The results of a U.S. Bankruptcy Court hearing Wednesday could determine a new floor price for ethanol plants on the bankruptcy auction block.

If Judge Brendan Shannon approves a suite of bids on VeraSun Energy Corp.'s (VSUNQ) 17 facilities, buyers interested in other distressed ethanol assets might hope to pay the same low prices offered by VeraSun's suitors.

VeraSun Tuesday accepted bids totaling $993 million for its facilities.

The price is just above a quarter of the replacement cost of the plants, but may provide a benchmark for cash-rich companies to use to buy assets from struggling ethanol producers. Analysts who follow the industry have looked to the VeraSun sale to set a benchmark price for ethanol assets, which may catalyze consolidation in the industry.

While several small ethanol companies have filed for bankruptcy protection in recent months, the auction of VeraSun's assets will be the first sale of a large network of ethanol plants built to the top industry standard.

The ethanol industry grew rapidly from 2005 to 2007, following the adoption of legislation mandating the use of renewable fuels. However, producers of the corn-based fuel were squeezed by high corn prices early in 2008, and low demand for gasoline, which often includes ethanol as a component. The ethanol-market weakness forced VeraSun to file for bankruptcy protection in October.

Without adequate financing to continue to operate its plants or reorganize, VeraSun announced plans to sell the assets.

Following a two-day auction that began Monday, Sioux Falls, S.D.-based VeraSun selected oil refiner Valero Energy Corp. (VLO) as the top bidder on seven ethanol plants, and on the option to build an eighth. Valero's bid of $477 million, or 61 cents per gallon of production capacity, is slightly above the refiner's preliminary bid of about 50 cents per gallon of capacity.

VeraSun hopes to sell the rest of its plants to its secured creditors, who have offered credit bids, rather than cash, for the plants.

Three separate groups of lenders have been formed. Dougherty Funding LLC bid on one plant, lenders led by West LB A.G. bid on two others, and lenders led by AgStar Financial Services bid on the remaining six plants.

Archer Daniels Midland Co. (ADM) said it bid on some of the assets. However, the company was not selected as the top bidder for any of the plants. The agribusiness giant's interest in VeraSun's assets indicates that it could bid on other ethanol facilities that are on the block in the future. Other ethanol producers like privately-held POET LLC have also expressed interest in potentially purchasing ethanol assets.

The VeraSun deal will set a widely-known benchmark that could potentially help these companies purchase assets from other struggling ethanol producers.

Earlier this week, another ethanol producer, Aventine Renewable Energy Inc. (AVR) notified the Securities and Exchange Commission Monday that it might be forced to file for Chapter 11 protection if it could not secure additional funding.

-By Jessica Resnick-Ault, Dow Jones Newswires; 201-938-4435; jessica.resnick-ault@dowjones.com