saudi-arabia-neom/
• [S3] Webuild Group, NEOM, Saudi Arabia: Update on Connector High-Speed Line Contract, press release, 21 May 2026. https://www.webuildgroup.com/en/media/press-releases/neom-saudi-arabia-update-connector-high-speed-line-contract/
• [S4] AGBI, Neom Terminates Structural Steel Contract for Trojena Ski Village, news report, 24 March 2026. https://www.agbi.com/giga-projects/2026/03/neom-terminates-structural-steel-contract-for-trojena-ski-village/
• [S5] TradeArabia, Hyundai E&C Says NEOM Tunnel Work Contract Terminated, news report, 16 March 2026. https://tradearabia.com/News/390345/Hyundai-EandC-says-NEOM-tunnel-work-contract-terminated
• [S6] AGBI, Saudi PIF Construction Contracts Plummet Amid Scaleback, news analysis, 20 February 2026. https://www.agbi.com/construction/2026/02/saudi-pif-construction-contracts-plummet-amid-scaleback/
• [S7] AGBI, Neom Exit Hasn’t Derailed Webuild’s Saudi Plans, CEO Says, interview, 1 July 2026. https://www.agbi.com/giga-projects/2026/07/neom-exit-hasnt-derailed-webuilds-saudi-plans-ceo-says/
• [S8] Al Arabiya English, PIF’s Al-Rumayyan Says No NEOM Projects Cancelled, Spending Priorities Reassessed, news report, 15 April 2026. https://english.alarabiya.net/News/saudi-arabia/2026/04/15/pif-s-alrumayyan-says-no-neom-projects-cancelled-spending-priorities-reassessed
• [S9] Semafor, Exclusive: Saudi’s NEOM Halts Work on The Line Until After 2030, news report, 22 May 2026. https://www.semafor.com/article/05/22/2026/saudis-neom-halts-work-on-the-line-until-after-2030
• [S10] Mark Pantry and Caitlin Binns, Fenwick Elliott, The Developing Right to Terminate for Convenience Under FIDIC, legal analysis, 29 January 2024. https://www.fenwickelliott.com/research-insight/newsletters/international-quarterly/right-terminate-convenience-fidic
• [S11] Greg Jones, Pinsent Masons (Out-Law), Using FIDIC Construction Contracts in Saudi Arabia, legal guide, 12 August 2025. https://www.pinsentmasons.com/out-law/guides/using-fidic-construction-contracts-in-saudi-arabia
• [S12] Haitham Khaireldin, HKA, Litigating Construction Disputes in Saudi Arabia: What You Need to Know Now, legal analysis, 8 June 2026. https://www.hka.com/article/litigating-construction-disputes-in-saudi-arabia/
• [S13] Argaam, SCCA Head Says Construction Sector Accounts for 30% of Disputes, news report, 27 August 2025. https://www.argaam.com/en/article/articledetail/id/1839240
• [S14] CNBC, Saudi Arabia PIF Fund Sees $8 Billion Writedown in Megaprojects, news report, 14 August 2025. https://www.cnbc.com/2025/08/14/saudi-arabia-pif-fund-sees-8-billion-writedown-in-megaprojects.html
• [S15] AGBI, Saudi Arabia Seeks $58bn to Meet 2026 Budget Deficit, news report, 5 January 2026. https://www.agbi.com/economy/2026/01/saudi-arabia-seeks-58bn-to-meet-2026-budget-deficit/
• [S16] The Edge Malaysia, Eversendai’s Trojena Ski Village Contract in Saudi Arabia Terminated Amid Middle East Tensions, news report, 24 March 2026. https://theedgemalaysia.com/node/797203
• [S17] Gulf Times, Saudi Arabia Not Afraid to Cancel Costly Vision 2030 Projects, Says Minister, news report, 3 December 2025. https://www.gulf-times.com/article/716342/business/saudi-arabia-not-afraid-to-cancel-costly-vision-2030-projects-says-minister
• [S18] Construction Review Online, State-Owned NEOM Terminates $1bn Structural Steel Contract for Trojena Ski Village, news report, 24 March 2026. https://constructionreviewonline.com/state-owned-neom-terminates-1bn-structural-steel-contract-for-trojena-ski-village/