The following will give the outofmemoryexception:

TranslationProviderServer TMServer = GetTMServer(serverURL, username, password);
System.Collections.ObjectModel.ReadOnlyCollection<ServerBasedTranslationMemory> list = GetTMList(serverURL, username, password);

TMServer = null;
System.GC.Collect();

List<Uri> TMs = new List<Uri>();
Uri TM_path;

foreach (var TM in list)
{
if (TM.Name.IndexOf(TM_name) != -1) // I only loop through TMs with specific part of TM name
{
srcLocale = TM.LanguageDirections[0].SourceLanguageCode;
trgLocale = TM.LanguageDirections[0].TargetLanguageCode;
TM_path = TM.Uri;

#region "newProject"
ProjectTemplateReference projTemplate = new ProjectTemplateReference(projTemplatePath);
FileBasedProject newProject = new FileBasedProject(this.GetProjectInfo(srcLocale, trgLocale), projTemplate);
#endregion

#region "Save"
newProject.Save();
#endregion

#region "CallAddFiles"
this.AddFiles(newProject, docFolder, recursion);
#endregion

#region "CallConvert"
this.ConvertFiles(newProject);
#endregion

#region "CallGetAnalyzeSettings"
this.GetAnalyzeSettings(
newProject,
trgLocale,
reportCrossFileRepetitions,
reportInternalFuzzyMatchLeverage);
#endregion

TranslationProviderConfiguration config = newProject.GetTranslationProviderConfiguration();
TranslationProviderReference refer = new TranslationProviderReference(TM_path);
TranslationProviderCascadeEntry entry = new TranslationProviderCascadeEntry(refer, false, true, false);

while (config.Entries.Count != 0) // just in case there are TM Providers, remove them
{
config.Entries.RemoveAt(0);
}
config.Entries.Add(entry);
newProject.UpdateTranslationProviderConfiguration(config);
newProject.Save();

#region "CallRunFileAnalysis"
this.RunFileAnalysis(newProject, trgLocale, serverURL, username, password);
newProject.Save();
#endregion

#region "GenerateReports"
this.CreateReports(newProject, docFolder, procmode, srcLocale, trgLocale);
#endregion

newProject.Delete();

newProject = null;
projTemplate = null;
config = null;
refer = null;
entry = null;
System.GC.Collect();
}
}

Looking at the code it doesn't seem anything suspicious. GC.Collect will not help since probably the objects that increase the memory are still referenced which is why you get the error. I would recommend to run a memory profiler. I've used ANTS Memory Profiler with success in the past. You can get a 14 days trial which should be more than enough to identify the problem.

Thanks, Romulus!

Indeed, it looks as if redirecting the pointer is not enough for GC to recognize the original memory allocation as unsed. This was just a try which I left in the code. =)

Unfortunately, the classes don't implement a Dispose function. This is why I will maybe really need to build my own wrapper class around them as proposed by Patrick Hartnett above.