He lied:
The Herald sought any information held by the Prime Minister which informed him or his office over the alleged "fabrication".
The Prime Minister's chief of staff Wayne Eagleson said "no information has been identified". He said the PM's office had to refuse the request because the "information requested does not exist or cannot be found".
[...]
OIA request responses from the PM's office and the GCSB show response to the Snowden stories was scripted from the outset. In only a few circumstances to it deviate regardless of the issue raised.
So, Key's lies were part of a systematic plan to deceive the public so the spies could keep doing their dirty work. We have a lying Prime Minister and lying spies. And the sooner we're rid of both, the better.