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PROCUREMENT PROCEDURES

1.Selection of Suppliers to be Invited to Tender

When procuring equipment and materials, HEPCO will select suitable suppliers of the item to be purchased from among registered suppliers. As a rule, tenders will be by competitive bidding between selected suppliers. However, in certain cases, a specific supplier may be designated based on patent rights held by that supplier, compatibility with the existing facilities, whether they are the sole supplier of a given item, or similar situations.

2.Request For and Submission of Tenders

A request for tenders indicating the conditions of the tender, contract conditions, and tender specifications will be provided to potential suppliers who will be invited to submit tender proposals.

Financial and technical proposals must be submitted by the specified date. In addition to the proposal made in accordance with the tender specification, alternative proposals containing additional cost-saving options other than as specified by HEPCO in the tender specification may be submitted provided that such alternatives meet the performance and function requirements as specified in the tender specification.

3.Technical Evaluation

In principle, technical proposals will be evaluated prior to the opening of the financial proposal in order to confirm that the technical proposal conforms with the conditions and requirements set forth by HEPCO. During the evaluation, HEPCO may request that the technical proposal be supplemented or amended. In cases where such changes could result in a change in the bid price, the supplier will be asked to submit such price adjustment and explanation.

4.Negotiation and Award of Contract

We negotiate over the contract price and other conditions with the most advantageous tenderer to HEPCO among those tenderers which meet the specified technical condition and requirement.

We will show the tenderer our standard contract conditions and reach to an agreement after negotiation.

5.Delivery, Inspections, and Payment

Products are to be delivered as agreed to in the contract. HEPCO reserves the right to claim liquidated damages if delivery is delayed beyond the specified delivery deadline.

HEPCO will inspect all products delivered by the supplier to ensure that they meet the requirements and conditions stipulated by HEPCO. Products which pass such inspections will be accepted. When necessary, inspections may also be carried out during the production process.

In principle, payment will be made the month following acceptance of the product. However, other payment methods may be considered based on mutual discussions in cases where a long time period is required for production or where other special circumstances exist.

6.Other

Proprietary information obtained during the course of any transaction shall be subject to strict confidentiality on the part of both HEPCO and the supplier concerned. Such information shall not be disclosed to any third party unless otherwise specifically authorized in writing.

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