Star Gas Enters into Amendment to Kestrel Unit Purchase Agreement to Improve Kestrel Recapitalization Transaction

Business Wire, March 30, 2006

STAMFORD, Conn. -- Star Gas Partners, L.P. (NYSE: SGU, SGH):

--Soros Group Proposal is Not Superior to Amended Kestrel Transaction

--Tender and Exchange Offer to Star's Senior Noteholders Commenced

Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE: SGU, SGH) announced today that the Partnership has entered into Amendment No. 2 to the Kestrel Unit Purchase Agreement (as amended, the "Amended Kestrel Unit Purchase Agreement") with Kestrel Energy Partners, LLC ("Kestrel") and its affiliates. The board of directors (the "Board") of Star Gas LLC, the Partnership's general partner, determined that the New Soros Group proposal, previously announced on March 23, 2006, to recapitalize the Partnership is not a "Superior Proposal" under the terms of the Amended Kestrel Unit Purchase Agreement.

The Amended Kestrel Unit Purchase Agreement continues to provide for an equity investment by Kestrel of $16.875 million. However Kestrel's investment under the amended agreement will be for 6,750,000 common units at a price of $2.50 per common unit (compared to 7,500,000 common units as a price of $2.25 under the previous Kestrel transaction). The Amended Kestrel Unit Purchase Agreement also continues to provide for a rights offering of $39.375 million to Star's common unitholders. Under the amended agreement the rights offering will be for 19,687,500 common units at a price of $2.00 per common unit (compared to a rights offering of 17,500,000 common units at a price of $2.25 under the previous Kestrel transaction). Under the Amended Kestrel Unit Purchase Agreement, Star Gas common unitholders of record at the close of business on April 6, 2006 will now be afforded the rights to purchase approximately 0.61 units for each common unit held, compared to approximately 0.54 units under the previous Kestrel transaction.

Kestrel has agreed to backstop the rights offering at a price of $2.25 for any rights not exercised by Star's common unitholders, resulting in an increase in the amount raised in the rights offering to the extent that Kestrel is required to purchase units pursuant to such backstop arrangement. The Amended Kestrel Unit Purchase Agreement will result in the aggregate issuance of 26,437,500 new common units (exclusive of new common units to be issued for notes in the noteholder tender and exchange and new common units to be issued to existing holders of Star's senior subordinated and junior subordinated units). Assuming full subscription in the rights offering, the Amended Kestrel Unit Purchase Agreement will continue to provide the Partnership with $56.250 million of cash, but with less dilution to Star's common unitholders when compared to the prior Kestrel transaction. All other terms of the previously amended Kestrel Unit Purchase Agreement, including the conversion of subordinated units to common units, remain the same under the Amended Kestrel Unit Purchase Agreement.

The Partnership has received consents to the Amended Kestrel Unit Purchase Agreement from holders of more than 2/3 of Star's senior notes.

As previously announced on March 23, 2006, the Partnership received a new proposal (the "New Soros Group" proposal) from a group consisting of Soros Fund Management, LLC, Atticus Capital LP and Almeida Oil Co., Inc. (collectively the "Soros Group"). The New Soros Group proposal includes, among other things, a proposed tender offer by the Soros Group for up to 15 million common units at a price of $3.00 per unit. The New Soros Group proposal contemplates a $67.5 million rights offering to Star's common unitholders at a price of $2.25 per common unit, with the common units purchased by the Soros Group through the tender offer being eligible to participate in the rights offering and the Soros Group providing a standby commitment to backstop the entire rights offering. The New Soros Group proposal would result in the aggregate issuance of 30 million new common units and cash to the Partnership of $67.5 million, which represents an increase, after considering certain termination fee, expense reimbursement, incremental transaction expenses and interest costs, which are estimated to aggregate approximately $9.5 million, of approximately $1.75 million in additional cash compared to the Amended Kestrel Unit Purchase Agreement. The New Soros Group proposal also contemplates no conversion of Star's senior subordinated and junior subordinated units into common units, although the Soros Group has advised Star that they would adjust their proposal to provide for such conversion if the Board thought it was necessary or desirable.

Pursuant to the New Soros Group proposal, Star Gas LLC, Star's current general partner, would remain the general partner of the Partnership, and the Soros Group would have the right to appoint all of the directors of the general partner. The New Soros Group proposal contemplates that Star Gas LLC would, in consideration of the Soros Group's standby commitment in the rights offering, (a) agree to relinquish its right to receive distributions from Star pursuant to Star's partnership agreement (other than with respect to capital actually invested in Star) and, (b) cause Star to issue to the Soros Group newly created units which would provide economic benefits substantially equivalent to the new general partner's rights to receive distributions under the Amended Kestrel Unit Purchase Agreement.