Key also released this letter from then SOE Minister SImon Power to John Palmer rejecting the Solid Energy 'National Resource Company' idea.
"Solid Energy states that the objective of the NRC proposal is to stimulate an accelerated development and use of New Zealand's natural resources and to capture maximum value for New Zealand.
The proposal required an estimated investment of $15.3 billion but Treasury said the proposal sought indicative approval "for total capital investment (including dividends and cashflow) of $2-3 billion per annum with cumulative investment of $27 billion".
Key this morning said the documents showed the proposal "absolutely required, as Treasury pointed out, somewhere between two and three billion dollars of Government money".
He said Palmer proposed selling a stake in Solid Energy to an offshore cornerstone investor "and that would involve taking more than 10 per cent of the company and not putting mums and dads first.".
"I made it quite clear to him that we had campaigned on a mixed ownership model which didn't involve someone having more than 10 per cent in the company".
Solid Energy's proposal "didn't involve a situation where kiwi mums and dads would be first and so the only way to get that money was through the Government."
Key said shortly after Solid Energy's problems, including $389 million in debt, were revealed last month that the company approached his Government seeking a capital injection "in the order of about a billion dollars to turn this company into the Petrobras equivalent in New Zealand".
Labour Leader David Shearer said Key had "scored an own goal" by releasing the paperwork.
"The documents actually show the company wanted to chase billions of dollars from private investors not the Crown."
"These documents don't show Solid Energy asking for a billion dollars and the letter from Simon Power doesn't show him rejecting a request for a billion dollars. So who is telling the truth?"
"What the documents do show is that Solid Energy wanted to create a massive new company by raising capital through 'external' sources rather than the Crown. The only financial request they made to the Government was to retain their dividends."
Shearer also said the documents proved the Government supported Solid Energy's less ambitious expansionary projects, including alternative fuels, lignite and unconventional gas, "despite its protestations that it didn't".
"This document dump is a desperate attempt by John Key to cover his tracks after he made up a story so that he'd look like the white knight riding to the rescue of taxpayers. The truth is he has overseen the collapse of this previously award winning taxpayer-owned company," Shearer said.
Palmer yesterday told MPs: "Were we talking to the Government about the possibility of capital and receiving that from the Crown? The answer is no".
The documents do not appear contain reference to a request for an injection of capital from the Crown of $1 billion or any amount beyond a comment that "any request for capital will need to be considered on a case by case basis and in context with other requests to the Crown for capital".
However the documents do note the proposal "forecasts the introduction of external equity which is not consistent with the Government's current policies.
Key has in recent days said the company approached the Government seeking approval to partner up with overseas companies who would help its expansion plans but he has said such a plan was not politically acceptable.
Labour's SOE spokesman Clayton Cosgrove has pounced on Palmer's comments about the investment plan and his comment that he opposed Government requests for the company to take on more debt as evidence Mr Key had misled the public over what led to the company's near-collapse to obscure the fact that his Government's oversight of it was poor.
"I don't know how many times the Prime Minister gets to make things up without someone using the 'L' word.
"John Key cited the increase in gearing as one of Solid Energy's downfalls while at the same time his Government was requiring an increase in gearing across the board and a greater dividend."
Palmer confirmed the Government was well informed, said Cosgrove, and did not ask the company to change its strategy.
Yesterday afternoon SOE Minister Tony Ryall was saying Solid Energy's problems were not due to its debt.
"The problems with Solid Energy come from the fact that the board made a number of investments that didn't generate the returns that they were expecting and together with the most significant collapse in world coal prices," he said.
But Labour leader David Shearer said Ryall's comments were "the complete opposite" to Mr Key's comment that a key contributor to Solid Energy's woes was that it "added gearing to a company that historically had not had gearing".
Ryall said the Opposition was being "deliberately mischievous".
"The Prime Minister did receive advice about the financial implications of Solid Energy proposals for a significant expansion into a national resource company," he said.
"Had the ministers been supportive of the proposal it would have required the Crown to contribute in excess of a billion dollars. In the event, ministers were not supportive and a formal proposal didn't eventuate."