News / NEOM linear city feasibility review puts DSV JV in the spotlight

Neom

DSV is likely to face questions from investors on its controversial joint-venture (JV) in Saudi Arabia when it presents its second-quarter and half -year results at the end of the month – given the prospect of a significant downscaling of the kingdom’s mega-project, NEOM.

DSV has a 49% stake in the JV; its mission is to provide NEOM with “end-to-end supply chain management, development and investments in transport and logistics assets and infrastructure, as well as transport and delivery of goods and materials”.

The JV is expected to require a $10bn gross investment and the business plan makes provision for a shareholder funding commitment, up and until 31 December 2031, of $5bn.

The Line, a $500bn, futuristic, 170km-long city on the northern Red Sea coast region is the centrepiece of NEOM, itself a key element of the country’s Vision 2030 economic diversification programme to reduce dependence on oil and emerge as a magnet for foreign investment and a luxury tourist destination.

Recently, however, media reports revealed that Saudi Arabia’s Public Investment Fund (PIF) had requested consultants conduct a feasibility review of The Line to ascertain whether the city could realistically be built.

One report quoted a source saying the analysis was “taking place in an environment of limited resources … Some things were done that need to be looked at again”. However, another quoted a NEOM spokesperson who said the review was “typical with large-scale, multi-year projects”.

A DSV spokesperson told The Loadstar: “Unfortunately, we are in a ‘silent period’ ahead of our Q2 results and are therefore unable to take questions at this time”.

DSV has been tight-lipped on updates on the Saudi JV. At the group’s 2024 AGM, CEO Jens Lund told investors NEOM had generated income for the group of $7m, and that with the volume of activity set to increase in 2025 and beyond, it would rise accordingly.

However, he did not disclose any information on the costs DSV was incurring on NEOM-related activity.

Work coming to a halt would inevitably raise the probability of financial losses, such as from the capacity DSV had secured on vessels and trucks, etc, to transport construction-related materials and equipment that would be surplus to requirements.

The Loadstar also approached a number of DSV investors for comment but no one could be reached.

Some have expressed concerns at DSV’s involvement in NEOM, on environmental, social, and governance (ESG) grounds. One in particular underlined the high risks associated with entering co-operation agreements with companies and countries that have a long history of serious human rights violations.

In another sign that moves are afoot to downscale NEOM, reports in the past week pointed to the project manager mulling laying-off up to 1,000 employees – an estimated 20% of the full-time staff – but that the plans were not yet finalised.

Saudi Arabia curbing its ambitions on mega-projects can be seen against a backdrop of budget deficits linked to the falling price of oil, a commodity which accounts for just over 60% of the kingdom’s revenues. Brent crude has been trading for less than $70 a barrel for most of this year.