This is fixed in cloud-init 0.7.7.

** Changed in: cloud-init
       Status: Fix Committed => Fix Released

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https://bugs.launchpad.net/bugs/1553815

Title:
  host keys never restored following metadata api outage

Status in cloud-init:
  Fix Released
Status in cloud-init package in Ubuntu:
  Fix Released
Status in cloud-init source package in Trusty:
  Confirmed
Status in cloud-init source package in Wily:
  Won't Fix
Status in cloud-init source package in Xenial:
  Fix Released

Bug description:
  We are running an Openstack cloud and have noticed some unexpected
  behaviour in our Ubuntu Trusty cloud instances created by Nova.

  We have observed that if a previously initialised instance (e.g.
  DataSourceOpenstack has already been run) is rebooted while the
  metadata api is not available (i.e. 169.254.169.264 is unreachable),
  cloud-init will retry a few times then switch to DataSourceNone and
  regenerate host keys.

      # Boot instance under normal conditions    
      ubuntu@vm1:~$ readlink -f /var/lib/cloud/instance
      /var/lib/cloud/instances/cd535bc4-9c2f-4d31-8903-0ede59c7ef95
      ubuntu@vm1:~$ grep "Generating public/private rsa key pair." 
/var/log/cloud-init-output.log 
      Generating public/private rsa key pair.

      # Stop neutron metadata api service and reboot instance (observing that 
host keys were regenerated)
      ubuntu@vm1:~$ readlink -f /var/lib/cloud/instance
      /var/lib/cloud/instances/iid-datasource-none
      ubuntu@vm1:~$ grep "Generating public/private rsa key pair." 
/var/log/cloud-init-output.log 
      Generating public/private rsa key pair.
      Generating public/private rsa key pair.

  So far so good since we expect this behaviour, but now we reboot this 
instance with the metadata api is once again reachable. Cloud-init rightly 
selects the original DataSourceOpenstack instance but it does nothing since it 
already ran once (and it is set to only run once). The problem here is that the 
original host keys are never 
  restored so any client connecting to that instance will have no option to 
accept the new host keys along with MITM attack warning.

      ubuntu@vm1:~$ sudo reboot
      ...
      ubuntu@vm1:~$ readlink -f /var/lib/cloud/instance
      /var/lib/cloud/instances/cd535bc4-9c2f-4d31-8903-0ede59c7ef95

  Surely we could find a way for cloud-init to know that if if the
  current DataSourceOpenstack uuid matches its previously run uuid, then
  it can check that the host keys are consistent with the original run.
  @smoser suggested in a side discussion that dmidecode info could
  perhaps be used since the Openstack instance uuid can be found there:

      ubuntu@vm1:~$ sudo dmidecode -t system
      # dmidecode 2.12
      SMBIOS 2.8 present.

      Handle 0x0100, DMI type 1, 27 bytes
      System Information
            Manufacturer: OpenStack Foundation
            Product Name: OpenStack Nova
            Version: 13.0.0
            Serial Number: ba5f7371-fd4c-a25e-132f-3dd1e5b92e93
            UUID: CD535BC4-9C2F-4D31-8903-0EDE59C7EF95
            Wake-up Type: Power Switch
            SKU Number: Not Specified
            Family: Virtual Machine

      Handle 0x2000, DMI type 32, 11 bytes
      System Boot Information
            Status: No errors detected

  If cloud-init kept a copy of previous host keys prior to regenerating
  them, it could presumably use this info to know when to safely restore
  the original host keys.

  Since it is not inconceivable for the metadata api to become
  unreachable for a brief period (perhpas during an upgrade), i think we
  really need to make cloud-init more tolerant of this circumstance.

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