Saudi Arabia to award $4bn worth of contracts for its Red Sea mega-project by year-end

Saudi Arabia is planning to award a total of 15 billion Saudi riyals ($4bn) worth of contracts for various infrastructure and utilities projects within its Red Sea mega-development as its seeks to grow its nascent tourism sector.

The Red Sea Development Company (TRSDC) —the project developer backed by the kingdom's sovereign wealth fund, the Public Investment Fund—will award contracts for an airport terminal, airport operator, and a public-private partnership (PPP) utilities package, according to a statement on its website. The utilities project will secure 100 per cent renewable energy generation, water desalination, waste treatment and district cooling.

"All of our world-class partners are carefully selected and are truly aligned to our sustainability and business principles," John Pagano, TRSDC's chief executive, said. "Taking just a sustainable approach isn’t enough. We want to enhance the destination for generations to come."

Saudi Arabia plans to develop more than 50 islands off its Red Sea coast, offering a tourism and nature reserve spread over 28,000 square kilometres. The leisure development is part of the kingdom's efforts to develop its nascent tourism sector, a key pillar in Crown Prince Mohammed bin Salman’s plan to diversify the economy and reduce its reliance on oil.

"TRSDC is a contributing factor to the growth of the Saudi Arabian economy and is playing a pivotal role in its Vision 2030 plan," Mr Pagano said.

The TRSDC has already awarded more than 500 contracts totaling about $2bn to international and local firms to date.

Work is on track to welcome the first guests by the end of 2022, when the international airport and the first four hotels will open. The remaining 12 hotels scheduled for completion during the first phase of the project will open in 2023, delivering a total of 3,000 rooms across five islands and two inland resorts.

The Red Sea Development Company is planning to close a $3.7bn loan from five local banks by the end of 2020 as it ramps up construction on the project, Mr Pagano told Bloomberg on Sunday.

When the entire development is completed in 2030, TRSDC will target 1 million visitors a year, split evenly between domestic and international, Mr Pagano said.

Work on the destination’s transport links is currently "well underway", including developing 80km of roads, highways and junctions and the new international airport, according to the TRSDC's website.

In July this year, the company signed its largest contract to date for airside infrastructure works for the international airport, set to open in 2022. The contract was awarded as a joint venture to Saudi contractors Nesma & Partners Contracting Co. and Almabani General Contractors.

The tourism sector currently accounts for 3.4 per cent of Saudi Arabia's economic output which indicates it “is under-represented in the kingdom", Mr Pagano said during the Future Hospitality Summit held online from Riyadh last week. Saudi Arabia wants the sector to account for more than 10 per cent of its gross domestic product by 2030.

The entire Red Sea destination is on track to be completed by 2030 when 22 islands and six inland sites will be developed, Mr Pagano said. There will be a total of 48 hotels but the developer has pledged to limit guest numbers in order to avoid over-tourism and a strain on the environment.

Looking to protect critical habitats in the Red Sea, 5,700 square kilometres of the surrounding waters have been preserved, the largest conservation zone at sea in the Middle East, Mr Pagano said at the online summit.

The entire reserve will be powered by renewable energy and aim to sequester carbon both through nature-based methods and technology.

Other projects that are under construction in the kingdom include the $500bn futuristic Neom mega economic zone, which borders the Red Sea project and extends into Egypt and Jordan, and the Qiddiya entertainment project near Riyadh.