(Bloomberg) -- Italy’s state insurance and financial group will grant Saudi Arabia $3 billion in loan guarantees to help the kingdom develop a sprawling futuristic megacity.
Insurer and export credit agency Sace agreed on 80% guarantees for loans from international banks backing Neom, the ambitious project to build a new urban area that will be bigger than Belgium, according to people familiar with the matter.
Prime Minister Giorgia Meloni’s government is looking to parlay its support for Neom into closer ties with the Gulf nation, and believes the loan deal could open opportunities for Italian infrastructure, construction and transportation groups, said the people, asking not to be named discussing confidential deliberations.
Sace, headed by Alessandra Ricci and controlled by the Italian Finance Ministry, opened an office in Riyadh earlier this year.
Representatives for the Italian government and for Sace declined to comment. A representative for Neom did not immediately respond to a request for comment.
The megacity project is the most ambitious part of Crown Prince Mohammed bin Salman’s strategy to diversify the Saudi economy away from oil.
Neom is envisaged to someday grow to comprise about a dozen different regions including vertical “smart cities,” a floating industrial development, and ultra-luxury tourist destinations.
The initial budget for the plan ranged around $500 billion, though other estimates have put the figure as high as $1.5 trillion.
Funding Cuts
But the project has faced funding cutbacks as Saudi Arabia grapples with budget deficits, and Bloomberg reported earlier that the kingdom was on the lookout for new forms of cash.
Neom also announced this week that it’s replacing its chief executive officer.
Meloni is weighing a visit to Saudi Arabia as soon as next month, according to people familiar with her plans.
Rome-based Sace has seen its profile expand since the government began stepping in to help companies hit by the pandemic and spiraling energy costs.
Sace’s outstanding guarantees as of last December totaled around €56 billion ($59.4 billion), according to its annual report.
Neom already counts Italian developer Webuild SpA among its contractors. The company was awarded a $4.7 billion contract on the Trojena mountain destination and is building part of a high-speed railway line.
--With assistance from Alessandra Migliaccio and Matthew Martin.
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