Zhejiang Expressway Co says it is confident it can maintain returns of more than 20 per cent from future road development projects, despite an expected increase in its interest costs. The company this week is continuing the international roadshow for 90 per cent of its initial public offering of 1.24 billion shares, leading up to the closing of its Hong Kong public offer for 10 per cent of the shares on Friday. The company operates the Shanghai-Hangzhou-Ningbo Expressway, which carries an internal rate of return of between 25 per cent and 30 per cent, compared with an industry average of 15 per cent. Chairman Geng Xiaoping said the high return was helped by low-interest World Bank loans, which have a rate of 6.1 per cent, and government preferential loans at a rate of 3 per cent. The high returns also were due to the relatively high toll rate and the province's robust economic growth which provided a healthy traffic flow. Mr Geng said the weighted average interest rate for the H share's existing 2.2 billion yuan of debt was 6.5 per cent. It might not enjoy such low interest rates in future because it would have to borrow more from commercial banks. 'The provincial government has promised the company in a concession agreement that it will continue to provide us with preferential loans,' he said. Analysts have expressed concern about whether the company can find new projects with similar high returns. Mr Geng said the province planned to build another 20 million kilometres of roads in eight years and this would provide many choices offering returns exceeding 20 per cent. The company's prospectus shows Hong Kong-listed Shanghai Industrial Holding as the only strategic investor in the company, agreeing to buy a 3 per cent stake. Mr Geng would not say whether the two firms would be jointly involved in road projects. 'We can co-operate in many areas, not necessarily in road development,' he said. Jordon Wu, from sponsor BZW Asia, said the shares had been oversubscribed during the international presentations in Asia and Europe. This week, the company will continue the roadshow in the US before it ends on Friday when the Hong Kong public offering closes. Based on a proposed issue price between $2.06 and $2.38, Zhejiang Expressway will raise between $2.56 billion and $2.96 billion. The issue price will be fixed next Tuesday. Under the concession agreement, Zhejiang Expressway's toll rate adjustment formula was pre-agreed by the provincial agreement and guaranteed by its parent. It can raise tolls every three years in line with the national retail price index. It has the right of first refusal for investment in new roads and a guaranteed 50km non-competition zone either side of its expressway. Mr Geng said it could apply for a toll rise below inflation, depending on the economy and traffic flows.