Italian construction giant Webuild has announced that Saudi Arabia’s futuristic city NEOM has terminated its contract for  the Connector High-Speed Line project in Tabuk, marking the latest setback for the kingdom’s flagship $500 billion development initiative, reported Reuters.

The Milan-based company said the termination will take effect on May 27, with construction on the rail project about 20% complete. 

Webuildpointed out that the remaining backlog tied to the contract was valued at roughly €1 billion ($1.16 billion), stated the report.

According to the Italian builder, NEOM will reimburse the company for costs incurred through the termination date, including expenses related to demobilisation and site withdrawal. 

The decision concludes all of its remaining work with NEOM, said the company in a statement.

The cancellation follows NEOM’s earlier decision in March to end Webuild’s contract for a three-dam system project that carried a backlog value of €2.8 billion.

Despite the contract losses, Webuild said it continues to hold a total construction backlog exceeding €50 billion. The company has previously said its exposure to the Middle East accounts for about 5% of its order book.

NEOM, a centerpiece of Crown Prince Mohammed bin Salman’s Vision 2030 strategy to diversify the Saudi economy beyond oil, has faced mounting scrutiny over costs, timelines and project scaling as the kingdom reassesses spending priorities.

The Connector High-Speed Line was part of infrastructure plans supporting the futuristic city project in northwestern Saudi Arabia.